Jubilation continues at D-Street for third straight day; Sensex reclaims 24,600 mark

Euphoric Indian equities showcased an impressive performance on Thursday, by recapturing the crucial 24,600 (Sensex) and 7,450 (Nifty) levels as the post-Budget rally continued following creation of higher bets coupled with a fresh spell of foreign fund inflows.  Initially it was the strong growth forecast by IMF (International Monetary Fund) that gave the required impetus to the local equity markets, as it projected India’s economic growth moving up to 7.5 percent in the 2016-17 fiscal year from 7.3 percent this year, citing a fall in global oil prices and positive policy actions from the government as reasons for its improved outlook. Besides, continued buying from FIIs, encouraged by the regulatory fillip to the financial sector and the government’s commitment to keep to the 3.5 per cent fiscal deficit target also boosted the domestic sentiment. The rally was so strong that investors overlooked the report that the growth in India's services industry slowed sharply in February, as rising prices led to a slight deceleration in demand. The Nikkei/Markit Services Purchasing Managers' Index (PMI) sank to 51.4 in February from January's 54.3, but chalked up its eighth straight month above the 50-level that distinguishes growth from contraction.

On the global front, Asian markets, including those of Hong Kong, Japan, Singapore and Shanghai, ended in the positive territory, as upbeat data on US jobs and a rally in a range of commodities whetted risk appetites globally. Notably, oil shrugged off record high US crude stockpiles, as investors chose to focus on an OPEC plan to freeze production, keeping alive talk the market had bottomed from a near two-year selloff. Meanwhile, European stock markets started weaker following gains in Asian markets, as investors awaited jobs data from the US and the start of China's annual legislative session, where leaders of the world's second-largest economy will likely downgrade their growth forecast.

Earlier on Dalal Street, the benchmark got off to good start as sentiments remained sanguine, thanks to encouraging leads from the Asian and overnight US markets, which gained after better-than-expected news on manufacturing, adding fuel to an early rally on China’s latest stimulus move.  Appreciation in rupee value against the dollar added to the optimistic sentiments. Hardening for the fifth consecutive day, the rupee appreciated another 19 paise to trade at a 7-week high of 67.36 against the dollar at the time of equity markets closing on sustained bouts of selling of the US currency by banks and exporters amid foreign capital inflows. The bourses further capitalized on the momentum and spurted in afternoon trades on the back of broad based bottom fishing in undervalued stocks. However, a mild profit booking in dying moments of trade ensured that the key indices shut shops off the intraday highs. Eventually the NSE’s 50-share broadly followed index Nifty, got buttressed by close to one and half percent to settle above the crucial 7,450 support level, while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated over three hundred points and closed above the psychological 24,600 mark. Moreover, the broader markets too participated in the rally and closed with gains of around a percent. On the BSE sectoral space, buying was evident across the board and investors piled up hefty positions in the Capital Goods counter, which rocketed by over four percent while the Metal and Auto pockets too gained from strength to strength and climbed by over two percent each. However, only chink in the armor was the defensive - FMCG index which closed with a negative bias. The market breadth remained optimistic as there were 1686 shares on the gaining side against 1084 shares on the losing side while 136 shares remained unchanged. Finally, the BSE Sensex surged by 364.01 points or 1.50% to 24606.99, while the CNX Nifty rose 106.75 points or 1.45% to 7,475.60. 

The BSE Sensex touched a high and a low 24640.51 and 24383.28, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.58%, while Small cap index gained 1.38%

The top gaining sectoral indices on the BSE were Capital Goods up by 4.12%, Metal up by 4.05%, Auto up by 2.08%, Oil & Gas up by 1.54% and IT up by 1.44%, while FMCG down by 0.20% was the only losing index on BSE.

The top gainers on the Sensex were Tata Steel up by 7.17%, Tata Motors up by 6.10%, BHEL up by 6.02%, Larsen & Toubro up by 6.01% and Dr. Reddys Lab up by 5.77%. On the flip side, ICICI Bank down by 1.04%, ITC down by 0.75%, NTPC down by 0.24% and Maruti Suzuki down by 0.01% were the top losers.

Meanwhile, praising the budget 2016 proposals, the multilateral lending agency the International Monetary Fund (IMF) has projected a robust growth rate of 7.3 percent for the country this fiscal, picking up to 7.5 percent next year, supported by stronger domestic demand, and has said that the measures are aimed at increasing public infrastructure spending, rationalising subsidies, creating more flexible labour and product markets as well as enhancing financial inclusion.

Though, the agency's protections are lower than the government's estimate of 7.6 percent growth in 2015-16 and unchanged from its earlier projection at the same rate in January, but it said that India has a very good outlook at the present time. It added that India certainly benefited from low oil and energy prices, one of the worlds largest oil importers and that's raised the real income of all Indians. In its report IMF said that the economy is on a recovery path, helped by a large terms of trade gain (about 2.5 percent of GDP), positive policy actions and reduced external vulnerabilities.

However, it also raised concern and said that main internal risk to a country like India comes from a weak corporate and bank balance sheet. There has been a big increase in non-performing loans in the present time, due to the previous shortfall in investment. It also noted that global financial market volatility, a potential further deterioration in exports, and strains in bank and corporate balance sheets could weigh on India’s growth prospects. It added that high fiscal deficits and upside risks to inflation constrain the scope for countercyclical policies.

It also cautioned that though balance of economic risks has improved, they remain tilted to the downside. These included the impact of intensified volatility on global financial markets, including from surprise unexpected US monetary policy moves or China`s economic slowdown.

The CNX Nifty touched a high and low 7,483.95 and 7,406.05 respectively. 

The top gainers on Nifty were Tata Steel up by 7.62%, Vedanta up by 7.23%, L&T up by 6.35%, BHEL up by 6.33% and Tata Motors up by 6.28%. On the flip side, Zee Entertainment down by 1.31%, ICICI Bank down by 1.09%, Ultratech Cement down by 0.87%, ITC down by 0.22% and Lupin down by 0.18% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 9.84 points or 0.22% to 4,415.05 and Germany’s DAX down by 4.39 points or 0.04% to 9,772.23, while UK’s FTSE 100 was up by 4.85 points or 0.08% to 6,151.91.

Asian markets ended mostly higher on Thursday, with positive overnight cues from Wall Street and gains in oil prices in Asian deals underpinning investor sentiment. Japanese stocks rose to 3-1/2 week highs as risk appetite improved following the release of upbeat data on US jobs and a rally in oil and other commodities, which burnished sentiment globally. Chinese shares ended higher as investors waited for the start of the National People’s Congress, an annual legislative session that begins on Saturday. Policy makers there are expected to map out plans to stimulate the slowing economy. Investors shrugged off mixed data from Caixin, which showed that China's service sector growth slowed in February on weaker demand. The yuan firmed against the dollar after hitting a near three-week low the previous day as Moody's Investors Service lowered the outlook on China's government credit ratings.