Bulls on the rampage; Sensex rallies 575 points

Indian markets that showed some signs of recovery in last session, went for a rally on Wednesday and the benchmarks after a gap-up start demonstrated remarkable performance, there was no sign of relenting throughout the session and bulls remained in command in a one way rally. It was broad based buying on positive global cues that led the major bourses reclaim some of their crucial psychological levels. The upbeat global environment gave traders a reason to cover their short positions just a day ahead of the May F&O series expiry. For the day there were many other factors that propelled the markets higher, one being the global brokerage houses upgrading Indian equities to “overweight” from “equal weight”, in a boost for investors they stated that India is becoming a low-beta market within the emerging markets basket. India's relative valuations as compared to emerging markets have come off. They also pointed that monsoon rainfall and passage of goods and services tax (GST) are the key triggers for the Indian markets. The other major factor to the day’s gains was private weather forecaster Skymet’s prediction of 'above normal' monsoon on the back of a warning announced by the Bureau of Meteorology (BoM), Australia. Skymet sees monsoon at 109 per cent of the long period average (LPA) of 887 mm for the four months from June to September, versus the initial estimate of 105 per cent. August rainfall is seen at 113 per cent and September at 123 per cent. odds of a La Nina increase, boosting planting of rice, corn and oilseed crops. Australian Met Department had reported that the weather system that wreaked havoc in India, Asia and Africa has just ended and will now give way to bountiful rain in the form of La Nina.

On the global front, after the rally in US markets the Asian markets followed the trend and barring modest cuts in the Chinese market all others major indices posted good gains with many surging by over a percent. Chinese market declined after the nation’s central bank set the weakest reference rate of the currency in five years. Tempering anxiety over the Federal Reserve’s plans to raise US interest rates, potentially as soon as next month, gave the European markets too a strong start and all the major indices were up by over a percent in early deals.

Back home, the boisterous rally of the domestic market was in line with global markets and both the Sensex and Nifty ended at their highest closing levels in last one month. Markets after a strong start witnessed pick-up in buying activity in recently beaten down stocks. While there was surge in companies with big rural sales after the good monsoon prediction, the banking stocks too remained on the buyers radar and the most jubilant ones from the beginning, leading the rally in the markets. Hopes of revival in rural demand also boosted consumer goods and auto stocks. Rebound in rupee too aided growth in the markets, the domestic currency after dropping to its over two and half months low after nine consecutive days of decline, strengthened against the dollar on Wednesday on fresh selling of the American currency by exporters and banks amid hopes of fund inflows.  Besides, some better-than-expected Q4 earnings too influenced trading sentiments on upside of the markets.

Finally, the BSE Sensex surged by 575.70 points or 2.28% to 25881.17, while the CNX Nifty rallied by 186.05 points or 2.40% to 7934.90.

The BSE Sensex traded in a range of 25430.59 and 25897.87. There were 29 stocks on gainers side against 1 stock on the loser side on the index.

The broader indices despite underperforming the benchmarks posted gains of around a percent; the BSE Mid cap index ended up by 0.97%, while Small cap index gained 0.94%.

The top gaining sectoral indices on the BSE were Bankex up by 3.17%, Capital Goods up by 2.96%, IT up by 2.25%, TECK up by 2.21%, Power up by 2.04%, while there were no losers on the sectoral front.

The top gainers on the Sensex were ICICI Bank up by 4.48%, BHEL up by 4.34%, Larsen & Toubro up by 4.02%, Bajaj Auto up by 3.96% and Maruti Suzuki up by 3.47%. On the flip side, Cipla down by 4.97% were the top losers.

Meanwhile, industry body, the Federation of Indian Chambers of Commerce & Industry (FICCI) has welcomed the signing of the long envisioned agreement on developing the key Chabahar port between India and Iran as a landmark development and a big leap forward in co-operation between Iran and India. The Federation in its statement on the development has said that Prime Minister Narendra Modi’s outreach to Tehran has infused vigour into the momentum to develop connectivity, infrastructure and in India’s energy security goals. Chabahar port, located in the Sistan-Baluchistan Province on Iran's southern coast, is of great strategic importance for India.

The industry body added that the signing of commercial contract for the Chabahar Phase 1 will open a route to land-locked Afghanistan and cut transport costs/time by third. India and Iran had in 2003 agreed to develop Chabahar on the Gulf of Oman outside the Strait of Hormuz, near Iran's border with Pakistan. India, Iran and Afghanistan inked an agreement on the Chabahar port on the Gulf of Oman that will make it a transport and transit hub to boost trade.

The bilateral agreement to develop the Chabahar port and related infrastructure signed by Prime Minister Narendra Modi and Iranian President Hassan Rouhani, underlines the extraordinary strategic opportunities that present themselves for India in the region. The signing of commercial contract for the Chabahar Phase 1 will open a route to land-locked Afghanistan and cut transport costs/time by third. The development of the port for which India will provide $500 million will help Indian companies enhance engagement in Iran and gain access to Afghanistan & Central Asia. In the long run Chahabar will also serve as the point of origin for the proposed Iran-Oman-India pipeline.

FICCI added that a multiplier effect rests on the possibility that other international investors may also see the rationale of this important investment, thus paving the way for creation of a strategic bulwark that facilitates greater flow of people and goods among the three countries, as well as in the region and contributes to economic growth of Afghanistan. FICCI also sees PM Modi’s timely visit to Iran setting the stage for boosting trade in a big way.

The CNX Nifty traded in a range of 7809.30 and 7941.20. There were 50 stocks in green against 1 stock in red on the index.

The top gainers on Nifty were Tech Mahindra up by 10.05%, Indusind Bank up by 5.03%, ICICI Bank up by 4.65%, BHEL up by 4.12% and Bajaj Auto up by 4.03%. On the flip side, Cipla down by 4.91% was the lone loser.

The European markets were trading in green, UK’s FTSE 100 was up by 37.63 points or 0.61% to 6,256.89, France’s CAC gained 41.96 points or 0.95% to 4,473.48 and Germany’s DAX increased by 126.87 points or 1.26% to 10,184.18.

Asian equity markets ended mostly higher on Wednesday, with Hong Kong leading the gains, inspired by solid overnight gains in US and European markets even as upbeat US housing data fueled speculation the Federal Reserve will raise interest rates in June or July. US new-home sales in April surged to the highest level in more than eight years. Investor sentiment was buoyed by gains in oil prices, easing Brexit worries and news of a ‘major breakthrough’ in talks between Eurozone finance ministers and Greece to unlock 10.3 billion euros ($12 billion) in new bailout loans as well as debt relief for Athens as demanded by the IMF. Japanese shares hit their highest level in nearly a month, thanks to a weaker yen and hopes that the government would delay an April sales tax hike. However, Chinese shares gave up early gains to end a tad lower on worries about fresh capital outflows, as the yuan dropped to a fresh 10-week low against the US dollar on fears of a possible US rate hike next month.