Markets rally for the third day in a row; Nifty reclaims 8,000-mark

The local equity markets rallied for the third day in a row on Thursday, as participants indulged in buying valuable stocks at attractive valuations. Sentiment got a boost after Prime Minister Narendra Modi said that he expects the long-pending GST bill to get the parliamentary nod this year while efforts to amend another contentious legislation on land acquisition are ‘over now’. Improving earnings have raised optimism at a time when investors are betting monsoon rains will be stronger than average, boosting the outlook for rural demand. Private weather forecaster Skymet said that monsoon rains are expected to be 109 per cent above the long-term average, compared with its earlier estimate of 105 per cent. Appreciation in the rupee against dollar too supported market sentiment. Indian rupee was trading stronger by 14 paise at 67.19 at the time of equity markets closing, on increased dollar selling by banks and exporters and due to capital inflows into the domestic equity market. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 652.35 crore on May 25, 2016.

On the global front, Asian equity markets ended mostly in green on Thursday as gains in oil prices and positive cues from overseas markets outweighed concerns about a slowdown in Chinese growth and prospects of higher interest rates in the US. European counterparts too are trading in the positive territory though with marginal gains with DAX being the top gainer in the space. Meanwhile, Brent oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months, after US government figures showed a sharper-than-expected drawdown in crude stocks last week. Back home, the local indices started the session on a sanguine note, with both the benchmarks crossing their respective psychological levels of 26000 (Sensex) and 7950 (Nifty) in the very early trade. Traders rejoiced with the report that the new bankruptcy law is credit positive for Indian banks as it increases their bargaining power in distressed asset resolutions. The current weak legal framework for asset resolution has been a key structural credit weakness for Indian banks. The new law entails greater efforts by corporate borrowers to avoid default and thereby a possible insolvency resolution process, as such a procedure would cause management to lose control over the company immediately. Besides, stellar results posted by L&T indicated signs of improvement in the Indian economy which further boosted sentiment. The bourses further capitalized on the momentum and spurted in afternoon trade on the back of broad based bottom fishing in undervalued stocks. Finally, the NSE’s 50-share broadly followed index Nifty, got buttressed by over one and half percent to settle above the crucial 8,000 support level, while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated around five hundred points and closed above the psychological 26,300 mark.

Moreover, the broader markets underperformed their larger peers by a good margin as the BSE’s midcap index went home with gains of 1%, while the smallcap index climbed 0.86% points. On the BSE sectoral space, hefty across the board buying was seen, as not even a single sectoral index went home in the negative territory. Investors piled up hefty positions in the Capital Goods counter which rocketed by over eight percent, while the badly butchered Banking and Realty indices too showed smart recovery and jumped by about two percent. While the sectors like - Power and PSU too soared in the session. The market breadth remained optimistic as there were 1408 shares on the gaining side against 1142 shares on the losing side while 197 shares remained unchanged.

The market breadth remained optimistic as there were 1408 shares on the gaining side against 1142 shares on the losing side, while 197 shares remained unchanged.

Finally, the BSE Sensex surged 485.51 points or 1.88% to 26366.68, while the CNX Nifty rose 134.75 points or 1.7% to 8,069.65.

The BSE Sensex touched a high and a low 26398.94 and 25941.51, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 1%, while Small cap index gained 0.86%

The top gaining sectoral indices on the BSE were Capital Goods up by 8.78%, Bankex up by 2.22%, Realty up by 1.82%, Power up by 1.51% and PSU up by 1.25%, while there were no losing indices on BSE sectoral front.

The top gainers on the Sensex were Larsen & Toubro up by 14.04%, SBI up by 4.91%, BHEL up by 4.73%, Axis Bank up by 3.35% and ONGC up by 3.09%. On the flip side, Sun Pharma Inds. down by 0.87%, NTPC down by 0.67%, Cipla down by 0.57%, GAIL India down by 0.31% and Reliance Industries down by 0.27% were the top losers.

Meanwhile, the MNI India Business Sentiment survey has reported that confidence among Indian businesses fell to a five month low in May, and also stated that with rising inflationary pressure, there is limited scope for the RBI to cut rates.

As per the report the Deutsche Boerses MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, declining for the third consecutive month fell from 62.4 in April to 61.8 in May, lowest since December 2015. The survey further stated that the decline was led solely by the manufacturing sector, while sentiment among construction and service sector firms improved.

The survey further said that the recovery in global commodity prices, especially crude oil, pushed up input costs following which prices charged by firms also rose to the highest since November 2014. It also stated that new orders held steady in May, although expectations for the coming three months eased for the third month in a row. In contrast, Export Orders fell to 52.9, the lowest level since May 2013.

MNI Indicators Chief Economist Philip Uglow, commenting on the survey findings said that with growth in China weakening, there has been increased focus on India's ability to grow rapidly for a sustained period. Evidence from the MNI India Business Sentiment Survey, though, paints a relatively subdued picture with output growth in particular running at a low level.

The CNX Nifty touched a high and low 8,083.00 and 7,948.50 respectively. 

The top gainers on Nifty were Larsen & Toubro up by 13.89%, SBI up by 5.40%, BHEL up by 5.06%, Axis Bank up by 3.76% and Idea Cellular up by 3.33%. On the flip side, Bharti Infratel down by 1.75%, HCL Tech down by 1.01%, Eicher Motors down by 0.71%, Bosch down by 0.57% and Reliance Industries down by 0.41% were the top losers.

European markets were trading in green; UK’s FTSE 100 rose 5.23 points or 0.08% to 6,268.08, France’s CAC increased 7.47 points or 0.17% to 4,489.11 and Germany’s DAX was up by 37.16 points or 0.36% to 10,242.37.

Asian equity markets ended mostly higher on Thursday as gains in oil prices and positive cues from overseas markets outweighed concerns about a slowdown in Chinese growth and prospects of higher interest rates in the US. The yen saw a sudden spike on the eve of G7 summit talks, with leaders of the world's seven major industrial democracies expected to promote monetary, fiscal and structural policies to spur growth in their communique, when the summit ends on Friday. Also, Fed Chair Janet Yellen speaks Friday on the economy at Harvard and her comments could provide further clues about whether the central bank would raise interest rates in June. Chinese shares closed higher to snap a two-day losing streak after falling to 2-1/2 month lows in early trade on growing worries that the economy is losing momentum. The combined profits of China's non-financial state-owned enterprises fell an annual 8.4 percent in the first four months of this year, highlighting the policy changes facing Beijing as it goes through a full-scale economic transformation. Japanese shares ended flat as an early rally fizzled out amid the yen's strength.