Boisterous benchmarks stages outstanding rally; Sensex ends above 28000 mark

Indian benchmark indices staged a blockbuster performance on the last day of the week by strongly rallying over a percent in the session and re-conquering their psychological levels. Investors continued to build hefty positions across the board, as sentiments got a boost after Union Finance Minister Arun Jaitley said that the government is working on a roadmap to roll out GST from April 1, 2017. GST can make the indirect tax system very efficient and will benefit all stakeholders including manufacturers, sellers, the ultimate consumers and the tax collecting governments apart from giving a substantial boost to GDP growth.  According to Moody’s investors Service, GST implementation will be positive for the country’s economic growth without any significant impact on inflation. Investors’ morale also remained upbeat after the Bank of England announced an interest rate cut and fresh stimulus package to counter the fallout from Britain’s vote to quit the European Union. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 559.49 crore on August 04, 2016. 

Meanwhile, metal stocks gained traction after the government extended its floor price regime on steel imports for a further two months, as the world’s third-biggest producer seeks to insulate domestic mills from a global glut. Besides, Auto counter extended their gains for another session as the sector is likely to benefit the most from the implementation of the GST Bill as the effective tax rate is likely to be lower than the current tax of nearly. On the other hand, mild selling was witnessed in selected Textiles stocks on reports that India's handloom export declined by 30% within a year after a gradual rise for several years.  IT exporters edged lower amid a stronger rupee and ahead of the US jobs data which is likely to signal the strength of the US economy.

On the global front, Asian equity markets edged higher on Friday, after the Bank of England (BoE) launched a potent post-Brexit stimulus campaign, but some caution before a big US jobs report limited gains.  The Bank of England cut its benchmark interest rate to 0.25 percent from 0.5 percent. The central bank also revived a UK government bond-buying program, also known as quantitative easing, that has been on pause since 2012, and said it would begin buying corporate bonds. A two-day short-covering rally in oil prices also boosted investor sentiment. Meanwhile, European shares gained in early trade, trimming weekly loss, amid growing investor confidence that central banks will keep monetary policy loose, with some better-than-expected earnings also supporting sentiment.

Back home, the local benchmarks got off to a rollicking opening as investors were largely influenced by the supportive leads from Asian markets. Thereafter, the frontline indices slowly but steadily started gathering steam and surged by around a percent by late morning trades. The bourses further capitalized on the momentum and spurted in afternoon trades on the back of broad based bottom fishing in undervalued stocks. The northbound journey only concluded with the close of the session helping the key gauges to regain the ground lost since the start of the week. Finally the NSE’s 50-share broadly followed index Nifty, got buttressed by over a percent to settle above the crucial 8,650 support level, while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated over three hundred points and closed above the psychological 28,000 mark. Moreover, the broader markets too participated in the rally and closed with gains of around one and half percent.

The market breadth remained optimistic, as there were 1841 shares on the gaining side against 894 shares on the losing side, while 171 shares remained unchanged.

Finally, the BSE Sensex surged by 363.98 points or 1.31% to 28078.35, while the CNX Nifty rose by 132.05 points or 1.54% to 8,683.15.

The BSE Sensex touched a high and a low 28110.37 and 27795.74, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 1.69%, while Small cap index was up by 1.47%.

The top gaining sectoral indices on the BSE were Auto up by 3.14%, Oil & Gas up by 2.74%, Metal up by 2.56%, Capital Goods up by 2.34% and PSU up by 2.17%, while IT down by 0.15% andTECK down by 0.07% were the top losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 5.02%, Bajaj Auto up by 4.38%, Axis Bank up by 3.62%, SBI up by 3.21% and Tata Motors up by 3.21%. On the flip side, Sun Pharma down by 0.79%, Power Grid down by 0.67%, Wipro down by 0.65%, Bharti Airtel down by 0.56% and Infosys down by 0.44% were the top losers.

Meanwhile, the government has decided to extend the Minimum Import Price (MIP) regime on 66 steel products for a period of two months. The MIP regime introduced for a six-month period in February 2016 which was due to end on August 5, will now be applicable on these items till October 4, 2016. The 66 steel products include flat-rolled non-allow steel and plastic, zinc or lead-coated steel among others.

Government in February had imposed MIP, ranging between $ 341 to $752 per tonne on 173 steel products for a period of six months, in order to guard domestic steel producers against cheap in-bound shipments. The Directorate General of Foreign Trade in its latest notification said that 66 out of 173 products will continue to remain in MIP regime for two more months.

The move to extend MIP comes after the Directorate General of Anti-Dumping recently recommended a tax of up to $594 per tonne on imports of hot-rolled flat steel products, specifically from China, Japan, South Korea and Ukraine. Also, the Directorate General of Safeguards proposed a safeguard duty on about 107 steel products for two-and-a-half years that were imported from China, Ukraine and Indonesia. The domestic steel majors JSW, Essar Steel and Tate steel too had pitched for extension of this barrier for a further six months to curb cheap imports.

The government has however not changed the MIP price range of $341 to $752 per tonne, on ingots and billets, blooms and slabs, the MIP stands at $362, $352 and $341 per tonne, respectively. On flat-rolled products of iron or non-alloy steel of a width of 600 mm or more, clad plated or coated, the minimum prices will be $ 643 and $ 752 per tonne on different items. Similarly, bars and rods, hot-rolled in irregularly wound coils of iron or non-alloy steel, the figure stood at $ 449 per tonne and $ 451 per tonne on different products.

The CNX Nifty traded in a range of 8,689.40 and 8,590.15. There were 42 stocks advancing against 9 decliners on the index.

The top gainers on Nifty were Grasim Industries up by 5.40% and Hero MotoCorp up by 5.12% and Hindalco up by 4.81% and Ambuja Cement up by 4.35% and Bajaj Auto up by 4.30%. On the flip side, Tech Mahindra down by 0.98%, Power Grid down by 0.95%, Bharti Infratel down by 0.87%, Sun Pharma down by 0.78% and Bharti Airtel down by 0.61% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 18.13 points or 0.27% to 6,758.29, Germany’s DAX increased 14.88 points or 0.15% to 10,242.74, while France’s CAC increased 20.84 points or 0.48% to 4,366.47.

Asian equity markets ended mostly higher on Friday, as aggressive moves by the Bank of England to cushion the Brexit blow and its dovish outlook for policy encouraged traders to pile into riskier assets. A two-day short-covering rally in oil prices also boosted investor sentiment. Chinese stocks closed a tad lower as worries about the economy and regulators' crackdown on speculation kept many investors on the sidelines. Japanese shares gave up early gains to end flat in cautious trade with investors looking ahead to the US jobs report later in the session, which could provide important insights into US economic outlook and the path of monetary policy. The Labor Department's non-farm payrolls report is expected to show an increase of about 185,000 jobs in July after employment jumped by 287,000 jobs in June. The unemployment rate is expected to edge down to 4.8 percent from 4.9 percent.