Indian benchmarks stage a remarkable rally; Sensex rallies around 500 pts

Indian benchmark equity indices staged a blockbuster performance on the first day of the new week by vivaciously rallying over one and half percent in the session and conquering their important psychological levels. Investors continued to build hefty positions across the board as sentiments got a boost from BJP’s stunning victory in Uttar Pradesh assembly elections, which gives it room for adding more representatives in the Rajya Sabha. On Saturday, the BJP won an unexpected 312 out of 403 seats in the assembly elections of the India’s largest state, raising expectations of continued political stability, smooth implementation of a proposed goods and services tax and reforms in areas such as labour laws and land acquisition. Furthermore, Investors’ morale also remained upbeat as Industrial production bounced back into expansion in January, kicking off the financial year’s last quarter on a positive note albeit amid expectations that it will bear the brunt of demonetisation. The index of industrial production (IIP) rose 2.7% in January from a year ago, the second fastest monthly growth this financial year behind 5.7% recorded in November 2016. Some support also came with the report that India's foreign exchange reserves rose $1.2 billion to reach $364 billion as on February 17, 2017. Buoyed by a strong domestic market and a stable Rupee, the central bank has been buying foreign currency in order to strengthen its foreign exchange reserves. However, markets participant didn’t give any response to wholesale price index-based inflation (WPI), which jumped to a 39-month high of 6.55% in February compared to 5.25% in the previous month on the back of expensive food and fuel items, even as manufacturing products saw a decline in inflation. The data justifies the Reserve Bank of India's caution on loose monetary stance amid expected increase in interest rates in the United States in the next few days.

On the global front, Asian stock markets ended mostly higher on Tuesday, as investors awaited the outcome of the Federal Reserve's meeting, and a batch of economic and political events later this week. Further, Chinese shares ended on a flat note even as a slew of economic reports suggested that the world's second-largest economy remained strong at the start of 2017. Chinese factory output and fixed-asset investment figures for the first two months of the year exceeded estimates, but annual growth in retail sales slowed during the period. However, Japanese shares fell from a 15-month high as the dollar fell against the yen ahead of this week's BoJ and Federal Reserve monetary policy meetings. The Fed is widely expected to increase interest rates at the end of its two-day policy meeting on Wednesday, while the Bank of Japan is expected to keep its rates and yield-curve policy steady when it reviews its monetary policy on Thursday. Meanwhile, European markets declined in early trade, as investors step back before this week’s Dutch election and developments from the U.K. moves closer calling the start of the Brexit process.

Back home, after getting a gap up start, the local benchmarks maintained their early gains throughout the session and ended the first day of new week on promising note. Finally, the NSE’s 50-share broadly followed index Nifty, got buttressed by over one and half percent to settle above the crucial 9,050 support level while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated around five hundred points and closed above the psychological 29,400 mark. Moreover, the broader markets too participated in the rally and closed with gains of over a percent. On the BSE sectoral space, buying was evident across the board and investors piled up hefty positions in the high beta Capital Goods counter, which rocketed by over three percent while the Realty, Consumer Durables and Banking pockets too climbed by about two percent each. However, the only indices, which ended the day in red, were Telecom and Metal. The market breadth remained optimistic, as there were 1704 shares on the gaining side against 1125 shares on the losing side, while 216 shares remained unchanged.

Finally, the BSE Sensex surged 496.40 points or 1.71% to 29442.63, while the CNX Nifty was up by 152.45 points or 1.71% to 9,087.

The BSE Sensex touched a high and a low of 29561.93 and 29356.05, respectively and there were 26 stocks on gainers side as against 4 stocks on the losers side on the index.

The broader indices ended in green; the BSE Mid cap index gained by 1.43%, while Small cap index was up by 1.19%.

The top gaining sectoral indices on the BSE were Capital Goods up by 3.06%, Realty up by 2.57%, Consumer Durables up by 2.40%, Bankex up by 1.93% and Consumer Disc up by 1.85%, while Telecom down by 0.56% and Metal down by 0.30% were the only losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 5.99%, Hindustan Unilever up by 4.54%, Larsen & Toubro up by 4.40%, HDFC up by 3.69% and Sun Pharma up by 3.61%. On the flip side, Coal India down by 6.63%, Bharti Airtel down by 0.95%, Axis Bank down by 0.88%, GAIL India down by 0.59% and Bajaj Auto down by 0.20% were the top losers.

Meanwhile, in a meeting to deliberate on options for resolution of stressed assets in the banking sector, the Finance Minister Arun Jaitley discussed options on resolution of bad loans with RBI Governor Urjit Patel and other top officials in finance ministry. The meeting discussed the concept of Private Asset Management Company (PAMC) and National Asset Management Company (NAMC) for resolution of stressed assets. While, the RBI was not in favour of giving more time to big ticket loan defaulters, the Department of Financial Services made a presentation on strengthening tools to manage NPAs and resolution of stressed assets.

The meeting which was attended by RBI Deputy Governor Viral Acharya and S S Mundra, besides Chief Economic Advisor Arvind Subramanian, Principal Economic Advisor Sanjiv Sanyal, Financial Services Secretary Anjuly Chib Duggal and Corporate Affairs Secretary Tapan Ray, also discussed RBI's various schemes for tackling bad loans, including Scheme for Sustainable Structuring of Stressed Assets (S4A), Corporate debt restructuring (CDR), Joint Lenders Forum (JLR) and Strategic Debt restructuring (SDR).

CEA Subramanian had earlier suggested setting up a state-owned asset reconstruction company or a bad bank to deal with the problem of non-performing loans, but creation of a 'bad bank' to hold bad loans seemed not on top of alternatives in the meeting. Stressed assets make up 16.6 per cent of all loans in India, worst among the world's major economies. Gross non-performing assets or bad loans of public sector banks (PSBs) were pegged at over Rs 6 lakh crore at the end of December 2016.

The CNX Nifty traded in a range of 9,122.75 and 9,060.50. There were 44 stocks in green as against 7 stocks in red on the index.

The top gainers on Nifty were ICICI Bank up by 5.97%, Hindustan Unilever up by 4.32%, Larsen & Toubro up by 4.05%, Ultratech Cement up by 3.76% and HDFC up by 3.50%. On the flip side, Bosch down by 2.11%, Idea Cellular down by 1.39%, Axis Bank down by 0.95%, Coal India down by 0.77% and Bharti Airtel down by 0.73% were the top losers.

The European markets were trading mostly in red; Germany’s DAX decreased 12.42 points or 0.1% to 11,977.61, France’s CAC decreased 15.29 points or 0.31% to 4,984.31, while UK’s FTSE 100 increased 8.6 points or 0.12% to 7,375.68.

Asian equity markets ended mixed on Tuesday as tumbling oil prices, European political risks and an impending Federal Reserve meeting remained high on investors' radar. Meanwhile, a slew of positive data out of China drew a lukewarm response. Chinese shares ended on a flat note even as a slew of economic reports suggested that the world's second-largest economy remained strong at the start of 2017. Chinese factory output and fixed-asset investment figures for the first two months of the year exceeded estimates, but annual growth in retail sales slowed during the period. Another report showed that China's property sales surged in the first two months of the year despite a slew of government curbs since October. Japanese shares fell from a 15-month high as the dollar fell against the yen ahead of this week's BoJ and Federal Reserve monetary policy meetings. The Fed is widely expected to increase interest rates at the end of its two-day policy meeting on Wednesday, while the Bank of Japan is expected to keep its rates and yield-curve policy steady when it reviews its monetary policy on Thursday.