Post session - Quick review

Indian equity markets staged smart bounce-back after two sessions of drubbing, as value buying of select blue chip stocks activated snoozing bears. Amid flip-flop session of trade, local equity markets showcased smart recovery in the second half of the trade, to end near the high points of the day. 30 scrip sensitive index, Sensex gathering over a percentage and half points concluded, piercing through 16200 level. While, 50 share index, Nifty, too snapped the session above the 4900 bastion. Broader indices, too gained traction, but not in magnitude of frontline indices, as both Midcap and Small cap index went home with gains of over 0.70%.

Speculation of RBI’s intervention after the beleaguered currency retrieved from the low point of the day’s, pacified some jittery nerves, worried about widening current account deficits, policy paralysis, stubborn inflation and wavering global growth.

Recuperation of European shares to green terrain also buttressed the sentiment at D-street. Reversing from day’s low point, European shares turned green, with investors beginning to see some value in some sectors after steep falls in the previous session. European shares opened shaky on Thursday after surveys showed major economies in the region witnessed a contraction in their manufacturing activities and German business climate deteriorated.

Meanwhile, Asian shares ended mixed as lack of a breakthrough in Europe's attempts to shake off its debt crisis , that escalated risks of Greece exiting currency bloc, minced the sentiment of Asian pacific shares, besides drawing the foreign investors away, who preferred parking their funds into safe bets such as bonds. While, markets sentiments turned bitter with the release of China's HSBC Flash Purchasing Managers Index, which retreating to 48.7 in May from 49.3 in April, suggested persistent weakness in the world's second-largest economy even as policymakers seek to shore up growth.

Back home, the trade at D-street started on good note after the Congress led UPA government finally giving a go ahead for hike in petrol prices, a move which was positive for Public Sector Undertaking, as OMC’s on an average were losing about Rs 8 per litre on petrol, but on the same time it turned negative for Auto. The government announced Rs 7.50 hike in petrol prices - the steepest to date - in petrol prices. However, by the trend, across the sectors gains were witness, as all the 13 sectoral pivotals of BSE were trading in green. Leading among them were Bankex, closely followed by Oil & Gas, Technology and TECK counters. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1537: 1140 while 123 scrips remained unchanged. (Provisional)

The BSE Sensex surged by 293.96 points or 1.84% and settled at 16,242.06.The index touched a high and a low of 16,252.37 and 15,934.77 respectively. Only 25 stocks advanced against 5 declining ones on the index (Provisional)

The BSE Mid-cap index gained 0.76% while Small-cap index was up by 0.75%. (Provisional)

Buying was witnessed across the space on the BSE sectoral front, however Bankex up 2.33%, Oil & Gas up 1.98%, TECk up 1.49%, Metal up 1.36%, PSU up 1.24%, were the top gainers. (Provisional)

The top gainers on the Sensex were, Bharti Airtel up 5.98%, ONGC up 5.97%, HDFC up 4.66%, Jindal Steel up 3.98% and ICICI Bank up 3.42%, while, TCS down 0.43%, Sun Pharma down 0.40%, BHEL down 0.38%,  Maruti down 0.20%, Hindustan Unilever down 0.19% were the top losers. (Provisional)

Meanwhile, petrol prices have been raised by a whopping Rs 7.54 litre with effect from May 24, taking the prices of petrol to Rs 73.14 a litre in the national capital. Following the hike, a litre of petrol will now cost Rs 78.16 in Mumbai, Rs 77.53 in Kolkata and Rs 77.05 in Chennai. This is the first hike in the last six months and has been necessitated due to the increase in prices of global crude oil. Nonetheless it is the steepest price hike in petrol price ever.

As was expected, the hike in prices has seen sharp reactions from the common people and from other political parties. However, the markets have reacted positively to the increase and the rupee is also expected to appreciate. Most analysts are now expecting that this hike will be followed by an increase in the prices of diesel, LPG and kerosene as well.

Justifying the government’s move the Oil Minister, S Jaipal Reddy stated that the depreciation in rupee had necessitated the increase in fuel prices. This was because when the rupee falls by one against the dollar, oil companies suffer losses to the tune of Rs 8,000 crore annually. The rupee has seen a substantial fall in the last fortnight and has touched an all time low of Rs 55 against the dollar. Last year the rupee was around Rs 46 to a dollar. This has translated in to a loss of Rs 72,000 crore, this year for oil company’s just on account of rupee depreciation.

The losses on petrol are over and above Rs 512 crore per day that oil firms lose on selling diesel, domestic LPG and kerosene. Diesel is currently sold at a loss of Rs 15.35 a litre, kerosene at Rs 32.98 per litre loss and oil firms lose Rs 479 on sale of every 14.2-kg domestic LPG cylinder.

The price of petrol has been deregulated but continues to be under government supervision. Even though global prices had shot up, the government had kept the oil companies from raising prices because of political considerations. Since the three oil PSUs were suffering heavy losses they had threatened the government that they would go ahead and increase the prices of petrol if they were not compensated for the loss. As a result the government has announced subsidies to the tune of Rs 38,500 crore for the last fiscal of FY12.

The price is expected to have an inflationary impact on the economy and the Planning Commission is of the view that the impact will be a one time price adjustment and will not have a cascading effect. The retail inflation (Consumer Price Index) for April was 10.36%, up from 9.38% in February. The inflation based on movement in wholesale prices (WPI) moved up to 7.23% in April from 6.89% in March.India VIX, a gauge for market’s short term expectation of volatility lost 6.04% at 25.49 from its previous close of 27.13 on Wednesday. (Provisional)

The S&P CNX Nifty gained 85.75 points or 1.77% to settle at 4,921.40. The index touched high and low of 4,931.75 and 4,830.15 respectively.40 stocks advanced against 10 declining on the index. (Provisional)

The top gainers on the Nifty were ONGC up 6.08%, Bharti Airtel up 5.32%, Bank Baroda up 5.21%,  Ranbaxy up 5.07%, and HDFC  up 4.41 (Provisional)

On the other hand JP Associates down 1.08%, Cairn down 0.95%, Maruti Suzuki down 0.70%, HUL down 0.47%, GAIL down 0.42%, and were the top losers. (Provisional)

The European markets too were trading in green, with France's CAC 40 up 1.20%, Germany's DAX up by 0.64% and Britain’s FTSE 100 up 1.26%.

Recovering from earlier day’s losses Asian shares ended the day on mixed terrain on Thursday on the back of shrink in factory orders in China and absence of concrete actions by European leaders in EUI summit to tackle the risk of Greece leaving the currency block. Chinese output has fell for the 7th month in a row to 48.7 in May against 49.3 in April, because of which China's Shanghai Composite index fell over half percent, extending declines for a second consecutive session. On Wednesday European Union leaders have been advised by senior officials to get ready with the contingency plans in case Greece quits the single currency area. Meanwhile the euro traded near the weakest level since July 2010. The triggers from Greece and Spain remained crucial as some additional hidden debt was found in Spain’s regions books, which could consider on non-core bonds at the onset of trading.

Indonesia's Jakarta Composite index and Singapore's Straits Times have not seen major changes and Malaysia's KLSE Composite was up 0.55%, but the Taiwan Weighed was down by 0.32%.