Sensex soars about 1% as Rate Senstives, Cap Goods rally; outclasses global peers

Stock markets in India once again showcased high degree of resilience on Thursday as the benchmark equity indices finished a choppy session on a sanguine note.

The benchmark gauges displayed a strong performance by vehemently garnering close to a percentage point and the sharp rally looked even more prominent given the fact that the gains came on a day when equity indices around the world suffered heavy pounding after the FOMC only gave a moderate extension of Operation Twist while it abstained from announcing quantitative easing measures but left the door open for QE3.

While European counterparts too traded on a weak note, as investors cashed in on a four-day rally after getting a batch of weak economic data from China and Germany. With the sharp upmove, the frontline indices not only surpassed the psychological 5,150 (Nifty) and 17,000 (Sensex) levels but also extended the gaining streak for the third straight session.

After getting off to a flat to positive opening, the markets traded in close proximity with the previous closing levels for most part of the day as cues from the Asian space remained sluggish. However, just when it was like the markets would go on to extend their consolidation phase, key gauges bounced back sharply and started a northbound journey, which only halted with the close of session.

The tentative recovery in investors’ appetite for riskier asset classes like equities surfaced after an influential investment bank upgraded domestic equities to overweight from its earlier neutral call on Indian equities, citing a number of factors including historic valuations, expectations for monetary stimulus, lower oil prices, and a weak rupee.

Moreover, stocks of PSU oil marketing companies like HPCL, BPCL ONGC etc rallied sharply as international crude oil prices slumped. The rupee too recovered to some extent after hitting all fresh historical lows in the session and provided some much needed support to the markets.

However, the upside in domestic markets got capped to some extent after heavyweight Reliance Industries got pounded by over two and half a percent on renewed concerns over gas output after Canadas Niko Resources slashed the reserve estimate at the KG D6 gas block, in which both companies hold stakes.

On the BSE sectoral space, the high beta Realty counter remained the top gainer in the space with close to three percent gains. The Capital Goods counter too rallied over two percent, led by heavyweights like L&T and BHEL after reports indicated that the government is likely to impose a 21% duty on imported power equipment.

On the global front, markets in Asia settled largely on a pessimistic note as the US Federal Reserve's policy announcement disappointed investors who had expected more aggressive policy measures. The Chinese manufacturing activity data also dampened investor’s sentiments, as PMI fell to 48.1 in June compared with a final reading of 48.4 in May. On the other hand, the European markets too traded on a weak note after Germany reported worse than expected manufacturing numbers.

Back home, the NSE’s 50-share broadly followed index Nifty, surged by close to a percent to settle above the psychological 5,150 support level while Bombay Stock Exchange’s Sensitive Index - Sensex garnered over one hundred thirty points to finish just above the crucial 17,000 mark. However, the broader markets too traded in tandem with their larger peers and settled with gains of just under a percent.

The markets consolidated on good volumes of over Rs 1.7 lakh crore while the turnover for NSE F&O segment also remained on the lower side as compared to that on Wednesday. The market breadth remained optimistic as there were 1,656 shares on the gaining side against 1,082 shares on the losing side while 123 shares remained unchanged.

Finally, the BSE Sensex gained 135.93 points or 0.80% to settle at 17,032.56, while the S&P CNX Nifty rose by 44.45 points or 0.87% to close at 5,165.00.

The BSE Sensex touched a high and a low of 17,050.44 and 16,799.63 respectively. The BSE Mid cap index was up by 0.81% and Small cap index up by 0.76%.

BHEL up 3.60%, SBI up 2.89%, L&T up 2.30%, Sterlite Industries up 2.16% and ICICI Bank up 2.07% were the major gainers on the Sensex, while Reliance down 2.58%, TCS down 2.18%, Hindalco Industries down 0.90%, Dr Reddy down 0.08% and Jindal Steel down 0.03% were major losers on the index.

The top gainers on the BSE sectoral space were Realty up 2.89%, Capital Goods up 2.18%, Bankex up 2.06%, Power up 1.74% and PSU up 1.33%, while Oil & Gas down 0.89%, IT down 0.19%, Consumer Durables down 0.06% and TECk down 0.01% were top losers on the BSE sectoral space. 

Meanwhile, India and China, the two emerging nations often regarded as global growth machines, are aiming to boost bilateral trade between the two leading Asian economies to $100 billion by 2015. The two Asian giants enjoyed a bilateral trade of a record $73.9 billion in the previous year. However, India’s trade deficit with China enlarged to $27.07 billion, even as Indian exports grew nearly 13 percent to $23.4 billion, according to official data.

Indian Prime Minister Manmohan Singh, who is in Brazil to attend Rio+20 Summit, met his Chinese counterpart Wen Jiabao and brought to his notice the large trade surplus in China's favor. The Chinese premier, who met Manmohan Singh for the 13th time since 2004, acknowledged that India has a large trade deficit with the Asian giant and in that context he said rice exports from India would be allowed soon.

Chinese officials have assured India that it can start exporting basmati rice to Asia’s largest Chinese economy soon following a long and tortuous six-year process that has been seen as underscoring the difficulties of navigating the complex bureaucratic hurdles that bar entry into the Chinese markets. Now that the regulatory issues, which existed earlier, have resolved Indian exporters may soon begin shipping basmati rice to China after both countries agree on a mutually satisfactory quarantine protocol.

Wen Jiabao has also vowed to encourage Chinese investments in India's infrastructure. India has set an investment target of at least Rs 2 lakh crore for core sector projects in the current fiscal. The two leaders also spoke of the joint mechanism set up by the two sides and agreed to form an inter-ministerial group within their respective countries on maritime matters, and deploy officials to hold formal talks on subjects pertaining to security, trade, navigation and other issues, including piracy.

The S&P CNX Nifty touched a high and low 5,170.40 and 5,093.45 respectively.

The top gainers on the Nifty were JP Associates up 4.70%, Reliance Infra up 4.44%, DLF up 4.05%, BHEL up 3.86% and PNB up 3.56%. On the flipside, Reliance down 2.56%, Cairn down 2.47%, TCS down 2.28%, Ambuja Cement down 1.99% and ACC down 1.18% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 down 0.54%, Germany's DAX down 0.36% and United Kingdom’s FTSE 100 down 0.58%.

All the Asian markets barring Japanese Nikkei ended day's trade in the negative territory as the US Federal Reserve's policy announcement disappointed some investors who had expected more aggressive policy measures. The Fed extended its so called 'Operation Twist' programme of selling short-term securities and buying longer-dated ones as expected, but did not signal another round of quantitative easing. Though, it said it expects economic growth to continue to grow moderately over coming quarters and then to pick up gradually but it lowered its expectations for US GDP growth in 2012, going to a range of 1.9-2.4% from 2.4-2.9%.

Moreover weak Chinese manufacturing data also dampened investor’s sentiments. The HSBC China Manufacturing Purchasing Managers Index fell to 48.1 in June compared with a final reading of 48.4 in May. It was the eighth straight month of a reading below 50, which indicated contraction from the previous month.