Benchmarks trade jubilantly on reform measures

Garnering over four percent last week, Indian equity markets have prolonged their gains for the ninth day in a row following the FDI approvals in aviation, retail, power and broadcasting carriage services sectors post-market hours on Friday. Sentiments remained jubilant and the indices touched its 52-week high on sustained buying by funds and retail investors ahead of RBI policy to be announced later today. Further, retail stocks like Pantaloon Retail, Shoppers Stop, Trent and CESC rallied after the government approved 51% FDI in multi-brand retail sector. Aviation stocks like Kingfisher Airlines, Jet Airways and SpiceJet too shot up after the government allowed 49% FDI in the sector. Meanwhile, Dish TV, WWIL, Den Networks and Hathway Cable climbed higher after receiving 74% FDI approval in broadcast carriage services.

On the sectoral front, Rate sensitive stocks - banks, auto and realty - were trading with strong gains ahead of the Reserve Bank's mid-quarter policy review. The central bank is expected to hold rates for a fifth straight month because of sticky inflation while, software, healthcare and fast moving consumer goods remained the top losers on the BSE sectoral space. The broader indices were trading slightly better than benchmarks while, the market breadth on the BSE was positive; there were 1,174 shares on the gaining side against 508 shares on the losing side while 69 shares remain unchanged.

On the global front, the US markets continued its surge on Friday following Fed’s announcement of buying more mortgage-backed securities, rise in retail spending too supported the markets to move higher while, Asian markets were exhibiting mixed trend at this point of time though, the Chinese market was trading lower on concern of slowing economic growth that may deepen next year as export demand slumps.

The BSE Sensex opened at 18,619.90; about 156 points higher compared to its previous closing of 18,464.27, and has touched a high and a low of 18,715.03 and 18,610.37 respectively.

The index is currently trading at 18,621.51, up by 157.24 points or 0.85%. There were 20 stocks advancing against 10 declines on the index.

The overall market breadth has made a strong start with 67.05% stocks advancing against 29.01% declines. The broader indices were trading slightly better than benchmarks; the BSE Mid cap and Small cap indices rose 0.97% and 1.16% respectively.

The top gaining sectoral indices on the BSE were, Realty up by 3.80%, Bankex up by 2.71%, CG up by 2.67%, Oil and Gas up by 2.42% and Auto up by 1.69% while, IT down by 2.40%, HC down by 2.08%, FMCG down by 1.57% and TECk down by 1.50% were the only losers on the index.

The top gainers on the Sensex were Jindal Steel up by 5.31%, RIL up by 4.25%, Sterlite Industries up by 4.11%, SBI up by 3.63% and ICICI Bank up by 3.55%.

On the flip side, Dr Reddy was down by 3.03%, Cipla was down by 3.01%, Infosys was down by 2.77%, ITC was down by 2.28% and TCS was down by 2.26% were the top losers on the Sensex.

Meanwhile, after a series of big reforms by the government, the Reserve Bank of India (RBI) is likely to surprise the markets with some easing in policy rates. However, the apex bank is under pressure as the government’s decision to increase the diesel prices and limiting the number of subsidised cooking gas cylinders per household to six per year may plug holes in fiscal deficit but are likely to fuel the inflation, still the hopes are high that they will tinker with rates.

One of the governors of the RBI has said that inflation is likely to rise further due to recent hike in diesel prices, which will have cascading effects on the economy. Wholesale price index (WPI) based inflation rose to 7.55 per cent in August after falling below 7 per cent in July. In the first quarterly monetary review announced on July 31, RBI had raised its inflation outlook to 7 per cent and revised the year’s growth target to 6.5 per cent.

In its recently released Monthly Bulletin for September 2012, RBI has highlighted that exports during Q1 of 2012-13 declined by 1.7% to $75.2 billion as global economic and trade environment remained unsupportive. However, imports too declined by 6.1% to $115.3 billion, reflecting the contraction in imports of gold and silver and a moderate growth in imports of petroleum, oil and lubricants (POL).

There is a group of economist that believe that Reserve Bank of India may hold rates steady, as it wages a protracted battle with inflation and the latest governments measures are likely to address the supply side constraints only for the medium term. On the same time, the hike in diesel price is likely to raise inflation by 60 basis points (bps) in the first round.

The S&P CNX Nifty opened at 5,631.75; about 54 points higher as compared to its previous closing of 5,577.65, and has touched a high and a low of 5,652.20 and 5,624.75 respectively.

The index is currently trading at 5,628.10, higher by 50.45 points or 0.90%. There were 35 stocks advancing against 15 declines on the index.

The top gainers of the Nifty were JP Associates up by 5.70%, IDFC up by 5.25%, Jindal Steel up by 4.31%, Sterlite Industries up by 4.10% and RIL up by 4.08%.

On the flip side, Dr Reddy down by 3.12%, Ranbaxy down by 3.05%, Infosys down by 2.69%, Cipla down by 2.69% and ITC down by 2.37%, were the major losers on the index.

Asian markets were trading mixed; Shanghai Composite was down by 8.44 points or 0.40% to 2,118.82, Kospi Composite lost 6.71 points or 0.33% to 2,000.87 and Taiwan Weighted declined by 6.88 points or 0.09% to 7,731.17.

On the other hand, Hang Seng was marginally higher by 2.46 points or 0.01% to 20,632.24, Jakarta Composite was up by 5.13 points or 0.12% to 4,262.13 and Straits Times added 7.86 points or 0.26% to 3,078.28.

The Japanese market is closed today on account of a public holiday on ‘Respect for the Aged Day’, while the Malaysian market is closed on account of Malaysia Day public holiday.