Indian markets witness massive rally on supportive global and domestic cues

Jubilation returned to the Indian markets a day ahead of the F&O November series expiry. All the major indices coming out of the consolidation phase posted humongous gains and the major indices went to the level last seen on November 21. There were supportive global cues complemented by the soothing political environment that led the market rally to a new high. Major indices gained over one and half a percent with Sensex and Nifty re-conquering their crucial psychological levels of 18,800 and 5,700 respectively. Though, the markets remained cautious in the last session as an all party meet remained inconclusive, but today the trade started with new vigor with Prime Minister Manmohan Singh meeting Congress allies to end deadlock over FDI in Parliament and UPA coordination committee meeting to discuss the provision of voting. The government got its much needed respite from its ally DMK, who was initially demanding vote on the FDI issue, said that it will vote in favour of the government. The development raised optimism that the government will be able to clear reforms announced in September, which were aimed at reviving growth and staving off a credit rating downgrade.

The local equities were also supported by the global markets, while the Asian markets made a mixed closing, the Chinese market slipped; closing below 2,000 for the first time since 2009 despite speculation that China Securities Regulatory Commission would announce measures to boost stocks. The surge in European markets further boosted the morale, as all the major indices showed good gains in early trade after European finance ministers eased the terms on emergency aid for the Mediterranean nation in the latest bid to keep the 17- nation euro-area intact.

Back home, the mood of the markets remained jubilant since morning and after a gap-up start the major indices kept strengthening till last, only to stop with the closing bell. There were broad based buying and blue-chip stocks that remained dormant in last session, actively participated in trade today, taking the markets higher. Market-men got another source of encouragement with Global ratings agency Moody's retaining India’s sovereign Baa3 ratings stable in its annual credit analysis on the country, supported by credit strengths which include a large, diverse economy, strong GDP growth as well as savings, and investment rates that exceed emerging market averages. Sectorally the day was of rate sensitive realty and Consumer Durables (CD) which surged by over 3%. However, the euphoria of the aviation sector was missing today and they suffered profit booking after two successive sessions of huge gains. There was buzz in the telecom sector after RBI relaxed ECB norms for the successful 2G spectrum bidders. Both Bharti Airtel and Idea Cellular surged by over 5% for the day.

Bombay Stock Exchange’s Sensitive Index, Sensex zoomed by over 300 points to finish near 18,850 level. Broader markets too traded in sync with the benchmarks. The market breadth remained in favor of advances as there were 1,746 shares on the gaining side against 1,144 shares on the losing side while 127 shares remain unchanged.

The NSE’s 50-share broadly followed index Nifty surged by 91 points to close at 5,727 level.

Finally, the BSE Sensex surged 305.07 points or 1.65% to settle at 18,842.08, while the S&P CNX Nifty climbed by 91.55 points or 1.62% to end at 5,727.45.

The BSE Sensex touched a high and a low of 18,862.70 and 18,616.55, respectively. The BSE Mid-cap index was up by 1.18% and Small-cap index was up by 0.93%.

Bharti Airtel up 5.22%, Sterlite up 3.56%, HDFC up 2.79%, HDFC Bank up 2.69% and Hindalco up by 2.55% were the major gainers on the Sensex, while NTPC down 0.38% and ONGC down 0.08% were the only losers on the index.

The few gainers on the BSE sectoral space were Realty up 3.20%, Consumer Durables (CD) up 3.18%, FMCG up 2.12%, Bankex up 1.84% and TECk up 1.81%, while there was no loser on the BSE sectoral space.

Meanwhile, given the absence of a pickup in private investment activity despite an improvement in sentiments; low transmission of the reduction in the cash reserve ratio (CRR) since September 2012; expectations of back-ended cut in the Repo rate (reduction of 50 bps in Q4FY13); and moderating consumption demand, rating agency ICRA has lowered the estimate for India’s economic growth for FY13 to 5.4 per cent from 5.7 per cent earlier.

The local unit of global rating firm Moody's Investor Services, raising the spectra of a rating downgrade, is also expecting government to overrun the upwardly revised fiscal deficit target due to lower revenue growth and its inability to cut expenses. 'Fiscal deficit is expected to exceed the revised target of 5.3% of GDP, in light of substantial under-recoveries on various regulated fuels already incurred,' said ICRA in a report.  Further, 'limited flexibility to control various types of expenditure and the likelihood of both tax and non-tax revenue receipts falling short of the budgeted amount' could boost government borrowing, ICRA underscored, without saying whether it would have a bearing on sovereign rating.

On monetary credit policy front, the rating agency expects repo rate to be reduced by a further 50 bps in the remainder of the current fiscal year, the timing of which would be guided by growth-inflation dynamics. At present, ICRA expects the Central Bank to slash CRR by 25 bps in the December 2012 mid-quarter policy review to ensure credit flow to productive sectors. Moreover, notwithstanding the impact of a weaker Rupee on competitiveness, demand for Indian exports is expected to remain muted in H2FY13, thereby reflecting global economic conditions, the rating agency opined.

The S&P CNX Nifty touched a high and a low of 5,733.20 and 5,658.00 respectively.

The top gainers on the Nifty were Bharti Airtel up 4.75%, JP Associates up 4.38%, BPCL up 4.14%, Reliance Infra up 3.07% and HDFC up by 3.01%.

The top losers on the index were Power Grid down 1.54%, NTPC down 0.47%, and Tata Power down 0.05%.

European markets were trading in green. France’s CAC 40 up 0.16%, Germany’s DAX up 0.50% and Britain’s FTSE 100 was up by 0.42%.

Asian stocks ended mixed on Tuesday as impuissance in Chinese shares and concerns over U.S. fiscal cliff overshadowed the optimism over Greek aid deal. Meanwhile, investor sentiments strengthened with euro-zone finance minister’s deal to release the next tranche of bail-out funds to Greece. Japanese Nikkei rose for a fourth straight session, led by defensive shares. Chinese markets extended losses for a third straight session in the absence of fresh market trigger. Hong Kong's Hang Seng index ended down marginally, weighed down by weakness in mainland stocks.