Post session - Quick review

Indian stock markets rose solidly on Friday as Europe's move to backstop troubled banks and Britain's plan to pump more stimulus into its fading economy gave a boost to confidence, thereby encouraging the demand for risky equities. Bears rejuvenating themselves on the holiday were back in shape after four days of slumber owing to the improved risk appetite as the domestic barometer gauges dipping their head in water for the fourth consecutive session on Wednesday ended the day near a 20 month low level. The domestic market was closed on Thursday on account of the 'Dussehra' festival. On the global front, the European Central Bank (ECB) announced aggressive liquidity measures on Thursday, throwing a lifeline to lenders who have seen wholesale funding drying up as market confidence ebbed, and the European Union said it would present a plan for a coordinated recapitalization of banks by member states. The mood heading into the weekend was further helped by a better-than-expected third quarter guidance from Samung Electronics, the world's biggest maker of memory chips and liquid crystal displays by sales and a key barometer for the chip sector in Asia, which besides leading to the cheer in the Asian pacific stocks also buoyed the sentiment at Dalal Street.

Sentiment was also lifted by fourth positive close of the Wall Street as better-than-expected economic data out of Washington eased concerns the United States is slipping into recession. Investors at Wall Street scurried to grab equities post the European Central Bank President Jean-Claude Trichet stated that ECB will resume covered-bond purchases and reintroduce year long loans for banks, while defying calls for an interest-rate cut and acknowledging the intensified downside risks to the economy.  Meanwhile, jobless claims that rose less than expected also fuelled the rally. The US Labor Department stated that the first-time applications for jobless benefits last week rose by 6,000 to 401,000, as and the four-week average dropped to 414,000. Separately, President Barack Obama urged Congress to move quickly and pass his jobs bill, that would help protect the economy from another downturn should Europe’s debt troubles worsen. Meanwhile, European shares steadied on Friday, halting a two-day rally, as investors awaited to see if U.S. jobs data will signal an improvement on the macro front before adding more risky assets.

Nothing practically could blemish the spirit at Dalal Street, not even the accelerating food inflation data and the downgrade of rating by Moody’s Moody's Investors Service.  Though the optimism appeared to be receding after Global rating agency -Moody’s downgraded the debt ratings of a dozen banks in United Kingdom because of doubts over the strength of the government’s support. But the covering up shorts approaching the fag end of the session counterbalanced it all. The rating agency, besides downgrading the debt ratings of a dozen banks in United Kingdom also pruned the ratings of nine Portuguese banks due to increased asset risk as a result of the banks' holdings of Portuguese government debt. Meanwhile, India's food inflation accelerating in the week ended September 24, reflected the prolonged inflationary pressures. The Wholesale price index-based inflation quickened to 9.41% from a year earlier, compared with 9.13% the previous week, according to data issued Friday by the Ministry of Commerce and Industry. On a week-on-week basis, the food articles index rose a marginal 0.2% to 197.7, recording the eighth successive week of rising prices.
 The 30 share index –Sensex- on Bombay Stock Exchange ( BSE)- despite registering  gains over 400 points shied away from its 16300 level, however, claiming back the crucial 16k level was like adding a feather to its victory. Similarly, the 50 share index- Nifty- on National Stock Exchange (NSE) capturing over 100 points settled the trade at sniffing distance of 4900 level. The broader indices too captured gains of over 1% on board. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1808:983 while 115 scrips remained unchanged.

The BSE Sensex gained 443.68 points or 2.81% and settled at 16,236.09. The index touched a high and a low of 16,347.48 and 16,148.97 respectively. 27 stocks advanced against 3 declining ones on the index (Provisional)

The BSE Mid-cap index gained 1.37% while Small-cap index was down by 1.15%. (Provisional)

On the BSE Sectoral front, Metal up 5.43%, Bankex up 3.80%, Consumer Durables up 3.20%, Realty up 3.12% and Capital Goods up 2.96% were the top gainers while, there were no losers.

The top gainers on the Sensex were Sterlite up 8.61%, Jindal Steel up 8.23%, Tata Motors up 7.70%, ICICI Bank up 5.78% and DLF up 5.67%.

On the flip side, Bharti Airtel down 3.81%, Tata Power down 0.36% and Hero MotoCorp down 0.16% were the only loser on the index. (Provisional)

Meanwhile, the economic growth in the coming quarters is expected to below 8% on the back of the uncertainty in global economy and the Reserve Bank of India’s (RBI) continuous hike in its key policy rates. The Citigroup in its research report said India's economic growth is likely to remain below 8% in the coming quarters owing to aggressive monetary tightening and worsening global prospects.

The India’s Gross Domestic Product (GDP) growth for the first quarter of 2011-12, fell to its 6 quarter lowest level to 7.7% from 8.8% in the same period of last fiscal year. 'Recently-released macro and sectoral data indicate a clear slowdown in economic activity,' Citigroup said. By adding further it said that the 'growth in the coming quarters will likely remain in the sub-8% range and average 7.6% in FY12.'

“We expect this trend to continue due to lagged effect of 500 bps of tightening, structural policy issues, and worsening prospects on the global front,” the Citigroup report added.

During last financial year, India’s economy grew by 8.5% and in 2009-10, it grew by 8%. For the current financial year, in this year’s budget, the government had forecasted India to grow by 9%. However because of the debt crisis in Eurozone and slowdown in United States, government revised downwards India’s GDP growth forecast to 8.2%.

The Citigroup said, “The worsening global economic situation has taken a toll on the domestic currency and equities. Moreover, higher deficits and peaking inflation is likely to further add to the burden”.

In the last month, on the back of global crisis, the Indian rupee fell by 7.3% and the Bombay Stock Exchange benchmark Sensex declined by 3.98%, and the headline inflation, measured Wholesale Price Index (WPI) stood at 9.78%, which is almost double the RBI’s comfort zone. Since March 2010, in order to cap hovering inflation, the RBI has increased its short term leading and borrowing rates by 12 times.

'While we have been expecting inflation to remain elevated due to higher minimum support prices of agricultural crops and continued upward revisions to past data; two further price pressures have emerged, firstly commodity prices have showed no sign of abating despite slowing global demand and secondly, weakness in rupee, which adds to inflationary woes,' the report said. By adding further it says this puts the RBI in an unenviable position of balancing slowing growth and rising inflation.

India is, somewhat in a better place than its Asian peers. Positives for India include the country's low exports to GDP ratio, domestically financed fiscal deficit, limited exposure to foreign liabilities, and a healthy banking system. However, in times of risk aversion, India immediately comes on the radar due to its reliance on external capital, Citigroup said.

During the April-July 2011, India’s fiscal deficit stood at Rs 2,288 billion from Rs 909 billion in April-July 2010. 'Despite the announcement of austerity measures, we expect the government to miss its deficit target due to both lower revenues and higher expenditures,' the report added.

India VIX, a gauge for market’s short term expectation of volatility lost 6.64% at 33.02 from its previous close of 35.37 on Wednesday. (Provisional)

The S&P CNX Nifty gained 134.40 points or 2.83% to settle at 4,885.70. The index touched high and low of 4,922.60 and 4,861.20 respectively. 43 stocks advanced against 5 declining ones while 2 stocks remained unchanged on the index. (Provisional)

The top gainer on the Nifty were, Sterlite up 8.47%, Axis Bank up 8.41%, Jindal Steel up 7.70%, Tata Motors up 7.23% and Sesa Goa up 5.86%.

 On the other hand, Bharti Airtel down 3.46%, Ambuja Cement down 2.78%, Tata Power down 0.71%, Ranbaxy down 0.55% and Hero MotoCorp down 0.21% were the top losers. (Provisional)

The European markets are trading in red, with France's CAC 40 down 0.31%, Germany's DAX down 0.30% and FTSE 100 down 0.52%.

All the Asian equity indices barring Jakarta Composite ended the session in the positive terrain on last trading day of the week as investors’ sentiment boosted after central banks in Europe launched fresh measures to prevent another recession and keep the region’s banking system liquid amid growing concern of the debt crisis worsening. The European Central Bank (ECB) said that it would buy an extra 40 billion Euros ($53.7 billion) of covered bonds from banks and would continue to provide unlimited three-month liquidity to the region’s banks at least until July next year. Moreover, the Seoul and Hong Kong tapped one-week highs as marketmen bought beaten-down stocks. However, stock markets in China remained closed today for the trade in observance of Golden Week holiday.