Markets get a huge gap-up start to extend Diwali celebrations

The Indian equity markets are in celebration mood and fireworks are being seen all across the markets after Diwali. The benchmarks got a huge gap-up start, better than what marketmen could have expected on European debt accord. The whole global markets have been in turmoil since last many months due to the European debt crisis and the leaders there coming with a rescue fund has relieved the global community. The leaders there boosted the size of the EFSF in order to isolate the sovereign debt scourge that has infected euro zone nations in addition to Greece.  Not only that the talk of world’s largest economy, US slipping into recession got a halt after the quarterly data illustrated the largest jump for the US economy in more than a year. Back home, all the sectoral gauges are showing good gain and the metal sector is in most jubilant mood, showing gains of over 5 percent, closely followed by banking and realty that are up by over 3 percent each. The surge in weekly food inflation too has failed to deter the gains in rate sensitive’s. However, the broader indices that outperformed the benchmarks in muhurat trading are lagging behind, underperforming the larger ones. The BSE Sensex opened at 17,671.86; about 383.03 points lower compared to its previous closing of 17,288.83, and has touched a high and a low of 17,908.13 and 17,671.86 respectively.

The index is currently trading at 17,750.78, up by 461.95 points or 2.67%.  All the 30 stocks were on advancing side.

The overall market breadth made a strong start with only 68.77% stocks on advancing side against 27.18% on declines ones. The broader indices too were up with sparkling gains; the BSE Mid cap and Small cap indices shot up by 1.22% and 0.99% respectively.

Buying was witnessed across the counter. However, Metal up by 4.86%, Bankex up by 3.21%, Auto up by 3.20%, Realty up by 2.82% and Capital Goods up by 2.75% were the top gaining counters on Sensex.

Since all 30 stocks were on advancing side there were no losers. However, the top gainers on the Sensex were Sterlite Industries up by 8.31%, Hindalco Industries up by 8.15%, Tata Motors up by 6.09%, Jaiprakash Associates up by 5.91% and Tata Steel was up by 5.55%.

Meanwhile, the ministry of finance indicated that it is likely to approve capital infusion into public sector banks, including State Bank of India by mid-November. In the current financial year, the capital requirement of PSU banks has been estimated between Rs 10,000-20,000 crore.

After the second meeting of the Committee on Capital Requirements of Financial Institutions, the financial services secretary D K Mittal said 'we will hopefully decide on the capital infusion for banks by Tuesday.' Once the committee on capital requirements of financial institutions approves the capital infusion, the proposal will be tabled to Finance Minister Pranab Mukherjee for his approval. This process is expected to finish by November 15. After receiving finance ministry’s approval, the proposal will go to the Union Cabinet.

The first meeting of the committee chaired by the finance secretary R S Gujral was held last week. About 5-6 PSU banks including SBI, Bank of Baroda, Syndicate Bank and Union Bank of India would require capital in the current fiscal year. The capital is either needed to increase the government holding to 58% of tier I capital to 8%.

The committee is examining proposals for capital requirement during the current fiscal as well as for long-term (2021). By that time banks will have to meet Basel II norms as well. As India is set to implement Basel III norms on capital adequacy, in coming ten years, PSU banks would need around Rs 3.5 lakh crore. 

In 2011-12, the government has already earmarked Rs 6,000 crore for capital infusion in the PSU banks and additional amount would be asked via second batch of the supplementary demand for grants to be tabled in the coming winter session of Parliament. In last financial year, the government had provided capital support of around Rs 20,157 crore to the PSU banks. The banks which got capital from the government last fiscal includes Punjab National Bank, Bank of Baroda, Union Bank of India, Oriental Bank of Commerce and UCO Bank

The S&P CNX Nifty opened at 5,341.90; about 140.10 points lower compared to its previous closing of 5,201.80, and has touched a high and a low of 5,399.70 and 5,329.05respectively.

The index is currently trading at 5,342.90, surged by 141.10 points or2.71%. There were 48 stocks advancing against 2 declines on the index.

The gainers of the Nifty were Sterlite Industries up by 8.55%, Hindalco Industries up by 8.46%, Tata Motors up by 6.41%, Jaiprakash Associates up by 6.04% and Tata Steel was up by 5.97%. On the flip side, BPCL down by 2.31% and Power Grid Corporation down by 0.24% remained the laggards.

All the Asian equity indices too got a strong start; Shanghai Composite gained 26.77points or (1.10%) at 2,462.38, Hang Seng added 372.74 points or (1.89%) at  20,061.44, Jakarta Composite surged 21.60 points or (0.57%) at 3,834.60, KLSE Composite  gained 11.47 points or (0.78%) at 1,482.40, Nikkei 225 added  92.60 points or (1.04%) at 9,019.14, Straits Times rose 39.98 points or (1.40%) at 2,887.55, Seoul Composite gained 9.10 points or (0.47%) at 1,931.14 and Taiwan Weighted gained at 53.42 points or  (0.71%) at 7,618.63.