Boisterous benchmarks stage a remarkable rally; surge over 1%

After displaying a distressing performance in previous two sessions, Indian benchmark indices managed to pull through a scintillating session by vivaciously rallying over a percentage point on Thursday, thanks to the hefty short covering in the beaten down, but fundamentally strong stocks. The relentless across the board value picking ensured that the frontline indices settle comfortably above the psychological 5,800 (Nifty) and 19,400 (Sensex) levels. Sentiments remained up-beat since beginning amid the tentative recovery in risk appetite globally. But, a bout of volatility was witnessed in mid-afternoon trade as key benchmark indices pared most of their intraday gains tracking weakness in Indian rupee which turned lower after breaching 60/$ mark in early deals. Meanwhile, Reserve Bank of India’s governor D Subbarao’s statement that the monetary policy transmission is not as agile as needed too dampened the sentiments. However, the profit booking proved short-lived as volatility ruled the roost in late trade as the key benchmark indices extended gains to strike intraday high.

Supportive cues from US markets provided the much needed support to local markets initially. Investors’ morale got buttressed on the back of stronger-than-expected US jobs data. Domestic benchmarks extended their northward journey following firm opening in European counterparts. Portuguese stocks led European markets higher amid signs of political progress in the country, following heavy losses in the previous session. Meanwhile, most of the Asian equity indices too ended in the green terrain and supported the sentiments.

Back home, buying in software and technology counters uplifted the sentiments. Stocks like Infosys, TCS, Wipro and HCL Technology edged higher on government’s notification that allows SEZs and units operating in them to not pay service tax - instead of paying the tax and then claiming refunds. Sentiments also remained up-beat as investors continued to pile-up positions in FMCG stocks. Dabur, Marico and GSK Consumer Healthcare edged higher on the back of early arrival and prospects of a good monsoon, which raised expectations of growth in uptake in rural areas that account for up to 50 per cent of their sales.

Banking stocks too ended mostly in the green after Finance minister P. Chidambaram urged state-run banks to lower their minimum lending rate and issue more loans to stimulate economic growth. Additionally, Aviation stocks viz. Spicejet, and Kingfisher Airlines surged on reports that suggested Government is looking into plea for review of FDI in aviation.

The NSE’s 50-share broadly followed index Nifty gained over sixty points to end above its psychological 5,800 support level, while Bombay Stock Exchange’s sensitive Index - Sensex zoomed by over two hundred and thirty points to finish over its psychological 19,400 mark.

Moreover, the broader markets too ended slightly in the green. The market breadth remained in favour of advances as there were 1249 shares on the gaining side against 1041 shares on the losing side while 140 shares remain unchanged.

Finally, the BSE Sensex surged 233.08 points or 1.22% to settle at 19410.84, while the CNX Nifty climbed by 66.05 points or 1.14 % to end at 5,836.95.

The BSE Sensex touched a high and a low of 19445.02 and 19245.01, respectively. The BSE Mid cap index was up by 0.56% and Small cap index was up by 0.21%.

The top gainers on the Sensex were, ITC up by 3.74%, Tata Power up 3.58%, TCS up 3.26%, Tata Motors up 2.80% and Bharti Airtel up by 2.38%, while Tata Steel down by 1.73%, BHEL down 1.63%, Sterlite Industries down 1.13%, Bajaj Auto down 1.02% and ONGC down by 0.84% were the top losers on the index. 

The top gainers on the BSE Sectoral space were, IT up 2.73%, FMCG up 2.69%, TECk up 2.35%, Realty up 1.56% and Consumer Durables up 1.23%, while Metal down 0.29% was the only loser on the sectoral space.

Meanwhile, in order to boost the consumers demand, Finance Minister P Chidambaram has urged public sector banks (PSU) to review their minimum lending rates or base rates to bring the cost of borrowing down to stimulate consumer demand, the main driver of an economy that has been pulled down by high inflation and interest rates. The Reserve Bank of India (RBI) has reduced its key policy rates (repo) by 1.25 percentage points since January 2012, but banks have passed on only 0.30 percent to consumers. Presently, the average lending rates for PSU banks is around 10.25 percent.

After meeting the heads of state-run banks, Chidambaram said that reduction of the base rate will be a powerful booster to economic growth and powerful stimulus to the credit growth. By adding further, he said that banks should look at the base rate as the central bank has cut the policy rates by 125 basis points, thus some part of this must indeed be passed on to borrowers. On the other hand, bankers said that they are constrained to pass on the rate cut benefit because of higher provisioning norms as well as due to increase in their own borrowing cost by up to 0.5 percent. However, they assured finance minister that they would review their base rate this month and will take appropriate decision on cutting the base rate.

Further, Chidambaram also advised the banks to focus on their top 30 non-performing accounts and take action recovery against the willful defaulters. Recently, the banking sector has taken various steps to improve the asset quality, and a significant improvement has been witnessed in the gross NPA ratio of banks.  

The CNX Nifty touched a high and low of 5,848.20 and 5,786.05 respectively. 

The top gainers on the Nifty were Reliance Infrastructure up 4.09%, HCL Tech up 3.95%, ITC up 3.88%, Tata Power up 3.63% and BPCL up by 3.54%.

On the flip side, the top losers of the index were, BHEL down 2.40%, Tata Steel down 1.71%, Sesa Goa down 1.53%, Cipla down 0.79% and Axis Bank down by 0.78%.

The European markets were trading in green, France’s CAC 40 up by 0.82%, the United Kingdom’s FTSE 100 up by 1.13% and Germany’s DAX up by 0.62%.

Most of the Asian equity indices shut shop in the green terrain on Thursday as sentiments remained up-beat ahead of European Central Bank meeting and the US non-farm payrolls report. Back on regional turf, Hong Kong shares produced their first gain in three sessions, as investors covered short positions ahead of the ECB meeting. Meanwhile, South Korean Kospi Composite edged higher by over half a percent on report that South Korea has proposed a working-level talk with North Korea to discuss restarting a shuttered joint industrial complex in the North. However, the Japanese market ended the session in the red as the yen moved back above the 100 mark against the dollar overnight.