Indian markets rally on Fed's dovish stance

Key equity benchmarks jumped the most in two weeks and extended initial gains to hit fresh intraday highs in late morning trade after U.S. Federal Reserve Chairman Ben S. Bernanke said the world’s biggest economy will continue to need stimulus and as the rupee gained for the third day. Bernanke, in a speech in Cambridge, Massachusetts on Wednesday, 10 July 2013, said that 'highly accommodative' monetary policy will be needed for the 'foreseeable future.' Meanwhile, minutes of the Fed's June meeting showed that, although several members judged that a reduction in asset purchases may be required, many wanted to see further improvement in the labor market before reducing the central bank's $85 billion-a-month quantitative easing program. The Fed currently buys $85 billion a month in government and mortgage bonds in an effort to keep interest rates low and stimulate economic growth. The Fed's bond-buying program which has flooded global markets with liquidity has helped support an array of assets, including equities in recent years. At a press conference following the June 18-19 meeting, Federal Reserve Chairman Ben Bernanke said the central bank could start reducing its $85 billion in monthly bond purchases later this year.

Sentiments turned better on revival of buying by funds and retail investors due to the firming trend in the other Asian bourses after Bernanke said its stimulus drive would be in place atleast for some time. Further recovery in the rupee also buoyed the investor sentiments. On the global front The US markets ended mostly in green overnight, while Asian markets like Shanghai Composite, Hang Seng, Jakarta Composite and Seoul all edged higher by over two percent with Fed’s stance. Back home, the traders were seen piling up positions in Metal, Bankex and Realty. In scrip specific developments, Gems and jewellery Stocks like Rajesh Exports and Shree Ganesh Jewellery edged higher on report that government is considering incentives for gold jewellery exporters hit by restrictions imposed on import of the metal to contain current account deficit.

In scrip specific actions, Jain Irrigation spiked 4 percent on reports that the company is planning to sell the wind power business to bring down its debt by Rs 63 crore. The company will appoint a team to finalise the wind power operations' sale by the month of August. Wockhardt lost nearly 3 percent, after the company is now barred from making medicines for Europe after its Waluj manufacturing facility in Maharashtra failed to meet the good manufacturing norms prescribed by the UK drug regulator. The stock has lost 40 percent since the start of the year.

Meanwhile, the NSE Nifty and BSE Sensex cruised past the psychological 5,900 and 19,600 levels respectively. The market breadth on BSE was showing positive trend with advances to declines in ratio of 1121:441. The BSE Sensex is currently trading at 19654.42, up by 360.30 points or 1.87% after trading in a range of 19664.62 and 19468.46. All the 30 stock were advancing on the index.The broader indices were trading in green; the BSE Mid cap index was up by 1.19% and Small cap index was up by 0.93%.

The top gaining sectoral indices on the BSE were, Metal up by 2.93%, Bankex up by 2.59%, Realty up by 2.15%, PSU up by 2.13% and Capital Goods up by 2.06% while there were no losers on the losers on the BSE. The top gainers on the Sensex were Hindalco Industries up by 4.08%, Coal India up by 3.62%, Sterlite Industries up by 3.41%, L&T up by 2.81% and HDFC Bank up by 2.66%. While there were no losers on the Sensex.

Meanwhile, The government is considering incentives for gold jewellery exporters, who have been suffering due to the restrictions imposed on gold imports to contain current account deficit (CAD), which widened to a record high to 4.8 percent of GDP in the FY13. The Jewellery exports are expected to decline considerably in the current fiscal due to limited availability of gold inventory in the domestic market with government regularly announcing measures to curb demand.

The government may go for the demand of gold jewellery exporters to increase the duty drawback rate to 8 per cent. It has already increased the duty drawback rate to 6 per cent from 4 per cent earlier. Under the duty drawback scheme, the revenue department refunds the duty incidence such as excise, customs, and service tax on the imported inputs used in the manufacture of exported goods. Further, the government is also expected to remove the restrictions on sale of gold in the domestic market.

India exported around $39 billion worth various precious gems and jewellery in the FY13. But the situation started weakening with different government measures and in May, Indian exports declined by 1.1% to $24.51 billion from $24.78 recorded in May’12 mainly due to the restriction on gold exports from Special Economic Zones (SEZ). Gold exports from SEZs in May declined by $0.8 billion, which forced the government to resume gold trading activities from SEZs, which would help reviving the gold exports.

The CNX Nifty is currently trading at 5,930.05 up by 113.35 points or 1.95% after trading in a range of 5,931.65 and 5,887.95. There were 48 stocks advancing against 2 declines on the index.

The top gainers of the Nifty were Sesa Goa up by 4.31%, Indusind Bank up by 4.01%, Hindalco Industries up by 3.92%, Coal India up by 3.67% and Bank of Baroda by 3.58% While, Ranbaxy down by 0.20% and  LT down by 0.03% were losers on the Nifty.

Most of the Asian equity indices were trading in green; Shanghai Composite surged 44.94 points or 2.24% to 2,053.07, Hang Seng soared 542.90 points or 2.60% to 21,447.46, Jakarta Composite increased 108.98 points or 2.43% to 4,587.63, KLSE Composite rose 10.18 points or 0.58% to 1,778.89, Straits Times added 45.77 points or 1.44% to 3,233.81, Seoul Composite jumped 44.72 points or 2.45% to 1,868.88 and Taiwan Weighted was up by 150.83 points or 1.88% to 8,162.52.

On the flip side, Nikkei 225 was down by 52.69 points or 0.37% to 14,363.91.