Benchmarks witness relief rally backed by strength in rupee

The relief rally finally came through on last trading session of holiday truncated week, after plunging close to nine percent in two weeks, the market participants hunted for oversold but fundamentally strong bargains amid encouraging tidings from both domestic as well as global front. Initially, the local bourses traded cautiously on report that foreign institutional investors (FIIs) sold shares worth a net Rs 350.93 crore on August 7, 2013, but soon markets reclaimed their gaining momentum and fervently gained strength to strength, taking support from Planning Commission Deputy Chairman Montek Singh Ahluwalia’s statement that the economy is likely to grow at 5.5 percent this financial year. Also, net direct tax collections went up by 10.37 per cent to Rs 1.17 lakh crore during the April-July period of the current fiscal year as against Rs 1.06 lakh crore mopped up during the same four months of 2012-13.

Firm opening in European counters too provided strength to Indian markets with CAC, DAX and FTSE trading higher after Bank of England inflation report, in which BoE Governor Mark Carney averred that the key interest rate will stay at its record low until the UK unemployment rate falls below 7%. Supportive cues from Asian counters too provided the much needed support to the local markets after Bank of Japan maintained its stimulus policy. Sentiments also got bolstered after Chinese exports rose 5.1 per cent in July from a year earlier, above expectations, while imports jumped 10.9 per cent, leaving the country with a trade surplus of $17.8 billion for the month.

Back home, markets continued to trade higher tracking strength in Indian rupee which appreciated against the US dollar. The local currency was up 38 paise at 60.91 against the dollar at the time of equity market closing on selling of the US currency by banks and exporters amidst volatile equity market. Buying in metal and mining stocks too aided the sentiments after better than expected Chinese trade data.

Some support also came in from Consumer Affairs Minister K V Thomas’ comments that India will be world leader in retailing by 2020 as it seems domestic retail market growing to a size of $1.3 trillion by then, providing a tremendous growth opportunity for retail and FMCG players alike. However, the gains remained capped due to selling witnessed in oil and gas counter after Parliamentary panel recommended review of the Government’s decision to raise gas prices and said that Reliance Industries should deliver its shortfall in production of the fuel at the old rate.

The NSE’s 50-share broadly followed index Nifty rose by around fifty points to regain the psychological 5,550 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged over one hundred and twenty points to reclaim the psychological 18,750 mark.

Moreover, broader markets too traded with traction and snapped the day’s trade in the green with gain of around one and a half percent. The market breadth remained in favour of advances, as there were 1381 shares on the gaining side against 867 shares on the losing side, while 152 shares remained unchanged.

Finally, the BSE Sensex gained 124.46 points or 0.67% to settle at 18,789.34, while the CNX Nifty rose by 46.55 points or 0.84% to end at 5,565.65.

The BSE Sensex touched a high and a low of 18,829.26 and 18,621.67, respectively. The BSE Mid cap index was up by 1.34% and Small cap index was up by 1.332%.

The top gainers on the Sensex were, Hindalco up by 5.42%, Tata Steel up by 5.18%, Cipla up by 5.09%, Maruti Suzuki up by 3.89% and Bharti Airtel up by 3.24%, while, Sun Pharma down by 3.24%, SBI down by 3.04%, Dr Reddys Lab down by 1.57%, Wipro down by 0.79% and Reliance down by 0.64% were the top losers in the index.

The top gainers on the BSE Sectoral space were, Metal up 2.61%, Realty up 2.35%, Power up 1.42%, Auto up 1.38% and TECk up 0.90%, while Health Care down by 0.21% and Oil & Gas down by 0.21% were the top losers on the sectoral space.

Meanwhile, the government has revised upward the textiles export target to $43 billion for the current fiscal, from $36 billion set earlier. Minister of State for Textiles Panabaaka Lakshmi said that following discussions with textiles export promotion councils against the backdrop of rupee depreciation and after considering strong industry performance, the government has decided to raise the textile exports target to $43 billion for FY14. In the previous fiscal, domestic textile exports stood at $34 billion.

Indian textile exports' growth remained flat to $7.79 billion in the first quarter  of this fiscal from $7.76 billion in the same period of the 2012-13 mainly due to the weak demand in global markets like the US  and Europe. However, it seems difficult for the government to achieve set exports target on account of prevailing slowdown in major markets include the US and Europe, which represents around 65 percent share in the country's total textiles exports. Exporters are now exploring new markets like Latin America, Africa, Australia, Japan, Israel, South East Asia and Middle East countries to reduce dependence on western markets.

The government has taken various steps to boost textiles exports including providing three percent interest subvention, incremental export incentive scheme and inclusion of new markets like New Zealand, Latvia for textile exports under the focus market scheme. The government had earlier said that textiles sector is the only sector where we can increase the exports substantially, adding that industry issues will be addressed soon. The government had also expressed need to encourage skill development as adequate skill development will boost the production and turn down the cost of production, leading the textile sector to grow which in turn will help it to compete in the global market.

The CNX Nifty touched a high and low of 5,577.60 and 5,510.05 respectively. 

The top gainers on the Nifty were Ranbaxy up by 28.60%, Hindalco up by 5.78%, Cipla up by 5.73%, Tata Steel up 5.72% and DLF up by 4.27%. On the other hand, SBI down by 3.60%, Sun Pharma down by 3.08%, Lupin down by 2.92%, Dr Reddy’s down by 1.28% and Reliance down by 1.07% were the top losers.

The European markets were trading in green; Germany’s DAX up by 0.41% and the United Kingdom’s FTSE 100 up by 0.35%, while France’s CAC 40 up by 0.50%.

The Asian markets barring Hang Seng and KOSPI Composite concluded Thursday’s trade in red, while major exchanges like Indonesia's Jakarta Composite, Malaysia’s KLSE Composite and Singapore’s Straits Times remained close on account of Public Holiday ‘Eid al-Fitr’. Stocks in Hong Kong rebounded from the previous day’s sharp losses, aided by strong monthly trade data from China and some upbeat earnings reports. Japanese shares tumbled in volatile trade amidst a strengthening yen. South Korean shares ended higher, snapping a three-day losing streak, as China posted stronger-than-expected trade data, but the gains were limited as foreigners sold the local shares most in more than four weeks.

China reported much better than expected trade results for July, marking a sharp recovery from the previous month. Chinese trade data showed exports rising 5.1% from a year earlier, swinging from June’s 3.1% fall. Imports, which had dropped 0.7% in June, showed a 10.9% leap for July. The trade data come after mixed messages on China’s economy last week when private and official surveys of the country’s important manufacturing sector showed differing results. Besides, China’s yuan strengthened to a 19-year record against the US dollar amid Chinese officials’ pledge to stabilize economic growth. China is set to release consumer and producer price data for July on Friday, which may provide further hints on the health of the world’s second-largest economy after stronger-than-expected trade data.

The Bank of Japan kept its policy unchanged following its meeting, while maintaining language from the previous month that the economy is starting to recover moderately. In terms of the inflation outlook, the central bank noted that consumer prices have begun to head higher and stated that inflation expectations appear to be rising on the whole. The Bank of Japan has set a 2% inflation target, which it hopes to achieve by 2015. Separately, the Bank of Korea held its policy interest rate unchanged at 2.5%, matching expectations.