Benchmarks extend northward journey for third straight day

Boisterous benchmarks once again showcased an enthusiastic performance on Tuesday, by rallying close to one and a half percentage points and breaking lots of psychological levels in their northbound journey. Barring initial volatility, there appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength as investors continued hunt for fundamentally strong but oversold stocks. Frontline indices managed to extend their rally for third straight day and settled near their crucial 5,700 (Nifty) and 19,250 (Sensex) levels as investors took to hefty across the board buying. Sentiments got bolstered from the Reserve Bank of India’s (RBI) chief Duvvuri Subbarao’s statement that perhaps there was a need to reduce the reserves that banks have to set aside via the cash reserve or the statutory liquidity ratios.

Finance Minister P. Chidambaram’s statement that the government would bring down CAD to 3.7 percent of the gross domestic product (GDP) in the current financial year, too aided the sentiments. Further, the government’s move like amendment in the special economic zones (SEZ) norms to increase investments in these zones also boosted the investors’ sentiments as rising investment in SEZs will also increase the exports from SEZs. Some support also came in from report that foreign institutional investors (FIIs) bought shares worth a net Rs 408.35 crore on August 12, 2013.

Firm opening in European counterparts too supported the domestic markets with CAC, DAX and FTSE all edging higher in early deals ahead of the release of economic data from Germany which will throw more light on the health of Europe's strongest economy. Rally in Asian markets boosted investors’ confidence with Japanese Nikkei gaining over two and a half percent as the yen weakened on report that Prime Minister Shinzo Abe is considering a corporate tax cut as a way to offset the impact of a planned two-stage increase in the sales tax.

Back home, recovery in Indian rupee too aided the sentiments. The Indian rupee was trading near 61 per dollar at the time of equity markets closing as against Monday’s close of 61.27 per dollar. Buying in Pharma related stocks too supported the sentiments as stocks like, Biocon, Aurobindo Pharma, Cipla and Sun Pharma edged higher after the Finance Minister said that the government will soon finalize the foreign investment policy on brown-field pharmaceutical projects.

The NSE’s 50-share broadly followed index Nifty rose by around ninety points to end just shy of its psychological 5,700 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged over two hundred and eighty points to reclaim the psychological 19,200 mark.

Moreover, broader markets too traded with traction and snapped the day’s trade in the green with gain of over a percentage point. The market breadth remained in favour of advances, as there were 1,440 shares on the gaining side against 904 shares on the losing side, while 145 shares remained unchanged.

The market breadth remained in favour of advances, as there were 1444 shares on the gaining side against 899 shares on the losing side, while 146 shares remained unchanged.

Finally, the BSE Sensex gained 282.86 points or 1.49% to settle at 19229.84, while the CNX Nifty rose by 86.90 points or 1.55% to end at 5,699.30.

The BSE Sensex touched a high and a low of 19248.11 and 18864.81, respectively. The BSE Mid cap index was up by 1.12 points and Small cap index was up by 1.01%.

The top gainers on the Sensex were, NTPC up by 4.01%, Tata Motors up by 3.61%, Bajaj Auto up by 3.20%, ICICI Bank up by 3.10% and HDFC Bank up by 3.06%. On the flip side,  Hindalco Industries down by 2.45%, Coal India down by 2.15%, ONGC was down by 0.97%, Jindal Steel was down by 0.55% and ITC was down by 0.46% were the top losers on the index. 

The top gainers on the BSE sectoral space were, Realty up by 4.46%, Bankex up by 2.92%, Auto up by 2.32%, Power up by 2.04% and Teck up by 1.83% were the top gainers, while Consumer Durables down by 0.20% and Metal down by 0.05% were the only losers in the space. Meanwhile, Stepping up its efforts to control the Current Account Deficit (CAD) ahead of a festival season, the government has hiked refined gold bars for a third time in eight months to 10% from the earlier 8%. Besides, it also upped the import duty on silver to 10% from the earlier 6%, and the factory gate duty on gold bars to 9% from 7%. Consequently, the government is targeting revenues of Rs 4,830 crore from the hike in customs duty. Though, with this announcement, gold and silver prices are set to become expensive.

Gold and silver imports from a long have been held responsible for widening CAD which rose to record 4.8% of GDP in 2012-13. The country, which is the world's biggest buyer of gold has been trying to curb imports of the yellow metal, the second biggest imported item after crude oil. Recently, the Reserve Bank of India (RBI) required a fifth of all gold imports to be used for export, usually in the form of jewellery.

Finance Minister P Chidambaram a day earlier has unveiled a slew of measures, including easier overseas borrowing norms to fetch an additional $11 billion dollars this fiscal to arrest rupee fall and check the burgeoning current account deficit (CAD). FM is confident that these measures will help contain the deficit at $70 billion for the fiscal year ending in March, or an estimated 3.7% of Gross Domestic Product (GDP), well below the record 4.8% in the previous fiscal year.

The CNX Nifty touched a high and low of 5,704.75 and 5,578.90 respectively. 

The top gainers on the Nifty were DLF up 9.34%, Ranbaxy up by 8.86%, Axis Bank up by 7.77%, JP Associate up by 5.25% and IDFC up by 4.48%.

On the flip side, the top losers of the index were, Hindalco Industries down by 3.24%, Coal India down by 2.15%, Ambuja Cements down by 1.99%, Cairn down by 1.08% and ONGC down by 0.95%.

The European markets were trading in green, France’s CAC 40 up by 0.30%, the United Kingdom’s FTSE 100 up by 0.59% and Germany’s DAX up by 0.80%.

All the Asian markets concluded Tuesday’s trade in green. Japanese stocks jumped on a weakened yen and a report that Prime Minister Shinzo Abe was reviewing a possible corporate tax rate cut in a bid to stoke growth and offset the impact of a national sales tax hike, while Hong Kong shares rose for a fourth straight day amid optimism over the Chinese economy. China shares gained for the third straight day, helped by strength in the financial sector. Chinese property shares added to their recent gains, following report that the eastern city of Wenzhou has become the first to ease restrictions on real-estate purchases. South Korea’s Seoul Composite ended at a one-week high, as large cap firms rallied on bargain hunting. Foreign investors have also bought 162.6 billion won ($146.05 million) worth of shares, snapping a five-session selling streak, to buttress the market.

Japan’s economic growth slowed more than expected in the second quarter, offering ammunition to those seeking to temper a planned sales-tax increase even as government debt has risen past 1,000 trillion yen ($10.4 trillion). But as the sharp slowdown was driven by an unexpected fall in corporate capital spending while personal spending remained hardy, the data may encourage Japanese Prime Minister Shinzo Abe to proceed with the tax hike and soften the pain by offering tax breaks to boost business investment. Separately, Japan’s core machinery orders, seen as a leading indicator of capital spending, fell 2.7% in June. The result beat expectations for a 7.1% drop. Core machinery orders, which exclude volatile purchases for power-generation equipment and ships, can nonetheless vary wildly from month to month: They rose 10.5% in May, fell 8.8% in April, and rose 14.2% in March.

Meanwhile, new home purchases fell to a 25-week low in Shanghai last week as a record heat wave, inadequate supply and continuously high prices jointly crimped buying sentiment. The sales of new homes, excluding government-subsidized affordable housing, dropped 22 percent from the previous seven-day period to 149,100 square meters, the lowest weekly volume registered since mid February. Indonesia Finance Minister Chatib Basri stated that the government is making efforts to boost consumption in order to keep the country’s economic growth above 6% this year. According to Chatib, expenditures related to household consumption dominate the GDP, and they grew by 55.44% in the first half of this year. Gross Capital Formation grew by 32.68%, government consumption by 8.63%, exports by 23.15% and import 25.72%.