Markets continue positive rally; Sensex reclaims 18,000 level

Indian equity markets continue their positive rally in the late morning session on Thursday amid sustained buying across the counters. The BSE Sensex gained nearly 250 points to reclaim the 18,000 mark, while the 50-share index was up by 74.90 points. Investors were still cautious, as market can turn volatile later in the session as traders will square off open positions on the settlement day of August series. Market sentiments improved as rupee recovered from record lows tracking Reserve Bank of India's move to provide dollars directly to oil companies, while a recovery in emerging market currencies also helped to offer support. With this initiative, RBI has removed the major source of dollar demand from the spot market. However, currency market still worried about the increase in the crude oil prices, which can increase further rise as western countries prepared to attack Syria, increasing worries over the security of oil supplies across the Middle East, which pumps a third of the world’s oil. On sectoral front, capital goods, consumer durables, FMCG and metal indices found investors' support, while realty index was trading down.

On the global front, Asian markets gain on the back of the stronger US closing. Japanese stocks rose after three days of losses as the Bank of Japan said it will continue its quantitative easing until inflation stabilizes. Back home, the market breadth was favoring the positive trend; there were 999 shares on the gaining side against 724 shares on the losing side, while 106 shares remained unchanged.

The BSE Sensex is currently trading at 18,251.93 up by 255.78 points or 1.42% after trading in a range of 18293.22 and 18071.22. There were only 25 stocks advancing against 5 declines on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.80%, while Small cap index also up by 0.63%.

The top gaining sectoral indices on the BSE were, Consumer Durables up by 2.13%, Capital Goods up by 1.98%, FMCG up by 1.54% and Oil and Gas up by 1.34%. While, Realty down by 0.96%, IT down by 0.27%, Auto down by 0.46% and Healthcare down by 0.57% were the top losers indices on the BSE.

The top gainers on the Sensex were, HDFC up by 5.34%, Sesa Goa up by 4.66%, Bharti Airtel up by 3.74%, HDFC Bank up by 2.96% and L&T up by 2.92%. On the flip side, Coal India down by 1.22%, Infosys down by 0.65%, Wipro down by 0.63%, Hero Moto Corp India down by 0.26% and Tata Steel down by 0.25% were the top losers on the Sensex.

Meanwhile, in its latest attempt to shore up a currency that has slumped to historic lows, Reserve Bank of India (RBI) has opened a forex swap window to help the three state-owned oil marketing companies (OMCs), IOC, BPCL and HPCL to meet their entire daily dollar requirements. The PSU oil companies are the biggest buyers of dollars, requiring $ 8-8.5 billion every month for the import of an average 7.5 million tonnes of crude oil.

With this decision, RBI aims at curbing volatility in the Rupee, which has been losing ground against the dollar. With its 4% slide on Wednesday to a life low of 68.80/$, the rupee has lost a fifth of its value this year. However, this is not for the first time that India’s Apex bank has resorted to such measures as in last 2008 global financial crisis too it had opened such window.

Further, under the swap facility, RBI will undertake sell/buy USD-INR forex swaps for a fixed tenor with the oil marketing companies through a designated bank. The swap facility, which has operationalised with immediate effect, will remain in place until further notice. This move, while reducing immediate demand pressures for dollar, would reduce volatility in the currency market and help restrict the sharp slide in the rupee against the dollar.

However, the OMCs would have to return the dollars they would source from RBI at a later date. The assumption is that dollar flows will improve, helping the OMCs to buy the US currency and return the money to RBI. Nevertheless, the immediate advantage is that demand of $ 13 billion goes out of the system. With the total monthly import bill coming to about $ 30 billion, one-third of the demand is taken out of the system.

The CNX Nifty is currently trading at 5,359.90 up by 74.90 points or 1.42% after trading in a range of 5,366.95 and 5,303.00. There were 36 stocks advancing against 14 declines on the index.

The top gainers of the Nifty were HDFC up by 5.91%, Sesa Goa up by 5.11%, Bharti Airtel up by 3.93%, Asian Paints up by 3.58% and L&T up by 3.06%. On the flip side, Ranbaxy down by 2.69%, DLF down by 2.65%, JP Associate down by 2.22%, PNB down by 1.96% and Ultra Tech Cement down by 1.47% were the major losers on the index.

The most of the Asian equity indices were trading in green; Straits Times up by 0.48%, KLSE Composite up by 1.01%, Seoul Composite up by 1.22%, Hang Seng up by 0.48%, Nikkei 225 was up by 0.91%, Jakarta Composite up by 0.44% and Taiwan Weighted up by 1.19%. While, Shanghai Composite down by 0.28%.