Benchmarks end higher; Nifty closes near the crucial 5,450 mark

After a massive fall of around three and a half percent in last session, Indian equity benchmarks managed to snap the volatile day of trade near intraday high on Wednesday with splendid gains of around two percentage points, as investors opted to buy battered down but fundamentally strong stocks. After some initial volatility, markets soon gained strength as investors’ sentiment remained up-beat on the hopes that new RBI governor Raghuram Rajan will loosen monetary policy to pick up the economic growth and will take fresh measures to check the rupee depreciation. Some support also came in after Prime Minister’s Economic Advisory Council Chairman C Rangarajan pegged economic growth at 5-5.5 per cent for the current financial year and said that the economy still had the potential to grow more than the previous year’s growth rate of five per cent.

But, markets faced strong resistance near their crucial 5,450 (Nifty) and 18,600 (Sensex) levels and started paring gains in noon deals after India’s services PMI contracted to 47.6 points in August, the weakest since 2009, from 47.9 points in July, indicating more contraction in this sector amidst falling volumes of incoming new work and tough economic conditions. This further resulted in the decline of composite PMI, which takes into account both manufacturing and services, to 47.6 points in August from 48.4 points in the previous month.

Weakness in European markets in early deals too dampened the sentiments with CAC, DAX and FTSE all edging lower over the increasing possibility of US military intervention in Syria. Moreover, most of the Asian equity indices shut shop in the red as risk appetite remained on the negative side after key congressional leaders John Boehner and Eric Cantor both pledged their support for military action to punish Syrian President Bashar al-Assad for his suspected use of chemical weapons against civilians.

Back home, markets started gaining strength in last leg of trade supported by sharp pull back in Indian rupee against dollar. Indian rupee, after a weak start, appreciated around a percent at the time of equity markets closing. Buying in software and technology counters continued on the back of steep rise in local currency and improving global economy. Additionally, Metal counter remained the top gainer among other sectoral indices as economic data in China showed growth in  services sector hit a five-month high in August. China is the world's largest consumer of copper and aluminum. However, realty remained the lone loser on the BSE sectoral front, declining around half a percent on RBI’s directive to banks on home loan disbursements, which came as a big blow for realty companies that have been betting on luring schemes to pull up sagging sales. In a notification floated on Tuesday, the central bank has barred banks from providing upfront housing loans for under-construction projects through innovative schemes termed as “80:20” or “75:25” by the developer.

The NSE’s 50-share broadly followed index Nifty surged by over one hundred points to end near its psychological 5,450 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex soared over three hundred and thirty points to end above the psychological 18,550 mark.

Broader markets too traded with traction and ended the session with a gain of around a percentage point. The market breadth remained in favour of advances, as there were 1,364 shares on the gaining side against 927 shares on the losing side, while 150 shares remained unchanged.

Finally, the BSE Sensex surged 332.89 points or 1.83 % to settle at 18,567.55, while the CNX Nifty climbed by 106.65 points or 2.00% to end at 5,448.10.

The BSE Sensex touched a high and a low of 18,612.60 and 18,188.43, respectively. The BSE Mid cap index was up by 1.02% and Small cap index was up by 0.71%.

The top gainers on the Sensex were, BHEL up 6.20%, Tata Motors up 4.71%, Bharti Airtel up 4.37%, ICICI Bank up 4.34% and Hindalco up 3.97%. On the flip side, ITC down by 0.81% was the only loser on the index. 

On the BSE Sectoral front, Metal up by 2.75%, Health Care up by 2.60%, Auto up by 2.47%, TECk up by 2.28% and IT up by 2.15% were the top gainers, while Realty down 0.41% was the only loser in the space.

Meanwhile, the Reserve Bank of India (RBI), in its half yearly report on management of foreign exchange reserves, has said that India's external debt profile has deteriorated over a period of time with significant rise in volatile capital and decline in import cover.

The central bank stated that the ratio of volatile capital flows include cumulative portfolio inflows and short-term debt to the reserves increased to 96.1 at end-March 2013 from 83.9 per cent as at end-September 2012. While, the country's foreign exchange reserves at end-March 2013 equaled to the nation's import cover of 7 months, down from 7.2 months at end-September 2012. India’s foreign exchange reserves came down to $292.0 billion at the end-March 2013 from $294.8 billion at end-September 2012, the RBI’s report added.

By adding further, central report said that the other external debt parameter of the country which relates to the portion of short-term debt in the total debt too showed deterioration. The ratio of short-term debt to the foreign exchange reserves, increased to 33.1 per cent at end-March 2013 from 28.7 percent recorded in end- September 2012.

The CNX Nifty touched a high and low of 5,460.25 and 5,318.90 respectively. 

The top gainers on the Nifty were Ranbaxy up by 8.70%, BHEL up by 6.46%, JP Associates up 6.13%, Lupin up 4.59% and Tata Motors up by 4.59%. On the other hand, DLF down by 1.02%, ITC down by 0.23% and Maruti was down by 0.07%.

The European markets were trading in red, France’s CAC 40 down by 0.79%, Germany’s DAX down by 0.62% and the United Kingdom’s FTSE 100 down by 0.56%.

Most of the Asian markets barring Shanghai Composite and Nikkei 225 concluded Wednesday’s trade in red amid renewed concerns over US military intervention in Syria which weighed on sentiment. Seoul shares also slipped on profit-taking following a recent rally, but firm market fundamentals contained losses. Foreign investors turned net sellers for the first time since August 22. They sold a net 5.8 billion won ($5.28 million) of local stocks. Indonesia’s finance minister has called on the US Federal Reserve to provide more clarity about when it will wind down its stimulus program. Southeast Asia’s biggest economy and other emerging markets have been hit by huge outflows of foreign cash since May when the Fed first signaled it may taper off the $85 billion a month bond-buying program.

The HSBC China Services Purchasing Managers’ Index rose to 52.8 in August, hitting a five-month high and rising from 51.3 in July, HSBC Holdings PLC stated. The HSBC China Services PMI accelerated in August thanks to the growth of new business. A reading above 50 in the gauge of nationwide service-sector activity indicates on-month expansion. The HSBC China Services PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in more than 400 private service-sector companies. Chinese Premier Li Keqiang stated that the country is on track to fulfill its growth target of 7.5% this year and the country will see a diamond decade of closer cooperation with ASEAN members.