Post session - Quick review

Retaliating bulls woke up from their slumber to set the scores against the rampant bears on the final day of the November futures and options (F&O) series albeit global turmoil, after an unsuccessful German bond sale raised alarm that Europe's ever-worsening sovereign debt crisis is starting to affect even the continent's economic powerhouse. Total bids at yesterday’s auction of 10-year securities amounted to 3.889 billion euros, out of a maximum target for the sale of 6 billion euros, indicating that investors were now skeptical even about the safest assets in the euro zone.

Back on domestic front, volatility which remained the trait of trade for the week throughout the expiry of November contract amidst lingering concerns over high inflation, slowing growth and a depreciating rupee failed to dominate the trade for yet another session. Market participants indulged in bottom finishing in the broadly oversold markets that scaled fresh 2011 low’s in the previous session,  also supported with the single digits weekly food inflation numbers, which dropped and returned to single digit to 9.01 percent for the week ended November 12 from 10.63 percent in the preceding week. Percentage of inflation in the corresponding week in the preceding year was 11.38 percent.

On the global front, negative leads from overnight trade at Wall Street dictated the momentum of bourses in early deals. US stocks slumped on Wednesday, sending the Standard & Poor's 500 Index down for a sixth straight day, after data showed that European services and manufacturing output shrank for a third month. Asian shares mostly nudged higher amidst speculation that China was aiming to ease its tight monetary policy, encouraged investor’s in building fresh long positions in risky asset class. Furthermore, European stocks rose for the first time in six days after German business confidence unexpectedly increased for the first time in five months in November, defying Europe’s worsening debt crisis also added to the risk appetite. US markets will be closed on Thursday for the Thanksgiving holiday and will have shortened hours on Friday.

Back on the home turf, the aggressive covering up of shorts in Auto, Capital Goods and TECk space led to delightful green close of BSE bellwether -Sensex- which registering gains of over 150 points from its previous close concluded the trade above the 15800 level. In a similar trend, broadly followed 50 share index -Nifty- on NSE despite gaining over 50 point shied away from the 4800 level. Meanwhile, on the broader space, the midcap index tailing the similar growth trajectory of frontline equity indices went home with gains of over a percent, while smallcap index too gained traction of over 0.25%. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1493:1294 while 105 scrips remained unchanged.

The BSE Sensex gained 169.82 points or 1.08% and settled at 15,869.79. The index touched a high and a low of 15,901.30 and 15,479.97 respectively. 24 stocks advanced against 6 declining ones on the index (Provisional)

The BSE Mid-cap index gained 1.70% while Small-cap index was up 0.56%. (Provisional)

On the BSE Sectoral front, Capital Goods up 2.58%, Auto up 2.24%, TECk up 1.61%, Power up 1.48% and HealthCare up 1.41% were the top gainers while Consumer Durables down 0.30% and FMCG down 0.09% were the only losers.

The top gainers on the Sensex were ONGC up 3.76%, Maruti Suzuki up 3.55%, L&T up 3.16%, M&M up 3.08% and BHEL up 2.85%.

On the flip side, Hero MotoCorp down 1.56%, Hindalco down 0.67%, Sterlite down 0.62%, Jindal Steel down 0.30% and HUL down 0.12% were the top losers on the index. (Provisional)

Meanwhile, in order to control the declining trend of rupee against dollar, the Reserve Bank of India (RBI) directed Indian companies to bring back offshore funds, raised via external commercial borrowing (ECBs) for the purpose of domestic business expenditure. Those funds need to be deposited with Indian banks.

The RBI said, 'the proceeds of the ECB raised abroad for rupee expenditure in India, such as, local sourcing of capital goods, on-lending to self-help groups or for micro credit, payment for spectrum allocation etc. should be brought immediately for credit to rupee accounts with AD category I banks in India.’

Besides, the RBI said these ECB proceeds cannot be used for investment in capital markets, real estate or for inter-corporate lending.  However, ECB proceeds meant only for foreign currency expenditure can be retained in abroad.

The rupee-dollar movement is a function of demand and supply, this step by the central bank is expected to strengthen rupee against dollar. Bringing back of money from abroad will create demand for rupee against the dollar, which in turn will help rupee to rise against the greenback.

Analysts are of the view that the measures taken by the RBI will stop rupee’s depreciation to an extent as some exporters and project finance companies seem to be holding back their money rise via ECBs in overseas. In the anticipation of further rupee depreciation, they are not bringing it now. For instance, if any firm takes a loan via ECB when rupee is at 48 per dollar, with rupee at 52, they will get benefit of Rs 4 per dollar.

In another move, the RBI has increased the ceiling of ECB rate. Firms can now borrow foreign funds at a higher rate at six months London Interbank Offered Rate (LIBOR) plus 350 basis points compared to LIBOR plus 300 basis points earlier, for an average maturity period of three to five years. For maturity period of more than five years, rates remain unchanged at 6 month LIBOR plus 500 bps. The enhancement in ceiling will be applicable up to March 31, 2012.

The change in rates is aimed at encouraging firms to raise more funds through ECBs, thereby bringing that money back to India. Sequentially, it will prompt dollar selling against the rupee. However, firms are less likely to go for more ECBs as the hedging cost is also very high in current condition.

The ECBs enable firms to borrow at a cheaper rate as domestic interest rates are costlier than international rates. However, RBI sets ceiling of ECB borrowing rate as excessive borrowings via ECBs will lead to drying up foreign exchange reserve, as firm borrowing funds via ECBs are required to repay their loans only in foreign currency. On November 23, rupee touched its lowest level of Rs 52.73 per dollar. This decline in rupee is expected to push inflation and adversely affect the capital market. 

India VIX, a gauge for market’s short term expectation of volatility lost 8.89% at 27.95 from its previous close of 30.68 on Wednesday. (Provisional)

The S&P CNX Nifty gained 50.05 points or 1.06% to settle at 4,756.50. The index touched high and low of 4,771.10 and 4,639.10 respectively. 38 stocks advanced against 11 declining ones while 1 stock remained unchanged on the index. (Provisional)

The top gainers on the Nifty were GAIL up 4.26%, ONGC up 4.12%, Sesa Goa up 3.73%, IDFC up 3.59% and Ambuja Cement up 3.45%.

 On the other hand, SAIL down 3.19%, Reliance Power down 2.61%, ACC down 1.84%, Hero MotoCorp down 1.58% and Ranbaxy down 0.62% were the top losers. (Provisional)

The European markets are trading in green, with France's CAC 40 up 1.68%, Germany's DAX up 1.82% and FTSE 100 up 0.81%.

Most Asian stock markets were slightly higher on Thursday, with several exchanges reversing morning losses amid a rise in US stock futures, even as many investors remained cautious after Germany’s failure to auction all the bonds it offered Wednesday. The surprising recovery in markets could be simply due to the fact that the sellers are exhausted and investors are looking to take advantage of recent share-price weakness to snap up some blue chips. China shares ended higher on Thursday, snapping six days of losses as property and financial shares turned higher. However, Nikkei average fell almost 2% to close at a two-and-a-half-year low on Thursday, hurt by a worrying German bond sale and expectations that mounting European debt concerns will continue to push overseas equities markets lower.

Earlier in the morning, Asian exchanges were lower due to continued worries over the euro zone’s debt crisis after slightly less than two-thirds of the bonds offered at a German auction were sold. There were also concerns over the Chinese economy as China watchers have forecasted the world’s second-biggest economy to see a slowdown in its growth momentum to 8.5% next year, due to weakening external demand and rising export prices caused by increasing wages and costs.