Post session - Quick review

Spirit at Dalal Street remained unscathed even as IMF, poured cold water and refuted reports that it was preparing a rescue package for Italy, as barometer gauges after starting on an optimistic note ended it glorified. However, trade at prolonged bear market just went from being “good” to “better” at the start of the fresh week as market participants placed all their conviction into risky equities amidst mounting hopes that euro zone leaders would unveil fresh measures to resolve the two-year-old debt crisis. Buoyed by a robust start to the US holiday shopping season, quiescent bulls woke up only to take control of barometer gauges, which plummeted over a nasty 4% in the previous week.  Better-than-expected retail sales during the Thanksgiving weekend in the United States, which hoisted hopes of a robust demand for the Christmas and New Year holiday season from the world’s biggest economy, led to early spurt at Dalal Street. A record 226 million shoppers visited stores and websites during the four-day US holiday weekend starting on Thanksgiving Day, according to early estimates by The National Retail Federation. The results for the first holiday shopping weekend showed that retailers' efforts to lure shoppers during the weak economy are working. Holiday shopping can account for 25 to 40 percent of a merchant's annual revenue.  However, bourses got turbo charged in early deals mainly on a report from Italian newspaper La Stampa which suggested that IMF was preparing a rescue plan worth up to 600 billion Euro’s for Italy.

Back on the home turf, investor’s showcased strong teeth of resilience even after government facing tough opposition from both political parties along with its own coalition allies, watered down its last week’s retail reform. Government changing the rule within days of announcing a supermarket policy said that, “Foreign supermarkets wanting to set up shop in India will have to source 30 percent of their produce from local, small industries”. Reacting to this, all retail stocks such as Pantaloon Retail, Shoppers Stop, V2 Retail, Trent and Koutons lost fervor.

However, market participants also overlooked fiscal deficit slippage concerns and added to their positions after Finance Minister Pranab Mukherjee on Friday sought parliamentary nod for a net additional spending of Rs 568.5 billion ($10.9 billion) for the fiscal year ending March, thereby increasing fears the government will not be able to meet its fiscal deficit aim of 4.6 percent of GDP.  Wide expectation that Indian economy will probably grew an annual 6.9% in the quarter through September, at its weakest pace in more than two years ahead of the release of the GDP data on Wednesday, also failed to hinder the momentum of the bourses.

Adding to the optimism was the positive close of Asian pacific markets. Meanwhile, sanguine trade of European shares too fuelled further rally. Back home, much to the benchmark’s delight, stocks from rate sensitive counters-Metal, Banking along with Oil & Gas, Public Sector Undertaking (PSU) endeavored to take the 30 share barometer index -Sensex- higher by over colossal 400 points, thereby sending it towards the crucial 16k psychological mark, similarly 50 share index on NSE-Nifty- accumulating over 100 points ended towards 4800 psychological mark. The broader indices too gaining sufficient traction ended up with gains of over 1.50%. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1924:833 while 93 scrips remained unchanged.

The BSE Sensex gained 465.93 points or 2.97% and settled at 16,161.36. The index touched a high and a low of 16,186.68 and 15,888.28 respectively. 28 stocks advanced against 2 declining ones on the index (Provisional)

The BSE Mid-cap index gained 1.49% while Small-cap index was up 1.77%. (Provisional)

On the BSE Sectoral front, Metal up 4.89%, Oil & Gas up 3.43%, Bankex up 3.40%, PSU up 3.02% and Realty up 2.62% were the top gainers while there were no losers.

The top gainers on the Sensex were Hindalco up 9.38%, Tata Motors up 5.36%, HDFC up 5.15%, Sterlite up 5.00% and Sun Pharma up 4.93%.

On the flip side, Bajaj Auto down 1.62% and Hero MotoCorp down 1.02% were the only losers on the index. (Provisional)

Meanwhile, in a crucial step towards gathering surplus cash of state-run companies for the delayed disinvestment, the finance ministry is likely to move a cabinet proposal to allow government companies to acquire equity in other public sector units (PSUs). After repeated delay on follow-on public offers (FPOs), because of the unstable and declining markets, the government feels that this move would allow it to strike the reserves of cash rich companies, helping achieve the disinvestment target of Rs 40,000 crore.

As per a finance ministry official, ‘there are some companies that have more surplus cash than their annual turnover. So, if they do not have any capital expenditure plans, they can invest this amount in some state-owned blue chip company.’

The finance ministry is already looking at other options, including cross-holding among state companies, share buyback, auction of strategic stakes and special dividend to raise revenues from state companies to fund its rising fiscal deficit. Further the ministry has already asked PSUs the details of their cash reserves and funds need for future to get an idea of kind of investment each company can make to buy equity in another state-run company.

Moreover, profit-making state companies have a certain amount of freedom of investments, but the disinvestment department feels that cabinet approval will allow it to facilitate this process of cross-holding among companies. It will also signal to the cash-rich PSUs the government's sanction to deploy their surpluses in shares of other PSUs without the fear of being questioned.

So far, the government has managed to raise Rs 1,145 crore from disinvestment, but Finance Minister Pranab Mukherjee earlier said that the government will stay with the Rs 40,000 crore target, signifying that it was ready to explore all options. Referring to auction or cross-holding mechanism finance ministry official said, ‘given the market conditions, no company will be willing to come with a public offer. The cabinet approval will give the government the scope to explore other options.’

The finance ministry, however, is already finding it difficult to get many of the administrative ministries to appoint independent directors on the board of their PSUs without which these companies cannot approach the capital market.

India VIX, a gauge for market’s short term expectation of volatility lost 8.51% at 26.64 from its previous close of 29.12 on Friday. (Provisional)

The S&P CNX Nifty gained 149.00 points or 3.16% to settle at 4,859.05. The index touched high and low of 4,859.10 and 4,766.40 respectively. 48 stocks advanced against 2 declining ones on the index. (Provisional)

The top gainers on the Nifty were Hindalco up 9.87%, IDFC up 6.76%, ACC up 6.72%, JP Associates up 6.43% and Kotak Bank up 6.23%.

On the other hand, Bajaj Auto down 1.36% and Hero MotoCorp down 0.06% were the only losers. (Provisional)

The European markets are trading in green, with France's CAC 40 up 3.80%, Germany's DAX up 3.08% and FTSE 100 up 2.28%.

Asian equity indices showcased a relief rally and jumped to higher levels in the Monday morning session as investors hunted for oversold but fundamentally strong bargains, after the recent streak of declines. Investors added positions with conviction on expectations that European leaders will boost efforts and announce some concrete steps to avert the nightmarish debt debacle. Reports that IMF is considering a rescue plan worth up to 600 billion euros for Italy, reinforced some amount of confidence in investors. Euro zone leaders also discussed a deal among themselves to institute strict new budget rules for their nations, instead of the long, complicated process of amending European Union treaties in order to act more quickly and reassure skeptical jittery financial markets. Moreover, retail sales broke records during the Thanksgiving weekend and surged to $52.4 billion, up 16% from $45 billion last year in the US, giving a much needed boost to a long-suffering economy and raising retailers' hopes for the best holiday shopping season ever.

The benchmarks in Hong Kong, Japan, South Korea and Taiwan rallied around two percent higher on the back of encouraging developments from both side of Atlantic. Shares in Hong Kong remained the top gainer in the space amid optimism that more will be done to contain Europe's sovereign-debt crisis and after Thanksgiving weekend sales.

Shanghai Composite climbed 14.91 points or 0.63% to 2,395.14, Hang Seng spurted 384.12 points or 2.17% to 18,073.60, Jakarta Composite gained 5.63 points or 0.15% to 3,642.82, Nikkei 225 soared 144.35 points or 1.77% to 8,304.36, Straits Times surged 38.53 points or 1.46% to 2,682.46, Seoul Composite zoomed 36.30 points or 2.04% to 1,812.70 and Taiwan Weighted jumped 128.46 points or 1.89% to 6,912.98.

Stock markets in Malaysia remained shut in observance of Awal Muharram.