Post Session: Quick Review

Exit polls that predicted a strong showing for the key opposition party in state elections, led to cheers for Dalal Street, which in sheer exuberance, locked gains of 1.25%, settling little below the psychological 21,000 (Sensex) and 6,250 (Nifty) levels respectively. After trading strength to strength in the first half of the trading session, benchmarks started retreating from day’s high point from the early afternoon deals on account of sustained selling pressure and lack of buying interest near record high levels that took benchmarks ending near day’s lowest point.

Besides, Moody’s warning of a weak economy, funding challenges, political uncertainties and a scale back of the quantitative easing by the US Federal Reserve, could have negative effect on Indian companies, reflecting macro-economic challenges over next twelve months, also tempered some of the  gains. Additionally, investors also booked portion of their profit after no business could be transacted on the first day of Parliament's Winter Session, as the opposition strongly opposed the centre's move to bring the Anti-Communal Violence Bill among other important legislations.

Nevertheless, it was nothing short of dream run for bourses up till morning deals, which regardless of the negative global set-up, vaulted on confirmation of a strong showing by the opposition Bharatiya Janata Party (BJP) when results are out on Sunday, a factor widely seen as bolstering Narendra Modi’s led government chances of victory in general elections due by May. Meanwhile, prevailing caution on how soon the Fed would begin its stimulus taper also triggered some profit-booking.

On the global front, Asian markets were mostly under water on Thursday as persistent speculation about the fate of US stimulus that lifted bond yields globally, while Japanese shares struggled to find their footing after a spill. Additionally, European shares fell for a fourth straight day to trade near a seven-week low early on Thursday, with investors taking some money off the table before central bank rate decisions and Friday's crucial US jobs data. Although the Bank of England and the European Central Bank are likely to hold off any fresh policy action later in the day, the ECB's new economic forecasts will be in focus for signs of prolonged price weakness that could lead it to act again next year.

Back on the home turf, the secular trend at Indian equity markets was led by the banking counter, following it were stocks from Capital Goods and Realty pivotal. Banking shares gained traction after Rupee appreciated to five weeks high level on increased selling of dollar by foreign banks. Further, acting against the positive forces were stocks from HealthCare, Fast Moving Consumer Goods and Information Technology counters that witnessed maximum profit-booking. Pharmaceuticals stocks, viz, Strides Arcolab and Jubilant Life Sciences, fell on regulatory concerns. While, Jubilant Life Sciences tanked over 10% on being issued a Warning Letter (WL) by US Food and Drug Administration (FDA for one of its manufacturing facilities, Jubilant HollisterStier, LLC (JHS) located at Spokane, Washington State. Shares of Strides Arcolab crashed 14% on the increased likelihood of the company not receiving $250 million of the USD 1.75 billion from Mylan, unless regulatory concerns (warning letter from USFDA) at one of the Indian drugmaker's factories are resolved. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1267: 1244, while 172 scrips remained unchanged. (Provisional)

The BSE Sensex gained 240.08 points or 1.16% to settle at 20948.79.The index touched a high and a low of 21165.60 and 20929.20 respectively. Among the 30-share Sensex, 19 stocks gained, while 11 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended higher by 0.09% and 0.44% respectively. (Provisional)

On the BSE Sectoral front, Bankex up by 4.33%, Capital Goods up by 3.59%, PSU up by 1.44%, Realty up by 1.35% and Power up by 1.31% were the top gainers, while Healthcare down by 1.53%, FMCG down by 0.94%, IT down by 0.54% and Teck down by 0.41% were the only losers in the space. (Provisional)

The top gainers on the Sensex were ICICI Bank up by 6.74%, HDFC Bank up by 4.45%, L&T up by 4.43%, BHEL up by 3.93% and Maruti Suzuki up by 3.52%, while, Sun Pharma down by 2.44%, Dr Reddys Lab down by 1.65%, ITC down by 1.10%, Hindustan Unilever down by 0.97% and SSLT down by 0.85% were the only losers in the index. (Provisional)

Meanwhile, in a bid to boost returns on pension funds and to develop the domestic bond markets, the government has eased the pension fund investments norms. The move will allow a portion of the country`s $80 billion in employee pensions to be invested in a wider array of debt. Marking the first overhaul of investment rules in a decade, Labour Ministry’s new rules will give more flexibility for Fund managers handling money on behalf of the Employees’ Provident Fund Organisation (EPFO) to invest in a range of financial instruments including corporate bonds. Further the relaxed rules will also let pension fund managers decide on strategic asset allocation and ranges, further it is expected to increase returns by 10 to 20 percent annually on the investments. Meanwhile, EPFO board will approve the changes in Labour Ministry new rules before they become official.

As per the new guidelines, the government will allow up to 5 percent of total pension funds to be invested in money markets, including treasury bills. It will also relax rules on corporate bond investments, allowing up to 55 percent of pension funds to be invested in debt issues by companies, banks and state-run financial firms, as against present 30 percent of funds in debt of these companies. Furthermore, the government will also allow up to 55 percent of the pension funds to be invested in a newly merged category comprising government and state bonds. Currently, managers have to deploy 25 percent of EPFO funds into government bonds and 15 percent into state bonds. Meanwhile, the government has not yet allowed the pension funds to be invested in equities due to high risk. 

Currently, the EPFO oversees the pensions of around 85 million public and private sector employees across India and has permitted fund managers handling its funds to invest only in government bonds and higher-rated corporate bonds.  In order to boost Indian pension sector, the government has recently cleared pension Bill which has opened up Indian pension fund management to foreign players, with foreign direct investment (FDI) limit of 26%.

India VIX, a gauge for markets short term expectation of volatility lost 8.56% at 21.68 from its previous close of 23.71 on Wednesday. (Provisional)

The CNX Nifty gained 76.45 points or 1.24% to settle at 6,237.40. The index touched high and low of 6,300.55 and 6,232.00 respectively. Out of the 50 stocks on the Nifty, 34 ended in the green, while 16 ended in the red.

The major gainers of the Nifty were IDFC up 6.78%, ICICI Bank up by 6.63%, HDFC Bank up by 4.62%, L&T up by 4.60% and BHEL up by 4.19%. The key losers were Sun Pharmaceuticals down by 2.43%, Dr. Reddy's Laboratories down by 1.61%, Lupin down by 1.41%, ITC down by 1.33% and Hindustan Unilever down by 1.22%. (Provisional)

Most of the European markets were witnessing some buying after initial set-back, Germany’s DAX was up by 0.15% and the United Kingdom’s FTSE 100 inched higher by 0.02%, while France’s CAC 40 was down by 0.01%.

The Asian markets barring KLSE Composite concluded Thursday’s trade in red on speculation that Federal Reserve could start cutting back its bond purchases earlier than expected. Indonesia’s weakening currency has yet to pose a threat to the country’s investment grade status, according to Moody’s Investors Service, which cited the country’s resilient growth and low debt burden. The rating agency warned government officials over mounting risk from rising private debt, which could make the country more susceptible to external financial shocks. Bank of Japan Governor Haruhiko Kuroda pledged to counter any new downside risks to the goal of sustained annual inflation of 2% by 2015. Kuroda stated that BoJ would act by adjusting monetary policy without hesitation.