Exit polls prop-up markets; Nifty regains 6,200 mark

Buoyed by hopes of 4-0 sweep for Bharatiya Janata Party (BJP) in state elections, Indian equity benchmarks exhibited a strong performance on Thursday with frontline gauges garnering gain of over a percentage point. There was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Both the benchmarks scaled past the psychological levels of 20,950 (Sensex) and 6,200 (Nifty). Sentiments remained up-beat since beginning as key bourses opened with a huge gap on upside after exit polls suggested a strong showing for the key opposition party in state elections held since November. Results for state elections are due on Sunday. Confirmation of a strong showing by the opposition Bharatiya Janata Party would bolster the chances of victory in general elections due by May. Some support also came in from currency front, as the rupee reached to its strongest level against the dollar in a month.

However, the markets came off their day’s highs as select investors started booking profits on higher levels after Moody Investors Service, while retaining its stable outlook of India’s lowest investment grading, warned that country could be downgraded if the government adopts policies that harm fiscal and growth scenario. Some portion of bourses’ gains were also tempered as no business was transacted on the first day of Parliament’s Winter Session, which began on Thursday, as the opposition strongly opposed the centre’s move to bring the Anti-Communal Violence Bill among other important legislations.

Global cues too remained sluggish , as most of the Asian equity benchmarks ended the session in the red with traders remaining concerned about the uncertainty about the outlook for the Federal Reserve’s stimulus program after payroll processor ADP reported a stronger than expected private sector job growth in the month of November. Moreover, European markets too made a flat start as investors remained on sidelines ahead of British budget update and interest rate decisions from both the Bank of England and the European Central Bank.

Back home, rally in oil and gas counter too supported the sentiments, as the Paris-based International Energy Agency said that India would be the largest single source of growth in global oil demand after 2020. Meanwhile, telecom stocks viz. Idea Cellular, Bharti Airtel and Reliance Communication all edged higher after the Cellular Operators Association of India (COAI) said that GSM mobile operators added 16.6 lakh new subscribers in rural areas in October to take the overall base in such areas to 27.43 crore.

The NSE’s 50-share broadly followed index Nifty rose by over eighty points to regain its psychological 6,200 level, while Bombay Stock Exchange’s sensitive Index -- Sensex surged by over two hundred and fifty points to end above the psychological 20,950 mark.

Broader markets too struggled to get some traction and ended the session in the red. The market breadth remained in favour of advances, as there were 1,269 shares on the gaining side against 1,247 shares on the losing side, while 167 shares remained unchanged.

Finally, the BSE Sensex surged by 249.10 points or 1.20%, to settle at 20957.81, while the CNX Nifty gained 80.15 points or 1.30% to settle at 6,241.10.

The BSE Sensex touched a high and a low of 21165.60 and 20929.20, respectively. The BSE Mid cap index was up by 0.13%, while the Small cap index gained 0.39%.

The top gainers on the Sensex were ICICI Bank up 6.66%, HDFC Bank up 4.52%, L&T up 4.49%, BHEL up 3.93%, and Maruti Suzuki up 3.67%, on the flip side Sun Pharma down 2.24%, Dr Reddys Lab down 1.52%, ITC down 1.39%, NTPC down 0.96%, and Hindustan Unilever down 0.90%, were the top losers on the index.

On the BSE Sectoral front, Bankex up by 4.44%, Capital Goods up by 3.59%, PSU up by 1.51%, Realty up by 1.48%, and Power up by 1.33%, were the top gainers, while, Healthcare down by 1.47%, FMCG down by 0.94%, IT down by 0.51%, and Teck down by 0.36%, were the only losers on the sectoral front.

Meanwhile, International credit rating agency, Moody’s Investors Service, while retaining stable outlook on India’s lowest investment rating, warned of a weak economy, funding challenges, political uncertainties and a scale back of the quantitative easing by the US Federal Reserve, having negative effect on Indian companies.

In its latest credit analysis report, the rating agency highlighted that downward pressure on the rating could develop, if policies that impair the growth and fiscal outlook, were implemented, or if there was a material decline in foreign exchange reserves coverage of external debt and imports. Besides, the rating agency underscored that the country’ s sovereign rating could also be lowered if forex reserves decline significantly, public sector banks asset quality deteriorated further and high inflation persisted.

Further, Moody’s assigned a negative outlook for India’s non-financial corporate, thereby reflecting macro-economic challenges over next twelve months. While, it assigned ‘negative’ outlook for steel, metals and mining, automobile, and oil refining and marketing, it allotted stable outlook to telecommunications, information technology and business process outsourcing, and exploration and production sector.

It further added that it expects country’s GDP growth to remain weak at 5.5% in the fiscal year ending March 2015, mainly because elections could delay reforms needed to revive the economy. Also, it highlighted that India’s investment climate and competitiveness indicators were weaker than those of similarly rated countries. However, it did make a note of increased policy efforts to induce investment in the last year, the impact of which will not be evident in the near term.

The CNX Nifty touched a high and low of 6,300.55 and 6,232.00 respectively.

The top gainers on the Nifty were IDFC up by 6.78%, ICICI Bank up by 6.63%, HDFC Bank up by 4.62%, Larsen & Toubro up by 4.60%, and BHEL up by 4.19%, On the other hand, Sun Pharmaceuticals Industries 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%, were the top losers.

Most of the European markets were trading in red, France's CAC 40 was down by 0.09%, and United Kingdom's FTSE 100 was down by 0.03%, while Germany's DAX was up by 0.08%.

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.