Benchmarks exhibit boisterous performance; Sensex regains 21,000 mark

Boisterous benchmarks showcased an enthusiastic performance on Friday, by rallying close to two percentage points and breaking lots of psychological levels in their northbound journey. Sentiments remained up-beat since beginning as key bourses opened with a decent gap on upside and there appeared not even an iota of profit booking in the session, as the benchmarks managed to fervently rally from strength to strength as investors continued hunt for fundamentally strong stocks. Frontline indices managed to end the session near their intraday high, surpassing their crucial 6,250 (Nifty) and 21,000 (Sensex) levels as investors took to hefty across the board buying.

Sentiments remained bolstered after finance minister P Chidambaram said that India is better prepared than in May to deal with any consequences of the US Federal Reserve’s move to wind down its economic stimulus. He also said that Government is of the view that the markets had already factored in the US Federal Reserve’s decisions and, therefore, is not likely to be surprised by these moderate changes. The investors’ morale also got boosted by data showing that foreign funds made heavy purchases of Indian stocks on December 19, 2013 despite tapering announcement. Foreign institutional investors (FIIs) bought shares worth a net Rs 2264.11 crore on Thursday. 

Firm opening in European counterparts too supported the domestic markets with CAC, DAX and FTSE all trading higher in early deals after the US Federal Reserve pledged to keep the cost of borrowing at rock-bottom levels for longer than expected, offsetting its decision to begin trimming back its massive $85bn a month stimulus programme. Though, Asian markets ended the session mixed with Japanese market ending modestly in green, while the Chinese markets losing considerable ground.

Back home, rally in index heavyweight Reliance Industries (RIL) was the major factor of markets up-move. The stock zoomed over four and a half percent after Cabinet Committee on Economic Affairs (CCEA) gave approval to sell D6 gas at higher price. The new rate will come into effect from April 1, 2014. Software stocks like, Infosys, Wipro, HCL Technologies and TCS all edged higher after top US software consultancy firm Accenture announced positive results that exceeded street expectations. Besides, fertilizer stocks RCF, Coromandel International, National Fertiliser and Zuari Agro, too gained momentum on CCEA’s decision of revising the prices of natural gas, which is an input to manufacturing fertiliser and electricity generation, every quarter based on the average of the past four quarters, but with a gap of one quarter. Sugar stocks too remained on the buyers’ radar with scrips like, Rana Sugars, Shree Renuka Sugars, Balrampur Chini, Bajaj Hindusthan, etc edged higher as the Cabinet Committee on Economic Affairs (CCEA) approved an interest-free loan of Rs 6,600 crore for the ailing sugar industry to pay off cane arrears.

The NSE’s 50-share broadly followed index Nifty rose by around one hundred and ten points to surpass its psychological 6,250 level, while Bombay Stock Exchange’s sensitive Index -- Sensex surged by over three hundred and seventy points to end above the psychological 21,000 mark.

Broader markets too traded inline with benchmarks and ended the session with a gain of around one and a half percent. Moreover, the market breadth remained in favour of advances, as there were 1,522 shares on the gaining side against 991 shares on the losing side, while 158 shares remained unchanged.

Finally, the BSE Sensex surged by 371.10 points or 1.79%, to settle at 21079.72, while the CNX Nifty gained 107.60 points or 1.74% to settle at 6,274.25.

The BSE Sensex touched a high and a low of 21117.99 and 20745.94, respectively. The BSE Mid cap index was up by 1.73%, while the Small cap index gained 1.28%.

The top gainers on the Sensex were RIL up 4.58%, ONGC up 3.93%, Wipro up 3.60%, Mahindra & Mahindra up 3.35%, and HDFC up 3.05%, on the flip side SSLT down 1.05%, Sun Pharma down 0.69%, and Jindal Steel down 0.50%, were the only losers on the index.

On the BSE Sectoral front, Oil & Gas up by 3.83%, Realty up by 2.76%, Auto up by 2.02%, PSU up by 1.97%, and Bankex up by 1.81%, were the top gainers, while Consumer Durables down by 1.45%, was the only loser on the sectoral front.

Meanwhile, the government has decided to extend interest-free loans of Rs 6,600 crore to cash-starved sugar mills to make payments to cane farmers. This development is definitely a welcome move for the industry as sugar millers, who are reeling under the impact of high cane costs amidst a bearish trend in sweetener prices. These millers are currently saddled with the payment arrears for last season estimated at Rs 3,400 crore as dues for the current season have started building up with the pick-up in cane crushing.

Going by the proposal moved by the Ministry of Food, the Cabinet Committee on Economic Affairs (CCEA), in its meeting on Thursday, allowed an interest subvention of up to 12% on the loans, which will be coming from the Sugar Development Fund and can be repaid in five years with a moratorium of two years. Further, the entire interest burden, estimated at Rs 2,750 crore over the next five years, will be borne by the government.

The food ministry proposal before the CCEA was based on the recommendations of the informal group of ministers, which was set up by the Prime Minister under the chairmanship of agriculture minister Sharad Pawar to address the industry's cash crunch. However, the loan amount which has been approved, is lower than the Rs 7,200 crore recommended by an informal Group of Ministers (GoM). Nevertheless, the ministry had also originally proposed that 7% of the interest burden would come from the Sugar Development Fund and the rest from the exchequer, which the CCEA revised.

As per CCEA’s decision, the loans will be provided by banks to sugar mills exclusively for making payments to sugarcane farmers, including arrears. However, as per the condition laid down earlier, the loans will be equivalent to the excise duty paid by the mills in the past three years. In another relief for the sugar industry, the CCEA also approved the exports of sugar without any quantitative restrictions.

The CNX Nifty touched a high and low of 6,280.55 and 6,170.35 respectively.

The top gainers on the Nifty were Reliance Industries up by 4.82%, ONGC up by 4.13%, Wipro up by 3.63%, Cairn India up by 3.53%, and HDFC up by 3.53%, On the other hand, SSLT down by 1.32%, Grasim Industries down by 0.58%, Sun Pharmaceuticals Industries down by 0.57%, Jindal Steel & Power down by 0.38%, and Larsen & Toubro down by 0.03%, were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.25%, Germany's DAX was up by 0.47%, and United Kingdom's FTSE 100 was up by 0.09%.

The Asian markets concluded Friday’s trade on a mixed note with Chinese stocks closing in red as local money market rates hit six-month high. The Shanghai Composite dropped as the benchmark seven-day repurchase agreement rate hit 7.8%. Money-market rates have climbed sharply in recent days, and continued to rise even after the People’s Bank of China stated that it undertook short-term liquidity operations to offer an appropriate amount of funds to the money market. The Indonesian banking index fell after central bank stated that it plans to increase banking capital reserves. Bank Indonesia stated that Indonesian banks need to boost their core capital to 6 percent of risk-weighted assets from 5 percent so that they are more resilient should there be a financial crisis.

The Bank of Japan kept its asset-purchase levels and overall monetary policy unchanged, a widely expected move that did little to move currencies. The BOJ will keep money market operations so that the monetary base increases at an annual pace of about Y60 to Y70 trillion. The central bank’s statement also retained previous language on the economic outlook, saying the nation’s economy has been recovering moderately, while inflation expectations appear to be rising on the whole. The BOJ expects the year-on-year rate of increase in consumer prices to rise for the time being toward its 2015 goal of a stable 2% inflation rate.