Markets bounce back in style; snaps the session and week with good gains

Friday proved a good day of trade for the Indian markets when the benchmarks reversing their last session's fall posted good gains, though they fell short of recovering all their losses but still managed to post decent gains for the week. Once again the guiding factor was the global markets, albeit positive for the day which helped the domestic markets to remain in fine shape. The gains were spread across the sectors, however, banking that had suffered sharp profit booking in last session showed remarkable come back and strengthened the market.

Earlier, the markets made a positive start after US indices ended higher overnight on getting report of preliminary manufacturing index, which expanded at the fastest pace in almost four years in February. The Asian markets outside China too made decent gains and boosted the morale of the local markets. Later the European markets made a cautious but positive start awaiting a US report on sales of previously-owned homes, slated to be announced later in the day.

Back home, the market showed a steady trade going to the F&O expiry week, there was not even iota of profit booking seen throughout the trade and benchmarks once after acquiring a high range kept gyrating within the limits. The good thing of the trade was that not only the blue-chips but the broader indices equally participated in the upmove. Traders were encouraged by the International Monetary Fund (IMF) revising its previous forecast of GDP growth upwards to a 4.6 per cent in FY14 and an improvement to 5.4 per cent in FY15. However, it has recommended India to go for more interest rate hikes to tackle high inflation and its expectations. On the sectoral front, all the beaten down sector showed smart recovery and banking along with Capital Goods, IT and FMCG surged by over a percent. In non sectoral gauges the Cement sector stocks were in most jubilant mood on some reports of rise in cement prices across the region.ACC was up by 6%, UltraTech Cements gained 5.29% and Ambuja Cements surged by 6.16%. On the other hand the telecom stocks remained in somber mood since beginning on some brokerage downgrade after the intense bidding in the recent 2G auction and after the Department of Telecom issued the much-awaited guidelines for merger and acquisition (M&A) in the industry. The operators have said that the clause that merged entity would need to pay the market price for the entire spectrum holding minus the entry fee already paid by the seller would increase M&A costs and potentially scuttle a lot of deals.

The market breadth remained in favour of advances, as there were 1,480 shares on the gaining side against 1,182 shares on the losing side, while 154 shares remained unchanged.

Finally, the BSE Sensex gained 164.11 points or 0.80%, to settle at 20,700.75, while the CNX Nifty added 64.00 points or 1.05% to settle at 6,155.45.

The BSE Sensex touched a high and a low of 20,725.04 and 20,599.91, respectively. The BSE Mid cap index was up by 0.71%, while the Small cap index gained 0.49%.

The top gainers on the Sensex were Axis Bank up by 2.85%, L&T up by 1.89%, ITC up by 1.83%, Tata Steel up by 1.80% and ICICI Bank up by 1.62%, while Bharti Airtel down by 2.91%, Sun Pharma down by 0.82%, Maruti Suzuki down by 0.52%, Cipla down by 0.51% and Hero MotoCorp down by 0.51% were the top losers in the index.

On the BSE Sectoral front, Capital Goods up by 1.24%, FMCG up by 1.20%, Bankex up by 1.16%, IT up by 1.16% and Metal up by 0.85% were the top gainers, while Realty down by 0.10% was the only loser in the space.

Meanwhile, the International Monetary Fund (IMF) has lauded India's ability to keep a tight check on spending and monetary policy in the face of snail-paced economic growth and soaring inflation, especially amid difference of opinion over handling these two toxic factors between the government and the Reserve Bank of India (RBI). It was all praises for Indian authorities for their ability to maintain macroeconomic and financial stability amid a challenging macroeconomic landscape.

In consonance with the views, while Finance minister P Chidambaram slashed spending and put in place several measures to ensure that the fiscal deficit was contained at desired level, RBI Governor Raghuram Rajan, a former IMF chief economist, raised the key repo rate by 75 basis points to 8.00 percent since becoming head of India's central bank in September.

IMF however has recommended RBI to go for more interest rate hikes, given the sticky nature of inflation. Further, it also revised its previous forecast upwards to a 4.6 per cent GDP growth in FY14, which would improve to 5.4 per cent in FY15. Though, the new growth estimates are higher than the IMF’s previous forecast of 3.75 per cent in the current fiscal and 5.1 per cent in the next fiscal, India is way more optimistic about economic recovery, given that Interim Budget 2014-15 has pegged the economy’s growth at 4.9 per cent this fiscal and at least 6 per cent in FY15.

Further, the report, which comes just ahead of spring meeting of IMF, said that India was successful to shore up its growth and revive investor sentiments since July last year. The report pointed that while, no further policy changes were assumed in the baseline, but slightly stronger global growth, improving export competitiveness, a favorable monsoon, and a confidence boost from recent policy actions would deliver a modest growth rebound in the near term.

The CNX Nifty touched a high and low of 6,159.65 and 6,108.00 respectively.

The top gainers of the Nifty were Ambuja Cements up 6.25%, ACC up by 6.04%, UltraTech Cement up by 5.70%, HCL Tech up by 4.56% and BPCL up by 4.44%. On the other hand, Bharti Airtel down by 2.86%, Ranbaxy down by 2.00%, DLF down by 0.94%, Cipla down by 0.73% and Maruti Suzuki down by 0.63% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.16%, Germany's DAX was up by 0.01% and United Kingdom's FTSE 100 was up by 0.29%.

The Asian markets barring Shanghai Composite concluded Friday's trade in green, with the regional benchmark index rebounding from their biggest drop in two weeks, after a larger-than-forecast climb in a measure of US manufacturing tempered concern about global growth. Japanese Nikkei 225 traded higher as the yen weakened against the dollar and after the US manufacturing hit its highest in nearly four years. The yen fell against its major rivals as minutes from the Bank of Japan’s Jan. 22 policy meeting showed some board members saying that the central bank should provide a clearer explanation that an expected decline in second-quarter domestic growth was factored into its outlook. Japan is on a smooth path toward achieving the 2% inflation target and the Bank of Japan's decision to expand its loan programs will help buoy economic growth.

China's equity market dropped on concerns that the economy might be slowing after a gauge of Chinese manufacturing fell to a seven-month low. Hong Kong's inflation rose more than expected in January to the highest level since July last year. As per the information given by Census and Statistics Department, the composite consumer price index increased 4.6 percent year-on-year in January. The rate was forecast to rise marginally to 4.4 percent from 4.3 percent.