Sensex showcases remarkable turnaround; climbs to a month high levels

Stock markets in India showcased a remarkable turnaround on the week’s last trading session as the frontline equity indices, after hitting the lowest point of day in mid noon trades, took a turn for the better, trimming the session’s around a percent losses and eventually settling with a green tick. The benchmark equity indices not only went on to accumulate the biggest amount of weekly gains in calendar year 2012 but also touched the highest point in around a month, sailing well beyond the psychological 16,700 (Sensex) and 5,050 (Nifty) levels.

After the weak opening and reeling under severe selling pressure for most part of the day, not many had hoped that Indian bourses would stage such a bounce back especially on a day when stock markets across the globe wilted after Federal Reserve Chairman Ben Bernanke dimmed hopes for more stimulus measures to prop up growth in world’s largest economy.

However, the downside in markets remained capped after reports showed that Chinese central bank unexpectedly slashed benchmark lending and deposit rates by 25 basis points in its bid to prop up flagging growth rate while giving banks additional flexibility to set competitive lending and deposit rates. The cues from European markets too remained pathetic as they were grinded lower after reports showed that German exports decreased more than expected and Spain’s debt rating downgrade to within two notches of junk.

Back home, the domestic markets ricocheted around one and half a percent from the lowest point in session in the last leg of trade as investors relentlessly bought blue-chip stocks from the Capital Goods, high beta realty and Oil & Gas spaces. Meanwhile, the upside in markets was limited as investors’ hopes of monetary easing by RBI in its forthcoming mid-quarter policy review on June 18, were doused to some extent by comments of one of Reserve Bank of India Deputy Governor that interest rates in India were not too high to adversely impact economic growth.

Sentiments also got undermined after money market woes resurfaced as Indian rupee snapped the four session appreciating streak and weakened against the US dollar. Besides, shares of infrastructure related companies rallied fervently for yet another session after the Prime Minister emphasized on boosting investment in this sector. On the other hand, investors exerted some selling pressure on IT and TECk counters, which settled with moderate cuts.

On the global front, leads from the markets across the globe too were un-supportive as benchmarks in Japan got thrashed by over two percent despite the encouraging Japanese GDP data, which showed that world’s third largest economy grew at a faster than expected rate of 4.7 percent on annualized basis in the January-March quarter compared with the initial estimate of 4.1 percent. The European markets too traded on a gloomy note with all indices trading with around a percent cuts.

Back home, the NSE’s 50-share broadly followed index Nifty, added over one third of a percent gains to settle above the psychological 5,050 support level while Bombay Stock Exchange’s Sensitive Index - Sensex gained about seventy points to finish above the crucial 16,700 mark. Moreover, the broader markets too settled on a positive note but went on to underperform their larger peers and closed with marginal gains of less a quarter percent.

The markets rose on larger volumes of over Rs 1.45 lakh crore while the turnover for NSE F&O segment also remained on the higher side as compared to that on Thursday, at over Rs 1.05 lakh crore. The market breadth remained optimistic as there were 1,371 shares on the gaining side against 1,357 shares on the losing side while 118 shares remained unchanged.

Finally, the BSE Sensex gained 69.82 points or 0.42% to settle at 16,718.87, while the S&P CNX Nifty surged 18.70 points or 0.37% to close at 5,068.35.

The BSE Sensex touched a high and a low of 16,767.77 and 16,485.02 respectively. The BSE Mid cap and Small cap indices rose 0.22% and 0.20% respectively.

Sterlite Inds up 3.50%, GAIL India up 3.06%, L&T up 2.53%, BHEL up 1.58% and HUL up 1.36% were the major gainers on the Sensex, while Maruti Suzuki down 1.66%, Infosys down 1.38%, ONGC down 1.37%, Bajaj Auto down 1.06% and TCS down 0.75% were the losers on the index.

On the BSE sectoral space, Capital Goods up 1.78%, Realty up 1.40%, FMCG up 0.89%, Power up 0.74% and Bankex up 0.51%, while IT down 0.75%, TECk down 0.38%, Consumer Durables down 0.13%, Healthcare down 0.01% were the only laggards on the BSE sectoral space. 

Meanwhile, after vowing to resort to unpopular austerity measures to deal with India’s fiscal problems last month, Union Finance Minister Pranab Mukherjee unveiled a slew of austerity measures which according to preliminary estimates could help the government save around Rs 1,000 crore of the public exchequer. The finance ministry’s austerity measures came after recent series of economic reports highlighted that the nation’s economy is going through a turbulent phase and has slowed to the lowest levels not seen in last nine years while government’s fiscal deficit widened.

In its bid to cut spending, the ministry unveiled various measures including cutting down on non-plan expenditure by 10 percent, barring ministers and official delegations from holding conferences in five-star hotels, buying new vehicles or travelling abroad unless absolutely necessary. The austerity steps also impose a total ban on creating new government posts.

Of the government’s total budgeted expenditure of Rs 14.9 lakh crore for 2012-13, plan expenditure stands at Rs 5.2 lakh crore while non-plan expenditure is Rs 9.7 lakh crore. It is estimated that the 10 percent cut on non-plan expenditure would additionally save the government more than Rs 50,000 core which could lead the government to borrow less and still meet fiscal deficit targets. With the fiscal deficit shooting up to 5.7% of the GDP in previous fiscal due to higher subsidy expenditure, Mukherjee in his budget 2012-13 had announced to limit its subsidies to 2% of the GDP.

The austerity measures were also extended to government’s autonomous bodies funded by the government like Agricultural and Processed Food Products Export Development Authority; Federation of Indian Export Organisations; Telecom Regulatory Authority of India; Income Tax Appellate Tribunal; Securities and Exchange Board of India; National Highways Authority of India; Pension Fund Regulatory Development Authority; Reserve Bank of India and National Institute of Public Finance & Policy.

The S&P CNX Nifty touched a high and low 5,084.45 and 4,994.80 respectively.

The top gainers on the Nifty were R-Infra up 5%, GAIL up 4.15%, Sterlite Inds up 3.70%, L&T up 3.47%, IDFC up 2.78%. On the flipside, Cairn down 1.65%, ONGC down 1.63%, Maruti Suzuki down 1.42%, Power Grid down 1.16%, Bajaj Auto down 1.16% were the top losers on the index.

The European markets were trading on a negative note, as France's CAC 40 plunged 1.05%, Germany's DAX descended 0.90% and United Kingdom’s FTSE 100 tanked 0.98%.

After three days of continuous rally, sentiments turned bearish in the Asian region and all the Asian equity indices shut shop in the negative terrain on last trading day of the week as market participants remained influenced by the disappointing overnight cues from US markets after Federal Reserve Chairman Ben Bernanke dimmed hopes for more stimulus measures while Fitch downgraded Spain’s credit rating also dampened the traders’ sentiment. However, the downside in markets remained capped after reports showed that Chinese central bank unexpectedly slashed benchmark lending and deposit rates by 25 basis points in its bid to prop up flagging growth rate while giving banks additional flexibility to set competitive lending and deposit rates.

Meanwhile, Hong Kong and Shanghai shares fell 0.51% and 0.94% respectively on Friday despite China’s decision to cut interest rates for the first time in three-and-a-half years to kickstart economic growth. While, Japanese Nikkei dropped over two percent as lurking fears on the eurozone, disappointment with the U.S. Federal and caution on China’s economy weighed on sentiment. The drop was also triggered as investors booked profits after a major settlement of June options earlier in the session.