Sensex jumps 387 on rate cut, fund flow hopes; banks shine

Equity benchmarks surged Tuesday in anticipation of global money flowing out of precious metals into equities, and back home, a reduction in interest rate by the RBI when it reviews the monetary policy on May 3. Gold partially recovered Tuesday after a steep fall in the last couple of days, but experts feel bull run in the yellow metal may have ended.

The BSE Sensex ended the day at 18744.93, up 387.13 points and the biggest single day gain in absolute terms in seven months. The NSE Nifty closed at 5688.95, up 120.55 points over its previous close.

Investors focused their attention on large cap stocks, which had taken a beating over the last couple of weeks.
Banking, auto and capital goods shares were the star performers of the day, as these sectors are seen benefiting the most from lower interest rates. IT shares struggled for direction, and so did metal shares.

Axis Bank, Oriental Bank, Federal Bank, Union Bank and HDFC Bank were the big gainers in the banking sector, rising 3-5 percent. Maruti, Mahindra & Mahindra, and Hero Motocorp were the best performers in the auto sector, gaining 3-4 percent.

But there was no respite for gold loan firms Manappuram Finance and Muthoot Finance, which extended Monday's losses, shedding around 10 percent each on concerns of customers defaulting on their loans against pledged jewelry.

Even as there is a strong case for the RBI to cut interest rates because of a steep fall in wholesale price inflation, some economists feel it will not really help revive growth.

"India faces structural problems on food price inflation and supply constraints, which cannot be addressed by lowering interest rates," said brokerage house Nomura in its note to clients, adding that rising consumer price inflation was still a big cause for concern.

Brokerage house Morgan Stanley too feels that lower interest rates are not good enough to solve India's macroeconomic problems.

"In our view, monetary policy has a limited role in reviving growth in the present cycle. We believe that policy reforms that help to correct the bad growth mix will be key to reviving growth," brokerage house Morgan Stanley said in its note to clients.

Brokers say the mood has turned positive in the hope that more money would move out of commodities in the coming days, and find its way into equities.

"It appears that commodities including precious metals have not benefited from the reflationary policies of central banks which include record low interest rates and massive balance sheet expansion. Instead financial assets, including bonds and equities have been the main beneficiaries," said an HSBC note on why investors could be moving away from gold.

India stands to gain from falling gold prices, as it will lower the import bill and ease the pressure on the rupee. The main worry at the moment is the slowdown in foreign fund flows over the last month. Overseas investors have been net sellers in April so far, and a weak macro environment and muted earnings growth could accelerate that trend, feels a section of the market.

But there are others who feel that worries of FIIs pulling out in a big way could be overdone.

"The gap between the Libor and the yield on the Nifty has dipped to a three-year low. Over the past four years this has been a precursor to a rebound in FII inflow," said a note by brokerage house Avendus.

The Nifty is trading back above its 200 day moving average of 5650 on hopes of RBI easing interest rates and lower current account deficit. The Indian Rupee has also cooled off to 54.42 per dollar. The market is factoring fall in gold and brent crude prices which would lead to lower import bills.

The Sensex is up 340 points at 18696 and the Nifty is up 102 points at 5671.

Heavy buying was seen in banks, realty, power, capital goods, auto and FMCG stocks.

Axis Bank, Maruti Suzuki, HDFC, IDFC and HDFC Bank are top gainers on the Nifty. Infosys, Cairn India, Sesa Goa, Lupin and HCL Tech are top losers.

Technical Analyst, Sudarshan Sukhani advises traders to hold on to long positions created at lower levels. No fresh long positions are recommended from his side at current levels.

Reliance Industries is up 2 percent. It is likely to post 30.8 percent year-on-year (YoY) jump in its Q4 net profit to Rs 5540 crore. Revenues will also climb 7.6 percent to Rs 91,673 crore YoY, according to CNBC-TV8 poll.

Gold futures in India, which hit the lowest level in more than 18 months on Tuesday are cooling off as key technical indicators point to the yellow metal entering oversold territory, according to analysts.

Gold in India, the world's biggest buyer of the metal, has shed 21 percent from the record high of Rs 32,464 for 10 grams struck in November, spreading panic among investors and importers.

The market seemed to be on booster shots today as the Nifty managed to trade above the 200 daily moving average (DMA) and breached 5650 level too. The Nifty was up 97.60 points at 5666 while the Sensex gained 315.25 points to be at 18673.05.

Midcap stocks were going strong in the afternoon trade. Future Retail, HDIL, Oriental Bank of Commerce were the lead gainers among the midcaps.

Meanwhile, M&M, Hero MotoCorp, HDFC, HDFC Bank and Maruti Suzuki were the major gainers in the Sensex. Reliance Comm, Sun TV and DCB were all up in the 4-7 percent range.

ITC shares gained over 1 percent on reports that it has increased prices of some of its cigarette brands. According to a news agency report, the Kolkata-based market leader has raised price of Gold Flake Kings by Rs 20 per pack of 20 cigarettes. Price of Wills Navy Cut has been increased by Rs 10 per pack of 10 cigarettes.

Sterlite Industries, Infosys, TCS, Jindal Steel and Tata Steel were dragging.

The market is trading firm on hopes of current account deficit narrowing after a fall in international gold and crude prices. Import bills of gold and crude are major components of current account deficit.

The government has slashed gold base import price to USD 499 per 10 grams from USD 521 earlier. Gold has bounced back in the international market after hitting 2-year low in trade. Brent Crude is down 1 percent at USD 110/barrel.

The Nifty is up 71 points at 5639 and the Sensex is up 239 points at 18597. The breadth of the market is also positive. The Nifty is now 10 points away from its 200 day moving average (DMA) of 5650.

Heavy buying is seen in banks, capital goods, power, FMCG and auto stocks. IT and metal stocks are major laggards.

Banking stocks are up after slowing wholesale price inflation could also spur the RBI to cut interest rates at its policy review on May 3.

Shares of oil marketing companies such as Hindustan Petroleum gain for a second day on hopes a slump in crude prices would lower the cost of under-recoveries.

Tata Power, HDFC, Hero Motocorp, Larsen and Maruti Suzuki are top gainers on the Nifty. Cairn India, Ambuja Cements, Infosys, Lupin and Sesa Goa are top losers.

The market started to consolidate with support from banking, capital goods, power and auto stocks. The Sensex climbed 172.80 points to be at 18530.60 and the Nifty was 51.55 points at 5619.95.

Gaining 3 percent, Tata Power was the big mover of the day.
The Central Electricity Regulatory Commission (CERC) has passed a landmark order allowing the company to raise electricity tariffs on a temporary basis at its Mundra power plant on account of rising cost of imported coal.

Uttam Galva was up 4.9 percent on the news that Posco will join hands with Uttam Galva Steel to set up a 3mtpa integrated steel plant at Satarda in Maharashtra.

Other big movers of the day were Hero MotoCorp, Maruti Suzuki, L&T and HDFC.

Meanwhile, Kingfisher Airlines hit record low of Rs 6.90 per share down 4.8 percent on concerns that the ailing airline will never fly again.

Sterlite Industries, Infosys, Hindalco, TCS and Cipla were the other losers.

The equity benchmark indices open on a flat note in trade today. Investors are expected to keenly follow Mukesh Ambani's flagship company Reliance Industries' movement in the stock market as the company announces its fourth quarter earnings today. Gold and silver prices will also be on traders' radar after its biggest two-day drop in 30 years.

The Sensex is up 64 points at 18421and the Nifty is up 21 points at 5589.

Tata Power, BPCL, IndusInd Bank, Hero Motocorp and ONGC are top gainers on the Nifty. Cairn India, Infosys, NMDC, Tata Motors and TCS are top losers.

RIL Q4 Results: Reliance Industries (RIL) is likely to post 30.8 percent year-on-year (YoY) jump in its Q4 net profit to Rs 5540 crore. Revenues will also climb 7.6 percent to Rs 91,673 crore YoY, according to CNBC-TV8 poll. The stock is trading flat.

Gold, Silver dip further: The yen firmed against the dollar and the euro on Tuesday while commodities from gold to oil extended their sharp declines after investors dumped risk assets overnight, worried over slowing growth in China and the US took hold. Live commodity prices

Spot gold was down 1.9 percent to USD 1,327 an ounce while silver shed nearly 2 percent to USD 22.11. On Monday, the price of gold bullion tumbled another USD 125 per ounce in its biggest-ever daily loss. In percentage terms, Monday's 9 percent loss would be the biggest since 1983.

Gold finance companies have extended their losses in trade. Muthoot Finance is down 8 percent while Manappuraam is locked at 10 percent lower circuit. Jewellery stocks are also down in the range of 5-10 percent.

OMCs in focus: Petrol price was cut by Re 1 per litre with effect from midnight today following a decline in international crude oil prices, however there is no change in diesel price. Oil marketing companies HPCL, BPCL, IOC are up in trade today. Full article

Tata Power spikes: Tata Power Company, one of the largest private power producers in India, gained more than 4 percent in early trade on Tuesday after the Central Electricity Regulatory Commission (CERC) allowed the company to raise power tariffs.