Sensex rallies 400 points; market pins hopes on rate cut

Equity benchmarks rose over 2% - the highest single day gain in 12 months - to end at seven month highs as investors are viewing the government's steps on fuel price as a precursor to the Reserve Bank of India cutting policy rates shortly. The 30-share BSE Sensex surged 443.11 points to close 18464.27 and the 50-share Nifty vaulted 142.30 points to finish the day at 5577.65.

Sentiment was also buoyed by the US Federal Reserve's move to continue with its bond purchase program as part of its policy to infuse liquidity into the banking system and revive the US economy. Here too, the bullishness appears to be based on more on hope than reality. Players expect a decent chunk of the excess liquidity in the US to find its way into emerging markets India included. The mood was so upbeat that the market ignored the higher-than-expected inflation reading of 7.55% for August.

However, it will not be an easy ride for the bulls.

With diesel prices being hiked, it is feared that inflation could climb further in the coming days, which along with high crude oil prices, could hold the RBI back from cutting interest rates.

The government's move to hike diesel price and cap the number of subsidized cylinders per household will ease the strain on its subsidy bill to an extent, and reduce the possibility of a downgrade, investors feel.

''While these much awaited measures clearly improves GoI's (government of India's) image in respect of implementing reforms and reduces rating downgrade risks, it would not significantly address the staggering under recoveries issue,'' wrote Mayur Patel of Spark Capital Advisors in a note to clients.

But others like Ambit Capital and Deutsche Bank are of the view that the market could continue to rally for some more time.

''While coalition dynamics continues to play spoilsport and has made investors
highly skeptical on domestic policy related issues, we believe that stressed
fiscal balances, fears of a sovereign rating downgrade and rapidly eroding
domestic confidence have compelled the government to move ahead on
politically contentious issue of fuel price rationalization,'' wrote Abhishek Saraf and Abhay Laijawala of Deutsche Bank in a note to clients.

''This, coupled with recent constructive commentary from finance ministry (such as GAAR deferral) should galvanize hopes that the government of India is keen to reinforce confidence of both corporates and investors and avert the risk of a sovereign rating downgrade,'' the note said.

And Ambit analysts Saurabh Mukherjea and Gaurav Mehta don't think weak corporate earnings and the possibility of further cuts in GDP estimates is a cause of major worry.

''Not only do consensus EPS estimates invariably lag stock markets at critical turning points, even GDP growth has no impact on stock market returns in India or elsewhere,'' said the Ambit note to clients.

Frontline indices were fired up by a 5% rise each in Reliance Industries, State Bank of India, Larsen & Toubro and ICICI Bank.

Overall, banks were the star performers of the day, with Axis Bank, Bank of Baroda, Indian Bank, Yes Bank and Canara Bank gaining 5-6%.

Shares from the realty, metal, and automobiles were among the other notable gainers of the day.

Even stocks related to cable TV, retail and aviation sectors gained quite sharply on hopes of hike in FDI cap.

However, PSU oil & gas stocks retreated in late trade as under-recoveries are still high though the government hiked fuel price. Oil retailers BPCL, HPCL and IOC were down 1-2.6% while ONGC fell 0.4%.

The BSE Sensex and NSE Nifty extended the rally to 2.5% each on consistent buying interest after the government's first major action to reduce fiscal deficit by raising diesel price and announcement of economic stimulus by the Federal Reserve.

The 30-share BSE benchmark jumped 446.19 points to 18,467.35 and the 50-share NSE benchmark climbed 139.15 points to 5,574.50. The Indian rupee too appreciated further, rising by 1.6% or 0.885 paise to 54.53 against the US dollar.

Stocks related to aviation, retail and cable TV services provider rallied quite smartly on hopes of green signal to hike in FDI cap. CNBC-TV18 reported quoting sources that the announcement on FDI in retail is likely this evening. Business Standard reported that the cabinet will consider FDI in aviation, broadcast sectors today.

Hathway Cable and Dish TV were up 2-4% while Den Networks shot up 6.5%. Kingfisher Airlines, Jet Airways and SpiceJet were up 5-10%.

Retail stocks like Brandhouse Retails, Provogue (India), Pantaloon Retail and Koutons Retail India surged 5-10%.

Among largecaps, Jindal Steel topped the buying list with 8.5% gains while Hindalco Industries moved up 7.6%.

Index heavyweights State Bank of India, Reliance Industries and ICICI Bank were up more than 5%. Shares of DLF, Jaiprakash Associates and Axis Bank spiked 6-7%.

Cipla, HCL Tech, BPCL, Ranbaxy Labs, Power Grid Corporation, Dr Reddy's Labs, NTPC and TCS were down 1-2%. Cigarette major ITC was down 0.3%.

The much awaited fuel price hike decision and a third round of quantitative easing by the Federal Reserve helped the Indian equity benchmarks trade at day's high. The 30-share BSE Sensex climbed 423.62 points or 2.35% to 18,444.78 and the 50-share NSE Nifty jumped 132.15 points or 2.43% to 5,567.50.

Yesterday the government has bitten the bullet by raising diesel prices by Rs 5 per litre and capped the use of subsidised LPG to 6 cylinders per family in a year, which will help the India to reduce the under-recoveries and avoid downgrades by rating agencies. Now experts feel the government may clear FDI in aviation and broadcasting soon.

Aviation stocks like Jet Airways, Kingfisher Airlines and SpiceJet gained 5-9%. Hathway Cable, Dish TV and Den Networks were up 4-9%.

India's largest lenders State Bank of India and ICICI Bank spiked 5% each. Even the engineering and construction major Larsen & Toubro went up 5%.

Index heavyweight Reliance Industries extended gains to 4.23% while shares of Infosys, HDFC and HDFC Bank were up 2% each.

Among auto stocks, Tata Motors, Mahindra & Mahindra, Maruti Suzuki, Hero Motocorp and Bajaj Auto moved up 2-4%.

Metals stocks like Jindal Steel and Hindalco Industries topped the buying list with 7.5% gains. Tata Steel and Sterlite Industries jumped 4-5%.

Cigarette major ITC, software services exporter TCS and drug producer Sun Pharma underperformed with marginal losses.

France's CAC moved up 2% while the Britain's FTSE and Germany's DAX gained 1.5% after the Federal Reserve said it has maintained its funds rate at 0.0%-0.25% 'atleast until mid-2015' and announced a third round of quantitative easing by saying will purchase USD 40 billion in mortgage backed securities every month. The Dow Jones, Nasdaq and S&P 500 futures were up 0.3% each.

Spain and Italy's 10-year bond yields declined by 0.5% while the Euro was holding the 1.3 level against the US dollar.

Indian shares maintained early trade gains due to long awaited fuel price hike, helped by the upmove in major sectors like metals, banks, auto, capital goods and oil & gas. However, the FMCG and healthcare, which always called defensives, turned flat.

The 30-share BSE Sensex spiked 2.05% or 368.91 points to 18,390.07 and the 50-share NSE Nifty rose 117.65 points or 2.16% to 5,553, supported may be by inflow of foreign money as the Indian rupee appreciated by 70 paise to 54.71 against the US dollar.

Equity benchmarks completely ignored higher than expected inflation but the market breadth was not quite good as advance:decline ratio stood at 2:1 as compared to 11:1 in early trade.

Wholesale price index inflation for August came in at 7.55% that was higher than the forecast of 7.06% and 6.87% in previous month. Another disappointing part is the upward revision in June inflation, which was revised to 7.58% as against 7.25% (provisional).

After looking at the current inflation, the Reserve Bank of India may not go for policy rates cut in its monetary policy review that scheduled on September 17. RBI Deputy Governor KC Chakrabarty says the taming inflation is RBI's topmost priority.

State Bank of India and ICICI Bank, country's largest lenders rallied 4-5%. Index heavyweights Reliance Industries and engineering conglomerate Larsen & Toubro were up 3-3.7%.

Software services exporter Infosys, housing finance company HDFC and two-wheeler maker Bajaj Auto moved up 2% each.

Commercial vehicle maker Tata Motors, top car maker Maruti and utility vehicle major Mahindra & Mahindra jumped 3-4%.

Metals extended gains; Hindalco Industries spiked 7% and JSPL was up 6%. Tata Steel and Sterlite climbed 4-4.5%.

FMCG majors ITC and Hindustan Unilever were flat. Country's largest IT services exporter TCS underperformed by falling 0.6%. Drug producer Sun Pharma declined 0.2%.

Currencies against the US dollar and commodities too reacted to the launch of third quantitative easing by the Federal Reserve yesterday. Copper futures jumped 2.6% while gold gained just 0.26% at USD 1,774 an ounce. Brent crude moved up 0.84% to USD 116.83 a barrel and NYMEX crude went up 1.33% to USD 99.62 a barrel.

European markets too opened quite higher as the Federal Reserve has decided to maintain its funds rate at 0.0%-0.25% 'atleast until mid-2015' and said it would purchase USD 40 billion in mortgage backed securities every month. But it has not defined maximum purchase target or duration of program.

Indian equity benchmarks continued to trade higher with 2% gains and even the broader markets maintained 1% gains since early. But the gap between advances and declines trimmed quite drastically; about two shares gained for every share declining on the National Stock Exchange as compared to 10:1 at open.

Wholesale Price Index inflation for August came in at 7.55%, higher as compared to 6.87% in previous month and forecast of 7.06%. The more dampener was the revision in June data, which revised to 7.58% as against 7.25% (provisional).

The market has constantly been trading at 7-month high following multi-year highs in global markets, especially after the much awaited launch of third quantitative easing (QE3) by the Federal Reserve yesterday with keeping the funds rate at 0.0%-0.25% 'atleast until mid-2015' and favourable German's Constitutional Court ruling on European Stability Mechanism.

Apart from global events, locally the booster was yesterday's fuel price hike . The government increased diesel price by Rs 5 per litre and capped the use of subsidised LPG to 6 cylinder per family in a year.

The 30-share BSE Sensex rallied 386.59 points to 18,407.75 and the 50-share NSE Nifty jumped 118.50 points or 2.18% to 5,553.85.

State-owned oil retailers HPCL, BPCL and IOC, and even ONGC, which shares subsidy burden trimmed gains to around 1% from 4% earlier.

Aviation stocks continued their rally for the third consecutive session today as the strong action on fuel price revision indicated that the government may consider hike in FDI cap in aviation sector soon. Jet Airways, SpiceJet and Kingfisher Airlines jumped 4-8%.

Among largecaps, Hindalco Industries, ICICI Bank, Jindal Steel, SBI, Tata Motors, Jaiprakash Associates and DLF rallied 4-7%. However, TCS, HCL Tech, Power Grid Corp and Ranbaxy Labs were only losers

In the second line shares, Indiabulls Real, Essar Oil, Anant Raj Industries, HDIL and Unitech gained 4-9% while Glodyne Tech, Tulip Telecom, India Infoline, Pfizer and Glenmark were down 2-5%.

WTI crude rose by USD 1.04 to USD 99.35 a barrel while Brent crude gained USD 0.75 to trade at USD 116.63 a barrel. Euro rose above the 1.30 against the US dollar while Dollar index fell to 79.09.

The 30-share BSE Sensex gained as much as 435 points in early trade on the much awaited announcement of fuel price hike and the US third economic stimulus package yesterday. Every stock barring ITC was on buyers' radar among Sensex 30 stocks.

The BSE benchmark climbed 371.64 points or 2.06% to 18,392.80 and the NSE benchmark rose 2.08% or 112.95 points to 5,548.30. But the broader markets underperformed the benchmarks by gaining just 1%. Even the gap between advances and declines has been reduced as the four shares gained for every share declining on the National Stock Exchange.

After positive developments locally as well as globally this week, experts looked bullish by raising the target on benchmarks. Sandeep J Shah, chief executive officer of Sampriti Capital says he would watch 5,600 carefully. "I had mentioned about a month back that we could even get to 5,800-6,000, if we saw easing by the ECB, we saw QE and we saw the government acting. It looks like, in some sense, all three engines are firing. So that possibility is very much alive now," he adds.

The Indian rupee too broke the 55 level after a hovering in the range of 55-56 since previous month, which appreciated quite sharply by 73 paise to 54.68 on huge gush of liquidity. Foreign institutional investors bought more than Rs 22,000 crore (till yesterday's provisional numbers) worth of shares since July and about USD 12 billion in the year itself.

Yesterday finally the government managed to hike diesel price by Rs 5 a litre and capped the subsidised LPG to 6 cylinders per family in a year. Oil retailers IOC, HPCL and BPCL were up 1-2%, though these stocks trimmed gains on profit booking.

Asian markets rallied 1-3% today and the US markets closed with 1.6% gains yesterday after the Federal Reserve said it has maintained funds rate at 0.0%-0.25% 'atleast until mid-2015' and it would purchase USD 40 billion in mortgage backed securities every month. It has not defined maximum purchase target or duration of program.

Back home, index heavyweight Reliance Industries, engineering conglomerate Larsen & Toubro, housing finance company HDFC and software services exporter Infosys gained 2-3%.

Country's largest lenders State Bank of India and ICICI Bank jumped 4-4.5%. Commercial vehicle maker Tata Motors spiked 4% and top car maker Maruti Suzuki went up 3.6%.

Metals stocks like Tata Steel, Sterlite Industries, Jindal Steel and Hindalco Industries were up 4-5%. Private power producer Tata Power and utility vehicle maker M&M gained 3% each.

Indian equity benchmarks rose more than 2% in early trade on Friday as the government hiked diesel price yesterday and the Federal Reserve launched third quantitative easing (QE3). Every stocks among largecaps caught in bull grip with metals, banks, oil & gas and auto indices gaining between 2-3%.

The 30-share BSE Sensex shot up 330.56 points to 18,351.72 and the 50-share NSE Nifty spiked 101 points to 5,536.40. The Indian rupee gained 73 paise to 54.68 against the US dollar.

State-run oil retailers BPCL, HPCL and IOC rose 2-3% as the government reduced under-recoveries of these companies by raising diesel price by Rs 5 a litre yesterday.

The government also capped the use of subsidised LPG to 6 cylinder per family in a year. It has cut excise by Rs 5.3 per litre instead of increasing price of petrol. ONGC gained 1.7% as the company is going to share less subsidy burden.

Country's largest lenders State Bank of India and ICICI Bank were up 3.5-4%. Index heavyweight Reliance Industries, software services exporter Infosys and housing finance company HDFC rose 1.7%.

Among metals stocks, Jindal Steel, Tata Steel and Hindalco spiked 4.5-5%. Commercial vehicle major Tata Motors and top car maker Maruti moved up 3-3.6%.

The CNX Midcap Index jumped 93 points to 7,363. About 11 shares advanced for every share declined on the National Stock Exchange in early trade.

In the second line shares, Essar Oil rallied 5% as the Supreme Court (SC) has ordered the company to pay Rs 5200 crore tax dues in 8 tranches. SC also asked company to pay 10% interest on dues from January 2012.

Aviation stocks continued to their rally for the third consecutive session today. Business Standard reported that cabinet will consider FDI in aviation and broadcast sectors today. Jet Airways was up 2.5%. SpiceJet surged 7% and Kingfisher Airlines gained 10%.

CNBC-TV18 reported that cabinet committe on economic affairs will meet today to consider divestment in five PSUs. Hindustan Copper, Neyveli Lignite, Nalco and Oil India were up 1-4%.

Shares of Yes Bank, HDIL and DLF rallied over 3%.