D-Street skyrockets ahead of Diwali; Nifty claims 5,200 levels

Festivity seems to have begun in Indian markets, a days ahead of the festival of lights - Diwali, which is evident from the benchmarks’ sparkling over two percent rally on the October series futures and options contract settlement day. It was a delightful performance by the frontline gauges and the fifty share - Nifty even rallied to re-conquer the important psychological 5,200 pinnacles last seen on August 5, 2011 but eased a tad in last to settle marginally lower from that level. The domestic benchmarks even went on to outclass all the global bourses as barring the China’s Shanghai Composite which surged by over one and half a percent, no other index across Asia or Europe could manage to come even close to the local markets close to two percent rally. The stellar performance came on a day when the Reserve Bank of India hiked key lending rates for the thirteenth time since March 2010.  The markets which had already factored in a 25 basis point rate hike by Reserve Bank gave a muted reaction to it. The RBI in an unexpected move announced to deregulate the savings bank interest rates with immediate effect which weighed only on the rate sensitive banking counter and major lenders like HDFC Bank, and SBI got butchered by over three percent each. However, a sudden spurt in buying activity came in the second half of trade after market participants rejoiced on hopes that the interests rates have peaked and that the RBI would soften its hawkish anti-inflationary stance and abstain from hiking rates further. Though the central bank cut the nation’s GDP growth forecasts to 7.6% from 8% for the current fiscal year, but it also reiterated that WPI inflation would also ease to 7% by the end of this fiscal. Meanwhile sentiments also got a lift from reports that the government has given its nod for the long-awaited National Manufacturing Policy (NMP) which seeks to set up mega industrial zones and create 100 million jobs by 2022. On the global front, the European markets which opened on a sedate note turned mixed amid discouraging reports of a demand for signoff rights from German politicians on details of the plan, ahead of the Wednesday summit. While Asian peers which exhibited courteous trends for most part of the day, settled mostly in the green terrain.

The NSE’s 50-share broadly followed index Nifty, went for a close to triple digit rally and settled just below the crucial 5,200 support level while Bombay Stock Exchange’s Sensitive Index - Sensex slammed a triple century to close a tad above the psychological 17,250 mark. The broader markets failed to match the fervor that their larger peers displayed. The midcap index added 0.40% while the smallcap index closed with 0.07% losses. On the BSE sectoral front, hefty short covering was evident in the rate sensitive Auto index topped the gainers space with 2.95% gains followed by IT and Oil & Gas which rose 2.66% and 2.22% respectively. On the flipside, the Consumer Durable and Bankex pockets remained top laggards as the indices shaved off 2.94% and 1.20% respectively. On the F&O front, October series Nifty and Sensex vehemently rallied by over 5% each. From the expiry perspective, market wide rollover of 64.1% was observed which is above the three month average of 63.2% while Nifty rollovers were at 65.98%, higher than 3 month average of 51.8%. Sectorally, the Cement, Automobile, FMCG and Metal spaces witnessed high rollovers while stocks from the Fertilizer, Sugar, Technology and Realty space observed relatively low rollovers. Among individual stocks, vast rollovers were witnessed in index heavyweights like RPower (83%), NTPC (80%), PNB (80%), Bank of Baroda (78%) and Seas Goa (77%) while low rollovers were seen in stocks like Dabur (35%), Chambal Fertilizers (36%), Patni (38%), Lupin (43%) and Jain Irrigation (44%). On expected lines, markets registered strong volumes of over Rs 2 lakh crore on the October series F&O expiry day. The turnover for NSE F&O segment remained on the higher side compared to Monday at over 1.9 lakh crore. The market breadth remained largely flat as there were 1375 shares on the gaining side against 1374 shares on the losing side while 129 shares remained unchanged.

Finally, the BSE Sensex surged 315.58 points or 1.86% to settle at 17,254.86, while the S&P CNX Nifty soared by 93.25 points or 1.83% to close at 5,191.60.

The BSE Sensex touched a high and a low of 17,322.13 and 16,900.26 respectively. The BSE Mid cap was up by 0.40% and Small cap index was down by 0.07%.

The major gainers on the Sensex were Mahindra & Mahindra up 5.49%, Wipro up 4.29%, HDFC up 4.23%, Sterlite Industries up 4.23% and Sun Pharma up 3.80%. While, SBI down 3.52%, HDFC Bank down 3.17% and BHEL down 1.07% were the major losers on the index.

The major gainers on the BSE sectoral space were Auto up 2.95%, IT up 2.66%, Oil & Gas up 2.22%, TECk up 2.19% and Metal up 1.93%. While Consumer Durables (CD) down 2.94%, Bankex down by 1.20% and PSU down 0.05% were top losers on BSE sectoral space.

Meanwhile, a day before Diwali, the Reserve Bank of India (RBI) has increased its short term lending and borrowing rates for the 13th time since March 2010. The RBI raised repo and reverse repo rates by 25 basis points to 8.5% and 7.5% respectively with immediate effect.

However, this hike of 25 basis points by the RBI was expected by the economist and bankers, on the back of the hovering high inflation, which is hovering close to two digit mark for quite some time. For the month of September it stood at 9.72% against 9.78% in August. On the other hand, India’s weekly food inflation also entered the two digit mark for the week ended October 8; it surged to 10.6% compare to 9.32% in the last week.

The apex bank has also decontrolled the saving banks deposit rates. Whilst announcing the second quarter monetary policy, Dr. D. Subbarao RBI governor, said 'Banks are now free to determine their savings bank deposit interest rate, subject to certain conditions.'

RBI expects headline inflation to moderate from first half of the fiscal year 2013. On October 24, the RBI said that the inflationary pressures are strong and persistent due to structural rigidities, continuing strong demand and the adaptive nature of inflation expectations. The path of inflation is sticky and remains broadly in line with earlier projections. With falling global commodity prices partly offset by rupee depreciation, the risks to inflation projections are now balanced.

The central bank has also reduced India’s economic growth forecast for the 2011-12. The RBI expects economy to grow by 7.6% in the current fiscal year from its earlier forecast of 8%. In the first quarter of the 2011-12, Indian economy grew by 7.7% compared to 8.8% in April-June 2010.

The S&P CNX Nifty touched high and low of 5,211.00 and 5,085.55, respectively.

The top gainers on the Nifty were Kotak Bank up 6.18%, M&M up 5.08%, Sterlite Industries up 5.05%, ACC up 4.99% and Grasim up 4.96%. On the flip side, PNB down 4.66%, Axis Bank down 4.33%, SBI down 3.48%, HDFC Bank down 2.59% and BHEL down 0.82% were the top losers on the index.

The European markets were trading in mixed. France's CAC 40 lost 0.24%, Britain's FTSE 100 up by 0.24%, and Germany's DAX advanced by 0.91%.

Asian markets made a mixed closing on Tuesday a day ahead of the European leaders meeting, while the Chinese market surged over one and half a percent, extending its previous session after a report showed China’s manufacturing may expand this month and also on some good earnings announcements. German Chancellor Angela Merkel and fellow European leaders will meet in Brussels tomorrow for a second summit in four days to find ways to enhance the firepower of a regional rescue fund. The Shanghai Composite Index has gained over 4 percent in last two days. On the other hand, the Japanese market lost stem after Finance Minister Jun Azumi kept up his warning to markets about pushing up the yen too far. The yen's strength and Europe's debt woes pose risks to external demand that could hurt export-oriented firms' profits and weigh on the economy's recovery.