Thursday, December 18, 2008

Lower inflation nos boost markets; Sensex ends above 10,000 news

Better-than-expected decline in inflation numbers and expectations of further rate cuts from the Reserve Bank played a key role in today's trade. Huge buying in rate sensitive, infrastructure, technology, and oil boosted the benchmark indices higher. The Sensex successfully closed above the 10,000 mark after 24 sessions and similer was the case with the Nifty, which settled above 3050 level.

Inflation for the week ended December 6 came in at 6.84% as against 8% on week-on-week basis. This was better-than-expected, as CNBC-TV18 poll saw inflation at 7.46%. Wholesale price Index (WPI) for all commodities fell 1.1% (WoW) to 231.1 and WPI for fuel and power index down 3.7% (WoW). Such an unexpected fall indicates that there may be rate cut in near term.

Commenting on inflation numbers which have fallen sharply, Mridul Sagar, Chief Economist, Kotak Securities, said inflation may fall to 3% by March and expects inflation in range of 3-4% next year. Sagar said he expects further rate cuts with inflation coming down.

Mridul Sagar, Chief Economist, Kotak Securities, said inflation may fall to 3% by March and expects inflation in range of 3-4% next year. Sagar said he expects further rate cuts with inflation coming down.

Yes Bank sees 100 bps repo cut and 25-50 bps reverse repo cut in January.

The Sensex has hit an intraday high of 10,110.34, before closing the day at 10,076.43, up 361.14 points or 3.72% over previous close. The Nifty shut shop at 3060.75, with a gain of 106.40 points or 3.60%, after hitting a high of 3072.55.

The markets had started the day with choppy trade and turned completely back into green after announcement of inflation numbers. In the last half an hour of trade, the Sensex held strong above 10,000 mark due to bounce back in shares of ONGC and Reliance Industries, which beaten down quiet badly since morning due to decline in crude prices.

Nymex January crude declined 8% to 4-year low on Wednesday despite OPEC cut. It was trading around USD 40.5 to a barrel on the NYMEX. OPEC cut output by record 9% (2.46 mbpd) from 29.04 mbpd in September. Crude declined on skepticism that OPEC will adhere to new agreement.

The fall in crude is very much positive for oil marketing companies. HPCL jumped 8.71% and IOC gained 6.01%. BPCL rose 3.59%. Oil exploration companies also gained in late trade; Reliance Petroleum surged 6.88% and ONGC was up 2.16%. Reliance Industries closed up just by 0.07%. BSE Oil & Gas Index ended with a gain of 120.26 points or 1.89% at 6,484.60.

Rate sensitive and infrastructure stocks witnessed huge buying interest on the expectations of further rate cut due to fall in inflation numbers.

BSE Bankex was up 370.66 points or 7.06%, to settle at 5,620.04. ICICI Bank jumped 8.62% and SBI rose 7.35%. HDFC Bank gained 4.79%.

According to the Indian Banks' Association (IBA) Head TS Narayanasami said that banks are likely to cut deposit rates in January. The extent of the interest rate cut may be decided in 1-2 days, he said. Banks cannot pay abnormal interest rates on deposits, he added.

Enormous buying was seen in realty stocks. Index closed at 2,283.99, up 154.78 points or 7.27% over previous close. DLF and Unitech surged 10-10.9%.

Power stocks also charged up; Index shot up 5.81% or 101.36 points to 1,845. Suzlon Energy, GVK Power, Reliance Infrastructure, GMR Infra, Reliance Power and NTPC shot up 5-12.6%.

Capital Goods Index surged 304.78 points or 4.46% at 7,140.20. L&T jumped 3.40% and BHEL moved up 6.63%.

Technology stocks like HCL Tech went up 12.90%. TCS, Satyam and Infosys rose 3-6.8%. Wipro gained 2.26%. BSE IT Index gained 99.13 points or 4.41% at 2,345.06. Satyam surged 6.7%, as the company's board meet on December 29 will consider buyback.

FMCG stocks like ITC, Tata Tea, Dabur India, Marico and HUL were up 1.9-5.4%. Index was up by 61.61 points or 3.12% at 2,034.81.

Auto stocks namely Tata Motors, Maruti Suzuki, Hero Honda and Bharat Forge rose 1.7-7.4%. Index ended at 2,516.49, with a gain of 74.72 points or 3.06% over previous close.

Among the telecom stocks, Reliance Communication and Idea Cellular were up over 3%. Tata Communication, MTNL and Tata Teleservices were up 1-2%. Bharti Airtel ended marginally up.

Metal Index finished with a gain of 104.75 points or 1.97% at 5,428.19. NALCO went up 12.19%. JSL, SAIL, Tata Steel, Jindal Steel and Sterlite Inds jumped 1.8-6.5%.

Buying was also seen in pharma stocks. BSE Healthcare Index rose 24.15 points or 0.84% to 2,915.37. Matrix Labs, Dr Reddys Labs, Dishman Pharma, Biocon, Wockhardt, Cipla and Ranbaxy Labs went up 2-5%.

Cement stocks like ACC, Ambuja Cements, India Cements and Shree Cements moved up 3.5-11.7%.

Midcap and small cap stocks also bounced back. BSE Midcap Index was up 68.39 points or 2.18% at 3,204.56 and Small Cap Index gained 33.39 points or 0.91% at 3,711.95.

Among the midcap stocks, Time Techno, India Infoline, IRB Infra, Educomp Solutions and GVK Power shot up 12-17%.

In the small cap space, ETC Networks, Mcnally Bharat Engg, Shrenuj and Company, Aptech and Astra Microwave rose 10-15.6%.

Asian markets ended higher. Shanghai gained 1.97%. Straits Times and Taiwan closed up over 1%. Nikkei, Hang Seng and Kospi rose 0.24-0.64%. However, Jakarta fell 0.9%.

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