Exuberant Indian markets finished the enthralling last day of the week with a spirited performance after bottom fishing in fundamentally strong shares gathered force, taking the frontline indices to the highest level of the week. Sentiments remained buoyant across the board, helping the key gauges to not only erase the week's losses but also amass around percent weekly gains. The sessions over one and half a percent rally took the benchmarks beyond important psychological 5,600 and 18,700 levels. Sentiments remained buoyant on reports that the European Union leaders carved out a second bailout package worth 109 billion euros ($157 billion) for debt-stricken Greece in a desperate effort to contain the 18-month-long debt crisis in the single-currency bloc of 17 nations. Also the reports that US President Barack Obama and congressional leaders inched closer to a deal to lift the US debt ceiling and strong profit numbers by Morgan Stanley along with reports of rise in manufacturing activity in the Philadelphia region in July, helped the markets across the globe edge higher. Back home, market participants resorted to hefty positions build up in the beaten down shares of Banking and Technology companies as uncertainty over earnings of software exporting companies reduced on expectations that Europe's debt crisis will not spread. The across the board buying came a day after the commerce ministry released the weekly inflation numbers which eased in the week ended July 9, raising hopes that prices may start cooling from uncomfortably high levels. Meanwhile, heavy rains in the past few days also erased most of an earlier shortfall and the key monsoon rains were 7 percent above normal in the week to July 20. The marketmen are now looking ahead for the RBI's policy meet, scheduled in the next week for further direction. The RBI is widely expected to hike its key policy rates by a further 25 basis points next week, which will mark its 11th hike since March 2010. The central bank may go for one more hike by the end of the year, before pausing its policy tightening measures to rein in the inflationary pressure on the economy.
Back on Dalal Street, the benchmarks got off to a gap up opening on supportive global developments overnight and steadily went onto capitalize on the momentum through the session. The frontline indices remained in fine fettle, seldom showing any kind of weakness in their northbound journey. Some profit booking in the dying hours only resulted in stronger recovery eventually, helping the key indices to snap the session around the highest point of the day. The NSE's 50-share broadly followed index Nifty, amassed close to a triple digit gains and settled above the crucial 5,600 support level while Bombay Stock Exchange's Sensitive Index, Sensex fell just short of hitting a triple century and ended above the psychological 18,700 mark. The broader markets too traded with strong gains in tandem with their larger peers. On the sectoral front, the Banking counter garnered maximum traction, being the top gainer in the space with gains of over 2% because of better than expected earnings announcement by major like Axis Bank, Union Bank and Allahabad Bank. The Tech pocket too remained amid the thick of things and accumulated 2% gains with some bottom fishing in beaten down stocks like Infosys and Bharti Airtel. Though markets witnessed broad based buying interests, the Consumer Durables counter remained the only chink in the armor languishing in the negative territory with around half a percent loss. From the result corner, apart from banking shares, stocks like Rallis India, Jet Airways, Thermax and Indiabulls Power got commended by investors. The markets jumped on strong volumes and the breadth too remained extremely positive as there were 1707 shares on the gaining side against 1192 shares on the losing side while 128 shares remained unchanged.
Finally, the BSE Sensex surged by 286.11 points or 1.55% to settle at 18,722.30, while the S&P CNX Nifty soared by 92.35 points or 1.67% to close at 5,633.95.
The BSE Sensex touched a high and a low of 18,747.06 and 18,533.43, respectively. The BSE Mid cap and Small cap indices were up by 1.25% and 0.82% respectively.
The top gainers on the Sensex were Bharti Airtel up 3.99%, Reliance Communication up 3.43%, Mahindra & Mahindra up 2.98%, ICICI Bank up 2.61% and Tata Motors up 2.18%.
On the flip side, DLF down 0.43%, Hindalco Industries down 0.28 and Jindal Steel down 0.07% were the only losers on the index.
The top gainers on the BSE sectoral space were Bankex up 2.14%, TECk up 2.06%, Auto up 1.76%, Capital Goods (CG) up 1.72% and IT up 1.55%. While Consumer Durables (CD) down 0.57%, was the only loser on the BSE sectoral space.
Meanwhile, ahead of the central bank's monetary policy review on July 26, RBI Governor D Subbarao met Finance Minister Pranab Mukhejee to discuss the macro economic situation of the country. Despite the fear of economic slowdown, RBI is expected to hike its key policy rate to control the sticky inflation.
After meeting finance minister, Governor said, "I have come to review the macro-economic situation with Finance Minister before the policy review, slated for July 26.' The meeting of RBI governor and finance minister was also attended by other senior official of finance ministry.
On 26 July, the central bank is scheduled to announce the first quarterly credit policy for current financial year. In the quarterly policy review, RBI is expected to hike its short term leading (repo) and borrowing rate (reverse repo) rates by another 25 basis points. Since March 2010, central bank has increased its short term leading and borrowing rates by 2.5% or 250 basis points, as a result of RBI's non-stop increase in interest rates, capital cost has increased significantly, and it also had adversely affected industry and consumers.
Despite the anti-inflationary stance adopted by the RBI, headline inflation measured by Wholesale Price Index (WPI) had remained well above the RBI's comfort level. For the month June, headline inflation increase to 9.44% from 9.06% in May.
RBI is facing challenging task of managing balance between inflation and growth. However, elevated inflation along with RBI's anti-inflationary stance had affected the health of economic growth. Recently, government also revised its projection of country's Gross Domestic Product (GDP) downward from 9% to 8.6 % on account of slower industrial production and stubbornly high inflation. The Index of Industrial Production for May stood at 5.6% which is nine month low level due to poor performance of manufacturing, mining and lower offtake of capital goods. The S&P CNX Nifty touched high and low of 5,642.20 and 5,567.10, respectively.
The top gainers of the Nifty were Axis Bank up 4.55%, Bharti Airtel up 4.00%, RCOM up 3.37%, M&M up 3.05% and Grasim up 3.00%.
On the flip side, Jindal Steel down 0.30% and ITC down by 0.05% were the only losers on the index.
The European markets were trading in green. France's CAC 40 gained 0.86%, Britain's FTSE 100 surged by 1.00% and Germany's DAX up by 0.57%.
All the Asian equity indices barring KLSE Composite finished the day's trade in the positive terrain on last trading day of the week after euro-zone leaders finally struck a second bailout deal for Greece that also puts in place steps to avoid contagion in other struggling economies. European leaders carved out a second bailout package worth 109 billion euros ($157 billion) for debt-stricken Greece from the European Union and IMF - the second for Greece - while private firms will also roll over their bonds and extend their repayment period. Moreover Japanese Nikkei surged over a percent in the trade, led by banks that leapt after Morgan Stanley's strong results and euro-sensitive issues such as Canon, up on the euro's gains after officials agreed on steps to solve Greece's debt woes.
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