Markets extended yesterday’s gains following global rally after a decision by International Energy Agency to increase oil supplies and a resolution over Greece debt crisis.
Nifty made a gap up opening and moved higher after oil prices eased, relieving concerns of inflation. The index touched a high of 5,477 in the afternoon session led by rally in heavyweight ICICI Bank, Infosys and Larsen & Tourbo. The S&P CNX Nifty closed near day’s high at 5,471, up 151 points and the Sensex ended at 18,241, up 513 points. This was biggest rally since March 1st 2011.
Among the frontline shares ICICI Bank, Infosys and L&T contributed 150 points on the Sensex.
Earlier in the week Sensex shed around 360 points on speculation related to changes in the Indo-Mauritius tax treaty and mid-week Indian Metrological Department reduced the Monsoon forecast which kept investor to the sidelines. But positive global sentiment and fall in oil prices helped markets erase all the early week losses and end higher by 2% on weekly basis. This was the first weekly gain after two consecutive weeks of losses.
The International Energy Agency (IAE) decided to turn on the oil spigot and release 60 million barrels, driving down crude prices to four month lows which caught investors off guard and spurred a rally across financial markets. Brent Crude fell 6% to $107.5/bbl and Nymex crude dropped to $91/bbl.
Additionally Greece government also agreed with European Union and International Monetary Fund on a five year austerity plan easing concerns of debt crisis.
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In Asia, markets ended on firm note. Japan's Nikkei Stock Average rose 0.9%, South Korea's Kospi Composite gained 1.7%, China's Shanghai Composite Index rose 2.2% and Hong Kong's Hang Seng Index climbed 1.9%.
While the Indian markets joined the global market rally, analysts recommend retail investors to be cautious as this could just be a dead cat bounce – temporary recovery from a prolonged decline and investors may get caught on the wrong foot. Also oil prices crawled back up on Friday and fundamentally things have not changed as political crisis in Delhi continues. Also Reserve Bank of India would move on with its tightening measures until there are clear signs of inflation easing.
Sugar stocks rallied on the bourses after an empowered group of ministers (EGoM) gave a nod for 5 lakh tonnes of sweetener exports. With this approval, the government has allowed one million tonne of sugar exports since April. The EGoM on food headed by finance minister Pranab Mukherjee also allocated an extra 5 million tonnes of food grains to families above the poverty line (APL), newspaper reports suggest. Balrampur Chini Mills jumped 3% to Rs 59. Bajaj Hindustan moved up 2.7% to Rs 65. Shree Renuka Sugars surged 4% to Rs 60.
Oil marketing companies went up for the second straight day on reports that the government would raise diesel, cooking gas and kerosene prices next month after a gap of one year. Further, the much anticipated meeting of a panel of ministers on raising auto and cooking fuel prices may happen next month, a top Oil Ministry official said today. HPCL surged 6% to Rs 393. BPCL rallied 3% to Rs 634 while IOC added 2.7% to Rs 337.
BSE IT index regained buying interest and closed higher by 3.9% on improving sentiment in Europe. HCL Technologies gained 4.9%, TCS gained 3.8%, Infosys added 3.2% and Wipro was up 3.4%.
BSE Realty index which was underperforming for the past 7 trading sessions was one of the top sectoral gainers up 3.8%. Sobha Developers gained 12%, Parsvanath Developers was up 7% and HDIL gained 6%.
The broader markets also ended higher. The midcap and smallcap indices were up 2.3% and 1.8%.
Top gainers on the Sensex were Hero Honda, up 6.1%, JP Associates added 4.6% and HDFC was up 4.5%. Only two stocks RIL and Reliance Infra ended in the red, down 0.8% and 0.03% each.
Among the Sensex stocks, renewed buying interest was seen in heavyweights State Bank of India and Larsen & Tourbo as they were available at attractive prices. State Bank of India advanced 6% to Rs 2291 and Larsen & Tourbo added 4.3% to Rs 1740.
Most of the benchmark stocks ended in the positive, but investors stayed away from heavyweight Reliance Industries, the stock was down 0.3%. Analysts said that reports by Controller Auditor General about Oil Ministry favouring RIL for increasing gas output from KG D6 seems to be an overhang on the stock.
Despite overall bullishness in the market, only 196 stocks hit their upper circuits while 151 were locked at their lower circuits.
Market breadth was positive, 1984 stocks advanced for 852 stocks which declined.