 "Weekly: Markets surge over 3% on lower CAD, Rupee gains")
In the week to June 28, the 30-share S&P BSE Sensex zoomed 622 points or 3.3% to 19,396 and the 50-share CNX Nifty surged 175 points or 3.1% to end at 5842.
Most of the gains came in the last two trading days after lower-than-expected current account deficit and weak US economic growth data sparked short covering ahead of the expiry of June derivative contracts on Thursday.
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For the March quarter, CAD narrowed to $18.1 billion, or 3.6 per cent of GDP, from an all-time high of $32.6 billion, or 6.7 per cent of GDP, the previous quarter.
During 2012-13, CAD stood at $87.8 billion (4.8 per cent of GDP), against $78.2 billion (4.2 per cent of GDP) during the previous financial year. A burgeoning trade deficit, along with a significant decline in invisible earnings, caused widening of CAD during the year.
For the financial year ended March, the country had a balance of payments surplus of $3.83 billion, compared with a deficit of $12.8 billion a year earlier. The swing to surplus was due to robust capital inflows. Experts said the country was in a far better shape than during a balance of payments crisis of 1991.
Indian indices jumped nearly 3 percent on Friday, their highest single-day gain in 22 months, after a steep hike in natural gas price led to a buying spree in energy shares and shortcovering in financials. A strengthening rupee also aided sentiment.
BSE’s Sensex rose 519.86 points or 2.8 percent to close at 19,395.81. NSE’s Nifty gained 159.85 points or 2.8 percent to close at 5,842.20. The gains on Friday were the highest in a single day since August 2011.
The rupee, which slumped to a record low of 60.73 to a dollar on Wednesday, gained 1.3% on Friday to close the day at 59.39 per dollar from the previous day after foreign institutional investors turned net buyers in equities pushing the benchmark indices higher.
Foreign institutional investors were net equity buyers to the tune of Rs 1,124 crore on Friday snapping a 13-day selling spree. FIIs sold shares worth almost Rs 12,000 crore since June 11 on worries that the US Fed would start pruning its monetary stimulus measures sooner-than-expected.
The gains during the week were led by oil and gas shares after the Cabinet Committee on Economic Affairs late Thursday doubled the price of domestic natural gas to $8.4 a million British thermal unit from $4.2 earlier.
The gas price hike has been ahead of street estimates of US$ 6.7/mmbtu and therefore, is a positive for gas producers to that extent. The increase in gas price also provides upside risk to our FY15 estimates as we had factored in a rise of US$ 2/mmbtu-US$ 6.2/mmbtu in our FY15 estimates. As a result, our FY15 EPS estimate for ONGC, OIL and RIL will likely be
Index heavyweight Reliance Industries was the top Sensex gainer after zooming 8.6% to end at Rs 862.
Gail (India) was the second best Sensex gainer after the stock zoomed 7.8% to end at Rs 313. State-run gas company GAIL expects a hit of Rs 1300 crore annually on pre-tax profits on account of higher costs in its liquefied petroleum gas (LPG) and petrochemicals businesses, the company's Finance Director P.K. Jain told Reuters.
Exploration major ONGC was the third best Sensex gainer after the stock surged 7.2% to end at Rs 330. ONGC expects to add about Rs 8000 crore in profits annually on account of the increase in gas prices, its finance head said on Friday.
Other Sensex gainers include, HDFC, TCS, Sun Pharma, Jindal Steel, Hindalco, Tata Power and HDFC Bank which jumped 5.4-7.1% each during the week under review.
Investors will focus on foreign fund inflows and expectation of further fiscal and economic reforms that could be announced post the natural gas price hike in the week ahead.