Winning streak continues, Sensex up 160pts

The markets bucked a weak global trend and ended a choppy session of trade on a positive note, buoyed by heavyweights-Reliance Industries, ITC and ICICI Bank; however, selling in IT stocks capped the gains.

The Sensex closed at 16,821, up145 points and the Nifty ended at 5,040, up 39 points. Both the indices ended higher for the third consecutive day and clocked 6% gains for the week, highest in the last two years.

Earlier in the day, the Nifty touched a high of 5,114 in opening deals and thereafter slipped to a low of 5,006 on profit-taking. The markets, however, bounced back on fresh buying in RIL, ICICI Bank and State Bank of India. Early noon, the markets received a fresh jolt after the European bourses opened in the negative note, but were able to weather the storm.

Asian markets ended in the red, snapping two sessions of gains. The Nikkei Stock Average, the Hang Seng and the Shanghai Composite indices closed down over 1% each. European markets also opened lower; FTSE, CAC and DAX slipped between 1% and 2% each as investors turned cautious ahead of the US nonfarm payrolls data. Analysts expect 53,000 nonfarm jobs in August, following a gain of 117,000 in July.

Back in India, a slew of negative macro indicators put a lid on the gains. The HSBC Markit, India’s Manufacturing PMI, fell to 52.6 in August against 53.6 in July due to a decline in orders amid waning global demand. Inflation for the week ended August 20 surged to 10.05% due to sharp rise in vegetable prices, raising concerns that the Reserve Bank of India would continue to tighten further. The RBI has raised rates 11 times since March 2011 to contain high inflation.

A K Prabhakar, Senior Vice President Equity Research from Anand Rathi said, "Indian markets have bucked trend because they were catching up with the global markets, short covering in heavyweight Reliance Industries and banking stocks have helped the markets." Prabhakar added, if Nifty holds above 4,960, than index can easily scale to 5,150 in the next few sessions.

Reliance Industries surged 3% on completion of British Petroleum’s acquisition of 30% stake in 21 oil & gas assets. ICICI Bank and ITC were also up over 1.6% each.  The three heavyweights contributed 90 points on the Sensex. However, losses in BHEL (down 1.7%), TCS (down 1.8%) and Infosys (down 1.2%) capped the gains.
 
High-beta metal shares led the gains. JSW Steel was the top gainer, up over 6%, followed by Sterlite Industries and Tata Steel, up over 4% each.

IT shares were the worst hit on concerns of a cut in IT spending in Europe and the United States. Shanu Goel, Senior Research analyst-Bonanza Portfolio said, “According to preliminary reports, hiring in US slowed in August as companies became less optimistic about the strength of the recovery and the unemployment rate probably held at 9.1 %, higher than expected weighed on the stocks.” Besides the frontline stocks, HCL Technologies, Tech Mahindra and Core projects were down almost 1% each.

From the broader markets, midcap index surged 0.8%, but the smallcap index fell 0.1%.

The market breadth was positive; 1,660 stocks advanced for 1,157 shares which declined on the BSE.