With market mood remaining upbeat after the government's decision on Saturday, 18 October 2014, to deregulate diesel prices and raise gas prices, key benchmark indices extended gains and hit fresh intraday high in mid-morning trade. The deregulation of diesel prices will reduce the government's fuel subsidy burden. As a result of the gas price hike, the government will get additional revenue of approximately Rs 3800 crore per annum on account of higher royalty, higher profit petroleum and higher taxes. Investors also cheered a strong showing of the Bharatiya Janata Party (BJP) in assembly election in Maharashtra and Haryana. Gains in Asian stocks also boosted sentiment on the domestic bourses. The barometer index, the S&P BSE Sensex, was currently up 396.43 points or 1.52% at 26,504.96. The BSE Mid-Cap index was up 1.51%. The BSE Small-Cap index was up 1.37%. The market breadth was strong, with more than 2 gainers for every loser on BSE.
Banks stocks rose across the board as a sharp cut in diesel price is expected to bring down freight rates which in turn could reduce consumer price inflation. Jindal Steel & Power slumps on reports that the Central Bureau of Investigations (CBI) has registered a fresh case against the company related to coal blocks allocation probe. IT pivotals declined on a firm rupee.
A sharp cut in diesel price announced by oil marketing companies on Saturday, 18 October 2014, is expected to bring down freight rates. This could reduce consumer price inflation and provide room for the Reserve Bank of India (RBI) to cut interest rates. Diesel is the main fuel for transporters and directly affects the retail price of items ranging from foodstuffs to white goods that are transported across cities.
On the political front, the Bharatiya Janata Party (BJP) on Sunday, 19 October 2014, created history in Haryana by securing a clear majority on its own for the first time and is set to form the government in state. For the first time, the BJP emerged with a clear mandate in Haryana, winning 47 seats in the 90-member assembly with a 33.2% vote share. The party emerged as the single largest party in Maharashtra and is set to form the government in state. In Maharashtra, the BJP won 122 seats in the 288-member assembly, falling well short of the 145 seats required for a simple majority. Its ally Rashtriya Samaj Paksha won one. The NCP, which won 41 seats, said it will offer BJP "outside support" to form a stable government in the state, leaving the former BJP ally and runner up Shiv Sena high and dry. The Shiv Sena won 63 seats. Shiv Sena Chief Uddhav Thackeray said after the election results that nobody from the BJP has approached his party for support, and his party would not approach it with any proposal.
The results of the assembly elections for Maharashtra and Haryana were announced yesterday, 19 October 2014. The polls for the assembly election in these two states were held on 15 October 2014.
Earlier, key indices had hit their highest level in almost a week at the onset of the trading session after the government's decision on Saturday, 18 October 2014, to deregulate diesel prices and raise gas prices.
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In overseas markets, Asian stocks rose after solid US data and earnings calmed tumult in global financial markets and reassured investors worried about the health of the world economy. Trading in US index futures indicated a higher opening of US stocks later in the global day today, 20 October 2014.
Brent crude futures edged higher after robust US data buoyed global financial markets, with a cut in Saudi-Kuwait oil output providing further support.
In the foreign exchange market, the rupee edged higher against the dollar after the government's decision on Saturday, 18 October 2014, to deregulate diesel prices and raise gas prices.
At 11:25 IST, the S&P BSE Sensex was up 396.43 points or 1.52% at 26,504.96. The index jumped 401.74 points at the day's high of 26,510.27 in mid-morning trading session, its highest level since 14 October 2014. The index rose 291.31 points at the day's low of 26,399.84 in early trade.
The CNX Nifty was up 119.95 points or 1.54% at 7,899.65. The index hit a high of 7,905.70 in intraday trade, its highest level since 14 October 2014. The index hit a low of 7,872.20 in intraday trade.
The BSE Mid-Cap index was up 140.19 points or 1.51% at 9,412.68. The BSE Small-Cap index was up 141.04 points or 1.37% at 10,455.01. Both theses indices underperformed the Sensex.
The market breadth indicating the overall health of the market was strong with more than 2 gainers for every loser on BSE. 1,616 shares rose while 635 shares declined. A total of 100 shares were unchanged.
Among the 30 Sensex shares, 26 rose and the remaining shares fell.
Jindal Steel & Power slumped 8.61% at Rs 135.35. The stock hit a 52-week low of Rs 128 in intraday trade today, 20 October 2014. According to a media report, the the Central Bureau of Investigations (CBI) has registered a fresh case of alleged cheating and corruption against Jindal Steel and Power among others in connection with its probe into coal blocks allocation. The report said that it is the 36th FIR in connection with its probe into the coal blocks scam.
Pivotals in the IT sector fell on firm rupee. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. CMC (down 1.26%), Infosys (down 0.92%), Wipro (down 0.53%), TCS (down 0.33%) and MphasiS (down 0.11%), edged lower.
However, Hexaware Technologies (up 3.23%), Oracle Financial Services Software (up 1.25%), Tech Mahindra (up 1.24%), MindTree (up 1.05%) and HCL Technologies (up 0.23%) edged higher.
Banks stocks rose across the board as a sharp cut in diesel price is expected to bring down freight rates which in turn could reduce consumer price inflation. Lower consumer price inflation could provide room for the Reserve Bank of India (RBI) to cut interest rates.
Soon after the government on Saturday, 18 October 2014, announced deregulation of diesel prices, PSU OMCs cut diesel prices. Indian Oil Corporation (IOCL) on Saturday, 18 October 2014, said it has cut diesel price by Rs 3.37/litre (including VAT) in Delhi with corresponding decrease in other price in other states from the midnight of 18/19 October 2014. The movement of prices in international oil market and rupee dollar exchange rate shall continue to be closely monitored and developing trends of the market will be reflected in future price changes in diesel prices, IOCL said.
Among state-run banks, Punjab National Bank (up 3.82%), Union Bank of India (up 3.15%), IDBI Bank (up 2.76%), Bank of India (up 2.29%), Bank of Baroda (up 2.18%), Canara Bank (up 2.18%) and State Bank of India (up 2.16%) edged higher.
Among private sector banks, Federal Bank (up 2.91%), Axis Bank (up 2.87%), Kotak Mahindra Bank (up 2.81%), Yes Bank (up 2.58%), ICICI Bank (up 1.98%), HDFC Bank (up 1.65%) and IndusInd Bank (up 1.16%), edged higher.
The Reserve Bank of India (RBI) is scheduled to undertake its fifth bi-monthly monetary policy review on 2 December 2014. The annual rate of inflation based on the combined consumer price indices (CPI) for urban and rural India eased to 6.46% in September 2014, from 7.73% in August 2014.
Meanwhile, provisional data released by the stock exchanges after trading hours on Friday, 17 October 2014, showed that foreign portfolio investors (FPIs) sold shares worth a net Rs 1430.03 crore on that day.
In the foreign exchange market, the rupee edged higher against the dollar after the government's decision on Saturday, 18 October 2014, to deregulate diesel prices and raise gas prices. The partially convertible rupee was hovering at 61.28, compared with its close of 61.44 during the previous trading session.
Brent crude futures edged higher after robust US data buoyed global financial markets, with a cut in Saudi-Kuwait oil output providing further support. Brent for December settlement was up 14 cents at $86.30 a barrel. The contract had risen 34 cents to end at $86.16 a barrel on Friday, 17 October 2014.
Japanese stocks led a rally in Asian stocks on Monday, 20 October 2014, after solid US data and earnings reassured investors worried about the health of the world economy. Key benchmark indices in Japan, China, Taiwan, South Korea Hong Kong, Singapore and Indonesia were up 0.44% to 3.69%.
Japanese stocks surged after a weekend media report that Japan's $1.2 trillion Government Pension Investment Fund, the world's largest public pension fund, is working out plans to increase its portfolio allocation devoted to domestic stocks to around 25%.
Meanwhile, in China, the country's central bank -- the People's Bank of China -- is reportedly planning the injection of about 200 billion yuan ($32.7 billion) into some national and regional lenders. The National Bureau of Statistics is due to announce data on third-quarter economic growth and September industrial production, retail sales and fixed-asset investment tomorrow, 21 October 2014. The Communist Party starts its plenary session today, 20 October 2014.
In Hong Kong, protest leaders and government officials pledged to move ahead with talks aimed at ending more than three weeks of pro-democracy demonstrations, even after a weekend of violent clashes that injured dozens. Talks between the two sides are set to begin tomorrow afternoon and will go ahead amid rising tensions in the streets. The clashes this weekend were concentrated in Mong Kok, one of the three sites occupied by demonstrators, after police cleared protesters from a key intersection on Friday, 17 October 2014, prompting thousands to pour back into the neighborhood to take back the streets.
Trading in US index futures indicated that the Dow could gain 80 points at the opening bell today, 20 October 2014. US stocks rallied on Friday, 17 October 2014, as earnings beat estimates, consumer confidence reached a seven-year high and investors speculated that central banks will add more economic stimulus. The Standard & Poor's 500 Index (SPX) rose 1.3% to 1,886.76. The Dow Jones Industrial Average increased 263.17 points, or 1.6%, to 16,380.41. The Nasdaq Composite Index climbed 0.96% to 4,258.
US consumer confidence unexpectedly rose in October to the highest level in seven years, showing a brightening in Americans' moods as gas prices drop and the labor market gains traction. The Thomson Reuters/University of Michigan preliminary sentiment index for this month increased to 86.4, the strongest since July 2007.
The Federal Reserve may want to extend its bond-buying program beyond October to keep its policy options open given falling US inflation expectations, Federal Reserve Bank of St. Louis President James Bullard said on 16 October 2014.
The Federal Open Market Committee (FOMC) next undertakes a monetary policy review at a two-day meeting on 28-29 October 2014.
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