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 retained their big gains in early afternoon trade. The barometer index, the S&P BSE Sensex, pared gains after hitting fresh intraday high in early afternoon 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 Sensex was currently up 382.08 points or 1.46% at 26,490.61. The BSE Mid-Cap index was up 1.42%. The BSE Small-Cap index was up 1.26%. The market breadth was strong, with more than 2 gainers for every loser on BSE.
Auto stocks gained as removal of price controls on diesel is seen helping demand for cars. Pharmaceuticals shares were in demand. Hathway Cable & Datacom rose after bulk deal. JSW Energy rose as increase in local gas prices is expected to benefit coal-based power producers. DLF jumped after filing an appeal against a Securities and Exchange Board of India (Sebi) order banning it and six top executives from capital markets.
Meanwhile, the 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.
BJP's strong showing in the two assembly polls will help it progress toward greater influence in the upper house of the parliament, where it is in a minority. State elections are important for control of the Rajya Sabha, or the upper house of parliament, where representation is based on seats in local assemblies. While the BJP controls the lower house, or Lok Sabha, after winning India's strongest mandate in 30 years, it is in a minority in Rajya Sabha.
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 12:25 IST, the S&P BSE Sensex was up 382.08 points or 1.46% at 26,490.61. The index jumped 409.37 points at the day's high of 26,517.90 in mid-morning trade, 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 114.40 points or 1.47% at 7,894.10. The index hit a high of 7,905.95 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 131.37 points or 1.42% at 9,403.86. The BSE Small-Cap index was up 129.68 points or 1.26% at 10,443.65. 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. 1,658 shares rose while 742 shares declined. A total of 102 shares were unchanged.
Among the 30 Sensex shares, 26 rose and the remaining shares fell.
Auto stocks gained as removal of price controls on diesel is seen helping demand for cars. Tata Motors (up 4.15%), Maruti Suzuki India (up 2.26%) and Mahindra & Mahindra (up 1.25%) edged higher.
Among auto shares, TVS Motor Company (up 5.40%), Bajaj Auto (up 1.72%), Escorts (up 1.72%) Ashok Leyland (up 3.23%), Eicher Motors (up 3.02%), Maruti Suzuki India (up 2.26%) and Hero MotoCorp (up 0.76%), edged higher.
Pharmaceuticals shares were in demand. Biocon (up 2.17%), Cipla (up 2.07%), Dr. Reddy's Laboratories (up 1.99%), Ranbaxy Laboratories (up 1.89%), Sun Pharmaceutical Industries (up 1.68%), Wockhardt (up 1.57%), Lupin (up 1.54%), Cadila Healthcare (up 1.52%), Divi's Laboratories (up 1.42%), Aurobindo Pharma (up 1.38%), IPCA Laboratories (up 0.78%) and GlaxoSmithKline Pharmaceuticals (up 0.32%), edged higher.
DLF jumped after filing an appeal against a Securities and Exchange Board of India (Sebi) order banning the company and six top executives from capital markets. The stock was up 4.02%. Copies of the appeal were served on Securities and Exchange Board of India (Sebi) on Friday, 17 October 2014, and the Sebi Appellate Tribunal has fixed the hearing of the appeal on 22 October 2014, DLF said in a statement. Early last week, Sebi issued an order barring DLF and its chairman K.P. Singh along with five other company executives from accessing India's capital markets for three years. The order is related to lapses in disclosures made at time of the company's IPO in 2007.
JSW Energy rose 2.5%. Increase in local gas prices is expected to benefit coal-based power producers. Power plants based on imported coal charge tariffs that are around 20% cheaper than gas plants. JSW Energy is estimated to operate nearly half of its capacity on imported coal.
Hathway Cable & Datacom rose 2.06% to Rs 304.25 after 0.97% equity changed hands in a bulk deal on BSE today, 20 October 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 61.305, 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 10 cents at $86.26 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 0.49% to 3.98%.
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 37 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.
In Europe, Teresa Romero, the Spanish nursing aide who became the first person outside of West Africa to contract Ebola, has reportedly tested negative for the virus for the first time. Romero will undergo a second test to be sure she is free of the disease. Another 15 patients who came in contact with Romero have shown no symptoms of the disease, according to reports.
Germany's producer prices index continued its fall on an annual basis in September 2014, as energy costs kept it under downward pressure, while it remained steady in on the month earlier, official data showed today, 20 October 2014. Producer prices were unchanged on the month and fell 1% on the year, data from the country's statistics office Destatis showed today, 20 October 2014. In August 2014, producer prices fell 0.1% on the month and declined 0.8% on the year.
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