Heavyweights buoy Nifty to 5K

Markets regained strength and ended near the day's high on the back of buying in heavyweights and strong global cues. The Sensex traded in the positive zone in morning trades but slipped to a low of 16,443 after the GDP data came out. However, short covering in select spaces helped the index to recover 271 points to a high of 16,676. Sensex finally ended up 260 points at 16,677. Nifty regained its 5,000-mark and ended up 81 points at 5,001.

The first quarter GDP growth dipped to 7.7% compared to 9.3% during the same quarter of the previous year. Manufacturing sector growth came in at 7.2% vs 12.7% on a y-o-y basis. Industrial growth stood at 5.1% and the farm sector grew at 3.9%, according to the government data.

"Growth was very close to consensus and there are few obvious "nasties" hiding in the industry breakdown. The acceleration in trade-exposed manufacturing is encouraging as is the steady, strong expansion in financial services. The slowdown in construction is less pleasing at face value, but overall this robust report should leave RBI on track for one more 25 basis point hike this year," said Sean Callow from Westpac Institutional Bank, Sydney.

However, markets have registered its second biggest monthly fall in August 2011, even though its recover more than 5% in past two trading days, on fears of a global slowdown due to the US sovereign downgrade and European debt crises.

The Bombay Stock Exchange (BSE) benchmark index Sensex fell 1,520 points, its second highest decline in the last thirty-four months in point terms.  The National Stock Exchange (NSE) S&P CNX Nifty fell 481 points or 8.8% during the month.

Global markets, however, continued to remain positive. Europe's FTSE has surged 2.6% to 5,265. However, CAC and DAX slipped 0.3% each in trades, erasing early gains. In Asia, Nikkei closed up 1% and Hang Seng gained 1.7% in trades.

Foreign institutional investors (FIIs) have net sold Rs 12,027 crore (approximately $2.6 billion) shares, a highest net outflow since October 2008, in this month till August 29, according to data available on the website of the stock exchanges. Earlier in January 2011, the benchmark indices had crashed 11% or 2,181 points on net outflow of Rs 8,904 crore by the foreign investors.

Overseas investors have started pulling out their investment from equities on concerns that rising inflation and interest rates may dent the profit growth of India Inc in the forthcoming quarters.

“India has underperformed other emerging markets since January, but the sheer under-performance is a concern for FIIs because interests are still going up. India has underperformed heavily compared to the world market in the past couple of days as the anti-corruption movement gains momentum,” said Neeraj Dewan, Director, Quantum Securities.

“If there is pause in the rate tightening cycle, FIIs may start finding India attractive again. In the short-term, the political risk for India has also gone up,” he added.

The rate-sensitive realty and banking and export oriented information technology and metal sectors have been the worst performers among the sectoral indices, falling more than the benchmark index or over 10% on fears of slowdown concerns.

Today, the BSE metal index surged 3.7% to 1,736. Jindal Steel, Tata Steel and Hindalco rallied 4-5% each in trades. Realty, bankex and IT indices also moved up 2-3% each.

Reliance, HDFC, HDFC Bank, Infosys and ICICI Bank together contributed around 177 points to the Sensex's upmove. Reliance gained 3.6% at 782.  ICICI Bank and Infosys were up around 2% each.

DLF, Sun Pharma, Jaiprakash Associates and Hero Motocorp were some of the other key gainers.

Meanwhile, ONGC languished through the day to end down 4.3% at Rs 263.

According to reports, ONGC's much-delayed Rs 12,000 crore follow-on public offer may open on September 20 or 27. The red herring prospectus (RHP) is likely to be filed with market regulator Sebi on September 5.

Larsen & Toubro, ITC and Bajaj Auto also dropped into the negative zone.

Shares of non-banking finance companies (NBFCs) rallied in early trades but pared gains by noon. Among individual stocks, Srei Infrastructure Finance added 5.4% to Rs 41.85 after soaring as much as 9% in the day. Mahindra & Mahindra Financial Services ended up 1.3%.

This followed after RBI released draft guidelines for licensing of new banks in the private sector on Monday. The existing NBFCs, if considered eligible, may be permitted to either promote a new bank or convert themselves into banks. The minimum capital requirement will be 500 crore and the aggregate foreign shareholding in the new bank shall not exceed 49 per cent for the first 5 years after which it will be as per the extant policy.

"All eyes are now on RBI’s monetary policy stance in the forthcoming policy meeting on 16th Sept. This being a truncated week, Market will now open on Friday. Nifty has already gained more than 250 points in 2 trading sessions and possibility of a pullback will be higher," said Shanu Goel, Senior Research analyst-Bonanza Portfolio Limited.

BSE market breadth was positive. Around 1,821 stocks were on the advancing side, while 977 stocks declined out of 2,944 total traded stocks.