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Benchmark indices recovered fabulously from yesterday’s carnage and ended nearly 2% higher led by the gains in financials, auto and index heavyweights on government’s accommodative stance on the contentious issue of capital gains taxation while firm global cues too helped in keeping the momentum going.
Government's promise of a high-level committee to look into the MAT issue lifted sentiments while analysts attributed the rebound in global equity markets to the return of calm in global bond markets and the surprise victory of David Cameron’s conservative party in the UK elections.
The 30-share Sensex ended up 506 points at 27,105 and the 50-share Nifty closed up 134 points at 8,191.
In the broader market, both the BSE Midcap and Smallcap indices, closing up 1.7% each were moving largely in-line with the front-liners. Market breadth in BSE ended positive with 1,862 advances against 834 declines.
Government’s decision to refer the contentious MAT issue -that has kept investors on tenterhooks for the last few sessions- to a high-level committee headed by Justice AP Shah has revived risk-appetite and has brought about a relief-rally of sorts.
As per existing norms, while long term gains are exempted foreign institutional investors are required to pay 15% tax on short-term stock gains and 5% on bond profits. However, government’s resolve to recover unpaid taxes raised the concerns over retrospective taxation. Finance Minister Arun Jaitley has estimated that such claims could reach as much as Rs 40,000 crore.
"Equity markets concluded with week with robust gains on Friday as the benchmarks recovered more than one and half percent, tracking positive cues from both domestic and global front. Sentiments got some support with Finance Minister Arun Jaitley announcing a high level committee, which will give its recommendations on the issue of imposition of MAT on foreign investors. Gains in global markets, decline in crude oil prices overnight and rupee's recovery against the dollar after a recent steep slide also aided rebound in domestic bourses," said Jayant Manglik, President-retail distribution, Religare Securities in a post market note.
"Despite Friday’s rebound in index, sustainability seems difficult at higher level due to existence of multiple hurdles and lack of conviction among the participants due to various domestic and global issues. Hence, we reiterate our sell on rise advice till Nifty is upholding below 8350 mark. On the other hand, stocks have been trading in both directions in response to their quarterly numbers these days so maintain stock specific view with strict risk management rules," he added.
Uptrend was also helped by the comments from global rating agencies like Fitch and Moody's that said India credit ratings will remain unaffected by the recent surge in capital outflows as relative to its peers India's external balances are strong and adequate to withstand current outflows.
Buzzing Stocks
Except BSE Consumer Durables index, down 1.6%, all the 12 sectoral indices of BSE ended higher. BSE Realty gained over 4% after the Union Cabinet eased norms for investing in real estate investment trusts (REITs). BSE Auto index and Bankex up 2.7% and 2.2% each were the next biggest gainers.
Financials kept the momentum going for the markets in today’s session boosted by hopes that RBI may cut rates by 25 basis points sometime before the next policy review meeting taking into account the sustained moderation in retail inflation. ICICI Bank gained over 4%, HDFC Bank gained 2.5%, Axis Bank ended up nearly 3%, housing finance major HDFC was up 2.7%. Public sector lender SBI gained 0.2%.
Tata Motors gained over 5%. The company has said its rights issue, which closed on May 2, was oversubscribed by 1.21 times and the company collected an amount of Rs 9,040.56 crore.
Among other auto stocks, Bajaj Auto was up over nearly 3%, M&M gained 0.6%, Maruti Suzuki was up 1.5%.
Hero Motocorp declined 1.8%. Hit by an impairment charge of Rs 155 crore, Hero MotoCorp, the country’s largest two-wheeler manufacturer by volume, reported a 14 per cent slump in net profit for the quarter ended March, 2015. Stand-alone net profit for the quarter was Rs 476.5 crore, against Rs 554 crore in the corresponding period of the previous year.
Oil shares closed mixed. RIL gained over 2% while ONGC declined 1%. Capital Goods stocks like BHEL and L&T gained 0.8% and 1.7% each.
Pharma stocks have posted strong gains. Cipla was up over 4%, Dr Reddys Lab gained nearly 2% and Sun Pharma was up 1.2%. Sun Pharma has said that the court convened shareholders' meeting on Sun Pharma Global Inc merger will be held on June 3, 2015.
Global Markets
European markets have opened higher led by UK shares after Prime Minister David Cameron’s Conservative Party succeeded to post a surprise victory in UK elections with the results declared so far and projections suggesting the party could come very close to an absolute majority in the 650-member House. FTSE 100 index is up 1.7% while CAC 40 and DAX indices have gained nearly 0.5% and 0.3% each.
Asian markets rebounded on Friday following the return of stability in global bond markets though some caution among traders was still visible ahead of US jobs data and start of negotiations between Greece and its creditors due this weekend. Nikkei ended 0.4% higher and Hang Seng and Shanghai Composite indices gained 1% and 2.2% each.
