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Benchmark indices have closed firm, amid volatile trading session, supported by strong buying among rate-sensitive sectors mainly financials and auto as the further softening in retail inflation to a four-month low of 4.87% in April gave rise to hopes of a rate-cut by the RBI.
The 30-share Sensex ended 373.62 points higher at 27,251.10 and the 50-share Nifty gained 108.50 points at 8,235.45.
Adds Kunal Bothra, Head - Advisory, LKP Securities, "The bi-directional volatility in the market, generally is an indication that the short term supports are in place. We believe that with Bank Nifty also doing well over the last few days, it augurs well for the benchmark index. Technically, if Nifty breaks 8,350 then it could complete an Inverse Head and Shoulder pattern, which could trigger the next rally. Hence, this level of 8,350 would now be a very crucial resistance for the index.".
Among broader markets, BSE Midcap and Smallcap indices were up 1-2% each. The BSE market breadth ended positive, with 1,640 advances against 1,054 declines.
On the macro-economic front, the retail inflation softened further to a four-month low of 4.87% in April compared to 5.25% in March.
In contrast, factory output growth slowed to a five-month low of 2.1 per cent in March as against 5 per cent registered in February which could push the Reserve Bank of India (RBI) to slash key interest rates.
On the currency front, the rupee is lingering at 64.05 per dollar, though the traders reckoned the RBI spent an addition $500 million the previous day.
Further, HSBC downgraded Indian stocks to "underweight" from "overweight", citing slowing earnings growth, little room for rate cuts and potential negative impact from an unusual weather due to El Nino.
ASIAN MARKETS
Asian shares advanced on Wednesday despite another set of disappointing Chinese economic reports, as investors instead focused on hopes of further stimulus from Beijing to prevent a sharper slowdown in the world's second-largest economy.
MSCI's broadest index of Asia-Pacific shares outside Japan was off session highs but still up 0.3 percent.
China's factory output rose a less-than-expected 5.9 percent in April compared with the same period last year, boosting bets the government will have to step up its efforts to shore up the sputtering economy in order to meet its gross domestic product target. Fixed-asset investment and retail sales also fell short of expectations.
SECTORS & STOCKS
BSE Bankex surged over 2.5%. Bank Nifty zoomed 2.66% at 18,097. Sectors like Auto, Capital Goods, Healthcare, Oil & Gas, Consumer Durables and Power gained between 1-2%. However, BSE Realty index dipped by almost 1%.
Rate-sensitive stocks witnessed fresh buying after retail inflation softened further to a four-month low of 4.87% in April compared to 5.25% in March giving rise to hopes of a rate cut by Reserve Bank of India.
Banking shares ended higher by up to 6% after the Consumer Price Index (CPI)-based inflation fell to a four-month low in April and is likely to increase the clamour for the Reserve Bank of India (RBI) to cut interest rates in its next monetary policy.
Union Bank of India, Oriental Bank of Commerce, UCO Bank, Bank of India, Bank of Baroda, IDBI Bank, Syndicate Bank and Andhra Bank were up more than 3% each, while Axis Bank, State Bank of India (SBI), ICICI Bank, Yes Bank, Canara Bank and Punjab National Bank were up 2-6% on the NSE.
L&T gained over 2%. According to media reports, L&T has signed a technology transfer agreement with South Korea based Hyundai Heavy Industries to build LNG carriers.
According to its release to BSE, BHEL has surpassed the capacity addition target, set by the government for utility projects, by 19%, accelerating its project execution momentum as part of its six point agenda for dynamic growth. The stock rose over 2%.
From the auto segment, M&M, Hero Moto and Tata Motors gained between 1-3%. M&M gained on reports of the carmaker's plans to launch a new variant of its sports utility vehicle XUV500.
Shares of GAIL jumped nearly 3% on reports that GAIL India is in talks to acquire Dabhol's 5 million tonne per annum regasification terminal.
On the losing side, Hindalco was the top Sensex loser, down over 3% after the quarterly earnings of its subsidiary Novelis missed expectations as the adjusted EBITDA for the fourth quarter of fiscal 2015 quoted at $201 million compared to the $250 million reported for the corresponding period last year.
NTPC slipped around 2%. The cabinet on Wednesday cleared a proposal for 10 per cent disinvestment in Indian Oil Corp and 5% in NTPC, which may fetch the government close to Rs 8,500 crore at the current prices.
Shares of Lupin dipped around 4% after reporting a 1% year-on-year (yoy) decline in consolidated net profit at Rs 547 crore for the quarter ended March 2015 (Q4), due flat growth in sales.
Among other shares, Sobha dipped 6% after reporting a 12% decline in year-on-year (yoy) consolidated net profit at Rs 61.50 crore for the quarter ended March 2015 (Q4), due to poor sales.
TV Today Network dipped 13% on the BSE after the company reported a 45% year-on-year (yoy) decline in its standalone net profit at Rs 8.69 crore for the fourth quarter ended March 2015 (Q4), due to higher operational costs.
