Monday, October 12, 2009

Robust IIP, Reliance pack push Nifty above 5050

Sustained buying across the board helped equities end sharply higher on Monday. While better than expected Index of Industrial Production figures for the month of August set the stage early in the first half, positive opening of European markets later set the markets alight.

Early in the day government data showed, India's industrial output for August rose 10.4 per cent against 1.7 per cent in the same month year ago.

“The double-digit growth in industrial production during August (first time since October 2007) was largely on expected lines. With this, industrial production in India has seen a sharp revival growing at an average 8.5% during Jun-Aug, 2009 up from an average of just 1% growth in the prior three months (Mar-May, 2009).

Two factors have driven this sharp revival in domestic industrial activity. Firstly, the revival in domestic credit as evidenced by indicators such as sharp pick up in auto volumes and strong FMCG volumes and secondly, a deceleration in the pace of decline of exports (export traffic at major ports actually grew in August).

The adverse impact of monsoons will be felt in 4QCY09. However, initial indicators suggest the impact has been lower than initially feared. In addition, 4QCY09 onwards, low base of last year will favorably impact reported YoY Industrial production growth. Consequently, in our view, industrial production growth should average around 7-8% for full year FY10 as against a growth of just 2.7% during FY09,” said Ashutosh Datar, Analyst – IIFL, institutional equities arm of India Infoline.

Market opened on a positive note after a poor performance last week. Sentiments were positive on reports that warring Ambani brothers may reach out for an amicable solution to end their business rivalry. Shares of both Mukesh and Anil Ambani brothers provided support to the indices.

Bombay Stock Exchange’s Sensex ended at 17,026.67, up 384.01 points or 2.31 per cent from Friday’s close. The index touched a high of 17,068.78 and low of 16,687.32 intraday.

National Stock Exchange’s Nifty closed at 5054.25, up 109.05 points or 2.21 per cent. The broader index hit a high of 5068.05 and low of 4945.45.

“Over the last few days, basic technical indicators were in a sell mode. Whenever that happens we see every rise as a bounce before a fall. Unless the indices break previous highs, the trend remains bearish. The Sensex may drift down to 16,200 levels if any downward correction takes place,” said Rohit Srivastava, technical analyst, Sharekhan.

The BSE Midcap Index closed 1.22 per cent higher and BSE Smallcap Index gained 1.05 per cent
Amongst the sectoral indices, BSE IT Index advanced 2.94 per cent, BSE Bankex jumped 2.63 per cent and BSE Oil&gas Index advanced 2.35 per cent.

Significant gains in State Bank of India (5.16%), Reliance Infrastructure (5%), Wipro (3.79%), ITC (3.74%), Tata Consultancy Services (3.36%) and Reliance Industries (3.19%) drove the Sensex.

Shares of Reliance Infrastructure and Reliance Industries were in limelight after the feud between warring Ambani brothers looked nearing to an end. Reliance Industries on Sunday responded positively to Anil Ambani’s call to settle all outstanding disputes between them through dialogue and discussion, but added that the contentious gas dispute is a larger national issue and can only be resolved through the Supreme Court.

Hero Honda (-0.9%), Reliance Communications (-0.62%) and BHEL (-0.21%) were the losers.
BSE breadth showed 1,627 advances against 1,108 declines. The market will be closed Tuesday for assembly elections in Maharashtra.

Elsewhere, European markets were led by gains in financials and commodities ahead of earnings season. US stocks were also expected to open on a higher note. At 5:30 pm IST, Dow Jones futures was up 0.59 per cent, S&P 500 gained 0.68 per cent and Nasdaq 100 moved 0.61 per cent higher

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