Benchmarks extend early gains; trade near intra-day high level

Going from strength to strength, Indian equity markets have escalated to day’s high on sustained buying activities by market-participants on availability of beaten down, but fundamentally strong stocks. Sentiments also got some support from Finance Minister P Chidambaram’s statement that India's economy has stabilised in past few weeks and the investment cycle must start again for high growth. Moreover, overseas investors, who have been the biggest driver of the rally, continue to be buyers in the cash market, though the momentum seems to be on the wane. However, caution largely prevails ahead of the general election results due next week and investors were trimming portfolios and encashing positions. Meanwhile, global ratings agency Moody’s said that the Indian economy is unlikely to return to previous growth rates of around 7-8% in the near future even if the new government pursues a strong reform agenda limit the further uptrend of local equities. The BSE Sensex rose more than 200 points, while Nifty was up more than 50 points after hitting a nearly 1-1/2 month closing low on Wednesday. On the BSE sectoral front, maximum positions were built in Capital Goods counter, followed by Power and PSU stocks, while selling was witnessed in Healthcare counters. In scrip specific development, Jet Airways (India) was trading higher after the Securities and Exchange Board of India (Sebi) exempted Etihad Airways PJSC from having to make an open offer to public shareholders of Jet Airways. Moreover, Sintex Industries jumped 4.2% as it reported 6.75% increase in consolidated net profit at Rs 161.17 crore for the quarter ended March 31, 2014. On the global front, Asian shares were trading mixed as a tense situation in Ukraine made investors cautious, though a tame inflation report from China calmed some nerves. Moreover, Wall Street indices ended lower following renewed selloffs in high-flying technology shares, offsetting optimism from better-than-expected jobless claims and dovish comments from European Central Bank president Mario Draghi. Back home, GlaxoSmithKline Consumer Healthcare, Eicher Motors and Chambal Fertilisers & Chemicals will be in focus on account of March quarter earnings announcement. The market breadth on BSE was positive, out of 1838 stocks traded, 1133 stocks advanced, while 629 stocks declined on the BSE. The BSE Sensex is currently trading at 22583.76 up by 239.72 points or 1.07% after trading in a range of 22584.47 and 22317.18. There were 28 stocks advancing against 2 stocks declining on the index. The broader indices were trading in green; the BSE Mid cap index was up by 0.42%, while Small cap index gained 0.49%. The gaining sectoral indices on the BSE were Capital Goods up by 1.45%, Power up by 1.32%, PSU up by 1.08%, Bankex up by 1.07% and Oil & Gas up by 1.03%. While, Healthcare down by 0.14% was the only loser in the space.    The top gainers on the Sensex were Hindalco up by 2.46%, Mahindra & Mahindra up by 2.23%, Tata Power up by 1.97%, HDFC up by 1.95% and Coal India up by 1.87%. On the flip side, SSLT down by 0.56% and Dr Reddys Lab down by 0.55% were the only losers on the Sensex. Meanwhile, Global rating agency Moody’s in its latest report has stated that India will not be able to revert to high economic growth path of 7-8 percent anytime soon, even if the new government formed after the general election pursues strong reforms agenda. The report added that India’s government has only limited opportunities to provide some fiscal stimulus to offset a possible slowdown in capital flows. The global credit rating agency has forecast India’s economic growth at 4.5-5.5 percent in 2014 and 5-6 percent in 2015. Indian economy’s growth slowed down to a decade low at 4.5 percent in FY13 and 4.6 percent during the first three quarter of FY14. The Moody’s report highlighted that Indian economy is hampered by lack of reforms in recent years and is now vulnerable to capital outflows. It expects the debt-to-GDP ratio to rise to more than 65 percent this year. Although, the country witnessed significant improvement in current account deficit (CAD), this curtailing is unlikely to be sustained once restrictions on gold imports are lifted. During the April-December’FY14, CAD stood at $31.1 billion (2.3% of GDP) versus $69.8 billion (5.2% of GDP) reported in the same period of previous fiscal year.  On inflation front, the report added that high inflation, at more than 8 per cent indicated that the central bank has no room to ease monetary policy in the short term and may even tighten the policy rates further. The rating agency further noted that during the past two months, the foreign investments in India increased at brisk pace, which indicate that international investors continue to perceive attractive investment opportunities in India. Capital flows increased amid expectations that new government will take strong reforms to boost the economic growth. However, these expectations could be disappointed if a coalition government lacks the political flexibility to pass reforms. The CNX Nifty is currently trading at 6,733.20 up by 73.35 points or 1.10% after trading in a range of 6,734.80 and 6,652.15. There were 46 stocks advancing against 4 declining on the index. The top gainers of the Nifty were Ambuja Cements up by 2.62%, Power Grid up by 2.32%, M&M up by 2.31%, Hindalco up by 2.23% and Tata Power up by 2.03%. On the flip side, SSLT down by 0.56%, Dr. Reddy's Laboratories down by 0.55%, Lupin down by 0.09% and Cairn down by 0.01% were the only losers on the index. Asian equity indices were trading mixed; Shanghai Composite was down by 0.38%, Hang Seng was down by 0.03%, Taiwan Weighted was down by 0.58%. On the other hand, Nikkei 225 was up by 0.36%, Straits Times gained 0.15%, Seoul Composite was up by 0.11% and Jakarta Composite added 0.17%.