Markets Hold High Note, End With A Flourish

Yesterday, the Indian markets were subdued over political uncertainty caused by the Trinamool Congress withdrawing support from the UPA in retaliation against the recent diesel price hike, FDI in retail and the reduced subsidies on LPG. This sparked anxiety in the markets about a possible rollback in the reforms announced. Regardless of opposition though, the government validated its announcement step, as the Department of Industrial Policy and Promotion (DIPP) released a notification signalling implementation. This move was further supported by the Samajwadi Party, giving the markets a strong upward trend throughout the day. Moreover, there has been talk about the Cabinet meeting scheduled for Tuesday to consider increasing the FDI cap in insurance and reducing subsidies on public distribution system (PDS) sugar.

The Sensex closed the day 403.58 points or 2.20% higher at 18752.83 and Nifty closed higher by 136.90 points or 2.46% at 5691.15.

The Asian markets also closed higher after seeing a major downfall over the week. There was increasing concerns over the Chinese PMI and Japanese trade deficit data. This, however, changed on the last day of the week, and the indices were majorly pushed upwards by technology and resources. A weak dollar had commodity prices moving up, and oil moved higher today after having fallen over 5% over the week. This gave a major boost to resource firms. Moreover, the launch of iPhone 5 resulted in an uptrend for telecom stocks, Apple’s suppliers and other technology stocks.

The European markets too were positive over the increased probability of a Spanish economic recovery plan. This plan would also enable the Spanish government to access the unlimited bond buying scheme of the ECB. The DAX and CAC are currently trading higher by 0.40% and 0.46% respectively.

On the domestic front, 2 of the 13 sectoral indices - IT and Teck - finally ended lower. Technology stocks saw selling because of the strengthening rupee, which is harmful for the export-oriented software industry and the import-oriented hardware industry. Infosys and TCS were lower by 0.80% and 1.38% respectively.

Among the top gaining sectors were Power, Capital Goods, Metals and Banking, up by 4.35%, 4.12%, 4.06% and 4.05% respectively. The highest gaining stocks included GMR Infra (10.64%), Reliance Infra (9.48%), Thermax (7.27%), SAIL (7.68%), Axis Bank (7.70%) and Canara Bank (6.28%). The heaviest losers included Dr Reddy’s Labs and Sun Pharma, shedding 1.28% and 0.22% respectively.

It was a clearly a very positive day for the markets and the economy. For next week, the Cabinet meeting on Tuesday would give a more clear picture on future reforms and steps that the government is likely to take to revive the economy.