Markets surge on hopes rate cut may spur growth

Sensex soared 2.4% to end at 28,122 while the 50-share Nifty surged 2.8% to close at 8,514

Benchmark share indices surged during the week, aided by sharp gains on Thursday, led by rate sensitive sectors on expectations that further easing of interest rates would help spur growth.

In the week to January 16, the 30-share Sensex soared 664 points or 2.4 per cent to close at 28,122 while the 50-share Nifty surged 229 points or 2.8 per cent to end at 8,514.

On Thursday, the Sensex gained 729 points to record its highest single-day gain since May 18, 2009, led by financials after the Reserve Bank of India (RBI) surprised the markets by reducing the repo rate by 25 basis points to 7.75 per cent with immediate effect.

Foreign institutional investors were net buyers in Indian equities worth Rs 3,248 crore for the week, as per provisional stock exchange data.

Key events that shaped the week

Industrial production increased at a five-month high of 3.8 per cent in November, while Consumer Price Index (CPI)-based inflation rose to 5 per cent in December from 4.38 per cent in the previous month, primarily due to a rise in food prices.

On the other hand, the wholesale price index-based inflation inched up to 0.11 per cent in December, snapping a six-month easing trend as food costs jumped up year-on-year.

The trade deficit for the month of December decreased by 44 per cent at $9.43 billion hitting a ten month low mainly on account of falling imports due to slump in crude prices.

Earnings corner

YES Bank and Axis Bank ended up 4-5 per cent after robust third quarter earnings, while TCS ended with marginal gains amid flat growth while Bajaj Auto ended slightly higher despite marginal fall in net profits during the third quarter. Further, Wipro surprised the Street by delivering better than expected numbers post market hours on Friday.

Reliance Industries ended up 1 per cent. The company reported standalone net profit of Rs 5,085 crore, in line with Street estimates, helped by other income post market hours on Friday.

Sectors and stocks

The BSE Realty Index was the top gainer among the sectoral indices during the week up 5.7 per cent followed by Capital Goods, FMCG, Bankex and Power indices.

HDIL was the top gainer up 18 per cent followed by Prestige Estates, Sobha, Mahindra Lifespace, DLF which gained 6-13 per cent each. Capital goods shares gained on hopes of order inflows from power producers. BHEL and L&T ended up 6-8 per cent each.

Except for Reliance Industries most oil and gas shares ended down 0.7-7 per cent each tracking further decline in global crude prices.

SpiceJet surged 12 per cent after Kalanithi Maran and his associates decided to transfer the ownership and management control of the airline to former promoter Ajay Singh and a clutch of investors.

Week ahead

Investors will keenly watch out for the corporate earnings by HUL, Mind Tree, Kotak Mahindra Bank, Cairn India, ITC, ING Vysya Bank and HCL Tech.

Movement of rupee against the dollar and crude oil price movement will dictate the trend on the bourses. Outcome of monetary policy meeting of European Central Bank along with China’s October-December 2014 gross domestic data will hold key triggers for domestic markets in the week ahead.