Nifty ends above 8,700 at fresh 52-week closing high; RBI policy eyed

Investors are keenly awaiting the outcome of the RBI's monetary policy review tomorrow

Benchmark indices ended at fresh 52-week closing highs led by rate-sensitive shares ahead of the RBI monetary policy review tomorrow while better-than-expected US jobs data led to a rally in export-oriented stocks such as IT and pharma.

Reserve Bank Governor Raghuram Rajan, whose 3-year term will come to an end on September 4, is widely expected to hold the key interest rate on Tuesday as retail inflation continues to be above the comfort zone.

The S&P BSE Sensex ended higher 61 points at 28,140 and the Nifty50 gained 28 points to settle at 8,711. Among broader markets, BSE Midcap and the Smallcap index surged almost by 1% each.  

Says Rohit Gadia, Founder & CEO, CapitalVia Global Research,"Market is expected to see short term correction if it breaks below the lower end of the range at 8720. Important support is at 8625-8610 and resistance is visible around 8700-8750. Going forward market movement will depend on FII and DII trading activity, quarterly results of the major companies and price movement of crude oil in international market. Investor is likely to react on RBI credit policy tomorrow. We expect interest rate to stay unchanged which is now at five year low of 6.5%."

Among overseas markets, European and Asian markets rose with sentiment underpinned by a stronger-than-expected US jobs report released on Friday. Japanese stocks edged higher as the yen weakened against the dollar amid the dollar's broad strength driven up upbeat job data.

The Nikkei 225 index closed 2.44% higher. Chinese shares shrugged off weak trade data. In mainland China, the Shanghai Composite was currently up 0.6%. In Hong Kong, the Hang Seng index was currently up 1.2%.

Back home, the government in consultation with the Reserve Bank of India (RBI) has notified consumer price inflation target of 4% with upper tolerance level of 6% and lower tolerance level of 2% to be achieved by the Reserve Bank of India (RBI).

Rate-sensitive sectors like banks, realty and auto ended positive. The Governor may prefer that RBI assesses the full impact of monsoon rains before taking a view on the interest rate.

"Continued strong liquidity support, bullish global backdrop post the strong US jobs data and spill-over of positive sentiments post the passage of GST bill are together keeping the markets buoyant. Recent correction in crude oil prices have also helped at the margin. Earnings season, so far has been progressing well. 98 companies of the MOSL universe, which have reported results, cumulatively delivered 6.8% PAT growth YoY vs. expectations of 6.5%," adds Gautam Duggad, ‎Head of Research - Institutional Equities - Motilal Oswal Securities.

Export oriental sectors like IT and pharma gained after upbeat US job data for July 2016. The US is the biggest outsourcing market for the Indian firms.

From the IT space, Infosys, Wipro and TCS rose between 0.1%-1%. Among pharma, Lupin, Dr Reddy’s Labs and Cipla were up 1%-2%.

Dr Reddy’s Laboratories has received approval from the Central Drug Standard Control Organisation (CDSCO) to export drugs for the European Union market.

Index heavyweight Reliance Industries gained over 1%. The company's subsidiary Reliance Jio Infocomm is shortly going to launch mobile and data services.

Adani Ports and Lupin rose 1%-3%% ahead of Q1 earnings scheduled to be announced tomorrow.

HDFC added nearly 2%. Max Financial Services (MFSL) in its board meeting scheduled today will also consider the proposed scheme of arrangement amongst the company, Max Life Insurance Company (MLIC) and HDFC Life Insurance Company (HDFC Life) and consequently, including Max India (formerly Taurus Ventures) as a party to such scheme for certain commercial reasons.

India's third largest telco Idea Cellular slipped over 3% on estimation that the company’s net profit may slip 23.5% at Rs 440 crore in April-June quarter from Rs 575.6 crore in the quarter-ago period.

Wockhardt tanked over 9% on reports that the US Food and Drugs Administration (FDA) has issued an import alert on the company’s Ankleshwar facility for alleged violation of good manufacturing practices.

Bharti Airtel ended over 3.5% lower on concerns that the company which has been offering discounts on its mobile voice and data services ahead of the launch of Reliance Jio could hurt margins going forward.

Q1 RESULTS REACTION

Hero MotoCorp ended marginally positive after touching fresh record high of Rs 3,556, up 3% on the National Stock Exchange (NSE). The company reported 18% year on year (YoY) growth in net profit at Rs 883 crore for the quarter ended June 30, 2016 (Q1FY17). Analysts on an average had expected profit of Rs 838 crore for the quarter.

Tata Coffee rallied nearly 10% after hitting  52-week high on the BSE in intra-day trade, after its  consolidated net profit more than doubles to Rs 64 crore for the quarter ended June 30, 2016 (Q1FY17), on the back of strong operational income.

Union Bank of India ended 6.5% lower as the bank's asset quality worsened in the April-June quarter (Q1FY17) with gross non-performing assets (NPAs) doubling to 10.16% from 5.53% in the year-ago period. It was 8.70% as on March 31, 2016.

Shares of midcap cement companies rallied up to 10%, with most of them hitting their respective 52-week highs on the BSE in intra-day trade after reporting robust earnings for the quarter ended June 30, 2016 (Q1FY17) because of lower operational costs.

Mangalam Cement, JK Cement, JK Lakshmi Cement, Sagar Cements, OCL India, Saurashtra Cement and Prism Cement were up 2%-9% on the BSE.

Britannia Industries moved higher by 9% after the company reported a consolidated net profit of Rs 221 crore against an average analyst estimate of Rs 210 crore for the quarter ended June 30, 2016 (Q1FY17).