Weekly: Markets extend gains on rate cut hopes

Benchmark share indices gained for the fifth straight week, amid high volatility, led by rate sensitive shares after sharp decline in April WPI rekindled hopes of a steeper rate cut by the central bank.

In the week ended May 17, the 30-share BSE Sensex firmed up 0.8% to end at 20,286 and the 50-share Nifty gained 1.3% to end at 6,187.

According to market experts that the rally is fuelled by global liquidity. Since January, Foreign institutional investors were net buyers in equities worth Rs 68,000 crore or $12.6 billion, after pumping in $25 billion in 2012.

Consumer price index-based inflation fell to a 13-month low of 9.39% in April against 10.39% in the previous month, official data showed on Monday. This return to a single digit is after four months, and this has taken place both in urban and rural areas.

India's trade deficit widened to $17.8 billion in April led by higher gold imports, according to official data released on Monday.

On Monday, global financial markets weakened as a stronger dollar sparked off a sell off in Asian equities, gold and crude oil. In the domestic market, benchmark share indices slumped over 2% after data showed the country's trade deficit had widened in April, led by higher gold imports, raising worries about the Centre's ability to control the current account deficit. S&P had assigned India BBB- long-term and A-3 short-term sovereign ratings, a notch above junk grade.

India's wholesale price inflation slowed for a third straight month in April to 4.89% against 5.96% in the previous month, official release showed on Tuesday. This was the lowest level in 41 months last seen in November 2009. RBI’s comfort level for inflation is between 4% and 5%.

On Wednesday benchmark share indices surged 2.5% to a 28-month high led by rate-sensitive shares and the Bank Nifty shot up to a 30- month high after April WPI which came in below 5% raised hopes of a steeper rate cut by the central bank.

FIIs were net buyers of equities to the tune of Rs 3,889 crore on the first four days of the week, according to the data on market regulator Sebi website.

Standard & Poor’s on Friday dashed India’s hopes of a rating upgrade. The agency not only retained the lowest investment grade on the economy but also warned of downgrading it to junk in a year if reforms were not expedited to reverse the slide in economic growth. An upgrade in outlook on these ratings, to stable from negative, was possible if the government improved investment climate, Standard & Poor’s (S&P) said. However, there was no assurance of an upgrade in the foreseeable future.The negative outlook, S&P said in a statement on Friday, signalled at least a one-in-three likelihood of a downgrade within 12 months.

Among the rate sensitive shares, banks, realty and capital goods shares were among the top gainers. The BSE Realty index was the top gainer among sectoral indices up nearly 6% followed by Capital Goods index up 4.3% and Bankex up 4.1%. Other gainers include, Power, Healthcare, Oil and Gas indices. However, FMCG, IT and auto shares ended lower amid profit booking at higher levels after recent gains.

In the Sensex pack, SBI and ICICI Bank gained over 5% each, while HDFC Bank, HDFC gained 2.3-3.2% each. In the capital goods segment L&T and BHEL gained 3-4% each. Reliance Ind and ONGC were the top gainers in the oil and gas space.

ITC ended down 5.6% at Rs 335. FOr the fourth quarter ended March 31, 2013 the company's total income and net profit gained over 19% to Rs 8,511 crore and Rs 1,928 crore, respectively.

Bajaj Auto ended down 1.6% at Rs 1,834. The company reported a net profit of Rs 766 crore for the fourth quarter ended March 31, 2013 as compared to Rs 772 crore last year. Net sales for the quarter stood at Rs  4,651 crore, a growth of 3 per cent as compared to Rs  4,515 crore posted in the same quarter a year ago.

Among realty shares, HDIL and Anant Raj surged over 10% each while Indiabulls Real Estate and Prestige Estates gained over 9% each.

For the fourth quarter ended March 31, 2013, Dr Reddy's Labs reported a net profit of Rs 571, up 67% compared to the same quarter last year while consolidated revenue increased 26% to Rs 3,340 crore compared to the same quarter last year.

In the broader markets, the BSE Mid-cap index rose 1.1% while the Small-cap index ended 0.2% higher.