Sensex, Nifty hit highest level in almost 11 months

Firmness continued on the bourses, with the barometer index, the S&P BSE Sensex, the Nifty 50 index, both, hitting their highest level in nearly 11 months in early afternoon trade. At 12:21 IST, the Sensex was up 478.41 points or 1.76% at 27,605.31. The gains for the Nifty index were lower than those for the Sensex in percentage terms. The Nifty was currently up 138.95 points or 1.67% at 8,462.15. Gains in Asian stocks aided the upmove on the domestic bourses.

Asian stocks edged higher as stronger-than-expected US jobs report suggested that the US economic recovery was back on track. The Fed funds futures market data showed that investors are not pricing in a rate increase from the US Federal Reserve in calendar year 2016 despite the strong jobs report for June 2016. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015. A delay in interest rate increases from the Fed would slow capital flight from emerging markets.

The Sensex jumped 492.01 points or 1.81% at the day's high of 27,618.91 in early afternoon trade, its highest level since 20 August 2015. The barometer index rose 231.33 points or 0.85% at the day's low of 27,358.23 in opening trade. The Nifty jumped 141.70 points or 1.7% at the day's high of 8,464.90 in early afternoon trade, its highest level since 20 August 2015. The index rose 83.85 points or 1.01% at the day's low of 8,407.05 at onset of trading session.

In overseas stock markets, Asian stocks edged higher as stronger-than-expected US jobs report suggested that the US economic recovery was back on track. The Fed funds futures market data showed that investors are not pricing in a rate increase from the US Federal Reserve in calendar year 2016 despite the strong jobs report for June 2016. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015. A delay in interest rate increases from the Fed would slow capital flight from emerging markets. Japanese stocks surged as investors saw poll results for Japan's upper house as signaling new rounds of economic and political reforms by the coalition government led by Prime Minister Shinzo Abe. The Nikkei 225 Average closed 3.98% higher. In the upper house elections held yesterday, 10 July 2016, Abe's ruling coalition led by his Liberal Democratic Party won a landslide victory, making it far easier for Abe to push through his economic agenda dubbed Abenomics.

US stocks edged higher during the previous trading session on Friday, 8 July 2016, as strong June employment report bolstered investor sentiment on the strength of the economy. US employers in June added a seasonally adjusted 287,000 jobs, the strongest month of hiring since last October, according to the Labor Department report. That was a sharp rebound from May, when hiring sagged to 11,000, the weakest reading since the economy stopped shedding jobs in 2010. The unemployment rate rose to 4.9% from 4.7%, suggesting that more people entered the labor force, given the better-than-expected headline number.

Closer home, the broad market depicted strength. There were more than two gainers against every loser on BSE. 1,703 shares gained and 789 shares declined. A total of 134 shares were unchanged. The BSE Mid-Cap index was currently up 1.61%. The BSE Small-Cap index was currently up 0.95%. Both these indices underperformed the Sensex.

Bank stocks edged higher on renewed buying. Among private bank stocks, Kotak Mahindra Bank (up 1.67%), ICICI Bank (up 3.37%), Axis Bank (up 0.08%), and Yes Bank (up 2.23%) rose.

Index heavyweight HDFC Bank gained 1.94% to Rs 1,194.90. The stock hit a high of Rs 1,196.55 in intraday trade so far which is record high for the counter. The stock hit a low of Rs 1,184.10 so far during the day.

Axis Bank rose 0.08%. Media reports suggested that the central government has finally made up its mind to sell minority stakes in many listed and unlisted companies held through the Specified Undertaking of the Unit Trust of India (SUUTI), in a bid to meet its asset-sale target. The government has invited bids from bankers for the mandate to manage the stake-sale process. SUUTI currently holds 11.53% stake in Axis Bank (as per the shareholding pattern as on 31 March 2016).

IndusInd Bank rose 0.86% ahead of Q1 June 2016 earnings today, 11 July 2016.

Among PSU bank stocks, State Bank of India (SBI) (up 1.9%), Bank of Baroda (up 2.1%), Canara Bank (up 1.97%), IDBI Bank (up 1.61%), Bank of India (up 3.33%) and Union Bank of India (up 2.01%) gained.

Punjab National Bank advanced 3.53% after the Reserve Bank of India (RBI) notified on Friday, 8 July 2016 that the aggregate foreign shareholding in the state-run has gone below the prescribed threshold caution limit stipulated under the extant foreign direct investment (FDI) policy. Hence, the restrictions placed on the purchase of shares of PNB are withdrawn with immediate effect.

Cement stocks gained on renewed buying. ACC (up 1.36%), UltraTech Cement (up 1.46%) and Shree Cement (up 2.2%) gained.

Ambuja Cements rose 0.85% to Rs 259.85. The stock hit a high of Rs 261.35 in intraday trade so far, which is 52-week high for the counter. The stock hit a low of Rs 259.05 so far during the day.

Grasim Industries was up 1.09% at Rs 4,585. Grasim has exposure to the cement sector through its holding in UltraTech Cement.

Meanwhile, as per the monthly data released by the Association of Mutual Funds in India (AMFI), equity mutual fund schemes including tax saving equity schemes known as Equity Linked Saving Schemes (ELSS) received net inflow of Rs 320 crore in June 2016. The inflow would have been much higher if one excludes large redemption of arbitrage funds. Media reports suggest that there was redemption of Rs 3500 crore from arbitrage funds in June 2016. AMFI does not give separate data on arbitrage funds. It clubs arbitrage funds under the equity fund category. Meanwhile, balanced funds received net inflow of Rs 2402 crore in June 2016. Balanced funds typically have 65-70% of their portfolio invested in equities and 30-35% in debt.

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