Nifty has to stay above 8090 for the upmove to continue
After closing lower in each of the past six trading sessions, the benchmark stock indices—NSE’s CNX Nifty and S&P BSE Sensex—closed in the black on 10 June 2015. On 9 June 2015, the Nifty had closed at its lowest since 27 October 2014, after declining by 411 points (or 4.87%) over the past six trading days. This downtrend was broken on Wednesday as the 50-stock Nifty gained 102.05 points (or 1.27%) to close at 8,124.45. The S&P BSE Sensex closed 359.25 points higher to close at 26,840.50 (up 1.27%).
We had mentioned that the Nifty may remain weak and for it to reverse the downtrend it has to close above 8,100. The 50-stock index closed above this level on Wednesday, setting itself up for more gains.
Both the Nifty and the Sensex opened slightly higher than the previous days close at 8024.15 and 26517.32, respectively and investors turned immediately bullish with both the indices trading around 0.80% higher than previous day’s close.
While Nifty moved to around 8,100, the 30-stock Sensex crossed 26,700 level. The indices maintained this level for most part of the trading session. Another surge of buying came in around 2pm, taking the indices to hit their intraday highs.
Both the indices gave up some gains towards the end, giving rise to the suspicion that the rise was substantially due to short covering. The Nifty hit an intraday high of 8,152.25 and closed at 8,124.45. The Sensex hit a high of 26,934.74 before closing at 26,840.50.
Of the 2,748 companies traded on the Sensex, 1,704 (or 62%) closed higher than their previous day’s close while 937 companies closed in the red. All the sector indices maintained by the NSE and BSE closed higher. Among the sector indices on the NSE, the CNX IT was the top gainer up 2.32%. Auto stocks trailed close with a CNX Auto index returning 1.89%. The CNX Bank Nifty closed 1.24% higher.
Defensive consumer stocks did not attract a strong buying interest and the CNX FMCG index closed just 0.19% higher. The CNX Metal and the CNX MNC gained 0.69% and 0.66% respectively.
On the BSE, the BSE Capital Goods index was the lead gainer among the sector indices after the IT Index. It closed 2.04% higher. Among the gainers on this index, BHEL rose 4.21%, Siemens gained 2.65%, L&T moved up 2.37% and Thermax was up 2.28%.
Sugar stock too, had something to cheer about. The Union Cabinet approved Rs6,000 crore interest-free loan to sugar mills for making payments to cane farmers. Cane arrears amounting to Rs22,000 crore of farmers are still pending. Sugar prices both in domestic and global market have fallen to the lowest levels in the last six years. India's sugar production is estimated to touch all time high of 28.3 million tonnes (MT) in 2014-15. According to Industry body Indian Sugar Mills Association (ISMA), the Indian sugar industry has so far produced a record 27.95 MT, as compared to about 24.04 MT of sugar produced till May in the last 2013-14 sugar season (October-September).
Bajaj Hindusthan Sugar surged 10.05%, Balrampur Chini Mills rallied 2.69%, Dhampur Sugar Mills gained 4.50%, Andhra Sugars surged 6.82% and Oudh Sugar advanced 9.15% on the BSE.
"Coal India has set a target of increasing its production capacity by 60 million tonne this fiscal. But taking into consideration the steps taken by the company to increase production, it may surpass the target," Coal Secretary Anil Swarup said at a media interaction. In 2014-15, the company's total coal production increased by 31.81 MT to over 494 MT, recording nearly 7% growth over 2013-14. Since coal production is likely to be higher, the government may be able to allocate some more additional quantities for auction for coal linkages, he added. Coal India closed 0.96% up at 404.90.
The Indian government is said to be planning to convert into equity a Rs50 billion ($783 million) loan extended by state-run Oil and Natural Gas Corp (ONGC) to its overseas investment arm to improve the unit's finances ahead of a possible public offering. According to news sources, Prime Minister Narendra Modi's cabinet is also expected to consider the deal, which would also require raising the authorised capital of the subsidiary ONGC Videsh by half to Rs150 billion. ONGC closed 1.21% higher.
Shares of Cairn India rebounded over 7% to Rs184.80 after slumping nearly 7% in the previous two sessions. It is being rumoured that Cairn India could be merged with another Vedanta group firm Vedanta Ltd. Vedanta closed 1.26% higher in today’s trade.
The Reserve Bank of India (RBI) laid down draft rules for companies to sell rupee bonds offshore, setting a limit on the price of the bonds at 500 basis points above government bonds of similar maturities. The price cap is not particularly restrictive, but the appeal of the bonds to offshore investors is likely to be limited for now, analysts said. The value of the rupee is uncertain as an increase in US interest rates begins to look more likely.
The benchmark 10-year government bond was trading at a yield of 7.80%, marginally higher than Wednesday’s close of 7.79%. The rupee traded marginally higher at 63.84 against the US dollar compared to 63.93 a day before.
China's benchmark Shanghai Composite index ended down 0.15% as investors expressed disappointment following the exclusion from MSCI, one of the world's major equity indexes. A report by the People's Bank of China, which stated that the central bank's economists have lowered their 2015 growth forecast for the country to 7% from 7.1%.
Negative sentiments prevailed among the other Asian indices. Hong Kong’s Hang Seng closed 1.12% lower, while Japan’s Nikkei closed 0.25% lower. South Korea’s KOSPI was down 0.62%.
Most of the European indices were trading higher.
UK’s FTSE 100 was up 0.33% while Germany’s DAX was trading 1.14% up.
US futures too, were trading higher in early trade. S&P 500 futures was up 0.31%, while the Nasdaq was up 0.30%.