Thursday Closing Report: More gains likely

Signs of easing of the global economy brought about by various central banks boosted global markets today and India was no exception. The market picked up the festive fever and the Sensex finished at a new all-time closing high today.

 The market opened in the green today on signs of easing of the economic pressures across the world. The US Federal Reserve’s stimulus initiatives announced last night were welcomed by investors worldwide. The listing of the shares of Coal India and fall in the weekly food inflation figures for the third week in a row also played a part in perking up sentiment as the market pushed further in its bid to regain the summit reached 34 months ago.
The Sensex closed at 20,893, up 427.83 points (2.09%). The index touched a high of 20,917 and a low of 20,605 in trade today. The Nifty settled at 6,282, surging 121.30 points (1.97%). The benchmark touched an intraday high of 6,290 and a low of 6,199 today.
The gainers outnumbered the losers in terms of market breadth. The Sensex ended with 28 gainers against two declining stocks. The Nifty had 44 advancing stocks while six stocks ended in the red. However, the broader indices were left behind in the race. The BSE Mid-cap index settled 0.83% higher and the BSE Small-cap index gained 0.66%.
The top Sensex gainers included State Bank of India (up 4.98%), Tata Motors (up 4.03%), Reliance Industries (up 3.71%), Hindalco Industries (up 3.66%) and Jaiprakash Associates (up 3.26%). The two laggards today were Hero Honda (down 1.32%) and Bharti Airtel (down 0.55%).
All sectoral indices, baring the BSE Consumer Durables, had a green closing today. The top gainers were BSE Oil & Gas (up 2.77%), BSE Metal (up 2.27%), BSE Bankex (up 2.12%), BSE Auto (up 1.67%) and BSE PSU (up 1.66%). The BSE Consumer Durables index settled 0.10% lower.
Sliding for the third straight week, food inflation fell to 12.85% for the week ended 23rd October from 13.75% for the week ended 16th October.
Experts said food inflation would soften further by November-end when kharif crops come to the market. Food inflation remained high in August and September as heavy monsoon caused a supply glut.
Markets in Asia settled with splendid gains following the US Fed’s new stimulus initiatives announced last night. The development is seen as a move to spur the economic recovery.
The Shanghai Composite jumped 1.85%, the Hang Seng surged 1.62%, Jakarta Composite gained 0.65%, KLSE Composite was up 0.27%, Nikkei 225 advanced 2.17%, Straits Times rose 0.48%, Seoul Composite was up 0.34% and the Taiwan Weighted ended 0.77% higher.
Amid concern that further liquidity injection by the US central bank would lead to a surge of capital inflows, a key economic adviser today said India has large capacity to handle these funds, but should keep all its options open in case the situation turns alarming.
Chief economic adviser Kaushik Basu told reporters that currently capital controls should not be stepped up as record fund flows by foreign institutional investors (FIIs) have not become a matter of concern as of now.
The US indices closed higher on Wednesday after the Fed announced that it would purchase government bonds worth $600 billion over the next eight months in a bid to lower interest rates and perk up growth and borrowing. The Fed left options open for additional measures if growth and inflation don’t stabilise in the months ahead. Besides, the Republicans’ strong gains in the mid-term polls are likely to encourage business activity.
The Dow surged 26.41 points (0.24%) at 11,215. The S&P 500 added 4.39 points (0.37%) at 1,198. The Nasdaq rose 6.75 points (0.27%) at 2,540.
Foreign institutional investors were net buyers of stocks worth Rs987 crore on Wednesday. Domestic institutional investors net sold equities worth Rs370 crore.
India Cements (up 2.48%) has reduced the prices of cement to Rs255-Rs265 per 50 kg bag, two days after the Tamil Nadu government asked the cement manufacturers to take steps to cut the escalating cost of the key construction component. In a statement, the Chennai-based company said that it has reduced the cost of a 50 kg bag to Rs255 in Chennai and Chengalpet and Rs265 per bag to stockists in other districts of the state.
Pipavav Shipyard (down 0.88%) has received a licence to build warships for the Indian Navy. With this, the company has become the first private sector shipyard with modular construction facilities along with a huge dry dock to get this licence. The company has been permitted to build five warships per year, as per the terms of the licence. This means at any given time, it can undertake construction of over 20 warships of different capacities simultaneously.
Pratibha Industries (up 0.39%) has won an order worth Rs63 crore from Raheja Universal for construction of residential buildings in Mumbai. The project involves civil construction (with finishing work) of three buildings of 20 floors above stilt level with a total built-up area of 4 lakh square feet. The project is scheduled for completion within 21 months time.


Commodity market already discounted US Fed’s $600 billion programme

The commodity market, except the crude oil has already discounted the US Fed’s move to buyback the debt from banks and so far have remained flat.

Commodity prices are not likely to witness a great momentum in the long-term following the US Federal Reserve's (the Fed) $600-billion programme to buy debt from banks, which may weaken the dollar further, say analysts.

"The programme will certainly impact the US dollar negatively as the Fed's decision will increase liquidity of the greenback in the market. However, the market was fully aware about the Fed's action so the impact would not be very acute. And I don't think it will create a significant pressure on the dollar," said an analyst from a Mumbai-based research firm.

The Fed also announced that the $600 billion programme would be topped by around $250 billion of re-invested assets, mainly mortgages, from the quantitative easing.

"The market was expecting around $500 billion, but they have come up with $600 billion. They will also continue their re-invest programme, so total would be around $850-$900 billion," said the analyst.

In early trades on Thursday in London, base metals prices gained marginally. Copper for the three-month delivery gained 1.3% to $8,430 per metric tonne, while aluminium gained 0.9% to $2,439 per tonne on the London Metal Exchange (LME). Ony silver was up about 3% and zinc was up 2%.

"We have not seen a great impact of the Fed's announcement on commodities as of today and since tomorrow is the holiday in India, there is not much action in the market," said a senior analyst from Anand Rathi Financial Services Ltd.

"Fundamentals are still not good for commodities. Commodity prices are climbing just because of the depreciation of dollar and will go further, except agriculture commodities, which are still in a better place due to huge demand-supply mismatch situation," added the analyst. 

Analysts also feel that the package announced by the Fed would give some support to crude oil price.

"Crude oil prices indicate the global economic condition in a better way than metals. Since last two to three months, metal prices have recovered very fast. However, crude oil prices are not showing the same performance and are hovering between a broad range of $75-$85 per barrel. Unless the US economy shows some recovery, crude oil prices will not move up much. However the Fed package and China's action to build up its strategic petroleum reserves due to lower crude oil prices, is likely to support oil prices to gain some strength," said an analyst.

JP Morgan Chase & Co and Bank of America Merrill Lynch (BoAML) have also said that crude oil would rebound and may touch $100 a barrel in 2011 as the US economy strengthens its growth. 

"We are expecting maximum price of oil would be $90 per barrel," added the analyst from Anand Rathi Finance.

The analyst was also bullish on gold. He said, "Gold prices will increase due to the dollar factor and fears of inflation. I think it would be a win-win situation for gold." 


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