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Value buying, short-covering lifts equity markets

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  17 May 2016 12:00 AM GMT

Mumbai, May 16: Value buying, coupled with short-covering and expectations of further economic reforms, buoyed the Indian equity markets on Monday. Consequently, the key indices closed the day’s volatile trade session with appreciable gains. Healthy buying in information technology (IT), pharma and reality stocks fuelled the late rally.

The wider 51-scrip Nifty of the tiol Stock Exchange (NSE) edged up by 45.85 points, or 0.59 percent, at 7,860.75 points.

The barometer 30-scrip BSE sensitive index (Sensex), which opened at 25,528.80 points, closed at 25,653.23 points — up 163.66 points or 0.64 percent from the previous close at 25,489.57 points.

The Sensex touched a high of 25,688.46 points and a low of 25,351.62 points during the intra-day trade. The BSE market breadth margilly favoured the bulls with 1,309 advances and 1,264 declines.

Both the key indices had ended on a lower note during the previous trade session on Friday due to disappointing macro-economic data and profit booking.

The barometer index had lost 300.65 points or 1.17 percent, while the NSE Nifty had edged down by 85.50 points or 1.08 percent.

Initially, the key indices opened on a positive note on Monday, in sync with their Asian peers and value buying after last Friday’s correction.

But they soon ceded their initial gains as investors were disappointed after India’s annual wholesale price index (WPI) accelerated into the positive terrain. The WPI had remained in the negative zone for the last 17 months.

Earlier, the Consumer Price Index (CPI) for last month also showed an upward movement in annual retail inflation.

The rise in both the inflation indices, coupled with forecast of a slight delay in the arrival of monsoon has reduced the chances of the Reserve Bank of India (RBI) further easing its key lending rates during the monetary policy review scheduled in June. Apart from the WPI, investors’ sentiments were subdued after data released on May 13 showed that India’s merchandise exports in April fell for the 17th straight month.

Besides, selling pressure was witnessed in the banking sector after the Bank of Baroda (BoB) reported its second consecutive quarter of losses. The BoB’s quarterly results were released after the market hours last Friday. Nevertheless, the day’s initial correction rendered prices attractive and triggered value buying which lifted prices. In addition, investors’ confidence was restored at the prospects of Goods and Services Tax (GST) getting passed. “Value buying after stocks had plunged deep in the red triggered short-covering and lifted prices,” And James, chief market strategist, Geojit BNP Paribas Fincial Services, told IANS.

Vaibhav Agarwal, vice president and research head at Angel Broking said that equity markets ended on a positive note, as stocks of index heavyweights ITC and HDFC rose.

“Markets may remain volatile due to global cues,” Agarwal said. According to Nitasha Shankar, senior vice president for research with YES Securities, banking index recovered from early morning slump led by buying in the private sector banks. “PSU banks remained under pressure ending lower by five percent,” Shankar noted. Both the foreign institutiol investors (FIIs) and domestic institutiol investors (DIIs) turned into net sellers during the day’s trade

Data with stock exchanges showed that the FIIs sold scrip worth Rs.79.84 crore, while the DIIs divested stocks worth Rs.127.91 crore.

Sector-wise, healthy buying was witnessed in fast moving consumer goods (FMCG), automobile and healthcare stocks, whereas scrip of capital goods, oil and gas, and banking came under intense selling pressure during the day’s trade.

The S&P BSE FMCG index surged by 121.91 points, followed by the automobile index, which gained by 102.14 points; and the healthcare index rose by 75.30 points.

Conversely, the S&P BSE capital goods index dipped by 43.22 points, followed by the oil and gas index, which declined by 37.91 points; and the banking index fell by 7.62 points. Major Sensex gainers during Monday’s trade were Dr.Reddy’s Laboratories, up 3.16 percent at Rs.3,004.25; ITC, up 3.13 percent at Rs.329.30; HDFC Bank, up 2.01 percent at Rs.1,163.05; Hindustan Unilever (HUL), up 1.85 percent, at Rs.846.45; and HDFC, up 1.82 percent at 1,187.30.

Major Sensex losers were State Bank of India (SBI), down 4.22 percent at Rs.177.20; Cipla, down 1.47 percent at Rs.523.45; Adani Ports, down 1.38 percent at Rs.185.80; ICICI Bank, down 1.13 percent at Rs.224; and BHEL, down 0.94 percent at Rs.121.55. (IANS)

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