The BSE benchmark Sensex ended the week above 20,000 after two years due to strong buying mainly in refinery, realty and PSU sectors on the back of partial deregulation of diesel prices and the Government’s decision to defer the implementation of controversial anti-tax evasion proposal GAAR.
Rate cut hopes by RBI in its monetary policy meeting on January 29 after a fall in inflation, as measured by Wholesale Price Index (WPI), to three-year low and persistent foreign funds inflow into equities also boosted the market.
Comments from the Finance Minister about immediate priority of the Government to keep the investment cycle going, too, aided the upsurge.
The 30-issue Sensex jumped 243 points on Monday, its best single-day gain in the current calendar year, on all- round buying as Government deferred implementation of the General Anti-Avoidance Rules (GAAR) by two years, from April 2014 to to April 2016, and a fall in inflation in December.
The BSE benchmark resumed higher at 19,689.09 and shot up further to a high of 20,126.55 before ending at 20,039.04, a gain of 375.40 points, or 1.91 per cent, its best level since January 6, 2011.
The NSE 50-share Nifty also rose by 113.10 points, or 1.90 per cent, to end at over two-year high of 6,064.40.
“The partial decontrol in diesel prices triggered a rally in oil marketing companies,” said Amar Ambani, Head of Research at brokerage IIFL.
The move to allow hike in diesel prices periodically to a maximum of 0.50 paisa per month would enable OMCs to cut their under-recoveries, thereby reducing the burden of fiscal deficit of Government. It will also reduce the oil subsidy bill, where diesel accounts for 59 per cent of total subsidy.
Refinery counters like IOC, ONGC, BPCL, OIL, HPCL and RIL zoomed between 7.11 per cent and 22.83 per cent. As a result, the BSE-Oil&Gas flared up by 10.96 per cent and was the top gainer from the sectoral indices.
Drop in WPI-based inflation to a three-year low of 7.18 per cent in December also triggered buying in stocks.
Buying was so strong that stock markets ignored data showing that retail inflation rose to 10.56 per cent in December from 9.90 per cent in November.
Foreign Institutional Investors (FIIs), the main market driver, remained net buyers throughout the week, investing a net Rs 4,977.79 crore, including the provisional figure of January 18.
The market ended in the green on four out of five trading days. On Wednesday, it had dipped by 169 points as rate cut hopes were dented by RBI Governor D Subbarao’s view that inflation is “still high“.
The rally was also attributed to approval of 50 per cent reduction by the Government in reserve price of spectrum used by CDMA operators and good third quarter results announced by some major corporates.
Thirteen out of 30 Sensex scrips ended with gains while others finished with losses.
Second-line counters, however, underperformed the Sensex, indicating lack of any major retail investments. The BSE-Small cap index settled down by 1.13 per cent while the BSE-Midcap was up by a mere 0.12 per cent.
State-run oil and gas major, ONGC, was the top gainer in the Sensex pack with a rise of 15.58 per cent. Petro-chem giant Reliance Industries (RIL) gained 7.11 per cent. Other gainers from the Sensex pack were NTPC (7.67per cent), Bharti Airtel (7.38 per cent), GAIL India (5.51 per cent), ITC (4.95 per cent), TCS (3.43 per cent) and Infosys (2.85 per cent).
However, M&M dropped by 5.90 %, followed by Wipro 5.33 %, Hero MotoCorp 3.75 %, Sun Pharma 3.52 %, Hindalco 3.38 %, Sterlite Ind 2.91 %, Bajaj Auto 2.88 %, Cipla 2.80 % Jindal Steel 2.15 %, HUL 1.70 %, Coal India 1.59 % and Maruti Suzuki 1.29 %.
Among other sectoral indices, the BSE-Realty spurted by 7.33 %, BSE-PSU 4.67%, BSE-Teck 2.82%, BSE-IT 2.45 % and BSE-Power 1.75% while BSE-Auto dropped by 2.88%, BSE-Metal 1.44% and BSE-HC by 0.89%.
The total turnover at BSE and NSE was at Rs 12,288.25 crores and Rs 66,915.11 crores respectively as against the last week’s level of Rs 13,452.18 crores and Rs 64,590.39 ccrores.