Markets Move Up Before An Expected Rate Cut

The Indian bourses continued their bull run during the last fortnight backed by the better-than-expected performance of by some of the companies of India Inc. In fact, after a decent decline in commodity prices over the last couple of weeks, market participants have their eyes set on a rate cut by the apex bank on May 3 in its monetary policy meet. The bourses are thus approaching the crucial mark of 20000 points.

The fortnight witnessed the Sensex thrash all psychological barriers to breach the 19000 points level. When the BSE Sensex opened at 18695 points on April 18, everyone was expecting some correction but instead the Sensex propelled itself to reach its peak of 19612 points on April 30 before closing at 19504 points, thereby gaining 808 points. The NSE Nifty also opened at 5682 points on April 18 and gained momentum to cross the 5962 points mark on April 30 before closing at 5868 points, gaining 185 points during the period.

The results of companies like TCS, HCL Tech, HUL, and Sterlite Industries have boosted investors’ confidence. In a major development, Unilever’s open offer to increase stake in HUL has put the FMCG major’s scrip on fire, touching its life-time high of Rs 597 on April 30. This has invited brisk trade in other MNCs over hopes of a similar action, putting the markets on a solid footing.[PAGE BREAK]

Markets across the globe are relishing the slow but sound economic recovery. The US Dow gained 1.37 per cent and Hong Kong’s Hang Seng emerged as the biggest gainer with a 5.32 per cent rise in the last fortnight. It was followed by Germany’s Dax, Japan’s Nikkei, Brazil’s Bovespa, UK’s FTSE, Taiwan’s Weighted and Singapore’s STI which gained by 4.71 per cent, 4.61 per cent, 3.78 per cent, 3.42 per cent, 3.19 per cent and 2.10 per cent respectively. China’s Shanghai Composite was the only loser with a 0.90 per cent drop owing to a long holiday.

A big push to the Indian markets was provided by FIIs with a whopping purchase worth Rs 4157 crore till April 26. Not a single trading session saw them in a sell mode. Conversely, DIIs were the net sellers of stocks worth Rs 846 crore. The combined turnover of the BSE and the NSE hovered between Rs 11868 and Rs 18066 crore during the last fortnight, with event specific and strategic trading in various sessions of the markets.

As far as the gainers are concerned, apart from a big intraday jump of 20 per cent by HUL on April 30, IB Real Estate was the biggest gainer of the fortnight with a 23.58 per cent jump followed by Jet Airways, R Com, TTK Prestige and Mahindra Finance that have gained 19.10 per cent, 16.49 per cent, 15.02 per cent and 13.55 per cent respectively. During the same period, JSPL was the biggest loser with a 10.48 per cent decline followed by Wipro, Bata India, GMR Infra and TCS.

This rally can mainly be attributed to some major events on the domestic and global front. On the domestic front, the Jet-Etihad deal, RIL-RCom deal, HUL’s open offer, and a good performance by some heavy weights have a positive impact on the bourses as the markets are now entering a crucial phase. This rally would only be sustainable if some good news comes in from the RBI in its monetary policy on May 3. The markets have, however, already discounted for a 25 basis point cut and any shift from this would be critical.