Banking sector buoys markets; Sensex up 409 points

Capital infusion in banks, clarity on retrospective tax on capital gains and expectations of a rate cut by the apex bank cheered investor sentiments and boosted Indian equity markets on Friday.

The positive cues propelled the barometer 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) to close the day's trade up by 409 points or 1.48 percent.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) also made gains and closed 111 points or 1.32 percent up at 8,532.85 points.

The S&P BSE Sensex, which opened at 27,814.51 points, closed at 28,114.56 points, up 409.21 points or 1.48 percent from the previous day's close at 27,705.35 points.

The Sensex touched a high of 28,161.17 points and a low of 27,814.51 points in the intra-day trade.

According to market analysts, Indian exchanges opened in the green tracking SGX Nifty, after it made gains worth 142 points on the last day of July series F&O (futures and options) expiry on Thursday.

There was a mild up-tick in the roll-over of F&O positions after Thursday's expiry which stood at 61.7 percent, when compared to last month's data. This shows a return of confidence in the investors.

On Thursday, global cues also supported the markets post Federal Open Market Committee (FOMC) meet in which the US Fed decided to keep rates unchanged.

However, the main trigger for Friday's gains was better-than-expected quarterly numbers and the government’s plan to infuse Rs.70,000 crore in PSBs (public sector banks) in the next four years.

"The news of capital infusion in the banking sector by the government lifted the banking index which drove prices. Banking sector's first quarter performance has been better-than-expected with bottom lines of many lenders improving," Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS. 

"The government's clarification on the recommendations made by the Justice A.P. Shah committee on minimum alternate tax (MAT) and the P-Notes also calmed investors anxiety."

On Thursday, SEBI (Securities and Exchange Board of India) chairman U.K. Sinha clarified that the SIT (special investigative team) appointed by the Supreme Court on black money did not recommend a ban on P-Notes.

Investors were anxious as the SIT had recommended that the participatory note, or P-Note, route of overseas funds investing in Indian stocks be stringently regulated. 

The MAT issues was expected to dent the foreign investors sentiments in the Indian markets. The foreign investors have been net-buyers since July 13.

James pointed out that the markets were also optimistic of a rate cut in the upcoming monetary policy review by the Reserve Bank of India (RBI) which is scheduled for August 4.

India Inc. is demanding a rate cut as it believes that this may be the last time in this calendar year for RBI to ease lending before inflation spirals up again and the US Fed decides on its own rates in September.

Gaurav Jain, director with Hem Securities said: "Indices welcomed the August series on a firm note. Good results from some key corporate like private banking heavyweight ICICI Bank, firm global cues after US Fed meet outcome improved the sentiments of the investors."

Sector-wise, healthy buying was observed in banking, automobile, healthcare, metal, information technology (IT), fast moving consumer goods (FMCG) and technology, entertainment and media (TECK) stocks. 

The S&P BSE banking index zoomed by 354.21 points, the automobile index rocketed by 338.35 points, healthcare index augmented by 333.18 points, metal index was higher by 145.53 points, IT index rose by 145.49 points, FMCG index gained by 142.41 points and TECK index was up by 77.57 points.

Major Sensex gainers during Friday's trade were: State Bank of India (SBI), up 5.25 percent at Rs.270.40; Coal India, up 4.55 percent at Rs.439.30; lupin, up 4.26 percent at Rs.1,695.65; DrReddy's lab, up 4.05 percent at Rs.4,065.70; and ICICI Bank, up 3.97 percent at Rs.302.50.

The major Sensex losers were: BHEl, down 2.84 percent at Rs.278.70; NTPC, down 0.70 percent at Rs.134.90, Tata Steel, down 0.42 percent at Rs.247.30; Bajaj Auto, down 0.18 percent at Rs.2,519.15; and Cipla, down 0.13 percent at Rs.709.20.

Among the Asian markets, Japan's Nikkei was up 0.30 percent and Hong Kong's Hang Seng gained by 0.56 percent. However, China's Shanghai Composite Index lost 0.98 percent. 

In Europe, the london FTSE 100 index was lower by 0.12 percent and Germany's DAX Index moved down by 0.05 percent. The French CAC 40 was, however, up by 0.24 percent at the closing bell here.