The News International Team
India’s credit outlook upgrade by S&P helped the equity benchmarks recover in late trade and snapped three-day losing streak on Friday. Indices fell nearly 3 percent in previous three sessions due to Supreme Court’s coal verdict, deferral of gas pricing and geopolitical tensions.
The 30-share BSE Sensex climbed 157.96 points to close at 26626.32 while the 50-share NSE Nifty managed to hold the important support level of 7850, up 57 points at 7968.85, making positive start of October series. However, during the day indices had fallen nearly a percent due to weak global cues.
Standard & Poor’s Ratings Services today revised its outlook on India to stable from negative . However, earlier in April 2012, the rating agency had cut India’s outlook to negative.
It affirmed ‘BBB-‘ long-term and ‘A-3’ short-term unsolicited sovereign credit ratings on India. It also affirmed transfer and convertibility assessment of ‘BBB+’.
“India’s improved political setting offers a conducive environment for reforms, which could boost growth prospects and improve fiscal management. Its external position is a key credit strength and well-entrenched democratic political system is another credit support,” it reasoned.
The rating agency further said it could raise the rating if the economy reverts to a real per capita GDP trend growth of 5.5 percent per year and fiscal, external, or inflation metrics improve.
“The change in rating indicates amplified conviction in the government’s intent and ability to make changes for growth. It also implies belief that budgeted fiscal targets are more likely to be met,” said Jayant Manglik, president-retail distribution, Religare Securities.
According to him, investor confidence will move up a notch along with the rating and this essentially means money waiting on the sidelines will now come into India.
S&P also revised outlook on six Indian companies to stable from negative, which are Reliance Industries, NHPC, NTPC, Power Grid, TCS and ONGC.
Meanwhile, Prime Minister Narendra Modi will start his five-day US visit early morning on Saturday. Experts believe the Union Budget next year is more important than this US visit.
Ruchir Sharma, Head of Emerging Markets and Global Macro, Morgan Stanley Investment Management dismisses all the hoopla about Prime Minister Narendra Modi’s maiden visit to the United States.
While the first year of the Modi government should not be judged too soon, Sharma says it is the Budget next year that will be the make or break for the government.
Sharma believes that the Sensex hitting a year-end high of 30000 is unlikely as the global economic environment is not conducive for the market rally.
For the weem, the Sensex declined 1.7 percent and Nifty lost 1.9 percent weighed down by banks, capital goods, metal, infrastructure and oil stocks. CNX Midcap Index tumbled 3.7 percent and BSE Small Cap Index plunged 6 percent.
Stocks in action
Banks (especially PSU banks) rallied smartly with the BSE Bankex rising 2 percent and CNX PSU Bank index gaining 3 percent. India’s largest lender State Bank of India and its rivals HDFC Bank and Axis Bank surged 2-3 percent.
Metal stocks too rebounded with the BSE Metal index climbing 2.5 percent aided by Hindalco Industries and Tata Steel with 5 percent and 3 percent upside, respectively. Hindalco on Thursday clarified that there will be no major impact on earnings due to coal verdict announced by Supreme Court. Jindal Steel too gained 5 percent.
Sun Pharma surged over 4 percent on hopes of not getting import alert from US FDA for its Halol plant in Gujarat. US FDA conducted surprise audit of this facility. Credit Suisse today said the US drug regulator did not find anything adverse in their audits. Ranbaxy Labs, which may be a subsidiary of Sun soon, gained 5 percent.
Among others, shares of ONGC, Mahindra and Mahindra, Larsen and Toubro, Tata Motors and NTPC were up 1.5-3 percent. However, HDFC, ITC, TCS, Dr Reddy’s Labs, HUL, Hero Motocorp and Gail India declined 1-2.6 percent.
The BSE Midcap and Smallcap indices too recovered, up 0.8 percent and 0.6 percent, respectively.
In the midcap space, Mangalore Chemicals was locked at 20 percent upper circuit at Rs 88.10 after Deepak Fertilisers revised its open offer price (for buying controlling stake in company) to Rs 93.60/share.
Jaiprakash Power surged 9 percent after JSW Energy signed MoU with the company to buy its three power plants of 1,891 MW capacity. In previous session, the stock had lost 14 percent after hydro power assets deal between company and Reliance Power called off.
Indiabulls Real, Voltas, Unitech, SAIL, Syndicate Bank, REC, PTC India Financial and City Union Bank shot up 6-10 percent.
The market breadth also improved in late trade as 1570 shares advanced while 1397 shares declined on the BSE.