Factors that drove the carriage of Indices yesterday

Five days and both the Benchmark Indices have been slipping

down. Nifty and Sensex had slipped 2%. But yesterday, on

18th September 2016, both the Indices tightened their belts

and soared up. Both Nifty and Sensex ended almost 2%

higher, singing happy songs. Amidst Global cues, Index

heavyweights staged a recovery on short covering.

The S&P BSE Sensex closed 521 up points to settle at 28,051

and the Nifty50 ended the day’s trade 158 points higher at

8,678. This has been the biggest intra-day gain since May 25,

2016, for both Nifty and Sensex. In the broader market, both

the BSE Midcap and Smallcap Indices hiked between 1-2%.

So what made the Indices gain so much in one day?

Behind the curtains: The rally had not been a mad rally. Several reasons fueled the run together to make the

Indices touch the new heights yesterday and turning the five-day gloom into a celebration.

The GST Council meet: Yesterday, the GST council commenced their three-day meet for

finalizing the main rate of GST. Shares of ten logistics companies surged up to 5% in

advance of the Goods and Services Tax Council meeting that begins later today.

Yesterday, the council had agreed on the compensation formula and discussed a four-tier

rate structure. The proposed slabs were 6, 12, 18 and 26% with cess on the highest tariff

for ultra luxury and demerit items. The discussion will go on for another two days.

Global Market: Global Indices, in general, did well yesterday. European and Asian stocks

inched higher with commodities-related stocks leading the rally after prices of major

industrial metals and crude oil went up on a softer dollar. Fed Vice Chair Stanley Fischer

apparently warned of the dangers of low-interest rates, suggesting they could drive to

longer and deeper recessions, making the economy more susceptible.

Crude Oil Prices: Crude Oil prices have always influenced the market. Oil prices went up

yesterday as some analysts declared that markets might not be quite as oversupplied as

hinted by many, with global inventories rising less than expected in advance of the high-

demand winter heating season in the northern hemisphere.

Rally in Financial Stocks: Financial shares along with Banks, NBFC, and housing

finance companies (HFC) came out as the top gainers rising by up to 7% on the NSE.

Nifty Financial Services index, the biggest gainer among sectoral indices ended up 2.75%.

Whilst, Nifty Bank, and Nifty PSU Bank Index gained 2.23% and 2%, respectively.

ICICI Bank, Bajaj Finance, DHFL, GIC Housing Finance, Bajaj Finserv, LIC Housing

Finance, HDFC and Repco Home Finance were up between 3%-6% on the NSE. Bank of

Baroda, Union Bank of India, Manappuram Finance, Bharat Financial Inclusion and Rural

Electrification Corporation surged 2%-7%.

ICICI Bank continued the gains to end near 5% higher. The stock had risen 7% in the

previous session after the Essar group on Saturday signed a requisite agreement with

Russia’s Rosneft, United Capital Partners and Trafigura to sell 98% in its most priced

asset, the 20 million ton per annum Vadinar refinery and Vadinar port in Gujarat.

According to Bank of America report, a current large deal is likely to help lower stress on

ICICI Bank. Positive catalysts near-to-medium term would be an enhancement in macro

growth, asset quality. Bank of America believes that the bank has provisioning cushion to

deliver +10/25% EPS growth in FY17/18E.

Besides, global rating agency Moody’s stated that the draft bill to institute a new regime

for resolution of distressed banks in India is credit positive as it will assist to enhance

overall stability of the financial system.

Midcaps: Mastek went up over 11.5% after the company's consolidated net profit more-

than-doubled to Rs 7.7 crore for Q2FY17, despite the decline in operational income.

Aarti Industries traded on a fresh 52-week high of Rs 740, closed 5% up after the company

said the board has permitted buyback of shares at a price of Rs 800 per share via the tender

offer route. Indian Hume Pipe hiked 20% after the company declared the board will meet

on October 26, to consider the issue of bonus shares to existing shareholders.

Quarterly earnings from bluechips Reliance Industries and Wipro would largely weight on

the market trend this week in the absence of any major domestic triggers.

Disclaimer

The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of the research

team. Users are advised to use the data for the purpose of information and rely on their own judgment while making investment decision.

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Article Written by

Tanaya Nath