The benchmark indices closed at one-month highs on Monday, posting gains for the second consecutive session, with investors expecting political parties to outline their economic goals in the coming days ahead of the 2014 general elections. Continued buying activity by foreign investors also boosted investor sentiment.
On Monday, the BSE?s 30-share Sensex ended 110.69 points or 0.53% higher at 20,811.44, while the NSE?s Nifty ended 30.65 points or 0.50% higher at 6,186.10 points. Foreign institutional investors (FIIs) bought $43 million worth of equities, according to the BSE provisional data, taking their year-to-date tally to $136.24 million. FIIs have been net buyers over the last eight trading sessions, buying $465.24 million worth of equities.
?Political parties would be unveiling their election manifestos in the coming days. On February 27, the BJP will spell out its vision for the economy,? said Saurabh Mukherjea, CEO, Institutional Equities, Ambit Capital.
While FIIs have been buyers in India in the recent trading sessions, emerging market funds have been under selling pressure. As per a recent Morgan Stanley report, emerging market funds saw their 17th straight week of outflows at $1.56 billion.
?The magnitude of outflows has reduced compared with the last three weeks? average outflow of $5.2 billion. Within EM, EM Asia regional funds reported the largest outflows of $0.89 billion for the current week, while GEMs funds reported outflows of $0.19 billion,? the report said.
Back home, the market rally was led by Tata Power (5.02%), BHEL (3.95%), Axis Bank (3.85%) and Larsen & Toubro (2.85%). Shares of Tata Power and Adani Power gained 7.36% and 5.21%, respectively, in intra-day on Monday after the Central Electricity Regulatory Commission (CERC) allowed the power companies to raise tariffs and receive compensation to make up for losses incurred at their Mundra projects.
The regulator has asked utilities of Gujarat, Maharashtra, Punjab, Haryana and Rajasthan to pay Rs 329.45 crore to Tata Power and Rs 829 crore to Adani Power in 36 monthly instalments for past losses.
However, the market gains were restricted by NTPC as the scrip fell to its lowest level in more than seven years on the back of the CERC order. According to experts, NTPC is likely to be the worst hit as CERC tries to cut incentives through its regulations. ?We see the cut in incentives not only as a structural decline in regulated RoEs but also a de-rating catalyst. NTPC would be the worst hit due to across-the-board cut in its incentives,? Bank of America Merrill Lynch analysts said in a report.
Among sectoral indices, BSE Capital Goods (2.53%), BSE Healthcare (1.11%) and BSE Bankex (1.19%) were the major gainers. Analysts say investors have been rotating their portfolios to buy into cyclicals. ?Capital goods stocks have been gaining as market players are moving out of consumers, IT and pharma towards defensives such as capital goods, auto and construction companies,? added Mukherjea.
Among Asian indices, the Nikkei (-0.19%), Kospi (-0.45%), Shanghai Composite (-1.75%) and Taiwan Taiex (-0.48%) ended in the red. Chinese shares were down amid reports that Chinese lenders have stopped extending loans to property developers.
European indices were trading flat with DAX (0.03%) and CAC (0.3%) marginally in the green, while the FTSE 100 (-0.18%) marginally in the red. In Germany, Ifo Business Climate Index recorded a reading of 111.3 in February, up from last month?s reading of 110.6. On the 30-share Sensex, 22 stocks advanced. In the broader market, the breadth was moderately strong with 1,338 advances against 1,323 declines. On Monday, the NSE cash turnover stood at Rs 8,411.56 crore, while the turnover in F&O stood at Rs 1.8 lakh crore.
