Party continues at Dalal Street: Global cues lift Sensex 301 pts ahead of Gujarat polls

Bulls retained control of Dalal Street for second consecutive session Friday as follow-through buying lifted equity benchmarks and broader markets 1 percent each ahead of the first phase of Gujarat elections tomorrow.

Positive global sentiment, bank loan growth and continued value buying across sectors barring PSU banks & technology helped the Sensex close above psychological 33,000-mark. The 30-share BSE index rose 301.09 points or 0.91 percent to 33,250.30 today and rallied more than 650 points in two straight sessions.

The 50-share NSE Nifty gained 99 points or 0.97 percent at 10,265.70 while the Nifty Midcap ended above 20,000-mark, rising 0.93 percent to 20,014.75.

The sharp bounce back in last two sessions was after losing over 400 points from record high of 10,490 levels on the Nifty.

Experts remain positive on Indian equities, citing likely improvement in corporate earnings and economic growth from second half of FY18 onwards. Two-day rebound indicated that investors want to buy every big fall in market despite short term concerns. They may be preparing for the outcome of Gujarat elections, experts feel.

“We feel other factors will take a back seat now as all eyes are on Gujarat election. The recent opinion polls indicate the ruling party, BJP, will retain the state, but may see loss of vote share,” Jayant Manglik President Retail Sales Religare Securities said.

He suggests keeping leveraged positions hedged, considering the possibility of volatile swings ahead. Continuous participation of banking pack is essential for sustainable surge, he said.

Saion Mukherjee of Nomura said the research house is bullish on India Equities with Nifty December 2018 target of 11,880.

“Business is on the cusp of an upcycle which will drive strong earnings growth as corporate earnings-to-GDP ratio is at its lows, with significant contraction in margins and return on equity,” he reasoned.

This is also supported by stable macro fundamentals and clean-up in the system in terms of stressed assets and unprofitable players, he said.

Global markets were higher on progress in Brexit negotiations and better-than-expected China trade data. European stocks like Germany’s DAX gained 1.25 percent and France’s CAC was up 0.66 percent at the time of writing this article. Among Asian markets, Japan’s Nikkei and Hong Kong’s Hang Seng closed higher by more than 1 percent.

Back home, for the week, the Nifty ended 1.4 percent higher and the Sensex gained 1.3 percent while Nifty Midcap index rose 1.7 percent.

Nifty Bank, Auto, FMCG, Metal and Pharma indices rallied 1-2 percent whereas PSU Bank fell 0.83 percent and IT ended flat.

The rally was largely driven by index heavyweights ITC (up 3.5 percent), HDFC Bank (1.7 percent), HDFC (1.66 percent) and ICICI Bank (1.62 percent).

Maruti Suzuki (up 1.8 percent) was the sixth most valuable company, surpassing big companies like SBI, HDFC, Infosys, Bharti Airtel and ICICI Bank in market capitalisation. The stock ended above Rs 9,000-mark for the first time.

HUL also ended at record closing high, up 2.7 percent.

Tata Motors was up 2.3 percent after analysts remained bullish on the stock ahead of JLR product launches that will drive earnings in second half of FY18. Credit Suisse has maintained its outperform call on the stock with a target price at Rs 560 per share, citing JLR’s double digits volume growth in November.

Oil marketing companies – HPCL, BPCL and IOC rallied 3-4 percent. Vedanta, Bharti Airtel, Sun Pharma and UltraTech Cement among others gained 2 percent each whereas Reliance Industries, Bharti Infratel, SBI and GAIL were down 1-2 percent.

The market breadth was positive but the gap between advances and declines narrowed a bit. About three shares advanced for every two shares falling on the BSE at end, against 4:1 ratio in morning.

Future Consumer surged 16 percent after Morgan Stanley initiated coverage with an overweight rating on the stock and set a target price at Rs 95 per share, implying a potential upside of 61 percent as revenues are expected to jump 3.2 times over FY17-20 and margin by 470 bps by FY20. The rally also spilled over to other Future Group stocks – Future Market Networks (up 18 percent) and Future Enterprises (up 10 percent).

Unitech was locked at 20 percent upper circuit as National Company Law Tribunal has issued notice that allowed the government to take control of the company.

Escorts gained 2 percent after HSBC initiated coverage with a Buy rating on the stock and set a target price at Rs 835 per share, implying a potential upside of 26 percent as it feels new products will boost market share, margins, and profits of the company.

Star Paper, West Coast Paper, JK Paper, India Cements, Havells India, SAIL, Edelweiss Financial, JM Financial and United Breweries gained 2-15 percent whereas Jet Airways, Petronet LNG, Hathway Cable and Den Netowrks fell 2-9 percent.

Jet Airways was down 4.5 percent after second quarter earnings disappointed the Street as profit fell sharply to Rs 49.6 crore, from Rs 549 crore in year-ago.