Politics forced Indian stock markets to gain a windfall
27-May-2009 •News Desk
Finance Minister may not have divulged any specifics about the Budget, since that would have been against the law, but what he had to say was lapped up by the cue-hungry stock markets in India.
Significantly, at the end of the meet, he had asked for something from everyone and that was, “Please, everyone, co-operate.” The bourses have fallen over themselves to prostrate themselves on his request. The sentiment on the markets was clearly gung-ho even before the press conference that the Finance Minister was addressing had ended, after they had the time to digest the news properly they shot upwards.
The power-speak helped markets to end higher by as much as 520 points, pushed especially by heavy buying in banking, commodity and realty stocks. The recent days’ favourites, BSE Small Cap and BSE Mid Cap, also gained today by as much as 3.37 per cent and 3.67 per cent respectively.
What set fire to the markets was the FM's promise of speaking to leaders of the banking sector to make them agree to a lower interest rate regime that would reduce the cost of taking on debt by corporates. While the private sector banks may go slow on that, yet for the public sector banks that would be a virtual order that will have to followed, sooner, rather than later. Coupled with his promise to ramp-up expenditure on infrastructure projects, the net result was a win-win situation for stock markets, across the board.
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The gain was more than just a point-wise addition, it also ensured that the Sensex again climbed over the 14,000-point mark, closing the day at 14,109.64 points, up by 3.83 per cent.
The Nifty too joined the party spurting by as much as 159.35 points to 4,276.05 points, up by 3.87 per cent.
Public sector enterprises too moved smartly on the FM's promise that the government will push for economic reforms and that may mean disinvestment plans in these companies may get green flagged, something that last happened during the BJP-led NDA regime – more than five years ago.
All the sectoral indices closed the day in positive territory. The biggest gainers were BSE Realty which clocked gains of 6.09 per cent and following it were the banking stocks with BSE Bankex turning in gains of 5.42 per cent. The other Indices that outperformed the Sensex were BSE Power (4.89 %), BSE PSU (4.71%), BSE Metals (4.67%), BSE CG (4.24%).
While the laggards were BSE FMCG which just managed to remain in positive territory with gains of 0.27% and BSE Healthcare with 2.31 per cent gains – a lagging healthcare index is a surprise considering the Congress has said it is looking at a huge expenditure on increasing healthcare across the country.
As far as specific stocks are concerned, among Sensex stocks, except for three stocks -- ACC, Bharti Airtel and ITC -- all stocks were net gainers for the day. It seems that for Bharti Airtel investors the FM’s words held out just hollow promises in the face of the merger deal with MTN. Leading the pack among gainers was Reliance Infrastructure with 14.72 per cent rise. After it was Sterlite Industries (9.49%), ONGC (9.42%) and DLF with (8.49%).
Aside from the domestic factors, what was adding to the feelgood effect was that US consumer confidence data indicated that demand was growing, thereby suggesting the world’s largest economy may well have found its bottom and would most probably rise hereafter. It enabled the Dow Jones to gain 2.36 per cent, which surged in May to register its biggest monthly jump since April 2003. The sentiment boosted Sensex’ opening by as much as 1.4 per cent higher on opening at 13,780.41 over previous close of 13,589.23 and touched an intraday high of 14,122.78.
The sentiment pushed oil prices higher too. Across Asia the stock markets booked gains with the Hang Seng jumping by over 5 per cent, Strait Times by 3 per cent, and Nikkei by 1.37 per cent. European markets also opened in positive terrain, although they were mostly flat.
Top gainers and top losers of the day