Sensex extends rally on global cues, RBI policy eyed Analysis for Mar 14, 2012

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The key domestic benchmarks ended on a robust note ahead of the RBI monetary policy review on Thursday. A firm rally on global stock markets supported domestic sentiment. The Banking and Capital Goods space led the rally.

BSE SENSEX closed at 17919.3 up by 105.68 points or by 0.59 % and then NSE Nifty ended at 5463.9 up by 34.4 points or by 0.63 %. The BSE MIDCAP closed at 6495.34 up by 20.9 points or by 0.32 %, while the BSE SMLCAP ended at 6846.64 down by -19.29 points or by -0.28 %. The BSE Sensex touched intraday high of 18040.69 and intraday low of 17837.22 The NSE Nifty touched intraday high of 5499.4 and intraday low of 5437.8.

The strong rally on US stock markets on Tuesday boosted domestic sentiment during morning trade. In the major indices, the Dow Jones Industrial ended up by 1.68% or 217.97 points at 13,177.68, the S&P 500 closed up 1.81% or 24.86 points at 1,395.95 and the Nasdaq closed up 1.88% or 56.22 points at 3,039.988. The Sensex surged at the start amid supportive cues from the Asian markets. Most Asian markets were trading higher on Wednesday as sentiment was boosted after a report showed that US retail sales rose at the fastest pace in five months in February 2012, adding to evidence that the US economic recovery is accelerating, brightening the outlook for Asian exporters. Sentiment was also lifted after the US Federal Reserve said that the nation's economy was improving. However, the domestic benchmarks pared gains post the announcement of the Railway budget and inflation data. The Railway Ministry hiked rail fairs. The budget also focused on modernization of railways, but experts said that the budget proposals would be tough to implement, citing funding challenges. Moreover, a rise in annual inflation also weighed on sentiment as firm inflationary pressures limited RBI's room to make interest rate cuts. Annual inflation stood at 6.95 per cent last month, up from 6.55 per cent in January 2012. The domestic benchmarks slipped to the day's low during afternoon trade but regained some lost ground to post decent gains amid strong European market cues. The Sensex and the Nifty gained over 0.58% each.

Out of the 30 Sensex stocks, there were 20 advances and 10 declines. The Market breadth, indicating the overall health of the market, was weak. On BSE out of total shares traded 3558, shares advanced were 1418 while 1562 shares declined and 578 were unchanged.

On the Sectoral front, Banking and Capital Goods space led the gainers, up by 1.83% and 1.6% respectively.

The top gainers of the BSE Sensex pack were NTPC Ltd. (Rs. 177.55,+2.63%), ICICI Bank Ltd. (Rs. 953.85,+2.61%), Larsen & Toubro Ltd. (Rs. 1394.70,+2.47%), Oil And Natural Gas Corporation Ltd. (Rs. 293.85,+2.21%), Tata Motors Ltd. (Rs. 289.10,+2.19%), among others.

In BSE, BSE Bankex index was at 12529 up by 225.69 points or by 1.83%. Punjab National Bank (Rs. 1035.00,+6.13%), YES Bank Ltd. (Rs. 386.85,+5.32%), Bank of India (Rs. 391.85,+5.21%), Union Bank of India (Rs. 247.00,+3.96%), Bank of Baroda (Rs. 845.25,+2.97%).

On the Economic front, India's annual inflation stood at 6.95 per cent last month, up from 6.55 per cent in January 2012, limiting room for a rate cut.

On the Global front, The US Federal Reserve on Tuesday upgraded its assessment of the US economy and refrained from undertaking additional monetary easing measures as an improving job market brightens the outlook for the world's largest economy. The Fed left its key benchmark interest rate unchanged at 0.to 0.25 per cent and offered no signs of a stimulus injection into the world's largest economy to aid the nation's economic recovery.

On the Asian front, Shanghai Composite ended down 2.63%, Hang Seng ended down 0.15% but Nikkei 225 ended up 1.53%.

On the European front, CAC 40 was up 0.84%, DAX was up 1.37% and FTSE 100 was trading higher by 0.52%.

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