Markets recover as GDP data beats estimates

Domestic indices reversed their losses and ended the session with significant gains in response to India’s Q2 GDP data beating market expectation and strong buying in realty stocks.

Major headlines

India's growth on track; Q2 GDP at 8.9%

Ranbaxy gets USFDA nod for Donepezil

Rural Electrification Corporation soars on getting FCB nod



Indian indices

The domestic indices extended their winning run to the second straight day largely on account of better than expected gross domestic product (GDP) data for the second quarter and strong buying in realty stocks and heavyweights like State Bank of India, Bharti Airtel, NTPC, DLF, Tata Motors, BHEL, Tata Consultancy Services and ITC. Short covering in realty stocks after the recent down fall also helped the market. India’s second quarter GDP came in at 8.9% against 8.6% in the corresponding previous year quarter.

Realty stocks were on the buyers' radar, especially after assuring comments from the management of DB Realty; the sector’s representative index on the BSE shot up 5.6%. However, heavyweight Reliance Industries wiped out some of the gains of the broader indices in the last hour of trade as news came out on leading business news channels that the company's top line would be hit by declining production at KGD1 and D3 block.

On the flip side, the sell-off continued in Larsen & Toubro, ICICI Bank, Housing Development Finance Corporation, Tata Steel, Sterlite Industries, SAIL, ACC and Hindustan Unilever leading to volatility in the benchmark indices. In the mid-cap space, Core Projects, Kwality Dairy, Prakash Industries, Indiabulls Real Estate and Berger Paints gained 8.7-12.5% while Money Matters and Shree Ashtavinayak plunged 10% each. Den Networks, Blue Dart and Monnet Ispat were down 3.5-6%.

The Sensex started the day 32 points lower at 19373 taking lead from weak Asian markets. The index remained weak and traded in the negative territory in the morning session. The Sensex trimmed some of its losses after India’s Q2 GDP data beat market expectation. The index again slipped and hit the day’s low of 19218 at noon. The Sensex started to erase its losses from the day’s low and turned positive after European markets opened in the green. The index hit the day’s high of 19610 in the afternoon session as realty stocks witnessed strong buying. The index remained strong through the rest of the session to end the day on a positive note.

At the closing bell, the Sensex closed at 19521, higher by 116 points. The Nifty shut at 5863, up by 33 points.

Bond and Rupee Update: The Indian rupee opened at 45.93-45.95 per dollar today. The bond market continues to be concerned about the tight liquidity situation. Investors are likely to be cautious.

Market sentiment

The market breadth was weak as declining shares outpaced advancing ones. Of the 2,014 stocks on the BSE, 1,153 declined while 804 rose. Fifty seven stocks traded unchanged.

Sectoral and stock screening

Almost all the BSE sectoral indices ended the session in the positive territory except the BSE Oil & Gas index that ended the session in the red with a loss of 0.56%. The BSE Realty index was the top performer, up by 5.67%, followed by the BSE Consumer Durables (CD) index that gained by 2.08% while the BSE Power index rose by 1.84%. The rest of the indices ended higher in the range of 0.21-1.73%.

Among 'A' group stocks, the top three gainers were — Rural Electrification Corporation (up 9.45%), Hindustan Construction Company (up 8.49%) and Indiabulls Real Estate (up 8.43%).

The top three losers in the ‘A’ group were — Pantaloon Retail (down 3.27%), UltraTech Cement (down 2.36%) and Coromandel International (down 2.11%).

Viewing volumes

Construction firm - Hindustan Construction Company was traded the most for the second day in a row, with over 1.03 crore shares changing hands on the BSE, followed by government's power utility - Power Grid Corporation (0.72 crore shares), industrial finance company - IFCI (0.70 crore shares), India's second largest developer - Unitech (0.69 crore shares) and wind turbine major – Suzlon Energy (0.40 crore shares).

Global signals

European shares bounced back in early trade from the previous day's eight-week closing lows. However, persistent worries remained that the debt crisis could spread to other weak Euro zone countries, forcing investors to stay cautious.
Majority of the Asian indices closed in the negative territory except the Kospi index that ended the session higher by 0.48%.
The US stock futures indicated to a lower opening on Wall Street ahead of the key consumer confidence data.

Market Outlook: Tonight we have the consumer confidence index data in the US.