Sensex soars 2.5%...Nifty ends above 5250

The key Indian equity indices sky rocketed on Friday after the Government sought to ease concerns over controversial GAAR provisions and the EU leaders gathered in Brussels proposed a common financial supervisor. Another positive development was that petrol prices have been scaled down by ~Rs3 per litre. Any further positive news on the policy front could keep the momentum going for a while. Problems confronting the eurozone remain the biggest risk though along with slow progress of southwest monsoon. Market participants also welcomed appreciation in the rupee and improvement in the core sector growth in May. The Indian Rupee was seen rising sharply against the US Dollar on optimism of fresh FII inflows in to the Indian markets. The rupee was trading above the 56 mark at Rs. 55.9150 per US Dollar. The NSE Nifty re-conquered the 5250 mark while the BSE Sensex surged past the 17400 level. The large caps led from the front, with stocks like Jindal Steel, Maruti, L&T, BHEL and Hindalco among the major gainers. Barring Cairn India, BPCL and Coal India all the other components of the Nifty index ended in the green. The Sensex ended at 17,430, gaining by 439 points or 2.5% from the previous close. It had earlier touched a day’s high of 17,448 and a day’s low of 17,134. It opened at 17,134. The NSE Nifty settled at 5278, up 130 points or 2.5% from the last close. It touched a day’s low of 5,189 and a day’s high of 5,286. Jindal Steel, Tata Power, Sterlite, BHEL, Maruti, Reliance Infra, Hindalco, Asian Paints, L&T and ICICI Bank were the notable gainers on the Sensex and the Nifty today. Cairn India, BPCL and Coal India were among the losers on the Nifty. The INDIA VIX on NSE fell by 7.5% to close at 19.08. It hit day’s high of 20.62. It hit a low of 18.80. The market breadth on the BSE was positive, 1864 stocks advanced and 988 stocks declined. The sentiment received a lift from media reports that the Government was planning to come out with clarifications over controversial tax proposals. Reports also indicated that the Centre was not averse to altering contentious provisions in GAAR to boost investor confidence. The Government also released the draft guidelines for the implementation of GAAR to invite suggestions from various stakeholders. Technically, Indian indices have formed a ‘bullish engulfing pattern’ after managing to recoup previous month's losses and forming a higher high. Coming week will be crucial in deciding long-term trend in the Indian markets. A higher opening on Monday would confirm the bullish implication on the monthly charts. The Nifty could retest levels of 5378 in the near term and turnaround the sentiment to positive if the Government announces more policy initiatives to bolster India's economic prospects. Meanwhile, the first day of the 19th EU leaders' summit in Brussels yielded a plan for a single financial supervisory mechanism for the debt-strapped region to help stabilize jittery financial markets. The euro gained versus the US dollar along with Asian stock indices and US stock futures following the announcements by the EU leaders. Spot gold and crude oil futures also advanced while the dollar index fell below the 82 mark briefly. European Commission President Herman van Rompuy said that the financial supervisor will involve the European Central Bank (ECB) and that there will be the possibility of direct recapitalization for European banks. Financial assistance will be provided by the European Financial Stability Facility (EFSF) until the European Stability Mechanism (ESM) becomes available, he said at a press conference early on Friday. Luxembourg Prime Minister Jean- Claude Juncker, who heads the group of euro area finance ministers, said that euro leaders agreed on short-term measures to aid Spain and Italy. Juncker said that the measures will be discussed in the coming weeks and euro area finance chiefs should reach final agreement on July 9. The European markets were trading with smart gains today. The FTSE in UK was up 1.5%, while the DAX index in Germany was up 2.2% and the CAC index in France gained 2.5%. The Spanish stocks surged while the yield on the 10-year benchmark bonds tumbled after European leaders agreed to drop the condition that emergency loans to Spanish banks give their governments preferred creditor status. The Asian markets also ended with healthy gains, with the Nikkei index in Japan rising 1.5%, and the Hang Seng index in Hong Kong rose 2.5%. The Kospi in South Korea was up 1.9%. The Straits Times index rose ~1.2% while the Taiex in Taiwan was up ~1.7%. The S&P/ASX 200 index was up ~1.2%. The Shanghai Composite Index rose 1.35%. However, it still clocked the worst monthly performance since March.Stocks in News There were hardly any losers in the main indices. However, Cairn India is under pressure amid media reports that its UK parent has sold a small stake in the Indian arm to a clutch of institutional investors at a discount. Cairn Energy sold about 66.8mn shares in the Indian unit, offering the shares at Rs. 307.40 to Rs. 317.50, according to media reports. IOC, BPCL and HPCL are subdued after they decided to cut petrol prices by Rs. 2.46 per litre (excluding state levies) citing a drop in international crude oil prices. Auto stocks advanced after the public sector oil marketing companies cut petrol prices by Rs. 2.46 per litre (ex-taxes). Maruti was up after the stock was raised to a 'Buy' by Jefferies. HCL Tech is a notable gainer after the stock was raised to a 'buy' from neutral by Espirito Santo. Shares of Nagarjuna Construction Company Ltd. (NCC) rallied after reports said that leading investor Rakesh Jhunjhuwala, his wife Rekha and three other entities have raised their stake in the company. Following this acquisition, their total shareholding in NCC has gone up to 7.9896% from 7.6973%, NCC said in a regulatory filing. OnMobile shares slid, reversing an earlier bounce, after the company denied reports that CEO Arvind Rao is not being probed for alleged misappropriation of funds. Orchid Chemicals was in focus after Goldman Sachs bought 742,001 shares while ABN Amro sold 355,485 shares and Macquarie Bank sold 366,000 shares. Shares of Punj Lloyd gained after the company's chairman Atul Punj was quoted as saying that the company is counting on peace in war-torn Libya to help revive 17% of its order book and sustain profit for a second straight year. Punj Lloyd plans to resume work next month in the North African nation where it has US$800mn worth of projects, Atul Punj said. It aims to begin drilling in Sirte Basin for Waha Oil Co. starting July and resume construction of a road and upgrading a township in Tripoli after elections, Atul Punj said.