Markets rally on hopes of subsidy reduction

Volumes were so high that the BSE witnessed a record turnover of Rs 5.40 lakh crore including (futures and options) F&O turnover.

Stock indices rebounded on Tuesday and surged sharply on the hope that the Government would increase the price of kerosene and cooking gas in a staggered manner to reduce the subsidy burden, said analysts.

Buying of stocks across the board, except IT and healthcare counters, gained momentum with speculation that prices of kerosene and LPG cylinders would go up by Re 1 and Rs. 5 per month respectively. Volumes were so high that the BSE witnessed a record turnover of Rs 5.40 lakh crore including (futures and options) F&O turnover, said brokers.

The BSE Sensex, led by oil and gas, PSU and banking stocks, closed with a gain of 338 points at 25369, up 1.35 per cent. The NSE Nifty closed at 7580.20, up 87 points or 1.16 per cent.

The Nifty top gainers included GAIL, BPCL, DLF, Bank of Baroda and NMDC.

“The main reason why the market surged was the likely decision of the Government to cut subsidies on kerosene and LPG. It was a good news for the market. The subsidy burden (on account of the likely hike) can come down by Rs. 2,000 crore over a period and it can make a change in the Government’s fiscal deficit numbers,” said Pramit Brahmbhatt, CEO, Veracity Financial Services.

“This resulted in a sharp increase in shares of oil marketing companies. Even Reliance and metal companies’ stocks also surged. The rally was sustained by institutional buying. Apart from this, a good amount of rollover happened as F&O expiry is on Thursday. The volumes at the exchanges were also very high,” said Alex Mathews, Head Research, Geojit BNP Paribas Financial Services.  

Sugar stocks were seen extending the previous day’s rally. Metal and mining stocks were also up on the positive Chinese manufacturing data. Aviation stocks were up as the crude oil prices slipped from the high levels of $115 a barrel.

“Markets rose sharply on the back of a marginal reduction in crude prices and stable global markets. Several stocks moved up after consolidating over the past one week. Stocks were volatile ahead of the F&O expiry on Thursday,” said Dipen Shah, Head- Private Client Group Research, Kotak Securities.

Rupee gains

The rupee on Tuesday appreciated against the dollar due to more inflows of dollars from foreign institutional investors. But month end demand for dollar from oil companies put pressure on the Indian currency to some extent. The rupee finally closed with a gain of 7 paise at 60.13 to a dollar as compared to the previous close of 60.20 a dollar on Monday.   

The geo-political issues had kept the rupee under pressure over the past few sessions. Analysts said that the rupee will settle in the range of 59.50 and 60.50 to a dollar till the budget.