Weekly: Record highest gain in calendar 2012
Benchmark share indices registered their highest weekly gain in calendar 2012 till date as hopes of rate cut by the central bank and Prime Minister Manmohan Singh's approval of key infrastructure projects coupled with his government’s resolve to remove bottlenecks to push growth boosted investor confidence.
For the week ended June 8, the 30-share Sensex surged 754 points or 4.7% to end at 16,719. The 50-share S&P CNX Nifty jumped 227 points or 4.7% to end at 5,068.
In the global arena, the European Central Bank on Wednesday maintained its status quo on keeping policy rates unchanged while global equities rallied to their highest level during in a week on Thursday and the euro gained after China lowered interest rates for the first time in four years. On Friday, Japanese government said, its current account surplus dropped 21.2% in April frmo a year ago to 333.8 billion yen. Meanwhile, European stocks lost some of the gains on Friday on renewed worries over banking crisis in Spain and Germany's trade deficit widened with imports surpassing exports after seasonal adjustment. Further, the downgrade of Spain's credit rating by Fitch also weighed on investor sentiment in the European region. The Bank of England also kept its key bank rate unchanged at 0.5%. Key US share indices also registered their best week in 2012 on Friday, but concerns of slowing domestic growth, debt concerns in the euro zone and declining demand in China, the world's No. 2 economy, continue to weigh on investor sentiment. For the week ended June 8, the Dow Jones gained 3.6%, the S&P 500 jumped 3.7% and the Nasdaq surged nearly 4%.
The broader markets witnessed subdued trading activity as focus shifted to large caps during the sharp rally intra-week. The BSE Mid-cap index ended up 2.9% while the BSE Small-cap index ended up 2.1% during the week under review.
The robust gains during the week were steered by capital goods following the Prime Minister's initiative for revival of infrastructure projects across the nation.
A statement by the Prime Minister’s Office (PMO) said the government would award 9,500 km of road projects in the financial year, an increase of 18.7 per cent over last year. Another 4,360 km of roads will be awarded for maintenance under the OMT (Operate, Maintain, Transfer) system for the first time.
Other initiatives include two new major ports in Andhra Pradesh and West Bengal, an addition of 18,000-Mw power capacity, three to four international airports, an airline hub policy, an elevated freight corridor in Mumbai and a bullet train from Mumbai to Ahmedabad.
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The BSE Capital Goods Index zoomed nearly 11% to end at 9,486. Among the industry majors L&T zoomed 15.4% while BHEL surged 7%. Other prominent gainers include, ABB, Bharat Electronics and Punj Lloyd.
Shares in the power sector also gained following the Prime Minister's approval for key infrastructure projects. The BSE Power Index gained 6.1% to end at 1,877. Reliance Infrastructure was the top gainer up 16.6% followed by JSW Energy up 12%, Reliance Power up 10.2% and Lanco Infratech up 10.4%.
Rally in rate sensitive sectors such as banks, auto, realty and power sectors on hopes that the Reserve Bank of India may cut key policy rates to boost growth. It may be recalled that the country's gross domestic for the fourth quarter of fiscal 2012 and fiscal 2012 fell to nine-year low.
The BSE Bankex ended up 7.8% at 11,514 on hopes that cheaper loans would boost credit growth. Prominent gainers among public sector banks include, SBI up 7.6%, Bank of Baroda gained 9.8% and Union Bank surged 10%. Among private sector banks, HDFC Bank jumped 9.5%, ICICI Bank gained 6% and IndusInd Bank shot up 10.2% during the week.
Realty shares gained on hopes that cut in key interest rates would make home loans cheaper thereby boosting sales and reducing high inventory levels. The BSE Realty INdex ended up 6.3% at 1,651. HDIL was the top gainer in the index galloping 14.4% followed by Sobha Developers which jumped 10.8% and DLF gained 7.7%.
Apart from rate cut hopes that would make vehicle loans cheaper gains in the auto sector was also on hopes that the government will decide against imposing excise duty on diesel vehicle sales. The BSE Auto Index ended up 5.9% at 9,192. Hero Motocorp surged 10% while Mahindra & Mahindra gained 6.7% and Ashok Leyland ended up 6.6%.
Airline stocks surged during the week after the civil aviation ministry proposed slashing state taxes on jet fuel, which may significantly bring down costs for ailing local airlines that are reeling under a debt load of $20 billion and annual losses of $2 billion. Jet Airways surged 19.8%, SpiceJet gained 17.7% and Kingfisher Airlines gained 10.4%.