The reversal that started during the latter half of the day, picked up pace during the closing hours of trade, enabling the key benchmark indices to end in the positive. While the Sensex closed higher by around 90 points (up 0.6%), the gains on the Nifty stood at around 20 points (0.4%). The BSE Mid cap and Small cap indices however witnessed contrasting trends as while the former closed with gains of 0.2%, the latter edged lower by around 0.7%. Today's turnaround was made possible because of strong gains in FMCG and engineering blue chips.
While most Asian indices ended strong today, most of Europe is also witnessing significant buying interest currently. The rupee was trading at Rs 47.0 to the dollar at the time of writing.
The sudden volte-face by the markets during the course of the day is perhaps an indicator that more money is waiting to enter the markets than the one wanting to get out. Although the markets look fairly valued to us from a near term perspective, the fact remains that interest rates in developed economies have been pushed to such low levels that even a return of the magnitude of 4%-5% will be happily accepted by foreign investors.
Combine this with an appreciating rupee and Indian equities suddenly start looking a hot property. The only risk seems to be that of a sudden reversal of flows. Given that the problems in the US are far from over, the return of risk aversion cannot be ruled out. If this scenario does indeed materialise then it will be an ideal opportunity for long term investors to jump right in and capitalize on the country's long-term growth potential. At present, making investments in a phased manner looks like the best approach to have.
FMCG companies figured prominently among the list of top gainers in the ‘BSE-A Group' stocks today. The buying seems to be a result of a couple of positive news flow for the sector. According to reports, food price inflationis not going to be as bad as expected, thus helping FMCG companies save costs on the raw materials front. Secondly, with the rural income not expected to take as big a hit as was previously anticipated, there could be some cheer on the topline front as well for these companies. Hence, it was little surprise that companies like ITC, HUL, Nestle and Godrej Consumers reported strong gains on the bourses today.
Big steelmakers like Tata Steel, SAIL and JSW Steel ended strong today amidst reports that the ambitious 24 m tonne project by world's largest steelmaker Arcelor Mittal could be delayed due to land acquisition problems in the states of Orissa and Jharkhand. This most likely means that the earlier date of commissioning of the projects, which is 2014-15 may not be met after all. Hence, this will keep the field open to fewer players for a longer period of time, helping these companies to not only record good volumes but also keep prices firm. It should be noted that the large Indian companies are themselves looking to expand capacities but since most of it is brownfield in nature, significant delays may not happen.
