Fantastic Friday! Sensex rallies 520 points on reform boost

iifl28th  June, 2013 : Comments by Amar Ambani, Head of Research, India Infoline.

The equity market stunned participants on Friday with the Nifty rallying 170 points and Sensex surging over 500 points on the back of government reform initiatives.

The government said it would double natural gas prices from the current $4.2 mmBtu (million British thermal unit) to $8.4-8.5 per mmBtu. This is the first hike in gas prices in three years and will come into effect from April 1, 2014.

Commenting on the same, IIFL’s Head of Research Amar Ambani feels the hike is above expectations. He sees a marked improvement in the long-term investment climate. “We have increased our FY15 EPS estimate for ONGC and Oil India by around 30%, while that of Reliance Industries by about 5%.” He advises investors to buy ONGC, Oil India, Reliance Industries and Petronet LNG.

The outburst on Dalal Street was so broad-based that not a single sectoral index on the Bombay Stock Exchange ended in the red. Metals, power, capital goods, oil and gas and banking stocks led from the front. Even mid- and small-cap stocks were in demand.

The Sensex closed the week at 19395, up 520 points, while Nifty ended at 5,842, up 160 points over Thursday close. For the week, the benchmark indices recouped all its intra-week losses to end 3% up. This should cheer investors as it comes after five weeks of continuous fall.

Jindal Steel, BHEL, Reliance Infrastructure, BPCL, Tata Power, Gail, JP Associates, NMDC and Coal India led the gainers pack while HCL Technologies, Ranbaxy and Hindustan Unilever lost out.

The advance-decline ratio favoured the bulls. Around 1,535 stocks advanced against 859 declines on the BSE, while 118 stocks remained unchanged.

Volatility, as measured by India VIX, was down 5% at 17.95. It hit a day’s high of 18.85 and low of 17.62.