Nifty closes above 5100, will the rally extend tomorrow?

It was a volatile session on the street today but the markets managed to recover as both the Sensex (0.92 percent) and Nifty (0.8 percent) closed higher. The BSE Sensex, the barometer of the Indian economy, closed up 153 points to 16,859 and up 190 points from the day’s low. The S&P CNX Nifty crossed and closed above the psychological 5,100 mark at 5,103.

The market breath was positive. On the BSE, 1,362 stocks advanced while 1,303 declined. Among sectoral indices, all baring IT closed in the green. The biggest gainers was the Oil & gas index which closed up 2.12 percent. Oil stocks moved up after crude oil prices slumped leading traders to bet on them as one of the domestic sectors to outperform during a period of uncertainty.

While HPCL surged 6.4 percent, BPCL (1.84 percent) and and ONCG (1.67 percent) edged higher. Reliance Inds was also up 2.5 percent, benefiting from its continued share buyback programme.

Shares of cigarettes to FMCG and hotels major ITC jumped 2.5 percent after reports that the company increased prices of select Sunfeast biscuits by 10 percent.

Foreign institutional investors (FIIs) bought shares worth a net Rs 412.41 crore on 18 June. According to Samir Arora of Helios Capital, foreign investors have not washed their hands off the Indian markets despite all the bad news and that they may not be overly pessimistic on India. However, he agrees that it is high time the government takes a step towards reforms and making policy decisions which will help the economy, because reasons for the market to rally are running out.e

But not cutting rates, the Reserve Bank of India has indicated that the ball is now in the government’s court to help boost the economy. Rating agencies S&P and Fitch have also put out warnings. Arora says “the government in some sense is getting it from every quarter, but they are not getting it in the end themselves as to what they should do.”

For the short-term, he believes it is a make or break situation for the country and the market, but has a more optimistic view for the long term

Stock specific news:

•Rcom stock recovered and closed down 2.46 percent after falling six percent in the morning. The stock had fallen sharply after Veritas downgraded the stock to sell with a target price of Rs 15 per share, which is a 77 percent discount to the current levels.

•Allcargo Logistics gained 4 percent, extending Monday’s six percent rally triggered by the company’s announcement that its board will meet on 20 June 2012 to consider buyback of the company’s own shares.

•MindTree gained 1.7 percent after V G Siddhartha, founder of Cafe Coffee Day, bought 15.64 lakh shares of the IT company, representing 3.84 percent of Mindtree equity, from Walden Software Investments at Rs 610 per share.