Indian markets ended on a firm note Monday as buying activity picked up in oil&gas stocks following hike in fuel prices. The Empowered Group of Ministers increased diesel prices by Rs 3 per litre, kerosene by Rs 2 per litre and LPG by Rs 50 per cylinder. The decline in international crude oil prices also boosted investor sentiments.
According to dealers, some short covering was seen in capital goods, banks and auto stocks ahead of June series F&O expiry. The fuel hike is likely to push inflation in double-digits which is above the comfort zone.
"We estimate the direct impact on headline inflation of the June 24 increase to be 0.6 percentage point (ppt), and an overall impact of 0.9 ppt for FY12. We therefore raise our WPI inflation forecast to 8.6%, with most of the increase likely in the near term. We project the July and August headline inflation numbers could be in the double digits, higher than expected, but we continue to expect inflation to peak in September," said Tushar Poddar, Chief India Economist, Goldman Sachs .
There's some concern for the rate-sensitive sectors in near-term as the Reserve Bank of India is expected to continue to hike interest rates.
"We maintain our view of 50bps of cumulative tightening by December-11, although the RBI's anti-inflationary stance could result in a further elongation of the rate tightening cycle," said Rohini Malkani, Economist, Citi India.
National Stock Exchange's Nifty closed at 5526.60, up 55.35 points or 1.01 per cent. The broader index touched a high of 5552.65 and low of 5434.25 in trade today.
Bombay Stock Exchange's Sensex was at 18412.41, up 171.73 points or 0.94 per cent. The 30-share index hit a high of 18494.11 and low of 18132.70 intraday.
BSE Capital Goods Index was up 1.75 per cent, BSE Bankex gained 1.61 per cent, BSE Auto Index moved 1.49 per cent higher and BSE Oil&gas Index advanced 1.40 per cent.
Bank of America Merrill Lynch has raised its target price on state-run oil marketing companies Indian Oil, Hindustan Petroleum and Bharat Petroleum. HPCL target price is increased to Rs 500 from Rs 441 per share, Oil India to Rs 1,756 from Rs 1,583, while BPCL's target price was raised to Rs 739 Rs 650.
Citigroup has said that the price hikes were well ahead of its expectations and upgraded state-run oil marketing companies including Indian Oil Corp , Hindustan Petroleum Corporation , Bharat Petroleum Corporation and Oil India to "buy" citing these companies stand out as clear near-term beneficiaries due to the sharply reduced under-recovery burden.
Power Grid Corporation (5.07%), BPCL (4.71%), ONGC (4.01%), Reliance Capital (3.57%) and Maruti (3.16%) were the major Nifty gainers.
Reliance Infrastructure (-1.13%), Grasim (-1.10%), DLF (-0.99%), Ambuja Cements (-0.75%) and ITC (-0.72%) were the top index losers.
Market breadth was positive on the NSE with 1669 gainers against 1212 losers.
