Indian equities on Monday joined the rally in Asian and European shares as investors took solace from a poor US jobs data on Friday that now reduces the odds of an interest rate hike by the US Federal Reserve. Even industrial commodities like crude oil and copper rose more than 1% each.

The Sensex surged to a six-week high on Monday and recorded its second-biggest gain of 2015. The gauge of top 30-companies advanced 564.60 points, or 2.15%, to close at 26785.55. The Nifty gained 2.1%, or 168.40 points ,to settle at 8,119.30. The positive mood was also witnessed in broader markets with the Mid- and Small-cap indices gaining nearly 2% each on bargain buying and short covering.

Foreign portfolio investors (FPIs) were net buyers in the cash segment of $100 million (Rs 650 crore), showed provisional data on stock exchanges. Their domestic counterpart also lent support, with data showing stock purchases worth Rs 365 crore.

Major indices in Asia closed the day with 1-4% gains each, led by Hang Seng, while European stock markets were in a buoyant mood despite economic data indicating a slowdown in the service sector. UK’s FTSE 100 index was the best performer with 3.7% at the time of going to print. France’s CAC index rose more than 2% following the news that its services firms actually caught up (a little) with the rest of the eurozone last month.

The Stoxx Europe 600 Index rose a second day, and US equity-index futures climbed after Friday’s worse-than-forecast jobs data. The MSCI Asia Pacific Index headed for its longest streak of gains since July.

The odds of Fed liftoff this month fell to 8% after US reports showed the pace of hiring slowed in September and wage growth stalled, spurring speculation policy makers will take longer to remove stimulus that has helped repair the global economy.

“The US jobs data for September push a rate hike further into the future and give more steam to the market to go higher, following a larger-than-expected rate cut by RBI last week,” said Ravi Shenoy, assistant vice-president, Motilal Oswal Securities.

Market breadth was strong and all sectoral indices ended positive. Twenty six out of 30 Sensex companies ended in the green. Overall, 2,001 stocks advanced compared with 792 stocks that ended in the red. Capital goods and banking shares were among the top gainers. HDFC, the top mortgage lender, rose for the first time in three days. ICICI Bank, the largest private-sector lender, had the steepest climb in five months and lifted the gauge of banking stocks to over 3%.

Analysts said the rally in banking stocks was triggered last week after RBI cut key refinancing rate by 50 bps to boost festive season demand from consumers. Transmission of the rate cut has started with most banks cutting rates by 25 bps. “In the immediate term, EMs will be on a positive note and India is likely to be among the strong beneficiary of the risk-on mode,” said Vinod Nair, head, fundamental research, Geojit BNP Paribas Financial Services.

Shares of Maruti Suzuki India, the country’s largest car marker by volume, declined nearly 4% on Monday after US investment banking firm Jefferies had downgraded the stock to “underperform”, citing high valuations, change in capital allocation plans and under-performance of the company’s latest offering, S-cross, in the domestic market.

The scrip closed at R4,415.45 on the BSE, down R164.40 or 3.59%.

More than 20.67 lakh shares changed hands on the BSE and the National Stock Exchange, more than four times the average daily volume of 4.8 lakh shares in the previous three months.

Jefferies noted that there has been lack of clarity about Maruti’s new arrangement with Suzuki for the new manufacturing plant in Gujarat. The investment bank also said Maruti may face capacity issues in FY17 as the new unit is expected to start production only in FY18.

“There is no systemic benefit to Suzuki setting up the plant instead of Maruti, and thus it is a zero sum game in which Suzuki holds the upper hand,” the Jefferies investor note, authored by senior equity analyst and head of India research Govindarajan Chellappa, said.

RC Bhargava, chairman of MSIL, said in a television interview that the arrangement was not a zero sum game but a win-win situation for both Maruti and Suzuki. “There is no reduction in our margins or profitability due to (the) Gujarat plant compared to what it would have been if the investments have been made by us,” Bhargava said in an interview to a TV channel.

The report also noted that the average size of cars has increased in the last few years. While MSIL is well positioned in small cars, it lacks strength in the large vehicle segment as the competition here is stiff with all global majors having relevant portfolios.

The board of directors of Maruti has already approved the contract with Suzuki Motors for the Gujarat manufacturing plant. The car major is now awaiting approval of minority shareholders and other regulatory nods.

The voting of minority shareholders is scheduled for October 27.

According to a quarterly study of PE investment activity by Venture Intelligence, such investments in the three months ended September 30, 2015, totalled USD 5.89 billion. (Reuters)

Private equity investments in July-September surged to a record high of USD 5.89 billion, taking the deal value for the first nine months of the year to USD 13 billion, says a report.

It is further poised to cross the historical highs of 2007, when the private equity investments was at USD 14.7 billion in 2015.

According to a quarterly study of PE investment activity by Venture Intelligence, such investments in the three months ended September 30, 2015, totalled USD 5.89 billion across 177 deals, higher than the previous quarter when 126 transactions worth USD 2.62 billion were announced.

“With the nine-month investment tally touching USD 13 billion (across 504 transactions), private equity investments in India for 2015 are poised to cross the historical highs of 2007,” it added.

The mega deals in the Internet sector ensured IT and ITeS companies grabbed 57 per cent of the PE investment by value. The sector attracted USD 3.36 billion in 107 deals during the third quarter of 2015.

This is followed by energy companies that pulled in USD 549 million across seven transactions.

According to the report, there were as many as 16 PE investments worth at least USD 100 million, with seven of them above USD 200 million in the three months ended September 30, 2015, compared with three such transactions in the same period last year and 11 in the immediate previous quarter.

“Apart from Internet ‘Unicorns’ of Flipkart, Snapdeal and Ola – which raised USD 700 million, USD 500 million and USD 245 million, respectively – other large PE investments included the USD 500 million investment by TA Associates and India Value Fund in ACT Broadband,” it added.

Tata Motors shares gained over 8 per cent on sales data for September and reports that its Jaguar Land Rover unit’s US sales surged.

Tata Motors rallied on Monday after reports emerged that PSA Peugeot Citroen and Tata Motors are in talks to form a partnership that might result in Tata producing and distributing the French giant’s cars in the Indian market.

The stock was the top gainer on both Sensex and Nifty.

The shares also got a a boost after the company’s September MHCV sales beat estimates, while unit Jaguar Land Rover US Sept sales rose 61 per cent.

At 1.22 pm, Tata Motors shares were trading 6.87 per cent up at Rs 317.40. The Sensex was up 432.99 points at 26,653.94 during the same time.

Shares of Tata Motors jumped 8.41 per cent to Rs 322 on BSE in early trade. On the NSE, shares of the company surged 8.17 per cent to Rs 322.10.

Tata Motors’ sales of passenger cars in September were higher by 5 per cent at 10,226 units, as compared to 9,766 units in same period of last year.

Meanwhile, BSE has sought clarification from Tata Motors with reference to news of Peugeot. As per media reports, the company is in talks with PSA Peugeot Citroen to form a partnership that might result in Tata producing and distributing the French giant’s cars for
the Indian market.

With PTI and Reuters inputs

Domestic markets to remain buoyant in the medium to long term.(Photo: PTI)

Aashish Somaiyaa, chief executive officer, Motilal Oswal AMC

After a rate cut of 50 basis points by the Reserve Bank of India in its fourth bi-monthly monetary policy on September 29, Aashish Somaiyaa, chief executive officer, Motilal Oswal AMC tells Financial Express Online that international developments, domestic political events and continued economic data, especially corporate performance will give direction to the markets. He added foreigners will fall in love with India all over again and this time more strongly with a lot of positive discrimination in our favour. Here are the excerpts from the interview:

Q. What is your take on a 50 basis points rate cut by the Reserve Bank of India?
A. It was definitely a positive surprise. Our belief is that he RBI has made best use of limited window of opportunity created by the unexpected continued pause stance of the US Fed. This 50 basis points cut will give much needed fillip and more importantly a positive guidance for the direction of the economy from here on.

Q. How it will impact public and private sector banks?
A. Accommodatory stance is a relief for both types of banks from perspective of a bottoming signal to economic woes, treasury gains and stress on account of continued high rates. It’s a larger relief for public sector banks whose fortunes are more closely linked to economic prospects. Capitalisation of banks coupled with a relaxed monetary stance are steps in right direction to kick start banks ability to engender and participate in a revival of investment cycle.

Q. How do you see infrastructure sector after the rate cut?
A. We don’t see any immediate impact except that with some lag effect one can see early signs of revival in the investment cycle and some relief on debt servicing burden. This doesn’t immediately change economic prospects of infrastructure companies from a shareholders perspective.

Q. Do you think RBI rate cut will bring in some cheer for the auto and real estate sectors? 
A. These two sectors would be the biggest beneficiaries more so real estate in light of relaxed provisioning norms for affordable housing as a sector.

Q. Do you expect further rate cuts in the ongoing financial year? Why?
A. We do not expect any further rate cuts before clarity on the movements of the US Fed. We find it hard to visualise continued rate cuts in India were the Fed to get into a step by step rate hike cycle.

Q. How do you see domestic equity markets at the current juncture? Where do you see Sensex and Nifty by March 2016?
A. We see continued buoyancy in domestic markets in the medium to long term. In the short term, one has to be prepared for high volatility emerging mainly from the international scenario plus domestic political events. Over the next 3 to 5 years we expect India to decouple from other emerging markets basket and stand out as an investment destination or asset class on its own.

As an investor in the markets, we are strictly bottom up and our level of confidence comes from economic performance of the companies that we buy. We firmly believe that returns come from earnings and not from stock markets whose main function is to provide liquidity and price discovery. Hence, we do not predict market levels. If I had to hazard a guess, keeping all factors in mind I would say we are very attractively priced. We are at a level which we saw before the election results of 2014 which were accompanied by some of the worst macros. All of that is behind us and but we are back where we were.

Q. After the rate cut, what are the other factors which can give direction to markets from here?
A. I would say international developments, domestic political events and continued economic data especially corporate performance.

Q. What are the key concerns facing the economy? Are global issues also having an adverse impact?
A. I think local concerns are overstated, we need to watch for news emanating from China and the reaction of developed economies as well as developed market investors to those news.

Q. Do you see a lacklustre market for some time or will there be some renewed interest after the recent fall?
A. We are confident of sustained interested in Indian markets. Domestic investors are continuing to invest. It’s not only relative attractiveness of equities compared to other asset classes but also sustained entry of new generation of investors into markets. Habits change with generations and hence equity is here to stay as a staple allocation for investors from here on.

Q. What is your take on FII activity that we have seen so far? In the first FIIs half of the ongoing financial year net outlows by FII were over 14,000 crore, how do you see the second half? Do you think this outflow will continue?
A. In the near term, I would say their behaviour will be unpredictable because when there is adverse development the selling tends to be indiscriminate. But as we saw in 2008 when the dust settled we got more money than we lost. I expect foreigners to fall in love with India all over again and this time more strongly with a lot of positive discrimination in our favour.