Benchmarks log fresh record highs on F&O expiry day

Wednesday’s session turned out to be a fabulous day of trade for the Indian equity markets, which scaled fresh all time closing highs for yet another session as pre-election rally dubbed as a ‘hope rally’ continued amid sustained foreign fund inflow. The markets, on the April F&O expiry day, remained remarkably steady with Sensex confining itself to a range of around 100 points. Though, some volatility was witnessed in last leg of trade but frontline gauges managed to log their new all time closing highs. Extensive buying by funds and retail investors, thanks to encouraging Q4 earnings by blue-chip companies helped domestic bourses to continue their record-breaking spree. However, gains remained capped up-to certain extent as rupee weakened past the key 61 per dollar mark on Wednesday to hit a one-month low, tracking losses in regional currencies and hurt by good demand for the greenback from oil importers.

Global cues remained sluggish with European counters edging lower in early deals after three days of gains, as signs of a still stuttering Chinese economy and rising worries about Ukraine offset a reassuring set of European economic numbers. Asian markets too ended mostly in the red after Chinese preliminary manufacturing data signaled persisting weakness in the world’s second-largest economy.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Stocks related to banking space remained on buyers’ radar after YES Bank reported 18.79% rise in its net profit at Rs 430.21 crore for the quarter ended March 31, 2014 as compared to Rs 362.15 crore for the same quarter in the previous year. Total income of the bank has increased by 13% at Rs 3013.57 crore for quarter under review as compared to Rs 2667.03 crore for the quarter ended March 31, 2013. The railway stocks too edged higher for the third day in a row as investors increased exposure in anticipation of a stable government at the centre post the elections in May. Titagarh Wagons, Kalindee Rail Nirman, Kernex Microsystems, Hind Rectifiers and Texmaco Rail and Engineering all edged higher between 5% and 10% each.

On the flip side, power stock edged lower after Appellate Tribunal (APTEL) issued notices to Central Electricity Regulatory Commission (CERC), Tata Power and Adani Power on NGO, Energy Watchdog’s plea. Stocks related to oil & gas sector too witnessed selling pressure after Oil Ministry reported that India’s fuel demand rose by its slowest pace in almost 12 years, by a meager 0.7 percent to 158.197 million tons in 2013-14. India had recorded a 6 percent growth in fuel consumption in 2012-13 to 157.057 million tons.

The NSE’s 50-share broadly followed index Nifty surged by over twenty five points to end near its psychological 6,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around one hundred and twenty points to surpass the psychological 22,850 mark. Broader markets too traded neck-to-neck with benchmarks and ended the session with gain of around quarter a percent. The market breadth remained in favour of advances, as there were 1,468 shares on the gaining side against 1,359 shares on the losing side while 144 shares remain unchanged.

Finally, the BSE Sensex surged by 118.17 points or 0.52%, to 22876.54, while the CNX Nifty gained 25.45 points or 0.37% to 6,840.80.

The BSE Sensex touched a high and a low of 22912.52 and 22780.13, respectively. The BSE Mid cap index was up by 0.12%, while the Small cap index gained 0.22%.

The top gainers on the Sensex were L&T up by 2.48%, Gail India up by 1.48%, BHEL up by 1.42%, Tata Steel up by 1.32% and Mahindra & Mahindra up by 1.22%. While NTPC down by 1.49%, Wipro down by 1.19%, Tata Motors down by 0.84%, Hero MotoCorp down by 0.72% and SSLT down by 0.57% were the top losers in the index.

On the BSE Sectoral front, Capital Goods up by 1.49%, Bankex up by 1.12%, Healthcare up by 0.44%, FMCG up by 0.41% and PSU up by 0.39%, were the top gainers, while Realty down by 1.28%, Consumer Durables down by 0.88%, Power down by 0.53%, Oil & Gas down by 0.33% and IT down by 0.02% were the top losers in the space.

Meanwhile, in order to help the US to tackle tax evasion, India has signed an 'in substance' agreement with the US under Foreign Account Tax Compliance Act (FATCA) to combat possible tax evasion by Americans through Indian financial entities. As per the agreement, India will provide US with the available information from Indian financial institutions on offshore accounts or assets of Americans or their entities. However, the US will give information on foreign accounts of Indian individuals, but not entities. The FATCA act is aimed to check and impose withholding tax on illicit activities of some wealthy individuals who use offshore accounts to avoid millions of dollars in taxes.

India has agreed to Model 1-Inter governmental Agreement (IGA) under FATCA under which financial entities will be required to report information on US account holders to the US internal revenue service (IRS) through CBDT. According to FATCA act, the US government to sign IGAs with various countries where American individuals and companies may hold accounts and other assets. The noncompliance with FATCA requires the investor to pay 30 percent withholding tax on certain US source payments. The US Treasury introduced two formats of the IGA - Model 1 and Model 2. As per the Model 2, financial institutions are required to report information directly to the US IRS rather than their local jurisdictions.

Indian regulators like SEBI and RBI are likely to issue guidelines soon for market intermediaries to ensure compliance of FATCA. After signing of IGA with the US, these regulatory measures would immensely help Indian financial institutions to cope up with this complex regulation. The FATCA is scheduled to come into effect from July 1, 2014.

 The CNX Nifty touched a high and low of 6,861.60 and 6,820.75 respectively.

The top gainers of the Nifty were Bank of Baroda up by 3.78%, Kotak Mahindra Bank up by 3.21%, Ambuja Cements up by 2.52%, PNB up by 2.45% and Larsen & Toubro up by 1.85%. On the other hand, Cairn India down by 2.67%, DLF down by 2.58%, IDFC down by 1.47%, UltraTech Cement down by 1.46% and BPCL down by 1.20% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.40%, Germany's DAX was down by 0.26% and United Kingdom's FTSE 100 was down by 0.13%.

The Asian markets concluded Wednesday’s trade mostly in red, after Chinese manufacturing data signaled persistent weakness in the world’s second-largest economy. China’s factory activity shrank for the fourth straight month in April, signaling economic weakness into the second quarter. But the pace of decline eased, helped by policy steps to arrest the slowdown. The HSBC/Markit flash Purchasing Managers Index for April rose to 48.3 from March’s final reading of 48.0, still below the 50 line separating expansion from contraction. The initial sign of stabilization in the economy was due to the government’s targeted measures to underpin growth, but believe more policy support may be needed as structural reforms put additional pressures on activity.

Meanwhile, China collected 2.6 trillion yuan ($417 billion) in taxes in the first quarter of 2014, up 9.9% year on year. Taiwan’s stock exchange is seeking to create a cross-border stock trading platform with Singapore by this year to boost overseas access to the island's listed shares. In Hong Kong, overall consumer prices rose 3.9% year-on-year in March, the same as in February. Netting out the effects of the government’s one-off relief measures, the underlying inflation rate was 3.6%, also the same as in February.