Domestic bourses maintain momentum; all eyes on Modi’s swearing-in

Domestic bourses continued to trade in fine contour on continued buying by funds and retail investors ahead of prime minister designate Narendra Modi’s swearing in ceremony later in the day. Sentiments also remained up-beat on report that foreign institutional investors (FIIs) bought shares worth a net Rs 416.80 crore on May 23, 2014, as per provisional data from the stock exchanges. On the currency front, the Indian rupee was trading higher at 58.44 a dollar, up 8 paise compared to Friday’s closing value of 58.52 a dollar.

Global cues too remained supportive with Asian counters were trading mostly higher at this point of time after the S&P 500 closed at a record high on Friday and as geopolitical risks faded following a victory for billionaire Petro Poroshenko in Ukrainian elections. Back on home turf, the broader markets were also rose in tandem with their large-cap counterparts; the midcap index has jumped 123 points or 1.4% at 8,791 and the small-cap index has gained 137 points or 1.5% at 9,265. Stocks related to software and technology counters remained on buyers’ radar on positive economic data in US, the biggest outsourcing market for the Indian IT firms. The market breadth remained in favor of advances, as there were 1,937 shares on the gaining side against 693 shares on the losing side while 87 shares remain unchanged.

The BSE Sensex is currently trading at 25056.18, up by 362.83 points or 1.47% after trading in a range of 25060.52 and 24912.57. There were 26 stocks advancing against 4 declines on the index.

The broader indices adding gains were outperforming larger peers; with both BSE Mid cap and Small cap index trading higher by 1.51% each.

The top gaining sectoral indices on the BSE were, Capital Goods up by 3.23%, Auto up by 3.00%, PSU up by 2.74%, Power up by 2.49% and Metal up by 2.05%. On the flip side, FMCG down by 0.02% was the lone loser on the index.

The top gainers on the Sensex were M&M up by 4.91%, Maruti Suzuki up by 4.20%, Coal India up by 3.99%, L&T up by 3.73%, Tata Motors up by 3.14%. On the flip side, Hindalco Industries down by 0.72%, Dr Reddy’s Lab down by 0.45%, Cipla and Hindustan Unilever down by 0.04%  each were the losers on the Sensex.

Meanwhile, in order to safeguard the interest of local steel firms, Steel Ministry has recommended new government to bring the imports from Japan and Korea with whom India has free trade pacts under negative list. Concerned over the growing steel imports, the Ministry has stated that under the Free Trade Agreement (FTA) with India and Japan/Korea, steel import has been rising at brisk pace due to progressively reducing import duty toward zero duty regime. India had signed FTA with Korea in 2009 and with Japan in 2011. India imported 5.445 million tonnes of steel in FY14. Though, the country has maintained its status as a net exporter of steel during the last fiscal.

With FTA in place, Japan and Korea are enjoying duty benefits and their proportion in India's total steel import is on rise replacing traditional sources of Russia and the European Union. Further, since the economies of Japan and Korea are struggling with slowdown, these nations are exporting a lot of steel into India at a very low price, taking advantages of these FTAs. Rising steel exports from these nations has highlighted the need to exclude steel products under Chapter 72 of International Trade Centre (ITC) code from Indo-Korea and Indo-Japan Comprehensive Economic Partnership Agreement (CEPA) to ensure sustainability of domestic steel industry.

India mainly imports flat steel products which find application in the automotive and fast-moving consumer durable sectors. India’s dependence on imports has also risen due to the sluggish domestic production. Over the past few years, domestic steel industry has been struggling with increased input cost, leading to decline in steel production. Further, low iron ore production, a main raw material for steel production, mainly in Karnataka has not only hampered the capacity utilization of various steel players, but also led to significant rise in the cost of iron ore in the domestic market due to limited supplies. At present, Indian steel production capacity stands at around 96 million tonnes. Meanwhile, domestic steel production is likely to improve as the government has lifted the iron ore mining ban in the main producing region Goa. 

The CNX Nifty is currently trading at 7,471.00, up by 103.90 points or 1.41% after trading in a range of 7,472.70 and 7,428.55. There were 42 stocks advancing against 8 declines on the index.

The top gainers of the Nifty were M&M up by 4.97%, Ambuja Cements up by 4.60%, Maruti up by 4.01%, Grasim up by 3.95% and Coal India up by 3.86%. On the flip side, Asian Paint down by 1.26%, Hindalco down by 0.69%, Dr Reddy’s Lab down by 0.60%, Cipla down by 0.52% and MCdowell-N down by 0.37% were the top losers on the index.

Asian markets were traded in mixed; Nikkei 225 surged 0.68%, Straits Times rose by 60.10%, Shanghai Composite advanced 0.26% and Taiwan Weighted gained 0.45%. On the flip side, Jakarta Composite slid 0.21%, Hang Seng lost 0.04%, KLSE Composite shrunk 0.26% and Seoul Composite was down by 0.42%.