Markets continue to trade firm in afternoon session

Indian benchmarks were continuing their firm trade in the noon session on the back of buying witnessed in frontline blue chip stocks. Though the major indices were following a tight range but there was no sense of any profit booking since morning. Firm global cues coupled with some positive economic related announcements at the domestic front has enthused the markets to extend their gains. All of the sectoral indices were trading in green with capital goods being the top gaining index on BSE up by around 2.27%. Further, the firm gains in power, banking, realty and infrastructure stocks also provided strength to domestic equity markets. Sentiments got a boost as Business Outlook Survey by the Confederation of Indian Industry (CII) has highlighted that Indian industry is upbeat on its growth prospects after the new government took charge at the Centre. The CII Business Confidence Index (CII-BCI) for the April-June quarter of 2014-15 rose from 49.9 in the Q4 FY14 to 53.7 points in Q1FY15, above 50 mark that separates strong business sentiments from weak. Further, there are also optimisms that the government will announce reform measures in coming budget 2014-15 to boost the business sentiments in the country. Apart from blue chips, broader indices too equally participated in the rally with both mid cap and small cap indices were trading up by over 1.25%.

Shares of ITC, the country's largest cigarette manufacturer, was trading higher by 1.3% at Rs 324 on back of heavy volumes as brokerages upgraded the stock from equal-weight to overweight and raised the target price to Rs 400. Shares in Ranbaxy Laboratories, extending Friday’s 5% rally, were trading higher by around 3% to Rs 512 after US Food and Drug Administration's (USFDA) nod for generic version of Novartis’ blood pressure drug Diovan.

On global front, Asian equity indices were trading in green with Nikkei up by 0.37% and Taiwan Weighted up by 0.93%. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 7,550 and 25,000 levels respectively. The market breadth on BSE was positive, out of 2,617 stocks traded, 1,807 stocks advanced, while 721 stocks declined on the BSE.

The BSE Sensex is currently trading at 25,369.43 up by 269.51 points or 1.07% after trading in a range of 25,404.33 and 25,179.55. There were 27 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.38%, while Small cap index up by 1.29%.

The gaining sectoral indices on the BSE were Capital Goods up by 2.27%, Power up by 2.17%, Bankex up by 1.91%, Realty up by 1.87% and Infrastructure up by 1.51%. On the flip side, there were no losing indices on BSE.   

The top gainers on the Sensex were Sun Pharma up by 2.79%, Tata Power up by 2.65%, L&T up by 2.51%, SBI up by 2.48% and ICICI Bank up by 2.13%. On the flip side, Hero Motocorp down by 0.29%, Maruti Suzuki down by 0.19% and RIL down by 0.01% were the top losers on the BSE.

Meanwhile, in order to help the US to tackle tax evasion, India has agreed to implement US law Foreign Accounts Tax Compliance Act (FATCA) to combat possible tax evasion by Americans through Indian financial entities. Accordingly, the Reserve Bank of India (RBI) has asked banks and financial institutions to register with US authorities by December 31, 2014 and obtain a Global Intermediary Identification Number (GIIN) to report accounts and assets held by US citizens. However, the Inter-Governmental Agreement (IGA) on FATCA, which came into effect on April 11, will be signed only after Cabinet's approval.

The RBI’s statement noted that Indian financial institutions with overseas branches should register for GIIN only when the formal IGA is signed after cabinet's approval. Further, financial entities in a jurisdiction without an IGA, which are allowed to register as foreign financial institutions (FFI) should get registered with the US authorities before July 1, 2014 to avoid potential withholding under FATCA. Overseas branches in a jurisdiction that does not have IGA and does not allow an FFI agreement may not register and they would eventually be subject to withholding under FATCA. If registration of the parent bank or head office is a pre-requisite for a branch to register, such banks should register as per the given time frame.

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. 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. 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. As per the Model 2, financial institutions are required to report information directly to the US IRS rather than their local jurisdictions.

The CNX Nifty is currently trading at 7,592.85 up by 84.05 points or 1.12% after trading in a range of 7,598.35 and 7,531.60. There were 47 stocks advancing against 3 declining on the index.

The top gainers of the Nifty were Bank of Baroda up by 3.52%, IDFC up by 3.51%, Sun Pharma up by 3.11%, PNB up by 3.02% and BPCL up by 2.83%. On the flip side, McDowell down by 3.79%, Maruti down by 0.46% and Hero Motocorp down by 0.21% were the major losers on the index.

Most of the Asian equity indices were trading in green; Nikkei up by 0.37% to 15,150.83, Taiwan Weighted up by 0.93%, Jakarta Stock Index up by 0.24% to 4,856.69, Hang Seng up by 0.20% to 23,267.84 and Shanghai Composite up by 0.59% to 2,048.35. While, Straits Times down by 0.35% to 3,259.74