Reliance rally fails to underpin benchmarks; snap three session uptrend

A session after showcasing a smart rally of around two percent, Indian benchmark equity indices went on to consolidate the gains in Wednesday’s session by settling just below the neutral line with marginal cuts. It turned out to be a range bound session for the frontline indices which somehow managed to cling on to the psychological 4,950 (Nifty) and 16,450 (Sensex) levels as investors indulged in stock specific activity. Investors resorted to largely across the board position squaring a day after witnessing sharp rally. IT bellwether TCS got punished in the session despite announcing quarterly earnings that were better than street expectations amid speculations that slowdown in major importing regions like Europe and the US will impact future earnings. However, the reports of index heavyweight Reliance Industries mulling over share buy-back underpinned the stock by close to five percent, giving the much needed support and preventing the downside for the benchmarks. Meanwhile, shares of aviation companies like Jet Airways, Kingfisher and SpiceJet flied higher after the government opined that it was considering allowing foreign carriers to take 49 percent stake in Indian airlines. Also the stocks of power sector companies remained in limelight in the session as a high level delegation consisting of top corporate leaders of the power industry like Ratan Tata, Anil Ambani, were scheduled to meet Prime Minister to discuss a host of issues concerning the power sector. Leads from the Asian peers too remained unexciting as most markets in the region sank into the negative terrain by the end after trading on an encouraging note earlier. Furthermore the European markets too got off to a subdued start and traded with a negative bias as investors shifted their focus to Portugal’s debt auction and talks in Greece on its debt restructuring.

Earlier on Dalal Street, the benchmark got off to a positive opening tracking the largely positive Asian markets as the encouraging economic reports from Germany and the US added to the hopes that global economic growth prospects are not as gloomy as feared. After some hiccups in initial hour of trade, the frontline indices gained some momentum and touched the session’s high in late morning hours but remained in a narrow range through the day’s trade. Though, some selling pressure surfaced after weak European opening which prevented the key gauges from climbing back into the positive terrain by the end. Eventually, the indices failed to extend the three straight session gaining momentum but managed to hold on to crucial levels. The NSE’s 50-share broadly followed index Nifty, slipped by about a quarter percent to settle above the crucial 4,950 support level while Bombay Stock Exchange’s Sensitive Index, Sensex eased by fifteen points, though managed to end above the psychological 16,450 mark. Moreover, the broader markets went home with large cuts of over a percent, underperforming their larger peers by quite a margin. On the BSE sectoral space, the Oil & Gas counter remained the gainer in the space with strong gains of over three percent while the high beta Realty sector was the only other gainer in the space which ended with over half a percent gains. On the flipside, the Metal counter remained the top laggard with over two percent losses followed by the IT index which too plunged with similar losses. The markets consolidated on weaker volumes of over Rs 1.26 lakh core while the turnover for NSE F&O segment also remained on the lower side as compared to that on Tuesday at over Rs 1.08 lakh crore. The market breadth remained negative as there were 1907 shares on the gaining side against 975 shares on the losing side while 103 shares remained unchanged.

Finally, the BSE Sensex lost 14.58 points or 0.09% to settle at 16,451.47, while the S&P CNX Nifty declined by 11.50 points or 0.23% to close at 4,955.80.

The BSE Sensex touched a high and a low of 16,517.96 and 16,384.48 respectively. The BSE Mid cap and Small cap indices down by 1.16% and 1.00% respectively.

The major gainers on the Sensex were Reliance up 4.94%, HDFC Bank up 2.79%, ONGC up 2.39%, Hero MotoCorp up 1.67% and DLF up 1.57%. While, Tata Steel down 4.05%, Coal India down 3.22%, M&M down 2.84%, BHEL down 2.78% and Wipro down 2.70%, were the major losers on the index.

On the BSE sectoral space, Oil & Gas up 3.12% and Realty up 0.61% were the top gainers, while Metal down 2.19%, IT down 2.16%, Capital Goods down 2.4%, TECk down 1.77% and PSU down 1.31% were top losers on the BSE sectoral space.

Meanwhile, a high level delegation consisting of top corporate leaders of the power industry like Ratan Tata, Anil Ambani, Prashant Ruia, L Madhusudan Rao, Anil Aggarwal and Ashok Hinduja are likely to meet Prime Minister Manmohan Singh today to discuss issues relating to shortage of coal and gas, issues arising out of coal imports becoming unviable, tariff hike and pending reforms in the power sector.

India has about 10% of the world's coal reserves, but has struggled to provide enough of the fuel to power sector because of challenges in land acquisition and environmental clearances for mining. The delegation will apprise the Prime Minister of the problems they face and the need to unleash the next round of reforms to meet the growing energy needs and to keep pace with the 9% GDP growth targeted in the 12th Five Year Plan.

From the government’s side, Finance Minister Pranab Mukherjee, Power Minister Sushil Kumar Shinde, Environment and Forest Minister Jayanthi Natarajan, Coal Minister Sriprakash Jaiswal and Planning Commission Deputy Chairman Montek Singh Ahluwalia are likely to attend the meeting.

Critical issues like deferred environmental clearances, slash in customs duty on imported coal, shortage of domestic coal and gas, and poor financial health of the distribution companies are likely to form the core of the discussions. The proposal to slap duty on imported power equipment would also figure in the discussions.

The Planning Commission has, however already showed its inclination for hike in tariffs to pay off the private power developers in view of increased cost of coal and other raw material after warning that banks have already started showing their unwillingness to finance power projects due to the poor outlook and various cost factors in the sector. Currently, the private power companies have a capacity of around 24,000 MW, while they are expected to add another 22,000 mw by March.

Further, it is reported that shortage of domestic supply is likely to increase coal imports by four times to 213 million tonnes in 2016-17 from 54 million tonnes this fiscal year. Tata Power and Reliance Power, developers of 4-gigawatt plus power plants, are also lobbying the government to free them from loss-making power sales contracts and want to be allowed to pass on rising fuel costs to consumers. Due to rate mismatches and subsidy problems, power distribution companies had accumulated a loss of about Rs 75,000 crore in 2008-09, which had increased to Rs 106,347 crore in 2009-10. Most discoms are under huge financial stress and some state discoms have already asked for a bailout package.

The S&P CNX Nifty touched a high and low of 4,980.65 and 4,931.05, respectively.

The top gainers on the Nifty were Reliance up 4.26%, HDFC Bank up 3.16%, Reliance Infra up 2.16%, RPower up 2.20% and ONGC up 2.06%.

On the flip side, Tata Steel down 4.52%, SAIL down 4.29%, Coal India down 3.48%, Kotak Bank down 3.26% and Axis Bank down 3.16% were the top losers on the index.

The European markets were trading in green. France's CAC 40 up 0.41%, Britain’s FTSE 100 gained 0.02% and Germany's DAX surged by 0.53 points.

Asian markets ended mixed on Wednesday, there was some upmove in early trade on the back of upbeat US and German data as well as successful bond auctions in Spain and Greece. Investors remained cautious as eurozone fears continued to cast a shadow while financial plays were weighed by disappointing earnings from banking giant Citi.  However drop in Shanghai came amid expectation that Beijing won't ease its monetary policy too much. The mainland Chinese stocks declined, giving up some of their previous session’s gains. China Securities Journal said the government may take steps to bolster long-term investor shareholdings.