Markets get another gap-up start; rate sensitive takes the lead

The Indian equity markets have once again made a gap-up start on the last trading day of the week with benchmark indices surging past their another crucial level in opening trade. Nifty has crossed 5,050 mark while, Sensex was comfortably over 16,700 mark. The global cues remained good as the US markets closed higher overnight on good economic and earnings report, while most of the Asian markets were trading in green with anticipation that China may take steps to stimulate growth in the world’s second-largest economy. Back home, the indices remained in fine fettle and the rate sensitives are hogging the limelight with consumer durables along with banking surging by over a percent. IT sector too is witnessing some buying after the sector heavyweight Wipro reported net profit rise of 10.43% to Rs 1456.40 crore for the quarter ended December 31, 2011. However, the oil & gas sector was slightly in somber mood after the Reliance Industries lost momentum ahead of its December quarter numbers.

The BSE Sensex opened at 16,745.01; about 101 points higher compared to its previous closing of 16,643.74, and has touched a high and a low of 16,759.82 and 16,693.16 respectively. The index is currently trading at 16,699.27, up by 55.53 points or 0.33%. There were 17 stocks advancing against 13 declines on the index.

The broader were trading in tandem with benchmarks; the BSE Mid cap and Small cap index were up by 0.32% and 0.34% respectively. The market breadth on BSE was in favor of advances in the ratio of 875:472 while 36 scrips remained unchanged.

The top gaining BSE sectoral indices were CD up by 1.46%, Bankex up by 1.04%, IT up by 0.91%, Realty up by 0.82%, Power up by 0.54% while Oil & Gas down by 0.29%, Metal down by 0.14% were the only losers.

The top gainers of the Sensex were Wipro up by 4.88%, ICICI Bank up by 3.13%, BHEL up by 2.60%, DLF up by 2.40%, Bajaj Auto up by 1.97%. On the flip side, Coal India down by 1.74%, Maruti Suzuki down by 1.47%, Bharti Airtel down by 1.14%, Hindalco Industries down by 0.68%, Hero Motocrop down by 0.51% were the losers on the index.

Meanwhile, giving a boost to the government's fiscal strengthening drive, states have agreed to a drastic pruning of centrally-sponsored schemes from 147 to 59, as suggested by the BK Chaturvedi's committee report. States have also lent their support to the re-classification of revenue and capital expenses as suggested by a panel headed by C Rangarajan, chairman of the Prime Minister's Economic Advisory Committee. The move will help the government substantially lower its revenue deficit, pegged at 1.8% of GDP in the current year.

Finance Ministers of 15 states endorsed these proposals at a six-hour-long pre-budget meeting with Finance Minister Pranab Mukherjee. While the states came with a long list of demands in pre-Budget consultations and sought a growth-centric Budget, Mukherjee sought their support in meetings the challenges posed by high inflation, increasing fiscal deficit and slowing growth.

Majority of states favoured the Rangarajan Committee's recommendations on doing away with the current system of classification of expenditure into plan and non-plan categories. The Rangarajan Committee had said that the present classification of expenditure into plan and non-plan leads to several contradictions. This classification leads to the neglect of the maintenance of assets such as roads. It also leads to an imbalance between the creation of physical infrastructure such as schools and hospitals, and creating the manpower required to provide services, such as doctors or teachers.

On the sidelines, Sushil Kumar Modi, Chairman of the empowered Committee of States' Finance Ministers, said, ‘funds should be routed through States. In such a situation, such expenditure can be audited by the Comptroller and Auditor General (CAG).’Further, the Deputy Chief Minister of Bihar Sushil Modi also asked the Centre to give funds to the states directly for various social sector schemes. In such a situation, they will have greater flexibility in designing effective schemes.

States pushed for increasing the open-market borrowing limit as it would give them the flexibility of borrowing at any point of time in the fiscal without taking prior permission. The state finance ministers also sought creation of an independent commission to identify below poverty line families, speedy release of compensation for central sales tax phase-out and removal of the professional tax cap. Some states also made their apprehensions clear about sharing any financial burden for implementing the Food Security Act. ‘The states having the larger incidence of poverty are also the poorest states in India and, hence there should be proper budgetary provision by the Central government for implementing the landmark Food Security Bill,’ said Sushil Modi.

The S&P CNX Nifty opened at 5,044.85; about 26 points higher compared to its previous closing of 5,018.40, and has touched a high and a low of 5,050.70 and 5,027.45 respectively. The index is currently trading at 5,027.80, up by 9 points or 0.19%. There were 27 stocks advancing against 23 declines on the index.

The top gainers of the Nifty were Wipro up by 4.45%, ICICI Bank up by 2.99%, BHEL up by 2.47%, DLF up by 2.45%, Bajaj Auto up by 1.97%, Sun Pharma up by 1.29%.

On the other hand, RPower down by 3.26%, Dr. Reddy’s down by 2.13%, Coal India down by 1.84%, Maruti Suzuki down by 1.22%, HDFC Bank down by 0.93% were the losers on Nifty.

Most of the Asian equity indices were trading in the green; Shanghai Composite up by 8.51 points or 0.37% Hang Seng rose 49.60 points or 0.25%, Nikkei 225 ascended 101.42 points or 1.71%, Straits Times increased by 14.44 points or 0.51%, Seoul Composite soared 16.94 points or 0.88%.

On the flip side, Jakarta Composite shed 26.58 points or 0.66% was the lone loser in Asian space.

Markets in Taiwan remained close for a public holiday.