India equities gain strength; trade gyrates around neutral line

Indian equity markets gain strength gyrating around the neutral line in the late afternoon session lacking any significant upside triggers for the day. The Reserve Bank of India’s decision in rate-setting meeting scheduled tomorrow coupled with Q3 earnings will decide the direction of the stock market in the near future. Traders were seen piling up the positions in Power, FMCG and Capital Goods sector while selling was witnessed in Oil & Gas, Metal and Auto sector. A slew of positive results along with earnings from heavyweight like L&T and Kotak Bank helped to bring positive sentiments in the market which in turn helped benchmarks to inch higher. L&T’s Q3 net improved by 18% thereby pulling the Capital Goods space while Kotak Mahindra Bank’s Q3 consolidated net surged by 21%. On the other hand, Maruti Suzuki’s net tumbled 64% in Q3 at Rs 205.62 crore as compared to Rs 565.17 crore for the same quarter in the previous year. Index heavyweight RIL from Oil & Gas sector were trading in red with cut of around three percent putting pressure on the markets. Metal stocks fell after LMEX, a gauge of six metals traded on the London Metal Exchange dropped on January 20, 2012. However, market participants remain cautious while picking front line counters as they await the outcome of important RBI credit policy review meet. While consensus estimates are that the Indian central bank will keep both repo and reverse repo rates unchanged at 8.5% and 7.5% respectively however, there are some expectations of open market operations (OMO). The OMO is a tool by which central bank controls the short term interest rate and the supply of base money in economy, thus indirectly controlling the total money supply.

On the global front, most of the Asian markets remain closed except Nikkei 225 which traded in red while the European markets were trading in green on optimistic note. Caution returned as Greece and private creditors struggled to reach an agreement vital for restoring confidence in Europe's refinancing ability. After several rounds of talks, Greece and private creditors are converging on a debt swap deal that would stave off bankruptcy for Athens, with investors shouldering losses of up to 70 percent. Euro zone finance ministers will decide terms of a Greek debt restructuring they are ready to accept as part of a second bailout package for Athens. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5,000 and 16,700 levels respectively. The market breadth on BSE was in favor of advances in the ratio of 1416:1220 while 121 scrips remained unchanged.

The BSE Sensex is currently trading at 16,763.06 up by 24.05 points or 0.14% after trading as high as 16,784.00 and as low as 16,659.32. There were 19 stocks advancing against 11 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index added 0.39% while Small cap gained 0.41%.

On the BSE sectoral space, Power up 1.21%, FMCG up 1.11%, Capital Goods up 0.88%, TECk up 0.85% and Realty up 0.79% were the major gainers while Oil & Gas down 1.77%, Metal down 1.44% and Auto down 0.37% were the only losers in the space.

BHEL up 3.51%, Bharti Airtel up 2.68%, HUL up 2.18%, ICICI Bank up 2.12% and DLF up 1.99% were the major gainers on the Sensex, while Sterlite Industries down 4.08%, Hero MotoCorp down 3.32%, Hindalco Industries down 3.00%, RIL down 2.75% and Coal India down 1.99% were the major losers in the index.

Meanwhile, Gems & Jewellery exports have declined by huge 15% in the month of December as compared to the same period last year. According to the Gems and Jewellery Export Promotion Council (GJEPC) India exported jewellery worth $3 billion in the month of December against $3.5 billion in December 2011.

The exports decline was mainly due to a slowdown in demand in the US and EU markets. According to the GJEPC Chairman Rajiv Jain, “There has been a demand slowdown for our products mostly from the western markets like the US and EU'.

Exports of cut and polished diamonds in December declined by 40% year-on-year in dollar terms. In volume terms, exports fell by 31%, to 36.38 lakh carats. Exports of cut and polished diamonds from India during the nine-month period of April-December 2011 lower by 5% in dollar terms. However, gold jewellery exports saw robust growth during December by 41% to $778.37 million. While, during the same period, silver jewellery exports too moved up, partly due to the low base effect. During the April-December period, gems and jewellery exports have grown 11.65% to $32.1 billion, compared to the same period last fiscal.

Exporters are now exploring new markets like Latin America, Africa and Russia to reduce dependence on traditional markets. Other major markets for the country's gems and jewellery exports include the UAE and Hong Kong. India mainly imports gold and rough diamonds in large quantities and re-exports value-added items like jewellery.

The S&P CNX Nifty is currently trading at 5,048.10, lower by 0.50 points or 0.01% after trading as high as 5,059.55 and as low as 5,021.35. There were 27 stocks advancing against 23 declines on the index.

The top gainers on the Nifty were BHEL up 3.56%, Bharti Airtel up 2.95%, HUL up 2.15%, ICICI Bank up 2.04% and DLF up 1.75%.

Sterlite down 4.52%, Hero MotoCorp down 3.50%, Hindalco down 3.10%, Reliance down 2.98% and Coal India down 2.19% were the major losers on the index.

In the Asian space, Nikkei 225 was marginally down by 0.01% to 8,765.90, while all other stock markets including that in China, Hong Kong, Indonesia, Malaysia, South Korea, Singapore and Taiwan remained closed in observance of a public holiday.

The European markets were trading in green with, France’s CAC 40 ascended 0.16%, Germany’s DAX added 0.05% and Britain’s FTSE 100 jumped 0.40%.