D-Street sustains sanguine mood; surges to highest levels in 11 weeks

First day of a fresh futures and options series brought more cheer for the Indian stock markets as the benchmark indices not only climbed around a percent higher in the session but also jumped to the highest levels in eleven weeks, re-tracing the psychological 5,200 (Nifty) and 17,200 (Sensex) levels. Coming in the session after the Republic Day holiday, the benchmarks failed to capitalize on the initial gap up opening but steadily gained ground after drifting to intraday lows in the late morning session. The psychological 5,150 (Nifty) and 17,100 (Sensex) levels proved as strong supports as the frontline gauges got a technical bounce from those levels thanks to hefty position build up in heavyweights like Reliance Industries and L&T. Sentiment got a boost after encouraging weekly inflation data showed that food inflation hovered in the negative terrain for the fourth successive week as it moderated to (-) 1.03% by week ended January 14, 2012. Moreover, foreign funds, which have been showing renewed interest in the fundamentally strong but deeply undervalued Indian equities, have infused more than $1.5 billion in local markets in January, in sharp contrast to net outflows of about $500 million in 2011. Meanwhile all sugar stocks including Bajaj Hindusthan, Shree Renuka and Balrampur Chini rallied sharply on reports that Prime Minister Manmohan Singh has formed expert committee to examine issues concerning the sugar industry and also to consider deregulation of the sector. However, the rate sensitive counters which have been in a stupendous uptrend of late, witnessed some profit booking. Earnings announcement from Canara Bank disappointed the street and plunged over three percent however Bank of India got commended for its third quarter performance as it surged over three percent post result announcement. In the global space, stock markets in Asia largely exhibited cautious trends while the European stock too traded on a negative note as investors eyed negotiations between private bondholders and the Greece’s government over the nation’s debt trouble.

Earlier on Dalal Street, the benchmark got off to a gap up start tracking the supportive leads from Asian markets. The indices jumped to the highest point in the session in initial moments of trade but soon slipped to lower levels. However, profit booking gathered momentum in late morning trades which dragged the gauges to lowest point in the session. But the frontline indices treaded on the road to recovery after hitting session’s lows and the upward journey only ended with the day’s close around the high point of the day. Eventually, the NSE’s 50-share broadly followed index Nifty, climbed around a percent and settled just above the psychological 5,200 support level while Bombay Stock Exchange’s Sensitive Index - Sensex amassed over one hundred fifty points to close above the psychological 17,200 mark. The broader markets too showed resilience and settled on a positive note with the small cap index outpacing the midcap one. On the BSE sectoral front, largely across the board buying was evident with the Oil & Gas counter leading the space with 2.69% gains. The Consumer Durables and TECk counters too went home with over 2% gains each. On the flipside, the high beta Realty sector plummeted over two percent, being the top laggard in the sectoral space followed by the defensive FMCG index which plunged about a percent. The markets surged on tepid volumes of under Rs 1 lakh crore as it was the first day of a new F&O series. The market breadth remained optimistic as there were 1781 shares on the gaining side against 1106 shares on the losing side while 110 shares remained unchanged.Finally, the BSE Sensex rose 156.80 points or 0.92% to settle at 17,233.98, while the S&P CNX Nifty up by 46.40 points or 0.90% to close at 5,204.70.

The BSE Sensex touched a high and a low of 17,258.97 and 17,106.57 respectively. The BSE Mid cap and Small cap indices were up by 0.66% and 1.30% respectively.

The major gainers on the Sensex were Sterlite up 5.49%, Tata Motors up 4.10%, L&T up 3.76%, Bharti Airtel up 3.66% and RIL up 3.48%. While, DLF down 3.47%, Bajaj Auto down 3.07%, BHEL down 2.84%, Hero Moto down 2.21% and Jindal Steel down 2.04%, were the major losers on the index.

On the BSE sectoral space, Oil & Gas up 2.69%, CD up 2.54%, TECk up 2.02%, Metal up 1.89% and Capital Goods up 1.89% were the top gainers, while Realty down 2.22%, FMCG down 0.81%, Bankex down 0.37%, Power down 0.25% were the only losers on the sectoral space.

Meanwhile, the Prime Minister has constituted a 7 member Expert Committee under the Chairmanship of Dr. C. Rangarajan, Chairman Economic Advisory Council to the Prime Minister, to examine issues relating to the sugar sector. The other members of the committee are: Dr. Kaushik Basu, Chief Economic Adviser, Ministry of Finance; Secretary, Department of Food and Public Distribution; Secretary, Department of Agriculture; Dr. Ashok Gulati, CACP; Shri Nand Kumar, former Secretary, Department of Food and Public Distribution and Department of Agriculture and Cooperation and presently Member NDMA and Dr. K.P. Krishnan, Secretary EAC - Convener. Further the Committee has been empowered to involve such experts, academics as required as special invitees.

The Committee will look into all the issues relating to de-regulation of the sugar sector and it has been requested to complete its task as early as possible and give its recommendations to the Prime Minister. The Ministry of Consumer Affairs, Food and Public Distribution has been requested to provide the necessary support to the Committee in discharging its functions.

Sugar is one of the most controlled industries, attempts to decontrol it were made in 1971-72 and in 1978-79, and then rolled back.  The government has two mechanisms by which it exercises its control.  The first is levy sugar mechanism, as per which sugar mills are required to sell 10% of their output to the government at 60% of the cost of production so that it can be supplied to ration shops under the Public Distribution System (PDS). This results in a loss of about Rs. 2500 - 3000 crores annually to the sugar industry. The second is the release mechanism, according to which the government decides the amount of sugar that has to be sold by each mill in the open market every month, a failure do so invites penalty.  The sugar industry has been demanding that both these regulations be done away with.

The S&P CNX Nifty touched a high and low of 5,217.00 and 5,162.40 respectively.

The top gainers on the Nifty were Sesa Goa up 7.47%, SAIL up 6.91%, Sterlite up 6.73%, Grasim up 4.43% and L&T up 4.16%.

On the flip side, Ranbaxy down 6.82%, PNB down 3.59%, DLF down 3.56%, JP Associates down 3.23% and BHEL down 3.19% were the top losers on the index.

The European markets were trading on a mixed note as France's CAC 40 down 0.11%, Britain’s FTSE 100 down 0.17% and Germany's DAX up by 0.32%.

Asian markets rose Friday on tentative hopes that Greece will be able to agree a deal with creditors on writing down some of its debt, although gains were capped by underwhelming US economic figures. Greek Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos on Thursday resumed talks with banks and insurers on a major write-down to help the troubled country escape a devastating default. The discussions aim to reach agreement on a voluntary exchange of bonds that would wipe 100 billion euros ($130 billion) off the country’s debt of 350 billion euros. While US stocks slipped overnight after the government reported an unexpected drop in new home sales in December, capping the worst year for home sales since record-keeping began in 1963.

Hong Kong stocks rose for a sixth straight session day on the back of banking and telecommunication shares, while Japanese equities were weighed down by weak earnings reports from Nintendo and NEC.

Hang Seng was up 62.53 points or 0.31% to 20,501.67, Jakarta Composite was up 2.98 points or 0.07% to 3,986.41, Straits Times was up 21.83 points or 0.75% to 2,916.26 and Seoul Composite was up by 7.65 points or 0.39% to 1,964.83.

On the flip side, Nikkei 225 was down by 8.25 points or 0.09% to 8,841.22.

Stock markets in China and Taiwan remained closed on Friday in observance of Lunar New Year holiday.