Markets pare all the early gains to make another flat closing

Wednesday was a day of disappointment for the Indian markets, when the major indices after making a solid start and retaining the good momentum till last, succumbed to profit booking in the final hours, giving up all their gains and ending flat with just a positive bias. The broader markets too suffered the similar fate and lost all their gains to end with a quarter percent of loss. While, partially the volatility was due the F&O expiry scheduled tomorrow, it was also due to the cautiousness ahead of the railway budget and the growing opposition to the proposed amendments to the land acquisition law. Opposition parties, along with some allies of the government, as well as activists like Anna Hazare, claim this proposed dilution of the law would make farmers vulnerable to hostile takeover of their land by corporates.

The local markets which drew cues from the good going in the global markets, completely lost their momentum in last. The US markets had ended at record high levels in last session after the Federal Reserve Chairwoman Janet Yellen’s testimony before Congress, sounded as a reassurance that a rate hike might not occur until the second half of the year. The Asian markets too ended mostly in the green despite some choppiness, while the European markets after making a positive start turned lower

Back home, major bourses gave up all their gains in last and the journey that looked as a prelude to the budget rally turned into a day of disillusionment.  All the early excitement generated by the dovish comment of the Fed chief and with the report of the Fourteenth Finance Commission which though suggested a fiscal deficit target of 3.6 percent of GDP in 2015-16 and 3 percent in the subsequent years on the back of likely pick-up in economic growth, also recommended greater devolution of financial resources to the states. 42 percent of gross tax revenue will be devolved to states. There was a bit of cautiousness with global rating agency Moody’s Investors Service, just ahead of the budget stating that its assessment of India’s credit ratings will be determined mainly by the extent of its fiscal reforms, not recent revisions to its economic growth data. On the sectoral front, by the end the majority was of the decliners with some indices losing all their gains in final moments. Healthcare, banking, capital goods and metal finally ended with cut of over half a percent on the BSE. There was some cheer in the IT sector ,one of the top gainers of the day, after the US announced that it will provide work permits to spouses of H-1B visa holders beginning May 26, a move that is expected to benefit thousands of talented and professional Indian spouses who come to America but were unable to work. Power stocks on the other hand remained under pressure, after World Bank in a report asked banks to pull up their socks and critically look at every loan proposal from power sector firms.

The NSE’s 50-share broadly followed index Nifty was up by just  five points, holding the psychological 8,750 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex ended higher by 3 points, above the psychological 29,000 mark. Broader markets, though ended in red with cut of around a quarter percent. On the penultimate day of F&O series expiry, the volumes at 4.27 crores were on the higher side, mainly due to rollovers. The market breadth remained in favour of decliners, as there were 1,224 shares on the gaining side against 1,661 shares on the losing side, while 114 shares remained unchanged.

Finally, the BSE Sensex gained 3.33 points or 0.01% to 29007.99, while the CNX Nifty ended higher by 5.15 points or 0.06% to 8767.25.

The BSE Sensex touched a high and a low of 29269.83 and 28967.61, respectively. The BSE Mid cap index was down 0.22%, while Small cap index lost 0.40%.

The top gaining sectoral indices on the BSE were TECK up by 0.47%, IT up by 0.45%, FMCG up by 0.36%, Realty up by 0.35%, Oil & Gas up by 0.29% while, Bankex down by 0.76%, Capital Goods down by 0.71%, Metal down by 0.51%, Power down by 0.49%, Consumer Durables down by 0.39% were the top losing indices on BSE.

The top gainers on the Sensex were HDFC up by 2.43%, Infosys up by 1.75%, Wipro up by 1.71%, Bharti Airtel up by 1.36% and ITC up by 0.93%. On the flip side, Dr. Reddys Lab down by 2.48%, Tata Steel down by 2.30%, Sun Pharma Inds down by 2.00%, Tata Power down by 1.83% and Hindustan Unilever down by 1.43% were the top losers.

Meanwhile, the 14th Finance Commission in its report tabled in Parliament has suggested the Centre to restrict the fiscal deficit target of 3.6 percent of GDP in 2015-16 and 3 percent in the subsequent years on the back of likely pick-up in economic growth.

The Commission, headed by former RBI Governor Y V Reddy, further said that 'We expect that an improvement in the macroeconomic conditions and revival of growth as well as tax reforms should enhance the total tax revenues of the Union Government, enabling it to eliminate the revenue deficit completely much earlier than 2019-20.'

As per the Commission, total devolution to the states in FY16 will be Rs 5.26 lakh crore against Rs 3.48 lakh crore in FY15.  It also said that fiscal deficit of all the states will be anchored to an annual limit of 3 percent of Gross State Domestic Product (GSDP). Though, the finance commission has subsumed both plan and non-plan expenditure. Moreover, it has not given any sectoral grants, not even for environmental or healthcare.

The report further stated  that the share of grants and tax devolution to states in the gross revenue receipts has been projected to increase from 47.5% in 2014-15 (base year, as per the  previous finance commission formula) to 49.4% in 2019-20. Meanwhile, the Centre has accepted the recommendations of the finance commission and has implicitly endorsed the fiscal deficit target of 3.6% of GDP for FY16 and 3% thereafter. The revised estimates of fiscal deficit will be unveiled by the Finance Minister in the Budget.

The CNX Nifty touched a high and low of 8,840.65 and 8,751.40 respectively. There were 23 stocks advancing against 26 stocks declining on the index, while one stock remained unchanged.

The top gainers on Nifty were ACC up by 2.33%, HDFC up by 2.30%, Infosys up by 1.97%, Bharti Airtel up by 1.91% and Ultratech Cement up by 1.82%. On the flip side, Dr. Reddys Lab down by 2.39%, Tata Steel down by 2.28%, Sun Pharma Inds down by 2.16%, Tata Power down by 1.72% and HDFC Bank down by 1.42% were the top losers.

Asian markets ended mostly in green on Wednesday led by the overnight gains in the US markets, which surged on dovish testimony by Federal Reserve Chair Janet Yellen, where she indicated that the Fed is not likely to begin raising interest rates for at least the next couple monetary policy meetings. The Chinese market that opened after a week long holiday ended with marginal cut after a volatile session of trade on HSBC's latest factory activity report, which showed export orders in February had shrunk at their fastest rate in 20 months. Though, the Hang Seng market posted modest gains despite the region’s economy missing growth expectations for 2014, expanding by 2.3% compared with 2.9% a year earlier. Traders were encouraged by the budget of the country various licensing and administration fees for restaurants, hotels and travel agencies were waived to try to boost tourism. The Japanese market gave all its early gains to end mildly in red.