Benchmarks turn green after an initial fall; Nifty reclaims 5,400 mark

Indian equity markets have made a soft start following weak Asian markets. Most of the Asian equity indices were trading lower after Moody’s downgraded Italy, Portugal, Spain, Slovakia, Slovenia and Malta, and warned it may cut other top-notch ratings. But, after trading for few minutes of initial trade markets got back their traction and turned green with Nifty recapturing 5,400 mark as traders hope for a fall in January inflation numbers. Investors are awaiting the announcement of WPI inflation numbers for the month of January, which is broadly anticipated at 6.7 percent against 7.47 while core inflation is likely to slip to below 7 percent. Meanwhile, a latest consumer survey by RBI has showed that the number of people who felt that their financial circumstances have improved went up marginally to 57.1 percent in December, from 56 percent in September. On the sectoral front, banking, realty and auto remained the top gainers while, healthcare, software and technology remained the only losers on the index. The broader indices were outperforming benchmarks. The market breadth on the BSE was positive; there were 1,167 shares on the gaining side against 589 shares on the losing side while 71 shares remained unchanged.

The BSE Sensex opened at 17,767.46; about 5 points lower compared to its previous closing of 17,772.84, and has touched a high and a low of 17,817.94 and 17,742.58 respectively.

The index is currently trading at 17,816.83, up by 43.99 points or 0.25%. There were 17 stocks advancing against 13 declines on the index.

The overall market breadth has made a positive start with 63.88% stocks advancing against 32.24% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices surged 0.74% and 0.54% respectively.

The top gaining sectoral indices on the BSE were Bankex up by 1.04%, Realty up by 1.02%, Auto up by 0.87%, CG up by 0.77% and CD up by 0.76%. While, HC down by 0.43%, IT down by 0.22% and TECk down by 0.11% were the only losers on the index.

The top gainers on the Sensex were SBI up by 3.64%, Tata Motors up by 1.65%, L&T up by 1.35%, DLF up by 1.34% and Gail India up by 1.04%.

On the flip side, Cipla was down by 3.93%, ONGC was down by 1.16%, HDFC Bank was down by 0.75%, Jindal Steel was down by 0.55% and Tata Power was down by 0.51% were the top losers on the Sensex.

Meanwhile, the oil ministry is keen that the finance ministry should waive off the withholding tax on rupee payments made by Indian oil refiners to Iran, as the tax rate, which could translate to over 40%, is likely to make the new payment mechanism unviable. In a recent development, the oil ministry has stated that it will be writing to the Finance Ministry requesting a waiver of withholding tax on payments made to Iran.

Iran is India’s second largest oil supplier accounting for 12% of its needs. India imports about 370,000 barrels per day of oil from Iran and Indian refiners pay about $1 billion a month in euro equivalent through the Turkish bank, Turkiye Halk Bankasi. However it was feared that this payment route could be hampered as Turkey may be forced to stop this after the move by US and the European Union (EU) to ban any entity involved in Iranian oil and gas or petrochemical sectors.

Therefore it was decided that Iran would receive 45% of the payments of over $12.6-billion for its oil made by India, in rupees. Iran could use the money to buy machinery, metal products, iron, steel, minerals, clothes, fibre, sugar, tea, wood and automobiles from India.

As per the mechanism, India was to pay the Iranian supplier, National Iranian Oil Company (NIOC) in an account opened in Kolkata-based UCO Bank. UCO Bank has been chosen because it has no US or European exposure and thus would not be impacted by sanctions. A part of the rupee payments would also be deposited in two Iranian private banks, Bank Parsian and Karafarin Bank. These are still not under sanctions that have been imposed on all state-run Iranian banks. However this mechanism does not seem viable anymore as it makes NIOC liable to pay income tax as the money it receives would be treated as income. This is called withholding tax and would be 40% of the income. Mostly likely NIOC would not want to pay this high tax and would want Indian oil refiners to bear it. However Indian refiners do not want to pay the tax as it will make their imports way costlier.

HPCL, which had in the fiscal year ending 31 March 2012 contracted 3.5 million tonnes of crude oil for imports from Iran on a term contract, has signed for import of only 3 million tonnes next fiscal. Mangalore Refinery and Petrochemicals (MRPL) is the India biggest buyer of Iranian oil at 7.1 million tonnes while Essar Oil buys 5.5 million tonnes. Indian Oil Corporation (IOC) has a term contract to buy 1.5 million tonnes while Bharat Petroleum Corporation (BPCL) could not commence its 1 million tonnes term imports from Iran this fiscal because it could not open an account with Turkey’s Halkbank for payment to NIOC.

The S&P CNX Nifty opened at 5,380.80; about 10 points lower compared to its previous closing of 5,390.20, and has touched a high and a low of 5,404.00 and 5,377.95 respectively.

The index is currently trading at 5,403.60, higher by 13.40 points or 0.25%. There were 30 stocks advancing against 20 declines on the index.

The top gainers of the Nifty were SBI up by 3.64%, IDFC up by 1.94%, Tata Motors up by 1.72%, Sesa Goa up by 1.59% and DLF up by 1.54%.

Cipla down by 3.83%, Semens down by 1.27%, ONGC down by 1.26%, Dr Reddy down by 0.92% and Bajaj Auto down by 0.81%, were the major losers on the index.

Most of the Asian equity indices were trading in the red; Shanghai Composite was down 13.74 points or 0.58% to 2,338.12, Hang Seng was down 0.71 points to 20,886.69, Jakarta Composite was down 2.00 points or 0.05% to 3,959.90, Seoul Composite was down 2.38 points or 0.12% to 2,003.36 and Taiwan Weighted was down by 19.38 points or 0.24% to 7,893.53.

On the flip side, Nikkei 225 was up 45.08 points or 0.50% to 9,044.26 and Straits Times was up by 0.93 points or 0.03% to 2,977.27.