Benchmarks pick up momentum despite fall in GDP growth

After some volatility, Indian equity markets has picked up momentum and currently trading with substantial gains despite a fall in GDP growth in the October-December quarter. Meanwhile, according to the data released by the government the Indian economy expanded at the weakest pace in more than two years in the third quarter of the current fiscal year at 6.1% versus 6.9% in Q2, because of  humid inflation, monetary tightening by the RBI and a decline in domestic demand amid global economic slowdown. However shares of ONGC retained its top position on buyers' radar on the back of auction of its equity shares on BSE today. Government has fixed floor price at Rs 290 a share, while its current market price stands at Rs 298, up 5%. On sectoral front, all were trading in green except some banking stocks. On the global front, Asian stocks hit a seven-month high while the euro and commodity currencies held their ground on Wednesday on hopes a fresh cash injection by the European Central Bank. Back home, the market breadth favoring the positive trend; there were 1,575 shares on the gaining side against 932 shares on the losing side while 98 shares remained unchanged.

The BSE Sensex is currently trading at 17,873.07, up by 141.95 points or 0.80%. The index has touched a high and a low of 18,001.35 and 17,815.91 respectively. There were 23 stocks advancing against just 7 declines on the index.

The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices rose by 0.91% and 0.79% respectively.

The top gaining sectoral indices on the BSE were Oil and Gas up by 2.75%, PSU up by 1.93%, Realty up by 1.57%, CD up by 1.12% and Power up by 1.04%. While, Bankex down by 0.06% was the lone loser on the index.

The top gainers on the Sensex were ONGC up by 4.74%, RIL up by 3.01%, Bajaj Auto up by 2.79%, Tata Steel up by 1.94% and Tata Power up by 1.83%.

On the flip side, L&T down by 0.84%, HDFC Bank down by 0.80%, Tata Motors down by 0.42%, HDFC down by 0.27% and ICICI Bank down by 0.23% were the top losers on the Sensex.

Meanwhile, differences have risen between the Power Ministry and the Commerce Ministry over the hike in duties on power equipment imports. The Commerce Department has opposed power ministry's attempt to protect existing ultra mega power projects (UMPPs) from the proposed duty hike on imported power equipment, and said the higher duties should be imposed on all imports from the day the Cabinet approves the proposal.

The power ministry has proposed a 5% basic customs duty on power equipment imports, a 10% countervailing duty and a 4% value added tax in the Cabinet note to shield domestic manufacturers like BHEL, L&T and Bharat Forge against cheap imports from China. The Commerce Department, however wants a 15% basic customs duty on all power equipment imports without any exemptions. The commerce secretary had pointed out that it is the basic customs duty that has to be raised to give protection against imports as against raising the CVD and VAT as that would mean higher local duties for domestic producers as well.

Currently, equipment imported for projects of less than 1,000 MW capacity attract 5% customs duty while those above that enjoy levy exemption. Private power producers, including Reliance and Tata Power on their part, have written to Prime Minister Manmohan Singh saying that imposition of higher duty on imported equipment would result in increased electricity tariffs and would hurt the sector. The letter noted that imported power gear comes on faster delivery schedules since domestic manufacturers are burdened with a huge order book. BHEL's order book is 3.7 times its turnover while it is 7.1 times for L&T.

Further as per the Association of Power Producers (APP), imports of equipment are supported by export credit agencies, resulting in competitive cost of financing. There was also reliability of equipment since international companies were more experienced in making large-sized super critical units. APP has further noted that there has been a significant depreciation of the rupee against both the US dollar and the Chinese yuan leading to an implicit duty of 15-17% on equipment and machinery imports. 

More than 50 per cent of coal-based power capacities are based on imported equipment in the current five-year Plan (2007-12) and the trend is likely to continue in the next Plan period (2012-17). It may be noted that the domestic power sector is grappling with multiple woes including fuel scarcity, rising coal prices and environmental hurdles.

The S&P CNX Nifty is currently trading at 5,420.65, higher by 45.15 points or 0.84%. The index has touched a high and a low of 5,458.80 and 5,400.25 respectively. There were 40 stocks advancing against just 10 declines on the index.

The top gainers of the Nifty were ONGC up by 5.15%, Bajaj Auto up by 3.26%, Reliance up by 3.14%, SAIL up by 2.71% and IDFC up by 2.25%.

On the flip side, HDFC Bank down by 1.21%, L&T down by 0.90%, Dr Reddy’s Lab down by 0.85%, Siemens down by 0.75% and Tata Motors down by 0.59% were the top losers on the index.

Most of the Asian equity indices were trading in the green; Hang Seng gained 0.16%, Jakarta surged 1.48%, KLSE Composite spurts 0.76%, Nikkei 225 added 0.01%, Straits Times expanded by 0.64%, Seoul Composite registered gains of 1.33% and Taiwan Weighted was up by 2.04% 

On the flip side, Shanghai Composite down by 0.66% was the lone loser amongst the Asian pack.