Markets negotiate a positive close amid extreme volatility

Indian frontline equity indices snapped a volatile session on a positive note, settling with gains of around one third of a percent. Despite trading with good gains through the late morning - early afternoon period the bourses failed to build on the impetus as domestic markets got influenced by the unenthusiastic cues from the European markets.

The enthusiasm appeared tempered also because of the spike up in international crude oil prices that kept optimism under check. The rally in oil prices would certainly have spiraling effect on the Indian economy as the nation imports more than 70% of the commodity for domestic requirements, thus re-fuelling the inflationary concerns.

Investors also lacked confidence to open fresh long positions as ONGC auction debacle battered divestment hopes and underscored the vulnerable government’s wayward policies which might spoil the country's economic attractiveness.

In the interim, hefty buying in heavyweights from banking, Healthcare and capital goods counters capped the downside risks for the benchmark indices. The BSE’s Bankex index spurted about one and half a percent, thanks to hefty gains in bellwethers like ICICI Bank, SBI, Axis Bank, while the surge in L&T pushed the Capital Goods index over half a percent higher.

However, the high beta Realty index got brutally pounded by over two percent after heavyweight DLF continued to reel under immense selling pressure as reports flagged concerns about the company's financial health. Meanwhile, automobile and cement sector stocks kept buzzing in the session as major companies reported their monthly sales numbers.

On the global front, apart from the overnight gains in US markets on the back of encouraging set of economic reports including the US jobs data, markets in Asia too moved higher as HSBC surveys underscored that manufacturing activity in the region remained resilient. European stock futures though traded on a flat note with a positive bias as investors cheered reports that the region’s leaders agreed to speed up payment to the permanent bailout fund.

Back home, the NSE’s 50-share broadly followed index Nifty, gained around one third of a percent and settled above the psychological 5,350 support level while Bombay Stock Exchange’s Sensitive Index - Sensex gained only fifty three points to close below the psychological 17,650 mark.

Moreover, the broader markets after showing some resilience slipped into the negative terrain and settled with marginal losses, underperforming their larger peers. The markets rose on good volumes while the turnover for NSE F&O segment also remained on the lower side as compared to that on Thursday. The market breadth was marginally tilted in favor of declines as there were 1411 shares on the gaining side against 1485 shares on the losing side while 127 shares remained unchanged.

Finally, the BSE Sensex gained 52.83 points or 0.30% to settle at 17,636.80, while the S&P CNX Nifty rose by 19.60 points or 0.37% to close at 5,359.35.

The BSE Sensex touched a high and a low of 17,731.88 and 17,504.38 respectively. The BSE Mid cap and Small cap indices were down by 0.12% and 0.09% respectively.

The major gainers on the Sensex were Sun Pharma up 3.11%, Jindal Steel up 2.15%, ICICI Bank up 2.08%, L&T up 1.66% and NTPC up 1.33%, while, DLF down 5.03%, ONGC down 2.22%, Hindalco Industries down 1.86%, Bajaj Auto down 1.56% and Tata Power down 1.34% were the major losers on the index.

The top gainers on the BSE sectoral space was Bankex up 1.40%, Health Care (HC) up 0.83%, Capital goods (CG) up 0.58%, Metal up 0.16% and TECk up 0.12% while Realty down 2.39%, PSU down 0.66%, FMCG down 0.37%, Oil & Gas down 0.34% and Auto down 0.30% were the top losers on the BSE sectoral space.

Meanwhile, the government in its efforts to bridge the widening fiscal deficit has given its nod to the Central Public Sector Enterprises (CPSEs) to go for buyback of shares. The decision opens up another route for the government to disinvest stake even if the market sentiment is poor.

The decision could put pressure on cash rich PSUs like Coal India and NMDC which do not have big investments lined up in the near future, to buy back their shares. The government could nudge them to either buy back shares or participate in government auction, given their surplus cash position. However Minister of heavy industries, Praful Patel has clarified that the decision rests with the companies.

Buy back of equities will make the companies part with its reserves and surpluses. Under the existing regulations, a company will have to make provisions to buy back not just for one particular stakeholder but for all. Secondly it will have to extinguish all the shares bought back within a time limit.

As per the government, opting for buyback and auction routes does not mean that initial public offerings and follow-on public offers will not be used as a route for disinvestment. In fact the process for stake sale in a few other companies, including Oil India, is likely to start soon.

The government had so far been selling stakes in state-run companies through public offers in keeping with its stated objective of benefiting the retail investors, but volatile and uncertain market had made follow-on offers difficult. The government had set a disinvestment target of Rs 40,000 for this fiscal. However it has garnered Rs 1,145 crore from stake sale in Power Finance Corporation and its stake sale in ONGC through the auction route yesterday has fetched it Rs 12,666 crore after Life Insurance Corporation (LIC) stepped in to buy a majority of its shares.

The S&P CNX Nifty touched a high and low of 5,392.55 and 5,315.05 respectively.

The top gainers on the Nifty were Sun Pharma up 3.23%, IDFC up 2.70%, Jindal Steel up 2.68%, Ambuja Cement up 2.13% and ICICI Bank up 1.99%.

On the flip side, DLF down 5.07%, ONGC down 2.43%, Siemens down 2.17%, Hindalco down 1.86% and Bajaj Auto down 1.72% were the top losers on the index.

The European markets were trading mixed as France's CAC 40 up 0.13%, Britain’s FTSE 100 down 0.11% and Germany's DAX up by 0.04%.

Stock indices in Asia rallied on last trading day of the week tracking positive global cues. Positive readings for US jobless claims and upbeat sales for US retailers on Thursday helped the regional mood though some investors remained cautious after yesterday’s oil price spike and soft US manufacturing data. Crude oil futures jumped to a fresh nine-month high of $110.55 a barrel on reports that an explosion destroyed an oil pipeline in Saudi Arabia. Nymex April oil futures were recently down 23 cents at $108.62 a barrel.

Meanwhile, Chinese benchmark Shanghai Composite ended up 1.40 percent, supported by banks and developers after China’s bank regulator said state-backed banks will lend more to qualified developers and speed up loan approvals to boost private sector housing. Moreover, Japanese Nikkei average hit a fresh seven-month closing high on Friday after a European Central Bank (ECB) liquidity operation this week underpinned market sentiment, but it failed to hold above 9,800 for a third day as market players warned of a correction.