Short covering keeps Sensex higher in noon trades

Stock markets in India continued to trade in the positive territory in Tuesday afternoon session as investors continued to cover the hefty short positions that got build in the previous session. However, the psychological 5,400 (Nifty) and 17,700 (Sensex) levels proved as difficult nuts to crack for the frontline indices which drifted lower in late morning trades amid the looming political uncertainty. Market participants grew increasingly worried that the ideal outcome of Samajwadi Party (SP) - Congress alliance in Uttar Pradesh assembly elections is mostly unlikely since the SP is emerging as the single largest party in the state, falling short of a clear majority. Investors took some profits off the table since Congress’ poor showing in UP elections may not prove fruitful for the government at the centre as it may fail to revive stalled reforms. Nevertheless, the local indices managed to comprehensively outperform all the Asian peers in the session which remained in a pessimistic mood amid lingering concerns over debt crisis in Europe, while the weaker than expected economic reports like the shrinking euro-area services output and declining US factory orders too played spoil sport. While European stock futures too are indicating a lower opening for the markets there on fresh jitters of a recession in Europe and a slowdown in world’s second largest Chinese economy. Back home, on the BSE sectoral space largely across the board buying was evident with the high beta Realty index leading with over 3% gains followed by the Consumer Goods and Capital Goods counters. On the flipside, decline in index heavyweight Reliance Industries dragged the Oil & Gas index which was the only index which traded in the red zone with marginal losses.

Moreover, the broader markets too traded on an optimistic note with the Midcap index outperforming its larger peers by a small margin. The bourses climbed on good volumes while market breadth on BSE was in favor of advances in the ratio of 1447:1003 while 106 scrips remained unchanged.

The BSE Sensex is currently trading at 17,497.66 up by 134.79 points or 0.78% after trading as high as 17,691.96 and as low as 17,185.24. There were 20 stocks advancing against 10 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index surged 1% and Small cap advanced 0.55%.

On the BSE sectoral space, Realty up 3.31%, Consumer Durables up 2.25%, Capital Goods up 1.55%, Bankex up 1.44% and IT 1.24% were the major gainers, while Oil & Gas down 0.11% was the only loser in the space.

DLF up 4.71%, SBI up 3.10%, Infosys up 2.18%, BHEL up 2% and Maruti Suzuki up 1.83% were the major gainers on the Sensex, while Tata Power down 1.24%, Hindalco down 1%, Sterlite down 0.96%, Cipla down 0.91% and Bharti Airtel down 0.56% were the major losers in the index.

Meanwhile, an infrastructure development fund (IDF) has been set up jointly by four banking and financial giants namely ICICI, Bank of Baroda, Citicorp Finance India (Citigroup) and Life Insurance Corporation of India (LIC). The IDF which has been set up as a non-banking finance company (NBFC) is aimed at catering to the special long term needs of the infrastructure sector.

The IDF will have an equity capital of Rs 300 crores with the option of raising an equal amount of tier-II capital through instruments such as bonds. While serving as a catalyst to channelise domestic savings and global liquidity, the fund will attempt to attract capital from local and international investors. It will invest in projects which are already under implementation and have completed at least one year of operations.

ICICI Bank (together with a wholly-owned subsidiary) will hold 31%, while Bank of Baroda, Citicorp and LIC are to take 30%, 29% and 10% respectively in the fund. Taking into account Tier-II capital and the ability to borrow, it can raise about $2 billion. The fund will seek to raise debt capital from domestic and foreign resources in the form of long-term pension, insurance funds and sovereign wealth funds. It is expected to start operations in FY’13.

As per the FM, India needs investments to the tune of $1 trillion to meet its infrastructure requirements in the next five years. 50% of this is expected to come from the private sector in terms of public private partnership (PPP). In the last budget, Mukherjee had announced the reduction of withholding tax on interest payments on borrowings by the IDFs from 20% to 5% to attract offshore funds into IDFs.

It has been felt that banks alone cannot meet the requirements of the infrastructure sector given the long gestation periods Involved. Hence an appropriate body needs to be created for the same. An announcement to create IDFs was made by the Finance Minister, Pranab Mukherjee in his last budget in February 2011 and the framework for the same was announced by the finance ministry in June 2011. RBI issued the regulations for IDFs to be set up as a NBFC in November, 2011 while SEBI issued regulations governing an IDF structured as a mutual fund in August, 2011.

The S&P CNX Nifty is currently trading at 5,325.35, higher by 45 points or 0.85% after trading as high as 5,382.05 and as low as 5,222.70. There were 37 stocks advancing against 13 declines on the index.

The top gainers on the Nifty were DLF up 4.97%, Siemens up 3.47%, IDFC up 3.42%, SBI up 3.03% and BHEL up 2.70%.

Tata Power down 1.63%, Hindalco down 1.18%, Cipla down 1.04%, Sterlite down 0.87% and Ambuja Cement down 0.83% were the major losers on the index.

In the Asian space, Shanghai Composite plunged 1.36%, Hang Seng plummeted 1.56%, Jakarta Composite sank 1%, KLSE Composite shed 0.35%, Nikkei 225 declined 0.63%, Straits Times got pummeled by 1.53%, Seoul Composite shrank 0.78% and Taiwan Weighted slumped 0.83%.