Gains at Dalal Street magnify; Nifty oscillates above 5300 level

Gains at Dalal Street have just magnified as benchmark equity indices after resuming the trade on awe-inspiring note, rushed up to accumulate triple digit gains. Signs of Greece moving closer to avert a default, besides bolstering global risk appetite; also saw local investor’s adding up their positions in early deals. However, investors also staging confidence were seen taking position ahead of the next week’s key event such as that of RBI’s mid-quarterly policy review on March 15, 2012 and Union Budget 2012-13 on March 16, 2012.

On the global front, after positive close of Wall Street overnight, Asian stocks firmed up the sentiment for Indian equity markets. Asian pacific markets rose on strong indications that enough private investors had signed up to a critical write down on their Greek debt, paving the way for a second bailout for Athens. Meanwhile, the US future indices were showing an uptick in the screen trade.

Although optimism was scattered across BSE Sectoral chart, but stocks from Metal, Capital Goods, Consumer Durable were up with prominent gains. The 30 share barometer index-Sensex- after opening above the 17300 level, added a good over a century of points and is currently trading above the psychological 17400 level. Similarly, 50 share index- Nifty-also snapping a three day’s losing streak oscillating above 5300 level. The broader indices too had enticed significant traction.

The BSE Sensex is currently trading at 17,478.37, up by 332.85 points or 1.94%. The index has touched a high and a low of 17,478.37 and 17,325.82 respectively.  There were 29 stocks advancing against only 1 decline on the index.

The broader indices too added gains; the BSE Mid cap and Small cap indices rose 1.77% and 1.75% respectively.

The top gaining sectoral indices on the BSE were, Metal up by 3.55%, CG up by 3.25%, CD up by 3.11%, Bankex up by 2.84% and Realty up by 2.35%.

The top gainers on the Sensex were Jindal Steel up by 5.73%, ICICI Bank up by 4.74%, L&T up by 4.38%, Tata Steel up by 4.11% and Sterlite Industries up by 3.89%. While, HUL down by 0.47% remained the lone loser on the Sensex.

Meanwhile, as per Moody's Investors Service report - ‘India’s Fiscal Deficits: What past trends portend for the future,’ India's wide and persistent fiscal deficits could eventually compromise the country's macro-economic profile and that while the annual budget statement can set fiscal reform in motion, lasting fiscal relief will take persistent policy efforts over several years.

The new report published by Moody’s notes that while the Indian economy has tripled in size over the last decade, the government's budget deficit to GDP ratio has remained close to levels of 10 years ago, and is far higher than that of similarly rated countries. This has been because a large part of the tax revenue comes from the manufacturing side and the services sector, which forms the majority of GDP, is still relatively untapped. Also the dependence on corporates for tax collection makes the revenues more susceptible to GDP changes.

Though the proposal to tax large number of services in the upcoming budget is a step in the right direction, it will take some time before the service tax's contribution to government revenues is equivalent to the contribution of services to overall GDP. 

Moreover, the addition of long-term claims on the government's limited resources via policy initiatives such as employment guarantees and the Food Security Act have added to its expenditures. Despite efforts to reduce fuel and fertilizer subsidies since 2010, the government's subsidy bill has risen due to exchange rate depreciation and global commodity price movements.

Such loose fiscal policy nourishes inflation, and persistent inflation, in turn, erodes the value of accumulated savings, raises capital costs, and discourages investment. Hence the benefits of growth and increased savings and investments can eventually be eroded by a weak fiscal policy. Considering the scenario, Moody has given India Baa3 rating.

The S&P CNX Nifty is currently trading at 5,317.85, higher by 97.40 points or 1.87%. The index has touched a high and a low of 5,321.90 and 5,291.60 respectively.  There were 47 stocks advancing against just 3 declines on the index.

The top gainers of the Nifty were Jindal Steel up by 5.25%, Cairn India up by 4.62%, TATA Steel up by 4.53%, IDFC up by 4.51% and ICICI Bank up by 4.30%.On the flip side, BPCL down by 0.99%, RPower down by 0.79% and HUL down by 0.57% remained the only losers on the index.

All the Asian equity indices were trading in the green; Shanghai Composite gained 0.46%, Hang Seng surged 1.41%, Jakarta Composite rose 0.62%, KLSE Composite added 0.11%, Nikkei 225 soared by 2.35%, Straits Times registered gains of 0.53%, Seoul Composite shot up by 1.04% and Taiwan Weighted expanded by 0.48%.