Benchmarks hold modest gains after recovering from day’s low

Recovering from day’s low, benchmark equity indices were holding their head above water and trading up with modest gains of around 0.06-0.09%, on emergence of buying by funds and retail investors in select stocks ahead of the expiry of January derivative contracts today. Sentiments got some support with the report that business sentiment among Indian companies rose for the first time in three months in January, largely supported by the first increase in new orders since last June. The  MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, rose from 60.7 in December to 61.8 in January -- the highest since October 2015 as domestic orders strengthened. However, depreciation in Indian rupee, weighed on sentiment. Extending losses for the third straight session, the rupee weakened by another 14 paise to a fresh 29 month low of 68.19 against the dollar in early trade. Investors remained cautious on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 366.93 crore on January 27, 2016.

On the global front, Asian market trading mostly in green as investors dipped their toes back into equities and demand for safe-haven assets such as the yen and sovereign bonds faded. On the other hand, US stocks ended over 1 percent lower after the US Federal Reserve kept interest rates unchanged citing growth concerns and said that it was ‘closely monitoring’ global economic and financial developments. The central bank's decision was widely expected after a month-long plunge in US and world equities raised concerns that an abrupt global slowdown could act as a drag on US economic growth.

Back home, stocks from Power, FMCG and IT counters were supporting the markets’ uptrend, while those from Capital Goods, Realty and Metal counters were adding to the underlying cautious undertone. In scrip specific development, shares of Power Grid Corporation of India have surged after reporting a 31% jump in its standalone net profit at Rs 1,613.12 crore for the quarter ended December 31, 2015 on account of increase in revenue from transmission business. Furthermore, SKS Microfinance has gained after the company posted nearly twofold increase in net profit at Rs 79,4 crore for the third quarter ended December 31, 2015.

The market breadth on BSE was positive, out of 2152 stocks traded, 1166 stocks advanced, while 872 stocks declined on the BSE. 

The BSE Sensex is currently trading at 24506.90, up by 14.51 points or 0.06% after trading in a range of 24400.52 and 24529.64. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.04%, while Small cap index up by 0.25%.

The top gaining sectoral indices on the BSE were Power up by 1.09%, FMCG up by 0.88%, IT up by 0.28%, PSU up by 0.07% and Auto up by 0.05%, while Capital Goods down by 0.57%, Realty down by 0.53%, Metal down by 0.21%, Bankex down by 0.17% and Oil & Gas down by 0.13% were the top losing indices on BSE.

The top gainers on the Sensex were Dr. Reddys Lab up by 1.69%, Hindustan Unilever up by 1.53%, Sun Pharma up by 1.49%, ITC up by 1.12% and TCS up by 1.05%. On the flip side, Bharti Airtel down by 1.49%, GAIL India down by 1.19%, ICICI Bank down by 1.18%, HDFC down by 1.17% and Tata Steel down by 1.15% were the top losers.

Meanwhile, in a bid to revive public-private-partnership (PPP) mode and attract more investments in roads projects, the government has approved hybrid annuity model for building roads. The decision was taken by the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi. The main objective of the approval is to revive highway projects in the country by making one more mode of delivery of highway projects.

The hybrid annuity model is a mix of engineering, procurement and construction (EPC) and build-operate-transfer (BOT) formats, with the government and the private companies sharing the total project cost in the ratio of 40:60 respectively. Under this model, the government will provide 40 per cent of the project cost to the developer to start work, while the remaining investment has to be made by the developer. Adopting such a model for projects not found viable on BOT (Toll) mode, shall be more effective in terms of maximizing the quantum of kilometers implemented within the available financial resources of the government.

The new model will increase financial comfort for all the major stakeholders in the PPP arrangement, namely the authority, the lender and the developer, resulting in revival of the sector through renewed interest of private developers/investors in highway projects and this will bring relief thereby to travelers in the area of a respective project. The model further will facilitate upliftment of the socio-economic condition of the entire nation due to increased connectivity across the length and breadth of the country leading to enhanced economic activity.

Under the new model, projects will be financed only to a certain extent by the private investor. This investment will be recovered through annuity payments by the government over a specified period. The balance percentage of the project cost is provided by the government during the construction period. In addition, the new model will ease the burden on the government coffers, as it will reduce dependence on the public funded EPC mode for development of highway projects.Further, the private partner will continue to bear the construction and maintenance risks as in BOT (Toll) projects, it is required only to partly bear financing risk. The developer is insulated from revenue/traffic risk and the inflation risk, which are not within its control.

The CNX Nifty is currently trading at 7444.45, up by 6.70 points or 0.09% after trading in a range of 7409.60 and 7447.35. There were 28 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 3.54%, Cairn India up by 2.15%, Vedanta up by 2.12%, Zee Entertainment up by 1.99% and Hindustan Unilever up by 1.57%. On the flip side, Bharti Airtel down by 1.48%, ICICI Bank down by 1.33%, HDFC down by 1.31%, Tata Steel down by 1.24% and Larsen & Toubro down by 1.18% were the top losers.

Asian markets were trading mostly in green, KOSPI Index was up by 0.16%, FTSE Bursa Malaysia KLCI up by 0.27%, Jakarta Composite up by 0.08%, Hang Seng up by 0.18%, Nikkei 225 up by 0.66% and Taiwan Weighted up by 0.26%. On the flip side, Shanghai Composite was down by 0.48%.