Sensex gradually gains strength; Cap Goods, IT lead

Indian stock markets have managed to capitalize on the momentum and the benchmark equity indices are trading at the session’s high levels in the Wednesday afternoon trades amid tentative improvement in market participants’ risk appetite. The markets traded on a lackluster note as the key indices kept oscillating in a tight range around the previous closing levels for most part of the morning session. However, after breaking the psychological 5,300 (Nifty) and 17,400 (Sensex) levels in early afternoon trades, the frontline indices have kept gaining traction. Hefty buying interests was evident in the beaten down Capital Goods counter which surged over one and half a percent after heavyweights like L&T and BHEL gained around two percent each. The IT sector stocks too kept buzzing in the session amid reports of a merger between two major companies viz. Tech Mahindra and Satyam Computer Services. The rate sensitive Realty and Banking pockets too moved higher supporting the local bourses. However, the Metal, Oil and Gas and Consumer Durables indices which traded with a negative bias too managed to prune their losses in the session. Besides, Indian bourses failed to get any significant triggers from global peers as most Asian equity indices traded on a cautious note with a negative bias as market participants remained largely influenced by overnight decline on Wall Street where shares slipped lower amid growing concerns over slowing growth in world’s second largest economy - China. While the European futures indicated that the markets there would open on a positive note amid reports that Greece’s prime minister won parliamentary approval for an international bailout.

Moreover, the broader markets traded on firmer note with good gains of close to a percent and outperformed their larger peers. The bourses gained on good volumes of over Rs 0.60 lakh crore while market breadth on BSE was in favor of advances in the ratio of 1431:1131 while 111 scrips remained unchanged.

The BSE Sensex is currently trading at 17,401.68 up by 85.50 points or 0.49% after trading as high as 17,412.91 and as low as 17,275.88. There were 17 stocks advancing against 13 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index gained 0.84% and Small cap added 0.70%.

On the BSE sectoral space, Capital Goods up by 1.53%, Realty up 1.48%, IT up 1.20%, TECk up 1.15% and Bankex up 0.81% were the major gainers, while Metal down 0.32%, Oil & Gas down 0.26%, Consumer Durables down 0.25% were the only losers in the space.

TCS up 2.83%, HUL up 2.05%, L&T up 2.05%, DLF up 1.94% and BHEL up 1.73%, were the major gainers on the Sensex, while Jindal Steel down 1.99%, Hindalco down 1.91%, Maruti Suzuki down 1.15%, ITC down 0.81% and Sterlite down 0.70% were the major losers in the index.

Meanwhile, initiatives taken in the budget to improve growth in agriculture sector combined with the slow pace of growth could help contain inflation, as per Deputy Governor of RBI, Subir Gokarn. As per Gokarn’s estimates, food prices are expected to ease in the coming months due to good monsoon.

Also initiatives announced by the Finance Minister in the budget to step up agricultural productivity would bring improvement in the growth of the sector, helping the food prices to soften. Moreover even though rising crude oil prices will exert inflationary pressures, the weakening in demand due to subdued growth in GDP is likely to keep the inflation numbers low.

Commenting on the new consumer price index (CPI), Gokarn stated that it is too early to make it a benchmark for policy formulation. However he believes that the index does show promise as the benchmark for inflation management. Gokarn also stated that full capital account convertibility would take place in the years to come.

The country has seen a recent surge in prices and the inflation even though increasing at a slower pace, is around the 7% mark, much higher than the RBI comfort level of 5-6%. With observations of inflation expecting to moderate coming from Subir Gokarn, someone who handles the monetary policy of the RBI, expectations of an interest rate cut have been strengthened.

The S&P CNX Nifty is currently trading at 5,296.85, higher by 22 points or 0.42% after trading as high as 5,303.45 and as low as 5,256.00. There were 31 stocks advancing against 19 declines on the index.

The top gainers on the Nifty were JP Associates up 3.13%, TCS up 2.92%, Ambuja Cement up 2.69%, ACC up 2.35%, Ranbaxy up 2.04%.

Jindal Steel down 2.32%, Cairn down 1.86%, Hindalco down 1.59%, Maruti down 1.28%, Sterlite down 1.01% were the major losers on the index.

In the Asian space, Hang Seng declined 0.19%, Jakarta Composite eased 0.01% and Nikkei 225 fell 0.55% Straits Times dropped 0.32% and Seoul Composite shed 0.73%.

On the other hand, Shanghai Composite gained 0.10%, KLSE Composite added 0.16% and Taiwan Weighted rose 0.12%.