Equity markets recoup losses to trade in green

Indian equities trim losses to continue its firm trade in green hovering near the highest point of the day in the late afternoon session. The pessimistic global sentiments spilled over local markets in early trades as markets participants largely remained influenced by the disappointing overnight close in US markets which registered their biggest one day fall in the year 2012 on Tuesday amid concerns about European debt crisis resurfacing after borrowing costs for Euro-zone nations rose ahead of the start of first quarter earnings season. However, sentiments in domestic bourses improved following the European markets opening. Traders were seen piling up position in Bankex, Health Care and PSU sector while selling was witnessed in Metal, Oil & Gas and Capital Goods sector. Further, the next major trigger for the market will also be judged by the inflation numbers. On Friday, April 13, 2012, the government will unveil data on inflation based on the wholesale price index (WPI) for March 2012. Metal stocks declined across the board as LMEX, a gauge of six metals traded on the London Metal Exchange dropped on Tuesday, April 10, 2012. In the scrip specific development, RIL is seen trading weak in red on reports that market men are expecting weak Q4 earnings due to falling refining margins and reduced output from its KG-D6 gas blocks. Shares of cement firms Ambuja Cements, Madras Cement, Jaiprakash Associates, India Cements, JK Cement, UltraTech Cement and Prism Cement were trading weak in red on reports that Competition Commission of India, or CCI is likely to come out with its report on cement cartelization by Thursday, April 12, 2012. Shares of aviation firms Jet Airways, KingFisher Airline and SpieJet were trading firm on reports that cabinet may soon take a decision on a proposal to allow foreign airlines to pick up stake in domestic carriers.

On the global front, Asian markets were trading on a mix note while the European markets were trading in green on optimistic note. On the home turf, the NSE Nifty and BSE Sensex were trading below their psychological 5,250 and 17,400 levels respectively. The market breadth on BSE was in favor of advances in the ratio of 1350:1253 while 148 scrips remained unchanged.

The BSE Sensex is currently trading at 17,307.74 up by 63.90 points or 0.37% after trading as high as 17,307.74 and as low as 17,075.89. There were 21 stocks advancing against 9 declines on the index.

The broader indices were trading on positive note; the BSE Mid cap index gain 0.09% while Small cap added 0.41%.

On the BSE sectoral space, Bankex up 0.99%, Health Care up 0.87%, PSU up 0.61%, IT up 0.60% and FMCG up 0.57% were the top gainers, while Metal down 0.51%, Oil & Gas down 0.30%, Capital Goods down 0.13% and Consumer Durables down 0.09% were the only laggards in the space.

NTPC up 1.42%, Sun Pharma up 1.23%, Infosys up 1.18%, ICICI Bank up 1.15% and SBI up 1.15% were the major gainers on the Sensex, while Jindal Steel down 1.76%, Sterlite Industries down 1.25%, RIL down 0.93%, Bharti Airtel down 0.83% and BHEL down 0.68% were the major losers in the index.

Meanwhile, the Petroleum and Natural Gas Regulatory Board (PNGRB) has directed a cut of 64% in the gas tariffs on sale of piped cooking gas to households and CNG to automobiles in the national capital. According to experts, the order will lead to a fall of 10% and 20% in the prices of PNG and CNG respectively. It will also directly impact Indraprastha Gas Ltd (IGL) which is a monopoly supplier in the NCR region.

IGL currently charges a pipeline distribution tariff of Rs. 104.5 per million British thermal units (mBtu) and a compression charge of Rs. 6.66 per kg of gas transported. As per the order, the tariffs have to be reduced to a pipeline distribution tariff of Rs. 38.58 per mBtu and compression charges of Rs. 2.75 per kg. Also, IGL is expected to refund the consumers the excess amount charged since 2008.

The order which is likely to put considerable strain on the finances of the company has been appealed against in the high court. IGL in its defense has stated that it has not been given any opportunity of a personal hearing before passing of the order, despite repeated requests. Hence it has been denied the principle of natural justice. It has also challenged the legality of PNGRB’s power to fix rates. However the regulator is of the opinion the decision was based on technical data and that it had been seeking data from IGL for a while now.

IGL is jointly promoted by state-owned GAIL (India) and Bharat Petroleum Corp (BPCL), which together own 45% of the company. GAIL is the biggest gas distributor in India. As per the new tariffs it is expected that IGL could struggle to make even normal gains on the capital it has invested in the business Also the refund could be in excess of Rs 1,000 crore.

Post the order the shares of other gas distribution companies also fell sharply, on fears that a similar directive may be extended to them.

The S&P CNX Nifty is currently trading at 5,247.55, higher by 3.95 points or 0.08% after trading as high as 5,252.20 and as low as 5,190.80. There were 24 stocks advancing against 26 declines on the index.

The top gainers on the Nifty were Kotak Bank up 2.12%, Ranbaxy up 1.72%, Sun Pharma up 1.38%, NTPC up 1.32% and BPCL up 1.23%.

ACC down 5.31%, Ambuja Cement down 4.59%, Reliance Infrastructure down 2.57%, Jindal Steel down 2.16% and Sesa Goa down 2.15% were the major losers on the index.

In the Asian space, Hang Seng plunged 1.06%, Jakarta Composite declined 0.62%, Nikkei 225 sank 0.83%, Straits Times plummeted 0.98%. On the flipside Shanghai Composite gained 0.13% and Taiwan Weighted up by 0.21% were the only gainers among the Asian pack.

Stock markets in Malaysia remained closed on Wednesday on account of a nationwide holiday for Installation of the Yang Di-Pertuan Agong. The South Korean markets too remained shut on account of Assembly Members Election Day.

The European markets were trading in green as France’s CAC 40 gained 0.39%, Germany’s DAX advanced 0.91% and Britain’s FTSE 100 rose 0.12%.