Benchmarks add gains of over half a percent on reform hopes

Prolonging their northward journey for second day in a row, domestic bourses garnered over half a percent on Thursday with benchmarks snapping the session near their crucial 5,250 (Nifty) and 17,300 (Sensex) levels. Though, the major indices traded in a tight band throughout the day but the sentiment remained upbeat on expectations of some reform-oriented measures from the Government after the completion of Presidential election this week. A hike in diesel prices and revival of the FDI in multi-brand retail are among the few major reforms that the markets are looking forward from the Prime Minister and his team. Strengthening rupee too added momentum and traded firmly during the session on higher dollar selling by foreign banks and exporters.

The optimism got bolstered by rally in PSU oil marketing companies which rose on buzz that apart from hiking diesel prices, the government is planning to quickly put in place a mechanism to cap the number of subsidized LPG cylinders for a household to 6-8 per year while, aviation stocks also took off higher after Union Commerce minister Anand Sharma said that the government plans to soon allow foreign carriers to invest up to 49% in Indian airlines. Bucking the trend, major telecom stocks like Bharti Airtel, Idea Cellular and RCom tumbled by 1.5-4 percent as the Empowered Group of Ministers (EGoM) on telecom deferred a decision, till later this week, on the contentious issue of a reserve price for the re-auction of 2G spectrum.

Rally in domestic benchmarks also got supported by positive global cues. The European counters rose to 11-week highs on Thursday as strong US corporate profits lifted sentiment, while signs of stress in the European debt market kept the single currency trading just above a two-year low. Fed chairman Ben Bernanke reiterated the central bank’s resolve to breathe more life into the US economy if things get worse. Moreover, Asian shares also ended higher as enhanced corporate profits from US bellwethers relieved worries of a slowdown in earnings.

Back home, the strength to the bourses were mainly provided by IT space as it remained the top gainer on sectoral front and stocks like Infosys, Wipro, TCS, HCL Technologies, MphasiS, Tech Mahindra and Oracle Financial Services Software edged higher as US-based IBM reported better-than-expected earnings after trading hours in the US, while among Capital Goods segment, BHEL and L&T surged between 1-3% on reports the cabinet will discuss import duties in power equipments however, the Auto index remained the major loser, led by India’s largest car maker by sales Maruti Suzuki India, which lost close to 5% after the company stopped production at its Manesar, Haryana factory, after labor unrest resulted in the death of one person and at least 40 people being injured.

The gains also remained capped as monsoon concern still lingered for the investors. India’s monsoon rains continue to cause concern, with sowing of pulses and rice behind schedule and rainfall still 22% below average for the year. While, disappointing earnings reported by the Hero Motocorp, DR Reddy’S Laboratories and Kotak Mahindra Bank too dampened the sentiments a bit.

The NSE’s 50-share broadly followed index Nifty, surged by over twenty five points to settle near its psychological 5,250 support level moreover, Bombay Stock Exchange’s Sensitive Index -Sensex- added over ninety points to finish well above the psychological 17,250 mark. The broader indices also managed to end above their crucial levels. Moreover, the market breadth was in favour of advances, as there were 1,514 shares on the gaining side against 1,299 shares on the losing side while 136 shares remained unchanged.

The BSE Sensex gained 93.84 points or 0.55% to settle at 17,278.85, while the S&P CNX Nifty rose by 26.40 points or 0.51% to close at 5,242.70.

The BSE Sensex touched a high and a low of 17,318.93 and 17,244.76 respectively. The BSE Mid cap and Small cap index ended higher by 0.12% and 0.37% respectively.

Infosys up 3.08%, Sterlite Inds up 2.42%, Tata Power up 2.34, BHEL up 2.18% and Bajaj Auto up 1.76% were major gainers on the Sensex, while Maruti Suzuki down 8.74%, Bharti Airtel down 2.34%, Hero MotoCorp down 1.37%, SBI down 1.29% and Dr Reddys Lab down 0.98% were top losers on the index.

The top gainers on the BSE sectoral space were IT up 1.75%, Consumer Durables (CD) up 1.38%, Oil & Gas up 1.24, Power up 0.88% and Metal up 0.88%, while Auto down 0.47% and FMCG down 0.02% were top losers on the BSE sectoral space. 

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) is mulling a proposal to hike the sugarcane prices, which the mills are required to pay to farmers by 17% to Rs 170 per quintal for 2012-13 marketing year (October-September) period. CCEA will be taking the decision on it pursuant to Food Ministry accepting CACP’s recommendation for the same.

The Government receives advice from a statutory body the Commission for Agricultural Costs and Prices (CACP) on farm pricing policy front. For the 2012-13 marketing year, CACP has recommended a 17.25% hike in the FRP on account of rising input production costs. The CCEA in its meeting scheduled is considering of increasing Fair and Remunerative Price (FRP) of sugarcane for 2012-13. The Government by and large accepts the cane price recommended by the CACP. The FRP is the minimum price that sugarcane farmers are legally guaranteed and for the ongoing marketing year it stands at Rs 145 per quintal. The FRP is the sugarcane price fixed by the Centre however some states like Uttar Pradesh and Tamil Nadu follow the policy of state advisory price (SAP), where they declare their own rate.

However, the SAP is higher than the FRP. In Uttar Pradesh, compared to Centre's FRP of Rs 145 a quintal the SAP for the current year stands at Rs 250 per quintal. The FRP is linked to a basic recovery rate of 9.5%, subject to a premium of Rs 1.46 for every 0.1% point increase in recovery above 9.5%. The recovery rate is the quantity of sugar that is produced from the crushed cane.

Due to bumper production of sugarcane, India, the world's second largest sugar producer, is currently exporting the sweetener which stood at 357.66 million tonnes in 2011-12.

The S&P CNX Nifty touched a high and low 5,257.75 and 5,233.15 respectively.

The top gainers on the Nifty were Cairn up 3.02%, BPCL up 2.99%, Infosys up 2.80%, IDFC up 2.56% and BHEL up by 2.47%. On the flipside, Maruti down 9.19%, Bank of Baroda down 3.05%, Kotak Bank down 2.96%, Bharti Airtel down 2.56% and SBI down 1.28% were the top losers on the index. 

The European markets were trading in green, as France's CAC 40 up 0.74%, Germany's DAX up 1.14% and United Kingdom’s FTSE 100 up 0.32%.

Asian shares ended higher on Thursday as enhanced corporate profits from U.S. bellwethers relieved worries of a slowdown in earnings, mainly for the besieged tech sector. However Korea's KOSPI rebounded sharply from losses in the previous session nearly despite a fall in banking shares that were hit by news that local banks were being probed by authorities investigating how a key interest rate has been set. Meanwhile Japan's Nikkei erased some of its gains as investors were cautious that a firmer yen would pressure exporters such as car makers and electronics manufacturers. Shanghai shares ended higher for the third consecutive day, boosted by strength in China's two biggest insurers as bourse volume jumped to the second-highest since June 4.