Local markets consolidate as traders book profit at higher levels

The key Indian equity indices, after trading jubilantly in the first half, erased almost their day’s gains, snapping the session nearly unchanged as investors booked their profit at higher levels. After slipping near intra-day’s lows in the wee hours of trade, benchmarks slug hard to wind-up in green territory by the close of the trade. Though, the Sensex came close to the 18,000 milestone while the Nifty almost touched 5,450 level in the first half. The two main Indian stock indices were up about a percent each on mounting speculation that leading global central banks may ease monetary policy to boost their economies.

The mood remained cheerful in the morning buoyed by strong FII inflows. Provisional data showing that foreign institutional investors (FIIs) remained net buyers of Indian stocks on Wednesday, August 22, 2012, boosted sentiment. Foreign institutional investors (FIIs) bought shares worth net Rs 96.63 crore from the secondary equity markets.

Software stocks supported the sentiments through the day’s trade after minutes from the US Federal Reserve showed that the central bank’s policy committee discussed a third round of quantitative easing at its last meeting. Moreover, metal space too aided the sentiments garnering over half a percent gains as global commodity futures advanced in Asia on expectations of further easing of monetary policy from US and China. Revival of monsoon rains this month too cheered the sentiments, India's monsoon rains were slightly below average in the past week, but heavy downpours in Rajasthan eased fears of a repeat of the widespread drought that gripped the country three years ago. The overall rainfall deficit has narrowed from 36% earlier to 15% in the last few days, which has pushed up sowing of rice and cotton over their normal acreage.

Global leads too remained encouraging as European counters, shrugging off purchasing managers' index (PMI) for the euro zone, traded in the positive note in early trade as an initial boost from US Federal Reserve stimulus comments. In Asia, Japan’s Nikkei average hit a three-month closing high on Thursday, reversing earlier losses as investors picked up stocks related to exports hurt by a firmer yen after the Fed signaled it is likely to launch another round of stimulus. South Korea’s won and Malaysia’s ringgit climbed the most in three weeks, while Thailand’s baht surged to a three-month high.

Back home, the rupee rose to its best level in more than one week today after the government made it easier for companies to tap overseas funds. The Centre has eased overseas borrowing rules, including allowing non-resident entities to provide some guarantees for external borrowings. However, the gains remain capped as pressure came in from oil and gas space, which lost over a percent led by index heavyweight Reliance Industries, which lost over one and half a percent due to worries about lower refining margins. The gains also remain limited after PSU oil marketing companies witnessed sell off as international crude oil prices continued their upswing on stimulus hopes.

The NSE’s 50-share broadly followed index Nifty, rose merely two points and hold the psychological 5,400 support level while Bombay Stock Exchange’s Sensitive Index - Sensex gained just three points to regain its crucial 17,850 mark. Moreover, the broader indices too lost the track in the second half and ended the trade marginally in the red. The market breadth remained pessimistic as there were 1,351 shares on the gaining side against 1,457 shares on the losing side while 148 shares remained unchanged.

The BSE Sensex gained 3.36 points or 0.02% to settle at 17,850.22, while the S&P CNX Nifty rose by 2.50 points or 0.05% to close at 5,415.35.

The BSE Sensex touched a high and a low of 17,972.54 and 17,792.87 respectively. However, the BSE Mid cap index was down by 0.08% and Small cap index down by 0.12%.

Wipro up by 2.61%, TCS up by 2.25%, Infosys up by 1.73%, Tata Steel up by 1.53% and Hindustan Unilever up by 1.45% were top gainers on the Sensex, while Reliance down by 1.68%, L&T down by 1.63%, ONGC down by 1.59%, Mahindra & Mahindra down by 1.55% and Tata Motors down by 1.09% were top losers on the index.

The major gainers on the BSE sectoral space were, IT up by 1.80%, TECk up by 1.36%, FMCG up by 0.88%, Health Care up 0.51% and Metal up 0.50%, while Oil & Gas down 1.05%, Auto down 0.83%, Capital Goods down 0.76%, Power down 0.41% and Consumer Durables down 0.37% were major losers on the BSE sectoral space.  

Meanwhile, in a move to allow easier cheap dollar funding, Finance Ministry has decided to further ease the norms for raising external commercial borrowing (ECBs) by domestic firms, particularly those in the realty sector. The high-level committee on ECBs, which met on Wednesday, although kept the overall window for ECBs unchanged at the current $40 billion, it allowed for the first time cash-starved micro, small and medium enterprises (MSME) to access such funds. The committee has allowed MSMEs to indirectly access such funds through Small Industries Development Bank of India (SIDBI), besides easing the refinancing norms for infrastructure and manufacturing firms. As per the new norms, the companies could now borrow up to 75% of the forex earnings of the last three years, against the earlier cap of 50%. In addition, special purpose vehicles (SPVs) of these companies incorporated over a year ago will also be eligible to tap this route to raise resources at a lower cost.

Further, the committee also has permitted eligible non-resident entities (NREs) to provide credit enhancement to the issue of rupee bonds by all Indian companies. FII’s have now been permitted to invest up to $5 billion in these bonds, which stays well within the overall corporate bond limit of $45 billion. The minimum maturity period of such bonds has been reduced to three years from the present seven years maturity period.

The rule relaxation is in backdrop of finance ministry’s drive to prop up manufacturing activity and boost infrastructure construction, which are termed as engine of growth for the Indian economy. However, the finance ministry will finalize upon these liberalized norms for these borrowings in consultation with the Reserve Bank of India (RBI).

The S&P CNX Nifty touched a high and low of 5,448.60 and 5,393.85 respectively.

The top gainers on the Nifty were Cairn up by 3.36%, Ranbaxy up by 2.68%, TCS up by 2.57%, Wipro up by 2.50% and HUL up by 2.15%. On the flip side, Reliance Infra down by 2.10%, Reliance down by 1.73%, M&M down by 1.72%, L&T down by 1.60% and Power Grid down by 1.51% were the major losers.

The European markets were trading in green, France's CAC 40 up by 0.16%, Germany's DAX was up by 0.19% and United Kingdom’s FTSE 100 was up by 0.42%.

Most Asian markets ended with green mark as minutes from the U.S. Federal Reserve's most recent meeting indicated that many members of the central bank's policy-setting committee were ready to introduce more stimulus measures if there is no recovery in economic growth. Japan's Nikkei closed high on Thursday, reversing earlier losses as exporters came under pressure due to firmer yen. Meanwhile, the more than expected decline in Chinese manufacturing was also overlooked on domestic indices as shares in both Shanghai and Hong Kong bounced on increasing hopes for further monetary easing after Zhou Xiaochuan, People’s Bank of China governor, said all monetary policy tools were on the table.