Local bourses close near intraday high on hopes of fuel price hike

Indian equity indices, after reeling under pressure in the first half, staged a spirited comeback in late trade snapping the session near intraday high buoyed by hopes of fuel price hike. Much of the hard work, which was done by bourses in the second half of the session, mainly led the outperformance of Indian equity markets against global peers. The gauges took a U-turn in late trade supported by three public sector oil marketing companies BPCL, HPCL and IOC, which edged higher by 1-3 percent after Oil Minister Jaipal Reddy stated that fuel price hike is unavoidable in the short term. Moreover, the buying which emerged in select blue chip stocks also attributed to the up-move in late trade.

The market sentiment also got some strength after Pharma stocks like, Cadila, Dr Reddys Laboratories and Cipla all edged higher on report that Health Ministry is working on new rules to ensure the availability of medicines at affordable prices in the local market and may put tougher conditions for foreign pharmaceutical companies looking to acquire Indian drugs businesses. Meanwhile, marketmen awaited the release of industrial production (IIP) data for July, amid speculations that IIP might edge up 0.3 percent year on year in July, after shrinking 1.8 percent in June, which was the third contraction in four months. Traders were also awaiting for August headline inflation figure slated to be released on September 14. Inflation remains above the comfort level of the government, as well as the Reserve Bank. The new data will provide key inputs for a decision on interest rates ahead of RBI’s monetary policy review on September 17, 2012.

The strength in the Indian markets during final hour were mainly provided by US stock index futures, which pointed a slightly higher open on Wall Street on Tuesday, with futures for the S&P 500 and Dow Jones up 0.2 percent, with Nasdaq 100 futures, 0.1 percent higher. However, European equities eased in early trade, with investors taking profits after a rally to 13-month highs on concerns about the strings that Germany may attach to the euro zone bailout fund and the chance that the United States may not deliver widely awaited stimulus. While, most of the Asian markets closed the shutter with negative mark as investors espoused a cautious approach ahead of FOMC meet.

Back home, metal stocks remained the biggest underperformers as the Goa mining ban adversely affected companies like Sesa Goa, which is country’s biggest iron ore producer in the private sector. However, aviation stocks like Kingfisher, Jet Air India and Spicejet all edged higher after Minister for Civil Aviation Ajit Singh urged Oil Ministry on declaring aviation turbine fuel (ATF) as a notified product, which may decrease the burden of fuel cost on airlines. Meanwhile, Sugar stocks gained after an industry body reportedly revised its sugar production estimate for 2012-13 season downward. Moreover, two non-banking finance companies -- Muthoot Finance and Manappuram Finance -- providing loan-for-gold surged on firming gold prices.

The NSE’s 50-share broadly followed index Nifty, rose by over twenty five points and end near the psychological 5,400 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex moved up by about ninety points to finish above the psychological 17,850 mark. Moreover, the broader markets traded in line with benchmarks and ended the session with a gain of about half a percent.

The markets rose on overall volumes of over Rs 1.20 lakh crore, which remained on the higher side as compared to that on Monday. Moreover, the market breadth remained in favor of advances as there were 1,574 shares on the gaining side against 1,264 shares on the losing side while 131 shares remain unchanged.

The BSE Sensex gained 86.17 points or 0.49% to settle at 17,852.95, while the S&P CNX Nifty rose by 26.55 points or 0.50% to close at 5,390.00.

The BSE Sensex touched a high and a low of 17,867.85 and 17,677.38 respectively. However, the BSE Mid cap index was up by 0.27% and Small cap index up by 0.58%.

HDFC up by 2.49%, NTPC up by 1.81%, Gail India up by 1.66%, BHEL up by 1.41% and TCS up by 1.41% were top gainers on the Sensex, while Sterlite Industries down 4.43%, Jindal Steel down 3.13%, Hero MotoCorp down 1.00%, Tata Steel down 0.79% and Hindustan Unilever down 0.58% were top losers on the index.

The major gainers on the BSE sectoral space were, Realty up 0.94%, IT up 0.88%, Power up 0.81%, TECk up 0.76% and Bankex up 0.58%, while Metal down 1.48% and Auto down 0.05% were top losers on the BSE sectoral space.  

Meanwhile, after ruling out the case of immediate fuel price hike, Oil minister Jaipal Reddy on Tuesday, said that “The Government will have to hike the price of heavily subsidized fuels such as diesel in the short term”, a decision that needs to be taken to rein in burgeoning subsidy bill. Further, the Oil Minister was quick to add that the hike may not be decided by the cabinet committee on political affairs (CCPA) at its meeting later in the evening. However, Reddy added that if the CCPA does not discuss the fuel price issue on Tuesday, it would be taken up at the next meeting of the cabinet committee which takes decision that has wider political ramifications.

The Oil Ministry circulated a note to the members of the CCPA, which is headed by the Prime Minister Manmohan Singh, detailing the crisis created by rise in crude oil prices and fall in value of rupee against the US dollar. Furthermore, although no suggestions have been made on quantum of increase by the Oil Minister, much of the media reports suggest that oil companies will be permitted to hike the price of petrol by as much as Rs 5, and those prices of diesel and kerosene, which are regulated, will also be increased in a week’s time.

Public State Undertaking (PSU) oil firms are losing a record Rs 560 crore per day on the sale of regulated diesel and cooking fuels, and another Rs 16 crore a day on petrol. These firms are losing about Rs 6 per litre on sale of petrol, a commodity which was deregulated from government in June 2010 but rates haven't moved in tandem with the cost.

The S&P CNX Nifty touched a high and low of 5,393.35 and 5,332.10 respectively.

The top gainers on the Nifty were Siemens up by 3.80%, IDFC up by 3.21%, BPCL up by 2.47%, HDFC up by 2.27% and Kotak Bank up by 2.21%. On the flip side, Sesa Goa down by 5.95%, Sterlite Industries down 3.81%, Jindal Steel down 2.98%, Hero MotoCorp 1.51% and Power Grid down by 0.98% were top losers.

The European markets were trading in red, France's CAC 40 down by 0.44%, Germany's DAX was up by 0.13% and United Kingdom’s FTSE 100 was down by 0.43%.

Most of the Asian markets closed the shutter with negative mark on Tuesday, as investors espoused a cautious approach ahead of the German Constitutional Court's decision on the Eurozone's bailout fund and the Fed meeting that may yield widely expected stimulus to bolster growth in the world's largest economy. Hong Kong market, for a fourth consecutive day, ended higher tracking gains in European markets after a German court said it would rule on the legality of the European bailout fund as scheduled on Wednesday. However, Japanese shares fell notably, as investors cut their exposure to exporters and riskier stocks.