Benchmarks strengthen; trade continues in a positive zone

Indian equity indices have gained strengthen paring off the losses to trade in green on account of buying coming at lower levels in blue chip stocks. Market participant were seen piling up the positions in IT, TECk and FMCG while selling was witnessed in Realty, Auto and Bankex sector. Stocks like Insecticides India, Indraprastha Gas, Residency Projects, Esaar India and Inventure Growth & Securities hit new high while stocks like MTNL, GTL, NDTV, Dishman Pharma, Allsec Technologies, WWIL, TV18 Broadcast, IndiaBulls Real Estate, Great Offshore, Allied Digital, Onmobile Global, Raj Oil, DEN Networks, MBL Infra, Career Point and Sanghvi Forging hit new low. Share of realty sector like Godrej Properties, HDIL, Parsvnath Developers, Unitech, Indiabulls Real Estate, Anant Raj Industries, Sobha Developers and Phoenix Mills were under pressure on worries of higher interest rates which could dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance. Commercial banks have raised lending rates after the Reserve Bank of India (RBI) late last month raised its key lending rate by a steeper-than-expected 50 basis points at a policy review while shares of Realty major DLF was in red after it has been imposed Rs 600 crore penalty by competition watchdog CCI for abusing its dominant market position. As DLF has been proven guilty of violating section 4(2) of the Competition Act, 2002, the penalty, which amounts to 7 percent of the company's average annual turnover of last three years, was imposed on it. Tata Motors was under pressure after reporting 6% decline in global July sales. Shares of aviation counters like Jet Airways, Kingfisher Airlines and SpiceJet was weak on account of rise in crude oil prices which raised concerns that high jet fuel prices may impact operating costs of these companies. On the global front, Asian markets were trading in mix while the European markets were trading in red on pessimistic note as meeting between German chancellor Angela Merkel and French president Nicolas Sarkozy failed to calm worries over the euro zone debt crisis. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,050 and 16,800 levels, respectively. The market breadth on the BSE was negative in the ratio of 767:1939 while, 119 scrips remained unchanged.

Moreover, Centre for Monitoring Indian Economy (CMIE) has cut India's FY12 growth forecast to 8.1% from 8.6% citing delays in the commissioning of projects that have made them less optimistic and more concerned. According to them there could be downward revision in the next two-three months, if things don’t improve. Also, state-run Coal India today toppled billionaire Mukesh Ambani-led Reliance Industries as the country's most valued company, with a slightly higher market valuation around mid-day. Heavy activity was seen in counters of Sical Logistics, Orissa Sponge Iron, Cable Corporation of India, Asian Hotels (West) and KS Oils with good volumes due to fund based activity as of yesterday. LRSD Global Holdings bought 250,000 shares of Sical Logistics while Rajasthan Global Securities sold 250,000 shares. Maharashtra Seamless bought 200,000 shares of Orissa Sponge Iron while Stable Trading Company sold 200,000 shares. Clareville Capital India Master Fund bought 1,200,000 shares of Cable Corporation of India while Swiss Finance Corporation Mauritius sold 1,200,000 shares.  Birla Sun Life Insurance Company sold 122,671 shares of Asian Hotels (West) and L&T Finance sold 5,700,000 shares of KS Oils.

The BSE Sensex is currently trading at 16,780.27 up by 49.33 points or 0.29% after trading as high as 17,000.38 and as low as 16,708.98. There were 20 stocks advancing against 10 declines on the index.

The broader indices were trading on a weak note; the BSE Mid cap index slipped 1.37% while Small cap shed 1.75% respectively. 

On the BSE sectoral space, IT up 1.71%, TECk up 1.18%, FMCG up 1.04%, Metal up 0.07% and Health Care up 0.06% were the only gainers while Realty down 4.08%, Auto down 1.93%, Bankex down 1.25%, Power down 0.40% and PSU down 0.22% were the only loser on the index.

Coal India up 2.45%, TCS up 2.30%, Sun Pharma up 2.08%, Infosys up 1.98% and HDFC up 1.93% were major gainers on the Sensex, while DLF down by 6.75%, Tata Motors down 3.59%, Maruti Suzuki down 3.39%, ICICI Bank down 2.67% and M&M down 1.95% were the major losers on the index.

Meanwhile, the Commerce Ministry is not in favor of capping foreign investment in pharmaceutical sector, however to address the concerns over the Multinational Corporation (MNC) takeover of Indian firms and in order to protect the public health concerns of the country, it will look for alternative route.  In the last few years many profit making drug companies have been buyout by the multinationals. Presently, 100% Foreign Direct Investment (FDI) via automatic route is allowed in the Pharmaceutical sector. And currently Indian Pharmaceutical industry is estimated to be around $20 billion. 

To study the impact of the multinational takeovers of the local drug firms, commerce department has commissioned a study to consultancy firm Ernst & Young (E&Y), recommended by pharmaceutical department. Currently the commerce ministry is examining the E&Y report and then it will send its recommendations to the Department of Industrial Policy and Promotion (DIPP) a nodal agency responsible for FDI-related matters.

Whereas the E&Y report has favored the continuation of 100% FDI in the sector, however, it has recommended that certain vulnerable segments can be taken away from the automatic route.  It has also recommended taking case by case clearance of takeovers by putting such deals under the Foreign Investment Promotion Board (FIPB) route.

Various segments of government including DIPP and the drug industry have raised their concerns over the issue of local drug company’s takeover. Last week, Chemicals and Fertilizers Minister Srikant Kumar Jena has expressed his concerns over the issue, he said that recent takeovers of Indian companies by MNCs could increase the possibility of other takeovers of domestic firms. Such takeovers would have an impact on the Indian health care scenario as well as on pricing and availability of medicines in the country, he added.

The S&P CNX Nifty is currently trading at 5,043.10, higher by 7.30 points or 0.14% after trading as high as 5,112.15 and as low as 5,017.25. There were 29 stocks advancing against 20 declines while 1 stock remained unchanged on the index.

The top gainers of the Nifty were HDFC up 2.40%, TCS up by 2.30%, Sun Pharma up 2.12%, Infosys up 1.91% and ONGC up 1.87%.

DLF down 6.99%, Tata Motors down 3.48%, Maruti Suzuki down 3.35%, Axis Bank down 3.27% and RCOM down 3.03% were the major losers on the index.

Asian markets traded on a mixed note, Hang Seng climbed 0.38%, KLSE Composite advanced 0.34% Straits Times inched up 0.01% and Seoul Composite climbed 0.68%. On the other hand, Shanghai Composite dipped 0.26%, Nikkei 225 shed 0.55% and Taiwan Weighted sank 0.73%.

Stock markets in Indonesia remained close on account of Independence Day holiday.

The European markets were trading in red with, France’s CAC 40 eased 0.35%, Germany's DAX shed 1.35% and London’s FTSE slipped 1.10%.