Bulls fight back to protect the 16,000 bastion; D-street soars by 1.25%

After weeks of horrendous performances, Indian equity benchmarks finally showed some enthusiasm as market bulls eagerly waited for some significant upside triggers to cover the huge pile of short positions that got build up through the August futures and options series. The frontline indices surged on large volumes amid heightened volatility, as gains on the European stock markets underpinned sentiments and reversed earlier losses caused by the declines in the Asian peers and Wall Street amid worries over a potential global economic recession. Local sentiments got the additional push as investors reckoned that the international crude oil prices, especially Brent crude, could see substantial decline as the momentum against the Gaddafi regime in Libya, an OPEC member which produces around 2% of world oil output, reached a tipping point, indicating that the six month long civil upheaval in Libya may come to an end soon. The reports of ceasing civil upheaval in Libya was not only a reason for rejoice for airlines and oil upstream and downstream companies but it also may have given a sign of relief to RBI and the government which have come under a lot of criticism for the spike in inflation that continued to hover at highly uncomfortable levels. Markets speculate that the imminent fall of Libyan leader Muammar Gaddafi will allow for a ramp-up of Libyan oil production. If that has the effect of driving down oil prices, it could be a positive cue for global equity markets. Investors globally are also expecting announcement of further stimulus from the US Fed when bankers gather in Jackson Hole, Wyoming, later this week, one year after Chairman Ben Bernanke launched a second round of quantitative easing to revive the economy. Back home, the psychological 4,800 and 16,050 levels proved as strong supports for the benchmarks as they got a technical bounce from those levels on the back of hefty short covering in beaten down oil and gas, power and rate sensitive counters, while most technology and software shares too pared losses. But pessimistic were of the belief that extreme volatility is likely to continue as uncertainties surrounding Europe’s debt problems and the outlook for growth in the US and around the globe loom large. Also the political overhang from the standoff between Team Anna and the government over the contours of the Lokpal institution did its share of drag on market sentiments.

Earlier on Dalal Street, the benchmark got off to a quiet opening amid the somber mood prevailing in Asian markets. The frontline indices kept oscillating around the neutral line through the first half of trade but the second half saw a reversal of sorts as sentiments suddenly turned sanguine and the key gauges swiftly started gathering a lot of traction. The hefty short covering ensured that the frontline indices snap the four straight session declining streak and settle around the highs of the session. Finally the NSE’s 50-share broadly followed index Nifty, surged by over a percent to settle a tad below the crucial 4,900 support level while Bombay Stock Exchange’s Sensitive Index, Sensex smashed a double century and ended below the psychological 16,350 mark. The broader markets also showed some resilience and managed to perform in line with their larger peers. In the BSE sectoral space, the oil and gas counter was the leading gainer with around two and half a percent of gains as heavyweights like RIL and ONGC rallied by around four percent. While the Power and Metal pockets too surged by around two percent each on hefty short covering. On the other hand, technology and software counter continued to languish at the bottom of the table though with moderate losses of around half a percent after Hewlett-Packard’s disappointing outlook overnight fueled concerns about a slowing down global economy. The markets surged on large volumes of over Rs 1.74 lakh crore while the turnover for NSE F&O segment remained on the lower side compared to Friday at over 1.63 lakh crore. The market breadth too remained positive as there were 1803 shares on the gaining side against 1018 shares on the losing side while 101 shares remained unchanged.

Finally, the BSE Sensex surged by 200.03 points or 1.24% to settle at 16,341.70, while the S&P CNX Nifty soared by 53.15 points or 1.10% to close at 4,898.80.

The BSE Sensex touched a high and a low of 16,370.46 and 16,046.48 respectively. The BSE Mid cap and Small cap indices up by 1.25% and 1.54% respectively.

The gainers on the Sensex were Jaiprakash Associate up 5.38%, ONGC up by 3.99%, Wipro up by 3.74%, Tata Power up by 3.60% and Bajaj Auto up by 3.56%.

On the flip side, DLF down 2.25%, HDFC Bank down 2.00%, Infosys down 1.41%, TCS down 1.24% and Mahindra & Mahindra down 0.66% were the top losers on the index.

The top gainers on the BSE sectoral space were Oil & Gas up by 2.47%, Power up by 2.04%, Metal up by 1.91%, Capital Goods (CG) up by 1.63% and FMCG up by 1.63%. While IT down 0.59% and Bankex down 0.14% were the top losers on the BSE sectoral space.

Meanwhile, by expressing concern over the limited reserve of iron ore in the country the Parliamentary Panel recommended the government to explore the possibility of curbing iron ore exports to ensure availability of the key steel making raw material, as the domestic reserves may last only for 10 years more. The Parliamentary Panel chaired by Kalyan Banerjee said, 'the Committee is concerned to note that reserve of iron ore may last till 2021-22. With a view to conserving iron ore for long-term use of domestic steel industry and also to ensure its availability to them at an affordable price, the government must explore possibility of restricting the export of iron ore.'

The production of iron ore was more than the domestic consumption, as a result of which more than half of the output was exported. As per the government estimates, during last financial year, country’s iron ore production and exports were around 208 million tonne and 97.6 million tonne respectively. During 2009-10 country has exported around 117.37 million tonne of iron ore. India mostly exports iron ore to China and it has around 22% share in China’s total imports.  

To restrict the exports of iron ore from India, the government has increased the exports duty on the exports of iron ore. It had increased the export duty by 5-20% from lumps and 5% for fines. However, the industrial bodies has opposed the recommendation of the Parliamentary Panel, by arguing that this would lead to up 35% decline in shipment and many job losses in the labour intensive mining sector.

Earlier according to the miners body Federation of Indian Mineral Industries, iron ore exports may fall by over 20% to around 75 million tonnes (MT) in the current fiscal as a result of hike in duty on overseas shipments. In the Budget for 2011-12, finance minister had raised export duty on fines four-fold to 20%.

The S&P CNX Nifty touched high and low of 4,910.05 and 4,808.75, respectively.

The top gainers of the Nifty were SAIL up 7.49%, RCom up 6.90%, IDFC up 6.64%, Reliance Infra up 6.50% and JP Associate up 5.72%.

On the flip side, GAIL down 3.87%, DLF down 2.09%, HDFC Bank down 1.81%, Infosys down 1.69% and TCS down 1.34% were the top losers on the index.

The European markets were trading in green. France's CAC 40 surged 1.774%, Britain's FTSE 100 soared by 1.68% and Germany's DAX advanced by 0.28%.

Asian equity indices continued their southbound journey for third consecutive session and snapped the day’s trade mostly in the negative terrain on Monday as traders remained worried over the possibility of a new global recession. Meanwhile, Japanese Nikkei declined over a percent in the trade after exporters tumbled due to concerns over the strong yen. Moreover, South Korean index Seoul Composite remained the top loser losing about two percent as fears of global economic downturn prompted investors to sell risky assets. However, Hang Seng remained the lone gainer amongst the Asian peers gained about half a percent, reversing all its earlier losses, thanks to late buying following two sessions of heavy selling at the end of last week.