Late hour turn-around help benchmarks to keep their head above water

Key domestic benchmarks witnessed another day of consolidation with both the frontline indices managed to keep their head above water on Tuesday. Buying which emerged in late trade was largely supported by Prime Minister Manmohan Singh’s comments that despite domestic constraints and challenges, India is confident that the strong economic fundamentals, backed by sound policies, will enable the country to return to a higher growth path. Sentiments also got some boost with the statement of Finance minister P Chidambaram that the difficult phase for the economy is over and that the focus would now shift to higher growth.

Domestic bourses, traded choppy for most part of the session, re-conquered their crucial 6,000 (Nifty) and 19,700 (Sensex) bastions quite nicely in the late trade following recovery in banking counters. Shares like, SBI, HDFC Bank, Kotak Bank and Bank of Baroda edged higher after Reserve Bank of India (RBI) on January 7 hinted at allowing part of the statutory liquidity ratio (SLR) holdings of banks to be treated as liquid assets under the Basel-III guidelines, which will come into effect next fiscal.

However, global cues remained sluggish as Asian market shut shop in the red on Tuesday as investors locked in profits after strong recent gains and on caution ahead of the US earnings season. Moreover, investors also watching political developments to resolve the debt ceiling issue. Meanwhile, European shares too traded mixed in early deals after an unexpected slump in German exports set a negative tone ahead of other data that will fill out the picture of the region's economic health. The latest German trade report was disappointing, as much steeper-than-expected 3.4 percent month on month decline in exports in November, following a 0.3 percent rise previously, was reported.

Back home, the buying accelerated in last leg of trade was supported by rally in realty pack. Stocks like Unitech, HDIL and DLF surged after government planning to fast track approvals for real estate projects and put up all approval status online that will help house buyers to check on the status of the project approvals before booking a house and bring down home prices. Some support also came in from sugar stocks which edged higher on reports that government raising the levy price of sugar - the rate at which it buys the sweetener from mills to sell through ration shops - by over Rs 2 to about Rs 22 per kg for the current year. Moreover, shares of telecom services provider like Idea Cellular, Reliance Communication and Bharti Airtel edged higher during the trade after the Empowered Group of Ministers (EGoM) on telecom decided to slash the reserve price for CDMA spectrum by 30-50 percent. However, the gains remain capped as selling witnessed in metal counters as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 0.35% on January 7, 2013.

The NSE’s 50-share broadly followed index Nifty declined by about fourteen points to end above the psychological 6,000 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by above fifty points to finish well above the psychological 19,700 mark. Moreover, broader markets tried to get some traction through the day and ended the session mixed.

The overall volumes stood above Rs 1.45 lakh crore, which remained on the higher side as compared to that on Monday. The market breadth remained in favor of declines as there were 1,451 shares on the gaining side against 1,478 shares on the losing side while 142 shares remain unchanged.

Finally, the BSE Sensex gained 51.10 points or 0.26% to settle at 19,742.52, while the S&P CNX Nifty rose by 13.30 points or 0.22% to end at 6,001.70.

The BSE Sensex touched a high and a low of 19,761.78 and 19,632.59, respectively. The BSE Mid-cap index was up by 0.06% and Small-cap index ended lower by 0.29%.

The top gainers on the Sensex were, ITC up by 2.18%, HDFC up by 1.95%, BHEL up by 1.42%, Cipla up by 1.31% and Sun Pharma up by 1.30%, while, Tata Steel down by 1.55%, Wipro down by 1.46%, L&T down by 1.45%, Infosys down 1.41% and Sterlite Industries down by 1.08% were the top losers on the index.

The top gainers on the BSE Sectoral space were Realty up by 1.22%, FMCG up by 1.07%, Health Care (HC) up by 0.73%, Power up by 0.63% and Bankex was up by 0.13%, while Consumer Durables (CD) down 2.01%, Metal down 0.96%, Capital Goods (CG) down 0.71%, IT down 0.49% and Oil & Gas down 0.28% were top losers on the sectoral space.

Meanwhile, in a move towards deepening the bond markets, the Reserve Bank of India (RBI) has eased the norms for trading in corporate repo markets thereby allowing short-term debt securities also qualified for it, and by widening the credit default swaps basket. The apex bank said short-term corporate debt could be traded in the repo market, where holders of securities pledge them to borrow funds with a promise to buy them back at a future date.

The central bank notified that repo in corporate debt shall also be permitted on commercial papers, certificates of deposit and non-convertible debentures of less than one year of original maturity. In short-term securities like commercial paper and certificate of deposit, the liquidity is higher, so the price discovery will be better. The Indian bond market has been shallow because of tight regulations. However, for this move to improve trading volumes, SEBI has to permit mutual funds to borrow against their assets to meet at least their temporary payment needs.

The RBI also allowed credit default swaps (CDS), an insurance against default, on unlisted corporate debt securities and those with less than one year maturity. Further RBI said ‘in addition to listed corporate bonds, CDS shall also be permitted on unlisted but rated corporate bonds even for issues other than infrastructure companies and CDS shall also be permitted on securities with original maturity up to one year like commercial papers, certificates of deposit and non-convertible debentures with original maturity less than one year as reference/deliverable obligations’.

Central bank also reduced the minimum discount that lenders have to withhold, while lending against a security. For AAA Securities, it is 7.5% now from 10%, and for AA+ bonds, it is 8.5% from 12%.

The S&P CNX Nifty touched a high and a low of 6,007.05 and 5,964.40 respectively.

The top gainers on the Nifty were Reliance Infra up by 2.71%, HDFC up by 2.45%, ITC up by 2.13%, BHEL up by 2.09% and Power Grid up by 1.66%.

The top losers of the index were IDFC down by 1.90%, Wipro down by 1.84%, Tata Steel by 1.75%, Sesa Goa down by 1.51% and L&T down by 1.46%.

The European markets were trading in green, France’s CAC 40 up by 0.49%, Germany’s DAX up by 0.05% and the United Kingdom’s FTSE 100 up by 0.17%.

Asian markets mostly ended lower on Tuesday as investors traded cautiously ahead of the US earnings season and the European Central Bank's policy meeting due later in the week. Japan’s Nikkei went home with red mark as a stronger yen pressurized Japanese exporters. Hong Kong’s market closed with losses weighted down by profit-taking in energy, insurance and property sectors after recent rallies. Chinese market ended lower before several batches of data due over the coming week, while Seoul's Kospi was dragged by heavyweight Samsung Electronics.