Post session - Quick review

Indian markets sensed modest recovery after the carnage of Budget day; traders resumed their usual trade doing some value buying but the overall mood still remained cautious and the new series got a flat start. Traders were largely analyzing the impact of the budget, which failed to meet the heightened expectations of the Street. Government’s different policy measures in the last few months has led to the expectation that it will be continued in the budget too, however, there was major concentration on fiscal prudence. While, the budget is being considered positive for infrastructure and agriculture, some proposals are likely to negatively impact the auto sector, while an increase in the corporate tax surcharge for large companies will have a negative impact on the equity market.

The global cues too remained unsupportive and after the US markets ended lower, the Asian markets followed the cues with the report that US economy grew 0.1 percent in the fourth quarter, a weaker pace than expected and as $85 billion of US spending cuts set to begin. Also Japan’s consumer prices dropped, while Chinese manufacturing growth slowed. The European markets too made a soft start after manufacturing declined in UK.

Back home, the domestic markets remained under the shadow of the budget, especially related to the confusion regarding the FII investments; however the Finance Ministry clarified that Income Tax Authorities will not question resident status after the Tax Residency Certificate (TRC) is produced by foreign institutional investors. There was a language confusion that the proposed sub-Section (5) of Section 90 could mean that the Tax Residency Certificate produced by a resident of a contracting State could be questioned by the Income Tax Authorities in India. But the clarification seemed too little-too late, as the investors took opportunities to book profit at higher levels, taking the benchmarks in red for a couple of time. Sectorally, the Consumer Durables witnessed the major recovery, moving up by over 3%, followed by Capital Goods and Auto sector. The capital goods sector remained in upbeat mood since morning after the Union Budget proposed to allow deductions on investments in plants and machinery. On the same time the Auto sales numbers started ticking and the companies who announced their numbers so far gave a positive view for the industry. Though, the realty index turned out to be the laggard of the day, losing about 4%. The IT and technology stocks too lost some ground due to volatile rupee.

The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 1346: 1511 while 113 scrips remained unchanged. (Provisional)

The BSE Sensex gained 49.82 points or 0.26% to settle at 18911.36.The index touched a high and a low of 18911.36 and 18820.90 respectively. 15 stocks were up, while 15 stocks declined on the index. (Provisional)

The BSE Mid-cap index was up by 0.31% while Small-cap index was down by 0.08%. (Provisional)

On the BSE Sectoral front, Consumer Durables was up by 3.30%, Auto was up by 1.64%, Capital Goods was up by 1.64%, Metal was up by 0.75% and Power up by 0.51% were the top gainers, while Realty down by 3.82%, FMCG down by 0.31%, Oil & Gas down by 0.16%, PSU down by 0.04% and Health Care down by 0.01% were the only losers in the space. (Provisional)

The top gainers on the Sensex were Maruti Suzuki up by 4.97%, Jindal Steel up by 3.20%, Cipla up by 2.56%, Tata Power up by 2.54% and L&T up by 2.52%, while, Bharti Airtel down by 3.74%, ITC down by 1.63%, Dr Reddys Lab down by 1.28%, Hero MotoCorp down by 1.22% and TCS down by 0.97% were the top losers in the index. (Provisional)

Meanwhile, After listening to the complains of oil firms like BP Plc for artificially low gas rates in the country impeding investments, Finance Minister P Chidambaram, while presenting the Budget for 2013-14, said ‘the natural gas pricing policy will be reviewed and uncertainties regarding pricing will be removed’. Presently, domestically produced natural gas is priced at USD 4.2 per million British thermal unit, one-third of the imported cost.

A government appointed committee headed by C Rangarajan, which recently submitted its report, recommended pricing of domestically produced natural gas at an average of international hub prices and cost of imported LNG instead of present mechanism of market discovery. Further, the Rangarajan formula is the mean of weighted averages of the producer price of liquefied natural gas imports to India and the price prevalent in Europe, the US and Japan. This average comes to about USD 8-8.5 per mmBtu, half-way meeting expectations of companies of being allowed to charged a price equivalent to imported liquefied natural gas (LNG).

Oil Minister M Veerappa Moily has already accepted the recommendations and is moving Cabinet for a formal approval.

Further, finance minister said that the oil and gas exploration policy will be reviewed to move from profit sharing to revenue sharing contracts. While, the cost-recovery model of the New Exploration Licensing Policy (NELP) will help the operators to recover all their investment in successful as well as unsuccessful wells from sale of oil and gas before sharing profits with the government.

As per Finance Minister, awarded NELP blocks are currently stalled for defence and other clearances and will be cleared soon. The transition of prices of domestic natural gas to import parity similar to the diesel price reforms will help to build a sustainable gas market in the country.

Chidambaram also said a policy to encourage exploration and production of shale gas will be announced. The government is planning to launch its first auction of shale gas block by 2013-end on terms that are expected to be remarkably different from bid rounds for oil and gas blocks. Shale gas or natural gas trapped in sedimentary rocks (shale formations) below the earth's surface is seen as a new alternative to conventional oil and gas for meeting growing energy needs.

Snapping earlier session’s gains, Asian markets ended mixed on Friday, as investors sentiments were hampered by lusterless manufacturing data from China and concerns over the economic fallout from Italy's political confusion as well as possible US spending cuts. China's Shanghai Composite ended lower as factory growth cooled in February to multi-month lows, signaling China's economy slipping into another slowdown. However, Japan's Nikkei went home with green mark, on expectations of strong reflationary measures from the Bank of Japan in coming months. Indonesia’s stocks closed higher as data showed country's trade deficit narrowed slightly in January from the previous month as exports posted their smallest fall in nearly a year.

South Korean markets remained closed for the trade today.