Indian equities continue firm trade; Nifty above 5,900 mark

Indian equity markets added gains to continue firm trade in the late afternoon session on account of buying in front line counters, despite the headline wholesale price inflation accelerating to 6.84% in February from 6.62% in January. However, Reserve Bank of India (RBI) Governor D Subbarao reiterating his concern about persistently high inflation and stated that inflation remains a major obstacle to growth in India, dimming expectations of an interest rate cut when policymakers meet next week. The banking stocks in the meantime got some relief after different banks, reacting to the sting operation report, said that they conduct business with the highest level of compliance to legal and regulatory requirements. Besides, top private sector banks, ICICI Bank, HDFC Bank and Axis Bank have ordered high level inquiries into allegations by a Cobrapost sting that they facilitate money laundering. Traders were seen piling some position in Bankex, Realty and Capital Goods sector while selling was witnessed in Consumer Durables and Auto sector.

In the scrip specific development, Sintex Industries was trading in green after the company redeemed its foreign currency convertible bonds (FCCBs) worth $ 291 million on due date. Gammon India was trading firm after the board of directors approved company’s corporate debt restructuring (CDR). Deccan Chronicle Holdings was trading in red after Canara Bank, one of the lenders, filed fraud case against the company with Central Bureau of Investigation (CBI). On the global front, the Asian markets were trading on a mixed note while the European markets were trading on optimistic note. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5,900 and 19,500 levels respectively. The market breadth on BSE was negative in the ratio of 1232:1446 while 129 scrips remain unchanged.

The BSE Sensex is currently trading at 19,533.32, up by 170.77 points or 0.88% after trading in a range of 19,554.17 and 19,179.33. There were 22 stocks advancing against 8 declines on the index.

The broader indices were trading on a mixed note; the BSE Mid cap index was up by 0.14% and Small cap index was down by 0.13%.

The top gaining sectoral indices on the BSE were, Bankex up by 1.85%, Realty up by 1.25%, Capital Goods up by 0.90%, FMCG up by 0.67% and PSU up 0.66% while, Consumer Durables down by 1.86% and Auto down by 0.02% were the only losers on the BSE.

The top gainers on the Sensex were SBI up by 3.13%, Maruti Suzuki up by 2.26%, Hindustan Unilever up by 2.19%, ICICI Bank up by 2.18% and HDFC Bank up by 2.03%. On the flip side, Gail India down by 1.88%, Bajaj Auto down by 1.87%, Bharti Airtel down by 1.16%, Tata Motors down by 1.08% and Sun Pharma down by 0.55% were the top losers on the Sensex.

Meanwhile, to encourage micro, small and medium enterprises (MSME) to make investment and expand operations, the government is expected to revise the investments thresholds in line with inflation by proposing amendments in MSME Act, 2006. The government will propose amendments to remove the definition of small scale industries out of the sector law, which will give the administration flexibility to increase the qualifying thresholds.

As per the MSME Act, 2006, a micro enterprise is one which has an investment of up to Rs 25 lakh in plant and machinery, enterprise with up to Rs 5 crore and Rs 10 crore investment qualify as small and medium enterprise. If the amendment is approved, the limits will be prescribed through rules and guidelines in line with inflation, which will provide a number of opportunities for MSME sector to expand. 

The small and medium enterprises are often unwilling to violate the given threshold and expand as they would lose the various benefits reserved for them, partly the reason why India's manufacturing has not grown as expected. Apart from this complex labour laws have also dejected expansion as investors feel employing more people will create manpower issues. Hence, manufacturing share in GDP has slid to 13.6% in 2012-13 from 17% in 2002-03, contributing particularly to problem of jobless growth.

Even Swedish home furnishing company, IKEA had also raised this issue after government imposed conditions that it must source at least 30% goods from SMEs. The company, given IKEA's scale of operations and SME units that it sourced goods from would quickly outgrowth the prescribed thresholds. Subsequently, the government diluted the sourcing conditions.

With this the government now feels that raising the investment thresholds for the MSME sector every few years will encourage the small and medium enterprises to invest more in plant and machinery, leading to its growth and also add to the manufacturing sector.

The CNX Nifty is currently trading at 5,901.75, up by 50.55 points or 0.86% after trading in a range of 5,909.05 and 5,791.75. There were 39 stocks advancing against 11 declines on the index.

The top gainers of the Nifty were SBI up by 3.01%, Ranbaxy Laboratories up 2.83%, Asian Paints up by 2.52%, Maruti Suzuki up by 2.31% and Hindustan Unilever up by 2.23%.

On the flip side, Bajaj-Auto down by 2.03%, Gail down by 1.68%, Bharti Airtel down by 1.34%, Tata Motors down by 1.31% and Cairn down by 0.91% were the major losers on the index.

The Asian equity indices were trading on a mixed note; Jakarta Composite tumbled 0.74%, KLSE Composite dipped 0.22%, Straits Times slipped 0.17% and Taiwan Weighted was down by 0.55%.

On the other hand, Hang Seng added 0.28%, Shanghai Composite up by 0.28%, KOSPI Composite up by 0.12% and Nikkei 225 was up 1.16% were the gainers.

The European markets were trading in green; France’s CAC 40 added 0.64%, Germany’s DAX ascended 0.87% and United Kingdom’s FTSE 100 jumped by 0.40%.