Indian equities pare gains; trade gyrates around neutral line

Indian equity markets pared gains to continue its trade at the lowest point of the day in the late afternoon session on account of selling in frontline counters.  The sentiments on the street were halfhearted despite Asian Development Bank (ADB) stating that growth in developing Asia is seen gaining momentum this year, powered by rising domestic consumption and intra-regional trade, but authorities need to ward off risks of inflation and asset bubbles arising from strong capital inflows. ADB added that the growth in India may recover to 6% this year and 6.5% in 2014 from 5% in 2012, but South Asia’s largest economy needs to pursue structural reforms to create a more favorable investment environment and spur growth. Traders were seen piling some position in Auto, Capital Goods and Metal sector stocks while selling was witnessed in IT, TECK and FMCG sector stock.

In scrip specific development, ICICI Bank was trading firm after Morgan Stanley upgraded the company to overweight from equal-weight and raised its target price as it expects a pickup in consumer loan growth to drive performance. Panama Petrochem was trading in green after the board approved buyback of shares at Rs 160 per share. Bharat Heavy Electricals (BHEL) is trading in red after Nomura maintained its rating on the company at reduce, warning that the company is at the start of a bad earnings cycle as orders won during a time of rising competition and lower utilization would further hurt margins. Wipro tumbled following news that the company had split its non-software businesses into a separate firm.

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 5,550 and 18,400 levels respectively. The market breadth on BSE was negative in the ratio of 1037:1085 while 124 scrips remain unchanged.

The BSE Sensex is currently trading at 18,403.94, down by 33.84 points or 0.18% after trading in a range of 18,565.56 and 18,403.31. There were 16 stocks advancing against 14 declines on the index.

The broader indices were trading on a mixed note; the BSE Mid cap was trading down by 0.09% while Small cap indices were trading higher by 0.17%.

The top gaining sectoral indices on the BSE were Auto up by 0.80%, Capital Goods up by 0.71%, Metal up by 0.53%, Bankex up by 0.44% and Power up by 0.01%, while, IT down by 1.62%, TECK down by 1.45%, FMCG down by 0.99%, Consumer Durables down by 0.97% and Realty down 0.51% were the top losers on the BSE.

The top gainers on the Sensex were Jindal Steel up by 2.92%, Tata Motors up by 2.39%, HDFC up by 2.08%, ICICI Bank up by 1.67% and L&T up by 1.39%. On the flip side, Wipro down by 12.50%, Infosys was down by 1.86%, ONGC was down by 1.58%, ITC was down by 1.54% and Bharti Airtel down by 1.42% were the top losers on the Sensex.

Meanwhile, India-EU free trade pact (FTA) looks far from the finish line with the European Union demanding more access to India’s insurance sector and a stricter intellectual property regime, India on the other hand refusing to give such assurances. The 27-member EU had hopes that the Insurance Bill, which aims to raise the cap on FDI from the current 26% to 49%, will be passed by Parliament before the FTA is signed. However, with the bill getting delayed, the EU is now looking for some assurance that the FDI limit would be increased within a specified time. India, on the other hand does not want to give such assurances.

Further, the EU is also upset on India refusing its strong commitments on tightening of IP regime. India had earlier refused to give data exclusivity to the EU which would lead to companies holding exclusive rights to data, without holding patents on them. Moreover, India has also not agreed to give the EU Customs authorities the right to seize medicines in transit in case they suspect IP violation.

In addition, the government is also refusing to take on binding commitments in labour and environment as this would lead the country to take on commitments on minimum wages, working environment and more sophisticated production processes that would raise costs. India believes that there are institutions such as the International Labour Organization to address non-trade issues and these should not be made part of the trade agreements.

However, on the positive front, the agreement will help Indian companies expand in the EU, the country's biggest trading partner. On the other hand, the EU wants to gain more access into the Indian markets and want significant reduction in customs duty on cars, wines and spirits on their exports to India. In 2011, the two-way trade between India and EU increased to about $110 billion from $ 83.37 billion in 2010. India has already implemented comprehensive FTAs with other countries such as Japan, Malaysia and South Korea.

The CNX Nifty is currently trading at 5,550.60, up by 7.65 points or 0.14% after trading in a range of 5,603.05 and 5,548.30. There were 26 stocks advancing against 24 declines on the index.

The top gainers of the Nifty were Cairn up by 3.35%, Jindal Steel up by 2.86%, Tata Motors up by 2.59%, Ambuja Cements up by 2.41% and IDFC up by 2.24%.

On the flip side, Reliance Infrastructure down by 1.93%, Infosys down by 1.84%, ONGC down by 1.82%, Ranbaxy down by 1.61% and ITC down by 1.42% were the major losers on the index.

The Asian equity indices were trading on a mixed note; Shanghai Composite rose 0.64%, Hang Seng surged 0.70%, KOSPI Composite gained 0.11% and Straits Times was up by 0.56%. On the flip side, Jakarta Composite decreased 0.06%, KLSE Composite lost 0.02%, Taiwan Weighted was down by 0.31% and Nikkei 225 was trading flat with negative bias.

The European markets were trading in green; France’s CAC 40 added 0.72%, Germany’s DAX jumped 0.71% and United Kingdom’s FTSE 100 edged higher by 0.62%.