Benchmarks make gap up start on firm global cues

The Indian equity markets have made a positive start and trading on a firm note tracking positive cues from global indices. The US markets rallied on Tuesday, after France and Germany reached an agreement to bolster the euro area’s rescue fund while, most of the Asian peers were trading in the green at this point of time, indicating strong investors’ sentiments. Back home, sustained buying in mostly all the key heavyweights along with broader indices supported BSE’s -- Sensex -- to regain its crucial 16,900 mark while NSE’s -- Nifty -- was trading near its crucial 5,100 level. Realty witnessed the maximum gain in trade followed by banking and auto while, there were no losers on the BSE sectoral space. Meanwhile, interest rate sensitive realty stocks rose on hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases next week while, auto shares rose after strong Q2 results from two-wheeler major Hero MotoCorp. The company registered a growth of 19.39% at Rs 603.62 crore as compared to Rs 505.60 crore for the corresponding quarter of the previous year. The broader indices too were trading on a firm note. The market breadth on the BSE was positive; there were 1,406 shares on the gaining side against 426 shares on the losing side while 53 shares remained unchanged.

The BSE Sensex opened at 16,883.36; about 135 points higher compared to its previous closing of 16,748.29, and has touched a high and a low of 16,959.24 and 16,874.34 respectively.

The index is currently trading at 16,936.43, up by 188.14 points or 1.12%. There were 29 stocks advancing against only 1 decline on the index.

The overall market breadth has made a strong start with 74.59% stocks advancing against 22.60% declines. The broader indices too were trading firm note; the BSE Mid cap and Small cap indices rose 1.23% and 1.09% respectively.

The top gaining sectoral indices on the BSE were, Realty up by 2.13%, Bankex up by 1.79%, Auto up by 1.79%, Metal up by 1.71% and CD was up by 1.51%. While, there were no losers on the index.

The top gainers on the Sensex were hero Motocorp up by 3.64%, DLF up by 3.20%, Tata Motors up by 3.09%, Sterlite Industries up by 2.23% and SBI was up by 2.02%. While, HUL down by 0.32% remained the lone loser on the Sensex.

Meanwhile, The limit on foreign institutional investment (FII) in Government Securities (G-Sec) could soon be raised, as the current cap of $10 billion for the entire fiscal year has almost exhausted. If the limit is raised further, more money would be available with the domestic financial institutions to lend to the corporate sector. This move will open up more possibility of interest rates stabilizing or even going down. With the government’s additional borrowing plan of Rs 52,872 crore during October-April 2011-12, there was apprehension that the private sector would get packed out of the market.

On this, a finance ministry official said, ‘we would soon look at it. We need more money. We first have to see if FII net inflow is good, then a decision could be taken.’ During January 1-October 17, 2011 the net FII investment (both equity and debt) dropped to $4,309.30 million from $33,726.10 million a year ago.

The market will keenly watch the amount by which the limit is raised. In case the limit is raised by more than $5 billion, it will definitely improve market sentiment, although it may not necessarily lead to any reversal in the interest rate direction.

Also efforts are on to rationalize the Securities Transaction Tax (STT), a tax levied on sale and purchase of equity, and a decision in this regard could be taken in the 2012 Budget. Reduction in this tax will bring down the cost of buying or selling shares. STT ranges from 0.0125% to 0.025% on sale and purchase of equity. The government collects about Rs 7,500 crore per annum from STT. Market players have been demanding withdrawal of STT ever since it was introduced in 2004. It is argued that STT accounts for 51% of the transaction cost. The removal of which, would boost volumes on stock markets.

The S&P CNX Nifty opened at 5,080.45; about 43 points higher compared to its previous closing of 5,037.50, and has touched a high and a low of 5,101.00and 5,075.30 respectively.

The index is currently trading at 5,094.60, higher by 57.10 points or 1.13%. There were 47 stocks advancing against only 3 declines on the index.

The top gainers of the Nifty were Hero Motocorp up by 3.45%, DLF up by 3.27%, Tata Motors up by 2.98%, Sterlite Industries up by 2.19% and HCL Tech up by 2.09%.

On the flip side, HDFC down by 0.11%, Tata Power down by 0.10% and NTPC down by 0.03% remained the only loser on the index.

Most of the Asian equity indices were trading in the green; Shanghai Composite was up 1.54 points or 0.06% to 2,385.03, Hang Seng was up 226.37 points or 1.25% to 18,302.83, Jakarta Composite was up 65.04 points or 1.80% to 3,687.06, KLSE Composite was up 5.16 points or 0.36% to 1,445.10, Nikkei 225 was up 26.14 points or 0.30% to 8,768.05 and Straits Times was up by 6.37 points or 0.23% to 2,731.06.

On the flip side, Seoul Composite was down 0.33 points or 0.02% to 1,838.57 and Taiwan Weighted was down by 18.37 points or 0.25% to 7,341.11.