Markets cool a tad from day's high; mood remains upbeat

Local equity markets, although have come off tad from day’s high, undertone of the market remain largely upbeat after Reserve Bank of India has issued clarification on its recently revised Overseas Direct Investment Guidelines, which also has led to substantial recovery of Indian currency. However, bit of profit-taking has crept into the markets with negative start of European markets. Both, Sensex and Nifty, are oscillating below the psychological 18,600 and 5,450 levels respectively, with gains of close to two percent. Meanwhile, broader indices, showing degree of underperformance in comparison to larger peers, are trading with gains of over 3 /4 of percent.

On the global front, European shares turned lower in early trade on Wednesday amid the increasing likelihood of U.S. military action in Syria. On Tuesday, President Barack Obama clinched the backing of key figures in Congress, including House Speaker John Boehner, in his push for limited U.S. strikes on Syria which is suspected of launching a chemical weapons attack last month.

Closer home, nevertheless, hopes that Raghuram Rajan, who takes over at the RBI on Wednesday, will bring a new approach to the central bank's defence of the rupee, which has so far relied on a risky strategy to drain cash and raise short-term interest rates, is also bolstering sentiment. Stocks from Oil & Gas, Banking and Metal are the top performers of the session. However, Realty stocks continue to reel under pressure after Reserve Bank of India (RBI) said late on Tuesday that housing loans from banks to individuals should be closely linked to the stages of construction. The overall market breadth on BSE is in the favour of advances which have thumped declines in the ratio of 1242:688; while 136 shares remained unchanged.

The BSE Sensex is currently trading at 18565.86, up by 331.20 points or 1.82% after trading in a range of 18612.60 and 18,188.43. There were only 28 stocks advancing against 2 declines on the index.

The broader indices too made further headroom in green; with BSE Midcap and Smallcap indices trading higher by 1.02% and 0.69%.

All the BSE sectoral indices are trading in green, Oil & Gas up by 2.79%, Bankex up by 2.40%, Metal up by 2.36%, Capital Goods up by 2.18% and Auto up by 2.13%, were the top gainers on BSE.

The top gainers on the Sensex were, BHEL up by 5.15%, Tata Motors up by 4.19%, Bharti Airtel up by 3.86%, Hindalco Inds up by 3.59% and RIL up by 3.58%. On the flip side, ITC down by 1.17% and Maruti Suzuki down by 0.64% were the top losers on the Sensex.Meanwhile, In view of the recent volatility in the stock market, the Securities and Exchange Board of India (SEBI) has asked exchanges to calculate circuit limits, the maximum permissible movement allowed to Sensex or Nifty in a trading session on a daily basis, thereby departing from the current practice of calculating the same on a quarterly basis.

Currently the stock exchanges calculate the circuit filters on the basis of the level attained by Sensex and Nifty at the end of every quarter and the same limits are applicable for every day of trade for the next three months. Under the current rules, a circuit filter is triggered if either of the Sensex or the Nifty moves 10%, 15% or 20% in either direction.

The new mechanism would apply for 10%, 15% and 20% circuit limits in Sensex and Nifty, the two benchmark indices of Indian stock market, with effect from October 1, 2013. Further, the circuit breaker limits of market-wide index variation will be based on the previous day’s closing level of the index. Under the new rules, if the 10% circuit filter is hit, there is a one hour halt of trading before it resumes. If the 15% circuit filter is triggered, then there would be a two-hour trading halt. At the 20% filter, trading will stop for the day.

Further, the regulator has directed that in case the circuit filter is hit, there would be a pre-opening trading session (called call-auction session in market parlance) of 15 minutes. Post to which only, the regular trading should resume.

As per the market regulator, circuit filters would act like a cushion to halt trading on stock exchanges in a coordinated manner in times of excess volatility, which will lend the market some time to take stock of the situation and then resume trading.

The CNX Nifty is currently trading at 5,448.00, up by 106.55 points or 1.99% after trading in a range of 5,460.25 and 5,318.90. There were 47 stocks advancing against 3 declines on the index.

The top gainers of the Nifty were Ranbaxy up by 7.48%, Inndusind Bank up by 6.77%,BHEL up by 6.33%, JP Associates up by 6.28% and Hindalco up by 4.17%. On the flip side, Maruti down by 0.68%, Power grid down by 0.42% ITC down by 0.23%, were the major losers on the index.

The Asian equity indices were trading in mixed; Straits Times down by 1.05%, While, Hang Seng down by 0.27%, Jakarta Composite down by 2.02%, Taiwan Weighted down by 0.06% and KLSE Composite down by 0.36%. Seoul Composite down by 0.04%. On the flip side, Shanghai Composite up by 0.21% and Nikkei 225 up by 0.54%.

European markets have got off to a negative start; with CAC 40 declining by 0.32%, FTSE 100 sliding by 0.26% and DAX losing by 0.04%.