Benchmarks cool off from day’s high on profit-booking; mood remains upbeat

Benchmark equity indices after trading exuberant from early deals have now given upon some gains, nevertheless the mood continues to remain upbeat on account across the board buying tailing positive global counterparts. Expectations for a narrower trade deficit and receding concerns about Syria helped the currency continue its recent recovery from record lows hit last month, is mainly glorifying  the sentiment at Indian equity markets. However, some amount of profit-booking was inevitable given the higher levels of markets which attracted traders to cash in some of their gains. Off day’s high, Sensex and Nifty now are trading off the crucial 19,750 and 5,850 psychological levels respectively, although with massive gains of over 2%. Meanwhile, broader indices too capitulating to selling pressure have trimmed some of its gains.

On the global front, receiving a positive hand over from Asian counterparts, European shares have got off to a fine start helped by receding expectations of U.S.-led military action against Syria and after better-than-expected Chinese macro data. Late on Monday, U.S. President Barack Obama said he saw a possible breakthrough in the crisis with Syria after Russia proposed that Damascus hand over its chemical weapons for destruction, which could prevent planned strikes. Also boosting sentiment on Tuesday was data which showed China's industrial output growth beat forecasts in August, adding to recent data pointing to a pick-up in growth in the world's second-largest economy.

Closer home, hopes that Rajan will unveil more market-friendly measures were further boosted after the Reserve Bank of India late on Friday made it easier for it for non-residents to buy shares of listed companies, also got the bulls going for fourth consecutive session. Meanwhile, sentimental boost was also received with the surge of Telecom stocks, after TRAI proposed a 60% cut in mobile spectrum prices in response to lukewarm interest from telecom companies in two previous sales. The overall market breadth on BSE continues to remain in the favour of advances which are outperforming declines in the ratio of 1338:673; while 104 shares remained unchanged.

The BSE Sensex is currently trading at 19745.59, up by 475.53 points or 2.47% after trading in a range of 19827.15 and 19,444.66. There were only 27 stocks advancing against only 2 declines on the index, while 1 share remained unchanged.

The broader indices too trimmed some gains; the BSE Mid and Small cap indices were trading up by 1.15% and 1.09% respectively.

The top gaining sectoral indices on the BSE were, Capital Goods up by 5.26%, Auto up by 4.36%, FMCG up by 3.34%, Consumer Durables up by 2.95% and Power up by 2.79%.

The top gainers on the Sensex were, Tata Motors up by 7.79%, L&T up by 6.59%, HDFC up by 5.26%, HUL up by 4.02% and ITC up by 3.89% and Maruti Suzuki up by 4.13%. On the flip side, Dr. Reddy’s Lab down by 0.87% and GAIL India down by 0.48% were the only losers on the Sensex.

Meanwhile, in order to succeed in the next round of spectrum auctions, telecom regulator, Telecom Regulatory Authority of India (TRAI) recommended up to 60% cut in minimum auction prices for mobile phone spectrum on account of lukewarm interest from telecom companies in previous two sales. In yet another relief to most operators, including Bharti Airtel and Vodafone India, TRAI also recommended trading of airwaves between operators and suggested a flat spectrum usage charge, instead of one linked to the quantity of spectrum held.

The regulator, however, held its ground firmly on the controversial spectrum re-farming issue, reiterating that the operators holding spectrum in either 900 MHz or 1800 MHz bands should give up those airwaves on expiry of the licences and buy them back though auctions. Further, the regulator abstained from offering any suggestions on the pricing of the 800 MHz band, used by CDMA operators, saying no auction is required due to the lack of demand.

Thus with this, regulator has recommended Rs 1,496 crore per MHz as the floor price for pan-India spectrum in the 1800 MHz band, which is about 37% lower than the March auction price, where four service areas, including the crucial circles of Delhi and Mumbai, had gone unsold. Further, in the lucrative 900 MHz band, which is eyed by most operators as it is highly efficient and stands cheaper to roll out services, it recommended a reserve price of Rs 288 crore per MHz for Delhi, Rs 262 crore for Mumbai and Rs 100 crore for Kolkata. These rates are about 60% lower than the previous reserve price.

TRAI's recommendations, which need to be cleared by the telecom department and then the cabinet, come amid a deep economic slowdown in India as well as strife in a sector hurt by huge debt and intense competition. Approval of these recommendations would be win-win situation for both the parties, i.e., telecom players as well as government. A successful auction is important to the government, as this would help them to improve its strained finances and meet its budgeted fiscal deficit target of 4.8% of GDP in the fiscal year to end-March. The proposals need cabinet approval.

The CNX Nifty is currently trading at 5,827.40, up by 147.00 points or 2.59% after trading in a range of 5,850.55 and 5,738.20. There were 45 stocks advancing against 5 declines on the index.

The top gainers of the Nifty were Tata Motors up by 8.04%, L&T up by 6.88%, HDFC up by 5.53%, Ultratech Cement up by 5.32% and Axis Bank up by 5.10%. On the flip side, Cairn India down by 2.20%, BPCL down by 1.55%, Dr. Reddy’s Lab down by 0.85%, Lupin down by 0.78% and GAIL India down by 0.45% were the major losers on the index.

The Asian equity indices were trading in green; Seoul Composite up by 1.15%, Straits Times up by 0.53%, Hang Seng up by 0.81%, KLSE Composite up by 0.85%, Shanghai Composite up by 1.15% , Nikkei 225 was up by 1.54%, Jakarta Composite up by 2.54% and Taiwan Weighted up by 0.20%.

European markets have got off to a positive start; with CAC 40 trading higher by 0.86%, DAX rising by 0.95% and FTSE 100 gaining 0.63%.