Benchmarks manage to negotiate positive close ahead of Fed policy outcome

Indian equity benchmarks, after trading cautiously throughout the session, managed to negotiate a positive close with frontline gauges recapturing their crucial 5,850 (Nifty) and 19,800 (Sensex) levels supported by pullback in dying hours. Earlier, markets exhibited lacklustre trade with immense volatility in a tight range, as investors opted to remain on sidelines ahead of outcome of the US Federal Reserve meeting and Reserve Bank of India’s (RBI) monetary policy review. Meanwhile, chairman of the PMEAC, C Rangarajan said that he expects the central bank to take into account inflation and the situation with regard to rupee while it takes a view on the monetary policy.

Global markets too remained choppy with European markets trading lower in early deals, while most of the Asian equity markets ending in the red as traders exercised caution ahead of a crucial US Federal Reserve meeting. The outcome of the US Federal Reserve Open Market Commitee (FOMC) meet on September 17-18 will be key in terms of any tapering of $85 billion monthly bond purchases that had led to significant inflow in the emerging markets especially India so far.

Back home, sentiments also remained dampened after Prime Minister’s key economic advisor C Rangarajan, pitching for a non-restrictive regulation in the financial sector, said that too many norms can impede financial innovations. Profit booking in banking space too dampened the sentiments. Moreover, shares of gold finance companies such as Muthoot Finance and Manappuram Finance too edged lower after the Reserve Bank of India (RBI) tightened regulations governing non-banking finance companies (NBFCs) lending against gold jewellery. As per the new norm, gold loan financing companies should have appropriate infrastructure for storage of gold ornaments. It also made mandatory for NBFC to obtain prior approval of the Reserve Bank to open branches exceeding 1000.

However, markets witnessed decent pullback in dying hours to get back to their positive trajectory supported by buying in software and technology counters after Indian rupee depreciated against dollar during the session. Buying in Auto space too provided some strength to the bourses. Most of the two-wheeler stocks rose on expectations of pickup in sales during the upcoming festive season and on hopes that good rains this year will boost rural sales. Some support also came in from report that Foreign Institutional Investors (FIIs) have bought shares worth $1 billion in the past eight trading sessions following RBI governor Raghuram Rajan’s recent announcements offering banks concessions to help them attract dollar flows through swap facility.

The NSE’s 50-share broadly followed index Nifty rose by around ten points to gain its psychological 5,850 support level, however Bombay Stock Exchange’s Sensitive Index -- Sensex rose over sixty to recapture its psychological 19,800 mark.

Broader markets struggled to get traction and ended the session in the red on Tuesday. The market breadth remained in favour of decliners, as there were 1,118 shares on the gaining side against 1,238 shares on the losing side, while 129 shares remained unchanged.

Finally, the BSE Sensex gained 61.56 points or 0.31% to settle at 19804.03, while the CNX Nifty added 9.65 points or 0.17% to 5,850.20.

The BSE Sensex touched a high and a low of 19819.10 and 19635.44, respectively. The BSE Mid cap index was down by 0.42% and Small cap index lost 0.05%.

The top gainers on the Sensex were Wipro up 5.41%, Dr Reddys Lab up 3.69%, TCS up 2.38%, Jindal Steel up 1.94% and Sesa Goa up 1.89%, on the flip side, Sun Pharma down 3.22%, ONGC down 2.30%, NTPC down 1.75%, Hero MotoCorp down 1.21%, and Tata Steel down 1.20%, were the top losers on the index. 

On the BSE Sectoral front, IT up by 2.05%, TECk up by 1.58%, Metal up by 0.97%, FMCG up by 0.77% and Auto up 0.73%, were the top gainers, while Realty down by 1.08%, Bankex down by 0.73%, Power down by 0.72%, PSU down by 0.67%, and Oil & Gas dowe by 0.59%, were the top losers.

Meanwhile, in a move to boost the country’s gems and jewellery exports, the finance ministry hiked the duty drawback rate on gems and jewellery by nearly 31 percent to Rs 227.20 per gram of net gold content, against Rs 173.20 in June. The incentive scheme now stands over 100 per cent higher than Rs 100.70 in 2012-13.

Duty drawback is the reimbursement of excise and customs duty and service tax on the imported inputs used in the manufacture of exported goods and the recent step will also provide relief to the jewellers by neutralizing the effect of increase in import duty on gold and silver. In order to contain rising gold imports, the government has recently raised import duty on gold to 10 per cent from 8 per cent set earlier. Further, import duty on silver was also raised to 10 percent from 6 per cent.

Indian total exports grew by nearly 13 per cent in August, but gems and jewellery exports still reflect negative numbers for the current fiscal. Meanwhile, the Federation of Indian Exporters (FIEO) expects that with the revision in drawback rates, annual exports of this sector will also register a positive growth in coming future. 

The CNX Nifty touched a high and low of 5,857.80 and 5,804.90 respectively. 

The top gainers on the Nifty were HCL Technologies up by 4.20%, Dr Reddy up by 3.37%, Ranbaxy up by 3.28%, Ultra Tech Cement up by 2.93% and Jindal Steel up by 2.42%. On the other hand, Sun Pharma down by 3.71%, Bank of Baroda down by 3.66%, Axis Bank down by 3.20%, IndusInd Bank down by 3.00% and ONGC down by 2.61%, were the top losers.

The European markets were trading in red, France’s CAC 40 was down by 0.31%, Germany’s DAX was down by 0.20%, and United Kingdom’s FTSE 100 was down by 0.36%.

Most of the Asian markets, barring KLSE Composite and Straits Times concluded Tuesday’s trade in red ahead of the US Federal Reserve’s policy meeting, with Japanese market weighed down by a stronger yen. The Fed meeting is important as regional markets were subject to a number of selloffs in the summer, especially in Southeast Asia, as investors became worried that the Fed could change direction on stimulus. Shanghai’s industrial production grew faster in August, while fixed-asset investment and inflation growth both quickened a little. Industrial production grew 4.7 percent from a year earlier to 270 billion yuan ($43.5 billion) last month, accelerating from the pace of 2.5 percent in July and 0.9 percent in June.

Besides, sales of new homes rose to an 11-week high in Shanghai last week amid robust buying in the mid to low-end segments. The purchases of new homes, excluding government-funded affordable housing, jumped over 10 percent from the previous week to 285,600 square meters during the seven-day period ended on Sunday. Foreign direct investment (FDI) into China rose 6.37 percent year-on-year in the first eight months of 2013, adding it was a sign of investor confidence in the world’s second-biggest economy. Incoming FDI, which excludes financial sectors, reached $79.77 billion for the January-August period.