Benchmarks turn volatile ahead of FOMC outcome

Benchmarks turned volatile in late morning deals as investors are cautious ahead of conclusion of two-day Federal Reserve meeting ending today and guidance from new RBI governor Raghuram Rajan on September 20. On the global front, the US stocks advanced overnight on expectations the Federal Reserve will make only moderate changes to its stimulus that has been highly supportive of stocks and other assets at the conclusion of its two-day meeting. While, most of the Asian equity benchmarks were trading in the red at this point of time with Chinese Shanghai were trading lower after official data showed that home prices were higher in August, which may constrain Beijing from further easing monetary policy.

Back home, traders were buying, Realty, Consumer Durables and FMCG while selling were seen in Auto, IT and Power on the BSE. Shares of jewellery companies like Titan Industries, Tribhovandas Bhimji Zaveri (TBZ), PC Jeweller, Gitanjali Gems, Shree Ganesh Jewellery House (India) and Goenka Diamond & Jewels edged higher after the government increased the customs duty on gold and silver jewellery by five percentage points to 15% to protect the domestic industry.

BSE Sensex and NSE Nifty were comfortably trading near their psychological 5800 and 19,800 levels respectively. The market breadth on BSE remains strongly in favour of gainers with advances to declines in the ratio of 820:660. The BSE Sensex is currently trading at 19805.39, up by 1.36 points or 0.01% after trading in a range of 19900.68 and 19775.29. There were 21 stocks advancing against 9 declines on the index. The broader indices were trading in red; the BSE Mid cap index was down by 0.28% and Small cap index lost 0.28%.

The top gaining sectoral indices on the BSE were, Realty up by 1.44%, Consumer Durables up by 1.10%, FMCG up by 0.79%, Health Care up by 0.60% and Metal up by 0.39% while Auto down by 0.21%, IT down by 0.13%, Power down by 0.09%, and TECK down by 0.01% were the top losers on the sectoral index.

The top gainers on the Sensex were Cipla up by 1.78%, Dr Reddys Lab up by 1.75%, Coal India up by 1.50%, SBI up by 1.39% and Hindustan Unilever up by 1.39%. On the flip side, HDFC was down by 2.71%, Mahindra & Mahindra was down by 1.30%, GAIL was down by 1.20%, HDFC Bank was down by 0.90%, and BHEL was down by 0.81% and were the top losers on the Sensex.

Meanwhile, As per the Apparel Export Promotion Council (AEPC), the recent hike in duty drawback rates by the government would help boost the garment sector's exports. Duty drawback is the reimbursement of excise and customs duty and service tax on the imported inputs used in the manufacture of exported goods. The latest government move is a major incentive for the garment sector as it imports large quantities of raw material to make items for export purposes.

Last week, the government has rationalized the duty drawback and brought more items including garment cotton, manmade and silk under the scheme in order to give a boost to country’s overseas shipments.  The drawback rates for the garment cotton, man-made garments and silk have increased to 7.6 percent, 10.2per cent and 7.8 percent respectively for 2013-14. The revised all industry rates of duty drawback will come into effect from September 21.

India's garment exports grew by 19 percent year-on-year to $1.27 billion in July on the back of rising demand in developed economies such as the US. Indian garment export to the US has witnessed a growth of 3.7 percent during the first five months of 2013. During April-July 2013-14, Indian garments exports grew by 13 percent to $4.84 billion. Meanwhile, the AEPC has also demanded the Reserve Bank of India (RBI) to include export sector in the priority sector lending for all banks, which will help exporters in getting easy and affordable credit.  

The CNX Nifty is currently trading at 5,848.55 down by 1.65 points or 0.03% after trading in a range of 5,877.90 and 5,840.20. There were 29 stocks advancing against 21 declines on the index.

The top gainers of the Nifty were DLF up by 2.66%, Ranbaxy up by 2.54%, DR Reddy up by 1.76%, Cipla up by 1.75%, Coal India up by 1.63%. On the flip side, HDFC down by 2.54%, Cairn down by 2.13%, Ambuja Cements down by 1.87%, M&M down by 1.47% and GAIL down by 1.29% were the major losers on the index.

Most of the Asian equity indices were trading in red; Shanghai Composite dipped 4.51 points or 0.21% to 2,181.05, Hang Seng dropped 97.43 points or 0.42% to 23,083.09, Jakarta Composite declined 30.56 points or 0.68% to 4,487.06, KLSE Composite slipped 4.24 points or 0.24% to 1,770.70, Seoul Composite shed 7.79 points or 0.39% to 2,005.58 and Taiwan Weighted was down by 6.91 points or 0.08% to 8,238.74.

On the flip side, Nikkei 225 surged 150.95 points or 1.05% to 14,463.92 and Straits Times was up by 15.83 points or 0.49% to 3,196.64.