Benchmarks end with modest gains on RBI’s measures to ease liquidity

Indian equity benchmarks, after a solid start, came off their day highs in final hours of trade, amid a weakening rupee, though managed to end slightly higher on Tuesday led by buying in select rate-sensitive counters. Earlier, domestic gauges made a gap-up start after the Reserve Bank of India (RBI), in a surprise move, eased the liquidity tightening measures it had initiated earlier, by reducing the marginal standing facility (MSF) rate by a further 50 basis points (bps). This is the second time in less than a month that the central bank has cut the key overnight interest rate, taking advantage from the rupee’s recent surge. Sentiments also remained up-beat on report that foreign institutional investors (FIIs) bought shares worth a net Rs 494.13 crore on October 7 2013.

Positive trade in Asian counters too provided some support to domestic markets with most of the regional bourses ending the session in the green despite investors warily watching the uncertain political standoff in the US over raising the country’s debt ceiling. However, sluggish opening in European counterparts dampened the sentiments amid concerns that the political deadlock in the US could continue, potentially hampering efforts to raise the US government's borrowing limit.

Back home, buying in rate sensitive counters like banking and realty continued to support markets as stocks related to these sectors edged higher after RBI announced measures to improve liquidity conditions in the banking system. Some support also came in from buying in auto sector on report that domestic car sales improved for the first time this fiscal with the industry selling 1.56 lakh cars during September, up by 0.73% from a year earlier 1.54 lakh. However, the uptick remained limited on account of high interest rates and fuel costs. Stocks related to telecom sector viz. Bharti Airtel, Idea Cellular and Reliance Communication edged higher after the Department of Telecommunications (DoT) slashed the proposed one time charge to Rs 1,989.18 crore from Rs 2,764.29 that was originally demanded for airwaves held by nine mobile phone companies whose permits were quashed by Supreme Court in February 2012. 

However, gains remained capped after Indian rupee depreciated due to dollar demand from private sector oil marketing companies. The rupee was trading at Rs 61.85 per dollar at the time of equity markets closing as compared with previous close of Rs 61.80 per dollar. Profit booking in software and metal counters after recent rallies, too limited the gains.

The NSE’s 50-share broadly followed index Nifty rose over twenty to hold its psychological 5,900 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around ninety points to end above its psychological 19,950 mark.

Moreover, broader markets traded in-line with benchmarks and ended the session with gain of around half a percentage point. The market breadth remained in favour of advances, as there were 1,276 shares on the gaining side against 1,141 shares on the losing side, while 147 shares remained unchanged.

Finally, the BSE Sensex gained 88.51 points or 0.44%, to settle at 19983.61, while the CNX Nifty added 22.25 points or 0.38% to settle at 5,928.40.

The BSE Sensex touched a high and a low of 20150.27 and 19936.72, respectively. The BSE Mid cap index was up by 0.19% and Small cap index gained 0.53%.

The top gainers on the Sensex were Tata Power up 2.87%, Bharti Airtel up 2.77%, L&T up 2.38%, ICICI Bank up 2.26% and ITC up 2.24%, on the flip side, Hindalco Inds down 1.77%, SBI down 1.29%, Tata Steel down 1.22%, Coal India down 1.18%, and Sesa Sterlite (SSLT) down 1.11%, were the top losers on the index. 

On the BSE Sectoral front, Realty up by 1.57%, Capital Goods up by 1.32%, FMCG up by 0.78%, Power up by 0.76%, and Bankex up by 0.67%, were the top gainers, while Metal down by 0.80%, IT down by 0.25%, and PSU down by 0.06%, were the only losers on the sectoral front.

Meanwhile, the Department of Telecommunications (DoT) has slashed the proposed one time charge to Rs 1,989.18 crore from Rs 2,764.29 that was originally demanded for airwaves held by nine mobile phone companies whose permits were quashed by Supreme Court in February 2012.  Earlier, in December, the government had imposed a one-time fee on telecom operators both prospectively and retrospectively for the airwaves they currently hold. Meanwhile, all leading telecom companies have challenged this fee in court. One-time charges have been calculated for spectrum allocated on a pro-rata basis based on the approved reserve price of airwaves in 1800 MHz and 800 MHz band auctioned last November.

The retrospective component of this charge also applies to the nine companies whose licences were canceled in February last year. Accordingly, DoT has provisionally computed one-time airwave charges for these operators by pegging licence validity till February 15, 2013 as there is no information on these players subsequently inking unified licences. Telecom players which are expected to incur biggest losses are Unitech Wireless, or Uninor at Rs 515.63 crore, followed by Sistema Shyam Teleservices at Rs 490.96 crore, Videocon Telecommunications at Rs 478.09 crore, Idea Cellular Rs 162.17 crore.

The CNX Nifty touched a high and low of 5,981.70 and 5,913.00 respectively.

The top gainers on the Nifty were Bharti Airtel up by 2.51%, Larsen & Toubro up by 2.21%, ITC up by 2.09%, Jindal Steel & Power up by 2.04% and ICICI Bank up by 2.00%. On the other hand, BPCL down by 3.23%, Hindalco Industries down by 2.05%, State Bank of India down by 2.02%, IDFC down by 1.93%, and BHEL down by 1.44%, were the top losers.

The European markets were trading in red, France’s CAC 40 was down by 0.32%, Germany’s DAX was down by 0.22%, and United Kingdom’s FTSE 100 was down by 0.77%.

All the Asian markets concluded Tuesday’s trade in green despite a budget gridlock in Washington. Shanghai Composite resumed trading after the National Week public holiday. China’s non-manufacturing purchasing managers’ index (PMI) rose to 55.4 percent in September from 53.9 percent for August, according to official data released. A PMI reading of more than 50 percent indicates expansion in non-manufacturing activity, while a reading below 50 percent indicates contraction. Investors are now looking ahead to trade and inflation data, out over the weekend and early next week, to see whether China will produce further signs of an economic recovery that have helped support stocks in recent weeks.

Bank Indonesia held its benchmark reference rate unchanged for the first time since May, thanks to encouraging data and developments that have eased pressure on the ailing rupiah. Between June and September, the central bank had raised the rate 150 basis points to 7.25 percent to battle inflation and boost the battered currency. Indonesia’s current account deficit is likely to be 3.4% of gross domestic product this year, central bank governor stated. The deficit hit 4.4% of GDP in the second quarter, helping drive down sentiment about the rupiah, which is now Asia’s worst performing currency.

Japan’s current account balance rose less-than-expected last month. The Ministry of Finance stated that Japan’s Current Account rose to a seasonally adjusted 0.35T, from 0.33T in the preceding month. Hong Kong foreign currency reserve assets amounted to $303.5 billion at the end of September, down from $303.9 billion in August, the Monetary Authority reported. The total foreign currency reserve assets represent more than seven times the currency in circulation, or about 51% of Hong Kong dollar M3. The Monetary Authority of Singapore will probably refrain from easing monetary policy this month as taming inflation takes priority over reviving economic growth.