Two and half year low September trade deficit data lifts market to day’ high

Narrower than expected trade deficit data, which came at two and half year low for the month of September, has lifted the markets to day’s high. The data came as the short in the arm to the Indian equity markets, which changing gears to the green terrain, have now escalated to day’s highest point, with Sensex trading past the crucial 20,000 and Nifty just shy of the crucial 6,000 level with gains of close to half a percent. On the macro-front, strengthening the outlook for the rupee, India's trade deficit narrowed to $6.7 billion last month, compared with $10.9 billion in August, led by fourth consecutive month decline of imports and three consecutive months of double digit growth of country’s export in the month of September. However, a sharp run-down of the bourses was limited since the start of the trade on account of overall neutral tone of RBI’s governor about the future scope of monetary policy in slew of media interview.

On the global front, Asian pacific shares were trading mostly upbeat after President Barack Obama said he was open to a short-term deal to end a US budget stand-off and avoid a devastating default. Meanwhile, European shares got off to a somber start as the U.S. government shutdown continues and the October 17 deadline to raise the debt ceiling approaches.

Closer home, stocks from Realty, Health Care and Oil & Gas counters witnessing maximum buying interest were the top gaining indices on BSE, while those from Consumer Durables, Technology and Information Technology were the major pockets of weakness, curbing the further up-trend of Indian equity markets. The overall market breadth on BSE is in the favour of advances which thumped declines in the ratio of 1103:850; while 141 shares remained unchanged.

The BSE Sensex is currently trading at 20064.78, up by 81.17 points or 0.41% after trading in a range of 20101.16 and 19826.96. There were only 15 stocks advancing against 15 declines on the index.

The broader indices too have added ground; the BSE Mid cap and Smallcap indices were trading higher by 0.65% and 0.51% respectively.

The gaining sectoral indices on the BSE were Realty up by 1.78%, Healthcare up by 1.69%, Oil and Gas up by 0.98%, Capital Goods up by 0.96% and FMCG up by 0.49%. While, Consumer Durables down by 0.41%, Teck and Information Technology were down by 0.03% were remained the only losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 3.69%, Tata Steel up by 1.67%, Reliance Industries up by 1.56%, HDFC up by 1.51% and HDFC Bank up by 1.41%. On the flip side, SSTL down by 1.13%, Wipro down by 1.10%, Bharti Airtel down by 1.07%, ICICI Bank down by 1.00% and NTPC down by 0.97% were the only losers on the Sensex.

Meanwhile, in a move to enhance the inflow of foreign capital into the country, the Reserve Bank of India (RBI) further relaxed norms that would encourage banks to raise funds in overseas market. Under new norms, the RBI allowed bank for swap facility for term deposits in dollar denomination at a concessional rate of 1 percent below the market rate for the period of 1 to 3 years. Banks can now borrow such funds from their head office, overseas branches and correspondents and overdrafts in nostro accounts up to a limit of 100 percent of their unimpaired Tier I capital as at the close of the previous quarter or $10 million, whichever is higher as against the existing limit of 50 percent.

The central bank said in its notification that during swap period a bank can sell dollars in multiples of a million to RBI and would have to buy the same amount of dollars at the end of the swap period. Central bank said that though the swaps would be for the entire tenor of the borrowing, the rate would be reset after every one year from the date of the swap at hundred basis points lower than the market rate prevailing on the date of reset. The concessional swap window shall be open till November 30, 2013. By adding further, RBI said that while the banks are allowed to borrow in any freely convertible currency, the swap will be available only for conversion of US dollar equivalent into rupees, which would be computed at the relevant cross rate prevailing on the date of the swap.

Further, in other amendment to overseas direct investment norms, the RBI has decided that issue of corporate guarantee on behalf of second generation will be considered under the approval route and on basis of current market conditions relating to excessive volatility in yields of government securities, the central bank has decided to increase the quantum of Held to Maturity (HTM) securities from 100 percent to 200 percent of the audited net owned fund of the bank as at end March.

The CNX Nifty is currently trading at 5,955.60 up by 27.20 points or 0.46% after trading in a range of 5,967.40 and 5,877.10. There were 30 stocks advancing against 19 declines on the index.

The top gainers of the Nifty were JP Associate up by 4.35%, Sun Pharma up by 3.68%, DLF up by 3.42%, IndusInd Bank up by 3.02%, and NMDC up by 2.48%. On the flip side, M&M down by 1.29%, NTPC down by 1.25%, Wipro down by 1.17%, Bharti Airtel down by 1.16% and SSTL down by 1.10%, were the major losers on the index.

The Asian equity indices were trading mixed; Jakarta Composite up by 0.34%, Seoul Composite up by 0.42%, Straits Times up by 0.31%, Nikki 225 up by 1.03% and Shanghai Composite up by 0.37%. While, Hang Seng down by 0.63%, KLSE Composite down by 0.28% and Taiwan Weighted down by 0.37%.

European markets got off to a negative start; with CAC 40 declining by 0.27%, DAX sliding by 0.13%and FTSE 100 declining by 0.36%.