Benchmarks pare early gains; slip to day’s low

Capitulating to fresh bout of selling pressure, Indian equity markets, erasing half of its early gains, have slipped to day’s lowest point as select investors preferred cashing in their profits ahead of the start of European markets amidst prevailing caution ahead of Reserve Bank of India's meeting on Wednesday where it is likely to raise rates for the third time in four months and ahead of a key US Federal Reserve policy decision later this week. Despite trading near day’s low, both Sensex and Nifty, were trading above the crucial 20,700 and 6,150 bastions respectively. Meanwhile, broader indices also following suit have trimmed most of their gains. Nevertheless, positive regional counterparts are mainly keeping the momentum positive for Indian equity markets. Asian share markets were trading mostly positive, on the back of rising U.S. manufacturing output and a jump in euro zone business activity, ahead of a momentous U.S. Federal Reserve policy decision later this week.

Closer home, besides the fall of banking shares, Realty pivotal too is witnessing selling pressure on hopes that RBI would hike rates by at-least 25 bps in policy review tomorrow. On the flip side, defensive Health Care, Technology and Fast Moving Consumer Goods counters are the prominent gainers of the session. Depreciation of Indian currency on outflows related to the unsubscribed portion of the Power Grid share sale is mainly lifting IT shares higher. The overall market breadth on BSE is in the favour of advances which have thumped declines in the ratio of 1167:904; while 161 shares remained unchanged.

The BSE Sensex is currently trading at 20707.45, up by 47.93 points or 0.23% after trading in a range of 20,784.03 and 20701.15. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices too trimmed gains; with BSE Mid cap and Small cap indices were trading up by 0.41% and 0.49% respectively.

The gaining sectoral indices on the BSE were Healthcare up by 1.50%, Teck up by 0.74%, FMCG up by 0.57%, IT up by 0.56%, and Metal up by 0.51% and Capital Goods up by 0.50%. While, Bankex was down by 0.58%  and Realty down by 0.19% were the only losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 4.30%, Cipla up by 2.80%, Sun Pharma up by 1.87%, Torent Pharma up by 1.75% and TCS up by 1.72%. On the flip side, HDFC Bank down by 3.16%, Coal India down by 2.96%, NTPC down by 1.20%, Bajaj Auto down by 1.07% and HDFC down by 1.06%.

Meanwhile, amid rising fears over the increase in natural gas prices to $8.4 per mbtu from April 1, 2014 which is twice the current rate, Finance Ministry has strongly pitched for putting a cap on gas rates saying that it is necessary to protect the interests of government/consumers in case of an unreasonable upswing in the prices. Earlier in June, the government had approved the formula under which all domestically produced gas will be priced at an average of the price prevailing at international gas trading hubs and the actual cost of importing liquid gas (LNG). The natural gas pricing formula will be effective from April 1, 2014 for a period of five years and the prices will be revised on the quarterly basis. Moreover, the price for each quarter will be calculated based on the 12-month trailing average price with a lag of one quarter.

Under the new approved pricing formula, the gas prices will get doubled at $8.40 per million British thermal unit from the current price at $ 4.20 per mbtu and put excessive burden on consumers. Meanwhile, finance ministry is of the view that under this formula the gas producers will reap unlimited gains in case of an upswing in global prices. So far, the new gas price formula has not been notified amid disputes over whether Reliance Industries should get the new rates, as it has not been producing as per pre-stated targets from eastern offshore KG-D6 block. Recently, oil ministry has submitted a draft seeking to allow higher gas price to Reliance Industries if it submits a bank guarantee for the unmet supply commitment from its KG-D6 block.

The new price will be uniformly applicable to all public and private sector producers alike. The increase in gas prices will directly benefit these local producers. Further, the move to raise gas prices is expected to benefit the government by around $2.2 billion incremental revenue by way of higher taxes. The government can use high profit share to subsidize gas supply to the core sector.

The CNX Nifty is currently trading at 6,168.45, up by 13.75 points or 0.22% after trading in a range of 6,190.55 and 6,166.05. There were 33 stocks advancing against 17 declining on the index.

The top gainers of the Nifty were Bharti Airtel up by 4.32%, Ranbaxy up by 4.15%, Cipla up by 3.14%, Sun Pharma up by 2.13% and JP Associates up by 2.05%. On the flip side, HDFC Bank down by 3.24%, Coal India down by 3.00%, NTPC down by 1.16%, Bajaj Auto down by 1.08% and HDFC down by 1.03% were the major losers on the index.

The Asian equity indices were trading in Green; Hang Seng up by 0.01%, Nikkei 225 up by 0.83%, Taiwan Weighted up by 0.47%, KLSE Composite up by 0.62%,  Seoul Composite up by 0.23%, Straits Times up by 0.51%, and Jakarta Composite up by 1.41%. While, Shanghai Composite down by 0.59% was the lone loser amongst Asian pack.