Markets trade higher in early deals ahead of RBI policy

Indian equity benchmarks are trading higher in early deals on Wednesday ahead of the outcome of the central bank’s policy review. The RBI is widely expected to raise its key repo rate by 25 basis points to eight percent, given the price rises at both the retail and wholesale levels. Some support also came in from reports that foreign institutional investors (FIIs) bought shares worth a net Rs 249.93 crore on December 17, 2013, as per provisional data from the stock exchanges.

On the global front, the US markets ended modestly lower in last session ahead of the announcement of the Federal Reserve’s monetary policy decision. However, most of the Asian equity benchmarks are trading in the green at this point of time led by Japanese Nikkei, which surged over one and a half percent, as the country saw a merchandise trade deficit of 1.292 trillion yen in November, beating forecasts for a shortfall of 1.351 trillion yen.

Back home, on the sectoral front, capital goods witnessed the maximum gain in trade followed by power and oil and gas, while metal remained the top losers on the BSE sectoral space. The broader indices too were trading with traction, while the market breadth on the BSE was positive; there were 771 shares on the gaining side against 375 shares on the losing side while 65 shares remain unchanged.

The BSE Sensex opened at 20568.70; about 43 points lower compared to its previous closing of 20612.14, and touched a high and a low of 20735.29 and 20568.70 respectively.

The index is currently trading at 20713.78, up by 101.64 points or 0.49%. There were 22 stocks advancing against 7 declines and one stock remains unchanged on the index.

The overall market breadth has made a strong start with 64.17% stocks advancing against 30.671% declines. The broader indices too were trading in green; the BSE Mid cap index up was by 0.58% and Small cap gained 0.46%. 

The top gaining sectoral indices on the BSE were, Capital Goods up by 1.36%, Power up by 1.02%, Realty up by 0.76%, Oil & Gas up by 0.75% and Consumer Durables up by 0.74%, while Metal down by 0.08% and FMCG down by 0.06% were the top losers on the sectoral index.

The top gainers on the Sensex were BHEL up by 2.36%, HDFC up by 1.90%, Bajaj Auto up by 1.47%, L&T up by 1.46% and Tata Power up by 1.25%. On the flip side, Jindal Steel was down by 1.27%, ICICI Bank was down by 0.54%, SSLT was down by 0.42%, ITC was down by 0.33% and Cipla was down by 0.32% were the top losers on the Sensex.

Meanwhile, In order to provide boost to the country’s manufacturing sector, the committee of manufacturing, chaired by Prime Minister Manmohan Singh, is likely to consider tax incentives and subsidies soon for making the manufacturing sector more competitive. The committee is likely to focus on manufacturing, especially in labour-incentive sectors, which leads to job creation in the country.

Furthermore, the committee is expected to consider measures needed to substitute imports in sectors such as telecom equipment and shipbuilding. Prime Minister Manmohan Singh had already expressed the need to develop a strong domestic manufacturing base in electronics and telecommunications in order to mitigate burden of growing imports for these sectors. India is expected to import electronics products worth $300 billion, which will be more than the value of the country's imports of petroleum products.

The domestic shipbuilding industry, which is even more labour intensive and skill intensive, is import dependent. Meanwhile, the government is of the view that the country is well placed to supply cheap skilled labour that can compete with the best in the world. Present market size of the Indian shipbuilding industry is estimated to be worth $92 billion. Indian manufacturing sector has grown by only 1 percent in Q2 FY14 and industry growth in the first eight months of 2013-14 was recorded at zero percent, reflecting the need of more measures for government to recover the domestic manufacturing sector. Further, sluggish growth in manufacturing and high imports has become main cause for widening current account deficit (CAD) of the country.

The CNX Nifty opened at 6,129.95; about 9 points lower as compared to its previous closing of 6,139.05, and has touched a high and a low of 6,177.90 and 6,129.95 respectively. The index is currently trading at 6,172.35, up by 33.30 points or 0.54%. There were 41 stocks advancing against 9 declines on the index.

The top gainers of the Nifty were BHEL up by 2.72%, HDFC up by 1.90%, Bajaj-Auto up by 1.68%, L&T up by 1.50% and Power Grid up by 1.32%. On the flip side, Jindal Steel down by 1.19%, ITC down by 0.48%, NMDC down by 0.43%, ICICI Bank down by 0.42% and SSLT down by 0.39% were the top losers on the index.

Most of the Asian equity indices were trading in green; Hang Seng rose 147.39 points or 0.64% to 23,216.62, Jakarta Composite strengthened 19.02 points or 0.45% to 4,201.37, Nikkei 225 surged 240.40 points or 1.57% to 15,519.03, Straits Times increased 1.63 points or 0.05% to 3,069.20, Seoul Composite gained 8.69 points or 0.44% to 1,974.43 and Taiwan Weighted was up by 2.68 points or 0.03% to 8,355.61.

On the flip side, Shanghai Composite slipped 0.85 points or 0.04% to 2,150.23 and KLSE Composite was down by 2.00 points or 0.11% to 1,848.90.