Govt nod for hiking FDI in cable industry prompts slender recovery at Dalal Street

Unwinding of long position after barometer gauges touched a two and a half year high in previous session, mainly prompted a lull at Dalal Street in early deals. As caution ahead of a Franco-German summit in Paris Monday, a key two-day European Union summit and the European Central Bank's policy meeting on Thursday kept some investors at bay. However, barometer indices have pared some off the loss on the back of recovery in few blue chip stocks. Moreover, buoyed by the upbeat reports of Cabinet giving its nod for cable digitization, with the government bracing itself for hiking the foreign direct investment (FDI) limit in the distribution platforms from 49 per cent to 74 per cent, has also prompted partial recuperation. Dish TV up by 0.22% and Hathway Cable & Datacom up by 1.39% were the among few cable stocks striving hard for boosting sentiment.

However, disappointed over the fading talks of central bank pruning the cash reserve ratio, which could pump liquidity into the system, market participants easily overlooked the new approved law to eliminate the country's budget deficit by 2013 and stronger-than expected monthly U.S. jobs report on Friday. Italian Prime Minister Mario Monti's cabinet on Sunday approved a law aimed at making sure Italy cuts its budget deficit by 2013, including Euro 17 billion in new taxes, Euro 13 billion in public spending cuts, and Euro 10 billion in measures aimed at boosting economic growth. Meanwhile, Asian shares failing to provide any cues were trading on a mixed note at this point of time. Additionally, the US future indices too endorsing divergent trend were trading mixed in the screen trade.

Back on the home turf, however, stocks from Power, Realty and Capital Goods (CG) are striving hard for pruning losses, while stocks from  Metal, FMCG and Information Technology counters are acting as the week spells in the trade. However, different from frontline indices, broader indices too have gained traction in trade. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1194:837, while 105 shares remained unchanged.

The BSE Sensex is currently trading at 16,785.93, down by 60.90 points or 0.36%. The index has touched a high and low of 16,845.87 and 16,727.10 respectively. There were 12 stocks advancing against 18 declines on the index.

The broader indices after commencing the session on a flat note gained some traction; the BSE Mid cap and Small cap index rose 0.25% and 0.38% respectively.

The top gaining sectoral indices on the BSE were, Power was up by 0.87%, Realty up by 0.80%, CG up by 0.53%, Auto up by 0.22% and PSU up by 0.20%. While, Metal down by 0.68%, FMCG down by 0.51%, IT down by 0.48%, Bankex down by 0.27%, Oil and Gas down by 0.21% were the top losers on the index.

The top gainers on the Sensex were BHEL up by 2.23%, Jaiprakash Associate up by 1.49%, DLF up by 1.16%, Maruti Suzuki up by 0.62% and Bharti Airtel up by 0.47%.

On the flip side, Wipro down by 1.83%, Tata Steel was down by 1.75%, Hindalco down by 1.55%, ITC down by 1.21% and HDFC down by 1.18% were the top losers on the Sensex.

Meanwhile, the government’s plan of meeting disinvestment target for the current financial year has run into fresh problem as the ministry of power has indicated that all six companies under its administration will not be able to participate in the process. The public sector enterprises under the administrative control of the power ministry are NTPC, Power Grid, NHPC, REC, PFC and NEEPCO.

In a oppose note to the North Block, the ministry of power has argued that all the state-run firms have big expansion plan to tackle the massive power shortage in the country and therefore, won’t be able to spare cash for share buyback.

A finance ministry official said, 'they (power ministry) have argued that they are targeting a capacity addition of almost 100,000 MW during the 12th Five Year Plan (2012-17)'. By adding further he said, 'this would need huge investments, and PSUs under them have already committed funds for various projects'.

As per the estimates, the combined cash surplus with all these state-run firms is around Rs 50,000 crore more than 2011-12 disinvestment target of Rs 40,000 crore that the government is struggling to meet, which have just raised Rs 1,145 crore in the 2011-12.

Till now, the department of public enterprises (DPE), a nodal agency for 246 state-run firms, has supported the cabinet note proposed by the finance ministry on share buyback.  However, the DPE has also cautioned that firms should not be forced to buy back shares, recommending that the option should be left to the respective boards. Further, DPE also suggested to follow all the guidelines of the capital market watchdog Securities and Exchange Board of India.

The ministry of finance has moved a cabinet proposal to give executive sanction to listed companies having surplus cash for buying back their shares. The government is also exploring various options, including cross-holding, share buyback, auction and special dividend to raise disinvestment proceeds. Recently, finance minister Pranab Mukherjee has said that the government will stick to its disinvestment target of Rs 40,000 crore in this fiscal.

The S&P CNX Nifty is currently trading at 5,028.55, down by 21.60 points or 0.43%. The index has touched a high and low of 5,049.70 and 5,014.90 respectively. There were 19 stocks advancing against 31 declines on the index.

The top gainers of the Nifty were RCom up by 3.04%, BHEL up by 2.62%, JP Associates up by 1.78%, DLF up by 1.52% and Cairn India up by 1.48%.

On the flip side, Tata Steel down by 1.67%, Hindalco down by 1.48%, Sesa Goa down by 1.37%, HCL technologies down by 1.34% and HDFC down by 1.21%, were the major losers on the index.

Asian markets were trading mixed; Hang Seng gained 0.39%, Jakarta Composite inched up 0.13%, Nikkei 225 added 0.44% and Seoul Composite rose by 0.04%.

On the flip side, Shanghai Composite declined 0.94%, KLSE Composite inched lower 0.01%, Straits Times slid 0.39% and Taiwan Weighted descended 0.66%.