Barometer gauges retreat from intra-day’s high; broader indices buck trend

After aligning gains with global indices in the early trade, domestic barometer gauges have now retreated from their intra-day’s high as cautious optimism ahead of the EU summit have made market participants wary about their long positions. However, overall positive milieu continues to envelop Dalal Street on the back of mounting optimism that European leaders will approve aggressive plans by the end of the week to rescue the region from a debt crisis that has roiled financial markets for months, which besides keeping the Asian indices in fine contour also augmented the spirit of local bourses. At the summit on Thursday and Friday, France and Germany are expected to try to force changes to EU rules to penalize countries that exceed deficit targets in hopes of restoring market confidence. A Financial Times report stated that European leaders will discuss boosting the firepower of the euro zone's rescue fund at the summit.

The regional mood in early deals was helped by Australia's stronger-than-expected third quarter growth. The Australian Bureau of Statistics reported on Wednesday that the nation's gross domestic product rose by 1 percent in the three months to September 30 from the previous quarter, bolstered by its booming mining industry.

Back home, lingering concerns over FDI in retail clamor, also contributed the choppiness on the bourses as opposition on Wednesday agreed to government offer to hold back Foreign Direct Investment (FDI) in retail. On the BSE sectoral front, though the entire space was filled with optimism, stocks from Information Technology, Power and Metal counters contributed the most towards the sparkling gains of the bourses. The broader indices too have gained traction.  The overall market breadth on BSE was hugely in the favour of advances which outpaced declines in the ratio of 1398:688, while 100 shares remained unchanged.

The BSE Sensex is currently trading at 16,956.49, up by 151.16 points or 0.90%. The index has so far touched a high and low of 16,995.08 and 16,781.62.   There were 26 stocks advancing against 2 declining ones on the index, while 2 stocks remained unchanged.

The broader indices have gained traction; the BSE Mid cap and Small cap indices surged 0.68% and 0.73% respectively.

Buying was witnessed across the board, however, the top gaining sectoral indices on the BSE were, IT up by 1.25%, Power up by 1.08%, Metal up by 1.02%, Auto up by 0.96% and  Bankex up by 0.92%.

The top gainers on the Sensex were Tata Power up by 2.78%, Jaiprakash Associates up by 2.68%, Wipro up by 1.97%, Jindal Steel up by 1.78% and Sterlite Industries up by 1.76%.

On the flip side, Coal India down by 1.76% and Bharti Airtel down by 1.61% were the only losers on the index.

Meanwhile, the government for the current financial year is less likely to further increase subsidy on imported fertilizers, especially Di-Ammonium Phosphate (DAP) and Muriate of Potash (MoP). The decision has come in the wake of high international prices and decline in rupee against America dollar, which increased the cost of imports.  

Despite the surge in demand for fertilizers, the ministry of fertilizer has indicated that any decision of raising the benchmark prices for DAP and MoP under the current policy would be taken after March 2012, as the ministry wants to wait and watch the situation. The ministry further expects that the global prices may come down because of decline in demand on the back of ongoing crisis in euro-zone and slowdown in United States.

In the Nutrient Based Subsidy (NBS) policy, which was introduced in 2010, the government subsidises imported phosphatic and potassium fertilisers based on the average benchmark rate to insulate domestic firms from high global prices. The government keeps domestic rates affordable for farmers.

Under the NBS policy, in 2011-12, the government is giving a subsidy of Rs 19,763 per tonne on DAP and Rs 16,054 per tonne on MoP. In the current fiscal, the ministry has raised the benchmark price of DAP and MoP to $612 per tonne and $420 per tonne respectively.

However, industry has demanded an upward revision in the benchmark price due to increase in cost of inputs on the back of surge in international prices and fall in rupee. However, ministry is of the view that currently there is no case for hike in the benchmark price as domestic firms have already constricted DAP and MoP supplies till March 2012.

India completely depends on imports to meet the requirements of Mop, which has contracted 5.5 million tonnes in 2011-12 for a price of $470 a tonne in the second and third quarters and at $530 a tonne in the last quarter. And for DAP, India imports 90% of its DAP requirement, has contracted around 2.5 million tonnes for $677 per tonne till the fourth quarter of 2011-12. In 2010-11, India has imported around 7.41 million tonne DAP and 4.5 million tonne MoP in 2010-11.

However, international prices of fertilizers may come under pressure with the likely surge in production of DAP and MoP in China, which is the largest consumers of fertilizers. Experts are of the view that the international prices of DAP and MoP would remain weak in the medium term because of uncertainty in global economy. However, in the long term international prices of both are expected to be buoyant.

The S&P CNX Nifty is currently trading at 5,082.75, higher by 43.60 points or 0.87%. The index has touched a high and a low of 5,097.15 and 5,032.25 respectively. There were 45 stocks advancing against 4 declining one’s on the index, while a stock remained unchanged.

The top gainers of the Nifty were RCom up by 4.14%, HCL Tech up by 2.76%, Tata Power up by 2.62%, JP Associate up by 2.38% and Wipro up by 2.23%.

On the flip side, Coal India down by 2.07%, Bharti Airtel down by 1.95%, Sun Pharmaceuticals down by 0.08% and Sesa Goa down by 0.05% were the losers on the index.

Asian pacific markets continued to trade in fine contour; Shanghai Composite gained 0.10%, Hang Seng added 0.93%, Jakarta Composite rose 0.19%, Nikkei 225 surged 1.10%, Straits Times rose 0.70%, Seoul Composite accumulated 0.51% and Taiwan Weighted was up by 0.77%.

On the flip side, KLSE Composite declined 0.34% was the loner loser among Asian pack.