Markets start new series on a positive note

Snapping five days of continuous sell off, Indian equity benchmarks have kick-started the new F&O series on a positive note, with market participants hunting for oversold but fundamentally strong bargains. Meanwhile, bank stocks remained on buyers’ radar after the Reserve Bank of India (RBI) on January 30, 2014 laid out a road map to deal with a surge in bad loans in the banking system. However, gains remained capped as cautiousness crept in, as RBI Governor Raghuram Rajan warned of a breakdown in global policy coordination after the Federal Reserve cut stimulus, further weakening the emerging-market currencies. The investors also remained on sidelines ahead of fiscal deficit data for the April-December period and first revised GDP data for the fiscal year that ended in March 2013, scheduled to be announced later in the day.

On the global front, the US markets rebounded in last session and the major indices recovered on getting report that despite slowing, US economic growth matched estimates. Also there were lots of good earnings supporting the markets. With most of the markets in the region close for Lunar New Year holiday, the mood is quite cautious in the Asian region. Japanese Nikkei, reversing all its gains, was trading in the red despite reporting some strong earnings.

Back home, on the sectoral front, realty witnessed the maximum gain in trade followed by metal and technology, while power, auto and consumer durables 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 975 shares on the gaining side against 392 shares on the losing side while 62 shares remain unchanged.

The BSE Sensex opened at 20544.64; about 46 points higher compared to its previous closing of 20498.25, and touched a high and a low of 20567.57 and 20478.54 respectively.

The index is currently trading at 20553.46, up by 55.21 points or 0.27%. There were 21 stocks advancing against 9 declines on the index.

The overall market breadth has made a strong start with 68.23% stocks advancing against 27.43% declines. The broader indices too were trading in green; the BSE Mid cap index up was by 0.96% and Small cap gained 0.94%. 

The top gaining sectoral indices on the BSE were Realty up by 1.61%, Metal up by 1.26%, Teck up by 1.24%, IT up by 1.16% and Capital Goods up by 0.85%, while Power down by 0.31%, Auto down by 0.11% and Consumer Durables down by 0.10% were the top losers on the BSE. 

The top gainers on the Sensex were Mahindra & Mahindra up by 2.61%, Tata Steel up by 2.25%, TCS up by 2.03%, SSLT up by 1.84% and Bharti Airtel up by 1.18%. On the flip side, Tata Motors was down by 2.80%, NTPC was down by 2.77%, HDFC was down by 1.03%, Hindustan Unilever was down by 0.60% and HDFC Bank was down by 0.57% were the top losers on the Sensex.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) is expected to consider Food Ministry’s proposal soon to give a cash subsidy of Rs 2,000 per tonne to the beleaguered sugar industry for export of four million tonnes of raw sugar for a period of two years. Total subsidy outgo has been pegged at Rs 800 crore that will be adjusted from the Sugar Development Fund (SDF). India, world's second biggest sugar producer but largest consumer, only makes white sugar for domestic consumption and does not manufacture raw sugar. Meanwhile, raw sugar segment presents a lot of exports opportunities for the country. The government had already given subsidy of Rs 1,450 per tonne in 2007-08 to export six million tonnes of sugar and the current incentive is being worked on the procedure.

However, there are differences of opinion among the various ministries on the quantum of cash subsidy as Agriculture Minister Sharad Pawar is in favour of a reasonable subsidy not less than Rs 3,500 per tonne in order to provide major boost to the exports of raw sugar. Furthermore, the industry body Indian Sugar Mills Association (ISMA) has also suggested same incentive of Rs 3,500 per tonne on raw sugar export in view of weak global prices.

It could be a difficult task for India to export raw sugar as global prices are ruling much lower as against the domestic production cost of Rs 26,500 per tonne. Further, domestic sugar mills are facing cash crunch as sugar prices have come down below the cost of production in view of surplus supplies. Meanwhile, the government has been taking measures to improve cash flow of sugar mills. Recently, it has announced interest subsidy on bank loans to mills for paying cane farmers.

The CNX Nifty opened at 6,082.75; about 9 point higher as compared to its previous closing of 6,073.70, and has touched a high and a low of 6,095.15 and 6,068.35 respectively. The index is currently trading at 6,091.35, up by 17.65 points or 0.29%. There were 38 stocks advancing against 12 declines on the index.

The top gainers of the Nifty were M&M up by 2.85%, Tata Steel up by 2.34%, TCS up by 2.05%, SSLT up by 1.76% and Ranbaxy up by 1.47%. On the flip side, NTPC down by 2.96%, Tata Motors down by 2.78%, HDFC down by 1.10%, Asian Paint down by 0.94% and Hindustan Unilever down by 0.94% were the top losers on the index.

In Asia, Nikkei 225 was down by 125.84 points or 0.84% to 14,881.22. Markets in Hong Kong, Shanghai, Taiwan, Singapore, Malaysia, South Korea and Indonesia are all closed for Lunar New Year holiday.