Indian markets starts the new F&O series on a positive note

First day of the new F&O series largely remained flat as the aimless indices oscillated in a very tight range throughout the session. Nevertheless, Indian barometer gauges, snapping five days losing streak, ended the session slightly in the green terrain, with market participants hunting for oversold but fundamentally strong bargains. Moreover, some relief crept in after Finance Ministry, in an attempt to calm down frayed nerves, underscored that the economy was well prepared to deal with the US Fed tapering programme.

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, European markets traded lower in early deals, as investors prepared for inflation and unemployment data from the euro zone, which should help gauge whether the region’s recovery remains on track. In Asia, with most of the markets in the region close for Lunar New Year holiday, Japanese Nikkei, reversing all its gains, ended the session in the red terrain with a cut of over half a percent despite some strong earnings.

Back home, banking 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. Some boost to the banking stocks also came after Punjab National Bank (PNB) reported fall in ratio of net non-performing asset to 2.8% on sequential basis from 3.07% as on September 30, 2013. Moreover, stocks related to software and technology counter viz. TCS, Wipro, Tech Mahindra etc. edged higher on good US economic data.

Additionally, select stocks from real estate counter like, Godrej Properties and Oberoi Realty edged higher after the Supreme Court on Thursday quashed all prior notices and orders regarding encroached forest land in various areas bordering the sprawling Sanjay Gandhi National Park in Mumbai.

The NSE’s 50-share broadly followed index, Nifty rose by over fifteen points to end above its psychological 6,050 support level, moreover Bombay Stock Exchange’s Sensitive Index -- Sensex too rose by over fifteen points to end above its psychological 20,500 mark. Broader markets too traded with traction and ended the session with a gain of over a percentage point. The market breadth remained in the favour of advances, as there were 1,525 shares on the gaining side against 1,059 shares on the losing side, while 147 shares remained unchanged.

Finally, the BSE Sensex gained 15.60 points or 0.08%, to settle at 20513.85, while the CNX Nifty added 15.80 points or 0.26% to settle at 6,089.50.

The BSE Sensex touched a high and a low of 20572.32 and 20448.43, respectively. The BSE Mid cap index was up by 1.56%, while the Small cap index gained 1.32%.

The top gainers on the Sensex were Tata Steel up 2.77%, Tata Power up 2.71%, Gail India up 2.62%, Mahindra & Mahindra up 2.43% and Bharti Airtel up by 2.19%, on the flip side Tata Motors down 3.14%, HDFC down 2.50%, Hero MotoCorp down 1.47%, NTPC down 1.33%, and Bajaj Auto down by 0.92% were the top losers on the index.

On the BSE Sectoral front Realty up by 1.63% Metal up by 1.27%, PSU up by 1.27%, Oil & Gas up by 1.18% and Teck up by 1.04% were the top gainers, while Auto down by 0.43% was the only loser on the sectoral front.

Meanwhile, a Group of Ministerial Panel (GoM) has recommended increase in fixed cost paid to urea manufactures by Rs 350 per tonne. Meanwhile, there will be no increase in the rate of crop nutrient for farmers as the additional cost of Rs 900 crore will be endured by the government. Earlier, Fertiliser Ministry had moved the proposal for modified New Pricing Scheme (NPS) III, under which the Ministry calculated production cost of urea to pay subsidy and had proposed to raise the fixed cost of urea by Rs 350 per tonne. Now, the proposal would be moved to Cabinet Committee on Economic Affairs (CCEA) for consideration.

According to the proposal, the fixed cost of urea produced by plants which are 30 years old or more would be increased by Rs 150 per tonne, while for all other plants it would be raised by Rs 350 per tonne. The base year for calculating fixed cost of urea has been changed from 2002-03 to 2008-09 and minimum fixed cost would be Rs 2,300 per tonne . Further, this scheme would remain applicable for one year from the date of notification. Fixed cost for a urea plant mainly includes repair & maintenance, salary & wages, contract labour and selling expenses. However, the proposed urea fixed cost at Rs 350 per tonne subsidy is lower than the industry demand at Rs 700 per tonne by using 2011-12 as the base year. The government introduced the New Pricing Scheme (NPS) Stage-III for urea units in 2007 and was originally effective from October 2006 to March 2010. Now, the scheme has been extended for three more years and was based on cost of production with 2002-03 as the base year.

India produces about 22 million tonnes (MT) of urea annually and also imports around 8 MT to meet the domestic total requirements. Currently, Indian fertilizer industry is struggling with acute liquidity crunch on account of high production costs. So far this fiscal, the government has allocated Rs 70,586 crore funds to Department of Fertiliser (DoF) as against the total demand of Rs 1,05,497 crore for the 2013-14 fiscal. Commodity wise, a subsidy of Rs 41,158.85 crore was allocated for urea and Rs 29,426.88 crore for P&K fertilizers.

The CNX Nifty touched a high and low of 6,097.85 and 6,067.35 respectively.

The top gainers on the Nifty were PNB up by 6.93%, Bank of Baroda up by 3.64%, ACC up by 3.38%, Tata Power Company up by 3.20%, and BPCL up by 2.98%. On the other hand, Tata Motors down by 3.26%, HDFC down by 2.78%, NTPC down by 1.56%, Grasim Industries down by 0.99%, and Asian Paints down by 0.94% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.83%, Germany's DAX was down by 1.37% and United Kingdom's FTSE 100 was down by 0.80%.

Major Asian markets barring Japanese Nikkei were closed for trade on Friday on account of Lunar New Year holiday. The Japanese market concluded the trade in red on cautious note despite positive lead from Wall Street. Markets in Hong Kong, Shanghai, Taiwan, Singapore, Malaysia, South Korea and Indonesia are all closed for Lunar New Year holiday. Indonesia’s economy likely grew less than 6% in 2013, marking its slowest pace of growth in four years, as the end of a commodity boom hit exports and a widening current-account deficit undermined investor confidence. Inflation in Japan picked up speed in December, placing pressure on Prime Minister Shinzo Abe’s government to encourage wage gains as he attempts to free the nation from the deflationary debility that has lasted 15 years.

Japan’s core consumer price index, which excludes volatile fresh-food costs, climbed 1.3% from a year earlier in December, faster than a 1.2% gain in the previous month. According to other data, 103 jobs were available for every 100 person hunting for employment, thus revealing a tightening in the labor market that might put pressure on companies to raise salaries. As for Japanese manufacturing activity, the Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 56.6 in January, from 55.2 in the previous month.