Benchmarks gain for third straight session on firm global cues

Buoyed by firm global cues, both the Indian equity benchmarks extended their gaining streak to third straight day, recapturing their crucial 6,050 (Nifty) and 20,350 (Sensex) bastions. Sentiments remained up-beat since morning amid firm global cues. Some boost also came on the buzz that the Securities and Exchange Board of India (SEBI) specified a circuit limit of up to 20% for all publicly traded stocks that are included in any index derivatives. The market regulator said the move is aimed at protecting stocks against excessive volatility risks. However, volatility ruled the roost in the late trade, as key benchmark indices regained positive zone soon after a sudden steep slide pushed them to negative zone for a brief period in afternoon trade. Some support also came from report that foreign institutional investors (FIIs) bought shares worth a net Rs 10.75 crore on February 6, 2014.

However, gains on the up-side remained capped as investors remained cautious ahead of advance GDP estimates for current fiscal 2013-14, likely to be announced after market hours and the government is likely to lower its estimate of 5% growth forecast for the financial year 2013-14, because of slower-than-expected recovery in industrial growth. Some cautiousness also crept in, as the National Council of Applied Economic Research (NCAER) on Thursday lowered the GDP projection for the current fiscal to 4.7-4.9 percent due to exchange rate depreciation.

Supportive cues from US markets provided much needed support to local markets and sentiments remained up-beat with investors reacting positively to the latest batch of US economic data. Moreover, Asian markets rallied with the Japanese Nikkei ending higher by over two percent after yen dropped against the dollar. European counters too made a positive opening after both the European Central Bank and the Bank of England made no changes to interest rates at their meeting on February 6.

Back home, sentiments got some support from currency front where Indian rupee traded higher on corporate dollar inflows at 62.33 at the time of equity markets closing versus its previous close of 62.36. Shares of pharmaceutical companies like, Aurobindo Pharma, Sun Pharmaceutical Industries, Biocon, Dr Reddy’s Laboratoreis, Divi’s Laboratories, Lupin etc. remained on buyers radar after reporting a robust net profit growth for the quarter ended December 31, 2013. Additionally, steel stocks viz. Tata Steel, SAIL, JSW Steel, Jindal Steel and Power edged higher after ArcelorMittal, the world's biggest steelmaker, announced strong Q4 December 2013 results and said earnings will continue to climb in 2014.

The NSE’s 50-share broadly followed index Nifty rose by over twenty points and ended above the psychological 6,050 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by around sixty points to finish above the psychological 20,350 mark. Broader markets too traded with some traction and ended the session with a gain of around half a percent. The market breadth was evenly divided, as there were 1,370 shares on the gaining side against 1,196 shares on the losing side while 164 shares remain unchanged.

Finally, the BSE Sensex gained 65.82 points or 0.32%, to settle at 20376.56, while the CNX Nifty ended up by 26.90 points or 0.45% to settle at 6,063.20.The BSE Sensex touched a high and a low of 20450.51 and 20282.30, respectively. The BSE Mid cap index was up by 0.59%, while the Small cap index gained 0.31%.

The top gainers on the Sensex were Tata Steel up 6.39%, SSLT up 3.66%, Sun Pharma up 2.80%, Axis Bank up 2.08% and Bajaj Auto up by 2.03%, on the flip side Hindustan Unilever down 1.52%, TCS down 1.44%, Wipro down 1.30%, BHEL down 0.73%, and ITC down by 0.37% were the top losers on the index.

On the BSE Sectoral front Metal up by 2.66%, Healthcare up by 1.69%, Realty up by 1.04%, Power up by 0.83% and PSU up by 0.83% were the top gainers. While, IT down by 0.62%, Teck down by 0.57%,  FMCG down by 0.49% and Consumer Durables down by 0.08% were the only losers on the sectoral front.

Meanwhile, in order to resolve the concerns of PSU banks for acting as an insurance broker, government’s panel is considering the proposal to define the exact road map to implement the multi-company insurance sale model. The government also indicated that PSU banks must follow broker model to sell insurance instead of corporate agency model. Government wants to use banking network to deepen insurance coverage in the country. Therefore, Finance Ministry, in December, has directed public sector banks to become insurance brokers instead of remaining corporate agents.

Conversely, banks are not keen to acts as an insurance broker as the banking industry is of the view that under this model, banks are likely to see a substantial decrease in their premium collections. As corporate agents, banks can earn up to 35 percent of the first-year premium but as brokers, they would be entitled to a maximum of 30 percent. Further, banks also fear that floating a subsidiary to sell insurance products and ending the exclusive arrangements with insurance companies will be difficult. 

The insurance broking model is also backed by the Insurance Regulatory and Development Authority (IRDA), which noted that it is open to further relax norms to facilitate this transition. The insurance regulator has cleared that its guidelines regarding bancassurance will be the same for both state and private sector banks for selling insurance products. As per the IRDA guidelines, banks will have to cap business from their own group companies at 25% for both life and non-life business. Furthermore, according to the RBI guidelines, banks with more than 3% of non-performing loans and lower than 10% capital adequacy ratio cannot undertake insurance broking business, eliminating PSU banks such as Central Bank of India, Allahabad Bank and United Bank of India. Currently, banks are allowed to sell products of one life, one nonlife and one health insurance company.

The CNX Nifty touched a high and low of 6,079.95 and 6,030.90 respectively.

The top gainers on the Nifty were Tata Steel up by 6.98%, Jaiprakash Associates up by 6.21%, Ambuja Cements up by 5.04%, IDFC up by 4.14%, and Bank of Baroda up by 3.84%. On the other hand, Hindustan Unilever down by 1.63%, TCS down by 1.49%, Wipro down by 1.24%, BHEL down by 1.18%, and HCL Technologies down by 1.04% were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.03%, Germany's DAX was up by 0.30% and United Kingdom's FTSE 100 was up by 0.18%.

The Asian markets concluded Friday’s trade in green on taking cues from Wall Street. Japan’s Nikkei gained after the yen weakened against the US dollar overnight. The greenback had climbed to trade at Yen 102.11 in New York, after gaining a total of 0.7% in the previous session. Indonesia’s rupiah forwards were set for their best week in four on optimism the current-account deficit will narrow after the country recorded the largest trade surplus in two years and international reserves climbed. The current-account shortfall was probably below 2 percent of gross domestic product last quarter, from 3.8 percent in the previous period. Indonesia is considering tax breaks for investors in the nation’s corporate bonds. Malaysian Trade Balance fell to 9.50B, from 9.70B in the preceding month.

The services sector in China expanded in January at its weakest pace since August 2011 after companies achieved a smaller volume of new business. The HSBC/Markit Services Purchasing Managers' Index (PMI) dropped to 50.7 in January, a low last seen two and half years ago. China’s current account surplus in the fourth quarter of 2013 reached 305.4 billion yuan, the fifth straight quarter of surplus. The goods trade surplus reached 708.8 billion yuan while deficits were recorded in service trade and current transfers of 148.1 billion yuan and 21.8 billion yuan, respectively. Japan’s index of leading economic indicators rose to a seasonally adjusted 112.1, from 111.1 in the preceding month whose figure was revised up from 110.8.