Benchmarks extend northward journey for second straight session

Indian equity benchmarks, extending their last session’s rally, ended in green with gain of around half a percent on Wednesday supported by firm global cues. Earlier markets made a positive start, though turned into red terrain in mid way of trade, as market participants reacted negatively to the long Lok Sabha election schedule announced by the Election Commission, starting from April 7, to May 12, 2014, while the counting of votes will take place on May 16. Sentiments also remained dampened after growth in services sector contracted for the eighth straight month in February. The HSBC Purchasing Managers’ Index (PMI) index rose to 48.8 in February from 48.3 in the previous month, but remained below the 50 mark that separates growth from contraction.

However, things got stabilized in second half of trade with Indian rupee appreciating against dollar. The rupee firmed up against the US dollar and was trading at 61.68 at the time of equity markets closing as compared to Tuesday’s close of 61.86, tracking gains in domestic equity markets. Some support also came after Finance Minister P Chidambaram said that the model code of conduct will not affect the bank licence process.

Global cues too remained supportive with US markets ending higher overnight, as Russia and Ukraine concerns eased, and the markets recovered all the previous session’s losses. Asian markets too ended mostly in the green, though the Chinese stocks ended lower as the national legislature began its annual meeting. However, European counters were trading in the red terrain in early deals, as investors remained on sidelines ahead of data from Europe and America.

Back home, the up-move in domestic markets was also supported by rally in stocks related to infra space, as the government has cleared a long pending bailout policy for financially-stressed highway developers which would allow them to defer the premium that they have committed to pay the government. Banking stocks too remained on buyers’ radar, as the Finance Minister P Chidambaram was having a meeting with chief executives of public sector banks for a quarterly performance review. In the meeting, besides capital adequacy, Chidambaram is expected to discuss the NPA situation and recovery measures taken by banks, status of stalled projects as well as credit flow to new projects.

Meanwhile, buying in software and technology counters too aided sentiments. Stocks like Infosys, TCS, Wipro, HCL Tech etc. surged after the Obama administration predicted that US gross domestic product will expand 3.1% in 2014 after rising 1.9% last year. Additionally, public sector oil marketing companies viz. BPCL, HPCL and IOC edged higher after crude oil prices eased as fears of an immediate armed conflict in Ukraine receded.

The NSE’s 50-share broadly followed index Nifty rose by over thirty points and ended above the psychological 6,300 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by around seventy points to finish above the psychological 21,250 mark. Broader markets too were traded with traction and ended the session with a gain of around half a percentage point. The market breadth remained in favor of advances, as there were 1,505 shares on the gaining side against 1,182 shares on the losing side while 151 shares remain unchanged.

Finally, the BSE Sensex surged by 67.13 points or 0.32%, to settle at 21276.86, while the CNX Nifty gained 30.70 points or 0.49% to settle at 6,328.65.

The BSE Sensex touched a high and a low of 21333.20 and 21176.16, respectively. The BSE Mid cap index was up by 0.94%, while the Small cap index gained 0.47%.

The top gainers on the Sensex were ICICI Bank up by 2.70%, Coal India up by 1.74%, Cipla up by 1.72%, SBI up by 1.54% and Maruti Suzuki up by 1.51%, while Tata Power down by 3.25% Bharti Airtel down by 1.67%, Gail India down by 1.21%, RIL down by 0.95% and Tata Motors down by 0.75% were the top losers in the index.

On the BSE Sectoral front, Realty up by 1.95%, Bankex up by 1.47%, PSU up by 1.29%, Capital Goods up by 1.13% and Metal up by 0.68% were the top gainers, while Consumer Durables down by 2.36%, Auto down by 0.23%, Oil & Gas down by 0.15% and Healthcare  down by 0.15% were the only losers in the space.

Meanwhile, in a big sigh of relief for financially-stressed highway developers, the government has cleared a long awaiting bailout policy for financially-stressed developers which would also allow the developers to defer the premium that they have committed to pay the government. As per the bailout policy, relief would be offered for highway developers through a mechanism called revenue shortfall loan under an article of the model concession agreement between developers and the government. Highway projects that are facing economic stress would now be eligible for this article which allows developers to reschedule the cash shortfall between necessary expenses and toll revenue in case of political events or default by the National Highway Authority of India (NHAI). Further, under this provision, the money that the developers need to pay the government would be considered as an expense.

The move is likely to benefit started highway projects facing difficulty in servicing debt. Now, the developers can service debt fully as it will be given priority over premium. Highway projects involving expansion from two lane to four lane are likely to benefit more as their debt servicing commences with tolling. On the other hand, projects involving expansion to six lane may not benefit so much owing to the fact that these projects have a moratorium period for servicing debt but toll collections commence from the beginning, thus, they would have to bring in equity on their own. Furthermore, debt flow to sector is also expected to improve as bankers will get more comfort and stressed projects could be prevented from turning into non-performing assets.

The CNX Nifty touched a high and low of 6,336.25 and 6,287.80 respectively.

The top gainers of the Nifty were Bank of Baroda up by 6.42%, PNB up by 4.45%, DLF up by 3.61%, Grasim Industries up by 2.99% and IDFC up by 2.91%. On the other hand, Tata Power Company down by 3.19%, Bharti Airtel down by 1.76%, HCL Technologies down by 1.34%, Cairn India down by 1.30% and GAIL (India) down by1.25% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.31%, Germany's DAX was down by 0.30% and United Kingdom's FTSE 100 was down by 0.41%.

The Asian markets barring Shanghai Composite and Hang Seng concluded Wednesday’s trade in green following remarks from Russian President Vladimir Putin that allayed fears of an imminent military conflict in Ukraine. At the start of China’s annual meeting of its legislature, the National People’s Congress, Premier Li Keqiang stated that the government would keep its economic-growth target at 7.5% in 2014, unchanged from that of 2012 and 2013. The consumer inflation target was set at 3.5%. The world’s second-largest economy grew 7.6% in 2013, its slowest pace since 1999. Robust demand for mid- to high-end properties saw sales of new homes rise in Shanghai last week, but they were below the average weekly sales over the past 12 months. The purchases of new homes rose 13.5 percent weekly to 179,200 square meters during the week. Philippines CPI rose to a seasonally adjusted annual rate of 0.1%, from 0.7% in the preceding quarter while Taiwanese CPI fell to a seasonally adjusted annual rate of -0.05%, from 0.76% in the preceding quarter.