Monday, March 14, 2011

MOOD REMAINS UPBEAT

Local markets have shown strong resilience on emergence of buying in fundamentally strong shares at lower levels albeit a steep decline in Japanese shares in the wake of the unprecedented calamity that has devastated the world's third largest economy and led to weakness in other regional peers. On the global front, US markets made some recovery on Friday after witnessing a serious blow in the previous session. Backhome, on the sectoral front, stocks from Oil and Gas, Metal and Bankex sector were enjoying investor's attention, the broader indices too have  managed to hold on to their slender gains. However, the Indian benchmark indices have pared some of their gains due to offloading of position in stocks from Auto, Teck and IT counters. Meanwhile, investors would await February inflation data, the wholesale price inflation in India is expected to have eased slightly to 7.79 percent in February even as commodity and fuel prices remain at elevated levels. The market breadth on BSE was in the favour of advances which outnumbered declines in the ratio of 1271:1000, while, 116 shares remained unchanged.
The BSE Sensex is currently trading at 18,277.06, up by 102.97 points or 0.57%. The index has touched a high of 18,300.01 and a low of 18,155.43 respectively.  There were 23 stocks advancing against 7 declines on the index.
The broader indices were trading in line with benchmarks; the BSE Mid cap and Small cap indices were up 0.19% and 0.27% respectively. 
The top gaining sectoral indices on the BSE were, Oil and Gas up by 1.17 %, Metal up by 0.87%, Bankex up by 0.84%, PSU up by 0.69% and Power was up by 0.58%. While, Auto down by 0.52%, TECk down by 0.07% and IT down by 0.02% were the only losers on the index.
The top gainers on the Sensex were Tata Steel up by 1.77%, HDFC up by 1.70%, Reliance Infra up by 1.64%, Reliance Communication up by 1.30% and Sterlite Industries up by 1.19%.
Maruti Suzuki down by 1.36%, Bajaj Auto down by 1.05%, TCS down by 0.94%, Bharti Airtel down by 0.88% and Tata Motors down by 0.81% were the top losers on the index.
Meanwhile, India's Central Bank, which is currently struggling with growth-inflation dynamics, is likely to opt for at least a 25 basis points hike in its key rates during its scheduled mid-quarter policy review on March 17, 2011, in a bid to rein-in high inflationary pressures. While the wide expectation is that the RBI may hike the repo rate by 25 bps to 6.75%, some economists also feel that the RBI may hike the reverse repo rate by 25 bps to 5.75%, given the meager industrial production data for the month of January.
This will be RBI's first policy announcement after finance minister Pranab Mukherjee announced the 2011-12 Union budget on February 28 that projected lower fiscal deficit and 9% economic growth. Reserve Bank of India (RBI) has raised its lending rate, known as the repo rate, seven times by a total of 175 basis points and its borrowing rate, or reverse repo rate, by 225 basis points since last March to contain inflationary pressures. (One basis point is one-hundredth of a percentage point).
Besides supply bottlenecks and the prospect that global oil prices could remain high, concerns over robust credit growth and elevated levels of non-food manufacturing inflation are likely to prompt central bank action to curb demand-led inflation. Further, with the inflation target of 7%for the fiscal year ending March, the Wholesale price-based inflation eased in January to 8.23% from the 8.43% reported in December, still above the "RBI's comfort zone", thereby signaling RBI to continue with its stance of gradual policy tightening.
Duvvuri Subbarao, governor of RBI while attending the convocation ceremony of the National Institute of Bank Management in Pune was quoted saying that the "For inflation management, we have to raise policy interest rates. For protecting, promoting and preserving recovery, we need to keep interest rates low, so there is a tension between raising policy interest rate and keeping them low".
However, with the industrial production recording a meager growth of 3.7% in January compared with a difficult-to-match 16.8% expansion in the same month a year ago, Industry chamber FICCI suggested that RBI should avoid increasing the key rates during the mid quarter policy on March 17, as it would affect the industrial output.
The S&P CNX Nifty is currently trading at 5,476.40, up by 30.95 points or 0.57 %. The index has touched a high of 5,484.25 and a low of 5,434.25 respectively. There were 36 stocks advancing against 14 declines on the index.
The top gainers of the Nifty were Reliance Capital up by 3.28%, GAIL up by 2.69%, BPCL up by 2.39%, Tata Steel up by 2.10%and Reliance Infra up by 1.79%.
Reliance Capital shares are up on the reports that Japan's largest life insurer Nippon Life Insurance is in talks with financial services firm Reliance Capital , controlled by Anil Ambani, to acquire a 26% stake into the Indian company's life insurance subsidiary for $724 million.
The top losers of the index were Suzlon down by 2.63%, Tata Motors down by 1.24%, Maruti Suzuki down by 1.19%, Bajaj Auto down by 1.06% and and TCS was down by 1.03%.
Shares of Maruti Suzuki India fell on concerns that an appreciation in Japan's yen following Friday's devastating earthquake would hurt the car maker's margins this year. Some Analysts expect the yen will continue to strengthen against major currencies as more yen is withdrawn for rebuilding projects in Japan. 1% strengthening of the yen impacts Maruti Suzuki's margins by 27 basis points, as it imports technology and equipment from Japan, apart from the royalty payments it makes to its Japanese parent.
Asian markets were trading mostly in the negative terrain; Hang Seng was down by 0.51%, Nikkei 225 was down by 6.21%, Straits Times was down by 0.50% and Taiwan Weighted down by 0.45%.
On the flip side, Seoul Composite gained 0.28% and Jakarta Composite added 0.74%and KLSE Composite was up by 0.02%.

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