AROUND ONE PERCENT GAINS

Hopes of a sharp bounce back for the Indian markets on the last trading day of the week took a hit as discouraging developments from the 2G spectrum scam front in the dying minutes of trade proved costly for the benchmarks. The indices which were cruising along on the back of an elegant short covering rally, met with stern resistance around the psychological 5,600 and 18,700 levels as skeptical investors started to book hefty profits from thereon. Nevertheless, despite the late correction, the frontline indices managed to accumulate around a percent gains as domestic investors cheered the ruling UPA's win against the Left Parties in West Bengal, Kerala and Assam which may strengthen the image of the beleaguered  government. Meanwhile a session after deposing over a percentage point, investors turned to hefty bottom fishing in fundamentally strong but undervalued shares across the board. Sentiments remained sanguine for most part of the day as optimistic leads from most Asian and European markets continued to persuade bulls to come out of their shelter. However it seemed like the bears had the last say as they stalled the resurgence of the benchmarks in late trade. The NSE's 50-share broadly followed index, Nifty drifted over a percent from the high point of the day in the last hour to settle around the 5,550 support level, while the Bombay Stock Exchange's Sensitive Index Sensex garnered around two percent and ended the day just below the psychological 18,550 level. The broader markets though failed to rub shoulders with the heavyweights as they underperformed by quite a margin. The BSE's midcap index climbed by 0.85% and the smallcap index advanced 0.39%. The FMCG counter on the BSE sectoral space settled as the top gainer, rallying 2.35% underpinned by majors like ITC and Nestle which amassed 3.10% and 2.07% respectively. The Metal pocket too witnessed huge buying interests as it surged 1.48% on the back of 2.70% and 1.63% spurt in JSW Steel and Tata Steel. Index heavyweight Reliance Industries, ONGC and L&T too made their presence felt as they settled in the green terrain on the BSE. On the result front, stocks like Dewan Housing, Emmsons International, Garware Polyester, LGS Global and Munjal Auto got commended by the investors in the session.

On the global front, majority of Asian equity indices settled higher led by Chinese and Hong Kong shares which rose about one percent in the trade amid optimism that China will limit interest-rate rises after its recent policy action which was its fifth rate hike this year. Singaporean benchmark surged by a percent, being the top gainer in the space. The European indices too are trading in the green territory with around half a percent gains. On the other hand, the screen trading for US index futures indicated that the Dow could open on a positive note.

Earlier on Dalal Street, the benchmark got off to a soft start tracking mixed leads from the Asian equity indices as investors sentiment in the region got spooked by factors like hike in bank reserve requirements for a fifth time this year by China and the ongoing concerns over European debt problems.  After beginning the session on a flat note the frontline indices immediately slipped below the neutral line for a brief period. Thereafter the bourses showed renewed vigor as investors kept on piling up positions in badly beaten down blue chip stocks which helped the indices gain from strength to strength through the session. However, just when it looked like the markets will shut shops with strong gains of around two percent, discouraging reports that CBI will file 3rd Charge sheet on the 2G spectrum scam on May 31 emerged and abated about a percent gains from the high point of the day thereby limiting the session's gains by only a percent.  Eventually, the bourses snapped session way below the high point of the day around the psychological 5,550 and 18,550 levels. Markets surged on larger volumes of over Rs 1.72 lakh crore while the turnover for NSE F&O segment remained lower compared to Thursday at over 1.58 lakh crore. Market breadth remained positive as there were 1582 shares on the gaining side against 1187 shares on the losing side while 148 shares remained unchanged.

Finally, the BSE Sensex surged 195.49 points or 1.07% to settle at 18,531.28 while the S&P CNX Nifty soared 58.60 points or 1.07% to end at 5,544.75.

The BSE Sensex touched a high and a low of 18,724.54 and 18,280.70 respectively. The BSE Mid-cap and Small-cap indices rose by 0.85% and 0.39% respectively.

Jaiprakash Associate up 3.12%, ITC up 3.10%, Hero Honda up 2.48%, Jindal Steel up 2.43% and Bajaj Auto up 2.17% were major gainers on the Sensex.

On the flip side, Reliance Communication down 0.49%, Infosys down 0.08% and HDFC down 0.05% were the only losers on the index.

Government on May 12, 2011 decided to grant an additional cash subsidy of Rs 20,000 crore in order to compensate the state-owned oil marketing companies (OMCs) like Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and Indian Oil (IOC) for selling petroleum products like diesel, domestic LPG and kerosene at controlled rates in 2010-11 fiscal. However not even six weeks have passed in the 2011-12 financial year and the government has already exhausted its entire budgetary provision of Rs 20,000 crore for petroleum subsidy.

Out of the total subsidy, around Rs 11,027 crore cash compensation will be provided to Indian Oil Corporation, Bharat Petroleum Corporation is likely to get Rs 4,595 crore while Hindustan Petroleum Corporation would be allotted about Rs 4,379 crore. The cash subsidy will facilitate the OMCs to report profits in their earnings for the quarter ended March 31 slated to be announced by the end of May.

Moreover, the government is also planning to hike prices of petroleum products after the meeting of the Empowered Group of Ministers (EGoM) to consider hiking fuel prices, which is scheduled to be held within a week' time by May 17-18.

Reports suggest that OMCs had originally sought Rs 30,000 crore as monetary compensation from the government. In the previous fiscal the industry had recorded under-recoveries of around Rs 78,000 crore, out of which one third will be borne by upstream companies like Oil and Natural Gas Corporation and Oil India which will contribute about Rs 25,750 crore, while the government contributed around Rs 21,000 crore in September 2010 and has only just granted Rs 20,000 crore taking the cumulative tally to Rs 41,000. The OMCs still fall short of another about Rs 11,000 crore from meeting their under-recoveries.

FMCG up 2.35%, Metal up 1.48%, Health Care (HC) up 1.40%, Auto up 1.35% and Capital Goods (CG) up 1.34% were the major gainers in the BSE sectoral space. There was no loser in the BSE sectoral space.

The current fiscal year began well for exports of the Asia's 3rd largest economy as the export grew by an inspiring 34.4% annually in April at $23.9 billion whereas imports increased by 14.1% reached around $32.8 compared to the same month a year ago.  In April, the balance of trade - the difference between a country's exports and its imports - in April stood at $(-) 8.9 billion.

In April, the nontraditional sectors performed well, exports of engineering grew by 109%, gems and jewellery by 39%, electronic goods by 48%, petroleum products by 53%. And on import front, the petroleum product grew by 7.7%, pearls and precious stones by 19% and gold by 60%.

Destination markets have seen a shift, with the US and European Union (EU) seeing a declining share and West Asia and rest of Asia now comprising a growing share of total exports. Share of the US and EU has come down to 11.8% and 22.2% in 2009-10 from 24.4% and 27.9% in 1999-2000 respectively, while that of West Asia has grown to 22.4% in 2009-10 from 12% in 1999-2000. In the last fiscal year, merchandise exports ended up at $246 billion increased by 37.55% compared to 2009-10, while imports of merchandise increased by around $350 billion up by 21.6%. The trade deficit for 2010-11 was $104 billion. 

As per the April figures, the composition of India's exports has shifted from the labour-intensive; traditional items to capital-intensive manufactured items as well as the petroleum products. This change in composition is reification of government's supportive policy, growing demand in abroad for Indian export.

The Commerce Secretary Rahul Khullar stated that "I expect 2011 will be good despite slowdown in Europe and the US but it is not going to be an easy summer," Khullar expects exports to increase by 20-25% for the current financial year. The figures might be adjusted once the official data gets released on June 1.

The better performance in the last financial year has prompted the government to aim higher export target this year.  The Commerce and Industry Minister Anand Sharma expects exports to touch $ 300 billion in this financial year. The government is aiming to achieve $ 500 billion by March 2014.

The S&P CNX Nifty touched a high and a low of 5,605.00 and 5,472.15 respectively.

The top gainers on the Nifty were Dr Reddy up 4.11%, JP Associate up 3.41%, Axis Bank up 3.41%, ITC up 3.37% and Ambuja Cement up 3.16%.

The top losers on the index were Reliance Communication down 0.71, HDFC down 0.25% and Sun Pharma down 0.20%.

European markets were trading mix. France's CAC 40 up 0.52%, Germany's DAX advanced by 0.22% and Britain's FTSE 100 was trading higher by 0.73%.

Most of the Asian equity indices finished higher in the trade on last trading day of the week led by Chinese and Hong Kong's shares which rose about one percent in the trade amid optimism that China will limit interest-rate rises after yesterday ordering banks to set aside more reserves for a fifth time this year. Strength in financial and property shares in China after analysts' view that the latest rise in bank reserve requirements had been priced into the market too aided the sentiments. However, Japanese Nikkei declined more than half a percent amid disappointing earnings following the nation's worst earthquake.