MARKETS CONTINUE TO TRADE HIGHER

Key benchmark equity indices continue to trade higher on the back of easing food inflation and a decline in crude oil prices in the global market. On the global front, other key Asian markets were trading mostly in the green; while the US index futures were trading in the red. Back home, all the sectoral indices on the BSE were trading in the green. Capital goods, power, realty, automobile and healthcare sectors were trading firm with most of their gains intact. A few stocks from banking, metal, PSU sectors too are up with strong gains this morning. Index heavyweights such as RIL, ONGC, SBI, ICICI Bank, ITC are all trading higher providing much needed support to the markets. Strong results from Larsen & Toubro also contribute to the surge. Broader markets too were ruling in the green with the BSE Mid cap and Small cap indices gaining 0.77% and 0.90%, respectively. The market breadth on the BSE was in favour of advances in the ratio of 1564:834 while 109 scrips remained unchanged.

The BSE Sensex climbed 184.20 points or 1.02% at 18,325.60. The index has touched a high of 18,356.80 and a low of 18,161.38, respectively.

The BSE Mid cap and Small cap indices gained 0.77% and 0.90%, respectively.

All the sectoral indices on the BSE were trading in the green. Capital Goods (CG) up 2.65%, Power up 1.19%, Realty up 1.17%, Auto up 1.11% and Healthcare (HC) up 1.10% were the top gainers in the BSE sectoral space.

The top gainers of the Sensex were L&T up 3.80%, ONGC up 2.33%, Bharti Airtel up 2.20%, Cipla up 2.06% and DLF up 1.87%; while Infosys down 0.01% was the lone loser on the index.

Meanwhile, "India would find it difficult to achieve its fiscal deficit target this year, unless it made adjustments to account for the rise in fuel and fertilizer prices", said RBI governor D Subbarao. The RBI governor's comment has raised the market fear that the government would require to increase borrowing to fund the deficit gap. In this year budget, the Indian government had projected a fiscal deficit target of 4.6% of the GDP. This deficit target was broadly considered as ambitious, after its 5.1% deficit target for last year that was met by one-time high revenue through the 2G auctions. The government had said it would borrow a gross Rs 4.17 lakh crore in the current financial year, of which it would raise Rs 2.5 lakh crore in the first half.

"Since crude, fertilizer prices have gone up since the Budget announcements, unless some adjustment is made, either on the expenditure side or the tax side, it is difficult to deliver on a 4.6% target," Subbarao said. "It is difficult to say whether the government can deliver on a 4.6% target. It depends on what decision they take and a number of issues - the adjustment of fuel prices being the most important one," he added.

The governor's comment has raised concerns among bond dealers that the government would increase its borrowing in second half of current financial year. While experts and market analyst feels there should not be any immediate impact on market now. Though oil prices have risen 44% in the past year, India increased the cost of gasoline by as much as 8.5% last week, the biggest rise in three years. Still the government has to share a major chunk of the subsidy burden to thwart the rising trend of inflation. Oil along with other subsidies will play the main spoiler to achieve the deficit target. The inflation picture is both alarming and troubling, as these rates have been high for now over two years and the governments' concentration is most likely to be in controlling them.

The S&P CNX Nifty jumped 54.05 points or 1% at 5482.15.  The index has touched a high and a low of 5490.40 and 5432.75, respectively.

The top gainers of the Nifty were L&T up 3.90%, IDFC up 2.66%, ONGC up 2.25%, Bharti Airtel up 2.12% and Kotak Mahindra Bank up 2.11%.

On the flip side, Dr Reddy's down 0.28%, HCL Tech down 0.27%, Cairn India down 0.23% and RIL down 0.05% were the only losers on the index.

Rest of the Asian markets were trading mostly in the green. Shanghai Composite jumped 0.20%, Hang Seng climbed 0.19%, Jakarta Composite soared 0.14%, KLSE Composite gained 0.08% and Seoul Composite rose 0.70%; while Nikkei 225 dropped 0.07%, Straits Times dipped 0.38% and Taiwan Weighted shed 0.63%.