MARKETS POSITIVE

The Indian equity markets have rallied in the early trade tracking positive cues from across the globe and good earnings report on domestic front. The US markets extended their gains overnight supported by decline in crude oil prices while; most of the Asian counterparts were trading in the positive terrain at this point of time, indicating strong investors' sentiments. Back home, sustained buying in all the heavyweights along with broader indices supported NSE's -- Nifty -- and BSE's -- Sensex -- to regain its crucial 5,450 and 18,300 mark, respectively. Capital goods witnessed the maximum gain in trade followed by auto and banking with no losers on the BSE sectoral space. The sentiments also remained strong as food inflation fell for the third consecutive week to 7.47 per cent for the week ending May 7. Moreover, the broader indices too were performing well in the trade. Meanwhile, PSU oil market companies viz., BPCL, HPCL and IOC were trading higher in the trade as crude prices declined again on Thursday and closed below $100 a barrel on getting disappointing economic data. The market breadth on the BSE was positive; there were 1,071 shares on the gaining side against 494 shares on the losing side while 63 shares remained unchanged.

The BSE Sensex opened at 18,199.96; about 58 points higher compared to its previous closing of 18,141.40, and has touched a high and a low of 18,341.96 and 18,161.38, respectively.

The index is currently trading at 18,311.78, up by 170.38 points or 0.94%. All the 30 stocks were on the advance side on the index.

The overall market breadth has made a strong start with 65.79% stocks advancing against 30.34% declines. The broader indices too were performing well at this point of time; the BSE Mid cap and Small cap indices surged 0.68% and 0.50% respectively. 

The top gaining sectoral indices on the BSE were, CG up by 2.24%, Auto up by 0.97%, Bankex up by 0.96%, Power up by 0.83% and Metal was up by 0.83%. While there were no losers on the index.

The top gainers on the Sensex were L&T up by 3.49%, Bajaj Auto up by 2.11%, Hindalco up by 1.87%, Bharti Airtel up by 1.71% and Tata Power was up by 1.43%. While there were no losers on the Sensex.

Meanwhile, the India and European Union Free Trade Agreement (FTA) might include tariff reduction on import of vehicles as well as automotives components. It will be for the first time when this aspect is being covered in a FTA, India's other FTA with auto hubs like Japan, ASEAN and South Korea had not covered completely-built vehicles from the area of FTA. The main reason for this being included in the FTA with EU is that many luxury car makers are originally from EU countries and Indian car market is important for them. European car majors such as Volkswagen, Mercedes Benz, BMW, Renault and Fiat have made extensive investments in India.

The India and EU FTA negotiation is in final stages and draft is likely to be announced shortly. Once both the Indian commerce ministry and EU trade commissioner reaches the agreement to sign, the FTA will be formally implemented next year.  

The auto industries' apex body Society of Indian Automobile Manufacturers (SIAM) and other industry related organizations had raised objection on the inclusion of fully built vehicles under the India-EU FTA earlier this year. After the protest from the industry, commerce ministry had asked for their recommendation on the same subject. The SIAM had argued that, it's against any exception to the rule that has so far applied to other FTAs, including the ASEAN, South Korea and Japan. All of them lead to some tariff reduction on components but did not touch fully built up vehicles.

Because of their protest, the SIAM and auto industry have been kept out of the loop about the details of the negotiations. Before this, the government and SIAM also had face-off on the tariff issue, the government has stated that, the Indian auto industry enjoyed too much of tariff protection unlike other sectors. On the other hand SIAM felt that the EU FTA would seriously impact both employment and investment in the auto sector.

Experts on auto industry says 'Apart from offering EU undue tariff advantage in automobiles over Japan, ASEAN and Korea, it will also mean cheap import of big cars which will run on subsidized diesel at a time when big cars in India are being taxed higher and there is also talk of a diesel tax on big SUVs and luxury vehicles". At present, import of fully built up cars attracts 110% duty though the actual import duty is 60%. The rest of the taxes are also applicable on locally assembled vehicles.

The S&P CNX Nifty opened at 5,450.65; about 22 points higher compared to its previous closing of 5,428.10, and has touched a high and a low of 5,488.70 and 5,432.75 respectively. The index is currently trading at 5,479.75, higher by 51.55 points or 0.95%. There were 47 stocks advancing against just 3 declines on the index.

The top gainers of the Nifty were L&T up by 4.28%, Bajaj Auto up by 1.94%, Hindalco up by 1.93%, Kotak Bank up by 1.84% and SBI up by 1.77%.

Cairn down by 0.65%, HCL Tech down by 0.21% and Wipro down by 0.05%, were the only losers on the index.

Most of the Asian equity indices were trading in the green; Shanghai Composite was up 2.11 points or 0.07% to 2,861.68, Hang Seng was up 23.75 points or 0.10% to 23,187.13, Jakarta Composite was up 5.27 points or 0.14% to 3,865.08, KLSE Composite was up 1.29 points or 0.08% to 1,545.31, Nikkei 225 was up 35.50 points or 0.37% to 9,656.32 and Seoul Composite was up 15.11 points or 0.72% to 2,110.62.

On the flip side, Straits Times was down 6.73 points or 0.21% to 3,165.83 and Taiwan Weighted was down by 24.19 points or 0.27% to 8,868.69.