MARKETS REMAIN FIRM

Crude is ruling the Indian markets move in the morning trade and solid gains in oil & gas after the rise in fuel prices and duty rejig has neutralized the somber global cues. Though, the benchmark indices have came off the high points of the day but still are managing to hold good gains in mid morning trade, extending their marvelous rally of last session. The broader indices too are equally participating in the markets upmove, keeping the breadth firmly in green. The one sector that is showing some weakness at this point of time is IT, after two technology majors in US reported weak numbers on Friday, showing that business are still not using IT in the recovery. Back home all the PSU oil companies have surged after the recent price hike.
The BSE Sensex is currently trading at 18,367.74, up by 127.06 points or 0.70%. The index has touched a high and low of 18,432.67 and 18,132.70 respectively. There were 25 stocks advancing against just 5 declines on the index.
The broader indices too are showing good upmove; the BSE Mid cap and Small cap indices were up by 0.62% and 0.65% respectively. The market breadth was strong with 62.32% stocks advancing against 33.26% declines.
The top gaining sectoral indices on the BSE were Oil & Gas up by 1.85%, PSU up by 1.53%, Auto up by 1.16%, Metal up by 0.88% and CG was up by 0.81%, while IT down by 0.02% was the lone loser.
The top gainer on the Sensex were ONGC up by 4.78%, M&M up by 3.125, Bajaj Auto up by 2.61%, HDFC up by 1.67% and Cipla was up by 1.41%.
On the other hand, R infra down by 1.03, hero Honda down by 0.44%, Maruti Suzuki down by 0.36%, NTPC down by 0.19% and ITC was down by 0.13% were the only losers on the Sensex.
Indian government on Friday hiked the much expected fuel prices in order to reduce the financial or revenue losses of state owned Oil Marketing Companies (OMCs) which are accruing expected revenue loss of Rs 490 crore everyday. By taking political risk, the Congress led UPA government raised prices of diesel, kerosene and cooking gas by Rs 3/litre, Rs 2/litre and Rs 50 per cylinders respectively. On the other hand, government also removed the custom duty of 5% on crude oil and reduced excise duty on diesel from Rs 4.6 to Rs 2 a litre, it also reduced the import tax on petrol and diesel to 2.5% from 7.5%. This reduction of duties will cost around Rs 49,000 crore to the government.
The decision of increase in diesel, kerosene and domestic cooking gas was taken by empowered group of ministers (EGoM) on fuel prices, headed by Finance Minister Pranab Mukherjee. After the announcement of fuel price hike, finance minister said, 'It is very modest increase. I have taken the risk of reducing the duties substantially... I think it will be around Rs 49,000 crore on account of reduction of import duty and also the excise duty." 'I do hope the states will also reduce their VATs (Value Added Tax) so that relief could be given to the consumer.' Finance Minister added.
The increased fuel prices will reduce the revenue losses of state owned OMCs by Rs 21, 000 in current financial year. The recovery from increased fuel prices is lower than reduced custom and excise duties, the government is losing around Rs 49,000 crore, out of this, Rs 26,000 crore from the import duties and Rs 23,000 crore from excise on diesel. However, revenue losses of public owned OMCs would still remain around Rs 1,20,000 crore for present financial year. Currently, OMCs are incurring a revenue loss of Rs 1,66,712 crore due to selling diesel, kerosene and domestic cooking gas on subsidized rates.

This decision of reducing duties on crude oil and product is likely to put pressure on the country's fiscal situation. The government is losing around Rs 49,000 crore and earlier it had provided Rs 23,000 crore in the budget for oil subsidies. The government is struggling to meet the fiscal deficit target of 4.6% of the GDP, due to slowdown in economic growth. This move of government is also viewed as inflationary as the diesel and domestic cooking gas account for more than 5.6% of wholesale price index (WPI) and this raised fuel prices are expected to increase inflation further. The headline inflation for month of May rose to 9.06% from 8.66% in April. The increased price of diesel will increase the transportation cost and increased cost will virtually increase the prices of all goods in the country. 

The S&P CNX Nifty is currently trading at 5,516.30, up by 45.05 points or 0.82%. The index has touched a high and low of 5,532.45 and 5,434.25 respectively. There were 41 stocks advancing against 8 declines, while one stock remained unchanged on the index.
The top gainers of the Nifty are BPCL up by 5.25%, ONGC up by 4.77%, M&M up by 35, SAIL was up by 2.94% and Powergrid was up by 2.75%.
On the other hand, HCL Tech down by 0.79%, Reliance Infra down by 0.71%, hero Honda down by 0.61%, Maruti Suzuki down by 0.325 and Rcom down by 0.11% were the top losers.
All the Asian markets barring Shanghai Composite are trading in the green; Hang Seng was down by 0.66%, Jakarta Composite was down by 0.72%, KLSE Composite was down by 0.07%, Nikkei 225 was lower by 0.77%, Straits Times was down by 0.65%, Seoul Composite has plunged by 1.11% and Taiwan Weighted was down by 0.37%.
On the other hand, Shanghai Composite was trading higher by 0.31%.