MARKETS COME OFF THEIR HIGHS

Gains at Dalal Street have started ebbing as the undertone of the markets has turned cautious well ahead of the RBI's policy meet later in the day, where the central bank is widely expected to raise key rates for a 12th time in 18 months. The wholesale price index in August which climbed to 9.78 percent, it's highest in more than a year on the back of higher food and manufactured goods prices has mainly reinforced the case for tightening policy despite weakening growth and a worsening global outlook. However, the global cheer prevailing on account of world's major central bank's move to ease funding for European banks in a coordinated effort to solve Europe's debt crisis, mainly has enhanced the risk appetite of the investors. Five major central banks - the Federal Reserve, the European Central Bank, the Swiss National Bank, the Bank of England and the Bank of Japan - moved in concert on Thursday to pump dollars into the European banking system by arranging three new funding operations, thereby calming fears that Europe's financial sector was headed for a credit freeze due to the region's sovereign debt crisis. On the global front, US markets ended in green for the fourth consecutive session despite disappointing US economic data, including a higher-than-expected rise in jobless claims, which totaled 428,000 last week, and a drop in a gauge of manufacturing in the New York region. Meanwhile, the regional counterparts too were trading in jubilant mood. The US future indices too were pointing at promising start of the Wallstreet with Dow Jones Indus futures index showing an uptick of over 1%.
Back home, although buying was witnessed across the board, however, stocks from PSU, Oil & Gas and Metal counters were sparkling with gains. Public sector oil marketing companies like IOC, BPCL and HPCL were trading in jubilant mood after the government decided to hike petrol prices by Rs 3.14/litre effective from Thursday midnight after rupee touched two-year low against the US dollar. IOC, BPCL and HPCL have lost Rs 2,450 crore this fiscal on selling petrol -- whose rates were freed from government control in June last year -- below the cost. The 30 share index capturing over 150 points is trading over its 17000 level. While the 50 share index- Nifty-gaining over 40 points is currently trading over the 5100 mark. The broader indices too have shrunk in gains inline with the larger peers. The overall market breadth on BSE is in the favour of advances which have thumped declines in the ratio of 1367:786, while 97 shares remained unchanged.
The BSE Sensex is currently trading at 17,045.50, up by 168.96 points or 1.00%. The index has touched a high and low of 17,083.29 and 16,976.61 respectively.  There were 23 stocks advancing against just 7 declining one's on the index.
The broader indices too were trading higher in the trade; the BSE Mid cap and Small cap indices surged 0.32% and 0.44% respectively.
The top gaining sectoral indices on the BSE were PSU up by 1.56%, Oil and Gas up by 1.45%, Metal up by 1.11%, CG up by 1.04% and Auto up by 1.01%.
The top gainers on the Sensex were ONGC up by 5.92%, Tata Motors up by 4.83%, Sterlite Industries up by 2.47%, Tata Power up by 2.36% and NTPC up by 2.31%.
On the flip side, Maruti Suzuki was down by 0.65%, HUL down by 0.39%, Bharti Airtel down by 0.34%, Infosys down by 0.31% and Wipro down by 0.16% were the only losers on the Sensex.
Meanwhile, in a move to help companies trading with China, the government today has decided to allow Indian companies to raise external commercial borrowing (ECB) in Yuan (Renminbi) equivalent to $1 billion and has also raised the borrowing limit from overseas market. The move is expected to help Indian firms who are suffering from high interest rates in domestic market, as the investment pace in economy have been moderating on the back of central bank hiking its key policy rates 11 times in past 18 months.
The Department of Economic Affairs Secretary R Gopalan after the meeting of High Level Coordination Committee (HLCC) on ECBs said, 'for the first time we are allowing Yuan (Renminbi), (equivalent of $1 billion) as an acceptable currency under ECB, basically for infra and capital goods.' On explaining the rationale behind this move, Gopalan said, 'Yuan wants to play much bigger role...certainly there is market for it.' The borrowing cost of China is significantly low compared to India.
However, HLCC did not raise the overall upper limit of ECBs which is presently around $30 billion. But, it relaxed the norms and raised the borrowing limits for various sectors to help the companies obtain funds from overseas market at competitive rates. The government is also considering reducing the withholding tax on the ECBs, Goplan said, 'Withholding tax will be brought down, we are interacting with department of revenue'. 
Earlier, industrial leaders had urged Finance Minister Pranab Mukherjee to relax the overseas borrowing policy, which can help them to raise funds in overseas market where interest rates are low.
The limit of external borrowings with tenure of 5 years or more under the automatic route has been increased from $500 million to $750 million. The decision will help the companies across all segments to access higher quantum of overseas funds, Goplan said. By adding further he said, for the services sector, the ECB limit under the automatic route has been doubled to $200 million and for NGOs from $5 million to $10 million.
In the first five months of current financial year, industries have raised around $15.93 billion from the total limit of $30 billion, till August. However, Goplan hinted that the government will consider increasing the limit of ECBs, especially for infrastructure sector. He said, 'If there is a requirement for additional money through ECBs, particularly in infrastructure sector, we can go beyond the $30 billion limit depending upon the requirement...We are quite positive. The cap remains at $30 billion but this can be relaxed depending upon the requirement.'

He also indicated that government may allow the High Networth Individuals (NHIs) to invest in infrastructure debt funds 'the committee held a view that HNIs ... be permitted to invest in infrastructure debt funds without any ceiling under the ECB route,' he said. With reference to rupee loan via ECBs, he said, 25% of the amount raised from overseas sources could be used to repay debts for infrastructure sector projects. The refinancing of buyers/suppliers credit through ECB would be permitted for infrastructure sector projects or capital goods segment.

However, on the issue of allowing ECBs for slum rehabilitation project around Mumbai International Airport, he said, 'the view was that we should not fuel real estate boom through ECB route, therefore it is not being permitted.'
The S&P CNX Nifty is currently trading at 5,117.10, higher by 41.40 points or 0.82%. The index has touched a high and low of 5,131.65 and 5,099.45 respectively. There were 39 stocks advancing against 11 declines on the index.
The top gainers of the Nifty were ONGC up by 5.95%, Tata Motors up by 4.79%, Tata Power up by 2.49%, Sterlite Industries up by 2.43% and NTPC up by 2.34%.
On the flip side, Maruti Suzuki down by 0.54%, Infosys down by 0.49%, HCL Technologies down by 0.47%, Bharti Airtel down by 0.46% and Kotak Bank down by 0.44% were the major losers on the index.
All the Asian equity indices were trading in the green; Shanghai Composite was up by 0.42%, Hang Seng up by 2.14%, Jakarta Composite was up by 0.95%, Nikkei 225 up by 2.08%, Straits Times up by 1.28%, Seoul Composite was up by 3.81% and Taiwan Weighted up by 2.93%.