MARKETS GATHERING STEAM

Indian equity markets continued to gather steam in Tuesday afternoon trades as sentiments remained sanguine on the back of encouraging global as well as local leads. The benchmark indices have gone from strength-to-strength to re-conquer the important psychological 4,700 (Nifty) and 15,800 (Sensex) levels and are eyeing the 4,750 (Nifty) and 15,900 (Sensex) levels amid hefty across the board buying in badly butchered but fundamentally strong equities. Investors' sentiments got buoyed on getting an encouraging manufacturing activity data which showed that the sector resiliently bounced in the month of December as it accelerated at a swiftest pace in last six months. The upbeat domestic demand, new orders and increase in exports together helped in underpinning Indian PMI index to remain in the expansionary territory for 33 months in a row. Meanwhile, the PSU oil marketing companies like HPCL, BPCL and IOC were bucking the optimistic trend and traded with around a percent cuts because surge in international crude oil prices and also as the government did not allow state-run fuel retailers to hike petrol prices, ahead of a series of state elections. Government has also hiked the ad valorem duty on iron ore exports to 30% from 20% to curb exports of the raw material which will have a mixed impact on listed companies. While on one hand, it would impact Sesa Goa, NMDC negatively, on the other it could be positive for JSW Steel. On the global front, some of the markets in Asia remained closed for extended New Year holiday while the markets that were open exhibited encouraging trends. Back home, on the BSE sectoral space, there appeared no sector in the red territory. The metal index remained the top gainer in the space with over three and half a percent gains followed by the rate sensitive Realty and Bankex pockets which traded about three percent gains.
Moreover, the broader markets too traded on an optimistic note with close to two percent gains, underperforming their larger peers by a small margin. The bourses jumped on good volumes of over Rs 0.50 lakh crore. The market breadth on BSE was dominantly in favor of advances in the ratio of 1755:628 while 111 scrips remained unchanged.
The BSE Sensex is currently trading at 15,831.34 up by 313.42 points or 2.02% after trading as high as 15,850.35 and as low as 15,640.56. There were 29 stocks advancing against 1 declines on the index.
The broader indices were trading on optimistic note; the BSE Mid cap index surged 1.71% and Small cap soared 1.87%.
On the BSE sectoral space, Metal up 3.69%, Realty up 3.27%, Bankex up 2.82%, Capital Goods up 2.82% and PSU up 2.44% were the major gainers while there were no losers in the space.
Tata Steel up 4.92%, Coal India up 4.70%, DLF up 4.52%, Tata Motors up 4.08% and Tata Power up 3.97% were the major gainers on the Sensex, while Mahindra & Mahindra down 1.37%was the only loser in the index.
Meanwhile, a move, which could hamper the overseas sales of iron ore raw material, the government has raised the ad valorem duty on iron ore exports to 30% from 20%. On the other hand, this decision is likely to enrich the cash-strapped government and also iron-ore producers who can now choose domestic players rather than export, due to higher taxes.
Federation of Indian Mineral Industries' Secretary-General R K Sharma said, the government has further hiked the export duty on iron ore to 30 percent on December 30. This will make Indian iron ore totally uncompetitive in the world market. By adding further he said, 'iron ore exports are already down by around 30 percent during the April-November period of the current financial year over the same period last fiscal. It will be far more challenging next year.'

Duty on overseas sales of iron ore was raised for the second time in 10 months to increase the availability of the key raw material for the domestic steelmakers. The government had raised the export duty on both lumps and fines to 20% in the budget for the current financial year to check the random export of the key steel-making raw material and support domestic value addition.

India, the world's third largest iron ore exporter, had shipped 117.3 million tonnes of iron ore in 2009-10 and 70-80% of this was in the form of fines, which do not have many takers among domestic steel makers. In 2010-11, iron ore exports from the country came down to 97.64 million tonnes and in the first eight months of the current financial year, exports plunged by a little over 28% to 40 million tonnes compared to the corresponding period last fiscal.
Apart from the duty hike, the fall in overseas sale of iron ore was due to a number of reasons, including the imposition of a ban on exports of the raw material from Karnataka since July, 2010, following accusation of widespread illegal mining. Further, production of iron ore in around 45 mines in Goa has also been shut down due to environmental reasons. An informal export ban is also in place in Odisha.
Concerned over the ruthless shortage of iron ore after the ban on mining in Karnataka, Steel Minister Beni Prasad Verma had written to the finance ministry last September for raising the export duty on iron ore to 30% to discourage exports.
The S&P CNX Nifty is currently trading at 4,733.40, higher by 96.65 points or 2.08% after trading as high as 4,736.25 and as low as 4,675.80. There were 48 stocks advancing against 2 declines on the index.
The top gainers on the Nifty were Kotak Bank up 6.65%, Tata Steel up 4.84%, DLF up 4.60%, Coal India up 4.53% and Tata Motors up 4.27%.
BPCL down 1.70% and M&M down 1.48% were the only losers on the index.
Asian markets traded on an optimistic note; Hang Seng soared 2.08%, Jakarta Composite climbed 0.94%, Straits Times amassed 1.56%, Seoul Composite spurted 2.69% and Taiwan Weighted surged 1.46%.
Stock markets in China and Japan remained closed for extended New Year's holiday.