POSITIVE MOMENTUM

Indian equity markets sustained the positive momentum in Friday afternoon trades as the benchmarks climbed around half a percent and knocked at the doors of the psychological 5,050 (Nifty) and 16750 (Sensex) levels in the session. Investors kept piling up positions with conviction as sentiments got buttressed by the strength in markets across the globe. After the previous session's over a percent rally, investors chose to indulge in stock specific activity amid a slew of earnings announcements by heavyweight companies. One of IT heavyweights Wipro reported better than expected earnings for the quarter ended December 31 and got commended for the performance by investors. Also FMCG bellwether ITC reported its third quarter earnings which were largely in line with street's expectations while its profit after tax surged 22% to Rs 1701 crore. Meanwhile the rate sensitive banking stocks witnessed heavy buying interests a day after the pre-budget meeting of Banking and Financial Institutions' representatives and Union Finance Minister where Pranab Mukherjee called for united efforts towards strengthening India's economy. Leads from the Asian peers too remained impressive as most markets in the region traded in the positive terrain. The optimism was spurred by upmove on Wall Street overnight on the back of encouraging earnings announcements by majors like IBM Corp, Bank of America and Morgan Stanley coupled with the upbeat US employment reports. The European futures indicated a sluggish opening for the markets there which climbed to a five-month high in the previous session after Spain sold more debt than expected while bond yields in France slipped lower. On the BSE sectoral space, largely across the board buying was evident. The Healthcare and Oil & Gas were the only chinks in the armor with moderate losses.

Moreover, the broader markets traded on a firm note with close to a percent gains, outperforming their larger peers. The bourses climbed on good volumes of over Rs 0.50 lakh crore. The market breadth on BSE was in favor of advances in the ratio of 1502:1084 while 113 scrips remained unchanged.

The BSE Sensex is currently trading at 16,738.73 up by 94.77 points or 0.57% after trading as high as 16,777.67 and as low as 16,693.16. There were 19 stocks advancing against 11 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index climbed 0.80% and Small cap advanced 0.73%.

On the BSE sectoral space, Bankex up 2.50%, Consumer Durables up 2.16%, Realty up 1.39%, Power up 0.94% and Auto up 0.74% were the major gainers while Healthcare down 0.37% and Oil & Gas down 0.21% were the only losers in the space.

ICICI Bank up 5.24%, Bajaj Auto up 4.80%, DLF up 2.59%, Hero Moto up 2.54% and Jindal Steel up 2.28% were the major gainers on the Sensex, while Coal India down 3.17%, M&M down 1.85%, Maruti down 1.85%, HDFC down 0.68% and ONGC down 0.50% were the major losers in the index.

Meanwhile, Union Finance Minister Pranab Mukherjee while addressing the CMDs/CEOs of Banking and Financial Institutions in a pre-Budget meeting urged all banks and financial institutions whether public or private to work together to attain the common objective of working towards a healthy economy. The Finance Minister was of the belief that this is a very challenging year for the nation and that there was a need to work together to meet these challenges of economy. He sought suggestions from the various stakeholders in formulating the Budget for 2012-13 in the current economic situation.

Mukherjee opined that the gross domestic product (GDP) growth rate for the fiscal year 2011-12 is expected to be around 7.2 percent and due to current uncertainty in global economy as euro zone crisis is still unresolved and volatility in international commodity prices especially fuel, it may be difficult to contain the fiscal deficit at 4.6 percent as targeted during the last budget. The international crisis of 2008 and the ongoing Euro Zone crisis have impacted India also and resulted in problems of inflation, deceleration of GDP and fiscal deficit.

Banking and Financial Institutions' representatives drew the attention of the finance minister on various issues concerning the sector. Voices of concern were raised over the credit to GDP ratio in India which is one of the lowest in the world while it was also mentioned that despite India's savings rate being about 32 percent, only one third of it reaches the banks. Suggestions of launching education loan guarantee scheme and a separate taxation window for pension funds and long term funds also came to the fore while the representatives also advocated the need for removal of handicaps which banks face in mobilizing the deposits.

The bank representatives' which included Pratip Chauduri of SBI and Chanda Kochhar from ICICI Bank among many others, underscored the significance of supporting India's under-developed infrastructure. Right from demanding to make banks eligible entities to issue tax free infrastructure bonds to seeking clarity and broadening of the definition of the infrastructure, the CMDs/CEOs of Banking and Financial Institutions raised many concerns and gave their suggestions that would help in giving the much need boost to infrastructure sector.

The participants also advocated for an independent regulator for infrastructure, suggested that single window clearance for the infrastructure sector projects including power projects would go a long way in attracting huge investment in this sector. It was suggested that there was a need for rationalization of transaction charges in the secondary market and also to boost microfinance. Regarding financial inclusion, it was said that banks who have done well in this regard may be given incentives in order to take them to the second level of economic inclusion. Participants focused on the need to encourage agriculture lending, SME lending and highlighted the issues of rural ware housing and food inflation etc.

The S&P CNX Nifty is currently trading at 5,042.25, higher by 23.85 points or 0.48% after trading as high as 5,054.60 and as low as 5,025.30. There were 28 stocks advancing against 22 declines on the index.

The top gainers on the Nifty were ICICI Bank up 5.18%, Bajaj Auto up 4.91%, Axis Bank up 3.06%, DLF up 2.59% and Hero Moto up 2.49%.

Dr Reddy's down 3.25%, Coal India down 3.04%, R Power down 2.30%, Maruti down 1.97% and M&M down 1.78% were the major losers on the index.

Asian markets were largely trading on a positive note; Shanghai Composite surged 1.01%, Hang Seng advanced 0.34%, Nikkei 225 jumped 1.47%, Straits Times soared 1.13%, Seoul Composite garnered 1.82%.

On the flipside only Jakarta Composite slipped 0.61%.

Stock markets in Taiwan remained shut on Thursday in observance of a public holiday.