MARKETS TRADING FIRM

The Indian equity markets gained strength and continued its firm trade in the mid morning session, on back of strong global clues, tracking strong Asian markets and on renewed buying interest from foreign institutional investors. The mood on the street was positive as data released by the US Labor Department showed that businesses accelerated hiring in January, creating jobs at the fastest rate in about nine months and signaling that worries over deep recession are making way for economic recovery. Traders were seen piling up positions in the Realty, Capital Goods (CG) and Metal sector. Sustained buying in mostly all the key heavyweights along with broader indices supported BSE's -- Sensex -- to trade comfortably over their crucial 17,750 mark while NSE's -- Nifty -- was trading over its crucial 5,350 mark. DLF and JP Associates from Realty counter were seen trading firm pulling the markets higher. L&T and BHEL from Capital Goods space were trading in green pushing the markets higher. Hindalco, Sterlite, SAIL, Tata Steel, Jindal Steel and Sesa Goa from Metal sector were standing firm in the positive zone giving the much needed support to the market. The market breadth on the BSE was positive; there were 1,789 shares on the gaining side against 538 shares on the losing side while 79 shares remained unchanged.

The BSE Sensex is currently trading at 17,795.47, up by 190.51 points or 1.08%. The index has touched a high and a low of 17,829.72 and 17,731.25 respectively. There were 28 stocks advancing against just 2 declining ones on the index.

Broader indices too are performing in tandem with the benchmarks; the BSE Mid cap and Small cap indices were up by 1.95% and 2.17% respectively.  

All the sectoral indices on the BSE were in green, Realty up 4.51%, Capital Goods was up by 2.36%, Metal up by 2.35%, Bankex up by 1.78% and PSU was up by 1.75% were the major gainers.

The top gainers on the Sensex were DLF up by 3.95%, SBI up by 3.28%, Hindalco Industries up by 2.75%, Sterlite Industries up by 2.73% and L&T was up by 2.61%. On the flip side, Gail India down by 0.74% and Tata Power down by 0.40% were the only losers on the index.

Meanwhile, in an attempt to increase revenues, the central government has decided to increase the number of services that fall under the gamut of service tax in the upcoming union budget. It is expected that the government will keep 22 services untaxed, technically called the negative list of service tax, and impose uniform 10% tax on all the other services. Services for the purpose will be defined as all kinds of economic activities, barring goods, money and immovable property.

This move has been motivated by the fact that though services sector contribute more than 60% of GDP, their contribution to the Central governments revenue is just 8.7%, as per the budget estimates for 2011-12. This is because service tax is a relatively new area in India and was imposed for the first time in 1994, when only 3 services were taxed. Then it contributed Rs 410 crore to the Centre's tax revenue.  Since then the net has widened to include over 125 services, but it is still felt that this is too minuscule relative to the size of the service sector in the economy.

Hence, it is believed that a larger number of services now need to be taxed. Analysts believe that increasing the net of service tax for the next financial year will alone increase service tax collections by 20-25%, and lead to a contribution Rs 82,000 crore to the Centre's revenue.

A negative list based on service tax represents a change in the government's approach as so far it has taxed on the principle of the positive list. The negative list concept is practiced globally and is proposed to be introduced in India as part of the Goods and Services Tax (GST). The government is trying to introduce the new GST regime, which will subsume various levies like excise, service tax and states tax, like value-added tax, entry tax and purchase tax.

In its pre-Budget consultative meeting with the finance minister, industry too demanded that government should come out with negative list, while expanding the service tax base. However, the States are of the opinion that the Centre should prepare the list in such a way that areas under their domain were not taxed by the Centre. States do not impose services tax, but certain categories that qualify as services are taxed by them under different heads.

As such, businesses paying tax to states may not be subjected to service tax by the Centre. Areas that could fall under this category are construction, entertainment, restaurants, transport, toll, betting and gambling.  States also proposed some services within the ambit of the Centre's residuary powers but critical for socio-economic reasons, such as social welfare and public utilities, agriculture, education and health, be kept in the negative list. The Centre may not be able to keep them in the negative list, but may decide to impose zero tax on them.

The S&P CNX Nifty is currently trading at 5,382.20, up by 56.35 points or 1.06%. The index has touched a high and a low of 5,390.05 and 5,361.15 respectively. There were 47 stocks advancing against 3 declining ones on the index.

The top gainers of the Nifty were JP Associates up by 4.53%, DLF up by 3.73%, SBI up by 3.41%, Ambuja Cement up by 3.30% and Hindalco was up by 2.98%.

Tata Power down by 1.06%, Gail India down by 0.95% and Dr. Reddy's Lab down by 0.40% were the only losers on the index.

The Asian equity indices were trading on a mix note; Shanghai Composite was up by 0.39%, Hang Seng surged by 0.51%, Nikkei 225 gained 1.12% and Straits Times was up by 1.20%. On the flip side, Jakarta Composite dropped 0.27%, Seoul Composite descended by 0.27% and Taiwan Weighted shed 0.54%.