SEA - SAW TRADE

The Indian equity markets suddenly picked up steam and now moved into the green after cautious and a slightly listless start due to a mixed lead from global markets. Investors appearing bit clueless ahead of key US jobs data. On sectoral front, Realty stocks, which opened on a weak note, have edged higher on renewed buying in the sector. Healthcare and power stocks were also trading firm. Select automobile, information technology, FMCG and consumer durables stocks were up in positive territory with smart gains. Metal stocks were mostly trading lower. Bank, capital goods and oil stocks were also displaying some weakness. On the global front, street edged lower overnight and the mood on the Asian bourses is quite cautious with a slightly negative bias at present. Back home, the market breadth favoring the positive trend; there were 1,393 shares on the gaining side against 1,082 shares on the losing side while 106 shares remained unchanged.

The BSE Sensex is currently trading at 17,441.80, up by 9.95 points or 0.06%. The index has touched a high and a low of 17,474.38 and 17,382.70 respectively. There were 18 stocks advancing against 12 declining ones on the index.

Broader indices were outperforming the benchmarks; the BSE Mid cap and Small cap indices were up by 0.84% and 0.77% respectively.  

The top gaining sectoral indices on the BSE were, Realty up by 1.19%, Health Care up by 1.09%, Power up by 1.07%, TECk up by 0.62% and Auto up by 0.50%.

On the flipside, Metal down by 1.01%, Bankex down by 0.39%, CG down by 0.29% and Oil & Gas down by 0.26%.

The top gainers on the Sensex were M&M up by 2.26%, Sun Pharma up by 2.26%, Bharti Airtel up by 2.14%, Coal India up by 1.97% and Hindustan Unilever up by 1.49%.

On the flip side, Hindalco Inds down by 2.54%, Tata Steel down by 2.31%, Sterlite Inds down by 2.30%, Jindal Steel down by 1.77% and L&T down by 1.20% were the major losers on the index.

Meanwhile, in an effort to make the country self-sufficient in the key soil nutrient, a Group of Ministers (GoM) is scheduled to meet on February 16, 2012 to review and finalize a new investment policy for the urea sector. The policy which was designed by the government's apex economic planning body, the planning commission and approved by the Committee of Secretaries (CoS), headed by Planning Commission member Soumitra Choudhary, is aimed at stepping up the domestic production of urea, the most widely used soil nutrient in the country.

Currently, India imports about 6.5-7 million tonnes of urea. It is believed that this dependence can be brought down and India can produce an additional 6 million tonnes of urea domestically. The new urea policy aims at providing the right framework to achieve this target. As per the drafted policy, the CoS has suggested that incentives be given for setting up new plants (green-field) and expansion of the existing plants (brown-field).

The draft policy stipulates for using gas of up to $14 per million British thermal unit price (mBtu) for production of urea for being eligible for government subsidy/support.  The draft policy has suggested that the government should bear the entire cost of gas till $14 per mBtu, with gas being the main feedstock of urea and accounting 80% of the cost of manufacturing. Moreover, if gas of a higher price is used, then urea price will go up by $20 per tonnes for every dollar increase in the fuel cost.

Further, under the new urea policy, the minimum (floor price) and maximum (ceiling price) cost of production, is fixed at $290 a tonne and $320 a tonne respectively for green-fields and $310 a tonne and $340 a tonne for brown-fields. For revival of old or closed plants, the floor price is fixed between $250 and $280 a tonne and ceiling price at $410 a tonne. However, the gas price in this case will be fully subsidised between $7.5-14 per mBtu.

The idea behind fixing prices is that the floor price protects investors and the ceiling price protects the government from paying out excessively large subsidies while making the project financially a viable proposition. The floor and ceiling price is determined based on the cost of imported urea, which is known as import parity price (IPP).

At present the domestic urea production is estimated at 22 million tonnes, while the consumption is pegged at 29 million tonnes. The country faces a shortfall of 7 million tonnes, which is met through imports. This is the second attempt at devising a new policy. The first attempt was made in 2008 by a committee chaired by Abhijeet Sen however; it had failed to attract investors because of unavailability of domestic supply of gas.

The S&P CNX Nifty is currently trading at 5,275.50, up by 5.60 points or 0.11%. The index has touched a high and a low of 5,279.45 and 5,255.55 respectively. There were 32 stocks advancing against 17 declining ones, while one stock remained unchanged on the index.

The top gainers of the Nifty were IDFC up by 3.23%, Powergrid up by 2.90%, Bharti Airtel up by 2.24%, Grasim up by 2.19% and Sun Pharma up by 2.16%.

RCom down by 3.26%, Hindalco down by 3.04%, Sterlite Inds down by 2.46%, Tata Steel down by 2.45%, and Jindal Steel down by 2.01% were the major losers on the index.

The Asian indices were trading mixed; Nikkei 225 lost 0.46% and Seoul Composite was down by 0.63%. On the other hand, Shanghai Composite was up by 0.90%, Hang Seng was up by 0.21%, Jakarta Composite added 0.09%, Straits Times gained 0.81% and Taiwan Weighted was higher by 0.29%.