MARKETS POWER AHEAD

Buoyed by sustained buying from overseas investors and a declining trend in global crude oil prices, domestic equity bourses have maintained their rally for the seventh consecutive day with the BSE Sensex surpassing the 19,300 mark and the NSE Nifty gyrating around its 5800 milestone. For once, the broader markets are keeping pace with their larger peers.  The uptrend can also be attributed to the covering up of pending short positions by speculators ahead of tomorrow's monthly expiry in the derivatives segment. On the global front, Asian stocks tailing the overnight strong performance on Wall Street is trading comfortably in green while Japanese exporters led Tokyo too was up on the back of a weaker yen, but fears over the atomic crisis continued to weigh. The US future indices are showing mixed trend in the screen trade. Back on Dalal Street, on the BSE Sectoral front, bulls have kept their footing firm as all the sectoral indices are confidently trading in green, however, stocks from Consumer Durable, Realty and Healthcare counters are contributing prominent gains. The overall market breadth on BSE was mightily in the favour of advances which thumped declines in the ratio of 1804:497, while, 71 shares remained unchanged. Meanwhile, Shares of PTC India Financial Services were trading at about 10% discount to its issue price on debut.

The BSE Sensex is currently trading at 19,313.79, up by 192.99 points or 1.01%.The index has touched a high of 19,340.93 and a low of 19,178.77 respectively. 29 stocks were advancing against 1 decline on the index.

The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices surged 1.13% and 1.75% respectively. 

All the sectoral indices were trading in green. However, the top gaining sectoral indices on the BSE were, CD up by 2.54%, Realty up by 1.98 %, HC up by 1.39%, Auto up by 1.27% and Metal up by 1.19%.

The top gainers on the Sensex were Cipla up 2.58%, Mahindra & Mahindra (M&M) up 2.55%, DLF up 2.35%, HDFC up by 2.15% and ONGC up by 1.84%.On the other side, Bharti Airtel down by 0.40% was the sole looser on the index.

Meanwhile, Capital controls were a legitimate response to a surge in volatile capital inflows and India's central bank will resort to the same if and when the need arises, said D Subbarao, Governor of the Reserve Bank of India (RBI) on Tuesday, adding that global perception of capital controls as an economic tool had improved.

Subbarao said that there was a broad consensus among most central banks about making capital controls a legitimate component of the policy response to surges in capital flows. While delivering a speech in Colombo on the occasion of the 60th anniversary celebrations of Central Bank of Sri Lanka, the Governor said the multi-speed recovery around the world and the consequent differential exit from accommodative monetary policy have triggered speculative capital flows into emerging market economies (EMEs).

'The most high profile problem thrown up by capital flows, in excess of a country's absorptive capacity, is currency appreciation which erodes export competitiveness,' he said adding that ideally capital inflows to EMEs should be stable on a medium term basis to benefit the host country and also be roughly equal to the economy's absorptive capacity.

He noted that while multilateral institutions like the International Monetary Fund (IMF) used to see capital controls as a form of protectionism, the views of most economists even in the developed world has changed since the financial crisis of 2008. 'The crisis has changed the terms of that debate. It is now broadly accepted that there could be circumstances in which capital controls can be a legitimate component of the policy response to surges in capital flows,' Subbarao said.

India has so far not imposed any capital inflows, but some other countries including Brazil had resorted to such restrictions. Capital controls are generally in form of some Tobin Tax, named after James Tobin, who was first to propose that cross boarder capital movement should attract a small tax to discourage volatile flows. Since India runs a significant current account deficit (CAD) of around 2.5-3% of its gross domestic product (GDP), it has been following a wait and watch policy on inflows so far. 

While there was a surge in capital inflows by middle of the current financial year, off late, foreign funds have been on the sell mode due to concerns including a high inflation and potential slowdown. Recovery in advanced regions has also lead to slowdown in inflows into emerging economies in recent months. Subbarao stressed that there was a need for economists from both developing and rich world to develop consensus on how temporary surge in inflows or outflows should be handled so as to bring more stability in global financial system.

The S&P CNX Nifty is currently trading at 5,792.15, higher by 55.80 points or 0.97%. The index has touched a high of 5,799.15 and a low of 5,753.90 respectively. There were 47 stocks advancing against just 3 declines on the index.

The top gainers of the Nifty were DLF up 2.55 %,M&M up 2.54%, Dr Reddy up by 2.29%, HDFC up 2.14% and Ambuja Cement up 1.98%.

Bharti Airtel down 0.71%, HCL Technologies down 0.38% and Axis Bank was down by 0.36 %, were the only losers on the index.

Hang Seng gained 1.71%, Jakarta Composite added 0.93%, KLSE Composite rose 0.59%, Nikkei 225 surged 1.90%, Straits Times soared 1.28%, Seoul Composite  expanded 1.21% and Taiwan Weighted increased 0.71%.On the flip side, Shanghai Composite down by 0.48% was the lone looser in the Asian pack.