MARKETS STRENGTHEN

The local equity markets after getting a lackluster start have now started trading strength to strength since losses are going thinner amidst enlarging gains. Initially the local bourses got a cautious start with investors appearing a bit clueless about the direction following a flat lead from global markets, but the slew of positive news floating in the market boosted the investor's sentiment. The rally could be partly attributed to the Government's decision to move the GST Bill and the Banking Bill in parliament, thereby raising hope that a protracted policy impasse may be coming to an end. Further, Empowered Group of Ministers (EGoM) allowing export of 5 lakh tonne of sugar under open general licence (OGL)  from earlier expectation of 2 lakh tonne also led the cheer in the Indian equity markets. Post to this development, stocks of some sugar companies like those of Shree Renuka Sugars, Balrampur Chini Mills, Dhampur Sugar Mills, Bajaj Hindustan spiked up over 1% each. On the global front, US markets closed marginally lower while Asian indices too were showing strong resilience, meanwhile US future indices were edging lower on the screen trade.

Back on Dalal Street, on the BSE Sectoral front, stocks from Bankex, Fast Moving Consumer Goods (FMCG) and Healthcare (HC) counters played the key role behind the triple digit gain on the 30 share index--Sensex-- which after conquering 18000 mark is calmly trading above it while broadly followed 50 share index--Nifty-- too was trading contently above the 5400 level respectively. The gains in the stocks from healthcare sector could be contributed to the finance minister Pranab Mukherjee's announcement of withdrawal of the proposed 5 per cent service tax on air-conditioned hospitals with more than 25 beds and on diagnostic services. Meanwhile, the broader markets too were on a firm footing, resulting in a broad-based advance and a healthy market breadth. The overall market breadth on BSE was in the favour of advances which thrashed declines in the ratio of 1497:757, while, 85 shares remained unchanged.

The BSE Sensex is currently trading at 18,153.52, up by 165.22 points or 0.92%. The index has touched a high of 18,183.08  and a low of 17,950.17  respectively. There were 28 stocks advancing against 2 declines on the index.

The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices were up 0.62% and 0.69% respectively. 

All the sectoral indices were trading in green. The top gaining sectoral indices on the BSE were, Bankex up by 1.36%, Fast Moving Consumer Goods up by 1.13%, Healthcare (HC) up by 1.00%, Metal up by 0.96% and Capital Goods (CG) up by 0.89%.

The top gainers on the Sensex were ICICI Bank up by  2.56%, Hindalco Industries up by 1.90%, Jaiprakash Associates up by 1.89%, Sterlite Industries up by 1.73% and Cipla up by 1.69%.

TCS down by 0.37% and Mahindra and Mahindra down by 0.26% were the top losers on the index.

Meanwhile, a recent study by the industry body Assocham has concluded that continued monetary policy tightening by the Reserve Bank of India (RBI) was beginning to have negative impact on Indian businesses as rising cost of funding was not only squeezing profit margins but also rendering some investment plans unviable.

"The country is pursuing a high growth strategy and braving the pains of high inflation. If the economy continues to use monetary policy without fiscal consolidation of appropriate degree, higher interest rates will continue to fuel high cost of production and squeeze profit margins of India Inc,' observed the study conducted to evaluate current economic health of the country.

It advocated that the government should also begin focusing more on the fiscal consolidation and try to focus on improving the efficiency of public spending. The central bank too had pointed out a number of times that a high fiscal deficit was hindrance to effective working of monetary policy. While the government has budgeted the deficit for current fiscal at 4.6%, which sounds reasonably low in current circumstances, experts doubt that there could be upside to the budgeted level in wake of surging crude prices and implied increase in subsidy outgo.  

The study by Assocham also observed that a large part of the inflation problem stemmed from food prices that were rising because of supply shortage. Even though some food article prices were cooling, the food articles index was still hovering at 10% rate from previous year. This could result in a more broad-based inflation in manufactured sector as well, concluded the study.

Further, while inflation was high, industrial growth was slowing down. The Assocham noted that the industrial production dropped to 5.5% in the third quarter of current fiscal year from 9.1% in second quarter and 12% in the first. While there was a slowdown in consumer goods too, greater worry was the slump seen in capital goods sector. The latter reflected that future industrial growth prospects too would be weak until the investment cycle picks up further. This however is unlikely while the central bank is hiking its policy rates in every review.  

The S&P CNX Nifty is currently trading at 5,466.55, up by 52.70 points or 0.97%. There were 46 stocks advancing against 4 declines on the index.

The top gainers of the Nifty were Kotak Bank up by 2.93%, ICICI Bank up by 2.38%, GAIL up by 2.30%,  Cipla up by 2.06% and Hindalco Industries up by 1.85%.

The only losers of the index were BPCL down 0.59%, M&M down by 0.52%, TCS down 0.47% and Siemens was down by 0.19%.

Asian markets were trading mostly in the green; Shanghai Composite was up by 0.78%, Jakarta Composite gained 0.60%, KLSE Composite added 0.04%, Straits Times rose 0.50%, and Taiwan Weighted increased 0.34%.

On the flip side, Seoul Composite declined 0.08%, Hang Seng  shed 0.17% and Nikkei 225 was down by 0.79%.