NIFTY ABOVE 5400

After remaining most part of the session around the crucial support levels of 5,400 and 18,000, the domestic benchmarks have snapped the day with about a percent gain but off the day's high level. The local markets were outclassed by the markets across the globe by a large extent on Monday, however, the frontline indices smartly bounced back in today's trade as many investors, smarting from huge losses, took up reverse positions, vowing to avenge the next day. Sanguine local and global cues too buttressed the chances of a rebound for the domestic indices which were reeling under the pressure of spiraling crude oil prices for three consecutive days. The consolidation in crude prices today was seen as an opportunity by the local investors who resorted to broad based buying as they closely watched the developments in Parliament where the Indian finance Minister tabled GST and Banking Laws Bill. The NSE's 50-share broadly followed index Nifty, regained the crucial 5,400 support level while Bombay Stock Exchange's Sensitive Index, or Sensex slipped below the psychological 18,000 mark by the skin of its teeth after garnering around one hundred and fifty points. The broader markets underperformed their larger peers by a small margin as the BSE's midcap index went home with gains of 0.79% while the smallcap index climbed 0.54% points. On the sectoral front, the high beta Realty index amassed 2.19% as strong position build up in stocks like DLF and Mahindra Lifespace which rose 3.17% and 3.66% respectively pulled the index to the top of the table. The other counter which saw huge buying interests was rate sensitive Auto which surged 1.53% on the back of jump in bellwether stocks like Maruti Suzuki up 3.58% and Apollo Tyres up 4.09% in the session. Meanwhile, shares of Healthcare companies like Opto Circuits and Fortis Healthcare jumped 3.46% and 2.23% respectively after Pranab Mukherjee rolled back the proposed 5% service tax on healthcare announced during the federal budget for 2011-12. While sugar stocks also surged today on the buzz that Government will be allowing 200,000 tonne of sugar exports under unrestricted sales or the open general license (OGL) which will be first tranche of the half a million tonne of exports announced earlier. Stocks like Dwarikesh Sugar, Ugar Sugar Works, Sakthi Sugars, and Oudh Sugar accumulated in the range of 4% to 10% in the session.

On the global front, majority of Asian equity indices finished in the positive terrain led by Japanese Nikkei which zoomed more than four percent supported by signs of ease in country's post-quake nuclear crisis. The European markets too mirrored the sanguine Asian cues as France's CAC, Germany's DAX and Britain's FTSE traded in the green zone though with marginal gains. On the other hand, the screen trading for US index futures also indicated that the Dow could open on a flat note.

Earlier on Dalal Street, the benchmark recovered by over 100 points in the opening trade taking sanguine leads from the overnight upsurge in the US markets which garnered about one and a half percent on reports of stabilizing nuclear crisis in Japan along with some acquisition report. The indices gradually gained traction and conquered the crucial support levels of 5,400 and 18,000 and gyrated around those levels for most part of the trade. Some bouts of profit booking were witnessed in late trade when the frontline indices touched intra-day highs which dragged the bourses below crucial supports. However, some short covering in dying minutes helped the indices to snap the three day losing streak with gains of almost a percent. The markets registered volumes of over Rs 1.17 lakh crore while the turnover for NSE F&O segment too remained on the lower side compared to Monday at over Rs 1.05 lakh crore. Market breadth remained positive as there were 1555 shares on the gaining side against 1294 shares on the losing side while 134 shares remained unchanged.

On Charts: The S&P CNX Nifty may face strong resistance around 5,440 (10 EDMA) if this break then only we may see further up move in the index and it may retest 5,530 levels. However, Nifty's nearest projection support seen around at 5340 and once below that, it may drop to the 5300-5280 levels also.

Finally, the BSE Sensex surged by 149.25 points or 0.84% to settle at 17,988.30 while the S&P CNX Nifty climbed by 49.10 points or 0.92% to end at 5,413.85

The BSE Sensex touched a high and a low of 18,041.38 and 17,878.80 respectively. The BSE Mid-cap and Small-cap indices declined 0.79% and 0.54%, respectively.

Maruti Suzuki up 3.58%, DLF up 3.17%, Bharti Airtel up 2.68%, Jaiprakash Associate up 2.05% and HDFC up 1.68% were the major gainers on the Sensex.

On the flip side, Jindal Steel down 0.31%, TCS down 0.28%, ICICI Bank down 0.27%, HDFC Bank down 0.13% and Bajaj Auto down 0.01% were the major losers on the index.

The inter-ministerial group (IMG), which is headed by Chief Economic Adviser in the Finance Ministry Kaushik Basu, and created by government to suggest measures to control spiraling prices, particularly of food articles is contemplating review of the Agriculture Produce Marketing Committee (APMC) Act with a view to prevent cartelization by traders and allowing free movement of essential commodities . In view of rising inflation, the IMG will evaluate the Act so that mandis are not held by a cartel. Also, in order to reduce the gap between what the farmers are getting and consumers are paying, the group will examine and pay attention to marketing of products, especially agriculture and food products. The overall inflation increased marginally in February to 8.31% from 8.23% a month ago. Last week, the Reserve Bank of India (RBI) in its quarterly monetary policy raised short-term lending and borrowing rates by 25 basis points each in a bid to contain inflation.

APMC Act provides for regulation of agricultural produce markets for providing an efficient system of buying and selling of agricultural commodities, but the group wants that the competition law to be used very carefully and space should be created for small traders to freely bring their products from farm to retail outlets.

Meanwhile, the IMG has seven-point terms of reference, including studying trends in international production and stocks, besides reviewing prices of major commodities and making recommendations for fiscal, monetary, administrative measures. Realty up 2.19%, Auto up 1.53%, Health Care up 1.10%, PSU up 1.08%, and CD up 0.97% were the major gainers in the BSE sectoral space. There were no losers in the BSE sectoral space.

Union Finance Minister Pranab Mukherjee on Tuesday tabled the Bill aiming at amending some of the tax related constitutional provisions required for implementing the much awaited Goods and Services Tax (GST), the country's most ambitious tax reform yet.

The constitutional amendment would allow states to levy tax on services for the first time. As per the current provision in the constitution, the states cannot tax services while the Union government can also not tax goods beyond the factory gate. Therefore, taxation powers of both the Union government and states will have to be raised to bring them in line with the GST. This will need a constitutional amendment bill to be first passed by the two houses of Parliament and then by at least two-third of state assemblies.

However, the road to implementation of the GST is not very clear so far as there is no complete agreement among states yet. A number of states, particularly the opposition ruled ones, are still firm on their stand that GST in its proposed structure will erode the fiscal autonomy of states, as provided in the Constitution. The Union government has already brought out a fourth revised draft of amendment bill that takes care of some of the issues raised by the states.

The S&P CNX Nifty touched a high and a low of 5,428.15 and 5,376.15 respectively.

The top gainers on the Nifty were Maruti up 4.08%, Bharti Airtel up 3.25%, DLF up 2.91%, Ambuja Cement up 2.40% and JP Associates up 2.29%.

The top losers on the index were Suzlon down 0.98%, ICICI Bank down 0.16%, HDFC Bank down 0.11%, TCS down 0.10% and Powergrid down 0.10%.

The Governor of the central bank D Subbarao said that while inflow of foreign capital was welcome for bridging the CAD, the RBI would always prefer the stable inflows in terms of FDI, which comes with a long term commitment, rather than volatile portfolio inflows which can reverse in case of even a small change in either domestic of global economic scenario.

In fact the RBI had raised the issue in its last two monetary policy reviews as well. The Central bank had expressed concern about the widening of the CAD and the nature of its financing in its third quarter review released on Jan 25. Going by the recent robust export performance though, the CAD for 2010-11 is now estimated to come lower than earlier expected, at around 2.5% of GDP.

However, even as the CAD this year has been financed comfortably, the central bank stressed in its latest policy review released last Thursday that funding pattern of CAD was still a concern. It observed that there should be continued focus on the quality of capital inflows with greater emphasis on attracting long-term funds, including through the FDI, so as to enhance the sustainability of the balance of payments (BoP) over the medium-term.

The concerns raised by the central bank are in face of the fact that FDI into India has registered a sharp decline in the last calendar year. While policy makers have been blaming the decline on week global economic scenario, the development has been rather against the trend seen in other developing countries. A recent report by the United Nations Conference on Trade and Development (UNCTAD) had observed that in the last calendar year, emerging market economies (EMEs) attracted more foreign investment than developed countries for the first time in history as the global economic engine shifts to the EMEs. Despite the fact that FDI into India has gone down which has been attributed at least partly to lengthy procedures and delays in environmental and other clearances. 

European markets were trading mixed on Tuesday. France's CAC 40 gained 0.14%, Germany's DAX fell 0.31% and Britain's FTSE 100 declined by 0.08%.

Asian equity indices finished the day's trade mostly in the positive terrain on Tuesday led by Japanese Nikkei which rose more than four percent today supported by signs of ease in country's post-quake nuclear crisis. The Bank of Japan pumped nearly $25 billion more into the market which also boosted the investors' confidence, while government bond futures slipped as reports of progress to contain radiation leaks at a quake-hit nuclear plant prompted investors to buy back risky assets. Moreover, Taiwan stocks closed with a gain of about half a percent, with banks hitting a nearly two-week high amid media reports that the government would re-initiate its consolidation push for the crowded sector.