UPTREND CONTINUES

Stock markets in India extended the uptrend on the first day of the F&O expiry week, after vivaciously rallying over two percent on Friday, and managed to finish a choppy session of trade on an optimistic note as the joy of closing in the positive territory got quintupled. The benchmarks displayed resilience as they traded firmly in the green for most part of the day's trade on the back of heavy buying in rate sensitive counters like Auto and Baking and managed to touch two month high levels. Investors traded with some conviction as growth concerns over Europe weighed on crude oil prices. However, the frontline indices met with stern resistance at the psychological levels of 5,700 and 19,000 as investors took profits off the table around those levels after reports of fierce retaliation between Western forces and forces loyal to Col Gaddafi emerged. The bourses climbed over half a percent in the session despite tepid leads from markets across the globe as investors speculated most of the headwinds have been factored in by the markets and that the companies will report strong quarterly earnings for the fourth quarter. Meanwhile, local sentiments also took cues from CII Survey which opined that the ongoing high inflation and resulting rapid increase in costs has so far been unable to significantly dent the performance of India Inc. The NSE's 50-share broadly followed index Nifty, receded after claiming 5,700 mark, an important psychological level, and settled a tad below the level while Bombay Stock Exchange's Sensitive Index, Sensex surged by over a hundred points and conquered the crucial 18,900 level. The broader markets too traded on healthy note but failed to perform in tandem with their larger peers nevertheless the BSE's midcap index went home with gains of 0.42% while the smallcap index rose 0.12% points. On the sectoral front, rate sensitive Auto pocket surged by 1.52% led by heavyweight Tata Motors which zoomed 3.25%, being the top gainer on Sensex while stocks like Maruti Suzuki and Cummins India too gained around 1.50% each. The Capital Goods index too remained amid the thick of things and advanced 1.27% on the back of gains in majors like L&T which was up 2.56% and Alstom Projects up 2.25%. On the other hand the Healthcare index languished at the bottom of the table with losses of 1.17% as massive sell-off in stocks like Aurobindo Pharma and Jubilant Life Sciences which respectively shaved off 5.84% and 3.74% dragged the counter. Index bellwether Reliance Industries remained highly unstable in the session and slipped marginally by the end of trade after rallying in the initial moments of trade on reports of forming a financial JV with D E Shaw Group to build a leading financial services business in India.

On the global front, majority of Asian equity indices finished in the negative led by Japanese stocks which declined more than half a percent on fresh concerns over a stricken nuclear power complex as radioactive water slowed repair work at the plant.  The European markets traded on a cautious note as France's CAC, Germany's DAX and Britain's FTSE exhibited mixed trend. On the other hand, the screen trading for US index futures indicated that the Dow could open on a flat note.

Earlier on Dalal Street, the benchmark got off to a soft start as fresh worries over high levels of radiation in Japan emerged which delayed efforts to stabilize a crippled nuclear power plant and shoddier than expected earnings reported by some blue chips companies weighed on cautious investor mood. After hitting intraday lows in the early hours, the frontline indices rose to higher levels on the back of buying in blue chips and fertilizer stocks. However, the session largely remained characterized by choppiness as investors seemed reluctant to pile up hefty positions after the recent over five percent rally. Eventually the bourses snapped fifth straight session in the positive territory and just below the psychological levels of 5,700 and 19,000. The markets registered strong volumes of over Rs 1.75 lakh crore while the turnover for NSE F&O segment was at over Rs 1.59 lakh crore. Volumes were large on expected line as the markets have entered the F&O expiry week. Market breadth remained negative as there were 1243 shares on the gaining side against 1724 shares on the losing side while 86 shares remained unchanged.

Finally, the BSE Sensex surged by 127.50 points or 0.68% to settle at 18,943.14 while the S&P CNX Nifty climbed 33.00 points or 0.58% to end at 5,687.25.

The BSE Sensex touched a high and a low of 19,024.18 and 18,799.57 respectively. The BSE Mid-cap and Small-cap indices increased by 0.42% and 0.12%, respectively.

Tata Motors up 3.25%, Bharti Airtel up 2.57%, L&T up 2.56%, Reliance Infra up 1.76% and Maruti Suzuki up 1.69% were the major gainers on the Sensex.

On the flip side, Jaiprakash Associate down 2.16%, Reliance Communication down 1.50%, Sterlite Industries down 0.89%, Infosys down 0.71% and DLF down 0.66% were the major losers on the index.

After nearly two years of delay, the ministry of civil aviation finally seems set to get the new ground-handling policy implemented. It has asked all airport operators in the country to initiate steps to implement the new policy from April 1 in an effort to enhance safety and improve quality of services.

The move comes even as the airlines continue to protest the new policy. All the private airlines have been opposing the new policy citing various reasons from causing unemployment among the current ground handling staff to potential losses that will accrue to them. The government did defer the implementation of the policy on airlines' plea at least thrice. Now however, the government has rejected any further delays and the Delhi high court too has recently rejected a plea by airlines to get a stay on implementation of the policy.

The new policy requires that the airlines outsource the ground handling operations at the airports to other operators selected for the job. Under the new policy, only the government owned Air India, the airport operator and a third private operator selected through the competitive bidding will be allowed to provide ground handling services. All private carriers will have to tie up with one of these to provide services. Obviously, this will hike the costs of ground services for airlines.

The civil aviation ministry had announced the new policy in 2008 and was expected to put in place the new ground-handling norms from January 1, 2009. However, the downturn in the economy following the global financial crisis and resulting substantial negative impact on civil aviation industry forced it to defer the implementation thrice as the move was strongly opposed by the airlines which were then struggling with declining air-traffic. 

Now, however, things have changed sharply in the aviation space. The industry has enjoyed more than a year of surging air traffic, and air fares have already crosses the peaks seen in the pre-crisis period. The industry, though still under somewhat pressure by accumulated substantial and rising cost of aviation turbine fuel, is certainly in much better position to cope with the small financial burden that it will face with the new policy.

Nonetheless, the implementation of the new ground handling norms will have some impact on the profitability of airlines. That is the reason that carriers have been looking to get yet another postponement for the policy. However, this looks difficult now as the civil aviation ministry feels that with surging demand for air-travel demand, it was the best time to implement the new policy and is keen to get the same kick-started on April 1.

Auto up 1.52%, Capital Goods up 1.27%, Bankex up 1.21%, FMCG up 0.86%, and Consumer durables up 0.61% were the major gainers in the BSE sectoral space.

On the other hand Health Care (HC) down 1.17%, Realty Down 0.56%, Metal down 0.29%, IT down 0.18% and Oil & Gas down 0.04% were the major losers in the BSE sectoral space.

Following the substantial increase in export duty on iron ore, the price of the key raw material has been coming down in the country. According to the steel makers and miners, iron ore prices have gone down by around 10% in the last few weeks. Going forward, there is expectation of a further decline as demand remains soft.

The Union Government had increased export duty on iron ore fines by four-fold to 20% in the General Budget for 2011-12 in a bid to discourage exports and conserve the material for use by the steel makers within the country. While this has been a major demand of steel players for quite some time and will take pressure off the cost side of steel makers, the increase in duty will certainly hit the prospects of miners.

According to the industry insiders, percentage drop from mid February to mid March in iron ore prices range between 10-15%, depending on the grades, where lower grades have got a bigger hit than the higher grades. However, it is difficult to say where the ore will bottom out because there have been global developments too that can significantly impact the contract prices at international level.

Iron ore prices have come down significantly in China as well in recent days following apprehension of slowdown in demand because of the double natural calamity in Japan and the following nuclear crisis that is still continuing. Japan is second largest steel maker in world after China and decline in production there can have substantial impact on demand and hence prices of iron ore.

Though most of India's iron ore is shipped to China, the demand slump in Japan is expected to have significant impact on international contract prices. These in turn will serve as benchmark for spot prices and most analysts expect spot iron ore prices to come down further once the next quarterly agreements are signed. An additional factor in case of India is that domestic steel capacity is significantly low compared with iron ore output and as the surplus increase at home due to higher export duty; the fall in prices can be greater than global softening in the key raw material.

The S&P CNX Nifty touched a high and a low of 5,709.10 and 5,643.20 respectively.

The top gainers on the Nifty were Tata Motors up 3.43%, Bharti Airtel up 2.37%, IDFC up 2.31%, L&T up 1.85% and Maruti up 1.65%.

The top losers on the index were Sun Pharma down 3.48%, GAIL down 2.14%, JP Associate down 2.10%, RCOM down 1.73% and Sesa Goa down 1.67%.

European markets were trading in mix on Monday. France's CAC 40 gained 0.10%, Germany's DAX fall by 0.19% and Britain's FTSE 100 surged by 0.05%.

Asian equity indices finished the day's trade mostly in the negative terrain on Monday led by Japanese Nikkei which declined more than half a percent on fresh concerns over stricken nuclear power complex as radioactive water slowed repair work at the plant. The Fukushima Dai-ichi complex has been leaking radiation since it was severely damaged on March 11, 2011 following a massive earthquake and tsunami that ruined the country's northeastern coast. However, Seoul Composite ended flat-to-positive on taking support from gains in steelmakers like POSCO.