IMPRESSIVE PERFORMANCE

Euphoric Indian equities showcased an impressive performance on Wednesday by recapturing the crucial 5,850 and 19,450 levels as they got underpinned by a series of encouraging leads which started emerging even before the trading hours commenced. HCL's announcement of a 33% rise in net profit for Jan-March quarter, beating street expectation while reports that India's exports surged 37.5% in 2010-11-their fastest annual growth since independence and projections of monsoon to remain normal this year set the tone of an outright rally. While cues from markets across the globe too remained highly supportive as most Asian and European indices rallied over one and half a percent points and little signs of profit booking emerged in global markets. Local investors even went ahead to discount the rebound in international crude prices which surged by over a percentage point in today's session. While the surprising news of a special court denying bail to five corporate honchos who were named in the 2G scam charge sheet weighed heavily on 2G scam linked stocks like, RCom, Unitech and DB Realty while weakness was also seen in the whole of ADA group stocks for some time, most of which pared losses in the late trade. The NSE's 50-share broadly followed index Nifty, settled with a triple digit gains, above the crucial 5,850 support level while Bombay Stock Exchange's Sensitive Index Sensex ended with around three hundred fifty point gains above the psychological 19,450 mark. The broader markets on the other hand too saw buying interests but were outclassed by their larger peers. The BSE's Midcap Index went home with moderate gains of 1.18% while the Smallcap Index added 1.29%. On the sectoral front, the rate sensitive Auto index, grabbed the top gainers position after soaring 2.72% due to some rally in stocks like Tata Motors and Mahindra & Mahindra which surged 3.99% and 5.05% respectively after reports that good monsoon will push sales of not only farm vehicles like tractors and threshers but also passenger vehicles. While the IT counter too witnessed some buying and ended with gains of 2.39% because of upbeat result announcement by bellwether HCL Tech which spurted 9.93%. Though,no sectoral index closed in the negative territory but weakness was seen in individual stocks like RCom, Hero Honda and L&T which shaved.

On the global front, all Asian equity indices bounced back smartly after yesterday's drubbing, the South Korean benchmark led the pack with over two percent gains as it attained all time high crest on the back of stronger than expected earnings announcements by heavyweight companies. The European markets after starting on a sanguine note have capitalized on the initial momentum with France's CAC gaining by 2.03%, Britain's FTSE 100 rising 2.07% and Germany's DAX advancing 2.39%. On the other hand, the screen trading for US index futures too indicated that the Dow could open with gains of around a percent.

Earlier on Dalal Street, the benchmark got off to good start as sentiments remained sanguine, thanks to encouraging leads from the Asian and overnight US markets which rebounded on the back of better than expected earnings announcements by blue-chip stocks along with some good US home construction report. The frontline indices, after the strong opening, gyrated in a tight range around the crucial 5,800 and 19,300 levels through the first half of trade. But the indices slipped to the low point of the day after reports of trial court rejecting bail to 5 accused in 2G case hit headlines. However, after some jitters, the benchmarks stablised and jumped back with greater conviction. Eventually, bourses snapped the session around the high point of the day, garnering close to two percent and recapturing psychological 5,850 and 19,450 levels. Markets  amassed volumes of over Rs 1.55 lakh crore while the turnover for NSE F&O segment remained lower compared toTuesday's volumes at 1.32 lakh crore. Market breadth remained negative as there were 1389 shares on the gaining side against 1476 shares on the losing side while 116 shares remained unchanged.

Finally, the BSE Sensex surged by 349.15 points or 1.83% to settle at 19,470.98 while the S&P CNX Nifty zoomed by 110.90 points or 1.93% to end at 5,851.65.

The BSE Sensex touched a high and a low of 19,484.77 and 19,171.03 respectively. The BSE Mid-cap and Small-cap indices gained 1.18% and 1.29%, respectively. 

Mahindra & Mahindra up 5.05%, TCS up 4.63%, Hindalco Industries up 4.16%, Tata Motors up 3.99% and Jaiprakash Associate up 3.92% were the major gainers on the Sensex.

On the flip side, Reliance Communication down 1.99%, Hero Honda down 1.87% and L&T down 0.04% were the only losers on the index.

Rubber production in the country increased by over 7% in the month of March, ending the positive fiscal on a strong note even as the prices of the commodity continue to hover around the record highs seen in recent months. Rubber has remained in a bullish zone for several months as global demand-supply equation remains tight.

According to the data compiled by the Rubber Board of India, total natural rubber production in March 2010 stood at 54,400 tonne. On a financial year basis, total production in the April-March 2011 period stood at 2,77,095 tonne as against 2,11,290 tonne in the previous fiscal, thus recording a growth of over 3%. The increase came mainly in the second half of the financial year as farmers increased tapping in response to strong prices.

Domestic consumption on the other hand has increased by little over 2% compared with last financial year to 9,49,205 tonne. This has come as a surprise during the last year, production of the automotive tyres increased by 23% while exports increased by 20%. Since tyre industry consumers nearly half the rubber produced in the country, total consumption growth should have been higher. However, it is possible that other rubber consuming industries cut down on consumption given the high prices.

According to the rubber Board, stock situation is also comfortable and there was no need to worry by the tyre industry. Board's data suggests that opening stock of rubber in 2011-12 stood at 2,77,095 tonne compared with a corresponding figure of 2,11,290 tonnes at the start of last financial year. In this wake, even though prices may remain high, supply should not be a major issue, the Rubber Board said.

Analysts expect that while some correction in near term was possible from highly elevated levels, overall, the prices of natural rubber may continue to remain strong through most of the 2011. This is because global supplies are unlikely to show substantial increase as aging problem of rubber trees has intensified in many producing countries. Only when new trees come under tapping by next year, a structural change in supply curve is possible. Till then, increase in supply will only come from intensified tapping of existing trees, which may be sufficient to dent prices much.

Meanwhile, the Automotive Tyre Manufacturers Association (ATMA) has urged the government as well as the rubber board to ensure timely mandatory inspection of imported rubber as delays in the same were affecting raw material supplies to the manufacturers. Although India is fourth largest producer of the raw material in rubber, tyre makers still have to depend on imports as domestic production is enough for rapidly growing tyre industry. In the last fiscal, imports stood at 1,77,482 tonne, largely unchanged compared with previous fiscal's figure of 1,76,756 tonne.

Auto up 2.72%, IT up 2.39%, Metal up 2.32%, CD up 1.99% and TECk up 1.95% were the major gainers in the BSE sectoral space. There were no losers in the BSE sectoral space.

The S&P CNX Nifty touched a high and a low of 5,857.35 and 5,759.65 respectively.

The top gainers on the Nifty were HCL Tech up 10.16%, Hindalco up 4.98%, M&M up 4.96%, TCS up 4.90% and Kotak Bank up 4.16%.

The only loser on the index was Reliance Communication down 1.48%.

India's Planning Commission, top economic strategy maker of the country, is likely to set the economic growth target for the next Five Year Plan (FYP) that will run through 2012-2017 at around 9-9.5% per annum. For the current plan, average growth is expected to work out to be around 8.1% against a target of 9%.

A full meeting of the Commission, to be chaired by Prime Minister Manmohan Singh, is likely to be held soon where the approach paper for the next plan will be finalized. Besides all the members of the commission and Deputy Chairman M S Ahluwalia, the meeting is likely to be attended by key cabinet ministers, including Finance Minister Pranab Mukherjee and Home Minister P Chidambaram.

In the current plan the government had targeted a growth of 9% per annum and seemed to be well on track to achieve the same until the global financial crisis emerged which resulted in substantial impact on Indian economy as well. However, the government is hopeful that India will soon revert back to the 9% growth trajectory. In fact, the finance ministry is hoping for 9% growth in FY12 itself though most economists expect growth to be around 8% this fiscal.

The Commission is likely to target a higher growth in the manufacturing sector at 11-12% in order to push the overall growth beyond 9%. At present, trend growth rate of manufacturing is around 8-9%. While services sector is expected to continue growing at 9-10%, the target for farm sector, which still contributes around 14-15% of overall gross domestic product (GDP) of the country, is likely to be pegged at 4%.

However, if India wants to further improve growth rate, it will have to raise both the saving and investment rates. Capital to incremental income ratio in India is at around 400% which means for generating every additional income of Rs 1, fresh investment to the tune of Rs 4 has to be made. Thus, for achieving 9.5% growth, India will need to invest upwards of $800 billion in the first year of the 12th Plan. This will require pushing up the saving and investment rates from around 34% and 37% respectively to about 38% and 42%.

In case it is not possible to push the saving rate by this extent, then the country will have to attract greater foreign direct investment (FDI) which helps bridge the gap between saving and investment rates. However, FDI has been going down in recent months owing to various factors including delay in environmental clearances and other bureaucratic delays. In this wake, some sustainable policies aimed at attracting greater flow of direct investment will also have to be envisaged within the plan document.  

European markets have good gains in early trade. France's CAC 40 was up by 2.32%, Germany's DAX gained 2.51% and Britain's FTSE 100 was trading higher by 2.04%.

All the Asian equity indices finished the day's trade in the positive terrain on Wednesday taking cues from Wall Street which made a strong rebound overnight as US housing starts gained and earnings beat estimates at companies including Johnson & Johnson, signaling the world's biggest economy is recovering. Seoul Composite gained more than two percent and hit a fresh all-time closing high today, lifted by rallies in steel and memory chip issues including POSCO and Samsung Electronics. Meanwhile, the Bank of Thailand has raised its benchmark rate for a fourth straight meeting today, continuing its normalization efforts as inflationary pressure builds, however, Taiwan Weighted surged more than two percent in the trade. Other indices like Hang Seng, Jakarta Composite and Nikkei closed with a gain of more than one percent while.