INDIAN MARKETS CONSOLIDATE

First day of the new F&O series finished on an unenthusiastic note as the domestic benchmarks appeared exhausted since they could only manage to crawl sideways throughout the session and snap the eight consecutive session winning streak. Today's session largely remained characterized by choppiness as the aimless indices oscillated in a very tight range and investors took a breather and resorted to mild profit booking in heavyweights after the tremendous around three percent rally for the week. However, the midcap and smallcap stocks remained the order of the day as hefty buying interests was witnessed in the broader markets which outperformed their large peers by a huge margin. Strong rally was witnessed in Cement and Auto counters as the companies reported healthy monthly sales numbers. The rebound in crude oil prices after Gaddafi's loyalist forces regained control of a number of coastal cities, including Ras Lanuf Port in eastern Libya, weighed down the domestic sentiments as the bourses even went ahead to shrug off sanguine leads from across the globe. The NSE's 50-share broadly followed index Nifty, settled on an absolutely quite note below the crucial 5,850 support level while Bombay Stock Exchange's Sensitive Index, Sensex too registered trivial losses and closed just above the psychological 19,400 level. In the broader markets the BSE's Midcap and Smallcap indices went home with strong gains of 1.59% and 2.23% respectively. Anil Dhirubhai Ambani Group (ADAG) pack too remained the crowd puller in today's trade as all the shares under the banner went home with good gains including Reliance Capital and RCom which soared 5.70% and 3.67% respectively. On the sectoral front, the high beta Realty pocket grabbed the top gainer's position after garnering 2.60% and majors like HDIL and Unitech surged around 3.50% each. The metals counter too remained amid the thick of things and advanced 1.15% on the back of around 2.50% gains in Sesa Goa and Hindalco Industries. On the other hand, the rate sensitive Bankex sector languished at the bottom of the table after slipping 0.83% as majors like SBI and PNB plummeted 1.75% and 3.34% respectively. A day after almost one and half a percent rally, index bellwether Reliance Industries slipped by over a percentage points by the end of trade.

On the global front, all the Asian equity indices barring Nikkei 225 finished the day's trade in the positive terrain led by Shanghai Composite which rose more than a percent, as reasonably valued financial stocks drove the index higher after a strong sector earnings performance. The European markets too traded on a firm note as France's CAC, Germany's DAX and Britain's FTSE exhibited optimistic trends. On the other hand, the screen trading for US index futures indicated that the Dow could open with moderate gains.

Earlier on Dalal Street, the benchmark got off to a soft start in the morning trade tracking leads from Asian markets which traded with moderate gains because of tepid leads from overnight US markets which closed mixed after positive US economic data got offset by the surge in crude prices to 30 months high levels amid lingering turbulences in the Middle East nations. The indices soon slipped in the red terrain and kept gyrating around the neutral line through the day's trade, as bulls ran out of steam after eight-day long winning streak. The indices hit the low point of the day in the dying hours of trade post which some short covering in Realty, Auto and Cement stocks helped the indices to eventually close the last trading day of the week just below previous closing levels. On the expected lines, markets registered low volumes of over Rs 1 lakh crore while the turnover for NSE F&O segment too remained at the lower side at over Rs 0.86 lakh crore on the first day of June series. Market breadth remained extremely positive as there were 2178 shares on the gaining side against 682 shares on the losing side while 96 shares remained unchanged.

Finally, the BSE Sensex declined by 24.83 points or 0.13% to settle at 19,420.39 while the S&P CNX Nifty fell by 7.70 points or 0.13% to end at 5,826.05.

The BSE Sensex touched a high and a low of 19,562.55 and 19,382.35 respectively. The BSE Mid-cap and Small-cap indices gained by 1.59% and 2.23%, respectively. 

Reliance Communication up 3.67%, Jaiprakash Associate up 3.03%, BHEL up 2.57%, Hindalco Industries up 2.42% and Mahindra & Mahindra up 1.65% were the major gainers on the Sensex.

On the flip side, NTPC down 2.12%, SBI down 1.75%, Reliance Industries down 1.19%, Tata Power down 1.04% and ICICI Bank down 0.90% were the Major losers on the index.

In a significant relaxation in the norms governing the foreign direct investment (FDI) into the country, the government has allowed companies to issue equity to overseas investors against import of capital goods and machinery to be used by such companies. The facility was earlier available for companies raising external commercial borrowings (ECBs).

Further, with the revised norms released on Thursday, FDI may also be considered in cases where foreign investors are involved in pre-operative or pre-incorporation expenses, including payments of rent etc. These measure, which are aimed at further liberalizing conditions for conversion of non-cash items into equity, are expected to significantly ease the conduct of business, said the government in an official release.

In another major simplification, the government removed the categorization of 'investing companies', 'operating companies' and 'investing-cum-operating companies' and has instead introduced a two-way classification including 'companies owned or controlled by foreign investors' and 'companies owned and controlled by Indian residents'. It also scrapped an existing rule that mandates prior approval of technology collaborations mandatory for FDI in existing joint ventures.

Further, as per the latest circular on FDI policies, corporate entities will have the option of prescribing to a conversion formula, subject to the FEMA/ SEBI guidelines, on pricing, instead of specifying the price of convertible instruments upfront. The move is expected to help the recipient companies in obtaining a better valuation based upon their performance the circular read.

In the agriculture sector too, the government has made some significant incremental liberalization aiming at improving the productivity of farm operations and made things easier for overseas investors like those engaged in production and development of seeds. As per the revised rules, FDI will now be permitted in the development and production of seeds and planting material, without the stipulation of having to do so under 'controlled conditions'.

Realty up 2.60%, Metal up 1.15%, Power up 0.93%, Capital Goods (CG) up 0.84%, and Auto up 0.70% were the major gainers in the BSE sectoral space.

Bankex down 0.83%, Oil & Gas down 0.59%, IT down 0.47%, TECk down 0.31 were the loser in the BSE sectoral space.

The Union Government's fiscal deficit during the first eleven months of last financial year has worked out to be significantly better than the previous fiscal on account of the mega one-time gains from the auction of third general (3G) telecom spectrum held last year.

According to the data compiled by the Comptroller General of India, the deficit in Apr-Feb 2010 works out to be 68.6% of the estimates, compared a corresponding figure of 92% in the last financial year. Looking at the absolute figures, the fiscal deficit stood at Rs 2.75 lakh crore in the 11-month period of 2010-11, against Rs 3.80 lakh crore in the corresponding period of the previous financial year.

Over the period under review, the net tax receipts of the government stood at Rs 4.60 lakh crore while its total expenditure increased to Rs 9.78 lakh crore. While the non-tax receipts in the last fiscal were fueled by the 3G auction, the tax receipts of the government were boosted by strong recovery that the Indian economy saw and as a result buoyant increase in income of corporates and individuals.

Union Finance Minister Pranab Mukherjee in the General Budget for fiscal year 2011-12, pegged the fiscal deficit for the fiscal year 2010-11 at 5.1%, owing to the better revenue position. He had originally estimated the deficit at 5.5% of the gross domestic product (GDP) at Rs 3.81 lakh crore in the FY11 Budget.

For the fiscal year 2011-12, the finance ministry has projected deficit at 4.6%, better than what was advocated by the Thirteenth Finance Commission (TFC) in its revised fiscal consolidation road map under the fiscal responsibility and budget management act (FRBMA). However, there are some concerns that lack of any major non-tax revenue gains like the one on 3G auction last year and surging crude prices that can fuel India's subsidy bill, the actual deficit might turn out to be significantly higher in the current fiscal than budgeted levels. 

The S&P CNX Nifty touched a high and a low of 5,860.20 and 5,810.40 respectively.

The top gainers on the Nifty were Reliance Capital up 5.36%, IDFC up 3.95%, RCOM up 3.76%, JP Associates up 3.13% and Power Grid up 3.09%.

The top losers on the index were PNB down 2.79%, HCL Tech down 2.44%, NTPC down 2.25%, SBI down 1.57% and Kotak Bank down 1.50%.

European markets were trading in green on Friday. France's CAC 40 rises 0.71%, Germany's DAX surges by 0.95% and Britain's FTSE 100 increased by 0.79%.

All the Asian equity indices barring Nikkei finished mostly in the positive terrain on last trading day of the week. Chinese Shanghai rose more than one percent, as reasonably valued financial stocks drove the index higher after a strong sector earnings performance. However, Japanese Nikkei was up in the second half of its trade but touched the negative belt when just an hour of trade was left and snapped the session with a cut of about half a percent. A weaker yen is seen as supportive of the country's exporters during a period of domestic rebuilding but the nation's struggle to recover will be a long-term one.