MARKETS GAIN MOMENTUM

The benchmark indices gained further ground during trade as buying activity improved. While, the BSE Sensex was up by over 200 points, while the NSE Nifty scaled up over 55 points. Other key Asian markets, barring Jakarta Composite, which was down by 0.04% are trading well in the green. US index futures too are trading up. Back home, all the sectoral indices on the BSE were trading with gains. Capital Goods sector has been the clear leader with a gain of around 1.50%. Auto, information technology and banking counters were also among the major gainers. The broader markets has gained momentum as the day progressed, the BSE Mid-cap and Small-cap indices were up 0.89% and 1.07%, respectively. The market breadth on the BSE was in favour of advances in the ratio of 1773:904 while 106 scrips remained unchanged. Meanwhile, the market, for further direction, has set its eyes on the earnings season which is ready to be kick-off from Friday with the Infosys results. However, the operating margins of companies are expected to be lower in the fourth quarter on account of rising input and commodity prices, which have been simmering due to an unabated rise in oil prices.

The BSE Sensex jumped more than 300 points or 1.5% at 19,600.47. The index touched a high and a low of 19,620.58 and 19,103.63, respectively.

The BSE Mid-cap and Small-cap indices gained 0.89% and 1.07%, respectively.

All the sectoral indices on the BSE were trading in the green. Capital Goods (CG) up 1.62%, Auto up 1.61%, Information Technology (IT) up 1.28%, Bankex up 1.13% and TECk up 1.03% were the major gainers.

Meanwhile, India and European Union (EU) have made considerable progress in narrowing down the remaining differences in some of the crucial areas of ongoing negotiations for the ambitious trade treaty. The two sides have been engaged in negotiations for a free trade area (FTA) treaty since last four years and are likely to reach an agreement soon.

Talks between the two sides gathered momentum last week when the chief negotiators from India and EU had two day meeting in Delhi, followed by the meeting of Indian Commerce Secretary Rahul Khullar and the Director-General for Trade for the European Commission (EC), Jean Luc de Marty in Brussels. Both the meetings were very productive and have helped narrow down differences.

Following the negotiations in Brussels, Khullar said that most of the contentious issues have been sealed and only some last minute things are left. He hopes that by the month of July, the two sides should have sealed the negotiated text and agreement might be signed before the end of current calendar year. The deal has been facing some problems on issues like human rights and intellectual property rights, but much progress on these matters has been made in recent days.

As a region, the 27-nation bloc is India's largest trading partner, while India is EU's 10th largest trading partner. The two sides started negotiations for a trade treaty in 2007 but things were delayed after the global economic crisis surfaced in late 2008. Nonetheless, the crisis increased awareness on part of the EU that it could not ignore emerging economy like India and negotiations picked up pace again in 2010. Both the sides are keen to sign the agreement with 2011.

With negotiations on the multilateral trade deal under the Doha round of world trade organization (WTO) looking to get extended into 2012 or even beyond, India has been focusing more on bilateral trade agreements and has already entered into trade agreement with the 10-member group ASEAN and has concluded separate treaties with Malaysia, Indonesia and Singapore. A comprehensive trade treaty with Japan is also ready to be implemented while separate feasibility studies for FTAs with Australia and Canada are going on. 

The top gainers on the Sensex were Jaiprakash Associates up 4.69%, HUL up 2.63%, Tata Motors up 2.40%, Hero Honda up 2.32% and HDFC up 2.30%.

On the flip side, Hindalco Industries down 0.65%, Sterlite Industries down 0.58%, Jindal Steel down 0.38%, Bharti Airtel down 0.33% and Tata Power down 0.33% were the only losers on the index.

The Indian government has said that high deficit that India faces in bilateral trade with China was a major concern and the two sides will have to resolve the matter at some stage. The statement takes importance in the fact that it came on the eve of Indian Prime Minister Manmohan Singh leaving for China for the BRICS summit.

Trade imbalance in favour of China had gone up to $20 billion in the overall bilateral trade of $55 billion as of December 2010. The imbalance was about $16 billion in calendar year 2009. The issue is expected to come up during the talks between Singh and Chinese President Hu Jintoo tomorrow in the Chinese resort of Sanya on the sidelines of Brazil-Russia-India-China-South Africa (BRICS) Summit.

'Trade imbalance with China has been a matter of concern. It has been discussed at the highest level when the Prime Minister met Chinese President in Hanoi in October last,' Commerce and Industry Minister Anand Sharma said  adding that India had sought more access to Chinese markets across the board so that the gap could be bridged. China had also assured India that it would give India greater access through government contracts in sectors like pharmaceuticals and IT.

At the Summit, which for the first time includes South Africa, besides the regular four Brazil, Russia, India and China, there will be deliberations on global financial and economic situation besides matters related to energy security, food security and challenges posed by terrorism. BRICS will also be discussing the reform of the international financial system. It was earlier reported that using Chinese currency as partial alternate to dollar will be discussed too but it has not found mention in any official release.

Replying to a related question, Sharma said the stage has not reached where the Chinese currency Yuan can be an alternate to dollar for currency exchange for trade. However, the member countries will be signing an agreement under which they could grant credit among themselves in own currencies. While India will be cautious on any steps towards replacing the dollar, it would not mind an arrangement where all five local currencies of BRICS members get equal treatment.  

The S&P CNX Nifty advanced 100 points or 1.5% at 5890.50. The index touched high of 5895.80 and a low of 5735.55, respectively.

The top gainers on the Nifty were Jaiprakash Associates up 4.58%, Siemens up 3.92%, HUL up 3%, IDFC up 2.77% and HDFC up 2.73%.

On the other hand, Sun Pharma down 1.02%, Hindalco Industries down 0.82%, ACC down 0.58%, Tata Power down 0.57% and Sterlite Industries down 0.55% were the major losers on the index.

Rest of the Asian markets, barring Jakarta Composite, which was down by 0.04% are trading in the green. Shanghai Composite rose 0.74%, Hang Seng added 0.55%, KLSE Composite increased 0.75%, Nikkei 225 soared 0.90%, Straits Times gained 0.99%, Seoul Composite jumped 1.56% and Taiwan Weighted advanced 0.55%.