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Saturday, 7 April 2012

Sensex gets shot in the arm after FM clears air on P-notes' tax liability

Indian stock markets staged a terrific rally on the last trading day of the financial year 2011-12 as the benchmark equity indices kept gaining from strength to strength and there appeared absolutely no evidence of profit booking.

The fresh futures and options series got off to a promising start and the frontline indices continued to build on the momentum after concluding the March series with around six percent decline and also registering the first negative close since November 2011. The benchmark equity indices vivaciously rallied over two percentage points and finished around the psychological 5,300 (Nifty) and 17,400 (Sensex) levels.

The key gauges' skyward journey only ended with the close of trade as sentiments got filliped on the back of the optimistic European market which halted the three session declining streak and rebounded on bargain hunting ahead of a two-day meeting of European finance ministers in Copenhagen.

On the domestic front, market participants drew solace after Finance Minister Pranab Mukherjee put to rest all the uncertainty surrounding the tax liability on P-notes and stated that government will issue clarification on its position on taxation of investments from overseas, amid FIIs expressing concern on the proposed anti-tax avoidance rules in due course. He opined that there will be no tax liability on Participatory Note holders and the intention of government is not to harass genuine investors.

Meanwhile, reports showed India's fiscal deficit during April to February was $96.8 billion, or 94.6 percent of the revised full fiscal year 2011/12 target. Besides, global rating agency Fitch has forecasted that Indian economy is likely to expand at 7.5% in 2012-13.

Hefty buying interests was evident in the rate sensitive Banking and Real Estate counters after the Indian central bank in its move to improve liquidity situation in the system and check the appreciation of rupee, announced Rs 10,000 crore worth of bond buying program. This is the first instance of the RBI's buying bonds in the last day of the fiscal year.

Oil marketing companies too rallied sharply in the session amid hopes that the government would allow hiking prices of petrol this weekend. The OMCs are also pushing for raising prices of other petroleum products like diesel and LPG. Though there appeared no sectoral laggards some individual names like Jindal Steel and Sun Pharma failed to keep their heads above the water and closed with losses.

On the global front, the most Asian markets rebounded on last trading day of the weak and settled on a positive note. However, the Japanese markets closed lower after factory activity in the world's third largest economy declined to a worse than expected 1.2 percent in February, its first drop in three months.

While the European markets rallied with over a percent gains in the session as Euro-zone finance ministers discussed to increase the amount of resources at their disposal for future bailouts to around 800 billion euro amid requests by a number of international institutions, as well as the US and China to increase the bailout funds to 1 trillion euro.

Back home, the NSE's 50-share broadly followed index Nifty, amassed triple digit gains to settle just below the psychological 5,300 support level while Bombay Stock Exchange's Sensitive Index - Sensex surged by around three hundred fifty points to finish above the crucial 17,400 mark. Moreover, the broader markets too settled on an optimistic note with over two percent gains, performing in tandem with their larger peers.

Since it was the first day of a new F&O series, the markets jumped on low volumes of over Rs 1.18 lakh crore while the turnover for NSE F&O segment too remained on the lower side as compared to that on Friday at over Rs 0.88 lakh core. The market breadth remained positive through the session as there were 1969 shares on the gaining side against 913 shares on the losing side while 113 shares remained unchanged.

Finally, the BSE Sensex jumped 345.59 points or 2.03% to settle at 17,404.20, while the S&P CNX Nifty climbed by 116.70 points or 2.15% to close at 5,295.55.

The BSE Sensex touched a high and a low of 17,439.51 and 17,105.22 respectively. The BSE Mid cap and Small cap index up by 2.35% and 2.04% respectively.

The top gainers on the Sensex were Tata Steel up 4.04%, Maruti Suzuki up 3.76%, Hindalco up 3.73%, ICICI Bank up 3.64% and RIL up 3.23%, while Jindal Steel down 0.69% and Sun Pharma down by 0.23% were the major losers on the index.

The top gainers on the BSE sectoral space were Oil & Gas up 2.82%, Realty up 2.61%, Metal up 2.58%, PSU up 2.57% and Bankex up 2.55%, while there was no loser on the BSE sectoral space.

Meanwhile, concerned over the massive losses made by power distribution companies (discoms), the Ministry of Power is considering a bailout package, as their deteriorating financial condition may lead to default in the banking system.

The net loss of 15 discoms, which account for over 90% of the country's power consumption, after subsidies was Rs 27,000 crore for the year ended March 31, 2010. The poor financial condition of discoms is mainly attributed to the low-tariff regime as well as high aggregate technical and commercial losses.

Recently, the Appellate Tribunal of Electricity (ATE) asked the State regulators to ensure time and cost-reflective tariff determination. As part of the second phase of reforms in the power sector, the Chaturvedi Committee had raised concerns over the massive losses being incurred by State distribution companies and the need to take steps to set the situation right.

Further in December last year, the Shunglu Committee has given various suggestions on the financial position of distribution utilities, including setting up of a special purpose vehicle, to absorb the losses of discoms.

Rating agency ICRA, based on a study of discoms functioning in 11 State, has pegged the losses of these utilities (before accounting for government subsidy) at Rs.80,000 crore for the current fiscal. Estimates were based on a study of discoms functioning in 11 states.

The S&P CNX Nifty touched a high and low of 5,307.10 and 5,203.65 respectively.

The top gainers on the Nifty were Kotak Bank up 4.79%, IDFC up 4.61%, SAIL up 4.02%, Ranbaxy up 3.73% and Hindalco up 3.69%. On the flip side, Cairn down by 0.98%, Jindal Steel down 0.74%, Sun Pharma down 0.67% and HUL down 0.33% were the top losers on the index.

The European markets were trading in green, as France's CAC 40 up 1.28%, Britain's FTSE 100 up 0.62%, while Germany's DAX was up by 0.95%.

After a choppy start, most of the Asian counters managed to close in the positive terrain on last trading day of the weak. However, gains remained capped by news that Japan's factory production fell a worse-than-expected 1.2 percent in February, its first decline in three months, as demand for exports weakened.

Meanwhile, Japan's Nikkei share average fell for a third straight session on Friday as investors pocketed gains from the strongest first quarter rally in 24 years, while the market waited on key global events next week for direction while, Hong Kong shares ended their best quarter in 2-1/2 years with a whimper on Friday, hit by a slump in local property developers after the arrest of the billionaire owners of Sun Hung Kai Properties on suspected corruption. Seoul managed to end on a flat note after a negative start. South Korea's industrial production rose at a slower pace in February and the nation's economy expanded less than the central bank initially estimated in the fourth quarter. Output rose 0.8 percent in February compared with a revised 3.2 percent gain in January.

Asian Indices

Last Trade

Change in Points

Change in %

Shanghai Composite

2,262.79

10.63

0.47

Hang Seng

20,555.58

-53.81

-0.26

Jakarta Composite

4,121.55

16.38

0.40

KLSE Composite

1,596.33

10.89

0.69

Nikkei 225

10,083.56

-31.23

-0.31

Straits Times

3,010.46

16.37

0.55

Seoul Composite

2,014.04

-0.37

-0.02

Taiwan Weighted

7,933.00

60.34

0.77


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