Benchmarks extend their early gains; Sensex up 153 points

Benchmark equity indices extended their early gains in late-afternoon trades mainly on the back of short-covering from derivative traders ahead of Thursday's F&O series expiry. The BSE's 30-share Sensex and the NSE's 50-share Nifty were inching closer to the psychological 20,200 and 6,050 levels, respectively. Buying remained evident across the board. Consumer durables, metal and banking stocks were the major gainers in trade. Global cues were also supportive with all Asian peers except Taiwan Weighted, showing strength. The Dow future was up by 11 points in screen trade. The European index futures were also indicating a positive start of the session there. Back home, the broader indices remained in a fine fettle. FMCG major Hindustan Unilever (HUL) was hogging the limelight in trade. The advance-decline ratio on the BSE Sensex stood at 26:4 while the same was at 41:9 on the NSE Nifty.

The BSE Sensex was up by 153.62 points or 0.77% at 20,179.04. The index touched a high and a low of 20,186.00 and 20,054.64, respectively.

The BSE Mid-cap and Small-cap indices advanced 0.77% and 1.08%, respectively.

The main gainers in the BSE sectoral space were Consumer Durables (CD) up 1.64%, Metal up 1.20%, Bankex up 1.13%, Fast Moving Consumer Goods (FMCG) up 0.96% and Realty up 0.60%; while there were no losers.

Meanwhile, the Reserve Bank of India (RBI) has on Tuesday released the final guidelines on over-the-counter foreign exchange derivatives and overseas hedging of commodity and freight prices. The new guidelines include the use of cost-reduction structures and embedded cross-currency options for foreign currency-rupee swaps, said the central bank on Tuesday. The guidelines will be effective from February 1.

Earlier, the existing guidelines on OTC foreign exchange derivatives were reviewed in the context of developments in the international and domestic markets and the draft guidelines were released on November 12, 2009 for feedback from the market participants. The draft guidelines had proposed to withdraw the facility of cost reduction structures and permit the clients/ customers to write covered call and put options and thereby receive premium in both foreign currency-rupee options as well as cross currency options.  

The major gainers on the Sensex were HUL up 2.40%, HDFC Bank up 2.35%, Bharti Airtel up 1.94%, Sterlite Inds up 1.84% and HDFC up 1.71%.

On the flip side, Wipro down 0.70%, Cipla down 0.63%, RCom down 0.36% and BHEL down 0.30% were the only losers in the BSE sectoral space. 

Textile industry continues to face the problems of rising cost of inputs as the cotton prices remain close to record highs on tight demand-supply equation. The government, which is facing the difficult task of balancing the interests of textile players and farmers, is unlikely to be able to provide much relief to the industry in near term.

Cotton prices shot up in the international markets in the second half of the current calendar year because of the demand-supply imbalance, driven mainly by increasing consumption in China and poor harvests in Pakistan due to floods. The global trend has been mapped in India as well where the price of the natural fibre increased 90% in the last five months. A cotton candy (356 kg) was priced at an all-time high of Rs 45,000 in October in the domestic market, compared with around Rs 27,000 this time around a year ago.

As the local cotton prices surged, the government capped cotton exports in the current season that started on October 1 at 55 lakh bales (170 kg each) and that for cotton yarn at 720 million kg. However, this has not reduced prices much, as traders believe that the export limit could be raised any time. Industry insiders now opine that in case the government does not increase the limit of cotton export from the current ceiling of 55 lakh bales, it may lead to an increased supply in the domestic market and lower cotton prices.

The S&P CNX Nifty soared 46.55 points or 0.78% to 6,042.55. The index touched a high and a low of 6,043.05 and 6,002.85, respectively. 

The top gainers on the Nifty were HUL up 2.55%, HDFC Bank up 2.47%, SAIL up 2.15%, Bharti Airtel up 1.97% and Sterlite Inds up 1.95%.

The top losers on the index were Cipla down 0.89%, Wipro down 0.68%, Ambuja Cements down 0.60%, RCom down 0.50% and ACC down 0.40%.

Other Asian markets were trading mostly in the positive terrain. Shanghai Composite rose 0.68%, Hang Seng soared 1.26%, Jakarta Composite climbed 1.07%, KLSE Composite gained 0.40%, Nikkei 225 rose 0.50%, Straits Times advanced 0.87% and Seoul Composite added 0.50% while Taiwan Weighted trimmed 0.05%. 

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