Benchmarks trade firm taking positive cues from Asian markets

The Indian equity markets are trading firm in the morning session after making a flat start. The indices have taken positive cues from the firm Asian markets, which were trading mostly in the green at this point of time. Back Home, with the help of sustained buying in key heavyweights, benchmark indices touched their seven-week high in morning trade. On sectoral front, realty witnessed the maximum gain followed by capital goods and consumer durables stocks in trade, on the other hand software was the lone loser on the BSE sectoral space, meanwhile the broader indices were outperforming benchmarks. The PSU oil marketing companies (OMC) viz. Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and Indian Oil Corporation (IOC) all were trading with gain of about one percent to one and a half percent after the petroleum secretary S Sundareshan said on Thursday that the government would not let state-run oil marketing companies hang out to dry. Meanwhile the private oil company and the Index heavyweight Reliance Industries too was trading with a gain of about half a percent. The market breadth on the BSE was positive; there were 1,573 shares on the gaining side against 413 shares on the losing side while 53 shares remained unchanged.

The BSE Sensex opened at 20,412.76; about 23 points higher compared to its previous closing of 20,389.07, and has touched a high of 20,482.26 while low remain its opening. The index is currently trading at 20,462.44, up by 73.37 points or 0.36%. There were 23 stocks advancing against just 7 declines while one stock remained unchanged on the index.

The overall market breadth has made a positive start with 77.15% stocks advancing against 20.26% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices surged 0.71% and 0.77% respectively.   

The top gaining sectoral indices on the BSE were, Realty up by 1.45%, CG up by 0.81%, CD up by 0.76%, Bankex up by 0.73% and Power was up by 0.63%. While, Information Technology down by 0.03% was the lone loser on the index.

The top gainers on the Sensex were Jaiprakash Associates up by 3.79%, Reliance Communication up by 3.18%, Reliance Infra up by 1.92%, DLF up by 1.59% and M&M was up by 1.01%.

Sterlite Industries down by 0.72%, Hero Honda down by 0.70%, NTPC down by 0.54%, HDFC down by 0.45% and HUL down by 0.23%, were the top losers on the index were.

Meanwhile, Steel prices, which continue to remain week despite rising raw material costs, may see an increase in the first week of January as companies look to pass at least a part of the increase in cost of production to the consumers. The increase in prices will be in the range of 3-5% and will help the companies cover the recent increase in raw material costs. Analysts opine that steel prices are at their lowest levels given the surging cost of production. While upside has been difficult due to some slowdown in infrastructure projects, the downside is certainly limited. The industry feels that demand will start moving up in the next quarter and therefore major producers like SAIL, JSW Steel, Essar Steel and Tata Steel may all go for a hike in prices to the tune of Rs 300-700 per tonne.

In fact, following a weak monsoon season, the companies did try to hike prices in September, but the increase did not prove to be sustainable and a correction followed immediately in October. Steel companies also offered additional discounts in November to liquidate their inventories. On the other hand, costs have continued to rise. This has resulted in the steel companies taking a hit on margins. The situation however may change with turn of the year as rising cost and stronger global prices coupled with recovering demand will give companies more pricing power.

One of the key reasons for expected pick-up in global prices is the concerted effort by the steel producers including the Chinese ones to keep a balance between demand and supply and not flood the markets. Also, as the winter season eases going further in the March quarter, construction activity tends to improve in the southern hemisphere which will also boost steel demand.

In case of India, local prices are not only impacted by global prices but also the supply-demand equation. Weak demand and large imports have kept the prices down in most of the fiscal so far. However, demand is expected to increase significantly in the first quarter of 2011. Also, following the scrap of export incentives by Chinese government, steel imports into India are also likely to decline. Coupled with rebound in global prices and decline in imports, the increase in domestic demand will help producers push prices over coming months.

The S&P CNX Nifty opened at 6,105.10; about 4 points higher compared to its previous closing of 6,101.85, and has touched a high and low of 6,124.75 and 6,103.55 respectively. The index is currently trading at 6,117.85, higher by 16 points or 0.26%. There were 35 stocks advancing against 15 declines on the index.

The top gainers of the Nifty were JP Associates up by 3.35%, RCom up by 3.03%, Reliance Infra up by 1.79%, Reliance Capital up by 1.60% and Reliance Power up by 1.52%.

The top losers of the index were HDFC down by 0.84%, Sterlite Industries down by 0.82%, NTPC down by 0.64%, Hero Honda down by 0.61% and ACC was down by 0.43%.

Asian market were trading mostly in the green; Shanghai Composite was up 11.67 points or 0.42% to 2,771.25, Hang Seng was up 30.27 points or 0.13% to 23,029.61 and Taiwan Weighted was up 76.34 points or 0.86% to 8,984.25.

On the flip side, Straits Times was down by 2.58 points or 0.08% to 3,209.88.  

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