Key indices break consolidation mood to register healthy gains

The domestic equity indices, which were witnessing range bound sessions from past couple of days, managed to break jinx on Wednesday prompted by short-covering and fresh buying from investors. Derivatives' traders squared off their short positions in trade today ahead of Thursday's expiry session, propelleing the key indices to their multi-week highs. The BSE Sensex scaled it's around six-week high in trade today while the NSE Nifty touched its three-week peak. Both indices also regained the psychological levels of 20,250 (Sensex) and 6,050 (Nifty) during the session. Out of 30 components of the Sensex, 27 edged higher in trade today while 39 out of 50 constituents of Nifty finished in the green. Gains remained broad-based during the session with consumer durables, fast moving consumer goods and metal counters attracting maximum attention. The broader indices also witnessed good traction in trade today but the mid-cap pocket underperformed its other peers.

Global cues also remained supportive throughout the session. All Asian counterparts, barring Taiwan Weighted, showed strength in trade today. Most of the European indices were also trading higher. The US index futures were showing up-tick in screen trade.

On the Dalal Street, the markets got off to a positive start this morning prompted by strong cues from regional peers. The bourses moved in a narrow range with a positive bias till mid-morning sessions. However, the markets started picking up strength in late-morning trades. The main indices extended their gains in the afternoon session. Higher US and European index futures in screen trade boosted investor confidence in late-afternoon session. The key indices consolidated at higher levels for some time in late trades before scaling their intraday peaks in last half an hour. At the end, the benchmark indices finished the session near their day's highs. Volume on the street picked up a bit in trade today to around Rs 1.33 lakh crore mark. The market breadth on the BSE was positive; there were 1782 shares on the gaining side against 1082 shares on the losing side while 186 shares remained unchanged.  Meanwhile, investors shrugged off fears over new fraud case in the country which has come to the surface. According to media reports, few employees of Citibank's Gurgaon-based branch sold non-existent scheme to wealthy individuals and corporate clients. The size of this fraud is expected to be in the range of Rs 400-500 crore. Fund raised from sale of the scheme was routed in the stock market through two leading brokers.

Among blue-chip counters, Hindustan Unilever (HUL), Bharti Airtel and Sterlite Industries were the major gainers in trade today while Cipla, Wipro and RCom were the only losers on the main index.

On the charts: The S&P CNX Nifty has successfully closed above 6048 mark, which was strong resistance for the index for last couple of sessions. If the index breaks 5,988-mark, next major support will be around 5,842 mark. On the flip side, resistance will be around 6,080 and 6,242.

Finally, the BSE Sensex zoomed 230.61 points or 1.15% to settle at 20,256.03 while the S&P CNX Nifty jumped 64.35 points or 1.07% to end at 6060.35.

The BSE Sensex touched a high and a low of 20,274.20 and 20,054.64 respectively. HUL up 3.48%, Bharti Airtel up 3.45%, Sterlite Inds up 3.38%, HDFC Bank up 3.23% and HDFC up 2.44% were the major gainers on the Sensex.

On the other hand, Cipla down 0.82%, Wipro down 0.66% and RCom down 0.50% were the only losers on the index.

The BSE Mid-cap and Small-cap indices rose 0.51% and 1.13%, respectively.

Meanwhile, the environment and coal ministries are in a sort of battle over the extent to which the coal reserves in the country are minable and what areas should be completely restricted for the mining companies. While the coal ministry wants to mine most of the coal reserves, the environment ministry wants to restrict the areas substantially.

The debate came into the light after the coal ministry came up with 'no-go-areas', or areas where coal mining cannot be conducted because they happen to be in environmentally sensitive zones. These areas comprise of a total of 206 coal blocks spread across 4,039 sq km in nine coalfields, with a production potential of 660 million tonne, or nearly 40% of identified potential.

The coal ministry has now approached the Cabinet to get a clearance for mining most of the areas classified as the 'no-go' zones by the environment ministry. Coal ministry argues that mining in the more sensitive areas can be reduced to protect the environment but totally disallowing mining will hamper India's overall coal production and hit the economic growth potential of the country.

India's Planning Commission, the top economic strategy making body of the country, too jumped into the debate and said last week that the environment ministry should show some flexibility in terms of demarking the go and no-go areas so that while the environmental concerns are addressed, industrial growth and overall development in the country is not effected either.

The main gainers in the BSE sectoral space were Consumer Durables (CD) up 1.93%, Fast Moving Consumer Goods (FMCG) up 1.64%, Metal up 1.48%, Bankex up 1.46% and Auto up 0.83%; while there were no losers.

The S&P CNX Nifty touched a high and a low of 6,067.55 and 6,002.85, respectively.

Bharti Airtel up 3.55%, HDFC Bank up 3.45%, Sterlite Inds up 3.40%, HUL up 3.35% and HDFC up 2.51% were the major gainers on the Nifty.

On the other hand, Cipla down 1.01%, Sun Pharma down 0.72%, Suzlon down 0.67%, Wipro down 0.57% and RCom down 0.57% were the major losers on the index.

Rubber prices have been on the rise throughout in the current year, on tight demand supply scenario in global markets, hitting the user industries like tyre makers. While it was anticipated earlier that prices will correct in 2011 owing to a supply response, the same is unlikely to happen now as demand grows strongly amidst tepid supply increase.

Global supply of natural rubber (NR) is now anticipated to fall 6.3% in the fourth quarter of the current calendar year as per the revised estimates of the Association of Natural Rubber Producing Countries (ANRPC) whose members, including India, produce over 90% of global output of natural rubber, dampening any prospects of early correction in prices of the crucial raw material.

This further downward revision, from the previously expected 3.8% fall during the quarter, originates from downgrade in production by many countries including Thailand, which revised downwards its production growth estimate from -28.4% to -33.4%, India (revised down from -1.8% to -4.6%) and Vietnam (revised down from +3.8% to - 2.8%). As a result, this year's annual supply growth in natural rubber is likely to be slower at 5.7% rate than the previously expected 6.6% rate reported last month.

Demand for natural rubber on the other hand has been buoyant. The latest spike in market in fact has been driven by an improved economic outlook coupled with China's higher import demand which rose at 58% and 65% annualised rates during the months of October and November respectively. Also, rising crude oil prices are also boosting prices of natural rubber as it makes the close substitute, synthetic rubber, more costly. 

Overall, as the rubber demand remains strong and supply tightens further over next couple of quarter, the rubber market is set to remain tight in the near term. Following the downward revision in production growth, the already tight supply situation is likely to be aggravated further during the Feb-May 2011 period coincident with annual leaf-shedding of trees. This will most likely result in firm prices in the short run.

In the medium term, rubber supply may begin to improve say in 3-4 quarters from now. New rubber trees are likely to ready for tapping in 2012 which could result in a significant shift in the supply curve. However, by then, aging problems of older trees in India and Thailand will intensify. Therefore, the relative strength of two opposite factors, that is, the new trees getting ready for tapping, and the older trees being replaced will determine how rubber prices behave in medium term.

All the Asian equity indices barring Taiwan Weighted finished in the positive terrain on Wednesday as increased oil and gold prices boosted commodities stocks globe over. Japanese Nikkei and Chinese Shanghai rose more than half a percent as a jump on Wall Street to two-year highs lifted the sentiment. However, Taiwan's index remained the lone loser in the region as investors were concerned over expectations of an interest rate hike on Thursday for the third time this year to curb gains in property prices and tackle accelerating inflation

Shanghai Composite rose 18.54 points or 0.68% to 2,751.53, Hang Seng soared 347.57 points or 1.54% to 22,969.30, Jakarta Composite surged 39.22 points or 1.07% to 3,699.22, KLSE Composite increased 6.90 points or 0.45% to 1,524.34, Nikkei 225 gained 51.91 points or 0.50% to 10,344.54, Straits Times jumped 24.21 points or 0.76% to 3,207.91 and Seoul Composite added 10.17 points or 0.50% to 2,043.49.

On the flip side, Taiwan Weighted was marginally down by 4.41 points or 0.05% to 8,866.35.

European markets were trading mixed on Wednesday. France's CAC 40 gained 0.70% and Germany's DAX jumped 0.37%, while Britain's FTSE 100 shed 0.12%.

 

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