Benchmarks gain further ground; remain range bound in the green

The benchmark indices gained further ground during the previous hour of trade as buying activity gained momentum. Further, decent corporate earnings are providing much needed support to the markets. In global arena, most of the Asian markets were trading in the green; however, US index futures were showing a down-tick in screen trade today. Back home, the 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) and the 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) are hovering around the 19,000 and 5700 levels, respectively. Among the sectoral indices, Information Technology, Metal, Bankex and Fast Moving Consumer Goods up by more than one percent each continue to lead the charts. However, Realty, Oil & Gas, Capital Goods and Power are dragging the markets lower. The smallcap and the midcap indices, though trading in the positive zone are underperforming their larger counterparts with gains of 0.23% and 0.27%, respectively. Total trading volume stood at around Rs 74,000 crore at this point of time. The market breadth on the BSE remained in favour of advances; the gainers outpaced the losers in a ratio of 1452:1170 while 104 scrips were unchanged

The BSE Sensex surged 117.71 points or 0.62% at 18,999.96. The index touched a high and a low of 19,106.95 and 18,933.47, respectively.

The BSE Mid-cap and Small-cap indices soared 0.23% and 0.27%, respectively.

Information Technology (IT) up 2.06%, TECk up 1.52%, Metal up 1.08%, Bankex up 1.01% and Fast Moving Consumer Goods (FMCG) up 1% were the major gainers in the BSE sectoral indices.

On the flip side, Realty down 0.32%, Oil & Gas down 0.21%, Capital Goods (CG) down 0.17% and Power down 0.12% were the only losers on the BSE sectoral front.

Meanwhile, the Reserve Bank of India (RBI) has tightened the prudential norms for the non-banking financial companies (NBFCs) in a move aimed at protecting the domestic financial sector in event of a global shock like that of the global economic crisis of 2008. However, it will raise the cost of operations for NBFCs and hence can hike the interest charged by them.

As per the new norms, the NBFCs will have to make a general provision at 0.25% of the outstanding standard assets. Also, the provisions on standard assets should not be reckoned for arriving at net NPAs. Further, the provisions towards standard assets need not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' in the balance sheet, said the RBI. The NBFCs though are allowed to include the 'General Provisions on Standard Assets' in Tier II capital which together with other 'general provisions/ loss reserves' will be admitted as Tier II capital to a maximum of 1.25% of the total risk-weighted assets.

The central bank has been taking some counter cyclic steps over last couple of quarters as growth in Indian economy recovers strongly and some signals of overheating as well as apprehension of potential asset bubbles emerge. It had earlier hiked the risk-weight on the home loans given by banks under the so called 'teaser loan' schemes where interest rate is generally low at the beginning but increases in subsequent years. It also heightened provisioning for home loans above Rs 75 lakh.

"In terms of Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms... all NBFCs are required to make necessary provisions for non performing assets. In the interests of counter cyclicality and so as to ensure that NBFCs create a financial buffer to protect them from the effect of economic downturns, it has been decided to introduce provisioning for standard assets also," said the RBI in a notification released on Monday.

The top gainers on the Sensex were TCS up 4.55%, Wipro up 3.74%, Cipla up 2.18%, Jaiprakash Associates up 1.87% and Sterlite Inds up 1.74%.

Tata Power down 2.38%, Rel Infra down 2.29%, DLF down 1.26%, HDFC down 0.82% and Hero Honda down 0.82%, were the top losers on the index.

Air fares in the country are likely to go up further following the rising prices of aviation turbine fuel (ATF). Two of India's largest private airlines, Jet Airways and Kingfisher, indicated on Monday that a hike in fares was imminent in wake of costlier jet fuel. Crude prices have crossed the $90 a billion mark resulting in substantial hike in jet fuel cost. 

Jet and Kingfisher both said that although the latest hike was just 2% over the last weekend, over last few months the fuel prices have increased substantially and some of the burden will have to be passed on to the consumer. Since October 2010, oil companies have increased ATF prices seven times. However, none of the airlines have yet given any word on extent of potential hike in prices.

Earlier, the state-owned oil marketing companies (OMCs) had again increased the prices of ATF by around 2% from midnight of Jan 15, implementing the seventh straight increase in jet fuel prices in a few months. The jet fuel will now cost Rs 48,764 per kilo-litre in Delhi, compared with 47,815 per kilo-litre in the previous fortnight.  Similarly, prices in Mumbai too have gone up from Rs 48,058 to Rs 49,046 over the same period.

Although in absolute sense the hike seems to be not very big, the cumulative increase in ATF over last three months has been quite significant. The OMCs had earlier increased ATF prices by massive 5.5% on November 16 followed by 1.5% on Nov 30, and 3% in middle of December in sync with the increasing in global crude prices. The state owned fuel retailers revise ATF prices twice a month.  As a result, over the last three months or so, jet fuel prices have seen an increase of more than 17%. For instance, the price of ATF in Delhi on Oct 1 was Rs 40,728.25 per kilo-litre. This represents an increase of over 17%.

The S&P CNX Nifty advanced 37.80 points or 0.67% to 5692.55. The index touched a high and a low of 5723.40 and 5671.25, respectively. 

The top gainers on the Nifty were TCS up 4.58%, Wipro up 3.27%, Axis Bank up 3.02%, SAIL up 2.50% and HCL Tech up 2.23%.

The top losers on the index were Tata Power down 2.25%, Reliance Infra down 2.23%, Sesa Goa down 1.90%, HDFC down 1.25% and DLF down 1.20%.

Other Asian markets are mostly trading in the green at this point of time. Shanghai Composite added 0.09%, Hang Seng advanced 0.48%, Nikkei 225 surged 0.15%, Straits Times rose 0.25% and Taiwan Weighted zoomed 1.12%. 

On the flip side, Jakarta Composite declined 0.01%, KLSE Composite dipped 0.28% and Seoul Composite trimmed 0.16%

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