Indian equity markets finish first trading day of 2011 in the green

The domestic benchmark indices have steadfastly maintained the impetus in the past four trading sessions and managed to kick-off the initial trading day of 2011 on an optimistic note. The NSE's 50-share broadly followed index, Nifty managed to hold on to the psychological 6,150 mark and closed a tad above the crucial mark while BSE's 30-share sensitive index, Sensex on the other hand amassed around a quarter percent gains to sail beyond the 20,550 level. The broader markets outclassed their larger peers by a huge margin for the second straight day after investors showed huge buying interests in the space with the smallcap index surging around two percent and the midcap index gaining almost a percent. Metal counter was the top sectoral gainer on the BSE, with Tata Steel and Sterlite Industries zooming well over three percent. While sugar stocks too rallied today after declining in the previous trading session on reports that the government will impose 60% import duty on sugar from January 1, 2011. Among the other significant gainers, the Reliance Anil Dhirubhai Ambani Group shares extended their gains for the second straight day after the group decided to re-brand all its businesses as 'Reliance' rather than maintaining individual identities for each service. On the other hand, information technology counter remained under mild pressure on Monday but managed to pare all the losses by the end of the day to end in the green terrain. Patni Computer Systems plunged nearly 4% in early trade after the Patni board rejected the 5-year strategy that was submitted by iGate as the iGate-Patni integration plan was not very clear.
On the global front, cues were favourable from the Asian counterparts which started the year 2011on a positive note. The key benchmark indices in Europe are trading on a strong note with gains of around two percent. However, major equity indices in Japan, mainland China and London remained closed today on account of New Year's holiday. The screen trading in US index futures indicated that the Dow could gain around 0.64% at the opening bell.

Earlier in the day, the markets got off to a strong start on the back of optimistic cues from the global markets. Sentiments remained upbeat in the early trade but gradually declined as investors opted to take profits out of the table on high levels. The bourses gyrated in a narrow range with a positive bias and touched their intraday highs in the initial moments of trade. However, sell-off in the dying hours of trade led the indices to close near the day's low level. Volumes remained weak for the second straight day at over Rs 76 thousand crore while the turnover for NSE F&O segment remained on the lower side compared to Friday at over Rs 62 thousand crore. The market breadth on the BSE was extremely positive; there were 2030 shares on the gaining side against 878 shares on the losing side while 164 shares remained unchanged. 

On charts: The S&P CNX Nifty closed above 5180, if the index holds above this level, the next resistance will be around 6242 and 6332 levels. On the other hand, support will be around 6080 and 6030 level.

Finally, the BSE Sensex advanced 51.96 points or 0.25% to settle at 20,561.05 while the S&P CNX Nifty added 23.10 points or 0.38% to end at 6157.60.

The BSE Sensex touched a high and a low of 20,664.80 and 20,531.00, respectively.

Tata Steel up 3.60%, Sterlite Industries up 3.05%, Reliance Infra by 2.43%, Jaiprakash Associates up 2.31%, RCom up 1.93% were the major gainers on the Sensex.

On the other hand, Bajaj Auto down 4.21%, Wipro down 1.50%, NTPC down 1.27%, TCS down 0.47% and RIL down 0.39% were the major laggards on the index.

The BSE Mid-cap and Small-cap indices rose 0.90% and 1.81%, respectively.

Meanwhile, the Indian government is considering a proposal to cap the foreign direct investment (FDI) in the pharmaceutical sector under the automatic route at 49%. For buying more than 49% stake, a foreign company will have to take approval from the foreign investment promotion board (FIPB). At present 100% FDI is allowed under the automatic route in pharma sector. 

There have been a lot of discussions between officials from the ministry of commerce and industry and the ministry of health on the issue. Both the ministries are in favour of a 49% cap on the automatic route and mandating the rest of investment to be routed through the FIPB. A note in this regard has been sent to the finance ministry which has the final say in terms of allowing or capping the FDI.

The reason behind the proposal is that the multinational pharma giants are increasingly looking towards acquiring Indian drug players. Already some of the domestic heavyweights have sold their business fully or in part to multinational players. The trend however threatens to put the healthcare system in the country at mercy of foreign players leading to both the commerce and health ministries raising concerns about it.

The department of industrial policy and promotion (DIPP) has pointed out two major negative impacts of the MNCs taking over the Indian companies. First, after the takeover, the multinationals will use the domestic unit as per their global plans and there would be little in it specifically for Indian needs. Secondly, the takeovers also have implications for affordability of healthcare as pricing of drugs might rise significant under the large foreign companies.

However, the finance ministry is not in favour of immediately rolling back the 100% FDI under the automatic route. The ministry feels that the rollback of a previously liberal regime can send wrong signals about the consistency of government policies. In this wake the commerce and health ministries are conducting a study to ascertain the actual impact of MNC acquisitions following which a discussion between the commerce, health and finance ministries will happen.

The top gainers in the BSE sectoral space were Metal up 2.07%, Consumer Durables (CD) up 1.54%, Public Sector Undertakings (PSU) up 0.59%, Bankex up 0.56% and Power up 0.54%.

On the other hand, Auto down 0.17%, Information Technology (IT) down 0.11% and Oil & Gas down 0.02% were the only losers in the BSE sectoral space.

Indian government is looking to add 15,000 mw of power capacity in the calendar year 2011 and add a total 65,000 mw over the 12th Five Year Plan (FYP), said the Union Minister for Power Sushil Kumar Shinde on Saturday. The minister said that in the year 2010, a total of 9,585 mw capacity was added. 

'We have added about 44,000 mw of capacity during the last four-and-a-half years. Last year capacity addition was 9,585 mw. This is for the first time in 60 years (after India's Independence) that 9,500 mw powers were added in a single year. We have a target of generating 15000 mw this year,' Shinde said while addressing a seminar.

He also said that the deficit in demand-supply of power in the country will come down substantially in the next few years as a lot of projects were under construction at present. "India's electricity needs will be solved to a large extent in two-three years after the commissioning of various thermal and hydro-electric power plants now under various stages of construction," Shinde said.

The minister said that the ongoing projects will be commissioned well ahead at the end of the 12th five year plan and will help bring down power supply deficit largely. Currently the country faces around 10-12% average shortfall which can go as high as 18% in the peak demand season. Over the last few years, peak shortage has come down somewhat due to better transmission and grid facilities.

The planning commission however has estimated that a minimum of 1 lakh mw of more power capacity would have to be installed by 2020 to ensure that the country sustains a growth trajectory of 8-10%. While historically the government has missed power capacity addition targets by huge margins, the performance has improved over last few years with private sector taking an increasingly active role within the power generation space.

The S&P CNX Nifty touched a high and a low of 6178.55 and 6147.20, respectively.

The top gainers on the Nifty were Sesa Goa up 3.79%, Tata Steel up 3.42%, SAIL up by 3.15%, Sterlite Industries up 2.95% and JP Associates up 2.74%.

On the other hand, Bajaj Auto down 4.29%, Wipro down 1.63%, NTPC down 1.07%, Suzlon Energy down 0.82% and TCS down 0.66% were top losers on the index.

All the Asian equity indices finished the first trading day of the year 2011 in the positive terrain. The sentiments in the region remained positive although several major markets remained closed for the trade today. Seoul Composite hit a record high and ended the day's with a gain of about one percent as traders looked forward to a healthy year ahead, while Singapore index Straits Times surged about one and half a percent after the government said late Friday that the economy grew at a record 14.7 percent in 2010 as the export-dependent economy bounced back from the global downturn. However, Several major markets viz Japan, mainland China, Australia and New Zealand remained closed on Monday on account of New Year's holiday.

Hang Seng surged 400.60 points or 1.74% to 23,436.05, Jakarta Composite jumped 24 points or 0.65% to 3,727.52, KLSE Composite rose 14.51 points or 0.96% to 1,533.42, Straits Times soared 45.73 points or 1.43% to 3,235.77, Seoul Composite increased 19.08 points or 0.93% to 2,070.08 and Taiwan Weighted was up by 52.80 points or 0.59% to 9,025.30.

European markets were trading in the green on Monday. France's CAC 40 gained 2.20% and Germany's DAX added 1.55%.

Unit-8, 3rd Floor, First Mall, The Mall, Ludhiana-141001, Punjab (INDIA).

To unsubscribe or change subscriber options visit: http://www.aweber.com/z/r/?TJzsLEwstCyc7OysHMyctEa0HOwMjEwMbA==