Benchmarks remain range bound in the green

Even as broader markets gave up their early gains, key benchmark indices -- Sensex and Nifty continue to trade above their crucial levels of 18,100 and 5,400, respectively, though in a narrow range. Other Asian markets are trading in the mixed range as decline in the US jobless rate provided some hope to the traders. Back home, on the sectoral front, fast moving consumer goods, realty, oil and gas, banking and technology continue to be the leading segments while healthcare, consumer durables and capital goods indices languished in the trade. Broader markets which moved up in the morning session are now trading in the negative territory with BSE Mid-cap and Small-cap indices declining 0.15% and 0.45%, respectively. The market breadth on the BSE was negative; the losers thrashed the gainers in the ratio of 1450:1202 while 82 shares remained unchanged. Meanwhile, investors will watch out for Union Budget 2011-2012 to be unveiled by the finance minister Pranab Mukherjee on February 28, 2011 to see the next course of action the central government takes to restrict mounting inflation.

The BSE Sensex jumped 106.86 points or 0.59% at 18,115.01. The index touched a high and a low of 18,135.02 and 17,995.45, respectively.

The BSE Mid-cap and Small-cap indices dipped 0.15% and 0.45%, respectively.

The top gaining sectoral indices on the BSE were Fast Moving Consumer Goods (FMCG) up 1.77%, Realty up 1.22 %, Oil & Gas up 0.62%, Bankex up 0.58% and TECk up 0.52%.

On the flip side, Healthcare (HC) down 1.15%, Consumer Durables (CD) down 0.38% and Capital Goods (CG) down 0.32% were the only losers on the BSE sectoral indices.

Meanwhile, the Indian government on Sunday called for deepening of ties among the SAARC (South Asian Association for Regional Co-operation) countries, particularly in the field of trade and commerce, through stricter implementation of South Asia Free Trade Agreement (SAFTA) in its letter and spirit.

"SAFTA can be an important instrument to deepen intra-regional trade if it is complied with by all member states and implemented in letter and spirit," said the foreign secretary Nirupama Rao at a meeting of foreign secretaries from the SAARC countries. While she avoided taking any names, the hint was probably at the Pakistan which has been conservative in lowering duties for commodities imported from India. 

Pakistan did sign the SAFTA and the treaty was implemented in 2006, but has so far not scrapped the non-tariff barriers or cut down import duties as required under the agreement, thus restricting imports from India. Further, while India has already granted the most favoured nation (MFN) tag to Pakistan, the latter had been reluctant in this regard too.

India has raised the issue a number of times, both bilaterally and through the SAARC secretariat, but given the recent political turmoil in Pakistan and its weakening economy, perhaps the former has intentionally held back direct criticism of Pakistan on the matter. Nonetheless, if the objectives behind the SAFTA treaty are to be realized, which will be a win-win situation for all concerned; it will take sincere efforts from all the members.

Economists point out that present the intra-SAFTA trade constitute less than 10% of overall foreign trade of these countries, which compares with a similar figure of close to 50% for the European Union and even higher for some other regional trading blocs. Clearly, there is a substantial opportunity and if all the members works towards it, massive scale and scope economies of the south Asian region can be availed to the benefit of every country involved in SAFTA.

The top gainers on the Sensex were Hero Honda up 3.42%, ITC up 2.84%, HDFC Bank up 1.95%, JP Associates up 1.74% and Bharti Airtel up 1.64%.

Cipla down 2.87%, Wipro down 1.90%, L&T down 1.13%, Tata Motors down 1.10% and Hindalco Inds down 0.84% were the top losers on the index.

The central statistical organization (CSO) has released the advanced estimate for national income in Indian economy for current fiscal, predicting some slowdown in growth in the second half of the fiscal. The CSO pegged the growth in gross domestic product (GDP) for FY11 at 8.6%, which, given the growth of 8.9% registered in the first half, indicates a growth of 8.3% in the second half.

In an absolute sense though the growth is fairly robust at 8.6%, 60 basis points higher compared with 8% revised estimate for the last fiscal. The challenge for the government from here on will be to ensure around 8.5% growth at least in the next fiscal as well given the slowdown in the second half that the CSO numbers inherently assume and most other economists also expect.

The government had earlier pegged its growth target for current fiscal at 8-8.5%, but with strong performance in the first half increased the same to 8.75%. However, most economists believe that here will be some slowdown in the Indian economy in second half, particularly in the March quarter, due to a very high base from the last year. Also, the high inflation currently being seen is impacting consumer demand, and further expected monetary tightening by the RBI will affect both household consumption and corporate investment demand.

A much bigger surprise came from the CSO on the fiscal deficit front, where the organization pegged the fiscal gap for the current fiscal at 4.8% compared with a budgeted figure of 5.5%. This certainly is a huge downside to the Budget estimate and even though the figure looks very pretty to eyes, it will be interesting to see that if it does turn out to be the right estimate, what the finance ministry does in the next year.

The sharp downside in deficit becomes clearer in light of the fact the Thirteenth Finance Commission (TFC), in its fiscal consolidation targets under the fiscal responsibility and budget management act, pegged the 4.8% deficit targeted for FY12. The government on the other hand targeted 4.7% for FY12. With 4.8% deficit looking in sight in FY11 itself, it will be interesting to see if the finance ministry attempts further, cut in deficit in next fiscal to say 4.5%. The problem will be that in the next fiscal there will be no onetime receipt like the one in current fiscal in terms of revenue from auction of telecom spectrum at Rs 1.06 lakh crore.

The S&P CNX Nifty advanced 20.15 points or 0.37% to 5415.90. The index touched a high and a low of 5431.50 and 5385.10, respectively. 

The top gainers of the Nifty were Hero Honda up 3.30%, Suzlon Energy up 2.91%, ITC up 2.91%, HDFC Bank up 1.94% and BPCL up 1.86%.

The top losers of the index were Cipla down 3.01%, Wipro down 2.13%, Ranbaxy down 2.11%, GAIL down 2.05% and Dr Reddy's down 1.51%.

Asian markets were trading on a mixed note; KLSE Composite was up by 0.40%, Nikkei 225 was up by 0.46%, Seoul Composite was up by 0.47%, while, Hang Seng was down by 0.39%, Jakarta Composite was down by 0.21% and Straits Times was down by 0.32%.

Meanwhile, markets in China and Taiwan continue to remain shut on account of last week's Lunar New Year.

 

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