Equity market recuperates after shaky start; broader indices shine

Local share markets recuperating from their shaky start have started building up on previous session's gains with the broader indices clearly outperforming larger peers. Both the barometer indices too have moved higher tracking gains in the Metal, Consumer Durable and Auto counters and are ruling up by 74.98 points (Sensex) and 21.65 points (Nifty) respectively. Earlier, markets consolidating a bit from its previous session gains after making a cautious start despite positive close of US stocks, however, bargain-hunting in few lucrative stocks and short-covering made the markets bounce back in green. On the global front, US stocks rose overnight; with investors favouring shares of retailers after encouraging chain-store sales raised confidence ahead of Friday's jobs report. Most of the Asian markets are not trading today on account of Lunar New Year holiday. Meanwhile, US future indices were showing mixed trend. Back to Dalal Street, on the BSE sectoral front, stocks from Metal, CD and Auto spaces were showing  strength, while, stocks from Fast Moving Consumer Goods, Information Technology and Realty counters were trying  to pull the market lower. The overall market breadth was in the favour of advances which flogged advances in the ratio of 1658:739, while, 60 shares remained unchanged on the index.

The BSE Sensex is currently trading up by 74.98 points or 0.41% at 18,524.29 from its previous close of 18449.31. There were 18 stocks advancing against 12 declines while on the index.

The broader indices were outperforming the benchmarks; the BSE Mid cap and Small cap indices were up by 1.12% and 0.95%, respectively.

The top gaining sectoral indices on the BSE were, Metal up by 1.53%, CD up by 1.04%, Auto up by 0.98%, Bankex and HC were up by 0.84%. On the other hand, FMCG down by 0.47%, IT down by 0.18%, Realty down by 0.16% and TECk down by 0.01%, were the only losers on the index.

The top gainers on the Sensex were Bajaj Auto up by 3.00%, Tata Motors up by 2.43%,ONGC up and Tata Steel up by 2.09% and Reliance Communication up by 2.03%.

M&M down by 1.30%, DLF down by 1.19%, TCS down by 1.03%, Cipla and HUL down by 0.76% each, were the top losers on the index were.

Meanwhile, the long-awaited move to deregulate the urea is on the radar of the government and some announcement in this connection might be made even before the General Budget to be released on February 28. The Committee of Secretaries (CoS) under Planning Commission member Saumitra Chaudhuri is working on a viable model for deregulating urea after finalizing a subsidy formula.

Earlier, a meeting of the group of ministers (GoM) headed by Finance Minister Pranab Mukherjee was held but the group deferred the decision on decontrol of urea prices and referred the issue to a CoS.  Secretaries from the planning commission, and fertilizer, agriculture and finance ministries are part of the CoS. The committee will submit its report to the GoM, which will then take a final decision.

The government had last year deregulated phosphatic and potassic fertilizers, allowing the sellers to fix the maximum retail price (MRP) under the Nutrient Based Subsidy (NBS) regime that was put in place from start of the financial year 2010-11. At that time the government did hike the urea MRP by 10% but did not allowed any freedom to sellers in deciding the prices.

The finance ministry has been wary of surging subsidy burden and wants to bring it down. It has therefore been looking to introduce some market dynamics in the fertilizer space. Not only will the partial deregulation of urea cut the subsidy burden of the government but the resulting rationalization in fertilizer prices will also help balance the overall fertilizer use in the country which has historically skewed a lot in favour of urea.

The move will also help boost investment in the fertilizer industry. In fact, there has not been any major capacity addition in last several years because the government was not allowing urea makers to operate beyond the rated capacity. Also, uncertainty in policy prevented new facility from coming up. Once deregulation happens, capacity addition projects will come up. Secondly, capex will also come from migration of the feed stocks because the companies which are making urea using naptha or LSD would like to shift to gas.

However, the fertilizer ministry is opposed to complete deregulation as it feels that in case the prices of inputs, which are already up substantially on year-on-year basis, surges further, urea prices will go up sharply and impact the overall fertilizer use. This will also further, boost the already high inflation. In this wake, the deregulation might be partial in nature only such that the urea producers will be allowed to decide prices within a certain formal or informal range, beyond which the decision would rest with the government. The feeling with fertilizer ministry is that if such an arrangement works for a while then complete deregulation can be implemented in a year or two.

The S&P CNX Nifty is currently trading at 5,548.40, gained 21.65 points or 0.39 %. There were 33 stocks advancing against 17 declines on the index.

The top gainers of the Nifty were Suzlon up by 3.79%, Reliance Power up by 3.29%, Bajaj Auto up by 3.21%, Tata Motors up by 2.55% and IDFC up by 2.46%.

The top losers of the index were Cairn down by 2.18%, HUL down by 1.15%, DLF down by 1.07%, M&M down by 1.03% and TCS down by 0.80%.

All the Asian equity indices barring Jakarta Composite and Nikkei remained closed today on account of Lunar New Year Day holiday; Jakarta Composite declined 14.73 points or 0.42% to 3,466.10, while Nikkei 225 surged 120.85 points or 1.18% to 10,553.15.

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