Benchmarks pare some gains; Nifty holding on to 5,400 level

Starting the day on a positive note, Indian equity benchmarks though have pared some gains in previous hour of trade, are still trading in the green with significant gains in trade today at this point of time. Global cues were also supportive as most of the Asian markets were trading in the green after the news came in that Japan has made progress in its efforts to restore damaged nuclear facilities. Engineers in Japan had restored electricity to three reactors at the Fukushima plant and hoped to test water pumps at the damaged facility soon. However, US index futures were showing down-tick in screen trade today. Back home, all the sectoral indices are trading in the green with realty sector leading the gains. Auto, public sector undertakings, consumer durables and oil & gas are mostly up in positive territory with notable gains. Several stocks from healthcare, power, FMCG and information technology sections have also moved higher. Market bellwether RIL rose 1.31% and was the biggest contributor to the Sensex. The broader markets have pared some of their early gains; the BSE mid-cap and small-cap indices are trading with gains of around 0.89% and 0.63%, respectively. The volume for the day at this point of time stood at Rs 74,000 crore. The market breadth on the BSE was in favour of advances in the ratio of 1545:1040 while 120 scrips unchanged.

The BSE Sensex surged 163.80 points or 0.92% at 18,002.85. The index touched a high and a low of 18,041.22 and 17,878.80, respectively.

The BSE Mid-cap and Small-cap indices rose 0.89% and 0.63%, respectively.

All the sectoral indices were trading in the green. Realty up 1.80%, Auto up 1.29%, Public Sector Undertakings (PSU) up 1.25%, Consumer Durables (CD) up 1.15% and Oil & Gas up 0.89% were the major gainers.

Meanwhile, Union Finance Minister Pranab Mukherjee on Tuesday tabled the Bill aiming at amending some of the tax related constitutional provisions required for implementing the much awaited Goods and Services Tax (GST), the country's most ambitious tax reform yet.

The constitutional amendment would allow states to levy tax on services for the first time. As per the current provision in the constitution, the states cannot tax services while the Union government can also not tax goods beyond the factory gate. Therefore, taxation powers of both the Union government and states will have to be raised to bring them in line with the GST. This will need a constitutional amendment bill to be first passed by the two houses of Parliament and then by at least two-third of state assemblies.

However, the road to implementation of the GST is not very clear so far as there is no complete agreement among states yet. A number of states, particularly the opposition ruled ones, are still firm on their stand that GST in its proposed structure will erode the fiscal autonomy of states, as provided in the Constitution. The Union government has already brought out a fourth revised draft of amendment bill that takes care of some of the issues raised by the states.

For instance, the third draft had proposed setting up a GST Council by the Act of Parliament, instead of President's order. This was not acceptable to States as it would have resulted in provincial government's autonomy being at the mercy of Union Parliament in many other situations. In the fourth draft that has been tabled in Parliament, it is proposed to set up a GST Council by Presidential order.

The purpose of the GST is to integrate all the indirect taxes on goods and services at the state and central levels including the value-added tax (VAT), excise and service taxes etc. Since the GST will bring all these taxes under one head, it will be easy to pay and collect taxes resulting in reduced cost of collection and greater compliance. The finance ministry has in a recent study pegged the benefits from GST in terms of national output at Rs 70,000 crore in 2004-05 prices. 

The top gainers on the Sensex were DLF up 2.67%, Maruti Suzuki up 2.42%, Jaiprakash Associates up 2.05%, Bharti Airtel up 1.65% and SBI up 1.46%; while Jindal Steel down 0.02% was the lone loser on the index.

In a signal of improving global economy, world crude steel production increased by 8.8% to 117 million tonne in the month of February 2011 compared with the same month last year, showed the data compiled by World Steel Association (WSA). However, in India, crude steel output dipped marginally by 0.5% to 5.1 million tonne during the same period.

The decline in India is mainly due to some supply constraints rather than demand weaknesses. In fact, demand for steel has been seen rising over last few months even as steel companies hiked prices at least three times in Dec-Feb period owing to higher cost of production and better demand-supply scenario in the market. Local steel producers expect that output will increase in coming months as demand from infra and auto space is likely to remain buoyant.

In case of China, the largest steel producer in world, steel production for February 2011 stood at 54.3 million tonne, up 9.7% compared to February 2010. Japan produced 8.9 million tonne of crude steel in February 2011, an increase of 5.7% compared to the same month last year. However, Japanese production is expected to be much lower in March due to ongoing nuclear crisis. In South Korea, production jumped massively by over 25% to touch 5.0 million tonne in February 2010.

Looking at the European Union, Germany's crude steel production for February 2011 stood at 3.7 million tonne, up 7.9% on year-on-year basis while Italy's crude steel production was 2.3 million tonne, up 4.9% compared to the same month last year. In other European countries too production was seen increasing between 6-10%, indicating that the continental economy was continuing recovery despite some sovereign debt concerns.

Elsewhere in the rich world, the US produced 6.6 million tonne of crude steel in February 2011, 5.6% higher than February 2010. Brazilian crude steel production in the month under review was 2.7 million tonne, an increase of 11.4% on February 2010. The world crude steel capacity utilization ratio stood at 82.0%, better than upwardly revised figure of 80.9% for January 2011. On year-on-year basis the utilization ratio was 2.7 percentage points higher.

The S&P CNX Nifty jumped 49.40 points or 0.92% at 5414.15. The index touched high of 5427.15 and a low of 5376.15, respectively.

The top gainers on the Nifty were Maruti Suzuki up 2.71%, DLF up 2.39%, Jaiprakash Associates up 2.17%, Bharti Airtel up 2.05% and M&M up 1.75%.

On the other hand, Sun Pharma down 0.52%, Suzlon down 0.44%, BPCL down 0.35% and HCL Tech down 0.06% were the only losers on the index.

Most of the Asian markets are trading in the green. Shanghai Composite added 0.18%, Hang Seng soared 0.66%, Nikkei 225 advanced 4.36%, Seoul Composite gained 0.51%, Straits Times advanced 0.72% and Taiwan Weighted jumped 0.48%; while Jakarta Composite dipped 0.15% and KLSE Composite dropped 0.09%.

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