Sensex slams double century; extends rally for second successive session

Indian benchmarks carried forward their northbound journey for yet another session on Wednesday, as optimistic cues from across the globe helped the indices to surpass crucial support levels of 5,400 and 18,000 and move in higher trajectories. Sentiments remained sanguine right from the start of trade as tabling of the banking sector amendment bill and the Constitution Amendment Bill in parliament on Tuesday buttressed the chances of a rebound for the domestic indices. The discouraging leads from Japanese markets which plunged over one and half a percent too went unnoticed amid reports that billionaire investor Warren Buffet intends to use the huge cash pile of his flagship firm Berkshire Hathaway to acquire companies in India, an investment destination Buffett feels is too big to be called an emerging market. Meanwhile, spiraling crude oil showed little signs of dying down as they toped $105 a barrel amid the ongoing turmoil in Libya and other parts of the Middle East, thereby raising skepticism over the advance on fears that the market lacks clear direction amid mounting global and local uncertainties. The NSE's 50-share broadly followed index Nifty, settled just below the crucial 5,500 support level while Bombay Stock Exchange's Sensitive Index, Sensex garnered a double century to regain the psychological 18,200 mark. The broader markets too remained amid the thick of the things but failed to outperform their larger peers. The BSE's midcap index went home with gains of 0.92% while the smallcap index climbed 0.65% points. On the sectoral front, high beta Realty counter continued to remain at the top of the table for second straight day after rising 1.92% led by heavyweights like DLF and HDIL which respectively surged 2.78% and 2.80%. Also, hefty position build up was witnessed in the rate sensitive banking index which soared 1.85% after Finance Minister Pranab Mukherjee proposed changes to tax and banking laws. The reform bill seeks to make voting rights for bank shareholders proportional to their holdings, a move believed to boost the attractiveness of state-owned banks for investors. Banking bellwethers like ICICI Bank and Kotak Mahindra Bank spurted 3.76% and 2.57% respectively. Index heavyweight Reliance Industries too pulled the markets higher after garnering around one and half a percent points on reports that its fluid catalytic cracker (FCC) unit is likely to start production from this week. Meanwhile, shares of Healthcare majors like Cipla and Orchid Chemicals jumped 4.13% and 3.34% respectively after Pranab Mukherjee rolled back the proposed 5% service tax on healthcare announced during the federal budget for 2011-12. While rally in sugar stocks also persisted after the government decided to allow sugar exports to the tune of 5 lakh tonnes.

On the global front, majority of Asian equity indices finished in the positive terrain led by Chinese Shanghai Composite which surged over a percent as investors bought property shares on attractive valuations and on expectations that developers' sales will benefit from the government's push for social housing. The European markets after opening on a weak note, pared losses as France's CAC, Germany's DAX and Britain's FTSE traded in the green zone though with moderate gains. On the other hand, the screen trading for US index futures also indicated that the Dow could open on a positive note.

Earlier on Dalal Street, the benchmarks had slipped to their intra-day low levels in the initial moments of trade tracking weak cues from the Wall Street and towering crude oil prices on concerns that conflicts in Middle East could pinch oil supplies. However the frontline indices staged a strong and stable pullback thereafter led by gains in banking, FMCG, healthcare and metal stocks. The indices gradually gained traction and sailed beyond the crucial support levels of 5,450 and 18,200 in the absence of any bouts of profit booking. Sustained buying interests across the board through the session helped the bourses eventually snap the day's trade around the high point of the day with over a percent gains. The markets registered strong volumes of over Rs 1.39 lakh crore while the turnover for NSE F&O segment too remained on the higher side compared to Tuesday at over Rs 1.24 lakh crore. Market breadth remained positive as there were 1650 shares on the gaining side against 1194 shares on the losing side while 135 shares remained unchanged.

On Charts: The S&P CNX Nifty holds above 5,440 (10 EDMA) level and next  resistance  will be around 5,530 and 5,550 levels. However, Nifty's nearest projection supports seen around at 5402, 5340 and once below that, it may drop to the 5300-5280 levels also.

Finally, the BSE Sensex surged by 217.86 points or 1.21% to settle at 18,206.16 while the S&P CNX Nifty climbed 66.40 points or 1.23% to end at 5,480.25.

The BSE Sensex touched a high and a low of 18,218.28 and 17,950.17 respectively. The BSE Mid-cap and Small-cap indices increased by 0.92% and 0.65%, respectively.

Cipla up 4.13%, ICICI Bank up 3.76%, Jaiprakash Associates up 3.48%, DLF up 2.78% and BHEL up 2.43% were the major gainers on the Sensex.

On the flip side, Mahindra & Mahindra down 1.02%, Jindal Steel down 0.64%, TCS down 0.45% and Bajaj Auto down 0.20% were the only losers on the index.

In a signal of robust increase in corporate incomes, overall advance tax payments by the India Inc for the current financial year have increased by buoyant 22%. Total advance tax paid by the corporates reached Rs 1.97 lakh crore in the current fiscal compared Rs 1.60 lakh crore in the last fiscal.

Highest tax payer as per the advance tax figures was publically controlled ONGC which paid Rs 8,492 crore, an increase of 35% compared to 2009-10. Another oil sector major, Reliance Industries, saw its overall advance tax payment increase by 38% to Rs 4,244 crore in the current financial year. Insurance major LIC paid Rs 3,599 crore as advance tax, nearly 11% higher than previous year.

Advance tax payments are often considered as a good barometer of overall performance of the economy and also serve as a lead indicator for growth in overall gross domestic product. However, part of the growth seen this year could also be attributed to the somewhat lower base as growth last year was weaker in many sectors and hence tax outgo also grew at a slower pace.

Nonetheless, the robust growth in tax receipts indicates that overall economy was doing well and if the trend continues, it will help the government meet an ambitious budgeted fiscal deficit target. The finance ministry has pegged fiscal deficit at 4.6% for the next fiscal. But experts have been raising doubts that given the high crude prices and implied increase in subsidy outgo, it would be difficult to adhere to the target deficit, particularly in light of the fact that there will be no one time receipt like the 3G revenue in next fiscal. 

Realty up 1.92%, Bankex up 1.85%, Health Care up 1.51%, Metal up 1.33%, and Oil&Gas up 1.17% were the major gainers in the BSE sectoral space. There were no losers in the BSE sectoral space.

The government has constituted a panel for deliberating on pooled pricing of gas irrespective of the source, international or domestic or public or private within the domestic space and the group is likely to meet within a week. The panel will be headed by Planning Commission Advisor on energy and is expected to come up with final recommendations pretty soon.

Demand for natural gas in the country has been increasing sharply, particularly from the power and fertilizer companies for whom there is a major feed stock. Further, overall output of gas in the country has been increasing rapidly and there are prospects of more gas supply from newer discoveries in near term. In this wake the government has been actively looking at a framework for pool pricing of gas in India.

At present, gas is sold at different prices based upon the source of the gas. For instance, domestic gas from public and private sector companies is mostly sold at $4.2 per per million British thermal unit (mmBtu). On the other hand, Australian LNG, which is to be imported by Petronet from its Kochi terminal in Kerala is indexed at 14.5% of crude oil price and will therefore cost over $14 mmBtu.

The terms of reference (ToR) of the committee indicate that the government wants an early alternative to differential pricing and is more inclined to get a pooled pricing solution as soon as possible. This is also reflected in the fact that the ToRs pre-suppose that the decision of a pooled price has already been taken and that the panel will only deliberate on the best method or formula for operating pool prices, without evaluating any other option.

The S&P CNX Nifty touched a high and a low of 5,484.95 and 5,401.95 respectively.

The top gainers on the Nifty were Cipla up 4.92%, Sesa Goa up 4.50%, ICICI Bank up 3.72%, JP Associates up 3.66% and DLF up 3.29%.

The top losers on the index were M&M down 1.39%, Jindal Steel down 0.86%, TCS down 0.52%, Siemens down 0.30% and Bajaj Auto down 0.15%.

Union Finance Minister Pranab Mukherjee on Tuesday tabled the Banking Laws (Amendment) Bill - 2011 in the lower house of the Parliament. The main aim of the Bill is to improve the regulatory powers of the central bank and reform the norms governing voting rights in both the public sector and private sector banks.

In case of the nationalized banks, the Bill proposes to raise the ceiling on voting rights of shareholders from 1% prevailing currently to 10%. It also proposes to enable the nationalized banks to increase or decrease their authorized capital with approval from central government and RBI. Presently, the nationalized banks are subjected to a ceiling of Rs 3,000 crore authorized capital.

In case of private banks it proposes to remove the voting right restriction of 10% for private sector banks in the total voting rights of all the shareholders of the banking company. It is proposed to "remove the existing restriction on voting rights limited to 10% of the total voting rights of all the shareholders of the banking company," said the statement of objects and reasons of the bill.

The Bill also includes provisions to further empower the central bank. Such a step was felt necessary before new banking licenses were issued so that the central bank is in a better position to regulate the industry. Once the bill is passed, it will be mandatory for anyone to obtain prior approval from RBI to acquire 5% or more of the share capital of a bank and the central bank will have the right to impose whatever conditions it deems fit for such acquisitions.

The bill will also exempt bank mergers and acquisitions from provisions of competition act. This is being done to ensure that bank mergers and acquisitions are exempted from scrutiny of competition commission of India (CCI) and continue to be overseen by the RBI only. This point was request by the central bank itself as bank mergers also often have to be evaluated from point of view of stability of overall banking industry. Many times a bank merger might become necessary to rescue an ailing bank even if it leads to significant increase in market share of acquiring bank. 

European markets were trading green on Wednesday. France's CAC 40 gained 0.53%, Germany's DAX fell 0.26% and Britain's FTSE 100 declined by 0.46%.

Asian equity indices finished the day's trade mostly in the positive terrain on Wednesday. Chinese Shanghai Composite rose more than one percent as investors bought property shares on attractive valuations and expectations that developers' sales will benefit from the government's push for social housing. However, Japanese Nikkei fell more than one and a half percent as investors booked their profit after the past two day's gains. The Japanese index rose almost 7.2% in the past two days.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,949.07	29.93	1.03
Hang Seng	22,825.40	-32.50	-0.14
Jakarta Composite	3,556.23	38.51	1.09
KLSE Composite	1,511.97	2.87	0.19
Nikkei 225	9,449.47	-158.85	-1.65
Straits Times	3,022.19	19.44	0.65
Seoul Composite	2,012.18	-1.48	-0.07
Taiwan Weighted	8,545.08	37.04	0.44

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