Markets northward journey continue; Capital goods IT stocks lead

The Indian equity markets northward journeys continue in late afternoon session and the benchmarks are trading at the day's highest point. The markets have gained momentum with the help of Capital goods and IT stocks. Meanwhile, all the Asian markets settled in green barring Jakarta Composite and Seoul Composite. On the other hand, European markets were trading mixed while US index futures were trading in green. Back home NSE Nifty and BSE Sensex were trading near their psychological levels of 5,900 and 19,700 respectively.  All the sectoral indices were trading higher Capital goods, IT, Power, Bankex and Teck companies rose 1-2 per cent. Whereas the broader markets outperformed the benchmarks; the BSE Mid-cap and Small-cap indices gained 1.62% and 2.61%, respectively. The overall market breadth on BSE was extremely strong, in the favour of advances which thumped declines in the ratio of 2332:486, while, 63 shares remained unchanged.

Capital goods major ,BHEL which also is an index biggie was up more than three percent on reported its good provisional numbers, while 2G scam linked stocks declined after the CBI named Reliance Telecom, Swan and Unitech Wireless as the beneficiaries in its chargesheet on Saturday, Reliance Communications was the top loser on the Sensex ,

The BSE Sensex surged  228.87 points or 1.18% at 19,649.26. The index touched a high and a low of 19,681.49 and 19,449.36 respectively.

The BSE Mid-cap and Small-cap indices gained 1.62% and 2.61%, respectively.

All the sectoral indices on the BSE are trading in the green. Capital goods up 2.16%, IT up 1.76%, Power up 1.59% Bankex up 1.58% and TECk up 1.52% were the major gainers.

The top gainers on the Sensex were BHEL up 3.80%, M&M up 3.48%, JP Associates up 2.83%, HDFC Bank up 2.55% and Infosys up 1.90%.

On the flip side, RCom down 2.28%, HUL down 1.62%, Cipla down by 1.37%, HDFC down 0.77% and Sterlite Industries down 0.23% were the losers on the index.

A study by the Reserve Bank of India (RBI) has said that China was getting unfair advantages in bilateral trade with India due to relatively undervalued Yuan. In a research paper titled 'The implications of renminbi revaluation on India's trade', the RBI said China's policy of keeping its renminbi artificially down against the US dollar was impacting India's exports to the communist nation as well.

'By keeping renminbi (RMB) undervalued against the US dollar (USD) and depreciating it in line with the USD in the international market without taking into account the economic fundamentals of China, it invariably and distinctly provides competitive advantage over its trade competitors and trade partners including India,' said the research paper. This is not the first time the RBI has signaled towards undue advantage China corners do due to its relatively cheaper currency.

'In this context, one of the factors favouring China is the cost advantage of its exports, influenced by various domestic factors. Factor like production-oriented subsidies for firms and industries does support China model. The cost of production as well as productivity of labour also becomes an added advantage in its export promotion,' the RBI study observed.

India's trade deficit has been on the rise against China and most economists have been, at least partially, blaming this on undervalued renminbi. In the financial year ending March 2010, the deficit stood at $19.2 billion in a total bilateral trade of around $60 billion. Concerns have been raised by economists and policy makers alike that such a high trade deficit was unsustainable and India must take steps to bring it down.

The Indian government has been somewhat soft in criticizing the currency policies of the Chinese government, which has come under severe attack from the US on the same matter, probably in wake of the two Asian giants looking to improve relations. However, the central bank had raised the same issue earlier as well and seems to reflect a feeling deeper in the Indian policy makers, particularly in wake of surging trade gap with China. The government also probably does not mind when the concerns are raised by a seemingly autonomous body like the RBI. 

The S&P CNX Nifty gained 71.80 points or 1.23% at 5,897.85. The index touched high of 5,904.05 and a low of 5833.20, respectively.

The top gainers on the Nifty were M&M up 3.60%, BHEL up 3.17%, Cairn up 2.95%, HDFC Bank up 2.94% and HCL Tech up 2.90%.

On the other hand, RCom down 2.19%, GAIL down 1.66% ,HUL down 1.57%, SesaGoa down 1.26% and Cipla down 1.16% were the major losers on the index.

All the Asian markets settled in green barring Jakarta Composite and Seoul Composite that has shed by 0.20% and 0.24% respectively.

Hang Seng advanced 1.46%, KLSE Composite surged 0.01%, Nikkei 225 climbed 0.11%, Straits Times gained 0.55% and Taiwan Weighted soared up 0.25%.European markets were trading in bias; FTSE advanced 0.22% and DAX increased 0.09 % while CAC 40 declined 0.84%.

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