Just when it looked like the Indian stock markets would negotiate a strong short covering rally after the recent drubbing, the reports of hike in subsidy burden for upstream companies has spooked local sentiments and nearly halved the intraday gains in the early afternoon session. Index heavyweight ONGC plummeted by 2.42% after the reports pointed out that government has raised the subsidy burden and it will now have to shell out Rs 24,892.4 crore in FY 2010-11. While other upstream companies like OIL and GAIL too slipped by 2.33% and 1.50% as they will have to pay around Rs 3,293 crore and Rs 2,111 crore of the total subsidy burden of 78,000 crore. However, the downside for the markets remained capped as construction major L&T spurted another 3.16% points a day after reporting strong quarterly earnings growth and giving encouraging revenue guidance. While various other badly beaten down counters like rate sensitives, healthcare and power are witnessing some short covering and keeping the frontline indices afloat above the neutral line. While leads from the markets across the globe remained lackluster as Asian markets traded on a mixed note while the European counterparts got off to a flat start, giving out no upside triggers to the local equity indices. Meanwhile the overnight plunge in international crude oil prices gave some respite to market participants who are reeling under interest rate hike fears.
Back home, the broader markets traded well above the neutral line performing in line with their larger peers. The midcap index amassed 0.42% and the smallcap index gained 0.55% points. The market breadth on the BSE was in favor of advances in the ratio of 1462:1047 while 140 scrips remained unchanged.
The BSE Sensex advanced 100.55 points or 0.55% at 18,241.95. The index touched a high and a low of 18,356.80 and 18,161.38 respectively.
The BSE Mid-cap index amassed 0.42% and Small-cap index gained 0.55%.
On the BSE sectoral front, Capital Goods up 2.10%, Healthcare up 0.88%, Power up 0.78%, Realty up 0.73% and Auto up 0.55% were the major gainers.
While, Oil and Gas down 0.50%, PSU down 0.45% and FMCG down 0.25% were the only laggards in the BSE sectoral space.
The top gainers on the Sensex were L&T up 3.16%, Bharti Airtel up 2.60%, Tata Power up 1.98%, Cipla up 1.96% and Bajaj Auto up 1.25%.
On the flip side ONGC down 2.42%, ITC down 0.95%, R Com down 0.42%, Infosys down 0.32% and SBI down 0.04% were the major losers on the index.
Meanwhile, the commerce department is suggesting an increase in repayment rates under the Duty Drawback Scheme. The commerce department's proposal is expected to assist exporters to facilitate in reducing their losses.
The Duty Drawback Scheme enables exporting companies to obtain a refund of custom duty paid on imported goods where those goods will be treated, processed, or incorporated into other goods for export, or are exported unused since importation. However, the compensation under the Duty Drawback Scheme is lower than DEPB.
Exporters will not be able to use tax benefits under the Duty Entitlement Pass Book (DEPB) scheme after it is closed on June 30. The government reimburses about $1.77 million a year to exporters on duty paid on imported inputs under the DEPB scheme.
Both the commerce and revenue department secretary met on Thursday to discuss the issues. As per the commerce department official, "Exporters are resisting the phasing out of the DEPB scheme as the refund rates are lower in the duty drawback scheme. We will ask the finance ministry to recalibrate the rates to bring the 2%,"
The commerce department also wants more items to be included in the drawback list. Exporters say it is very important that additions are made to the drawback list, as there are no corresponding drawback rates for several products, such as electronic items.
'All exports will be zero-rated after the DEPB scheme ends. Two similar schemes cannot go on. It will save some revenue for the government,' said Sunil Mitra, revenue secretary. Exporters are worried that in hurry to provide drawback for all products, the finance ministry may come up with a residual list which will have low reimbursement rates. The S&P CNX Nifty garnered 34.70 points or 0.64% at 5,462.80. The index touched high and low of 5,490.40 and 5,432.75, respectively.
The top gainers on the Nifty were L&T up 3.45%, Bharti Airtel up 2.79%, IDFC up 2.62%, Cipla up 2.27% and Tata Power up 2.09%.
On the other hand, ONGC down 2.16%, GAIL down 0.72%, ITC down 0.66%, HCL Tech down 0.44% and R Com down 0.36% were the major losers on the index.
On the Asian front, Jakarta Composite added 0.14%, KLSE Composite rose 0.05% and Seoul Composite advanced 0.76%.
On the other hand, Shanghai Composite declined 0.04%, Hang Seng dropped 0.01%, Nikkei 225 fell 0.14%, Straits Times eased 0.27% and Taiwan Weighted shaved off 0.63%.
The European markets have opened a mixed note as the France's CAC 40 eased 0.02%, Germany's DAX amassed 0.21% and London's FTSE 100 added 0.05%.
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