Benchmarks trade flat after a decent start

The Indian equity markets have pared their initial gains and are trading flat after a gap up start in early trade on the back of supportive global cues. The US markets surged overnight ahead of a crucial vote in Greece, expecting a solution to its debt problem while, all the Asian counterparts barring Shanghai Composite were trading in the positive terrain at this point of time. Back home, on the sectoral front, auto witnessed the maximum gain in trade followed by software and healthcare while, realty, metal and fast moving consumer goods remained the major losers on the BSE sectoral space. Meanwhile, steel companies like SAIL, JSW Steel, Jindal Steel and Power and Ispat Industries all edged lower in the trade on report that India's crude steel production rose by just 0.3% in May, after declining 1.7% in April. Timbor Home, the new listing today has got a good response from the traders and trading with a gain of over 25 percent. The broader indices were outperforming benchmarks. The market breadth on the BSE was positive; there were 891 shares on the gaining side against 695 shares on the losing side while 80 shares remained unchanged.

The BSE Sensex opened at 17,659.37 about 100 points higher compared to its previous closing of 17,560.30 and has touched a high and a low of 17,678.86 and 17,554.49, respectively.

The index is currently trading at 17,564.60, up by 4.30 points or 0.02%. There were 17 stocks advancing against 13 declines on the index.

The overall market breadth has made a positive start with 53.48% stocks advancing against 41.72% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices were up by 0.27% and 0.23% respectively. 

The top gaining sectoral indices on the BSE were, Auto up by 0.48%, IT up by 0.32%, HC up by 0.24%, CG up by 0.24% and TECk up by 0.18%. While, Realty down 0.40%, Metal down 0.06%, FMCG down 0.05% and PSU down 0.05% remained the major losers on the index.

The top gainers on the Sensex were M&M up by 1.85%, Jaiprakash Associates up by 1.12%, Infosys up by 0.90%, L&T up by 0.84% and Sterlite Industries up by 0.81%.

Jindal Steel down by 2.07%, Reliance Infra down by 1.22%, HUL down by 1.01%, Maruti Suzuki down by 0.85% and TCS down by 0.83%, were the top losers on the index.

Meanwhile, the Indian government is expected to permit Foreign Direct Investment (FDI) in multi brand retailing only in the six mega cities. This development is on the recommendation made by the Department of Commerce & Industry to allow such stores in cities with over one million population is premature. The six metros in which FDI in multi-brand retailing will be permitted are Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad.

As per the note prepared by the commerce ministry for the committee of secretaries on the FDI in retail has said the cities will be selected on the basis of 2011 census, as per the 2001 census, around 35 cities have more than 1 million population and the number will be higher in the 2011 census.

By adopting this calibrated liberalization in retails sector (by keeping other cities out) government is trying to avoid political resistance regarding the impact of the opening of the multi-brand retailing to FDI on small retailers. The FDI in multi-brand retails has several riders; state governments may get power to decide if they want to allow foreign retailers to open the front-end store in their cities, the policy also say minimum of 50% investment should be in back end infrastructure creation, the minimum investment is $100 million, around 30% manufactured products should be outsourced from Small and Medium Enterprises (SME).   

Currently, $400 billion Indian retail sector is dominated by the unorganized retailers or local Kirana stores. At present government allows 51% FDI in single-brand retail and 100% in wholesale cash and carry business. Global retailers like Wal-Mart and Carrefour have already opened wholesale operations in the India.

The calibrated approach adopted by the Indian government is based on the China model. China allowed foreign investment in 1992, but only in six major regions and cities and limited foreign ownership to 49%. The number of foreign retailers operating large store was restricted to 50, it allowed 100% foreign investment in 2004. The China has been able to attract huge foreign investment without affecting its small retailers or domestic retail chains.

With 15 million stores, India's retail sector is highly fragmented. Only 4% outlets have more than 500 square feet space. The other 96% are in the unorganized sector. All important ministries has supported foreign investment in multi-brand retail sector, Indian government's policy on retail investment will also help in increasing the country's FDI, which fell by 25% to $19.5 billion in last financial year.

The S&P CNX Nifty opened at 5,304.65; about 30 points higher compared to its previous closing of 5,275.85, and has touched a high and a low of 5,310.50 and 5,278.30 respectively.

The index is currently trading at 5,280.85, up by 5.00 points or 0.09%. There were 29 stocks advancing against 21 declines on the index.

The top gainers of the Nifty were M&M up by 1.77%, Grasim up by 1.11%, Axis Bank up by 0.90%, Sun Pharma up by 0.86% and Tata Power up by 0.85%.

The top losers of the index were Jindal Steel down by 2.43%, SAIL down by 1.22%, RIL down by 1.15%, TCS down by 1.12% and SBI was down by 0.90%.

All the Asian markets barring Shanghai Composite were trading in the green; Hang Seng was up 72.10 points or 0.33% to 21,922.69, Jakarta Composite was up 23.33 points or 0.61% to 3,818.27, KLSE Composite was up 1.57 points or 0.10% to 1,562.36, Nikkei 225 was up 123.91 points or 1.31% to 9,583.57, Straits Times was up 3.62 points or 0.12% to 3,057.13, Seoul Composite was up 17.87 points or 0.87% to 2,066.04 and Taiwan Weighted was up by 12.50 points or 0.15% to 8,610.12.

On the flip side, Shanghai Composite was down by 7.71 points or 0.29% to 2,638.77.

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