Exuberant benchmarks showcase a momentous performance

After all the dilly-dallying in the start of the week, the Indian frontline indices showcased a boisterous feat of registering biggest intra-day gains since the post budget rally. It was a day when bulls went on rampage and the Sensex snapped the enthralling last session of a the week with over a 500 points rally in an euphoric atmosphere after bottom fishing in fundamentally strong shares gathered strength. It seems like the heartening global cues of plunge in the crude prices and Greece gaining European Union and IMF's approval of its latest five-year austerity plan, encouraged the market participants to catch the falling knife and trigger the reversal for the Indian stock markets which off-late were getting accustomed to daily obliteration. The frontline indices managed to fire on all cylinders as sentiments remained buoyant across the board. The bourses registered strong back-to-back gains in last two trading sessions scaling beyond psychological 5,450 and 18,200 levels, signaling that bullishness may be returning on expectations that the markets have already bottomed out and a lot of headwinds have been factored in. Meanwhile reports of fuel price revision, duty rejig and talks on under recoveries in the Empowered Group of Ministers (EGoM) meet later in the day underpinned the rally mood. However, pessimists were of the belief that further hike in prices of petroleum products would stoke the inflation to double digits which would lead the Indian central bank to further its hawkish stance against the inflationary pressure and hike interest rates. Any further attempt to bring down the rate of price rise will come at the cost of near tem GDP growth and will also lead to further downgrades in the earnings estimates.

On the global front, leads from the markets across the globe too were buttressing the local sentiments as benchmarks in China, Hong Kong and South Korea spurted by close to two percent while the European markets too opened on a sanguine note with all indices trading with well over a percent gains. Also the sharp plunge in crude prices after IEA's declaration to release 60 million barrels of oil into world markets spurred optimism on speculations that release of oil stocks will bring down prices of commodities at large thus easing inflationary pressure.

The NSE's 50-share broadly followed index Nifty, settled with close to three percent gains above the crucial 5,450 support level while Bombay Stock Exchange's Sensitive Index, Sensex closed with over a five hindered point gains above the important psychological 18,200 level. The broader markets have finally showed some fervor after languishing in the red terrain in previous sessions and the midcap index garnered 2.26% while the smallcap index amassed 1.80%. On the sectoral front, it was the rate sensitive Realty and Bankex counters which outperformed not only their sectoral peers but the benchmarks as well. Moreover, Aviation shares flied higher on hopes state-run oil marketing companies will cut aviation turbine fuel prices as crude oil prices fell sharply on Thursday, 23 June 2011. The sugar stocks too remained in jubilant mood after EGoM finally gave a nod for additional 5 lakh tonne of sugar for exports under the open general license. IT stocks rallied after National Association of Software and Services Companies (NASSCOM) President reiterated 16%-18% growth in export revenue for IT outsourcing services in 2011-12 fiscal year, indicating that demand for outsourcing services remains strong. While the PSU oil marketing companies (OMCs) spurted ahead of empowered group of ministers (EGoM) meeting to be held later today, headed by finance minister Pranab Mukherjee to discuss fuel prices. On the other hand, Consumer Durables packs which was the only index that languished in the red terrain with 2.24% losses, succumbed to profit booking after amassing over four percent in the previous session. The markets surged on strong volumes of over Rs 2.13 lakh crore while the turnover for NSE F&O segment also remained on the higher side compared to Thursday at over 1.97 lakh crore. Market breadth remained positive as there were 1984 shares on the gaining side against 852 shares on the losing side while 124 shares remained unchanged.

Finally, the BSE Sensex surged by 513.19 points or 2.89% to settle at 18,240.68  while the S&P CNX Nifty rushed 151.25 points or 2.84% to settle at 5,471.25.

The BSE Sensex touched a high and a low of 18,268.95 and 17,804.94, respectively. The BSE Mid cap and Small cap index surged 2.26% and 1.80% respectively.

The top gainers on the Sensex were Hero Honda up 6.07%, SBI up 5.95%, JP Associate up 4.55%, HDFC up 4.46% and L&T up 4.25%.

On the flip side, Reliance Infra down 0.84% and Reliance down 0.03%were the only losers on the index.

An Empowered Group of Ministers on fuel (EGoM), headed by the Finance Minister Pranab Mukherjee, is expected to meet today to consider a increase in diesel and LPG prices, as well as a cut in duty rates to combat the high cost of crude oil.

It is expected that a hike of Rs 2-3 per litre in diesel prices and an increase of at least Rs 25 per domestic LPG cylinder are on the EGoM agenda. It may also consider raising kerosene prices, along with this, it may also consider reducing custom or importing duty on crude oil to nil from current 5%, and on diesel from 7.5% to 2.5%. At present, state owned Oil Marketing Companies (OMCs) are losing Rs 15.44 per litre on sale of diesel at government subsidized rates.

The Oil Ministry is pushing for equitable sharing of the burden occurring because of the increased international crude oil prices, among consumers, the government and state-owned OMCs. Oil Minister S Jaipal Reddy had met Prime Minister and Finance Minister for calling EGoM meeting as early as possible.

One third of increased prices will have to pass on to consumer in stages, whereas a similar amount will have to be borne by the government by the way of either providing cash subsidy or reducing custom and excise duty. The remaining would be absorbed by the upstream firms like ONGC and fuel retailers. The similar formula would apply to Rs 27.47 per litre loss on kerosene and Rs 381.14 loss on sale of every 14.2 kg domestic LPG cylinder, besides this oil ministry also wants a cut in Rs 4.60 per litre central excise duty levied on diesel to reduce the impact of the high crude oil prices.

At current subsidized prices, which is below the market price, government owned OMCs are estimated to lose Rs 1,66,712 crore in revenues on selling diesel, domestic LPG and kerosene. In May, OMCs had increased prices of deregulated petrol by Rs 5; however, OMCs are still losing Rs 1.98 a litre on the sale of petrol. At present, OMCs are losing Rs 490 crore a day on fuel sales.

The government is likely to keep the hike in retail prices of diesel at minimum level, as any increase in diesel prices will have a significant impact on the headline inflation which is hovering around 9%. The EGoM was originally scheduled to meet on May 11, but the meeting was canceled on the last moment, there was a talk of EGoM meeting on June 9 to take decision on fuel price hike but the meeting was never scheduled for the day. EGoM has not met since last June, when the international crude oil prices were around $70-72 per barrel, which is increased by almost 50%.

The top gainers on the BSE sectoral space were Realty up 3.76%, Metal up 3.40%, IT up 3.37%, Capital Goods(CG) up 3.32% and Bankex up 3.25%.

The only loser in the BSE sectoral space was Consumer Durables (CD) down 2.24%.

The Indian government has asked United States (US) to make progress on the Bilateral Totalisation Agreement (BTA) which would exempt Indian professionals working in the United States from payment of security taxes to mitigate the impact of a visa fee increase last year. India and US are negotiating BTA which once singed, would benefit many Indians who are working in US and paying social security tax but not getting any benefit out of it. Under the BTA, professionals of both the countries would be exempted from social security taxes when they go to work for a short period in the other country.

At the event organized by the US India Business Council (USIBC) on June 23 in Washington DC, the subject which is important for Indian Information Technology Industry came up for discussion between Commerce and Industry Minister Anand Sharma, and William Daley , Chief of Staff in the US administration.  As per the statement issued by Anand Sharma, stressed on the need to make progress on BTA and to mitigate the impact of discriminatory measures such as the Border Security Legislation and Zadrog bill enacted last year which would unfairly tax Indian companies.

Under the Zadrog bill, US had imposed 2% tax on the US government procurement from foreign companies and also extended the visa fee on certain categories of H1B and L1, by one more year from 2014 to 2015. Visa categories such as H1B and L1 are mostly used by Indian IT professionals to fund security measures along the US-Mexico border. This increase of visa fee has raised the great concern and anxiety in the $60 billion Indian IT industry, which get its 60% business from the US.

Anand Sharma, asked US firms to invest in sectors like Agriculture, Infrastructure and Agro-processing industry. Minister said there is requirement for investment to bring about the Second Green Revolution in India and to develop the agro-processing and food processing sectors.

Anand Sharma said India will be spending around $1 trillion on the development of infrastructure in the next Five Year Plan beginning in 2012. There are many gaps in the infrastructure which present opportunities for investment, especially in energy, roads and power. Minister also emphasized on the need to give strength to the ongoing technological collaboration between the two countries through institutional linkages and co-development of technologies. He also pointed out the opportunities available in India in the manufacturing sector, in pharmaceuticals, in research and development and in a number of other sectors.    The S&P CNX Nifty touched high and low of 5,477.85 and 5,343.40, respectively.

The top gainers of the Nifty were Sesa Goa up 6.10%, SBI up 5.91%, Hero Honda up 5.71%, Ranbaxy up 5.15% and HDFC up 4.65%.

On the flip side, Reliance Infra down 0.91% and Reliance down 0.23% were the only losers on the index.

European markets were trading in green. France's CAC 40 up by 0.84%, Britain's FTSE 100 advanced 0.98%, and Germany's DAX gained by 0.87%.

All the Asian equity indices barring Taiwan Weighted finished the day's trade in the positive terrain on the last trading day of the week led by Chinese Shanghai which soared more than two percent, its biggest daily rise in more than four months on hopes that inflation will ease soon while, a slew of bullish forecasts of the market's outlook for the second half of this year too strengthened the investors sentiments. Moreover, Hang Seng and Seoul Composite remained the other top gainer followed Shanghai and gained over one and a half percent. However, Taiwan Weighted remained the lone loser among the Asian peers and lost about half a percent, pressured by fall in TSMC which shed 1.75 percent after a broker downgrade and by plastics firms, offsetting a rise in transport shares.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,746.21	57.96	2.16
Hang Seng	21,171.95	412.81	1.90
Jakarta Composite	3,848.56	24.91	0.65
KLSE Composite	1,564.66	1.47	0.09
Nikkei 225	9,678.71	81.97	0.85
Straits Times	3,066.85	22.13	0.73
Seoul Composite	2,090.81	34.95	1.70
Taiwan Weighted	8,532.83	-34.45	-0.40

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