Indian equities overlook unexciting global leads; extend rally mood

Exuberant Indian markets have commenced the F&O expiry week with an exciting performance extending Friday's pullback rally with short covering gathering greater force. Sentiments remain buoyant for the frontline indices which have vivaciously rallied over eight hundred fifty points in last three trading sessions re-capturing the psychological 5,500 and 18,400 levels. The rally on local bourses also looked superior as markets across the globe reeled under the fears of spreading European debt crisis after a ratings agency placed Italian banks on a review for a possible downgrade. Investors went on the defensive as Greece's parliament began debating harsh new austerity measures ahead of a Greek austerity vote this week that may sow stronger doubts about financial stability and economic recovery. However, local frontline indices did not show any signs of capitulation despite the weak opening as investors gave a thumbs up to government's recent act of hiking fuel prices. Though expectations are rife that double-digit inflation may re-emerge following the hike in prices of diesel by Rs 3 a liter, kerosene by Rs 2 a liter and cooking gas by a steep Rs 50 a cylinder, however, PMEAC chairman C Rangarajan's statement that fuel price hike was a calculated decision by the government and its impact on inflation is seen as temporary, calmed investor concerns to some extent. He said that after initial correction, inflation will come down to 6.5% by March 2012. Apart from fuel price hike, governments' move to scrap customs duty on crude oil and petroleum products by 5% and reduce excise duty on diesel by Rs 2.6 per liter, was cheered by marketmen as it would ease the government's subsidy burden and also bolster its image among cautious investors. Over the weekend, plunge in international crude prices too buttressed buying interests and lifted sentiments. Investors' morale also got a boost as FIIs turned net buyers on Friday, indicating that interest of foreign investors are not fading any time soon.

The NSE's 50-share broadly followed index Nifty, settled with a percent gains above the crucial 5,500 support level while Bombay Stock Exchange's Sensitive Index, Sensex closed with over one hundred fifty point gains above the important psychological 18,400 level. The broader markets too traded on a firm note and moved in tandem with their larger peers. The midcap index garnered 0.82% while the smallcap index amassed 0.80%. On the sectoral front, it was the Public Sector Undertakings that outperformed not only their sectoral peers but the benchmarks as well as it surged by 1.92%. The Oil and Gas counter kept buzzing through the session as government's move to hike fuel prices and cut duties will reduce under recoveries of oil marketing companies (OMCs) and also ease the subsidy burden for upstream oil company like ONGC. Moreover, aviation shares once again flied higher on hopes that state-run oil marketing companies will cut aviation turbine fuel prices as crude oil prices fell sharply. However, IT stocks came under some selling pressure initially amid possibilities of further downgrades in Europe however, they managed to claw back in the positive terrain and settle with around half a percent gains after majors like TCS and Oracle Finserv 1.28% and 3.74% respectively. On the other hand, high beta realty and defensive FMCG packs were the indices that languished in the red terrain with 0.62% and 0.48% losses. The markets surged on strong volumes of over Rs 1.77 lakh crore while the turnover for NSE F&O segment remained on the lower side compared to Friday at over 1.63 lakh crore. Market breadth remained positive as there were 1636 shares on the gaining side against 1193 shares on the losing side while 116 shares remained unchanged.

Finally, the BSE Sensex gained 171.73 points or 0.94% to settle at 18,412.41 while the S&P CNX Nifty surged by 55.35 points or 1.01% to settle at 5,526.60.

The BSE Sensex touched a high and a low of 18,494.11 and 18,132.70, respectively. The BSE Mid cap and Small cap index up 0.82% and 0.80% respectively.

The top gainers on the Sensex were ONGC up 4.16%, Mahindra & Mahindra up 3.09%, Maruti Suzuki up 2.86%, L&T up 2.69% and Tata Steel up 1.65%.

On the flip side, Reliance Infra down 1.48%, ITC down 0.77%, Hero Honda down 0.76%, DLF down 0.74%, Wipro down 0.33% were the top losers on the index.

Meanwhile, due to nationwide protests against the increase in prices of diesel, kerosene and domestic cooking gas, finance minister Pranab Mukherjee is likely to write letter to state Chief Ministers to reduce state taxes on at least LPG to reduce the impact of increase in prices on the common man. Meanwhile, the states like West Bengal and Kerala have already announced that they will be reducing the taxes on petroleum products. 

The Finance minister will be writing letter to the state heads to explain the rationale of the price hike and the need to reduce sales tax on cooking gas to give some relief to the common people. The central government has removed custom duty, excise duty and import duty from the crude oil and its products, which would result in revenue loss of Rs 49, 000 crore per annum.

meanwhile, giving relief to common man, West Bengal government has decided to remove sales tax on cooking gas; the decision would reduce the price of domestic cooking gas by Rs 16 in state. The Kerala's CM Oommen Chandy too has decided to reduce the state tax on diesel, after this the diesel price will get reduced by 75 paise in state, however, Kerala government would loss around Rs 142.2 crore by giving up the taxes. The Delhi government is also expected to reduce the sales tax and VAT on diesel and domestic cooking gas. At present, the Delhi government gets around Rs 5 or 12.5% from the sales tax on diesel and 4 % or Rs 16 of VAT on domestic cooking gas. The Congress has asked its Chief Ministers to find out the similar possibility to provide relief to the common man.

The Empowered Group of Ministers (EGoM) chaired by Finance Minister Pranab Mukharejee on 24 June has decided to hike the price of  diesel by Rs 3/litre, Kerosene by Rs 2/liter and domestic cooking gas by Rs 50/14.2 kg cylinder. The decision of price hike was taken to reduce the revenue loss of state owned Oil Marketing Companies, OMCs were making loss of Rs 490 crore everyday because of increased international prices of crude oil.

The top gainers on the BSE sectoral space were PSU up 1.92%, Capital Goods up 1.75%, Bankex up 1.61%, Auto up 1.49% and Oil & Gas up 1.40%.

The losers in the BSE sectoral space were Realty down 0.62%, FMCG down 0.48% and Consumer Durables (CD) down 0.43%.

The Ministry of Telecom is mulling significant policy changes in the telecom sector on the recommendations made by the Telecom Regulatory Authority of India (TRAI). The Ministry is likely to propose policy changes on pricing of excess spectrum and delinking of spectrum from license, these expected changes in policy will be sent to Cabinet for final decision.

The Telecom Commission, the highest decision making body of the Department of Telecommunications (DoT), was expected to meet next month to consider the recommendations of the Telecom Regulatory Authority of India (TRAI) on spectrum management and other licensing issues. However, after the deliberations in the Telecom Commission on all the issues, the main policy changes would be referred to the Cabinet for a final decision.

The telecom commission has members from the various ministries and governmental bodies related to the sector. "The major proposed policy changes such as revising the structure of the unified access service licence and delinking of spectrum from licence and pricing of excess spectrum will be taken to the Cabinet since these decisions were earlier taken by the Cabinet under the aegis of the National Telecom Policy, 1999. Any change in the letter and spirit of this policy on licence and spectrum issues has to be subjected to the scrutiny of the Cabinet and Parliament," the department said in a note for Telecom Commission.

The DoT has acknowledged in principle a majority of the suggestions of TRAI, including a one-time fee on operation for holding spectrum beyond contractual limits and mergers and acquisitions rules, under which a combined entity after merger will have a total market share of 30 % and not more than 14.4/10 MHz of spectrum.

The suggestions made by Telecom Regulatory Authority of India have became important inthe wake of increasing need for consolidation in the telecom industry, which has been observing low tariffs and reducing revenues due to increased players in the sector. After the entry of new plays in the telecom sector in late 2008, the average revenue per user with the profits of the operators has started falling due to low tariffs. If Department of Telecom, accepts the suggestions of TRAI on pricing spectrum will increase exchequer's revenue realization.

The S&P CNX Nifty touched high and low of 5,552.65 and 5,434.25, respectively.

The top gainers of the Nifty were Powergrid up 5.07%, BPCL up 4.71%, ONGC up 4.01%, Reliance Capital up 3.57% and Maruti up 3.16%.

On the flip side, Reliance Infra down 1.13%, Grasim down 1.10%, DLF down 0.99%, Ambuja Cement down 0.75% and ITC down 0.72% were the major losers on the index.

European markets were trading in green. France's CAC 40 rose by 0.26%, Britain's FTSE 100 advanced 0.45%, and Germany's DAX gains by 0.14%.

All the Asian equity indices barring Shanghai Composite finished the day's trade in the positive terrain on Monday amid fears of a spreading European debt crisis after a ratings agency placed Italian banks on a review for a possible downgrade. Investors in the region remained spooked by the pessimism in Europe where Moody's said it had put the ratings of 16 Italian banks on review for possible downgrade and had changed the outlook to negative from stable for a further 13 banks. Moreover, Seoul Composite ended with a cut of about a percent as foreign investors remained seller amid continued worries about the Greek debt situation ahead of crucial parliamentary vote later this week.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,758.23	12.02	0.44
Hang Seng	22,041.77	-130.18	-0.59
Jakarta Composite	3,813.43	-35.13	-0.91
KLSE Composite	1,562.52	-2.14	-0.14
Nikkei 225	9,578.31	-100.40	-1.04
Straits Times	3,048.28	-18.57	-0.61
Seoul Composite	2,070.29	-20.52	-0.98
Taiwan Weighted	8,500.16	-32.67	-0.38

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