Local equity markets sustain the momentum; CG stocks lead the rally

Local equity market after starting on high spirits have prolonged the momentum as the Greece parliament on Wednesday, 29 June 2011, approved harsh austerity measures aimed at meeting EU aid requirements and staving off default for debt-laden nation, which easing the concern fuelling overseas buying. Overnight triple digit gains of the Wall Street coupled with the rally of the Asian indices have been dictating the positive momentum of the Indian equity markets since the start of the trade. Meanwhile, US future indices were showing an uptrend on the screen trade. Back home, CG, FMCG and Realty stocks were the leading the rally, while TECk and Oil & Gas counters were lacking the spirit. Consumer-goods makers rose on expectations that a strong monsoon will boost demand from rural areas and also reduce input prices. Hindustan Unilever rose 2.7% and ITC added 2.8%. Meanwhile, nonferrous metal plays tracked base metal prices higher, with Sterlite Industries rising 3.5% and Hindalco Industries advancing 0.7%. Also, Reliance Industries, India's largest company by market capitalization, rose over 1% on value buying after its recent underperformance. However, among decliners, Oil & Natural Gas fell 0.74% after the company late Tuesday said its board approved a proposed share sale.

The BSE Sensex is currently trading at 18,764.69, up by 74.09 points or 0.40%. The index has touched a high and low of 18,823.06 and 18,733.47 respectively. There were 23 stocks advancing against 7 declines on the index. The broader indices too are trying to keep up the pace in line with benchmarks; the BSE Mid cap index up by 0.30% and Small cap indices rose 0.37%. The top gaining sectoral indices on the BSE were, CD up by 2.09%, FMCG and Realty were up by 0.82%, Metal up by 0.54% and Bankex was up by 0.51%. While, TECk and Auto down by 0.06% and 0.02% were the only losers on the index.

The top gainers on the Sensex were JP Associates up by 1.99%, HUL up by 1.88%, Hero Honda up by 1.53%, NTPC up by 1.08% and RIL was up by 1.07%. On the flip side, Bharti Airtel was down by 2,13%, Tata Motors was down by 0.78%, ONGC was down by 0.74%, BHEL was down by 0.34% and Hindalco Industries was down by 0.30% were the top losers on the Sensex.

The telecom industry is expected to suffer from the dispute between ministry of defence (MOD) and ministry of telecom (MOD) on the ownership of spectrums. In the communication to telecom ministry and Information Technology ministry, the defence ministry has said, the defence forces will not vacate any more spectrums, as the telecom ministry has not met its commitments made under the Memorandum of Understanding (MoU) signed in 2009.

The MoU specifically provided for DoT exclusively earmarking spectrum for the armed forces and commissioning an optical fibre cable network at a cost of Rs 10,000 crore through Bharat Sanchar Nigam. Also, the Finance Ministry was to waive the spectrum fee of around Rs 10,000 crore payable by the defence ministry.

Meanwhile, the Defence Minister A K Antony, has also rejected the recommendation of Telecom Ministry to take the issue to an Empowered Group of Ministers (EGoM) and argued that there is no point in getting the EGoM involved all over again, adding further, the defence minister said, any further vacating of spectrum by the defence forces would hinge upon DoT delivering on its commitments under the MoU. Last month, Telecom Minister Kapil Sibal had suggested taking the matter to EGoM on ground that the both ministries cannot arrive at an agreement on how to distribute spectrum among various users.

In reply to telecom minister's proposal, defence minister, in a letter dated June 25, 2011, said, "The MoU itself was a product of the deliberations of the EGoM. Unless the outstanding issues are resolved and concerns of the defence services adequately addressed through concrete actions, I am afraid another EGoM will not serve the purpose."

As per the agreement made between both the ministries was to guarantee that the defence force will vacate spectrum for 3G auction, under the MoU, the defence ministry had agreed to vacant 25 MHz spectrum in the 3G and 20 MHz in the 2G band in phases. Whereas defence force says it has kept its part of bargain, the promises made by the telecom ministry are still on paper. BSNL is yet to award the contract for laying the cable network and the finance ministry, too, has to notify waiver of spectrums.

There is also a difference between both the ministries on the exact frequency to be earmarked exclusively for the defence forces. "MoD had agreed to the release of the spectrum in good faith in order to avoid any embarrassment to the Government due to its failure in adhere to the commitments made in the notice for public auction of spectrum," Antony said.

Meanwhile, the telecom ministry has moved a note to the EGoM for getting the defence ministry to vacate more spectrums, the telecom ministry has asked for 230 MHz for mobile services, a major portion of which is for future 2G mobile services. Thus, disagreement between these two ministries has a huge implications and importance for telecom sector. The telecom operators are waiting for fresh allocation of 2G spectrum, which is not possible until the defence force agree to vacate additional spectrums. 

The S&P CNX Nifty is currently trading at 5,623.40, higher by 22.95 points or 0.41%. There were 34 stocks advancing against 14 declines on the index. The top gainers of the Nifty were SAIL up by 3.50%, JP Associates up by 2.18%, HCL Technologies up by 1.88%, HUL up by 1.68% and Hero Honda up by 1.40%.
On the flip side, BPCL down by 1.57%, ONGC down by 1.47%, Tata Motors down by 0.92%, Sesa Goa down by 0.78% and Bharti Airtel down by 0.67%, were the top losers on the index.

All the Asian equity indices barring KLSE Composite were trading in the green; Shanghai Composite was up by 1.35, Hang Seng was up by 1.70%, Jakarta Composite was up by 1.25%, Nikkei 225 was up 0.21%, Straits Times up by 1.11%, Seoul Composite was up 0.23% and Taiwan Weighted was up 0.44%.
On the flip side, KLSE Composite was down by 0.04% was the lone loser among the Asian pack 

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