Markets recover half of their previous day losses in mid morning session

After some flip-flop the markets are back on the recovery path with benchmarks gaining almost half what they lost in previous sessions pounding. There was some profit booking in the initial hours of trade that took the indices to the neutral lines but the bounce back in the market heavyweights is supporting the markets to move higher, especially the Reliance Industries that is witnessing some firm green after seven consecutive days of sell-off. All other beaten down stocks and sectors were showing smart recovery as the government said that India 'cannot impose arbitrarily' capital gains tax on investment routed through the island nation. However, the two nations are likely to hold discussions on revision of the double tax avoidance treaty, which has been used for routing third country investment into India for availing of tax exemptions.

The BSE Sensex is currently trading at 17,642.10, up by 135.47 points or 0.77%. The index has touched a high and low of 17,675.49 and 17,504.27 respectively. There were 26 stocks advancing against just 4 declines on the index.

The broader indices too are showing improvement but are still underperforming the benchmarks; the BSE Mid cap and Small cap indices were up by 0.53% and 0.50% respectively. The market breadth was in green with 54.57% stocks advancing against 40.92% declines.

The top gaining sectoral indices on the BSE were Bankex up by 0.90%, Auto up by 0.88%, HC up by 0.84%, TECk up by 0.80% and metal was up by 0.77%, while the losers were Realty down by 0.68%, CD down by 0.29% and Power was marginally down by 0.05%.

The top gainer on the Sensex were Hindalco Inds up by 2.175, TCS up by 1.93%, Tata Motors was up by 1.62%, Bharti Airtel up by 1.57% and Hero Honda too was up by 1.57%

On the flip side, JP Associates down by 1.27%, ONGC down by 1.02%, DLF down by 0.71% and BHEL down by 0.57% were the losers.

Meanwhile, the Indian power sector, perturbed due to demand-supply gap of coal, may face trouble in its coal imports. The major coal exporter Indonesia has made recent policy change which mandates all coal exporters to sell coal at market prices. Due to rise in demand of coal from India and China, another major coal exporter Australia may follow this move or restrict the exports.

This will affect the private producers as they operate power plant on imported coal due to Indian government's priority based allocation. These private producers, who are allowed to import only 30% coal, are already importing it at higher prices as compared to what is being offered by domestic major distributor Coal India (CIL). The Reliance Powers 4,000-MW Krishnapatnam Ultra Mega Power projects (UMPP) is facing road block for the similar reason as the plants coal requirement is fulfilled by Indonesia and such change in policy has become a road block for this UMPP.

This will not only affect the growth of power sector but also may lead to rise in the electricity prices thereby affecting the inflation troubled Indian economy. The various factors affecting the power sectors growth has already moved away the FDI. The delay from environment ministry in approving the captive blocks is further widening the demand-supply gap. This is also one of the major reasons for delay in ambitious UMPP of Indian government.

The power minister is expected to discuss this issue with the Prime Minister Manmohan Singh. Energy produced with the help of coal contributes to 66% of the total electricity supply. Also, gas has made lower than expected contribution and has not been of much help to the economy.

The S&P CNX Nifty is currently trading at 5,298.95, up by 41.00 points or 0.78%. The index has touched a high and low of 5,308.55 and 5,257.00 respectively. There were 39 stocks advancing against 11 declines on the index.

The top gainers of the Nifty are Sun Pharma up by 2.525, IDFC up by 1.95%, TCS up by 1.93%, Hindalco up by 1.93% and RIL was up by 1.78%.

On the other hand, HCL Tech down by 1.61%, DLF down by 1.21%, ONGC down by 1.15%, JP Associates down by 1.01% and BHEL down by 0.78% were the top losers.

The Asian markets continue to trade firm, Shanghai Composite was up by 0.48%, Hang Seng gained 0.32%, Jakarta Composite was up by 0.83%, KLSE Composite was higher by 0.01%, Nikkei 225 was up by 0.93% and Straits Times has gained 0.61% Seoul Composite up 1.28% and Taiwan Weighted was higher by 0.64%.

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