Indian benchmarks recoup some lost ground; broader markets surge

It was the turn of broader markets to gain traction on Monday as the frontline indices struggled to keep up the pace at which they briskly re-captured the 5,650 and 18,850 levels last week. Though the benchmarks failed to extend their rally mood in two previous sessions, but the broader markets took the charge today and attracted huge buying interest. The key frontline indices which registered their biggest weekly gain in three months on the back of overseas investors becoming net buyers of Indian equities for the first time in three weeks and also because of food inflation slowing to a six week low, failed to capitalize on the promising start yet managed to snap the session in the green terrain and recover some ground that was lost in Friday's session. The optimism was spurred since European finance ministers agreed to bailout Greece from the debt crisis which not only improved the appetite for risk-taking locally but through the Asian region. Most Asian peers rallied by around a percent point on the back of encouraging US manufacturing data and easing concerns over Greece's sovereign debt trouble. Back home, foreign funds have been pumping in their hot money into the highly beaten down counters ahead of the first quarterly earnings announcement scheduled to start from the second week of July onwards. The rate sensitive Real Estate, Automobile and Banking counters had a busy day as they saw huge position build up in the session. The Automobile counter was amid the thick of things as companies announced good monthly sales numbers while the cement sector too gained a lot of traction on reporting good monthly despatches numbers.

Moreover, the psychological 5,700 and 18,950 levels proved as stiff resistance for the benchmarks as they failed to go beyond those levels in the session and traded in a very narrow range to eventually snap the session with moderate gains. The NSE's 50-share broadly followed index Nifty, settled with close to a percent loss at the crucial 5,650 support level while Bombay Stock Exchange's Sensitive Index, Sensex only managed a fifty point gain to close above the important psychological 18,800 levels. However, buying in the midcap and smallcap stocks remained the order of the day as hefty buying interests was witnessed in the broader markets which outperformed their larger peers by a fat margin.  The midcap index garnered 0.92% points while the smallcap index amassed 1.19% point. On the sectoral front, it was the beaten down high beta - Realty pocket which once again vivaciously rallied by over 3.5% point as majors like DLF, HDIL and Unitech zoomed in the range of 1-6%. The Consumer Durables counter too remained amid the thick of things and gained 1.99% as majors like Titan and VIP gained 2.06% and 9.59% respectively. Index heavyweight Reliance Industries too made its presence felt by climbing over half a percent point.  Shares of sugar companies too kept buzzing since morning on the bourses as after allowing an additional 5 lakh tonne of sugar export, there were speculations that government will discuss sugar decontrol in a meeting in the next 8-10 days. On the other hand only the Capital Goods and FMCG were the sectors that languished in the red terrain with marginal losses as bellwethers like L&T, BHEL, ITC and HUL went home with losses. The markets rose on weaker volumes of over Rs 0.68 lakh crore while the turnover for NSE F&O segment also remained on the lower side at over 0.55 lakh crore, on expected lines as this being the second session of a new F&O series. Market breadth remained positive as there were 1766 shares on the gaining side against 1075 shares on the losing side while 123 shares remained unchanged.

Finally, the BSE Sensex gained 51.68 points or 0.28% to settle at 18,814.48, while the S&P CNX Nifty advanced by 23.30 points or 0.41% to settle at 5,650.50.

The BSE Sensex touched a high and a low of 18,942.42 and 18,781.88, respectively. The BSE Mid cap and Small cap index were up by 0.92% and 1.19% respectively.

The top gainers on the Sensex were Reliance Infra up 6.84%, DLF up 6.01%, Reliance Com up 3.29%, Hindalco Industries up 1.90% and Tata Motors up 1.76%.

On the flip side, ITC down 1.34%, L&T down 0.88%, Tata Steel down 0.86%, NTPC down 0.81% and Hero Honda down 0.36% were the top losers on the index.

Meanwhile, the department of commerce under the Ministry of Commerce and Industry has exempted cotton and yarn waste from the extra cap of 10 lakhs bales imposed on export of the natural fibre for 2010-11 season.

As per the note issued by the Directorate General of Foreign Trade (DGFT)  said, it has been decided that the cap of additional 10 lakh bales, on export of cotton during the cotton season 2010-11 (upto 30.09.2011), will apply only to Tariff codes 5201 (Cotton, not carded or combed) and 5203 (Cotton, carded or combed). This cap shall not apply to export of cotton waste including yarn waste and garneted stock (Tariff code 5202).

Although, other conditions regarding registration of export contract with DGFT will remain in force. On June 8, the government had decided to allow export of extra 10 lakh bales (170 kg each) of cotton in the present season due to sharp decrease in the price in the domestic market. In last October, due to increase in prices of natural fibre, government imposed a quantitative restriction of 55 lakh bales.

However, from April the prices of natural fibre has saw sharp correction of 38%, after peaking at Rs 62,500 per candy (356 kg) in March-end in the domestic market, at present the prices of  cotton prices have dropped to over Rs 40,000 per candy.

The top gainers on the BSE sectoral space were Realty up 3.66%, Consumer Durables (CD) up 1.99%, Bankex up 1.09%, Auto up 0.91% and PSU up 0.84%. While Capital Goods (CG) down 0.29% and FMCG down 0.21% were the only losers in the BSE sectoral space.

The S&P CNX Nifty touched high and low of 5,679.65 and 5,633.10, respectively.

The top gainers of the Nifty were Reliance Infra up 6.95%, DLF up 5.76%, RCOM up 3.34%, PNB up 3.21% and Kotak Bank up 3.08%.

On the flip side, NTPC down 1.50%, ITC down 1.31%, TCS down 0.78%, L&T down 0.75% and Cairn down 0.71% were the major losers on the index.

India's 80% power plants are facing the risk of default because of coal shortage and environmental matters. An organization of power producers had appealed government to form an expert's panel or Empowered Group of Ministers (EGoM) to review the contracts awarded in the competitive bidding route.

'An institutional arrangement (possibly an EGoM or an expert group) may be set up by government to carefully evolve the principles and mechanisms to revisit the contracts, duly holding the developers accountable for aspects in their control, but finding practical ways for treating aspects that are not,' Association of Power Producers Director General Ashok khurana said in the communication to Planning Commission.

Because of fuel shortage and environmental issues, indications have already appeared of power plants defaulting from their current obligation. Recently, Indonesia and Australia had changed their norms for the coal exports. The revised norms have increased the prices of the import of coal from these countries, both accounts for 55% of the nation's coal imports.

The situation is expected to worsen further, with 80% of plants likely to default on account of the shortfall in domestic coal availability; environmental issues involved in captive coal blocks; and change in law/regulations in the coal exporting countries, the note added. From last few years, the situation has changed dramatically because of many developments like an acute coal shortage threatening in the power sector, changes in the norms for coal exporting and environmental issues, and other developments, which demanded a revision at the bidding mechanism.

In 2005, the competitive bidding framework in the power generation was introduced, during the last five years, government electricity distribution companies have contracted more than 42, 000 Mega Watt (MW) capacity through the competitive bidding route.

The Association of Power Producers is a organization representing private power developers companies such as Tata Power, Reliance Power, Adani Power, Lanco Infratech and Essar Power, with almost 1,20,000 MW of power projects in various stages of development and operation under its belt. 

European markets were trading mixed. France's CAC 40 lost 0.17%, Britain's FTSE 100 gained 0.33% and Germany's DAX advanced by 0.12%.

Asian equity indices continued their bull run for yet another day and all the indices barring KLSE Composite finished the day's trade in the positive terrain on Monday on the back of better-than-expected US manufacturing data while, further ease in traders' concerns over Greece's sovereign debt too aided the sentiments. Moreover, Seoul shares rose about a percent led by sustained foreign buying and firm gains in automakers and brokerages like Hyundai Motor and Woori Investment too supported the upmove while, Taiwan stocks ended with a gain of about half a percent, with smartphone maker HTC Corp soared by 4.46 percent after record monthly sales in June.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,812.82	53.46	1.94
Hang Seng	22,770.47	372.37	1.66
Jakarta Composite	3,953.52	26.42	0.67
KLSE Composite	1,582.35	-0.59	-0.04
Nikkei 225	9,965.09	97.02	0.98
Straits Times	3,153.44	14.43	0.46
Seoul Composite	2,145.30	19.56	0.92
Taiwan Weighted	8,774.72	34.90	0.40

 

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