Markets Manage To Close Positive

On the second day of the derivatives expiry week, the Indian markets have shown weak trades again. The markets remained largely range-bound and a partial recovery was seen in the second half of the day. By closing, the BSE managed to put gains of 21 points on the board to close at 18,694 and Nifty managed to add 4 points to close at 5673.

Earlier in the morning, the Power stocks saw significant gains as the government has gone ahead with a Rs 1.9 lakh crore debt restructuring scheme for the state distribution companies. However, the scheme does not address the chronic issues of fuel security, tariff revisions, etc.

Meanwhile, according to reports, a poll of economists has indicates that the country may be downgraded despite a host of reforms and measures to boost investor sentiment. A downgrade means that the country may lose its investment grade status, and will be the first to do so among the BRIC countries. It will also mean that the borrowing costs of the country and companies will rise and investors may turn bearish. The poll says that the fiscal deficit will touch 5.8% of the GDP against government expectations of 5.1%.

In a separate report, the Kelkar panel has said that the fiscal deficit will cross 6% if the reforms suggested by the government are not implemented. The panel has also raised doubts on certain figures given by the government.

In the global markets, the European stocks are showing flat to negative trades. UK’s FTSE opened slightly positive, but has now turned flat. CAC and DAX too are trading in the red. The Spanish government has said today that it will raise pensions in 2013 amid the tight budgetary considerations and will also try to avoid a full-blown bailout. The European region has agreed to an unlimited bond buying program in the last meeting and the slowdown in the region has weakened the world markets.

In Asia, the Nikkei and Hang Seng managed to close in positives, while China’s Shanghai finished with 0.2% losses.

Back in the domestic markets, the Realty index saw gains of 2% by closing. The defensive FMCG shares were also up. Consumer Durables stocks are higher by nearly 1% after a long wait. The Power index lost its edge after the initial gains and managed only 0.5% gains. Metals stocks, however, remained underperformers as the most of them were trading lower from yesterday’s closing value.

Among the Sensex Stocks, Cipla continued its good run with 1.9% gains. HDFC and TCS were the only two other stocks that were up by over 1% each. Power-related stocks NTPC, Tata Power, L&T and BHEL also remained up for the whole day. Sun Pharma and Dr. Reddy’s Labs also featured in the gainers list.

Jindal Steel closed as the strongest loser, though it managed to cut the losses. In the Metals and Mining space, Tata Steel, Sterlite, Hindalco and Coal India were also down. Among Auto stocks, Tata Motors, Hero, M&M, Maruti Suzuki and Bajaj Auto were all in the red.

In other stocks, Pantaloon Retail gained as much as 9% today. Vijay Mally’s United Spirits, United Breweries and Kingfisher Airlines gained on confirmed news that UK’s Diageo Plc is in discussions to buy a stake in the liquor companies.

The advance-decline ratio in the markets was mixed for the day, but showed some improvement towards the end.

Ahead in the week, the market may remain volatile with a positive bias. Investors and market watchers must pay attention to the news from the European region. We believe that the government will make some further announcements in the coming days, which will keep the markets in gains. However, the fundamental factors have not changed and it will take some time to change the business sentiment. In any case, the short-term sentiment on the bourses seems positive.