Market Analysis - 23rd March 2011

SENSEX  - 18,206.16         +217.86 (1.21%)

NIFTY  -   5,480.25            +66.40 (1.23%)

Both the national bourses extended gains today backed by positive investor sentiment. The sensex ended 217.86 points higher while the nifty closed 66.40 points up. The markets hit intraday highs towards the end of day as both European an American stocks reversed their initial losses. Positive sentiment also prevailed as billionaire investor Warren Buffet affirmed his belief in the India story by announcing that his firm is looking to make some acquisitions in the country.markets also like the fact that the government has put forth two reform bills in the parliament.

Sensex

All sectoral indices on BSE were in the green. Sectoral indexes were led by Realty (+1.91%), Bankex (+1.85%) and Health Care (1.51%). Health care saw a rise after the center decided to withdraw the service tax proposal put forth in the union budget.

Index heavyweight Reliance Industries (RIL) rose 1.45% to Rs 1014 after oscillating between Rs 1015 and Rs 995.50 during the day. Reportedly a fluid catalytic cracker (FCC) at RIL's old plant could start product output from Wednesday, 23 March 2011. The FCC unit of about 200,000 barrels per day (bpd) at RIL's older refinery at Jamnagar was shut for maintenance in early February 2011.  

BSE midcap and smallcap were up by .92% and .65% respectively. Tata communications was the highest gainer on BSE (+11.90%). The scrip saw the rise after 2 broking houses upgraded the stock and revised their price targets.BNP Paribas has upgraded the stock to "buy" from "reduce" and raised its price target to 313 rupees from 230 rupees. Separately, HSBC upgraded the stock to "neutral" from "underweight" and raised the price target to 241 rupees from 225 rupees.

In the Sensex scrips the top gainer was Cipla (+4.13%) followed by ICICI (+3.78%).

 Shares of DB realty fell (-8.85%) after the company declared in a disclosure that its largest shareholder, Neelkamal Tower Construction , had pledged additional shares in the company.

In the Sensex group only 4 scrips saw negative movement, with two Mahindra & Mahindra (-1.02%) and Bajaj Auto (-.20%) belonging to the auto sector. The other 2 scrips that were in the red were TCS and Jindal Steel.

Nifty

The Nifty climbed 66.40 points to close at 5480.25 (+1.23%). On the Nifty 43 scrips advanced while 7 saw decline.

The sectors leading the charge on NSE were, Realty (+2.24%), bank Nifty (+1.73%), CNX Infra (+1.07%).

Sesa Goa stock rose for a second day after its yesterday's announcement of acquisition of assets of Bellary Steel & Alloys.

Software scrips saw mixed trend. India's second largest software exporter by sales Infosys Technologies rose 1.75% and India's third largest software exporter by sales Wipro rose 0.81%. India's largest software exporter by sales TCS fell 0.46% 

Meanwhile, the government on Tuesday, 22 March 2011, introduced in parliament the Constitution Amendment Bill to facilitate implementation of Goods and Services Tax (GST). The Bill is likely to be referred to the Parliamentary Standing Committee for scrutiny. The GST seeks to replace multiple indirect taxes, such as the central excise duty and services tax, and state taxes including value added tax, entry tax and purchase tax, with a neat single levy.

Finance Minister Pranab Mukherjee on Tuesday made some crucial changes including, reducing dividend distribution tax (DDT) threshold for foreign companies to 26%. He announced withdrawal of 5% service tax on air-conditioned hospitals with more than 25 beds and on diagnostic services. Mukherjee also announced that 10% excise duty would be levied on 45% of the price instead of the earlier proposed levy of 10% excise duty on 60% of the price of the branded apparel. The ministry also cut import duty on raw silk to 5% from 30% to push imports, however, adding that the duty could be changed as and when needed. 

The FM also announced a cut in excise duty for completely knocked down (CKD) automobile kits to 30% from the proposed 60%. Further, the FM also said that seven computer parts would be exempted from customs duty and imported coking coal from excise duty. 

US crude futures were up 19 cents a barrel or 0.19% to $105.17 a barrel, off the day's low. Oil prices have surged in recent months amid ongoing turmoil in Libya and other parts of the Middle East. Unrest in Yemen and Syria has also added to geopolitical worries.

The Nikkei 225 average ended 1.65% lower. But, most other Asian shares rose. The key benchmark indices in Singapore, Taiwan, Indonesia and China rose by between 0.44% and 1.03%. The key benchmark indices in Hong Kong declined 0.14% and South Korea fell 0.07%. 

US stocks registered slight losses on Tuesday amid concerns about violence in Libya after a US fighter plane crashed there. The Dow Jones industrial average closed at 12,018.63, down 17.90 points or 0.2%. The broader S&P 500 closed at 1293.77, down 4.61 points or 0.4%.  

The near term major trigger for the market is Q4 March 2011 results. Advance tax payments made by top 100 firms based in the country's financial capital --Mumbai reportedly rose by 25% in the Q4 March 2011 over Q4 March 2010, hinting robust earnings.