Markets opened lower, but erased all the losses and were trading in green in the morning session as ONGC and oil marketing companies rallied after government raised diesel and natural gas prices.
The S&P CNX Nifty touched a low of 5,434, but reversed the trend and was trading higher by 44 points, at 5515 and the benchmark Sensex climbed 137 points, at 18,382.
On Friday after market hours Empowered Group of Ministers decided to take a bold step of raising diesel prices by Rs 3 per litre, kerosene by Rs 2 per litre and cooking gas by Rs 50 per cylinder which may boost oil market companies.
However, diesl and cooking coal price hike may further stoke inflation and prompt the Reserve Bank of India to continue with its tightening regime. Analysts said this development will weigh on the markets going forward.
Oil Marketing Companies HPCL, BPCL and IOC surged between 5-6% and ONGC rallied 8% after the government decided to boost the finances of the oil firms by cutting import tax on petrol and diesel to 2.5% from 7.5%. The government may lose tax revenue of Rs 45,000 crore.
Across Asia markets lost ground led by losses in energy companies due to falling crude prices. Also central bankers met over the weekend
to discuss Europe's debt problems and they decided to increase capital buffer of banks under basel requirements which weighed on the markets.
Japan’s Nikkei Stock Average was down 0.9%, the Hang Seng Index lost 1% and South Korea’s Kospi declined 1.2%.
Back in India besides Oil & Gas shares, PSU shares were the top sectoral gainers, up 2%. Power Grid Corporation was up 2.1%, Reliance
Power added 1.9% and GVK Power was up 1.3%.
IT shares were laggards in the morning session. BSE IT index was down 0.1%. HCL Technologies lost 0.6%, Infosys was off 0.3% and Tech Mahindra was down 0.3%.
The midcap and the smallcap indices were up 0.4% each.
Top gainers on the Sensex were ONGC, up 9%, Bajaj Auto gained 2.6% and Mahindra & Mahindra was up 2.3%. Among the losers were Hero Honda fell 0.8%, ICICI Bank was down 0.4% and Infosys lost 0.3%.