Market firm in early trade

Key benchmark indices edged higher in early trade. The barometer index, the S&P BSE Sensex was up 181.21 points or 0.83%, up 109.03 points from the day's low and off 25.54 points from the day's high. The market breadth, indicating the overall health of the market, was strong.

Index heavyweight Reliance Industries (RIL) rose after the company after market hours on Saturday, 22 March 2014 clarified in a statement that a political party has written to the Election Commission (EC) to keep on hold a bonafide decision of the Union Cabinet on gas pricing. Jaiprakash Associates gained after the company said that its board will meet today, 24 March 2014 to consider stake sale in joint venture (JV) subsidiaries. ACC slipped marginally on turning ex-dividend today, 24 March 2014.

Asian shares pared gains on Monday after the China HSBC flash manufacturing purchasing managers index (PMI) fell to an eight-month low in March.

Foreign institutional investors (FIIs) bought shares worth a net Rs 14.79 crore on Saturday, 22 March 2014, as per provisional data from the stock exchanges.

The market may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near-month March 2014 series to April 2014 series. The near-month March 2014 F&O contracts expire on Thursday, 27 March 2014.

At 9:25 IST, the S&P BSE Sensex was up 181.21 points or 0.83% to 21,936.53. The index gained 206.75 points at the day's high of 21,962.07 in early trade. The index rose 72.18 points at the day's low of 21,827.50 in opening trade.

The CNX Nifty was up 56.25 points or 0.87% to 6,551.15. The index hit a high of 6,554.90 in intraday trade. The index hit a low of 6,510.50 in intraday trade.

The market breadth, indicating the overall health of the market, was strong. On BSE, 834 shares gained and 310 shares fell. A total of 60 shares were unchanged.

The BSE Mid-Cap index rose 38.31 points or 0.56% to 6,830.46 and the BSE Small-Cap index rose 35.75 points or 0.52% to 6,867.74. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 121 crore by 09:25 IST.

Among the 30-share Sensex pack, 25 stocks gained and rest of them declined.

Axis Bank (up 2.53%), Coal India (up 2.01%) and ICICI Bank (up 2.07%) edged higher from the Sensex pack.

Index heavyweight Reliance Industries (RIL) rose 0.8%. RIL after market hours on Saturday, 22 March 2014 clarified in a statement that a political party has written to the Election Commission (EC) to keep on hold a bonafide decision of the Union Cabinet on gas pricing. The party has a history of ill-informed diatribe. It is thus important to examine established conventions in this regard. When the model code of conduct (MCC) is in force, the government in power cannot take any new decision. New decisions mean undue benefit to the ruling political party. By implication, decisions already taken by the state or the central government continue to be implemented, the company said in a statement.

For example, schemes such MNREGA, Sarva Siksha Abhiyan, etc, which are for the benefit of the masses continue to be in effect. Similarly contracts and projects already awarded prior to the kicking in of MCC continue to be honoured. The decision to implement the new price from 1 April 2014 is part of this contractual obligation. This decision was taken keeping in view of the fact that the current gas prices are valid only till 31 March 2014, RIL said.

The existing code of conduct came into force on 5 March 2014 and the cabinet decided on the new gas price policy on 27 June 2013 and notified the same on 10 January 2014. Even a bare reading of this factual position leads to a simple conclusion: change in gas pricing from April 1 is not a new decision but only implementation of a cabinet decision taken in June 2013.

The notification of the gas price is a mere formality and not apolicy decision which will lead to any political benefit to an elected government and the Union Cabinet several months before MCC kicked in. Ensnaring the EC in this pursuit of political disinformation is regrettable, the company said.

Jaiprakash Associates rose 1.76%. The company said that its board will meet today, 24 March 2014 to consider stake sale in joint venture (JV) subsidiaries. The announcement was made before market hours today, 24 March 2014.

ACC shed 0.13% on turning ex-dividend today, 24 March 2014, for final dividend of Rs 19 per share for the year ended 31 December 2013.

Arshiya International jumped 9.02%. Arshiya International after market hours on Saturday, 22 March 2014 said that a meeting of its board of directors will be held on 27 March 2014, to review 'Restructuring package approved in CDR system by CDR Cell'. A special live trading session was held on Saturday, 22 March 2014, as the National Stock Exchange (NSE) was testing its software.

MT Educare rose 2.22%. MT Educare's board of directors at its meeting held on Friday, 21 March 2014, inter alia approved the sale of pre-university college campus (PUC Campus) in Mangalore, Karnataka, subject to approval of members of the company through postal ballot. The announcement was made after market hours on Saturday, 22 March 2014. A special live trading session was held on Saturday, 22 March 2014, as the National Stock Exchange (NSE) was testing its software.

The Reserve Bank of India will announce the First Bi-monthly Monetary Policy Statement, 2014-15 on 1 April 2014. Citing price pressures, the Reserve Bank of India raised its key lending rates by 25 basis points after Third Quarter Review of Monetary Policy for 2013-14 on 28 January 2014.

The next major trigger for the stock market is the outcome of the upcoming Lok Sabha elections. Lok Sabha elections will be held between 7 April 2014 and 12 May 2014 in nine phases. The counting of votes will be take place on 16 May 2014. The term of the current Lok Sabha expires on June 1 and the new House has to be constituted by May 31. Along with the Lok Sabha election, Andhra Pradesh (AP), including the regions comprising Telangana, Odisha and Sikkim will go to polls to elect new assemblies. AP, Odisha and Sikkim assemblies come to end on June 2, June 7 and May 7 respectively.

Asian shares pared gains on Monday after the China HSBC flash manufacturing purchasing managers index (PMI) fell to an eight-month low in March. Key benchmark indices in Hong Kong, China, Singapore, Japan, Indonesia and South Korea rose by 0.16% to 1.91%. In Taiwan, the Taiwan Weighted fell 0.18%.

A preliminary gauge of China's factory activity fell to an eight-month low, weighing modestly on some stock markets Monday. The "flash" edition of HSBC's China manufacturing Purchasing Managers' Index (PMI) dropped to 48.1 from February's 48.5, remaining below the 50 level separating expansion from contraction. HSBC chief China economist Hongbin Qu said the result "suggests that China's growth momentum continued to slow down." Qu said this may lead to fresh stimulus from China's government, which could "include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower."

US stocks dropped on Friday, 21 March 2014, pressured by a sell-off in the health-care sector, but major equity indexes still posted solid weekly gains.

Federal Reserve Governor Jeremy Stein on Friday, 21 March 2014, said monetary policy should be less accommodative when bond markets are overheated even if it raises the risk of higher unemployment. "All else being equal, monetary policy should be less accommodative -- by which I mean that it should be willing to tolerate a larger forecast shortfall of the path of the unemployment rate from its full-employment level -- when estimates of risk premiums in the bond market are abnormally low," Stein said. He didn't comment on the current stance of policy. Stein said pursuing lower levels of unemployment with low interest rates may also entail costs if they raise financial instability that could affect jobs and growth at later time if yields shoot back up. "There is a cost to be weighed alongside the benefit" of an accommodative policy, Stein said at a forum on monetary policy at Georgetown University in Washington. Financial stability matters "insofar as it affects the degree of risk around the employment leg of the Federal Reserve's mandate."

As one measure of financial overheating, Stein pointed to risk premiums on longer-term debt, or the component of the bond's yield that compensates investors for owning a longer-term security as opposed to a short-term security. He said that in the spring of 2013 in the US when yields on US 10-year notes were around 1.6 percent, estimates of the term premium were around negative 0.80 percentage point. "Applied to this period, my approach would suggest a lesser willingness to use large-scale asset purchases to push yields down even further," he said. Stein said the "dark side" of collapsed risk premiums occurs if they return to normal abruptly in a way that causes "larger economic effects than the initial compression."

Minneapolis Fed President Narayana Kocherlakota, the sole dissenter on the Federal Open Market Committee (FOMC), released a statement on Friday, 21 March 2014, in which he criticized the Fed's new guidance, saying it "weakens the credibility of FOMC's commitment to target 2% inflation" and "fosters policy uncertainty and thereby suppresses economic activity."

The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 said after the conclusion of a monetary policy review that it will trim its monthly bond purchases by $10 billion to $55 billion. The Federal Reserve will end its bond-buying program before the end of the year with an interest-rate increase likely to follow in "around six months," Chair Janet Yellen said on 19 March 2014. Quarterly Fed forecasts on 19 March 2014 showed more officials predicting that the benchmark interest rate, now close to zero, will rise to at least 1% by the end of 2015 and 2.25% a year later.

President Vladimir Putin signed laws completing Russia's annexation of Crimea on Friday as investors took fright at a US decision to slap sanctions on his inner circle of money men and security officials. Putin promised to protect a bank partly owned by an old ally, which Washington has blacklisted and Russia would respond in kind to the latest financial and visa curbs after producing one blacklist of its own. Obama's national security adviser said the world was reassessing its relationship with Russia and Washington was sceptical of Russian assurances that troop movements on the Ukraine border were no more than military exercises.

European Union leaders - who like Obama insist Crimea is still part of Ukraine - imposed their own sanctions on 12 people, including Russian deputy prime minister Dmitry Rogozin and two aides to Putin. Canada sanctioned 14 people.

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