The key benchmark indices closed with small gains in what was a choppy trading session, halting last six days' steep losses. Firm global stocks supported domestic bourses. Volatility was the order of the day as traders rolled over positions in the derivatives segment ahead of the expiry of the near-month January 2010 futures & options contracts today, 28 January 2010. The BSE 30-share Sensex rose 17.05 points or 0.1%, off close to 220 points from the day's high and up close to 125 points from the day's low. Capital goods stocks fell. But, healthcare, banking, realty and metal stocks rose. The market breadth was weak.
The key benchmarks moved in an erratic manner. The market pared gains after a firm start triggered by higher Asian stocks. The market regained strength in morning trade. The market pared gains again in mid-morning trade after hitting fresh intraday high in morning trade. The market further trimmed gains in early afternoon trade after the government released the weekly inflation data. The market recovered from lower level in afternoon trade. The market moved between positive and negative zone for a while. Volatility surged in mid-afternoon trade.
India VIX, a volatility index based on the S&P CNX Nifty index option prices, declined after a steep rise on Wednesday. It declined 6.78% to 26.96. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days
The US Federal Reserve on Wednesday, 27 January 2010, said conditions in the world's largest economy are showing signs of improvement. The Fed said it intended to end some emergency lending and asset-buying programs while sounding more upbeat on the economy overall. The Fed also left its benchmark interest rate in a range between zero and 0.25% and renewed its pledge to keep the rate near zero to promote economic recovery.
World stocks rose after US President Obama moderated his tone on bank restrictions. In his annual State of the Union address on Wednesday, Obama pledged to slap tough new regulation on Wall Street but said he was "not interested in punishing banks." Obama said he would continue financial reform to fight against excessive speculation and also vowed he would veto any finance bill that does not contain "real reform." Investors will now pay attention to Treasury Secretary Timothy Geithner's speech in Minnesota later in the global day for fresh cues about bank regulation plans. The US earlier this month proposed plans that would limit banks' risk-taking capability.
Obama pledged to double exports in five years to help create jobs, prompting some market players to think the US government may seek a weak dollar to promote exports
Meanwhile, the Fed and other major central banks around the world on Wednesday decided to end emergency dollar lending operations on 1 February 2010 due to improvement in financial markets. The decision marks the first unified retraction by central banks around the world of extraordinary support measures to boost lending after credit markets seized up in late 2007, causing the global economic downturn.
Equities worldwide fell sharply over the past few days following reports China has directed banks to pull back lending activity in a bid to stave off overheating in its economy. China's economy grew by 10.7% in the fourth quarter. Weak global cues and sustained selling spree by foreign investors had weighed on the domestic bourses in recent trading sessions. From a high of 17,641.08 on 18 January 2010, the Sensex had lost 1,351.26 points or 7.65% to 16,289.82 on Wednesday, 27 January 2010.
In the derivatives segment, rollover of Nifty futures from January 2010 series to February 2010 series was about 60% and for Mini Nifty futures it was about 64% at the end of Wednesday's trading. Among individual stocks, higher rollover has been seen in stocks like Idea Cellular, Hindustan Unilever, Bhel, Tata Steel, and Mahindra & Mahindra. Stocks where rollover is low include Sun Pharma, Andhra Bank, ONGC, Bajaj Hindustan and Orchid Chemicals.
On the macro front, the government said today that food price index rose 17.40 % in the year to 16 January 2010 slightly higher than previous week's rise of 16.81%. Fuel price index rose 5.70% while primary articles price index rose 14.66% in the year to 16 January 2010 .
The Reserve Bank of India need not take monetary measures to contain food inflation, farm minister Sharad Pawar said on Wednesday. Pawar also said the wholesale sugar prices have already come down and retail prices may also follow suit soon.
Market men expect a 50 basis point increase in the cash reserve ratio (CRR), or the proportion of deposits banks must keep with the Reserve Bank at the Reserve Bank of India (RBI)'s quarterly monetary policy review scheduled to be announced on Friday, 29 January 2010. Statements from the central bank in its macro-economic review would be watched as it will provide final clues on the policy outlook.
Inflation has surged, primarily driven by a sharp rise in food prices after a weak monsoon. Signs of economic recovery are also evident in strong GDP and industrial output data. The RBI says the rise in inflation driven by food prices is a supply-side issue that monetary policy cannot address. Still, it is worried about inflation pressures spilling over to the broader economy, and will watch for signs of demand-side price pressures in indicators such as asset prices, credit growth, and manufacturing prices.
Nifty February 2010 futures were at 4,885, at a premium of 17.75 points as compared to the spot closing of 4,867.25. Turnover in NSE's futures & options (F&O) segment increased to Rs 1,66,193.03 crore from Rs 1,58,503.98 crore on Wednesday, 27 January 2010.
The near-month January 2010 contracts expired today, 28 January 2010. The rollover of Nifty futures from January 2010 series to February 2010 series was about 60% and for Mini Nifty futures it was about 64% at the end of Wednesday's trading.
Reliance Industries February 2010 futures were at premium at 1,043.55 compared to the spot closing of 1,038.35.
Tata Steel February 2010 futures were at discount at 581 compared to the spot closing of 587.85.
State Bank of India February 2010 futures were at discount at 2,005.60 compared to the spot closing of 2,010.
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