Markets firm up led by rate sensitives

Markets shrugged off the US federal government shutdown and firmed up in late trades led by rate sensitive shares

Markets shrugged off the US federal government shutdown and firmed up in late trades after first quarter current account deficit was in line with expectation and moderate contraction in PMI September manufacturing. Encouraging sales reported by auto companies also boosted sentiment.

At 2:30pm, the 30-share Sensex was up 110 points at 19,490 and the 50-share Nifty was up 34 points at 5,769.

The PMI for manufacturing, although marginally up from the previous month, stood at 49.6 points in September from 48.5 points in August, indicating moderate contraction in the sector.  A reading above 50 indicates growth and below that depict contraction.

In line with estimates, India’s current account deficit rose to 21.8 billion (4.9% of Gross Domestic Product) for the first quarter ended June 2013, due to rise in imports especially that of gold and shrinking exports. The CAD for April-June 2012-13 was $16.9 billion (4% of GDP).

The rupee gained against the dollar as narrower current account deficit numbers for the April-June quarter helped boost sentiments.

While CAD widened for the first quarter as compared to the previous one but the deficit is likely to come down in the subsequent quarters as gold imports restrictions imposed by the government will start yielding results.

At 2:10PM, the rupee was trading at 62.26/dollar against the previous close of 62.62/dollar.

Japan's Prime Minister Shinzo Abe took a historic step on Tuesday that none of his predecessors had managed in more than 15 years by raising the national sales tax to 8% in April from 5%.

In Asia, the Nikkei ended up 0.2%, while Straits Times and Shanghai Composite was up 0.4-0.7% while Hang Seng was down 1.5%.

European markets continue to trade firm on expectations that the issues encompassing the US federal government shutdown would be resolved soon. The CAC-40, DAX were up around 0.6% each and FTSE-100 was marginally down.

The rally in the markets was led by beaten down rate-sensitive shares after the central bank surprisingly raised the repo rate on worries of high inflation dashing hopes of rate cuts.

Realty Index was the top gainer among the sectoral indices up 2.1% followed by Bankex, Capital Goods and Auto indices. Metal, Oil and Gas and Power indices were trading with marginal losses.

HDFC Bank, ICICI Bank, HDFC and SBI contributed the most to the gains in the Sensex up between 2-3% each.

Other Senex gainers include, ITC, TCS, L&T and index heavyweight Reliance Industries.

Auto shares firmed up on encouraging sales numbers for September. Tata Motors, Mah&Mah and Maruti Suzuki and Bajaj Auto was trading with firm gains.

The broader market was trading with marginal gains. The BSE Mid-cap and Small-cap indices were up 0.4-0.5%.

The market breadth was positive with 1,234 gainers and 944 losers on the BSE.