Volatility to the fore

High volatility was witnessed as key benchmark indices regained positive terrain after reversing intraday gains in early afternoon trade. The market breadth, indicating the overall health of the market, turned negative from positive. The barometer index, the S&P BSE Sensex, was currently below the psychological 20,000 mark, having alternately moved above and below that mark in intraday trade. The Sensex was up 34.16 points or 0.17%, up close to 155 points from the day's low and off about 115 points from the day's high.

IT stocks reversed intraday gains. Power generation shares rose on reports that the government is considering a policy to allot coal-mining licenses through auctions. Interest rate sensitive realty stocks rose on bargain hunting recent losses triggered by the Reserve Bank of India's surprise decision to raise its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on Friday, 20 September 2013. Among capital goods shares, Bhel extended intraday gain.

A bout of volatility was witnessed in early trade as key benchmark indices reversed initial losses triggered by weak Asian stocks. Key benchmark indices extended initial gains and hit fresh intraday high in morning trade. The Sensex moved past the psychological 20,000 level. Key benchmark indices regained strength after trimming intraday gains in mid-morning trade. The market regained positive terrain after reversing intraday gains in early afternoon trade.

The market may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near month September 2013 series to October 2013 series. The September 2013 F&O contracts expire on Thursday, 26 September 2013.

At 12:20 IST, the S&P BSE Sensex was up 34.16 points or 0.17% to 19,935.12. The index jumped 149.46 points at the day's high of 20,050.42 in morning trade. The index declined 118.18 points at the day's low of 19,782.78 in early trade, its lowest level since 18 September 2013.

The CNX Nifty was up 14.05 points or 0.24% to 5,903.80. The index hit a high of 5,938.40 in intraday trade. The index hit a low of 5,854.55 in intraday trade, its lowest level since 18 September 2013.

The market breadth, indicating the overall health of the market, turned negative from positive in early afternoon trade. On BSE, 997 shares dropped and 943 shares rose. A total of 154 shares were unchanged.

Among the 30-share Sensex pack, 17 stocks rose and rest of them fell. Cipla (up 1.82%), L&T (up 1.52%) and HDFC (up 1.52%), edged higher.

Bhel rose 2.58%, with the stock extending intraday gain.

Interest rate sensitive realty stocks rose on bargain hunting recent losses triggered by the Reserve Bank of India's surprise decision to raise its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review on Friday, 20 September 2013. The central bank retained hawkish tone at the latest monetary policy review. Purchases of both residential and commercial property are largely driven by finance. DLF (up 0.14%), HDIL (up 1.05%), Unitech (up 1.52%) and D B Realty (up 1.51%), gained.

Power generation shares rose on reports that the government is considering a policy to allot coal-mining licenses through auctions. Tata Power Company (up 2.21%), Reliance Power (up 0.83%), NTPC (up 0.6%), Torrent Power (up 0.56%), and Adani Power (up 0.29%), gained.

A panel of ministers is expected to discuss issues on Tuesday, 24 September 2013, such as pricing and giving preliminary environment and forest approvals for mining the blocks before they are auctioned. The government is reportedly considering auctioning four coal blocks with total estimated reserves of two billion metric tons, enough to generate about 10 gigawatts of power. The government has so far allocated licenses for 178 coal mines with an estimated 44 billion tons of reserves. But the country is facing a shortage in the fuel's supplies because of the delays in starting mining at many of those blocks. The shortage is affecting power production, and uncertainty over fuel supplies is leading companies to postpone or scrap plans for investment in the sector. The shortage in coal supplies is also hurting sectors such as cement and steel, which use coal.

The government earlier planned to auction 54 coal blocks with total estimated reserves of 18.18 billion tons. Later, it decided to split the process into several phases and auction blocks where an estimate on reserves has already been made.

IT stocks reversed intraday gains. HCL Technologies fell 0.98% to Rs 1,082. The stock reversed direction after hitting record high of Rs 1,104.30 in intraday trade.

TCS shed 0.16%. Infosys dropped 0.19%.

Wipro fell 1.5%, with the stock reversing intraday gains. Wipro becomes a part of the 50-unit CNX Nifty with effect from Friday, 27 September 2013. The IT major replaces Reliance Infrastructure in Nifty.

Pidilite Industries rose 2.48% to Rs 255.95. A block deal of 6 lakh shares was executed in the counter on BSE at Rs 256 per share at 11:53 IST.

PI Industries rose 2.01% to Rs 147, with the stock extending recent gains triggered by the company's announcement that it has increased the limit for investment by foreign institutional investors (FIIs) to 40% of its equity from 24% earlier.

Bond prices rose after the government kept the borrowing target for the fiscal year through March 2014 unchanged at Rs 5.79 lakh crore ($92.49 billion). The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.7855%, lower than its close of 8.8505% on Monday, 23 September 2013. Bond prices and bond yields are inversely related.

Economic Affairs Secretary Arvind Mayaram said on Monday, 23 September 2013, that the government will raise Rs 3.44 lakh crore by the end of September. That will be Rs 5000-crore short of the target it had initially set for the first half of the fiscal year, Mr. Mayaram said. The shortfall will be made up in the October-March period, taking the total borrowing during the second half to Rs 2.35 lakh crore, he said.

Mr. Mayaram said that the government would cut spending if revenue falls short of the budget projections, but won't breach the full-year fiscal-deficit target which is 4.8% of gross domestic product for this year. The gap was 4.9% last fiscal year. Last week, the government announced austerity measures to slash nonessential spending, as it sought to reinforce its commitment to meeting the deficit target.

There had been concerns off late that the heavy spending on social-development programs at a time when the government's revenue growth has been hit by a slowdown in the economy would mean that the government may have to increase its borrowing this year. Data late August showed the government's fiscal deficit between April and July reached about 63% of the target it had set for the full fiscal year.

In the foreign exchange market, the rupee reversed initial losses against the dollar. The partially convertible rupee was hovering at 62.59, compared with its close of 62.60/61 on Monday, 23 September 2013.

Asian stocks dropped on Tuesday, 24 September 2013, following overnight decline in the US stocks. Key benchmark indices in China, Indonesia, Japan, Hong Kong, Singapore, and South Korea were off 0.01% to 0.94%. Taiwan's Taiwan Weighted rose 0.08%.

Trading in US index futures indicated a flat opening of US stocks on Tuesday, 24 September 2013. US stocks fell on Monday after notching three weeks of gains, as investors heard from Federal Reserve officials and worried about another standoff in Washington. Addressing business leaders in New York Monday morning, Fed Bank of Atlanta President Dennis Lockhart said the economy is losing some steam. Fed Bank of New York President William Dudley told an audience at the Fordham University Graduate School of Business that an accommodative monetary policy is still needed. In a speech about US banking in San Antonio, Federal Reserve Bank of Dallas President Richard Fisher said he advocated slowing down the pace of central-bank asset purchases at last week's policy session.

The Federal Open Market Committee (FOMC) holds a two-day policy meeting on 29-30 October 2013. On 18 September 2013, the Fed surprised economists and investors with its decision to delay scaling back its stimulus.

Political showdown in Washington over the US budget also weighed on US stocks on Monday, 23 September 2013. House Speaker John Boehner and his Republican caucus are pushing the federal government closer to a shutdown in a fight over funding and the debt limit, Democrats Max Baucus and Patty Murray said in a letter to colleagues yesterday, 23 September 2013.

In Europe, German Chancellor Angela Merkel on Sunday, 22 September 2013, won re-election by the largest amount in more than 20 years.

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