Oil shares help Sensex finish above 20,000; midcaps slack

Oil shares stole the show on Friday, as the Sensex closed above the psychological 20,000-mark, up 75 points over the previous close and a weekly gain of 2 percent.

Buyers scrambled for shares of state-owned oil companies even as analysts were divided on the implications of Thursday's Cabinet decision allowing oil companies to hike diesel prices in small measures.

The Sensex closed at 20039.04, up 75.01 points and the Nifty at 6064.40, up  25.20 points.

OIL India, ONGC, BPCL and Indian Oil shares climbed 7-10 percent, as a few broking houses upgraded the stocks to a buy, betting on a improvement in their profitability.

But others like Nomura remained unconvinced.

"Even as fuel price hikes are positive and reduce under-recoveries, we highlight that these may not change the bottom lines of oil PSUs, which would continue to be determined via ad-hoc subsidy sharing mechanism,'' said a note by the brokerage.

"OMCs are compensated for their entire under-recoveries, and thus reduction in under-recoveries does not impact OMC's profitability.  Also, we think given  weak fiscal situation, GoI might usurp all the benefits of any price increases, by reducing cash compensation to OMCs. Thus, subsidies payouts by upstream companies to OMCs may also not be reduced,'' the note added.

Other brokerages like Kotak Securities and Ambit were more hopeful about the prospects for state-owned oil companies.

Overall, market breadth was weak with losers outnumbering gainers 1305:954. The BSE Midcap and Smallcap indices closed slightly lower; an indication that the market may find it tough to sustain recent gains.

While the recent moves on hiking railway fares and fuel prices has enthused the market, valuations are already reflecting much of the positives, say brokers. Unless macro-indicators start showing a clear recovery, investors would be wary of buying at these levels, they said.

In major earnings today, ITC and HDFC Bank reported strong growth numbers. Wipro's third quarter numbers were slightly ahead of analyst estimates, but the mute revenue guidance for the March quarter prompted investors to book profits. Wipro shares ended around 8 percent lower. Overall, IT shares underperformed as analysts feel they are fairly priced for the time being after the recent run up.

Other than oil & gas shares, the key gainers were from the power and realty sectors. Metal shares started off on a firm note, but gave up much of the gains.

Equity benchmark were trading strong in the mid-afternoon trade. The BSE Sensex which gained 100 points to trade at a fresh two year high of 20067, gave up most of the gains by 2.30 PM.

At 2.32 PM, the Sensex was up 35.42 points or 0.18% at 19999.45, and the Nifty up 12.45 points at 6051.65. due to strong buying in oil and gas shares. Traders said buying sentiments got a boost on government virtually deregulating diesel prices in a key economic reform measure yesterday.

Top Sensex gainers were ONGC (7.60 percent), NTPC (3.92 percent), Maruti Sizuki (3.81 percent), GAIL (2.21 percent), ICICI Bank (1.66 percent).

Banking stocks too were trading with strong gains. While Bank of Baroda surged 2.38 percent, HDFC  rose 1.69 percent, SBI  appreciated 1.07 percent, and ICICI Bank gained 1.19 percent. However, profit booking hit private banking major HDFC Bank after it announced its Q3 results. The stock was down 1.27 percent.

Besides interest in Oil and Gas sector, strong buying was seen in realty stocks. DLF, Oberoi Realty, Pantaloon, HDIL and Shobha Developer were trading wth 1 percent to 2.5 percent gains.

The BSE benchmark Sensex is trading over 100 points up at a fresh two-year high of 20,069 at mid-session on strong buying in fundamentally strong stocks, particularly oil and gas shares. The key index was trading 108.01 up, or 0.54 per cent, at 20,069.13 at 1245 hrs.

The wide-based National Stock Exchange index Nifty also moved up by 20.65 points at 6,059.85. Traders said buying sentiments got a boost on government virtually deregulating diesel prices in a key economic reform measure yesterday.

Shares of ONGC were trading at 7.74 per cent, RIL up 0.12 per cent, GAIL 1.89 per cent. The oil and gas index was up 2.72 per cent. Shares of software services firm Wipro fell by 5 per cent even as the company reported 18 per cent rise in its consolidated net profit for the third quarter ended December 31, 2012. Sensex stocks Maruti , SBI and ICICI points were trading at 4.03 per cent, 1.44 per cent, 1.38 per cent, respectively.

The BSE Sensex rose 112.01 points or 0.56% at 20076.04 in the earl;y afternoon trade. At 12 PM, the Nifty was trading up 33.95 points at 6073.15, helped by oil marketing companies.
 
While, ONGC surged 7.81 percent and BPCL rose 9.90 percent, IOC came off morning highs and was trading with 12 percent gains and Oil India was trading up 11.26 percent at Rs 573.10.

Cigarette major ITC announced its market-beating third quarter numbers. The stock was trading at Rs 288.70 up 1.24% from its previous close of Rs 285.15.

Tech shares were trading with marginal losses. However, shares in India's No.3 software services provider Wipro Ltd (WIPR.NS) were down 5 percent, with traders saying the performance of the company's core IT services segment was not as strong as expected.

Exide Industries was another big loser on the Nifty, falling 8 percent after reporting poor Q3 numbers.

The Sensex gains 0.6 percent, while the Nifty is up 0.5 percent. Shares in state-run oil companies such as ONGC surged for a second consecutive session on Friday after the government's diesel price hike was seen reducing their subsidy burden.

Oil and Natural Gas Corp Ltd is up 10.2 percent, adding about USD 6 billion in market value.

Refiner Hindustan Petroleum Corp Ltd gains 5.3 percent while Bharat Petroleum Corp Ltd is up 5.8 percent. Oil India  Ltd is up 7.9 percent.

However, shares in India's No.3 software services provider Wipro Ltd were down 4 percent after earlier falling as much as 5 percent, with traders saying the performance of the company's core IT services segment was not as strong as expected.

Key indices hit fresh two-year highs early Friday, led by powerful rallies in state-owned oil companies. The government's decision to allow oil marketing companies to tweak diesel has raised hopes that all state-owned oil companies will see their under-recoveries decline in the coming months.

The Sensex was up 153 points at 21,117, and the Nifty was up 40 points at 6080. Among the big gainers, ONGC and IOC were up 10-11 percent, and HPCL, BPCL and Oil India were up 6-7 percent.

While not terming it diesel price deregulation, the government's move to allow oil companies to make small increases has boosted sentiment as market is seeing it as a sign of commitment towards fiscal discipline. This in turn should make the RBI more amenable to a cut in interest rates at its next policy review meeting on January 29.

Wipro shares were down around 4 percent as the company's muted revenue guidance for the March quarter prompted investors t book profits. Wipro, along with other IT majors had seen a good run-up over the past few weeks.

Broadly, IT shares were under pressure this morning, as investors feel the shares are fully valued after the recent rally. Third quarter numbers of all four IT majors-Infosys, Wipro, HCL tech and TCS-have been better than market expectations.

Auto and healthcare were the other major laggards in early trade, while metal shares firmed up after China's better-than-expected fourth quarter GDP growth of 7.9 percent has raised hopes of demand for commodities picking up.