Buoyed by strong sentiments across Asia, Indian stock markets performed well today and edged significantly higher, snapping a three day losing streak. Fitch's positive reviews on a few Indian banks also seemed to help matters. Thus, while BSE-Sensex closed higher by around 351 points, gains on the NSE-Nifty came in at around 109 points. BSE Mid Cap and BSE Small Cap indices also closed strong, edging higher by around 1% each. consumer durables and auto stocks emerged as the maximum gainers. For the full week though, Sensex witnessed a decline of 1.3%.
As far as global indices are concerned, while Asia closed strong today, Europe is also trading mostly strong currently. The rupee was trading at Rs 57.6 to the dollar at the time of writing.
In yet another instance of USFDA clamping down on Indian companies, the regulatory body has now issued an import alert on Dabur India's two plants located in the state of Himachal Pradesh. This alert implies that US authorities can confiscate the products of the company without any physical examination. While the company does not make any drugs, it does manufacture oral hygiene products like Meswak toothpaste and also skin care products. The company has however clarified that it does not export any products to the US and hence, the ruling will have no impact to its business. The stock closed around 1% higher today.
In order to avoid further worsening of current account deficit (CAD) the government increased the import duty on gold recently. And this has had its desired impact. Gold imports have fallen. It may be noted that during the first 15 days of May gold imports averaged in the region of US$135 m. However, subsequently in the next 15 days they fell to US$36 m. With hike in duty showing the desired results, finance minister P Chidambaram has ruled out any further hike in import duty.
Apart from hiking import duty the government also laid certain restrictions on importing gold in order to curb current account deficit (CAD). It may be noted that gold and crude are main constituents of India's imports. With crude being a necessary commodity India will have to continue import the same until its domestic production is self sufficient. However, the situation is different for gold. Increasing imports was hurting CAD. Thus, the current measure to curb gold imports is a step in the right direction. Not only will it help in curbing CAD but it will also bring in more stability to the currency markets and thus foreign inflows.