IT pivotals, RIL provide springboard for the 282-point rebound

The market recouped a portion of the recent heavy losses, tracking a recovery across Asian markets. Short-covering in derivatives also played a part in today's remarkable upsurge. IT, telecom shares and leading banks edged higher. An upmove in index heavyweight Reliance Industries (RIL) provided the much-needed springboard for the sharp rebound.

The 30-share BSE Sensex jumped 282.05 points (2.2%), to settle at 12,697.09. A bout of volatility struck in afternoon trade, and the market was firm till then. A sudden sell-off later had pulled the Sensex down up to 12,427.13 by 12:56 IST, just 12.09 points higher for the day.

The S&P CNX Nifty gained 79.15 points (2.2%), to settle at 3,655.65. The Nifty March 2007 futures were at 3,644 compared to the spot Nifty closing of 3655.65.

The BSE clocked a turnover of Rs 3807 crore compared to Monday (5 March 2007)’ s Rs 3996 crore. Turnover on NSE’s futures & options segment rose to Rs 35406.27 crore from Monday’s Rs 33865.52 crore.

Asian shares recuperated from the recent steep losses, as investors struck bargains. Key benchmark indices in the Asian region rose 1% to 2%. Asian markets had declined sharply over the past few days due to worries pertaining to the US economy, volatile markets in China, and more frequently, the unwinding of yen carry trades, or when investors borrow the yen to take advantage of low interest rates in Japan, and then invest in higher-yielding assets.

As per provisional data, FIIs were net sellers to the tune of Rs 489.57 crore today. FIIs were net sellers to the tune of Rs 312.70 crore on Monday (5 March 2007), the day when the Sensex had tumbled 471 points. FIIs were net buyers to the tune of Rs 324.90 crore on Friday (2 March 2007), the day when the Sensex had lost 273 points.

Today recovery was not supported by the market-breadth. Against 1,465 shares declining on BSE, 1,105 shares declined. Just 50 shares were unchanged. Losers outpaced gainers by a ratio of 1.32:1. The BSE Small-Cap Index lost 11.23 points (0.18%), to settle at 6,259.52. BSE Mid-Cap Index rose 25.05 points (0.48%), to 5,219.45.

Among sectoral indices, BSE IT Index was the top gainer in percentage terms. It surged 231.64 points (4.9%), to 4,961.94. The BSE Oil & Gas Index surged 131.25 points (2.2%), to 6,067.22. The banking benchmark, BSE Bankex, advanced 132.24 points (2.1%), to 6,353.28. Some indices did decline. The BSE Metal Index dropped 34.37 points (0.4%), to 8,002.12. The BSE FMCG Index shed 1.73 points (0.1%), to 1,699.63.

Wipro led the rally in IT shares. The Wipro stock jumped 8% to Rs 582. IT bellwether Infosys gained 6% to Rs 2130, Satyam Computer gained 5% to Rs 435.50 and TCS advanced 3% to Rs 1198. The recent easing of the rupee triggered renewed buying for IT shares. The rupee’s fall will ease pressure on their profit-margins. The IT sector derives a lion’s share of its revenue in dollars. In early trade, the Indian rupee was at 44.550/560 per dollar, extending its move off Monday's trough of 44.695, the lowest since 21 December 2006. It had closed at 44.625/640 on Monday.

Reliance Industries (RIL) rose 3.5% to Rs 1304.05. The stock gained on bargain-hunting after a recent steep fall in the counter. RIL enjoys 11.1% weightage in the BSE Sensex.

ICICI Bank surged 4% to Rs 854. The stock enjoys 9.3% weightage in the barometer Sensex. ICICI Bank said on Saturday (2 March 2007) it plans to transfer investments in four subsidiaries to a new wholly-owned unit, ICICI Holdings, and may list the unit next year.

Cement shares came off the lower level in volatile trade. ACC surged 5.9% to Rs 861.50, Grasim gained 1.4% to Rs 2133 and Gujarat Ambuja Cements gained 1.7% to Rs 113.80. Steel shares recovered from an intra-day decline. State-run Steel Authority of India advanced 1.2% to Rs 98.20, off the session’s low of Rs 91.50. Tata Steel ended flat at Rs 421, off the session’s low of Rs 404.55.

Steel and cement shares had declined over the past few days with the government taking steps to rein in prices to combat inflation. Steel makers on Monday decided to rollback Rs 300 - Rs 700 per tonne price hike in reinforced steel. Producers have also agreed to cut prices of hot rolled coils by Rs 500 a tonne. At least two steel makers, Essar Steel and Tata Steel, had raised the price of hot rolled coils by Rs 1,000 per tonne on 1 March 2007, in line with international prices.

However, cement makers refused to roll-back a price hike, executed post-Budget, following an increase in excise duty on cement.

Bharti Airtel gained 4.7% to Rs 724. The near-term trigger for the scrip is the number of new subscriptions for February 2007. Bharti Airtel has 5.8% weightage in the Sensex.

L&T rose 3% to Rs 1427. The stock rose on bargain-hunting after a recent steep drop. L&T has benefited from the government’s thrust on infrastructure in the Union Budget for the next fiscal.

NTPC dropped nearly 3% to Rs 132.80. The board of NTPC approved a proposal for the company's foray into nuclear power generation.

Ashok Leyland jumped 5% to Rs 38.50. The company said on Tuesday vehicle sales in February rose 33% to 8,036 units from 6,038 units a year ago. Domestic sales rose 33% to 7,353 units from 5,517 units a year earlier, while exports climbed 31% to 683 from 521 units.

Aban Offshore rose 2% to Rs 1815. The company said on Tuesday its subsidiary had secured a drilling contract worth $123 million from affiliates of Canada's Addax Petroleum and China's Sinopec.

Gujarat Narmada Valley Fertilizers rose nearly 2% to Rs 95.70. As per reports, the company plans to invest Rs 750 crore in 2007/08 to convert its urea plant feedstock to natural gas, in order to improve efficiency.

Hotel Leelaventure lost nearly 3% to Rs 52. The company said on Tuesday its board would meet on 14 March 2007, to consider raising up to $110 million through various means, including foreign currency convertible bonds (FCCBs).

Gemini Communication gained 0.3% to Rs 370. The company said on Tuesday it had bagged an order worth Rs 75 crore from a state utility for computerising its collection centres.

Orchid Chemicals was volatile. The stock lost 0.3% to Rs 232. It staged a strong intra-day rebound from a 12.3% fall. The company today said its board had forfeited 10% of the share price amount paid by R Vijayalakshmi (promoter) and Dr M R Girinath (promoter group), aggregating to Rs 8.05 crore, on account of the non-conversion of the 35,60,000 share warrants into equity within the stipulated 18-months from the date of their allotment.

Micro Inks lost 35% to Rs 320. The company today reported a net loss of Rs 16.89 crore in the December 2006 quarter compared to a net profit of Rs 16.07 crore in the December 2005 quarter. Total income for the December 2006 quarter was flat at Rs 242.85 crore (Rs 242.26 crore).

Vivimed Labs lost 0.7% to Rs 178.20. The company today said it has been approved as a global supplier to L'Oreal of France.

Software firm Hexaware Technologies rose 5.1% to Rs 152.65 after 2.5 million shares, or 1.9% of the share capital, changed hands in a block deal on the BSE at Rs 148.

The major gainers among side counters were UTV Software (up 14.8% to Rs 281), MM Forgings (up 13.9% to Rs 170.90), Nalco Chemicals (up 13.7% to Rs 749), Rainbow Papers (up 13% to Rs 88.75), Gwalior Chemicals (up 12.9% to Rs 56.30), Automotive Axles (up 9.9% to Rs 599), GMM Pfaudler (up 9% to Rs 123.40), Rolta India (up 8.6% to Rs 307.50), Glenmark Pharma (up 8% to Rs 545.70), and PTC India (up 8% to Rs 58.80).

Trading on the bourses has been extended by 45 minutes till 16:15 IST due to sun outage. The extended trading hours are till 19 March 2007.

Indian stocks had tumbled in the last few days due to a sell-off in global markets, and also due to disappointment from Union Budget 2007-08 of 28 February 2007. The fall was accentuated as margin calls were triggered. The Sensex had tumbled 541 points on Budget day itself. The market had recovered the next day (on 1 March 2007) on the back of a rally in IT shares under the reckoning that their earnings will be impacted only to a small extent following an increase in tax in the Budget. The Sensex had surged 221 points, to 13,159.55 on 1 March 2007. However, a sell-off had gripped the bourses again, which saw the Sensex hurtle to 12,415.04 on 5 March 2007.

While there was no cut in the 10% corporate surcharge which the market was expecting, the dividend distribution tax was raised to 15% from 12.5%. The Budget also raised direct/indirect taxes for cement, construction and IT sectors.

A section of the market believes that the current fall offers a good buying opportunity for long-term investors. Deutsch Bank in a post-Budget report states that Bhel, Infosys, Punjab National Bank and Grasim (a high-risk, high-return play) are its top picks.

UBS shares a similar view. ‘Post the recent correction, relative valuations don’t appear as expensive as they used to be. India is now the fourth most expensive market in Asia compared to the most expensive status that it used to have about a month back’, it states in its post-Budget report. At current levels, the Sensex trades at 15.8 times 1-year forward EPS – an 8% premium over the long-term average of 14.6, the report adds.