Market gains a handsome 855 points

The domestic bourses were back to their winning ways after posting losses for five consecutive weeks. The market managed to post gains, taking cues from a firm trend on bourses around the globe. In the past, domestic bourses have tracked global markets. Short covering in the derivatives segment also supported the rally.

Prior to this, local bourses had suffered a sharp setback from their all-time highs struck in February, as a host of factors including lack of inflows at higher levels, a surprise CRR-hike, high valuations, rising inflation as well as interest rates kept investors nervous. Fears of an earnings slowdown in the coming quarters, weak global markets led by severe yen-carry-trade unwinding, the defeat of the Congress party in Uttarakhand and Punjab, weak global markets and profit-taking at the higher levels had also plagued the market lately.

The BSE Sensex surged 855 points (6.88%) for the week ended Friday (23 March 2007), to settle at 13,285.93, while the NSE Nifty rose 255 points (7%), to finish at 3,861.05.

Trading for the week started on upbeat with the Sensex surging 214.59 points, to 12,644.99, as buying continued unabated during the session. Strong markets across the globe also boosted sentiment.

The BSE Sensex gained 60.95 points the following day, to settle at 12,705.94, amid high volatility. IT, banking and telecom shares were in demand helped by heavyweight Reliance Industries (RIL).

On 21 March 2007, the barometer index advanced 239.94 points triggered by heavy buying for shares from the banking, FMCG, IT and the metals segment.

The 30-share BSE Sensex jumped 362.15 points, to settle at 13,308.03, as global markets rallied after the US Federal Reserve's policy-setting meeting on 21 March 2007, left interest rates unchanged at 5.25%.

On 23 March 2007, the Sensex settled 22.10 points lower, at 13,285.93, amid extreme volatility, as investors booked profits after four days of a fantastic rally.

Reliance Industries (RIL) gained 5.81% to Rs 1379.20, after it said it was exploring joint construction of an acrylic-monomer plant in India with Rohm and Haas Co, US. The proposed plant in Jamnagar will be able to produce 2 lakh tonnes of acrylic acid and its esters, annually. Products from the new firm will be used to make paints, packaging adhesives, detergents, textile and construction materials.

State-run Bharat Heavy Electricals (Bhel) surged 16.41% to Rs 2279.50, on reports that the company was in talks with two overseas firms for nuclear technology deals. Bhel also informed BSE that the tentative performance for FY 2007 will be announced on 3 April 2007, at a press conference to be addressed by the chairman & managing director.

Tata Motors edged up 4.74%, to Rs 788. Its Managing Director, Ravi Kant, said that its small car project coming up at Singur, Kolkata, was on track, and will be completed by the middle of next year.

Car maker Maruti Udyog (MUL) rose 7.26%, to Rs 837. MUL increased prices of cars across all models in the Rs 258 - Rs 1017 range across all cities effective 15 March 2007. The hike is in response to an increased cess announced in the Union Budget 2007-08.

Ranbaxy surged 4.53% to Rs 330, on a report that the company had pulled out of the bidding war for Merck's generic-medicines unit, citing high valuations. The company exited the race on concerns that the acquisition would not add to earnings, a television report said.

Cigarette maker ITC moved 0.79% higher to Rs 144. The Lok Sabha on 19 March 2007, passed the bill allowing more than 4% VAT on tobacco. Analysts reckon that any levy of 12.5% VAT by state governments on cigarettes will impact cigarette volumes. In the Union Budget 2007-08, the total excise duty on cigarettes was raised by 6%, which also includes 1% educational cess. ITC derives more than half its revenue from cigarettes.

Reliance Energy advanced 6.21% to Rs 485, on reports that the company was pursuing tie-ups with US companies. The firm plans to get into the nuclear energy market. Apart from nuclear energy, the company had also chalked out aggressive growth plans for wind energy. Besides, REL has reportedly bagged a contract for developing the Trichy–Dindigul National Highway four-laning project to be undertaken on a build-operate-transfer (BOT) basis worth Rs 576 crore.

Hero Honda rose 3.91% to Rs 675.10. Honda Motorcycle & Scooters India, a wholly-owned subsidiary of Japan’s Honda, proposes to foray into the entry-level 100-cc motorcycle segment. Hero Honda currently generates over 75% of its sales volume from the entry-level segment.

Oil exploration major ONGC surged 10.6% to Rs 843.25. US crude oil held firm near $60 a barrel after a big drop in US gasoline supplies raised worries of a crunch leading into the US summer driving season.

Term lending institution IFCI surged 26% to Rs 31. It appointed Ernst & Young as an advisor for the induction of a strategic investor in the company.

Five IPOs were listed during this week. On 20 March 2007, Astral Poly Technik, a manufacturer and provider of CPVC (Chlorinated Poly Vinyl Chloride) piping and plumbing systems, settled at Rs 104.55 on BSE, a discount of 9% over the IPO price of Rs 115.

On 19 March 2007, shares of three companies got listed on the bourses. Abhishek Mills settled at Rs 91.15, a discount of 8.85% over the IPO price of Rs 100, while Jagjanani Textiles settled at Rs 23.15, a discount of 7.4% over the IPO price of Rs 25.

Lawreshwar Polymers settled at Rs 14, a discount of 12.5% over the IPO price of Rs 16. AMD Metplast, however, settled at Rs 78.30, a slight premium of 4.4% over the IPO price of Rs 75.

Indiabulls Real Estate settled at Rs 325.65, after touching a low of Rs 325.65 and a high of Rs 414.80 on BSE, after it was listed on the bourses on 23 March 2007. Indiabulls Real Estate (IBREL) was formed following the de-merger of the real estate business of Indiabulls Financial Services (IBFSL). The total equity capital of IBREL is Rs 35.93 crore, consisting of 17.96 crore shares of Rs 2 each.

The Bank of Japan (BOJ) decided to keep interest rates unchanged at 0.5%. BoJ Governor Toshihiko Fukui stuck to previous comments by saying the bank would adjust rates gradually on 20 March 2007.

On 21 March 2007, the US Federal Reserve’s policy-setting meeting dropped an explicit reference to the possibility of taking rates higher in its statement, sparking talk abut the next move of a cut. The Fed left interest rates unchanged at 5.25%. US interest-rate futures indicated a 48% chance of a rate-cut by end - June 2007, compared to 24% before the Fed's announcement.

India's wholesale price index rose 6.46% in the 12 months to 10 March 2007, matching the previous week's annual increase, latest data showed on Friday (23 March 2007). The figure was slightly lower than a forecast of 6.51% in a poll of analysts. The annual inflation rate was 3.80% during the corresponding week of the previous year.

Meanwhile, the Securities & Exchange Board of India (Sebi) authorised all institutional investors, domestic and foreign, to sell short in the cash segment of the capital market. “The time frame for this will be decided fairly quickly,” Sebi Chairman M Damodaran said after the market regulator’s board meeting on Thursday. Sebi held preliminary discussions with stock exchanges who also have agreed, he added.

Though naked short selling will not be allowed, investors will have to fulfill their delivery obligation by borrowing shares through the securities lending and borrowing (SLB) mechanism. The SLB mechanism can be implemented through a clearing corporation or the custodian route, where investors can lend their shares to those who sold short. Of course, the lending investors could earn a fee for the shares lent.

In yet another major development, the Union Cabinet on Thursday decided to raise the foreign direct investment (FDI) ceiling in the telecom sector up to 74%, from the prevailing 49%. The Cabinet clearance came after the Department of Telecom (DoT) and security agencies reached a consensus on allowing remote access with certain safeguards.

In December 2006, the Cabinet had extended the deadline for telecom operators to comply with the norms for an increased foreign direct investment limit of 74%. The deadline expires on 2 April 2007.