Market gives thumbs up to rail budget; Sensex garners 156 points

The market extended Monday (25 February 2008)'s gains after Railway Minister Lalu Prasad Yadav provided thrust on modernising rail infrastructure in Railway Budget 2008-09 which he presented to parliament today. Keeping the common man in mind, the railway minister also cut passenger fares, with parliamentary elections due in 2009. Firm global markets also helped support domestic bourses.

The 30-share BSE Sensex rose 155.62 points or 0.88% at 17,806.19. It opened 148.99 points higher at 17,799.56. Sensex hit a high of 17,860.10 in late trade. At day’s high Sensex gained 209.53 points. Sensex hit a low of 17,678.74 in afternoon trade. At the day's low, Sensex was up 28.17 points.

The broader based S&P CNX Nifty was up 69.35 points or 1.33% at 5,270.05.

Metal, capital goods, banking, realty and power stocks rose. Reliance Energy and Infosys soared in late trade.

The market breadth was strong. Mid-cap and small-cap indices outperformed Sensex. 19 stocks from 30-member Sensex pack were in the green.

Railway Minister Lalu Prasad today announced a cut in freight rates by 5% on petrol and diesel in the Railway Budget for 2008/09. He also announced a reduction of 5% in fares for second class sleeper-class passengers. Yadav cut the fare of air conditioned (AC) I-tier by 7%, AC II-tier by 4%, and AC III-tier by 3%. The Indian railways will offer discounts on charges for freight booked during lean seasons Yadav told parliament in his budget speech.

The Railway Minister said Indian Railways will report a cash surplus of Rs 25,000 crore in FY 2007-08. Railways will invest Rs 75,000 crore to upgrade infrastructure over the next seven years and also to start making steel coaches from FY 2009 and introduce them from FY 2010. There will be no peak season surcharge on cement transport.

Railways plan to upgrade 50 container terminals across the country which includes Mumbai and Chandigarh terminals. The Railways will begin 25-30 tonne axle load trains.

BSE clocked a turnover Rs 4818 crore compared to Monday (25 February 2008)'s Rs 5,666.57 crore.

Nifty February 2008 futures were at 5259.35, at a discount of 10.7 points as compared to spot closing of 5270.05.

The NSE's futures & options (F&O) segment turnover was Rs 56,515.69 crore, which was higher than Rs 51,314.54 crore on Monday, 25 February 2008.

As per provisional data, FIIs sold shares worth a net Rs 31.99 crore today, 26 February 2008. Domestic funds bought shares worth a net Rs 511.33 crore.

As per reports, the government has clarified that lending and borrowing of securities under the securities lending and borrowing scheme will not attract Securities Transaction Tax (STT) or capital gains tax. However, it is not clear if sale and repurchase transactions made on the basis of borrowed securities would be taxable.

The next major trigger for the market is the Union Budget 2008-09. With general elections due in 2009, Union Budget 2008-09 to be presented on 29 February 2008 will be the last full-fledged budget of the Congress-led United Progressive Alliance government and it is therefore likely to be a populist budget. Thus, the Finance Minister (FM) is likely to provide higher allocations to several social initiatives like rural upliftment, employment, education, agricultural growth and public health.

Though populist measures will dominate the budget, FM is also expected to take steps to stimulate investment and consumption demand at a time when the economy is witnessing moderation from a solid growth last year. A reduction in personal income tax, if any, will result in increase in disposable incomes which in turn may boost demand for consumer goods.

Expectations are that the corporate income tax rate may be cut or the 10% surcharge on corporate tax may be abolished. The surcharge is 10% on a tax rate of 30%, making the effective corporate tax rate 33%. Another possibility is that of a cut in dividend distribution tax from 15% to 12.5%. Meanwhile, FM may raise the Securities Transaction Tax slightly.

It is also expected that the FM would announce some relief packages for troubled export sensitive sectors like textiles, rubber, jewelry, leather and IT services. These sectors have been hit by rupee’s surge in the past one year.

The market breadth was strong: on BSE 1,652 advanced as compared to 1,081 that declined. 41 shares remained unchanged.

The BSE Mid-Cap index rose 1.27% to 7,690.86 and BSE Small-Cap index rose 1.28% to 9,648.49.

BSE FMCG index (up 0.49% to 2,250.79), BSE Auto index (up 0.54% to 4,746.46), BSE Consumer Durables index (up 0.7% to 4,865.24, BSE HealthCare index (up 0.57% to 3,813.61), BSE Bankex (up 0.75% to 10,189.48) underperformed Sensex.

BSE Oil & Gas index (up 1.42% to 11,214.76), BSE PSU index (up 1.56% to 8,438.08), BSE Metal index (up 1.64% to 16,801.01), BSE Power index (up 2.65% to 3,706.80), BSE IT index (up 1.76% to 4,062.67), BSE Captal Goods index (up 2.05% to 16,124.36), BSE Realty index (up 2.53% to 10,016.49) outperformed Sensex.

IT stocks were mixed. Infosys (up 3.02% to Rs 1,662.10), Wipro (up 1.05% to Rs 444.15) edged higher. However Satyam Computer Services (down 0.12% to Rs 449.75) and Tata Consultancy Services (down 0.24% to Rs 897.85) edged lower.

Information Technology Vision 2012 aims at radical changes in IT applications on a common platform in Indian Railways with focus on improvement in operational efficiency, transparency in working and better services to the customers.

Shares of three oil refinery firms rose between 3.64% to 4.18% after a cut in freight rates by 5% on petrol and diesel announced in the Railway Budget for 2008/09. Indian Oil Corporation (up 4.17% to Rs 550.90), Bharat Petroleum Corporation (up 5.38% to Rs 456.45) and Hindustan Petroleum Corporation (up 4.75% to Rs 307.70) gained.

Shares of the eight cement firms rose between 0.65% to 5.06% after Railway Minister, Laloo Prasad Yadav, in his Railway Budget, said the government would erect new bulk handling facilities for cement transportation. Andhra Cements (up 3.41% to Rs 31.80), Grasim Industries (up 5.06% to Rs 3042.70), J K Cements (2.32% to Rs 165.70), JK Lakshmi Cement (up 1.8% to Rs 138.70), ACC (up 1.53% to Rs 830.90), Ambuja Cement (up 0.65% to Rs 123.35) and Ultratech Cement (up 0.78% to Rs 910.65), moved up.

The Railways Minister said that no busy season surcharge would be charged for cement transported in bulk through the new facilities.

Metal stocks rose. Jindal Stainless rose 7.19% to Rs 160.35 on hopes of higher demand for stainless steel, after the railway budget announced introduction of stainless steel coaches in express trains. National Alluminium Company 7.37% to Rs 465.85), Steel Authority of India (up 2.57% to Rs 245.40), Sterlite Industries (up 3.89% to Rs 846.05) edged higher. However Tata Steel rose 0.08% to Rs 809.25.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) rose 0.94% to Rs 2,575.75.

Capital goods stocks rose after rail budget. Thermax (up 5.86% to Rs 681.30), Suzlon Energy (up 6.26% to Rs 314.85), Bharat Heavy Electricals (up 4.58% to Rs 2,180.55) and Larsen & Toubro (up 0.72% to Rs 3,518.25) edged higher.

Banking stocks edged higher. HDFC Bank rose 2.27% to Rs 1,455. As per reports after acquiring Centurion Bank of Punjab, HDFC Bank, the second largest private sector bank after ICICI Bank, may look at an overseas buy. The bank would look at an acquisition for increasing its presence in the retail space abroad. ICICI Bank, India's biggest private sector bank in terms of net profit rose 0.72% to Rs 1,118.05 while State Bank of India, India's biggest commervial bank, declined 0.36% to Rs 2,119.85.

Power stocks rose. India's second largest power utility firm by revenue Reliance Energy rose 4.95% to Rs 1,697.25 after company said its board will meet on 5 March 2008 to consider, buy back of equity shares of the company. Tata Power Company (up 0.44% to Rs 1,356.05), PowereGrid Corporation of India (up 0.44% to Rs 102.45) and NTPC (up 0.27% to Rs 203.90) edged higher.

However, Reliance Power declined 0.54% at Rs 447.95. The company had announced yesterday that its board had approved a proposal for issuing free bonus shares to all categories of shareholders, excluding the promoter group (comprising of Reliance Energy and the ADA Group), in the ratio of 3 shares for every 5 shares held.

Realty stocks rose. Indiabulls Real Estate (up 11.06% to Rs 642.45), Unitech (up 2.17% to Rs 390.45), Housing Development Infrastructure (up 1.56% to Rs 836.40) edged higher. However DLF declined 0.19% to Rs 832.60.

India's largest truck maker by sales Tata Motors declined 0.46% to Rs 702.10. As per reports US-based automaker Ford Motor Company could announce as early as late next week the sale of its luxury Jaguar and Land Rover brands to the Indian company.

India’s biggest oil exploration firm by market capitalisation ONGC rose 1.41% to Rs 1,027.75. ONGC has reportedly made four oil and gas discoveries.

Bharti Airtel (down 1.38% to Rs 838.80), ITC (down 0.35% to Rs 201.25) and HDFC (down 0.48% to Rs 2,574.35) edged lower from Sensex pack.

Texmaco moved up 2.8% to Rs 1631.35 after the railway minister said 20,000 new freight wagons are expected for 2008/09 and another 5,000 open wagons are to be upgraded to stainless steel.

Bartronics India surged 8.43% to Rs 223.90 on BSE after the Railway Minister proposed smart card-based ticketing system.

Tulsi Extrusions clocked highest volume of 2.45 crore shares on BSE. Reliance Natural Resources (1.14 crore shares), Gujarat NRE Coke (68.30 lakh shares), Reliance Power (66.76 lakh shares) and Nagarjuna Fertilisers and Chemicals (64.83 lakh shares) were other volume toppers in that order.

Tulsi Extrusions clocked highest turnover of Rs 338.44 crore on BSE. Reliance Power (Rs 299.35 crore), Onmobile Global (Rs 263.14 crore), Reliance Capital (Rs 164.21 crore) and Reliance Natural Resources (Rs 157.47 crore) were other turnover toppers in that order.

European markets were strong. France’s CAC 40, Germany’s DAX and UK’s FTSE 100 were up by between 0.96-1.53%.

Asian stocks were mixed. Key benchmark indices in Hong Kong, South Korea, Singapore, China and Taiwan were up by between 0.26% to 1.92%. However, Japan’s Nikkei declined 0.66% to 13,824.72.

US stocks rose sharply on Monday on signs the two largest bond insurers would stabilize, bringing a wave of relief to a market dogged by concerns of further bank write-downs. The Dow Jones industrial average was up 189.20 points, or 1.53%, to end at 12,570.22. The Nasdaq Composite Index was up 24.13 points, or 1.05%, to close at 2,327.48.

The 30-share BSE Sensex had surged 301.50 points or 1.74% at 17,650.57 on Monday, 25 February 2008 following a higher than expected bonus ratio from Reliance Power and taking its cue from firm global markets. However, the market breadth was weak on that day.

Sensex is down 3,400.58 points or 16.03% from a record high of 21,206.77 hit on 10 January 2008. The barometer index is down 12.22% in calendar 2008 so far.