Sensex garners 296 points in Asian recovery

The Indian stock market which had hit its lowest level in 2008 yesterday, 10 June 2008, recovered today as investors resorted to bargain buying after recent steep fall in share prices, taking cue from firm Asian markets. Falling crude prices further boosted sentiments. Sensex had tumbled 880.47 points in the past three trading sessions. Realty, banking, capital goods and power stocks gained. FMCG stocks declined. The market breadth was strong.

European markets, which opened after Indian market, were mixed. Asian stocks rebounded from a two-month low on Wednesday, 11 June 2008, with the stronger US dollar helping shares of exporters.

The 30-share BSE Sensex rose 296.07 points or 1.99% at 15,185.32. At the day’s high of 15,225.81, Sensex gained 336.56 points at the fag end of the trading session. The barometer index rose 120.23 points at the day's low of 15,009.48 hit in early trade.

The broader based S&P CNX Nifty jumped 73.8 points or 1.66% at 4,523.60. Nifty June 2008 futures were at 4515.90, at a discount of 7.70 points as compared to spot closing of 4523.60.

The market breadth was strong on BSE with 1,830 shares advancing as compared to 809 that declined. 77 remained unchanged. Among the 30 stocks from Sensex pack, 22 were trading in green.

The BSE clocked a turnover Rs 5296 crore today as compared toa turnover of Rs 5321.84 crore yesterday, 10 June 2008. The NSE's futures & options (F&O) segment turnover was Rs 45,775.86 crore, which was lower than Rs 53,893.30 crore on Tuesday, 10 June 2008.

As per the providional figures on NSE, the foreign institutional investors (FII) sold shares worth Rs 217.27 crore today while domestic funds bought shares worth Rs 546.47 crore.

The BSE Mid-Cap index rose 1.42% to 6,190.72 and BSE Small-Cap index rose 1.72% to 7,467.30.

All the sectoral indices on BSE ended with gains except the BSE FMCG index. The BSE Realty index (up 3.07% at 5,803.66), BSE Capital Goods (up 2.44% at 11,901.49), BSE Bankex (up 2.27% at 7,018.42) outperformed Sensex.

BSE PSU index (up 1.77% to 6,503.21), BSE Power index (up 1.76% to 2,652.92), BSE IT index (up 1.72% to 4,357.43), BSE TecK index (up 1.5% to 3,372.97), BSE Oil & Gas index (up 1.46% to 9,832.24), BSE Metal index (up 0.88% to 15,400.80), BSE HealthCare index (up 0.8% at 4,447.24), The BSE Auto (up 0.79% at 4,152.31), BSE Consumer Durables index (up 0.15% to 3,846.77), BSE FMCG index (down 0.35% to 2,268.35), underperformed Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 2.76% to Rs 2,260.

Realty stocks galloped in late trade. DLF (up 6.53% to Rs 511.20), Housing Development & Infrastructure (up 4.45% to Rs 576.85) and Unitech (up 2.87% to Rs 184.35) edged higher. Indiabulls Real Estate declined 2.62% to Rs 380.90.

Capital goods stocks rose ahead of the release of the April 2009 industrial production data by the government tomorrow, 12 June 2008. Bharat Heavy Electricals (up 7.19% to Rs 1,481.45), Larsen & Toubro (up 2.45% to Rs 2,652.95) and Suzlon Energy (up 0.24% to Rs 270.05) edged higher.

Banking stocks rose after recent steep losses triggered by concerns the Reserve Bank of India may raise interest rates to rein in inflation. HDFC Bank (up 4.74% to Rs 1,184.55), State Bank of India (up 2.38% to Rs 1,309.50) edged higher.

India’s largest private sector bank by net profit ICICI Bank rose 1.37% to Rs 741.65. It is reportedly cutting about 1000 jobs at different levels. While the company insists that only the poor performers have been asked to leave, reports say the job cut is part of the company's attempt at cutting cost, mainly in segments such as retail, rural and agri-credit.

Power stocks gained. NTPC (up 2.38% to Rs 165.30), Tata Power Company (up 0.91% to Rs 1,302.80) and Reliance Power (up 0.05% to Rs 182.40) edged higher.

FMCG stocks declined. ITC (down 1.09% to Rs 199.35), Hindustan Unilever (down 0.79% to Rs 232.55) and United Spirits (down 1.61% to Rs 1,377.25) edged lower.

Ambuja Cements (up 7.19% to Rs 88.20), HDFC (up 4.1% to Rs 2,187.05), Bharti Airtel (up 3.78% to Rs 806.90), Cipla (up 3.41% to Rs 218.25), Jaiprakash Associates (up 3.39% to Rs 183.15), ACC (up 3.09% to Rs 635.45) edged higher from Sensex pack.

Reliance Communications (down 1.41% to Rs 543.05), ONGC (down 0.08% to Rs 830.55), Maruti Suzuki India (down 1.07% to Rs 733.60) edged lower from the Sensex pack.

India’s largest drugmaker by sales Ranbaxy Laboratories was flat at Rs 560.80. Ranbaxy founders Malvinder Singh and Shivinder Singh today inked a deal to sell their combined 34.8% stake to Japanese drug maker Daiichi Sankyo at Rs 737 a share, a 30% premium over Tuesday (10 June 2008)'s closing price. Daiichi also seeks to acquire majority of the voting capital of Ranbaxy. The total transaction value is expected at about Rs 14740 crore to Rs 19800 crore depending on the response to a mandatory 20% open offer which Daiichi will be making to Ranbaxy shareholders.

India’s largest commercial vehicle maker by sales Tata Motors declined 1.42% to Rs 505.60. As per reports, it plans to raise an additional $1 billion in the international market to fund its expansion plans, which include strategic alliances and acquisitions.

Grasim Industries declined 1.13% to Rs 2,192.05 after the company said on Tuesday, 10 June 2008, it has sold its sponge iron business Vikram Ispat to Welspun Power and Steel for Rs 1030 crore.

IFCI clocked the highest volume of 2.67 crore shares on BSE. Ranbaxy Laboratories (1.19 crore shares), Karuturi Global (1.08 crore shares), Ispat Industries (83.99 crore shares), Anu’s Laboratories (81.45 lakh shares) were the other volume toppers in that order.

Ranbaxy Laboratories clocked the highest turnover of Rs 684.05 crore on BSE. Reliance Industries (Rs 322.83 crore), Anu’s Laboratories (Rs 251.7 crore), Reliance Capital (Rs 186.62 crore) and IFCI (Rs 164.99 crore) were the other turnover toppers in that order.

European markets were mixed. Key benchmark indices in France and UK were down by between 0.12% to 0.2%. Germany’s DAX rose by 0.13%.

Asian markets were mixed. Key benchmark indices in Japan, South Korea and Singapore were up by between 0.41% to 1.16%. Key benchmark indices in Hong Kong, China and Taiwan were down by between 0.21% to 1.57%.

Oil fell sharply on Tuesday, 10 June 2008, after the US Federal Reserve signaled it was taking aim at inflation, triggering a rebound in the US dollar and a sell-off across commodities markets. Further pressure on prices came after two of the world's biggest energy forecasters lowered their outlook for global energy demand as high prices bite consumers, easing the effect of lackluster increases in world production. US crude dropped $3.04, or 2.26%, to settle at $131.31 a barrel, well below last Friday (6 June 2008)'s record near $140.

A surge in global commodity prices led by crude oil spooked stocks across the globe in the past few days. Crude price is up about 40% so far in calendar 2008. In India, foreign funds have pressed heavy sales. FIIs sold shares worth a net Rs 4326 crore in the first few days of this month, till 9 June 2008. They had dumped stocks worth a net Rs 5011.50 crore in May 2008. Their outflow in calendar 2008 reached Rs 19695.40 crore, till 9 June 2008. There has been heavy buying by domestic funds led by insurance firms in the past few days, but that has failed to stop the slide on the bourses.

Brokerage earnings downgrades of Indian firms/stock prices amid rising input and interest costs for India Inc, high inflation and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market. If inflation remains high, the Reserve Bank of India (RBI) would be forced to hike repo rate – a move that could choke overall growth of the economy. The Indian industry and consumer have already been reeling under high interest rates over the past few months. A further hike in rates would raise interest costs of corporate India and hit bottomline.

After 10 days of debate, the Union government on Wednesday, 4 June 2008 agreed to raise retail petrol and diesel prices by about 10%, more than expected, to help curb losses at its state-owned refiners. A sharp fall in the rupee against the dollar in the past few days has heightened concerns about inflation. This is because the fall in rupee will raise cost of imports which in turn will result in further rise in inflation.

According to rating agency CRISIL, headline inflation is expected to increase by 95 basis points on account of direct and indirect effects of the fuel price hike. The indirect impact which will be felt over the course of the next few months, it states in a note.

India’s fiscal deficit is slated to rise in the current financial year on account of the hefty fuel and fertilizer subsidies, a big sixth pay commission recommended wage hike, a debt-waiver package to farmers announced in the Union Budget 2008-09 and the recent sharp cut in duties by the government on petroleum products to mitigate the impact of oil price rise on consumers. A rise in fiscal deficit means negative savings for the government. This will result in higher government borrowings which in turn will keep interest rates high.

A well distributed monsoon will bolster food production, helping douse inflation. Agricultural output in India depends on good rains. The Indian Meteorological Department (IMD)’s second monsoon forecast for the crucial annual south-west monsoon (June-September) due this months which may indicate spatial rainfall distribution in the main sowing month of July 2008, will be keenly watched by market men. The IMD has forecast the 2008 monsoon rains would be near-normal and 99% of the average between 1941 and 1990.

A section of the market is of the view that the central bank may only use the reserve requirement route to tame inflation, fearing any hike in rates would further hurt growth already seen moderating to a still strong 8%-8.5% this fiscal year from 9% in 2007/08. To rein in inflation, in its monetary policy review for 2008-09 on 29 April 2008, the RBI raised cash reserve ratio (CRR) by 25 basis points to 8.25% to suck out excess liquidity in the banking system. RBI often says pass-through of high global oil prices is incomplete in India, complicating policy making.

According to a latest monthly June 2008 strategy report by HSBC Global Research, a possibility of Left parties withdrawing support to the government at the centre over the fuel price hike issue, cannot be ruled out. In such an environment with prospects of mid-term polls, the stock market is likely to remain nervous, HSBC says. Parliamentary elections are due in India in May 2009. HSBC’s 2008 year-end (calendar year) target for Sensex is 17,500, compared to current Sensex level of 15,066.10.

Another near term trigger for the market will be corporate advance tax payments for the first installment which falls due on 15 June 2008. The income tax law requires a company to 15% the estimated tax liability for the year as advance tax in the first installment. The advance tax payment by the corporate sector will give a cue on Q1 June 2008 results.

The market will also be keeping a watch on the industrial production numbers for April 2008, which the government will unveil on Thursday, 12 June 2008, which will give a cue on the extent of slowdown in the Indian economy caused by high interest rates.

The BSE Sensex may fall to a 10-month low of around 13,000 points by end-2008, as the Reserve Bank of India may raise interest rates to check inflation due to record oil prices, Credit Suisse said on Monday, 9 June 2008. "The market is still not pricing in the much lower earnings growth being forecast by corporates and banks," Nilesh Jasani, head of research at the Indian unit of the Swiss bank told reporters at a briefing on Monday, 9 June 2008. Uncertainty ahead of national elections will also weigh on the minds of investors, Jasani said.