The undertaking of a new action brings new strength.
As expected, the bulls came out in full strength on Wednesday, a day after the UPA convincingly won the confidence motion. The Sensex gained almost 6% while the Nifty jumped nearly 5.6%. Even the Mid-Cap and Small-Cap indices joined the party. Market breadth was obviously positive. Traded volume and cash market turnover too rose sharply. There is growing optimism among the bulls that with the Left parties out of the way, the Congress-led coalition may press ahead with its reform agenda. The Finance Minister's comments that the Government will table the bills on banking and insurance in parliament soon added fuel to the fire. Banking stocks were the biggest beneficiary, with the BSE Bankex surging by 10%. According to the FM, reforms are also likely in pension and FDI. Disinvestment (in both listed and unlisted PSUs) is also expected to be revived.
But, intent is one thing, and execution another. Whether the Centre is actually able to clear some of the reforms is doubtful, as the new allies might not be too supportive. Also, the Left and its new allies may continue to oppose reforms that require approval in parliament. The topmost priority is to try and contain inflation. The monsoon has also been quite indifferent, with the western and southern states getting deficit rainfall. A revival in monsoon, particularly in these regions, could help soften prices of essential food commodities before the year-end. On the other hand, weak rainfall will hurt food and other commercial crops, putting fresh pressure on prices. The Centre's fiscal situation is another area that needs urgent attention. A few divestments will prove to be more than handy. The Government clearly has its task cut out, and will need to address the macro-economic issues to not only win votes but bring back the bulls.
Talking of bulls, FIIs pumped in Rs13bn (provisional) in the cash segment yesterday even as the local institutions sought to cash out. If the market has to sustain the resurgence in mood, the foreign funds will have to play a crucial role. Whether the overseas investors oblige the market is a million-dollar question. Most analysts believe that FIIs remain bearish on India over the longer term despite the recent reversal in their money flows. Also, most of the FII buying off late is mostly short covering. The market needs fresh buying on a sustained basis to continue the north-bound journey. We expect the key indices to run a few miles more, but one should use the opportunity to lock in gains rather than go aggressively long.
Today, we expect the momentum to continue, as global markets remain firm while crude oil prices have fallen below $125 per barrel. Having said that, there could be some cooling after an initial spurt, as the Sensex has gained well over 2,000 points in the past five sessions. Inflation will be out today at 5 pm. Most experts expect the headline number to cross 12%. Despite the steep drop in crude oil prices, the RBI is expected to go for another round of monetary tightening next week. But, if oil prices soften further, the central bank may choose to be a bit less hawkish. F&O expiry will lead to heightened volatility as well. The current run-up looks more a bear-market rally rather than beginning of a fresh upturn. Hence, one must remain guarded at all times.
Key Results Today: ACC, Aventis Pharma, Bajaj Electricals, Bharti Airtel, CRISIL, Cummins India, Essel Propack, Exide, Gulf Oil, Hindustan Zinc, Idea Cellular, Info Edge, JK Tyre, MRF, Marico, Mysore Cement, NIIT, NMDC, Piramal Healthcare, Reliance Industries, Rolta, Shaw Wallace, Sobha Developers, United Breweries, United Phosphorus, WWIL, Zee News and Zensar Tech.
FIIs were net buyers of Rs20bn in the F&O segment yesterday. On Tuesday, FIIs were net sellers of Rs3.9bn in the cash segment. Mutual funds were net buyers of Rs3.72bn on the same day.
Shares of Somi Conveyor Beltings Ltd. will get listed on the bourses.
Shares of IT companies could come under pressure as the rupee has hit a new 10-week high this morning.
Asian stocks advanced for a fourth day, led by automakers and consumer-electronics manufacturers, as a stronger dollar and declining oil prices bolster earnings.
Honda gained as a weaker yen against the dollar boosted the value of overseas earnings and European carmakers reported results that beat analyst estimates. Sony advanced in Tokyo. Bridgestone climbed for a sixth day, as oil traded near the lowest in seven weeks and the price of rubber fell.
The MSCI Asia Pacific Index gained 0.9% to 136.05 as of 10:53 a.m. in Tokyo. The index has climbed 5.3% this week, heading for its biggest weekly advance since Aug. 24. About five stocks rose for each that declined, with eight of the index's 10 groups advancing.
The Nikkei in Tokyo was up 1.2% at 13,470 while the Hang Seng in Hong Kong was nearly flat at 23,156.
US stocks finished higher on Wednesday as investors cheered falling oil prices, even as lawmakers came closer to approving a plan to help troubled mortgage companies Fannie Mae and Freddie Mac.
The S&P 500 added 5 points, or 0.4%, to 1,282.19, a three-week high. The Dow Jones Industrial Average rose 30 points, or 0.3%, to 11,632.38. The Nasdaq Composite Index advanced 22 points, or 1%, to 2,325.88.
Market breadth was positive. Three stocks rose for every two that fell on the New York Stock Exchange.
Oil prices continued to decline after a government report showed stronger-than-expected inventories and a Federal Reserve report showed a weakening economy. Light, sweet crude for September delivery fell $3.98 to settle at $124.44 a barrel on the New York Mercantile Exchange, the lowest close since June 4.
After the close, the US House of Representatives voted 272-152 to pass sweeping legislation that will offer up to $300bn in assistance to troubled homeowners and throw government support behind mortgage finance giants Fannie Mae and Freddie Mac.
In currency trading, the dollar hit a two-week high against the euro, and gained against the Japanese yen as well. In the bond market, Treasury prices fell, sending yields higher. The yield of the benchmark 10-year note rose to 4.11%, up from 4.10% Tuesday. COMEX gold for August delivery fell $25.70 to $922.80.
Shares in the UK rose on Wednesday, helped by strong gains for banks and airlines. Banks were the main sector supporting the U.K. index after strong gains for their Wall Street rivals on Tuesday. The main FTSE 100 index closed up 1.6%, or 85.80 points, to 5,449.90.
Indian bourses ended with significant gains recording its biggest intra-day point gains for Sensex since March 25, 2008. UPA winning the confidence motion with an unexpectedly wide margin proved to be a major trigger for the markets. A sharp decline in crude oil prices coupled with encouraging global cues further boosted the sentiments on Dalal-Street.
Banking stocks were in demand as the UPA government would face less resistance to carry out reforms in the banking sector. Early in the day, Finance Minister P Chidambaram announced that reforms in the banking sector are top priority.
The Banking Regulation Bill is likely to be introduced in parliament during the forthcoming session. This bill is to allow foreign investors to have voting rights in banks in proportion with their equity holding.
The BSE Capital Goods, BSE Realty, BSE Power and BSE Metal indices were up by over 7% each. Even the Mid-Cap and the Small-Cap indices were up by over 4% each.
Among the 30-scrips of Sensex, ICICI Bank, Reliance Industries, HDFC and L&T were among the major gainers. However, the major laggards were Cipla and Hindustan Unilever. Finally the Sensex rallied 838 points to close at 14,942 and the Nifty surged 236 points to close at 4,476.
Shares of Sesa Goa rallied by over 14% to Rs3304 after the company announced its Q1 results with Net income rising to Rs6.33bn in the three months ended June 2008 from Rs1.31bn a year earlier and sales more than doubled to Rs12.8bn.
The company’s earnings per ton from iron ore in the June quarter climbed 43% to US$90 per ton and gains from coke, used to fire blast furnaces, doubled to US$500 per ton, said a top official in an interview. Income from sources other than its main business surged fivefold to Rs611.2mn. The stock had hit a 52-week high of Rs4,400 on May 5, 2008 and 52-week low of Rs1,686 on August 17, 2007.
Shares of Strides Arcolab rallied by over 17% to Rs172 after Onco Therapies Ltd ("OTL"), the JV between Strides Arcolab Ltd ("Strides"), and Aspen Pharmacare Holdings Ltd ("Aspen"), concluded a licensing and supply agreement with leading multinational pharmaceutical corporation, GlaxoSmithKline ("GSK"). In terms of the agreement OTL will license intellectual property and supply finished dosage form pharmaceuticals to GSK. The licensing and supply agreement is for 95 emerging market countries.
J Kumar Infraprojects was locked at 20% upper circuit to Rs100.95 after the company announced that it secured Rs200mn Mumbai Metropolitan Region Development Authority for Construction of Sky Walk from Kanjurmarg Station (East) to MMRDA Colony and also secured order for Rs330mn from Planning Cell, Engineering Services & Project Bldg for Augmentation of SWD system at Catchment No 117 BPT Colony, railway Yard and Training of Kharoo Creek Nalla.
The scrip touched an intra-day high of Rs100.95 and a low of Rs87 and recorded volumes of over 1,00,000 shares on NSE.
Shares of Maytas Infra rallied by over 19% to Rs494 after the company’s consortium won Hyderabad Metro Railway order, stated reports. The scrip touched an intra-day high of Rs495.80 and a low of Rs420 and recorded volumes of over 1,00,000 shares on NSE.
Valecha Engineering surged by over 9% to Rs141 after the company announced that it recently secured new projects worth ~Rs1.33bn which includes Road Project at Indore worth ~Rs980mn, Bridge Project at Delhi worth ~Rs350mn to be executed in 18-24 months. The scrip touched an intra-day high of Rs147 and a low of Rs133 and recorded volumes of over 45,000 shares on NSE.
Exide Industries advanced by 6% to Rs69 after reports stated that the company expects to double its supplies to automobile makers in FY10 to 5mn units. The scrip touched an intra-day high of Rs73 and a low of Rs66 and recorded volumes of over 49,000 shares on NSE.
Hotel Leela surged by over 6% to Rs33 as the company is reportedly entering into a marketing pact with US-based Preferred Hotel Group to increase its brand awareness and plans to invest US$500mn to add seven hotels in three years. The scrip touched an intra-day high of Rs33 and a low of Rs31 and recorded volumes of over 4,00,000 shares on NSE.
Arvind Ltd surged by over 5% to Rs33 after the company announced that it plans to float a new retail chain that will house six of its key premium brands under one roof. The scrip touched an intra-day high of Rs35 and a low of Rs32.5 and recorded volumes of over 8,00,000 shares on NSE.
NOCIL rallied by over 14% to Rs24 as the company is reportedly planning to increase its turnover to Rs10bn by 2012 and double its market share from 4% to 8%. The scrip touched an intra-day high of Rs25.5 and a low of Rs22 and recorded volumes of over 18,00,000 shares on NSE.
Government plans pre-IPO placement for OIL (BS)
Reliance Power to enter the power equipment space in collaboration with global major Shanghai Electric to manufacture boilers, turbine and generators (ET)
Two US senators asked the USFDA to provide details of market approvals given to all medicines sold by Ranbaxy in that country (BS)
BSNL’s proposed US$10bn IPO plan is back on track (ET)
A clutch of banks like SBI, HDFC, Axis bank plans to open a new exchange to facilitate trading exclusively in currency futures (ET)
Tata Power aims 1,000MW wind and solar energy projects in Gujarat (BS)
Kingfisher airlines may fly to Pakistan in September (BS)
Taib Bank, Bahrain has picked up a 26% stake in Anant Raj Projects for Rs2.2bn (ET)
The Government is examining possibilities of easing out a part of the shortage in diesel by diverting some of the fuel produced by RIL’s EOU refinery in Jamnagar to the domestic market. (ET)
Max India has restructured its joint venture with its insurance partner New York Life Insurance (BS)
IFCI drags Emaar MGF to court, seeks refund of Rs0.5bn given during a pre-IPO placement (BS)
Shree Cement plans to invest Rs5.5bn in FY09 (ET)
Air India to cut down its total capacity by ~10-12% (BS)
Tata Steel to resume work at Orissa plant by this month end (BS)
Biocon along with CSIR has developed a recombinant enzyme expression system which has wide applications in food, cattlefeed and industry (BS)
IDFC Projects has entered into an agreement with Indian Renewable Energy Development Agency to structure and implement a renewable energy development program (ET)
Century Textiles plans to invest Rs63bn, including Rs26bn to develop commercial projects in Worli and Rs18bn for cement manufacturing capacity expansion, over the next five years (ET)
Strides Arcolab Ltd’s JV with South Africa’s Aspen Pharmacare has struck a global licensing and supply agreement with GlaxoSmithKline (BL)
SBI plans to hire 3,000 marketing and recovery officers (ET)
Maytas consortium emerges lowest bidder for Hyderabad Metro project (BL)
Ranbaxy launches hypertension drug in Japan (BL)
The Godrej group plans to enter oil & gas equipment business, which will be executed through Godrej & Boyce with an initial investment of Rs1.5bn (ET)
United Spirits has launched Romanov Red, an extension of its million plus premium Vodka brand Romanov (ET)
Dalmia Cement (Bharat) Ltd floated a subsidiary which will invest over Rs40bn in the next three years to expand cement production (BL)
J. Kumar Infraprojects Ltd has secured two orders worth Rs0.5bn for construction of sky-walk in Mumbai (BL)
Two international banks to pick up stake in the International Asset Reconstruction Company (IARC) (BS)
Thanalakshmi Srinivasan Sugars Ltd plans to set up a 3,500 ton a day sugar mill in Tamil Nadu with an investment of Rs3.5bn (BS)
Economic Front Page
DoT has identified spectrum of up to 60 MHz for 3G services in a move that could allow up to 12 players in a circle (FE)
Trai has issued a consultation paper on a plethora of tariff offers in access service (FE)
The ministry of coal plans to fix the normative quantity of biomass power and bagassee cogeneration plants at 15% of the total energy consumption in kilo calories or as per the detailed project report (FE)
Government likely to relax human trial norms (BS)
The Rupee against the Dollar surges by 65 paise (BL)
COAI has issued a letter to the media slamming the CDMA body over 2G spectrum issue (BS)
TRAI has proposed to increase the minimum protection period available to access services consumers from tariff hikes to one year from the date of enrolment into a tariff plan (BL)
Orissa Government is negotiating with National Hydro Power Corporation for establishing about 10 multi-purpose projects including hydel power generation stations (FE)
The ethanol producing sugar co-operatives in Maharashtra have demanded that the procurement price be raised to Rs30 from current Rs21.5 per litre (ET)
The flower exports are likely to fall by ~20% in FY09 (ET)