Heavyweights stage a late comeback; breadth weak

Hopes that other central banks will follow suit after a surprise steep rate cut announced by China's central bank propelled the market sharply higher in late trade. The BSE Sensex raced past the psychological 9,000 mark. However, volatility was high.

Despite the rally in the key benchmark indices, the market breadth, indicating the overall health of the market remained negative as small and mid-cap stocks dropped on concerns about the weakening domestic and US economy.

China's central bank today, 26 November 2008, cut banks' benchmark lending and deposit rates by 1.08% for the fourth time since mid-September 2008. The cut in the lending rate was the biggest since October 1997. The steep rate cut by China raised expectations of a coordinated action by other central banks by way of rate cuts to counter the downside risks to the global economy.

Expectations of further cut in interest rates in India gathered momentum after Finance Minister Palaniappan Chidambaram Monday, 24 November 2008, said monetary policy was biased towards stimulating growth and the Reserve Bank of India (RBI) was likely to lower rates further as inflation cooled. Lower interest rates boost stocks as lower borrowing costs help lift corporate profits.

With corporate India forced to compete with the government domestically for raising finance, interest rates cannot drop meaningfully till either growth slows and demand for credit cools or the RBI continues to provide liquidity to banks, aggressively cutting interest rates, the cash reserve ratio (CRR) – the percentage of deposits banks have to keep with the central bank and statutory liquidity ratio (SLR) – the percentage of deposits bank have to hold in government and other approved securities.

The slowdown in the Indian economy and reduced availability and rising cost of funds are taking their toll on the performance of the corporate sector. Moreover, companies which have resorted to substantial overseas borrowing are seeing increase in cost of servicing the loan due to depreciation rupee which hit a record low of 50.60 against the dollar on 20 November 2008. Some companies have cut production to avoid higher inventories.

The Indian stock market witnessed high volatility today caught between concerns about the weakening domestic, US economy and volatile European shares and firmer Asian stocks on the back of the latest US Federal Reserve measures to boost the flagging US financial system. In a volatile trade, the Sensex swung 403.19 points between the day's high and low during the day.

After a rebound from lower level triggered by news of rate cut by China, European shares weakened again. Key benchmark indices in UK, Germany and France were down by between 1.41% and 2.14%.

The US Federal Reserve on Tuesday, 25 November 2008, outlined an $800 billion lending facility to support the market for consumer debt securities. The US central bank will buy billions of dollars worth of debt and mortgage-backed securities to increase the flow of credit for mortgages, student loans, car loans and credit cards.

However, the data released Tuesday showed the US economy shrank more severely during the third quarter ended September 2008 than first estimated as consumers cut spending at the steepest rate in 28 years. The Commerce Department said third-quarter gross domestic product shrank 0.5% on a sharp drop in consumer spending. That was a downward revision from the US government's first estimate that GDP had contracted 0.3% in the third quarter.

Metal shares led rally in Asian stocks as the crumbled BHP and Rio deal is seen opening opportunities in other firms. Key benchmark indices in China, Hong Kong, Singapore, South Korea and Taiwan were down up by between 0.12% and 4.72%. Miner BHP Billiton on Tuesday called off its bid to acquire rival Rio Tinto.

However, Japan bucked the strong trend in Asia after Fitch Ratings on downgraded Toyota's long-term foreign and local debt ratings to AA from AAA, with a negative outlook, saying the company needed to review its global investments, product mix and speed of expansion to address the challenges it faces. The Nikkei slipped 1.33%

The BSE 30-share Sensex jumped 331.19 points or 3.81% to 9,026.72. The Sensex opened 110.49 points higher at 8,806.02. At the day's high of 9,061.72, the Sensex gained 366.19 points in late trade. The Sensex fell 37 points at the day's low of 8,658.53 in mid-morning trade.

The S&P CNX Nifty gained 98.25 points or 3.70% to 2752.25. Nifty November 2008 futures were at 2758.55, at a premium of 6.30 points as compared to the spot closing.

Foreign institutional investors (FIIs) were net sellers worth Rs 416.82 crore while mutual funds bought shares worth Rs 362.05 crore on today, 26 November 2008, according to provisional data on NSE.

The barometer index BSE Sensex is down 11260.27 points or 55.50% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 12180.05 points or 57.43% below its all-time high of 21,206.77 struck on 10 January 2008.

Volatility may rise tomorrow 27 November 2008 ahead of the derivatives expiry for November 2008 series. As per reports, rollover of Nifty positions from November 2008 to December 2008 series stood at 39% while marketwide rollover of positions was 45%, as on Tuesday, 25 November 2008.

The market breadth, indicating the overall health of the market, was negative on BSE with 1390 shares declining as compared with 1065 that rose. 84 shares remained unchanged.

The BSE Mid-Cap index rose 0.17% to 2,877.38 while the BSE Small-Cap index fell 0.56% to 3,314.89. Both these indices underperformed the Sensex.

The total turnover on the BSE amounted to Rs 3223 crore as compared to Rs 3196 crore on Tuesday, 25 November 2008. Turnover in NSE's futures & options (F&O) segment surged to Rs 48,888.96 crore from Rs 44,612.44 crore on Tuesday, 25 November 2008.

All the sectoral indices on BSE logged gains. However only the BSE Oil & Gas index (up 5.96% to 4,625.23), and the Bankex (up 4.41% to 5,648.06), outperformed the Sensex.

The BSE FMCG index (up 1.05% to 1,920.85), the BSE Auto index (up 0.69% to 2,297.75), the BSE Realty index (up 2.12% to 1,576.27), the BSE Capital Goods index (up 0.29% to 6,405.26 ), the BSE Consumer Durables index (up 1.38% to 1,800.50), the BSE HealthCare index (up 2.16% to 2,879.09), the BSE IT index (up 1.48% to 2,468.45), the BSE PSU index (up 1.47% to 4,621.34), the BSE Power index (up 1.91% to 1,632.30), the BSE Teck index (up 2.17% to 1,953.83), the BSE Metal index (up 3.66% to 4,420.45) underperformed the Sensex.

Among the 30-member Sensex pack, 28 advanced while only 2 of them slipped. NTPC (up 7.58% to Rs 165.30), Reliance Infrastructure (up 4.91% to Rs 522), and Jaiprakash Associates (up 3.18% to Rs 56.75), edged higher from the Sensex pack.

India's largest copper maker by sales Sterlite Industries jumped 12.14% to Rs 229.50 on 16.71 lakh shares on recent reports the company is still eyeing Asarco, which operates three copper mines in Arizona, but an agreement could only be reached at a substantially reduced price. Sterlite originally offered $2.6 billion to buy Asarco but withdrew from the deal in October 2008 because of falling metals prices. It was the top gainer from the Sensex pack.

Other metal shares Hindalco Industries (up 1.95% to Rs 52.35), Sesa Goa (up 2.62% to Rs 70.50), and Tata Steel (up 1.56% to Rs 153.15), rose.

Banking shares advanced on reports banks operating in India including foreign ones may soon be able to open new branches and set up automated teller machines (ATM) without a licence from the Reserve Bank of India (RBI). ICICI Bank (up 9.06% to Rs 348.95), HDFC Bank (up 8.85% to Rs 909), and State Bank of India (up 1.80% to Rs 1091.40), gained.

Rate cut hopes also aided rally in bank shares. The RBI has cut rates over the past two months to shield the domestic economic from global economic recession. The repo rate has been cut by 150 basis points to 7.5% since October this year and the CRR has been reduced by 350 basis points to 5.5%. In response, government owned banks lowered prime lending rates by up 75 basis points, but large private lenders like ICICI Bank and HDFC Bank are yet to do so.

India's top mortgage lender by net profit Housing Development Finance Corporation (HDFC) gained 5.57% to Rs 1424 after Citigroup reportedly said it is not looking to liquidate its 11.74% stake in HDFC.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) advanced 5.89% to Rs 1134.80 on high volumes of 32.21 lakh shares. Reports the company wants to restart selling petrol and diesel after margins on the two fuels turned positive, boosted the stock to day's high of Rs 1098.90. The Mukesh Ambani-run company had reportedly shut all of its 1,432 petrol pumps around March 2008 after it could not compete with public sector companies, who sold fuel at rates much lower than their cost, as they got government subsidies.

India's largest oil exploration firm Oil & Natural Gas Corporation (ONGC) was up 2.11% to Rs 700 after Russia on Tuesday, 25 November 2008, said it would not set any precondition such as a stake for its state-run firms in return for approval for ONGC's acquisition of Imperial Energy.

India's largest realty firm by market capitalisation DLF jumped 5.74% to Rs 199 on reports global gaming and theme park leader Sega Corporation, a subsidiary of the Tokyo Exchange-listed Sega Sammy, is in talks with the company for a possible India entry.

IT pivotals gained shrugged off a firmer rupee. Infosys Technologies (up 0.69% to Rs 1188.95), Satyam Computer Services (up 1.09% to Rs 236.40), Wipro (up 5.11% to Rs 240.50), and TCS (up 4.22% to Rs 524.50), gained despite the rupee rising to 49.51/54 a dollar from its previous close of 49.95/96 in sync with a rally in equity markets.

A stronger rupee impacts operating margins of IT firms as they earn most of their revenues from exports with US as the major market.

Telecom shares rose on reports India would press ahead with an auction of airwaves to offer so-called third generation or 3G mobile phone services despite the global financial crisis. India's largest cellular services provider by sales Bharti Airtel rose 4.59% to Rs 655.20. However India's second largest cellular services provider by sales Reliance Communications gained 1.30% to Rs 198.10 and was the top loser from the Sensex pack.

Without stating how many licences would be issued, reports said the auction process is expected to start in a few days and be completed in mid-January 2009.

Capital goods shares reversed early losses on hopes that lower interest rates would keep order flows strong and aid project funding. The country's largest power equipment maker by sales, Bharat Heavy Electricals, rose 1.63% to Rs 1303.90,off day's low of Rs 1246.55. India's top engineering and construction firm by sales, Larsen & Toubro (L&T), rose 1.35% to Rs 746.10, rebounding from low of Rs 721.

But Siemens tumbled 16.46% to Rs 224 on high volumes of 21.74 lakh shares as net profit fell 27.03% to Rs 225.19 crore in Q4 September 2008 over Q4 September 2007. The company announced the results after trading hours on Tuesday, 25 November 2008.

India's top pharma company by sales Ranbaxy Laboratories by sales rebounded sharply from early low of Rs 195.50 to settle 4.89% higher at Rs 213.55. Recent reports the company's subsidiary Ranbaxy Fine Chemical's (RFCL) plans to acquire the US-based speciality chemicals maker Mallinckrodt Baker is facing delays because of valuation problems, caused early slide.

Sun Pharmaceuticals Industries rose 3.12% to Rs 1109 on acquiring a US pharmaceuticals and performance chemicals firm. The company announced the acquisition before trading hours today, 26 November 2008.

India's largest tractor maker by sales Mahindra and Mahindra slumped 4.57% to Rs 264 and was the top loser from the Sensex pack. Reportedly Mahindra Renault, a venture of Mahindra and Mahindra and French auto company Renault SA, has scaled back production of Logan sedan by at least half, after sales sharply fell in the past months.

India's top truck maker by sales Tata Motors rose 2.36% to Rs 139 after its American depository receipt jumped 11.37% on Tuesday, 25 November 2008.

Bajaj Auto rebounded from its 52-week low of Rs 307.15 to settle 2.65% higher at Rs 326.15. The early fall came on reports the company is likely to scale down production targets, shrink vendor base, align production across manufacturing sites and aggressively target export market, to tackle the economic slowdown.

Reliance Industries was the top traded counter on BSE with turnover of Rs 356.70 crore followed by State Bank of India (Rs 193.65 crore), Reliance Capital (Rs 156.70 crore), Reliance Infrastructure (Rs 135.25 crore) and Educomp Solutions (Rs 130 crore).

Unitech led the volumes chart on BSE clocking volumes of 2.30 crore shares followed by Suzlon (1.90 crore shares), GVK Power Infrastructure (1.26 crore shares), Rajesh Exports (65 lakh shares) and Reliance Natural Resources (61.60 lakh shares)

From the small and mid-cap basket, Kingfisher Airlines (up 17.78%), GSS America (up 19.88%), KSB Pumps (up 11.33%), Ruchi Soya (up 9.05%), IVRCL Infrastructure (up 13%) surged.

However, Adhunik Metaliks (down 14.29%), Unity Infraprojects (down 15.16%), Puravankara Projects (down 9.44%), and Bhushan Steel (down 8.60%), slipped.

Adlabs Films jumped 5.16% to Rs 157 on reports of planning a Rs 200-crore push for the film services and movie exhibition businesses.