Foreign fund flows help market regain vigour

A strong booster dose by the government, in the form of a fiscal stimulus package for the economy and rate cut by the central bank, aided a recovery on the bourses last week. Besides the stimulus, after trading hours on Friday, 5 December 2008, the government had lowered petrol prices by Rs 5 per litre and diesel by Rs 2 per litre - the first reduction since February 2007 - following over $100 a barrel slump in world oil prices from record highs in mid-July 2008. The fuel price cut will bring down inflation further and will provide further room for the Reserve Bank of India (RBI) to cut rates.

Inflation based on the wholesale price index rose 8% in the year through 29 November 2008, lower than previous week's annual rise of 8.4%, data released by the government on 11 December 2008, showed. Inflation had surged into double digits in early June this year after an increase in state-set retail fuel prices, and peaked at 12.91% on, 2 August 2008, the highest reading since annual numbers in the current data series became available in April 1995.

The BSE 30-share Sensex rose 724.87 points or 8.09% to 9,690.07 in the week ended Friday, 12 December 2008. The S&P CNX Nifty rose 206.95 points or 7.62% to 2921.35 in the week.

The BSE Mid-Cap gained 157.53 points or 5.45% to 3,050.48 and the BSE Small-Cap index rose 207.42 points or 6.24% to 3,530.96 in the week. Both these indices underperformed the Sensex.

The market sentiment improved following resumption of buying by foreign funds this month. Foreign instittional investors bought shares worth Rs 2048.70 crore in December till 11 December 2008. They are net sellers of Rs 52688.50 crore in calendar year 2008 so far.

Doubts as to how much stimulus the already stretched government budget will be able to finance, pulled the market sharply off the higher level in late trade on Monday, 8 December 2008. The BSE 30-share Sensex rose up 197.42 points or 2.2% to 9,162.62. The S&P CNX Nifty gained 69.60 points or 2.56% at 2784. Market remained closed on Tuesday, 9 December 2008 on account of Bakri-Id.

Frenzied buying in index pivotals on speculation US lawmakers will approve a $15 billion bailout of American auto companies, boosted the domestic bourses Wednesday, 10 December 2008. The BSE 30-share Sensex surged 492.28 points or 5.37% to 9,654.90. The S&P CNX Nifty advanced 144.25 points or 5.18% to 2928.25.

Hopes that the central bank may cut rates further and reports that the government is likely to come out with a second fiscal stimulus for the economy helped the key benchmark indices bounce back in the last one hour of trade on Thursday, 11 December 2008. The BSE 30-share Sensex slipped 9.44 points or 0.10% to 9,645.46. The S&P CNX Nifty fell 8.10 points at 2,920.15.

Shrugging off a dismal industrial production data and failure of the plan to rescue US auto makers, the market ended in the green on Friday, 12 December 2008. The BSE 30-share Sensex rose 44.61 points, or 0.46%, to 9,690.07. The S&P CNX Nifty rose 1.20 points, or 0.04%, to 2921.35.

India's industrial output fell 0.4% in October 2008 from a year earlier, sharply below the previous month's upwardly revised 5.5%, data showed on Friday, 12 December 2008. Industrial production had expanded 12.2% in October 2007.

Real estate shares rallied after the Reserve Bank of India (RBI) on Saturday, 6 December 2008, announced several measures, including a refinance facility for the National Housing Bank and priority sector status for housing loans up to Rs 20 lakh. India's top real estate developer by market capitalisation DLF galloped 36.11%, Unitech (up 11.36%), and Housing Development & Infrastructure (HDIL) (up 23.65%), rose.

Banking shares vaulted on hopes rate cut will boost lending growth. India's largest private sector bank by net profit ICICI Bank rose 14.79%. India's second largest private sector bank by net profit HDFC Bank rose 3.52% and India's largest state-run bank by net profit State Bank of India rose 6.96%.

The RBI, on 6 December 2008, announced a 100-basis point cut in the repo rate and the reverse repo rate each. Repo rate is the rate at which RBI lends to commercial banks and reverse repo rate is the rate at which RBI accepts deposits from banks. The RBI also announced steps to improve liquidity and shore up economic activity.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 16.77% in the week. Reliance Industries is reported to have signed an agreement for a $400 million financing facility from JPMorgan. The 11-year facility will help Reliance buy equipments from 17 suppliers in the United States, and is guaranteed by the Export-Import Bank of the United States. Reliance has reportedly raised over $2.5 billion over the last four months to support its capital expenditure program.

India's largest oil exploration firm by market capitalisation Oil and Natural Gas Corporation fell 1.28% on reports Imperial Energy, which is in the process of being taken over by ONGC, has not renewed its licence to prospect oil in Kazakhstan. This revelation comes at a time when ONGC is critisized for overpaying for the acquisition.

The non-renewal of licence in Kazakhstan means that Imperial has lesser assets now than what it had five months ago when ONGC had agreed to buy it for $2.6 billion. Imperial Energy, a British oil company operating in West Siberia and Kazakhstan, held 75% stake in Kazakhstan's Sevkazgra which has a licence to prospect and produce oil at the North Torgai block in north-central Kazakhstan.

India's second largest cellular services provider by sales Reliance Communications jumped 26.34% on reports that strategic investors, including telecom groups from the US and Europe, are in talks with the company to acquire around 20-26% stake

Software exporters fell this week as outlook for the US market, their biggest market, still remains grim. India's second largest IT exporter by sales Infosys Technologies declined 2.49%. India's largest software exporter by sales TCS declined 7.56%, and India's fourth largest software exporter by sales Satyam Computer fell 1.63%. However, India's third largest software exporter by sales Wipro rose 5.08% in the week.