Market snaps four-day losing streak; Satyam vaults

Expectations of a second government stimulus package for the slowing economy and, hopes of further rate cuts by the central bank helped key benchmark indices reverse early losses in what was a volatile trading session. The BSE 30-share Sensex gained 204.60 points or 2.19% at 9533.52, bouncing back from a slide of as much as 1.8% in morning trade.

Recovery in Asian markets from early fall, firm European markets and higher US index futures boosted the sentiment further. The market breadth turned positive in late trade in contrast to a weak breadth earlier in the day.

Volatility was high. Volatility in index heavyweight Reliance Industries (RIL) and Satyam Computer caused volatility in the key benchmark indices. The market dropped in mid-morning trade on concerns over corporate earnings and a flare-up of violence in the Middle East. A strong recovery triggered by rebound in Asian stocks saw the BSE Sensex wipe out its entire losses in early afternoon trade. The recovery proved short-lived as the market weakened again. It once again recovered but once again lost ground shortly. A firm start of European markets aided a sharp rally in mid-afternoon trade.

The market cut gains in late trade as Satyam Computer came sharply off the higher level after it said two more independent directors have resigned. The market surged later as Satyam bounced back again.

European shares advanced today, 29 December 2008 led by energy and metals stocks that tracked firmer commodity prices. Key benchmark indices in UK, Germany and France were up by between 0.95% and 2.11%. Trading in US index futures indicated the Dow could rise 28 points at the opening bell.

Asian shares advanced led in part by resource-related stocks on the back of higher commodity prices. Key benchmark indices in Hang Seng and Singapore were up 1.02% and 1.36%. In Japan, the Nikkei average ended up 0.09%, helped as well by news that three non-life insurers including Mitsui Sumitomo Insurance Group Holdings were in talks to merge.

Earlier in the day, Asian stocks had dropped due to a flare-up of violence in the Middle East. Israeli warplanes pounded the Hamas-ruled Gaza Strip for a third consecutive day on Monday as the Jewish state prepared to launch a possible invasion amid the intensifying clashes between the two sides.

The flare-up of violence in the Middle East stirred worries about energy supply disruptions, boosting crude oil prices. Oil prices rose as much as $2 to nearly $40 a barrel during Asian trade on Monday as investors worried about crude supplies, though crude pared gains later to be up 97 cents at $38.68. Oil markets are ending a manic year in which crude surged to a record at close to $150 a barrel in July before crashing down amid fears about a sharp slowdown in the global economy.

Closer home, the Indian government is reportedly considering another stimulus package to lift slowing growth. The first stimulus package announced early this month mainly involved additional government spending and an across-the-board cut in excise duties.

Meanwhile, a sustained declined in inflation will provide room for the Reserve Bank of India (RBI) to further cut interest rates. Inflation has been falling after it had surged into double digits in early June this year following an increase in state-set retail fuel prices.

But investors in India are bracing for poor Q3 December 2008 results. The government said during trading on Friday, 26 December 2008, advance taxes paid by companies declined 22% to about Rs 42600 crore in the December 2008 quarter over the December 2007 quarter, reflecting economic slowdown. The Indian economy has slowed down after a strong growth in the past three years.

The BSE 30-share Sensex gained 204.60 points or 2.19% at 9533.52. At the day's high of 9,550.40, the Sensex advanced 221.48 points in late trade. The Sensex declined 166.26 points at the day's low of 9,162.66 in mid-morning trade.

The S&P CNX Nifty gained 64.95 points or 2.27% at 2922.20. Nifty January 2009 futures were at 2937.55, at a premium of 15.35 points as compared to the spot closing. Turnover in NSE's futures & options (F&O) segment surged to Rs 33,326.10 crore, from Rs 24,153.90 crore on Friday, 26 December 2008.

The market recovered after last week's steep slide. The BSE Sensex had declined 770.99 points or 7.63% in four trading days to 9,328.92 on 26 December 2008 from a recent high of 10,099.91 on 19 December 2008.

The barometer index is down 10753.47 points or 53% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 11673.25 points or 55.04% below its all-time high of 21,206.77 struck on 10 January 2008.

The market breadth, indicating the overall health of the market, turned positive in late trade, reversing initial weakness. On BSE, shares 1302 advanced as compared with 1091 that declined. 86 shares remained unchanged.

The total turnover on the BSE amounted to Rs 3398 crore as compared to Rs 3,175.04 crore on Friday, 26 December 2008.

The BSE Auto index, down 0.63%, was the lone loser from the BSE sectoral indices. The BSE Realty index (up 0.26%), BSE Consumer Durables index (up 0.57), the BSE Teck index (up 1.97%), the BSE IT index (up 1.14%), the BSE HealthCare index (up 1.08%), the BSE Capital Goods index (up 1.24%), the BSE Power index (up 2.01%), the BSE FMCG index (up 0.22%), and the BSE PSU index (up 1.37%), underperformed the Sensex.

The Bankex (up 3.71%), the BSE Metal index (up 3.23%), and BSE Oil & Gas index (up 2.87%), outperformed the Sensex.

Among the 30-member Sensex pack, 24 advanced while the rest slipped. Ranbaxy (up 8.23% to Rs 234.80), Jaiprakash Associates (up 7.88% to Rs 79.45), and Grasim (up 6.03% to Rs 1260), edged higher.

India's fourth largest IT exporter by sales Satyam Computer Services galloped 10.37% to Rs 149.55 on massive volumes of 3.06 crore shares on hopes of a better corporate governance. The stock saw high volatility in mid-afternoon trade. A sharp slide in the stock was witnessed after the company said two more independent directors have resigned. Just before the announcement in mid-afternoon trade, the stock had jumped 17.78% to Rs 159.60 on hopes of a better corporate governance. The stock moved in a range of Rs 159.60 and Rs 129.55. On 26 December 2008, Satyam had announced the resignation of independent director Mangalam Srinivasan.

Satyam said before trading hours today, 29 December 2008, it has postponed a board meeting set for Monday, 29 December 2008 to 10 January 2009 to mull options beyond just a possible share buyback. The board had been expected to consider a share buyback, after news last week that the outsourcer had been barred from doing business with the World Bank added to its woes.

A media report quoted US-based independent director Vinod Dham as saying the 10 January 2009 board meeting would discuss a change in management, including a possible exit of Satyam's chairman and founder B Ramalinga Raju. It would also discuss appointing a chief executive or even a sale to another entity, the report said. Dham is one of the two independent directors who resigned from the board today, 29 December 2008.

While Satyam soared, other IT pivotals reversed early losses on a weaker rupee. India's second largest IT exporter by sales Infosys rose 0.22% to Rs 1112, off the day's low of Rs 1065. India's fourth largest IT exporter by sales Wipro gained 0.86% to Rs 229, after touching day's low of Rs 214.20. India's largest IT exporter by sales Tata Consultancy Services advanced 1.01% to Rs 476.85, rebounding from low of Rs 460.

Core Projects & Technologies rose 5.15% to Rs 46.95 after the company acquired a US-based company for $20 million. The company made the announcement before market hours today, 29 December 2008.

The rupee was hovering at around 48.49, lower than 48.45/46 a dollar on Friday, 26 December 2008. A weaker rupee boosts operating margins of IT firms as they earn most of their revenues from exports.

Banking shares advanced on speculation falling bond yields and lower rates would accelerate loan growth and profitability. India's largest private sector bank by net profit ICICI Bank rebounded sharply from day's low of Rs 404.60 and settled 5.97% higher to Rs 442.90, on reports it is set to cut interest rates by 50-75 basis points across the board shortly.

India's second largest private sector bank by net profit HDFC Bank gained 2.18% to Rs 993.80. India's biggest bank in terms of total assets and branch network, State Bank of India, vaulted 2.27% to Rs 1272.70.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 3.22% to Rs 1251, after its unit Reliance Petroleum started processing crude at its 5,80,000 barrels per day refinery last week. The stock swung in a band of Rs 1188 and Rs 1252.60 in volatile trade during the day. Reliance Petroleum was up 4.49%, extending Friday's (26 December 2008)'s gain of 6.3%.

Telecom shares shrugged off reports the government has deferred a global auction of third-generation wireless spectrum by two weeks. India's largest cellular services provider by sales Bharti Airtel gained 3.68% to Rs 712. India's second largest cellular services provider by sales Reliance Communications rose 3.71% to Rs 212.60.

Metal stocks rose as metal prices surged on the London Metal Exchange. Tata Steel (up 1.65% to Rs 215), Steel Authority of India (up 11% to Rs 78.20), and Sterlite Industries (up 3.29% to Rs 257.20), edged higher.

India's largest private sector aluminium maker Hindalco Industries rose 1.34% to Rs 49.20 on reports it may spend about Rs 25,000 crore over the next five years for expanding capacity by as much as three times in aluminium and copper.

Hindustan Zinc jumped 3.97% to Rs 340.20 after the company hiked zinc prices by nearly 3%. The price revision is effective from Thursday (25 December 2008), a company circular said.

India's top power equipment maker by sales Bharat Heavy Electricals jumped 3.68% to Rs 1348 on reports it has bagged a Rs 5,040 crore contract from Jindal Power for setting up 2,400 megawatt power plant in Chhatisgarh.

Real estate shares were mixed amid recent reports property rates are expected to fall by 20-25% as demand has dropped sharply over the past 9-10 months due to high interest rates. Indiabulls Real Estate (down 2.17%), DLF (down 0.13%), slipped. However Unitech (up 6.51%), and Housing Development and Infrastructure (up 1.81%) advanced.

Fall in property prices is expected to hit the margins of developers already hit by the demand slowdown. Additionally, developers are facing a severe cash crunch that is hindering the execution of ongoing projects and grounding new launches.

Auto shares were subdued after the Society of Indian Automobile Manufacturers (SIAM), an industry body for automobile sector, estimated lower sales in December 2008. India's top truck marker by sales Tata Motors slumped 4.40% to Rs 148.75 and was the top loser from the Sensex pack. The stock came off the day's low of Rs 144.80

Mahindra & Mahindra (down 3.58% to Rs 256), and Maruti Suzuki India (down 2.14% to Rs 499.80), declined.

SIAM said domestic vehicle sales are likely to fall by over 15% in December 2008 to 6,18,000 units and projected a whopping 25.5% fall in sales in the December 2008 quarter and over 34% slide in sales in the March 2009 quarter.

Aviation stocks gained on fall in jet fuel prices. India's biggest private sector airline by revenue, Jet Airways India rose 2.61% to Rs 190.50 after it slashed basic domestic fares by 15% to 40% with effect from Monday, 29 December 2008. SpiceJet rose 3.63% to Rs 15.69 and Kingfisher Airlines jumped 6.61% to Rs 37.10.

Recently, oil-marketing firms had slashed jet fuel or aviation turbine fuel (ATF) prices by 11%. Jet fuels prices have fallen by over 50% since August 2008 when prices touched a record Rs 71,028.26 per kilolitre. Jet fuels constitute more than 50% of the operating cost for airliners.

Satyam Computer Services was the turnover topper on BSE with turnover of Rs 451.36 crore followed by Reliance Industries (Rs 234.53 crore), Reliance Infrastructure (Rs 171.54 crore), Reliance Capital (Rs 166.45 crore) and DLF (Rs 161.83 crore).

Satyam Computer Services also topped volume chart on BSE clocking volume of 3.07 crore shares followed by Unitech (2.74 crore), Suzlon Energy (1.68 crore), Reliance Natural Resources (1.26 crore) and Cals Refineries (1.05 crore).

New Delhi Television rose 2.93% to Rs 114 on reports Shah Rukh Khan-promoted Red Chillies Entertainment will produce a comedy sitcom, Ghar Ke Baat, for NDTV Imagine. New Delhi Television holds 82.05% in NDTV Imagine, a general entertainment channel.

Kirloskar Brothers rose 1.86% to Rs 82 despite the company shutting its production unit in Madhya Pradesh from 25 December 2008 to 4 January 2009 to avoid excess inventory. The company made this announcement before trading hours today, 29 December 2008.