Rate sensitive stocks lead 3.7% Sensex surge as inflation declines sharply

Interest rate sensitive banking, realty and auto stocks led the rally on the bourses as a sharp fall in inflation raised the prospect of deeper interest rate cuts in coming weeks. The barometer index BSE Sensex breached the psychological 10,000 level. The Sensex rose 361.14 points, or 3.72%.

Sentiment was also bolstered after the government said it was seeking extra spending of about $9 billion for the current fiscal year to the end of March 2009 as part of a fiscal stimulus to lift economic growth and offset the impact of the global slowdown. The extra spending includes about Rs 12,500 crore for fertiliser and food subsidies.

Buying by foreign funds this month has also helped market sentiment. Foreign funds bought a net Rs 1681.10 crore of equities this month till, 17 December 2008.

The market was volatile. After a firm start, the market weakened in morning trade. The market recovered from the day's low in mid-morning trade on reports the government is working on a second stimulus package to pump prime the economy. The recovery gathered strength as a further fall in inflation added to expectations of a further cut in interest rates by the central bank. Lower rates may revive demand over a medium term. The market extended gains with the Sensex hitting 10,000 level in mid-afternoon trade. It later cut gains before spurting again.

Inflation based on the wholesale price index rose 6.84% in the 12 months to 6 December 2008, below the previous week's annual rise of 8%, data released by the government today, 18 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.

Meanwhile, in a second stimulus package to boost growth, the government is likely to provide sops to the automobile, housing and steel sectors. As per reports, the committee of secretaries (CoS) on economic crisis is examining proposals like increasing the limit for low interest-rate housing loans from Rs 20 lakh to Rs 30 lakh, increasing the tax rebate on home loans, reducing car and two-wheeler loan rates by 2% (from the current 12-14%), increasing depreciation and ensuring faster disbursal of central value added tax (Cenvat) credit for the steel sector.

The first stimulus package unveiled by the government on Sunday, 7 December 2008, involved Rs 20,000 crore in additional government expenditure, an across-the-board 4% excise duty cut amounting to Rs 8,700 crore and benefits worth Rs 2,000 crore for exporters.

The new package could also include monetary measures such as cuts in the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) by the Reserve Bank of India (RBI). CRR, down to 5.5% from 9% in August 2008, impounds cash with RBI while SLR mandates banks to keep a specified proportion of their deposits in government securities.

The BSE 30-share Sensex was up 361.14 points, or 3.72%, to 10,076.43. The barometer index settled above the psychological 10,000 level for the first time in more than a month. The last time the Sensex had settled above the 10,000 level was on 10 November 2008.

The Sensex rose 395.05 points at the day's high of 10,110.34 hit in late trade. At the day's low of 9,633.04, the Sensex fell 82.25 points in mid-morning trade.

The S&P CNX Nifty up 106.40 points, or 3.6%, to 3,060.75.

The BSE clocked a turnover of Rs 5,078 crore higher than Rs 4,893.61 crore on 17 December 2008.

Nifty December 2008 futures were at 3085.25, at a premium of 24.50 points as compared to the spot closing of 3060.75. Turnover in NSE's futures & options (F&O) segment surged to Rs 54,607.11 crore, from Rs 49,360.05 crore on Wednesday, 17 December 2008.

The Sensex is down 10,210.56 points or 50.33% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 11,130.34 points or 52.48% below its all-time high of 21,206.77 struck on 10 January 2008.

The BSE Realty index (up 7.27%), the BSE Bankex (up 7.06%), the BSE Power index (up 5.81%), the BSE PSU index (up 5.11%), the BSE Capital Goods index (up 4.46%), the BSE IT index (up 4.41%) outperformed the Sensex.

The BSE HealthCare index (up 0.84%), the BSE Oil & Gas index (up 1.89%), the BSE Metal index (up 1.97%), the BSE Consumer Durables index (up 2.85%), the BSE Teck index (up 2.98%), the BSE Auto index (up 3.06%), the BSE FMCG index (up 3.12%) underperformed the Sensex.

The market breadth was positive. On BSE, 1,490 shares rose as compared with 966 that declined. 91 shares remained unchanged. Earlier, the breadth had turned negative from positive in mid-morning trade.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 0.74% to Rs 1,360.20, recovering sharply from the day's low of Rs 1,281.25, on hopes stimulus packages around the world would revive demand for its petroleum and petrochemical products. RIL's refining margins comfortably beat most of its global peers, and is seen as well placed to tap any revival in demand.

The stock had fallen 2.64% to Rs 1,350.15 yesterday, 17 December 2008 on profit booking after 10.68% rally in the previous six trading sessions.

Rate sensitive auto stocks rose on reports a likely second government stimulus package for the economy will include a reduction in interest on car and two-wheeler loans by 2%. Maruti Suzuki India, Hero Honda Motors, and Mahindra & Mahindra rose by between 1.38% to 5.21%.

India's largest commercial vehicle maker by sales, Tata Motors, rose 7.09%, shrugging off reports the company is undertaking a block closure of its commercial vehicle plant in Pune for three days from 29 December 2008, as high interest rates and unavailability of finance had depressed demand.

Rate sensitive real estate shares surged on hopes lower rates will spur housing demand. Unitech, DLF and Indiabulls Real Estate rose by between 8.95% to 9.56%. Home purchases by home buyers are largely through finance.

Banking shares extended gains on hopes lower interest rates will boost lending growth. India's largest commercial bank State Bank of India (SBI) rose 7.88% as its advance tax payment rose 56% at Rs 1,700 crore in Q3 December 2008 over Q3 December 2007. India's largest private sector bank by net profit ICICI Bank rose 9.16% even as its advance tax payment declined 6% to Rs 470 crore in Q3 December 2008 over Q3 December 2007.

India's second largest private sector bank by net profit HDFC Bank rose 5.82% even as its advance tax payment fell 10.7% to Rs 250 crore in Q3 December 2008 over Q3 December 2007.

Canara Bank surged 8.07% after a block deal of five lakh shares was executed on BSE at Rs 172.50 per share.

The Reserve Bank of India (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.

IT stocks gained on gains in American depository receipts (ADRs) and on recent reports President-elect Barack Obama's team is considering a plan to boost the recession-hit US economy that could be far larger than previous estimates and might reach $1 trillion over two years. Satyam Computer Services jumped 7.15% to Rs 169.35 on 1.35 crore shares after the company said its board will meet on 29 December 2008 to consider buyback of shares, a move aimed at boosting investor confidence.

The stock had slumped 30.22% to Rs 158.05 on Wednesday 17 December 2008 after it called off a deal to buy Maytas Properties and Maytas Infra, the two firms promoted by the family of promoter and chairman Ramalinga Raju bowing to investor pressure.

India's fourth largest IT exporter by sales Wipro rose 2.74% as its ADR gained 2.73% on Wednesday. India's largest IT exporter by sales Tata Consultancy Services jumped 6.93%. India's second largest IT exporter by sales Infosys gained 2.87% as its American depository receipt (ADR) rose 3.31% on Wednesday. Infosys sees the Indian IT industry going through a slow phase of growth for some time, its chief executive said on Wednesday.

IT firms derive more than 50% of their revenues from the US, shrugged off a firmer rupee. The Indian rupee traded near its highest in a month on Thursday, as a rise in local share prices raised expectations of more foreign capital inflows in the coming months. The partially convertible rupee was 47.05/06, off an intraday peak of 46.95, its highest since early November, and stronger than Wednesday's close of 47.67/69. A stronger rupee affects IT firms negatively as they earn most of their revenues from exports.

Some cement stocks rose on hopes government's efforts to give a boost to the realty sector will spur cement demand. ACC, Ambuja Cements, Birla Corporation of India rose by between 1.38% to 10.37%.

Infrastructure stocks rose on the government's effort to boost the infrastructure sector. Gammon India, Nagarjuna Construction Company, Era Infra Engineering, Hindustan Construction Company, Larsen & Toubro rose by between 0.16% to 9.36%. Government had 7 December 2008 had announced a slew of measures to prop up the sector.

GMR Infrastructure gained 6.53% as the promoters hiked stake in the company.

Patel Engineering galloped 9.7% after a consortium of the company bagged an order worth Rs 3,859 crore.

But Maytas Infra hit 20% lower circuit to Rs 310.65 extending losses for a second day after Satyam Computer Services cancelled acquisition of the builder just 12 hours after the $1.6 billion deal was announced on Wednesday 17 December 2008. The stock had hit 20% lower circuit to Rs 388.25 on 17 December 2008.

The government hopes to precipitate infrastructure projects worth Rs 100,000 crore through faster clearances of public-private partnership projects, and ensure their easier financing by way of a tax break on fund raising by the India Infrastructure Finance Company, a specialist lender to the infrastructure sector. The government has allowed India Infrastructure Finance Company (IIFCL) to raise Rs 10,000 crore by issuing tax-free bonds.

IIFCL will use these funds to refinance bank lending of longer maturity to infrastructure projects, especially in highways and port sectors.

PSU OMCs rose on fall in crude oil prices. BPCL, HPCL and Indian Oil Corporation were up by 5.48% to 9.58%.

Oil extended its losses to below $40 a barrel on Thursday, 18 December 2008, near its lowest in more than four years, as rising US crude inventories and further evidence of slowing demand trumped the Organisation of Oil Exporting Countries (Opec)'s biggest ever production cut. Lower oil prices will reduce under-recoveries at the state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

Airline shares rose following a recent steep cut in jet fuel prices. Jet Airways, Kingfisher Airlines and SpiceJet rose by between 4.47% to 8.66%. Jet fuel constitute more than 50% of the operating cost for the Airliners.

Meanwhile, as per reports, SpiceJet, Indigo and GoAir are likely to cut fares by 8%-10% from January 2009. Kingfisher Airlines, Jet Airways and Air India are working on plans to reduce fares by Rs 600 per ticket, reports suggest

Bharat Electronics rose 2.18% after a block deal of one lakh shares was executed on NSE at Rs 700 per share.

National Aluminium Company soared 11.41% on reports a likely second government stimulus for the economy may include measures to safeguards the domestic aluminium industry from cheaper Chinese imports.

McNally Bharat Engineering Company jumped 11.58% on bagging two orders aggregating Rs 244 crore.

Astra Microwave Products jumped 10.25% on bargain hunting after the stock fell sharply in the previous session despite the company winning an order.

Sun TV Network gained 5.07% after the company said its movie division to produce Rajinikanth starred Endhiran, India's biggest movie.

Thomas Cook India surged 6.83% after the company priced a rights issue of equity shares at Rs 35.50, a 26.73% discount to the ruling market price.

Reliance Natural Resources clocked the highest volume of 3.49 crore shares on BSE. Suzlon Energy (2.67 crore shares), Unitech (2.41 crore shares), GVK Power & Infrastructure (1.95 crore shares) and Housing Development & Infrastructure (1.69 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 469.11 crore on BSE. Housing Development & Infrastructure (Rs 249.25 crore), State Bank of India (Rs 234.65 crore), Satyam Computer Services (Rs 229.59 crore) and DLF (Rs 190.07 crore) were the other turnover toppers in that order.

European markets were mixed. Key benchmark indices in Germany and UK were up by between 0.09% to 0.9%. France's CAC 40 was down 0.8%.

Asian stocks were in positive zone, recovering from earlier fall, on hopes regional policy makers may be more aggressive after the cut in US rates on Tuesday, 16 December 2008. Key benchmark indices in Japan, South Korea, China, Hong Kong, Singapore and Taiwan were up by between 0.24% to 1.97%.

Trading in US index futures indicated the Dow could rise 48 points at the opening bell. US stocks fell on Wednesday, 17 December 2008, as the government's effort to stave off a deep economic recession raised worries about mounting public debt and blunted optimism following the Fed's sharp rate cut on Tuesday. The Dow Jones industrial average shed 99.80 points, or 1.12%, to 8,824.34. The Standard & Poor's 500 Index fell 8.76 points, or 0.96%, to 904.42. The Nasdaq Composite Index fell 10.58 point, or 0.67%, to 1,579.31.