Rate sensitive stocks lead rally

Interest rate sensitive sectors led the rally on the bourses on hopes of further cut in interest rates by the central bank and on a likely second government stimulus package for the economy. However, a sharp slide in index heavyweight Reliance Industries (RIL) in late trade pulled the key benchmark indices off the higher level. The BSE 30-share Sensex advanced 182.64 points or 1.92% at 9716.16, off 68.88 points from the day's high. Firm European markets and higher US index futures lifted sentiment.

However volatility was high as it has been in the past few days. Index heavyweight Reliance Industries (RIL) was responsible for the volatility in the market. Stocks surged in early trade on hopes for a second government stimulus package for the economy, expectations of further reduction in interest rates and on firm Asian stocks. Selling pressure in index heavyweight Reliance Industries (RIL) pulled the market into the red shortly.

The market moved in narrow range in early afternoon trade as some Asian markets slipped into the red from green. Higher US index futures and firm start of European bourses lifted the domestic bourses, with the Sensex surging 251.52 points or 2.63% in late trade. A sharp slide in RIL pulled the market off the higher level later.

Trading in US index futures indicated, the Dow could rise 42 points at the opening bell, after the US government said late on Monday, 29 December 2008, it was pumping $5 billion into General Motors' (GM) auto and mortgage financing arm GMAC and lending an additional $1 billion to GM to help it buy shares in GMAC, which is considered crucial to GM's survival. The loan to GM would come on top of assistance extended to the No. 1 US automaker earlier this month.

The US government agreed on 19 December 2008 to rescue GM and Chrysler LLC with up to $17.4 billion in loans to stave off a collapse that would have cost hundreds of thousands of jobs and dealt a severe blow to an economy already in recession. GMAC has lost $7.9 billion over the last five quarters as the global credit crunch lifted its borrowing costs sharply and the value of many of its assets plunged.

Oil and bank stocks led rally in European markets. Key benchmark indices in Germany, France and UK were up by between 0.97% and 1.84%.

Asian markets were mixed. Key benchmark indices in Japan, South Korea, Taiwan were up by between 0.62% and 3.91%. However, indices in China, Singapore and Hong Kong were down by between 0.56% and 0.95%. Earlier in the day, gains in resource firms that could benefit from a sharp rebound in oil prices, had triggered a broad-based rally in Asian stocks.

Closer home, Planning Commission Deputy Chairman Montek Singh Ahluwalia on Monday, 29 December 2008, said the government will come out with a second stimulus package for this fiscal and another package for fiscal year 2009-10 in the next few days to spur economic growth. With industrial production contracting by 0.4% in October 2008, for the first time in 15 years, and the exports declining by over 12% during the month, the government came out with a stimulus package on 7 December 2008 to spur growth and help the industry combat the impact of global financial meltdown.

As part of the stimulus package, the government cut excise duty by 4% across the board, except on petroleum products, and announced raising of the public expenditure by Rs 20,000 crore to boost demand.

Meanwhile, Prime Minister Manmohan Singh has reportedly directed the Reserve Bank of India (RBI) to reduce the mandatory cash reserve ratio (CRR) for banks and short-term interest rates. Reports suggest that the RBI may cut the CRR by one percentage point that will give banks more headroom to lend. It may also slash the short-term lending rate (repo rate) and the short-term borrowing rate (reverse repo rate) for banks by half percentage points each.

The BSE 30-share Sensex advanced 182.64 points or 1.92% at 9716.16. The Sensex opened 91.61 points higher at 9,625.13. The Sensex gained 251.52 points at day's high of 9,785.04 in late trade. At the day's low of 9,494.70, the Sensex lost 38.82 points in midmorning trade.

The S&P CNX Nifty advanced 57.30 points or 1.96% at 2979.50, retreating from an intra-day high of high of 2999.15. Nifty January 2009 futures were at 2975, a discount of 4.5 points from the spot closing.

The BSE Sensex has risen 387.24 points or 4.15% in last two trading days. Before the recovery, the Sensex 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 10570.83 points or 52.10% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 11490.61 points or 54.18% below its all-time high of 21,206.77 struck on 10 January 2008.

All the sectoral indices on BSE logged gains. The BSE Auto index (3.09%), the BSE Realty index (up 3.48%), the BSE Capital Goods index (up 2.92%), the Bankex (up 2.24%), the BSE Teck index (up 2.73%), the BSE IT index (up 2.40%), the BSE Power index (up 2.38%), outperformed the Sensex.

The BSE FMCG index (up 0.32%), the BSE PSU index (up 1.20%), the BSE Consumer Durables index (up 1.12%), the BSE HealthCare index (up 0.98%), the BSE Metal index (up 1.86%), and BSE Oil & Gas index (up 0.51%), underperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1633 shares advanced as compared with 821 that declined. 80 shares remained unchanged.

The BSE Mid-Cap index advanced 2.18% to 3,216, outperforming the Sensex. The BSE Small-Cap index gained 1.79% to 3,635.48, underperforming the Sensex.

Grasim was the lone loser from the 30-member Sensex pack. Shares of the diversified firm lost 1.16% to Rs 1233.60.

Jaiprakash Associates (up 6.01%), Ranbaxy (up 4.09%), and Reliance Infrastructure (up 4.06%), edged higher from the Sensex pack

India's fourth largest IT exporter by sales Satyam Computer Services jumped 8.67% to Rs 161.10, extending yesterday's (29 December 2008) 9.41% rally helped by a newspaper report that private equity players were eyeing a stake in the company. It was the top gainer from the Sensex pack. As per reports, some institutional investors in Satyam had approached IT firms and private equity players for a stake sale.

Satyam shares are down almost a third since an aborted attempt two weeks ago to buy two firms in which management held stakes. Satyam on Monday, 29 December 2008, said three more independent directors, Krishna Palepu, Vinod Dham and Mendu Rammohan Rao, had quit. On Friday, 26 December 2008, the company announced the resignation of independent director Mangalam Srinivasan.

Other IT pivotals also logged gains on a weaker rupee. India's second largest IT exporter by sales Infosys rose 1.41% to Rs 1126. India's fourth largest IT exporter by sales Wipro gained 2.99% to Rs 234. India's largest IT exporter by sales Tata Consultancy Services advanced 0.27% to Rs 478.15.

Rolta India surged 4.26% to Rs 115.75 on acquiring a US firm which provides IT solutions to oil and gas refineries.

The partially convertible rupee was at 48.55 per dollar against its previous close of 48.41/44. A weaker rupee boosts margins of IT pivotals as they derive majority of their revenue from exports to the US.

India's second largest cellular services provider by sales Reliance Communication (RCom) advanced 7.16% to Rs 228.10 after the company said it had spent Rs 10000 crore ($2.1 billion) on expanding GSM services across India, and expects to spend a further Rs 2000-4000 crore on building 3G networks.

RCom also said during trading hours it had repurchased zero coupon foreign currency convertible bonds worth Rs 121 crore ($25 million) at a discount of 52.5%.

Idea Cellular surged 8.02% to Rs 53.85 on its plans to invest Rs 300 crore in the next 15 months to grow its business in Karnataka.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) gained 0.13% to Rs 1248.95, after its unit Reliance Petroleum started processing crude at its 5,80,000 barrels per day refinery last week. But the stock came sharply off the day's high of Rs 1272 struck in late trade. At the day's high, the stock had risen 1.98%. The stock witnessed a wild gyration during the day. It hit a low of Rs 1228.20.

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 rose 3.05% to Rs 458.05. India's second largest private sector bank by net profit HDFC Bank gained 1.51% to Rs 1018.15. India's biggest bank in terms of total assets and branch network, State Bank of India, vaulted 1.35% to Rs 1288.85.

Auto shares gained on reports the government is likely to remove an additional excise duty of Rs 10,000-20,000 on large cars and sports-utility vehicles as part of the package for the automobile industry which is facing downturn in sales for want of cheap retail credit. India's biggest commercial vehicles maker by sales Tata Motors rose 4.91% to Rs 156.10, India's biggest small car maker by sales Maruti Suzuki India gained 3.72% to Rs 517.60 and India's top utility vehicles maker by market share Mahindra & Mahindra advanced 5.75% to Rs 270.45. The additional duty was imposed in June this year.

Realty shares gained on hopes of further sops in the second government stimulus package to boost the ailing sector. DLF (up 3.16%), Unitech (up 4.35%), and Indiabulls Real Estate (up 4.57%), gained.

India's largest power generation firm by sales NTPC gained 2.48% to Rs 181.60 on reports it is one among the companies that have submitted bids for the 4,000 megawatt Tilaiya Ultra Mega Power Project in Jharkhand.

India's largest copper producer by sales Sterlite Industries advanced 4.82% to Rs 265.05 tracking a 2.87% rise in American depository receipt overnight.

India's largest engineering and construction company by sales Larsen & Toubro gained 3.90% to Rs 770 on hopes that lower interest rates would keep order flows strong and aid project funding.

India's largest power equipment maker by sales Bharat Heavy Electricals (Bhel) rose 2.01% to Rs 1373.95, extending yesterday's (30 December 2008) 3.60% rise after the company said on Friday, 26 December 2008, it had secured a Rs 5,040-crore contract from Jindal Power for setting up 2,400 megawatt power plant in Chhatisgarh.

PSU OMCs were mostly lower on reports the government is considering passing on the benefit of the fall in international crude oil prices to consumers by cutting petrol and diesel prices. HPCL (down 0.05%), and IOC (down 0.17%), slipped. However, BPCL gained 1.29%.

Reliance Industries topped the turnover chart on BSE with turnover of Rs 371.76 crore followed by Bajaj Hindusthan (Rs 278.33 crore), Satyam Computer Services (Rs 269.60 crore), Reliance Communication (Rs 150.74 crore) and Reliance Capital (Rs 142.39 crore).

Bajaj Hindusthan was the volume topper on BSE clocking volume of 4.32 crore shares followed by Unitech (2.71 crore), Reliance Natural Resources (2.33 crore), Suzlon (1.91 crore) and Satyam Computer Services (1.72 crore).

Sun TV Network jumped 8.58% to Rs 183.45. The company recently said its movie division will produce a mega-budget Rajinikanth starrer Tamil film Endhiran. The film, set to cost a whopping Rs 165 crore, is the highest budgeted Indian film till date.

Electrotherm India jumped 20% to Rs 128.40 on board's approval to spin off its engineering business into a new entity - Electrotherm Engineering & Projects.

Oil fell below $40 on Tuesday, 30 December 2008, as demand concerns overshadowed Middle East crude supply fears amid the Israeli-Hamas conflict, with prices on track to end the year down 60%, their biggest annual loss on record. US crude was down 24 cents at $39.78 a barrel, after having gained almost 1% earlier in the day.

Crude jumped as much as 12% on Monday, 29 December 2008, after Israel launched its fiercest air offensive in the Hamas-ruled Gaza strip in decades and prepared for a ground assault, raising fears that enraged Arab crude-producing neighbours would react.