Sensex, Nifty regain vital levels

Key benchmark indices- the BSE Sensex and S&P CNX Nifty regained key levels of 10,000 and 3,000 levels respectively on buying support from foreign institutional investors. Fall in inflation to a 9-month low and slump in crude oil prices further bolstered the sentiment.

The BSE 30-share Sensex rose 409.84 points or 4.22% to 10,099.91 in the week ended Friday, 19 December 2008. The Sensex had last close above the 10,000 level on 10 November 2008. The S&P CNX Nifty gained 156.15 points or 5.34% to 3,077.50 in the week. The Nifty had last closed above the 3,000 level on 4 November 2008.

The BSE Mid-Cap gained 213.51 points or 6.99% to 3,263.99 and the BSE Small-Cap index advanced 213.06 points or 6.03% to 3,744.02 in the week. Both these indices outperformed the Sensex.

The Sensex is down 10187.08 points or 50.21% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 11106.86 points or 52.37% below its all-time high of 21,206.77 struck on 10 January 2008.

Buying by foreign funds this month has lifted sentiments. FIIs bought shares equities worth Rs 1626.90 crore this month, till 18 December 2008. However they were net sellers in calendar 2008, so far, as they offloaded shares worth Rs 52,690.90 crore.

Trading for the week started on an upbeat note as expectations of a second tranche of fiscal sops from the government and hopes of additional interest rate cuts by the central bank to shield the domestic economy from the global economic recession boosted the market on Monday, 15 December 2008. The BSE 30-share Sensex gained 142.32 points, or 1.47%, to 9,832.39 and the S&P CNX Nifty was up 59.85 points, or 2.05%, to 2,981.20, on that day.

The barometer index BSE Sensex breached the psychological 10,000 level on Tuesday, 16 December 2008 with index heavyweight Reliance Industries (RIL) leading the surge. Expectations that the US Federal Reserve will lay out emergency tools to dispel a recession at a policy meeting also lifted the sentiment. The BSE 30-share Sensex rose 144.59 points, or 1.47%, to 9,976.98 and the S&P CNX Nifty was up 60.55 points, or 2.03%, to 3,041.75, on that day.

Concerns about a lack of transparency and worries about absence of strict corporate governance practices following an abortive attempt by Satyam Computer Services' to buy two related companies pulled the market lower on Wednesday, 17 December 2008. The BSE 30-share Sensex lost 261.69 points, or 2.62%, to 9,715.29 and the S&P CNX Nifty was down 87.40 points, or 2.87%, to 2,954.35, on that day.

Interest rate sensitive banking, realty and auto stocks led the rally on the bourses on Thursday, 18 December 2008 as a sharp fall in inflation raised the prospect of further interest rate cuts. The BSE 30-share Sensex surged 361.14 points, or 3.72%, to 10,076.43 and the S&P CNX Nifty gained 106.40 points, or 3.6%, to 3,060.75, on that day.

Market pared gains on Friday, 19 December 2008 as weak European markets and lower US index futures offset expectations of a second government stimulus package for the economy and on hopes of further cut in interest rates by the central bank. The BSE 30-share Sensex rose 23.48 points, or 0.23%, to 10,099.91 and the S&P CNX Nifty gained 16.75 points, or 0.55%, to 3,077.50, on that day.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 3.30% to Rs 1349.25 in the week 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.

India's largest oil exploration firm by revenue ONGC jumped 9.70% to Rs 709.15 after UK-listed Imperial Energy said its agreed takeover by ONGC was not at risk because Lehman Brothers held a miniscule stake. There were concerns that as Lehman Brothers is being shut due to bankruptcy, it is possible any shares it owns might not be tendered. But, Imperial Energy clarified that the investment bank only held 0.01% of Imperial's share capital.

Banking rose on hopes further interest rate cuts by the central bank to boost lending growth after inflation rate dropped to a nine-month low in the week ended 6 December 2008.

India's largest commercial bank State Bank of India (SBI), gained 6.01% to Rs 1287.65 on reports it paid 56.25% higher advance tax at Rs 1,700 crore in Q3 December 2008 over Q3 December 2007.

Inflation in the week ended 6 December 2008 dropped to a nine-month low of 6.84%, below the RBI's target of 7% for 2008-09. Data released by the commerce and industry ministry on 18 December 2008 showed that the inflation rate for the week under consideration fell sharply from 8% in the previous week, driven mainly by the cut in fuel prices. Lower rates may revive demand over a medium term.

Auto stocks gained amid hopes the soft interest rate regime may boost demand for vehicles which are mainly financed. Also reports of a likely second government stimulus package including a reduction in interest on car and two-wheeler loans by 2% buoyed the sentiment.

Maruti Suzuki India (up 8.53%), Hero Honda Motors (up 5.31%), Mahindra & Mahindra (up 9.64%), and Tata Motors (up 16.35%), gained.

Real estate stocks advanced on hopes housing demand will improve following a concessional home loan package unveiled by the state-run banks on Monday 15 December 2008. DLF (up 11.65%), Housing Development & Infrastructure (up 53.49%), Unitech (up 29.01%), and Indiabulls Real Estate (up 26.53%), edged higher.

IT stocks gained, barring Satyam Computer Services, after technology outsourcing and consulting firm Accenture's Q1 results topped forecasts. India's second largest IT exporter by sales Infosys rose 7.12% to Rs 1186.30 after it secured a five year, multi-million dollar global sourcing deal from AstraZeneca on 15 December 2008.

India's fourth largest IT exporter by sales Wipro rose 4.27% to Rs 248.90 and India's largest IT exporter by sales Tata Consultancy Services rose 6.42% to Rs 513.20.

HCL Technologies soared 30.10% to Rs 139.40 on reports it has signed $1 billion in contracts in October-December 2008, a record in single quarter. The strong new orders in the quarter have been aided by its purchase of British software firm Axon. HCL Tech said said after market hours yesterday, 15 December 2008, it completed acquisition of the Axon Group for 441.1 million.

However India's fourth largest software firm in terms of sales, Satyam Computer Services tumbled 26.25% to Rs 162.80 as investors slammed its move to buy Maytas Properties for $1.3 billion and a 51% stake in Maytas Infrastructure for $300 a million, as the acquisition could have wiped out its entire nearly $1.2 billion cash pile. Satyam had announced the acquisition after trading hours on Tuesday, 16 December 2008. Meanwhile the stock recovered from 52-week low of Rs 153.80 after the company said its board will meet on 29 December 2008 to consider buyback of shares.

India's largest engineering and construction firm by sales Larsen and Toubro gained 4.02% to Rs 818.65 after its advance tax payment reportedly jumped 73% to Rs 312 crore in Q3 December 2008 over Q3 December 2007.

Among the side counters, India Infoline (up 31%), Educomp Solutions (up 30.85%), Bajaj Hindusthan (up 28.18%), Pyramid Saimira Theatre (up 67.37%) and Varun Industries (up 51.79% ), surged.

Factory output in India fell for the first time in more than 13 years in October 2008, the latest evidence of a rapid economic slowdown. The weak industrial output data for October 2008 has raised expectations of a suitable policy response from the government and the central bank to shield the domestic economy from the global economic recession. There is an anticipation of a second tranche of fiscal sops from the government and additional interest rate cuts by the central bank.

US light crude for January 2009 delivery recorded a 4-year low of $39.19 a barrel on 17 December 2008 as rising US crude inventories and further evidence of slowing demand trumped organisation of petroleum exporting countries biggest ever production cut.