Rate sensitive stocks lead gains ahead of the RBI's rate cut

Buying demand in interest rate sensitive banking, realty and auto stocks led gains following reports the government will announce a second stimulus package at about 18:00 IST today, 2 January 2009 to help shore up the economy. Firm markets also supported the sentiment. However the barometer index BSE Sensex which breached the psychological 10,000 mark in mid-afternoon trade, later fell below that level on profit booking in IT pivotals in what was a choppy trading session. The Sensex rose 54.76 points or 0.55% at 9,958.22.

After opening on a firm note tracking gains in Asian stocks, the market soon slipped in red before bouncing back in mid-morning trade. The market weakened again as the Sensex slipped into the red in early afternoon trade. The market strengthened later in choppy trade. The BSE Sensex surged past the psychological 10,000 mark in mid-afternoon trade led by gains in interest rate sensitive stocks. Market pared gains in late trade on fall in IT pivotals, with the Sensex falling below 10,000 level.

After trading hours today, 2 January 2009, the Reserve Bank of India (RBI), slashed interest rates. The RBI cut the repo rate and the reverse repo rate by 100 basis points each. It cut the cash reserve ratio (CRR) by 50 basis points. 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. CRR is the amount of mandatory funds that commercial banks have to keep with RBI.

Meanwhile, as per reports, the government will today, 2 January 2009, unveil a second stimulus package to give the economy traction through measures aimed at aiding specific sectors, including auto, realty and small and medium enterprises. It had on 7 December 2008 announced a multi-billion package to prop up demand in all these segments, besides giving a push to infrastructure financing.

The government is also reportedly targeting an investment of Rs 1 lakh crore in the infrastructure sector over the next two years. With private sector investments drying up due to tight monetary condition the demand for massive government-backed spending on infrastructure has gained momentum. Such spending raises the demand for steel, cement and capital equipment, which, in turn, has a cascading effect on the other segments of the economy.

A survey on Friday, 2 January 2009, showed Indian manufacturing activity contracted in December 2008 to its lowest in more than 3-1/2 years as the impact of the global slowdown on Asia's third-largest economy deepened. The ABN AMRO Bank purchasing managers' index (PMI), based on a survey of 500 companies, fell to a seasonally adjusted 44.4 in December, falling for the fourth consecutive month to its lowest since the survey began in April 2005 and below November's 45.8. A reading above 50 signals economic expansion while a figure below 50 suggests contraction.

European markets gained after energy firms in Germany, France, Poland, Romania, Austria and Italy said on Thursday, 1 January 2009 they had not yet seen any drop in supply. Key benchmark indices in UK, Germany and France were up by between 1.16% and 2.59%.

Asian markets were trading firm today, 2 January 2009 amid speculation government policies will help shelter the region from the global recession. Key benchmark indices in Hong Kong, Singapore, and South Korea were up by between 0.05% and 4.55%. Stocks markets in Japan, China, Taiwan are closed on account of New Year holiday. US markets also remained shut on Thursday, 1 January 2009, on account of New Year holiday.

The BSE 30-share Sensex gained 54.76 points or 0.55% to 9,958.22. The Sensex opened 88.37 points higher at 9,991.83. At the day's high of 10,070.28, the Sensex 160.82 gained points in mid-afternoon trade. The Sensex lost 39.60 points at the day's low of 9,863.86 in early trade.

The S&P CNX Nifty rose 13.30 points or 0.44% at 3046.75. Nifty January 2009 futures were at 3055.35, at a premium of 8.60 points as compared to the spot closing.

The BSE Sensex has risen 629.30 points or 6.74% from its recent low of 9328.92 on 26 December 2008. The barometer index lost 10639.68 points or 52.44% in the calendar year 2008, on global financial crisis. Nifty lost 3179.45 points or 51.79% in 2008.

The BSE Sensex had seen a sustained bull run during five years from 2002 to 2007, gaining 47.10% in 2007, 46.7% in 2006, 42.3% in 2005, 13.1% in 2004, 73% in 2003 and 3.52% in 2002.

The market breadth, indicating the overall health of the market, was strong on BSE with 1700 shares advancing as compared with 835 that declined. 83 shares remained unchanged.

The BSE Mid-cap index gained 72.08 points or 2.17% at 3,391.18 and the BSE Small-Cap index rose 60.04 points or 1.58%, to settle at 3,870.45, outperforming the Sensex.

The total turnover on the BSE amounted to Rs 4259 crore as compared to Rs 3089 crore on Thursday, 1 January 2009. Turnover in NSE's futures & options (F&O) segment surged to Rs 31,631.68 crore, from Rs 22,397.66 crore on Thursday, 1 January 2009.

The BSE Realty index (up 2.07%), the BSE Capital Goods index (up 0.67%), the BSE Power index (up 1.33%), the BSE Consumer Durables index (up 2.44%), the BSE PSU index (up 0.59%), Bankex (up 1.60%), and BSE Oil & Gas index (up 1.32%), the BSE FMCG index (up 0.73%), the BSE Metal index (up 0.59%), outperformed the Sensex.

The BSE Auto index (up 0.01%), BSE Teck index (down 0.96%), the BSE IT index (down 1.25%), the BSE HealthCare index (up 0.11%), underperformed the Sensex.

Among the 30-member Sensex pack, 16 advanced and the rest slipped.

Infrastructure stocks on reports that the government is targeting an investment of Rs 1,00,000 crore in the infrastructure sector within the next two years. India's largest private sector power generation firm by sales Reliance Infrastructure jumped 4.21% to Rs 638.20 and was the top gainer from the Sensex pack.

GVK Power & Infrastructure surged 4.24% to Rs 24.60 after a block deal of 6.78 lakh shares was executed on BSE at Rs 25.50 a share. The block deal constituted 0.05% of the company's equity.

Era Infra Engineering jumped 9.90% to Rs 79.20 at on bagging orders totaling Rs 294.15 crore. The company announced the order win during trading hours today, 2 January 2009.

IVRCL Infrastructure (up 7.15% to Rs 161), GMR Infrastructure (up 9.8% to Rs 85.90), and (up 3.30% to Rs 36), rose

Metal stocks gained on hopes global metal prices will recover due to production cuts resorted by many firms globally. Hindalco Industries (up 3.60% to Rs 56.15), Steel Authority of India (up 1.51% to Rs 84), National Aluminium Company (up 3.54% to Rs 205), also logged gains.

India's largest private sector steel maker by sales Tata Steel gained 0.63% to Rs 230.20. As per reports, Tata Steel's first priority is to complete the current expansion work at its Jamshedpur plant as soon as possible and would take up work on its planned greenfield projects, including that in Jharkhand, in phases.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) advanced 2.89% to Rs 1289.80 after its unit Reliance Petroleum (RPL) started processing crude at its 5,80,000 barrels per day refinery last week. The stock recovered from an early low of Rs 1252. Meanwhile, RIL has denied media reports of it reaching an out-of-court settlement with Anil Ambani's Reliance Natural Resources (RNRL) over the KG basin gas dispute.

Realty shares rose on hopes of further sops in the second government stimulus package to boost the ailing sector. DLF (up 3.79% to Rs 302.80), Housing Development & Infrastructure (up 1.71% to Rs 143), and Unitech (up 5.06% to Rs 46.75), edged higher.

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 gained 1.50% to Rs 471 after it cut its main lending rates by 50 basis points from Wednesday, 31 December 2008

India's second largest private sector bank by net profit HDFC Bank rose 0.35% to Rs 1016. India's biggest bank in terms of total assets and branch network, State Bank of India, vaulted 1.09% to Rs 1330.10.

India's largest truck maker by sales Tata Motors galloped 3.10% to Rs 176.25 on reports it is ready to roll out first batch of the world's cheapest car, Tata Nano, from its manufacturing unit in Pantnagar. It will roll out the car in early 2009 and it is expected that it will start booking for the car by March 2009.

Maruti Suzuki India fell 0.91% to Rs 544 after its sales declined 10% to 56293 units in December 2008 from December 2007. The company announced the monthly sales data during trading hours yesterday, 1 January 2009.

Telecom pivotals were mixed amid reports that the finance ministry has asked the Department of Telecom (DoT) to double the reserve price for pan-India third generation (3G) spectrum to Rs 4,040 crore. India's largest cellular services by sales Bharti Airtel fell 1.89% to Rs 706. India's second largest cellular services by sales Reliance Communications advanced 2.57% to Rs 251.70.

Similarly, the Finance Ministry has also asked to double the reserve price for wireless broadband services, known as WiMAX, to Rs 2,020 crore for pan-India allocation. Early this week, the DoT had issued the revised schedule for auctioning 3G spectrum and as most of the domestic players were getting ready to participate in the bidding process, However, the Finance Ministry's intervention could delay the process. If this recommendation is accepted, it could significantly raise the cost of 3G spectrum for operators and subsequently, the pricing of 3G services could also be unattractive for a significant number of users to adopt these services, which would lead to 3G services not taking off in a big way in the country

Cement shares slipped on reports cement firms may see tougher times this year due to huge capacity additions and due to the slowdown in real estate sector. ACC (down 0.18% to Rs 495), Grasim (down 1.06% to Rs 1213), Ambuja Cement (down 2.26% to Rs 69.15), and UltraTech Cement (down 1.15% to Rs 392), slipped.

Outsourcing focussed IT firms declined as fears a weak global economy would cut the amount firms spent on technology offset a weaker rupee. India's fourth largest IT exporter by sales Satyam Computer Services slumped 2.88% to Rs 177.10 on profit booking after a 35.12% rally in one week to 1 January 2009 on buzz of a likely change in management after a recent aborted to bid buy stake in firms in which the management held stake. It was the top loser from the Sensex pack.

Also concerns about renewal of contracts by the existing prestigious clients across the globe weighed on the stock on reports Forrester Research, a global IT analyst company, has warned its customers to watch Satyam before renewing the contracts or awarding fresh ones.

India's second largest IT exporter by sales Infosys shed 1.70% to Rs 1127.95. Reportedly the company is looking at a closer integration between its technology and BPO businesses to beat the slowdown blues. The move is expected to maximise profits for the tech bellweather at a time when billing rates are under pressure and customers want more value for the same price.

India's third largest IT exporter by sales Wipro slipped 2.40% to Rs 242. But India's largest IT exporter by sales Tata Consultancy Services rose 0.27% to Rs 498 on recent reports the company is likely to win two large BPO contracts estimated at $512 million following its acquisition of Citigroup Global Services in late 2008.

The rupee slipped to 48.89 per dollar from 48.76 on Thursday, 1 January 2009. A weak rupee boost operating margins of IT firms as IT companies derive a lion's share of revenue from exports.

India's largest drugmaker by sales, Ranbaxy Laboratories rose marginally by 0.06% to Rs 250.10. The stock slipped to day's low of Rs 242.60 on reports the company has missed a deadline to launch an anti-migraine drug in the US. Ranbaxy was expecting to earn almost $100 million from the drug, a low-cost version of GlaxoSmithKine-owned Imitrex.

State run oil marketing firms rose after US light, sweet crude fell $1.87 to $42.73 a barrel today, 2 January 2009 on profit booking after 14% surge on Wednesday, 31 December 2008. HPCL (up 0.68%), BPCL (up 1.33%), and IOC (up 0.97%), gained. Lower oil prices will reduce underrecoveries at the state-run oil firms on domestic sale of LPG and kerosene at a controlled price. Oil firms are making profit on sale of petrol and diesel thanks to a sharp fall in crude oil prices over the past few months.

Satyam Computer Services was the top traded counter on BSE with turnover of Rs 268.06 crore followed by Reliance Industries (Rs 263.48 crore), Reliance Natural Resources (Rs 189.26 crore), DLF (Rs 162.74 crore) and HDFC (Rs 160.87 crore).

Unitech led the volume chart on BSE clocking volumes of 3.32 crore shares followed by Reliance Natural Resources (3.02 crore), GVK Power Infrastructure (2.03 crore), Suzlon Energy (1.97 crore) and Satyam Computer Services (1.51 crore).

Among the small and mid-cap stocks, India Infoline (up 20.69%), Tanla Solutions (up 17.01%), Core Projects (up 14.29%), Nagarjuna Construction (up 14.71%), Entertainment Network (up 13.52%), Thomas Cook (up 13.02%), INOX Leisure (up 19.91%), JBF Industries (up 20%), Walchandnagar (up 15.69%), Nitco Tiles (up 11.97%), Unichem Laboratories (up 11.62%), surged.

Gujarat Alkalies and Chemicals spurted 11.99% to Rs 81.25 on reports its shareholders blocked the state government's demand to contribute a large part of company's profits to various social projects.

Transgene Biotek was locked at 5% upper circuit filter at Rs 20.35 on receiving regulatory nod for manufacturing four drugs. The company made this announcement during trading hours today, 2 January 2009.

Neyveli Lignite Corporation rose 2.38% to Rs 71.45 after the company said its board approved fund raising plan for the projects presently under implementation. This is a positive development as the company's projects will not be put on hold due to cash crunch.

United Phosphorus rose 6.48% to Rs 115.80 on reports the firm is looking at acquisitions in Latin America and East Europe to expand its footprint in the global market.