RIL, banking, metal shares lead 3.2% Sensex surge

Coordinated fiscal and monetary measures by policymakers to boost sagging growth and firm global markets boosted the domestic bourses, with the barometer index, the BSE 30-share Sensex, breaching the psychological 10,000 mark. The Sensex vaulted 317.38 points, or 3.19%.

But the market was volatile. After opening on a firm note, the market pared gains at the onset of the trading session. It bounced back again shortly and witnessed a bout of volatility later. After a 2.34% rally in afternoon trade triggered by a firm opening of the European markets, the market pared gains in mid-afternoon trade. The market spurted in the last half-an-hour of trade.

Though the Sensex had breached the 10,000 market in intraday trade on Friday, 2 January 2009, it had ended below that level.

Bank stocks rose on speculation falling bond yields and lower rates would accelerate loan growth and profitability. Metal stocks rose after the government withdrew exemptions from countervailing duty on TMT bars, used in construction activity, and withdrew exemption from basic customs duty on zinc and ferro alloys, which was provided earlier to contain inflation.

Shares of commercial vehicle makes rose as the government's second stimulus announced after trading hours on Friday, 2 January 2009, comprised measures to boost sagging truck and bus sales in India. Infrastructure stocks rose after the government unveiled steps to make availability of funds to infrastructure projects.

The Reserve Bank of India (RBI) after trading hours on Friday, 2 January 2009, cut the repo rate and the reverse repo rate by 100 basis points each, with immediate effect. 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. After the latest cuts, the repo rate is now at 5.5% and the reverse repo is now at 4%, the lowest ever.

The RBI also announced a cut in cash reserve ratio, the proportion of deposits banks must keep with the central bank, by 50 basis points to 5% with effect from 17 January 2009. Lower interest rates may revive the domestic economy which has been slowing faster than expected due to high interest rates and the global financial crisis.

Complementing monetary easing by the RBI, the government enhanced the spending power of states with specific measures to boost credit availability in the second fiscal stimulus package. It offered additional sops to exporters and the small-scale sector, besides raising the level of protection for cement and steel sectors a tad. It has also incentivised purchase of commercial vehicles.

Credit availability has been hiked in a variety of ways, the interest ceiling on external commercial borrowings has been removed; the cap on foreign institutional investments in the domestic corporate debt market has been jacked up two-and-a-half times from $6 billion to $15 billion; a special purpose vehicle is being created to lend to non-banking finance companies to the tune of Rs 25,000 crore; Indian Infrastructure Finance Company is being permitted to raise another Rs 30,000 crore by means of tax-free bonds, and states are allowed to borrow an additional Rs 30,000 crore from the market.

In addition, public sector banks would be given additional capital to the extent of Rs 20,000 crore over the next two years, so they can lend roughly 10 times as much additionally.

The latest measures, which come in less than a month after the first package was unveiled on 7 December 2008 are aimed at benefiting housing and non-banking finance firms that lend to infrastructure and finance commercial vehicles.

Firm global markets supported the domestic bourses. European shares gained on Monday, with higher crude prices boosting energy heavyweights and US President-elect Barack Obama's plans for tax cuts fuelling optimism. Key benchmark indices in Germany, France and UK were up by between 0.11% to 0.52%.

Asian stocks surged on hopes big government stimulus spending packages around the world will help revive growth. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore, China and Taiwan were up by between 1.4% to 5.2%.

US stocks started the new year with a big jump as investors looked beyond yet another piece of grim economic data on hopes that a recovery is on the horizon after a disastrous 2008. The Dow Jones industrial average rose 258.30, or 2.94% to 9,034.69 on 2 January 2009, the first trading day of the new calendar year. The market shrugged off a report by the Institute for Supply Management that said US factory activity fell to a 28-year low in December 2008, showing a more severe contraction than economists had expected.

Many market players are looking for a large US spending package and tax cuts to help support the world's largest economy. Obama will meet later on Monday, 2 January 2009, with senior Congressional leaders to discuss the plan. As per reports, about 40% of Obama's economic package worth as much as $775 billion would be in the form of tax breaks for businesses and the middle class.

The BSE 30-share Sensex rose 317.38 points, or 3.19%, to 10,275.60. The Sensex rose 347.95 points at the day's high of 10,306.17 in late trade. The Sensex rose 110.89 points at the day's low of 10,069.11 in early trade.

The S&P CNX Nifty rose 74.70 points, or 2.45%, to 3,121.45.

The BSE Sensex clocked a turnover of Rs 4,171 crore, lower than Rs 4,279.80 on Friday, 2 January 2009.

Nifty January 2009 futures were at 3133, at a premium of 11.55 points as compared to the spot closing of 3121.45. Turnover in NSE's futures & options (F&O) segment rose to Rs 34,219.31 crore, from Rs 31,631.68 crore on Friday, 2 January 2009.

The BSE Mid-Cap index was up 1.78%, while BSE Small-Cap index was up 1.21%. Both the indices underperformed the Sensex.

The BSE Metal index (up 5.54%), the BSE Oil & Gas index (up 5.1%), the BSE Bankex (up 3.53%) outperformed the Sensex.

The BSE FMCG index (down 0.53%), the BSE Realty index (down 0.33%), the BSE HealthCare index (up 0.05%), the BSE Consumer Durables index (up 1.21%), the BSE Auto index (up 1.3%), the BSE Teck index (up 1.46%), the BSE Power index (up 1.75%), the BSE PSU index (up 1.78%), the BSE IT index (up 2.4%), the BSE Capital Goods index (up 2.83%), underperformed the Sensex.

The BSE Sensex has risen 946.68 points or 10.14% from a recent low of 9,328.92 on 26 December 2008.

As per the provisional data on BSE, the foreign institutional investors (FIIs) bought shares worth Rs 469.56 crore while domestic funds bought shares worth Rs 220.82 crore today, 5 Janaury 2008.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,680 stocks advanced and 859 stocks fell. A total of 74 stocks remained unchanged.

Jaiprakash Associates, Tata Power Company, Larsen & Toubro and Reliance Infrastructure rose by between 3.87% to 7.76%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) jumped 6.38% to Rs 1,365.75 as global crude oil prices climbed amid rising tensions in the Middle East. Higher oil prices would boost RIL's refining margins. Late last month, its unit Reliance Petroleum (RPL) started processing crude at its 5,80,000 barrels per day refinery. From the recent low of Rs 1,230.25 on 31 December 2008 the stock jumped 11.01%.

India's largest state-run oil exploration firm by revenues ONGC jumped 6.43% on rally in crude oil prices. But the oil price surge weighed on PSU OMCs. BPCL, HPCL and Indian Oil Corporation fell by between 0.58% to 1.59%. Oil prices rose above $47 a barrel Monday in Asia as a ground offensive by Israeli troops against Hamas militants in Gaza heightened tensions in the oil-rich Middle East.Light, sweet crude for February delivery rose $1.36 to $47.70 a barrel, after earlier jumping toState-run oil marketing firms suffer losses on domestic sale of LPG and kerosene at a controlled price. They are making profit on sale of petrol and diesel thanks to a sharp fall in crude prices over the past few months.

India's largest drug maker by sales Ranbaxy Laboratories fell 0.18% after Japan's third-largest drugmaker, Daiichi Sankyo Co, said on Monday it would book an appraisal loss of 359.5 billion yen ($3.9 billion) on a parent-company basis on its stake in Ranbaxy Laboratories. Daiichi Sankyo paid nearly 500 billion yen for a 63.9% stake it acquired in the major generic drug maker last year.

India's largest telecom services provider by sales Bharti Airtel slipped 2.76% on concerns the company may reduce tariffs to retain costumers following an aggressive nationwide rollover of the GSM-based cellular services by Reliance Communication (RCom), India's second India's second largest telecom services provider by sales. RCom was up 5.35%.

Steel stocks surged in late trade after the government withdrew exemptions from countervailing duty on TMT bars, used in construction activity. Bhushan Steel, JSW Steel, Tata Steel, Steel Authority of India, Jindal Steel rose by between 1.61% to 6.97%.

India's largest zinc maker by sales Hindustan Zinc rose 8.24% after the government withdrew exemption from basic customs duty on zinc.

Other metal stocks, Hindalco Industries, Sterlite Industries and National Aluminum Company rose by between 1.62% to 9.82%.

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 6.04% after its American depository receipt (ADR) rose 7.06% on Friday, 2 January 2009. The bank had recently cut its main lending rates by 50 basis points.

India's second largest private sector bank by net profit HDFC Bank rose 2.66% as its ADR gained 7.5% on Friday. India's biggest bank in terms of total assets and branch network, State Bank of India, gained 2.35%.

Allahabad Bank rose 2.47% after the bank cut benchmark prime lending rate by 75 basis points from 13.25% to 12.50%. Union Bank of India rose 2.7% after bank on 3 January 2009 announced a reduction in deposit rates ranging between 25 and 75 basis points across various maturities. This will pave the way for the bank to lower lending rates also.

Bank of Baroda rose 2.32% after bank on 3 January 2009 announced a reduction in deposit rates ranging between 25 and 75 basis points across various maturities. This will pave the way for the bank to lower lending rates also.

India's largest dedicated housign finance firm by operating income HDFC rose 5.4%.

IFCI galloped 13.15% after a block deal of 6.06 lakh shares was executed on NSE at Rs 25.50 a share.

Future Capital Holdings spurted 10.68% after the company acquired non-banking financial firm Black Diamond Finance.

IT pivotals gained on hopes a large government stimulus package may help revive the US economy. India's second largest IT exporter by sales Infosys gained 3.85% as its ADR rose 2.36% on Friday. India's third largest IT exporter by sales Wipro rose 1.13% as its ADR rose 3.2% on Friday. India's largest IT exporter by sales Tata Consultancy Services rose 3.56%. IT firms derive a lion's share of revenue from export to the US.

But India's fourth largest IT exporter by sales Satyam Computer Services fell 6% on reports the company's management and some of its institutional investors are reportedly exploring a merger with another software firm. Meanwhile, the stake owned in Satyam Computer Services by SRSR Holdings, which was floated by founders, has fallen to 5.13% from 8.27% in November 2008, the company said on Friday (2 January 2009).

GTL soared 5.37% on share buyback plan.

Commercial vehicle makers rose as the government's second stimulus announced after trading hours on Friday, 2 January 2009, comprised measures to boost sagging truck and bus sales in India. India's largest commercial vehicle maker by sales Tata Motors rose 2.05% while India's second largest commercial vehicle maker by sales Ashok Leyland rose 0.93%.

Other Auto stocks, Mahindra & Mahindra and Maruti Suzuki India rose by between 2.35% to 3.15% on hopes rate cuts would spur demand for vehicles which is mainly driven by finance.

Infrastructure stocks rose on government's effort to prop up the sector. Era Infra Engineering, Valecha Engineering, Hindustan Construction Company and Gammon India rose by between 0.76% to 7.54%.

Ahluwalia Contracts hit 5% upper circuit after it received orders worth Rs 394 crore, which includes construction of depots at Delhi and Mumbai and the building work for Tata Medical Centre in Kolkata.

India Infrastructure Finance Company (IIFCL), which has already been authorized to raise Rs 10,000 crore through tax free bonds by 31 March 2009 for refinancing bank lending of longer maturity to eligible infrastructure bid based public-private partnership projects, will be accessing the market next week for raising the first tranche of the amount. This will enable the funding of mainly highways and port projects on hand of about Rs 25000 crore.

To fund additional projects of about Rs 75,000 crore at competitive rates over the next 18 months, IIFCL will be allowed access in tranches an additional Rs.30,000 crores by way of tax free bonds once funds raised in the current year are effectively utilized.

Under the second stimulus package for the economy unveiled by the government Friday, 2 January 2009, the centre will provide assistance to states for purchase of buses for their urban transport systems under the Jawaharlal Nehru Urban Renewable Mission till 30 June 2009.

Further, public sector banks will offer a special line of credit to non-banking finance companies (NBFCs) for truck and bus financing which will reduce the credit crush being faced by NBFCs. This may boost sales of trucks and buses. Additionally, the government has also announced accelerated depreciation of 50% for commercial vehicles bought from 1 January 2009 to 31 March 2009.

Cement stocks rose after the government reinstated the countervailing duty on structural cement which will help protect the domestic industry from cheaper imports. ACC, Ambuja Cements rose by between 1.52% to 2.55%.

Grasim Industries rose 1.65% while UltraTech Cement fell 1.45% after Aditya Birla Group said on Friday (2 January 2009) cement dispatches rose 13.4% to 2.98 million tones in December 2008 over December 2007. The group's cement business includes flagship Grasim Industries and UltraTech Cement, with combined production capacity of 35 million tonnes a year.

Realty shares were mixed amid hopes steep rate cuts by the RBI and sops provided by the government in the second stimulus package may help boost housing demand. Indiabulls Real Estate and Unitech rose by between 1.15% to 2.59%. DLF and Housing Development & Infrastructure fell by between 0.49% to 1.6%. While

In an effort to boost the cash-starved realty sector, the government on 2 January 2009 allowed the developers of integrated townships to borrow funds from overseas and also asked states to release land for low- and middle-income housing schemes. Earlier, as part of the first stimulus package announced last month, the public sector banks had lowered rates on home loans up to Rs 20 lakh

Unitech clocked the highest volume of 3.18 crore shares on BSE. IFCI (2.5 crore shares), Reliance Natural Resources (1.87 crore shares), Suzlon Energy (1.3 crore shares) and Satyam Computer Services (1.12 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 292.58 crore on BSE. Reliance Capital (Rs 193.16 crore), Satyam Computer Services (Rs 189.14 crore), Unitech (Rs 152.12 crore) and DLF (Rs 146.74 crore) were the other turnover toppers in that order.