Global woes offset budget hopes as Sensex sheds 1.6%

Sustained selling in index pivotals kept the market depressed, with key benchmark indices trading in the negative zone throughout the day. The BSE 30-share Sensex lost 152.71 points, or 1.59%. Lingering worries about the slowing economy, weak European markets, lower Asian markets and US index futures data which indicated the Dow could fall 81 points at the opening bell, weighed on the domestic bourses. Nevertheless, the market breadth, indicating the overall health of the market, was positive.

Volatility was high. After a weak opening, the market had lost further ground in morning trade on weak Asian stocks. It had cut losses in mid-morning trade ahead of the released of the key economic data. A sudden sell-off was witnessed at about 12:00 IST when the dismal industrial production data for December 2008 added to economic worries.

The market bounced back shortly as the dismal industrial production data reinforced expectations of another government stimulus package for the economy and as sharp fall in inflation raised hopes of rate cuts. But the intraday recovery proved short-lived and the market weakened in afternoon trade.

Industrial production contracted 2% in December 2008 as compared to 8.6% growth a year earlier, government data released at noon today showed. The fall was led by a led by a 2.5% contraction in the manufacturing output. The mining output for the month was up 1% as compared with 5% a year earlier.

The market is agog with talks that the forthcoming interim budget may offer tax sops and sector-specific stimulus package. The government has so far announced two stimulus packages including tax cuts and the capital injections for banks. The Central Statistical Organisation (CSO) on Monday, 9 February 2009, pegged India's projected GDP growth for the year ending March 2009 at 7.1%, the slowest in six years and below the previous year's 9%

The Congress party-led coalition government will unveil an interim railway budget on Friday, 13 February 2009 followed by a mini general budget on 16 February 2009, ahead of national elections due by May 2009. A full budget for 2009-2010 will come only after a new government takes over. Foreign Minister Pranab Mukherjee, who is also responsible for finance and will present the mini budget, today, 12 February 2009, said there is a need to sustain India's foreign trade, revive foreign investment and generate domestic demand. Mukherjee said during trading hours today that a strong economic growth is essential for the uplift of the multitudes below the poverty line.

Inflation based on the whole sale price index rose 4.39% the year through 31 January 2009, much lower than previous week's annual rise of 5.07%, government data released at noon today showed.

Though the key benchmark indices were in the red, the market breadth, indicating the overall health of the market, was strong.

Banking and oil stocks led European markets lower as fresh signs of deepening economic misery overshadowed a compromise deal on a $789 billion US stimulus plan. Key benchmark indices in UK, Germany and France were down by between 1.35% and 2.25%.

Asian stocks fell for a fourth day, led by financial and consumer-related companies, on concern US measures to alleviate the financial crisis won't be enough to revive the world's largest economy. Key benchmark indices in Hong Kong, South Korea, Singapore, Taiwan and China were down by between 0.87% and 2.39%.

Japanese stocks slumped 3.03% sending the benchmark Nikkei index to its lowest in nearly three months, as wholesale prices dropped in the year to January 2009, the first such drop in five years, bringing the world's second-largest economy closer to its second bout of deflation in a decade as the economy slips deeper into recession.

US Treasury Secretary Timothy Geithner on Tuesday, 10 February 2009 announced a financial rescue plan that included as much as $2 trillion in funding for programs aimed at spurring new lending and addressing banks' illiquid assets.

Geithner said the plan to get trillions of dollars in financing flowing through the world's largest economy was urgently needed as part of the government's effort to stave off "catastrophic failure" of institutions. A key plank involves the government teaming with the private sector to buy up to $1 trillion in souring assets from financial firms. A separate lending program would be expanded to as much as $1 trillion from $200 billion for consumers and businesses.

The US government was going to proceed carefully on the proposal, Geithner told the US Congress on Wednesday.

US stocks gained on Wednesday, 11 February 2009 in a choppy session as lawmakers said Congress will reach an agreement on a $789 billion plan to revive the economy. The Dow Jones Industrial Average rose 50.65 points, or 0.6% to 7,939.53. The S&P 500 added 6.58 points or 0.8% to 833.74 and the Nasdaq Composite index gained 5.77 points or 0.38% to 1,530.50.

US Senate majority leader Harry Reid said differences have been bridged between the two versions of the package that had been passed by the House of Representatives and the Senate, and that votes on the final bill could come as early as Thursday.

US weekly jobless claims and January 2009 retail sales data due later in the day, which will give a clearer indication of how the US economy is faring, will be closely watched.

The BSE 30-share Sensex lost 152.71 points or 1.59%, to 9,465.83. The Sensex opened 59.51 points lower at 9,559.03. At the day's low of 9,445.54, the Sensex lost 173 points in late trade. The Sensex lost 39.55 points at the day's high of 9,578.99 hit in early afternoon trade.

The S&P CNX Nifty shed 32.65 points or 1.12% to 2,893.05. Nifty February 2009 futures were at 2885.95, at a discount of 7.10 points as compared to the spot closing.

The Sensex had lost 0.30% on Wednesday, 11 February 2009, after a solid 6.12% surge in the preceding three trading sessions triggered by expectations the forthcoming interim budget will contain fiscal incentives to revive sagging growth. Buying by foreign funds aided the surge. Foreign funds bought shares worth a net Rs 816.70 crore in four trading sessions between 5 and 10 February 2009.

The inflow followed heavy sales last month. The cumulative outflow of foreign funds in calendar year 2009 totaled Rs 3756.80 crore, till 11 February 2009. The barometer index BSE Sensex is down 181.48 points or 1.59% in the calendar 2009 from its close of 9,647.31 on 31 December 2008.

Even as the key benchmark indices were in the red, the market breadth, indicating the overall health of the market, was positive. On BSE, 1307 shares advanced as compared with 1108 that declined. The breadth was much stronger earlier in the day. A total of 106 shares remained unchanged.

The BSE Mid-Cap index rose 0.10% at 2,968.11 and the BSE Small-Cap index gained 0.71% to 3,374.79. Both these indices outperformed the Sensex.

BSE clocked a turnover of Rs 3199 crore as compared to Rs 3,280.70 crore on Wednesday, 11 February 2009. Turnover in NSE's futures & options (F&O) segment was Rs 31,424.42 crore lower than Rs 32,988.37 crore on Wednesday, 11 February 2009.

Sectoral indices on BSE displayed mixed trend. The BSE IT index (down 2.46%), BSE Oil & Gas index (down 1.85%), and BSE Teck index (down 2.27%), underperformed the Sensex.

The BSE Metal index (down 0.97%), BSE Bankex (down 1.15%), BSE Realty index (up 1.30%), BSE Capital Goods index (down 1.30%), the BSE Auto index (up 0.94%), BSE Consumer Durables index (down 0.08%), the BSE FMCG index (down 0.88%), the BSE PSU index (down 0.09%), the BSE Power index (down 0.47%), outperformed the Sensex.

Among the 30-member Sensex pack, 21 slipped while the rest gained. Jaiprakash Associates (down 4.82%), Bharti Airtel (down 4.21%), and Bhel (down 3.22%), edged lower from the Sensex pack.

Reliance Infrastructure (up 1.29%), Sun Pharma (up 0.53%), and Hindalco (up 0.11%), edged higher from the Sensex pack.

Auto shares advanced on hopes of the government could announce some tax sops for the automobile sector. India's top tractor maker by sales Mahindra & Mahindra jumped 6.99% to Rs 300.20 and was the top gainer from the Sensex pack.

India's largest truck maker by sales Tata Motors rose 0.81% to Rs 137.05, off the day's low of Rs 132.50. Hindustan Motors (up 3.24%), Hero Honda (up 1.57%), Bajaj Auto (up 4.60%), also gained.

Reports indicated that excise duty on big cars with engine capacities of 1200 cc or more in petrol may be reduced to 16% from the existing 20%, post an across-the-board 4% cut in excise in December 2008.

Realty shares advanced on hopes the forthcoming interim budget may include sops to the housing sector. India's largest real estate firm by market capitalisation DLF advanced 2.49% to Rs 154.60 on recent reports the company has secured long-term loans of about Rs 2000 crore.

Anant Raj Industries (up 4.99%), Akruti City (up 4.89%), and Ansal Infrastructure (up 2.91%), advanced.

As per reports, the government may announce tax sops aimed at boosting the housing sector, which has been identified as a potential driver for the economy and job creation during a slowdown. As things stand, taxpayers are allowed to deduct up to Rs 1.5 lakh of interest paid on home loans from their taxable income. This limit could be raised to Rs 2 lakh. This, if it happens, will enable those who have bought a house for self-use to save up to Rs 68,000 in tax. At present, the maximum anyone can save through this deduction is Rs 51,000.

Another possible sop for the housing sector could be reintroduction of Sec 80IA, under which corporates building dwelling units of less than 1,000 square feet area were exempted from tax on the profits from these units. This move may prompt developers towards constructing smaller houses, making houses more affordable for the lower segment of the market.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 2.64% to Rs 1347.50, on profit booking. The stock moved in a range of Rs 1345.60 and Rs 1376 in the day. The stock had advanced 20.24% to Rs 1384.05 in a month to 11 February 2009.

India's largest state-run oil exploration firm by market capitalisation ONGC fell 1.97% to Rs 693.10 on reports the company has revised downwards its profit estimates for the year ending March 2010 by 35% due to the drop in international prices of oil.

State run oil-marketing companies though in the red, outperformed the Sensex, on slide in crude oil prices overnight. HPCL was down 0.52%, BPCL shed 0.89% and IOC lost 0.78%. Lower crude oil prices will reduce under-recoveries of state run firms on sale of fuel at controlled prices. They are currently making profit on sale of petrol and diesel, but continue to make losses on sale of kerosene and liquefied petroleum gas.

Shares of private sector banks slipped on fears of rising defaults in a weakening economy offset an overnight rise in American Depository Receipts (ADRs). India's second largest private sector bank by net profit HDFC Bank lost 0.26% to Rs 931 even as its ADR rose 3.78% on Wednesday, 11 February 2009. India's largest private sector bank by net profit ICICI Bank slipped 3.42% to Rs 420.50 despite 3.92% gain in its ADR on Wednesday, 11February 2009.

IT pivotals declined as investors feared the new bank rescue plan announced by the US government may not be enough to revive the economy from a deepening recession and also on weak ADRs. TCS, India's largest software services exporter by sales slipped 1.18% to Rs 508. Tata Consultancy Services today said its promoter Tata Sons has pledged 10.89 crore shares representing 11.14% stake in the company with lenders. As at end December 2008, Tata Sons held 73.75% stake in TCS.

India's second largest software services exporter Infosys Technologies shed 3.30% to Rs 1259.60 as its ADR declined 0.44% on Wednesday, 11February 2009. India's fifth largest IT exporter by sales HCL Technologies fell 0.91% to Rs. 114.20

However India's third largest software services exporter, Wipro rose 0.38% to Rs 222.80. IT firms derive a lion's share of revenue from export to the US.

Some small-cap IT shares surged on a weaker rupee. Hexaware Technologies jumped 58.46% to Rs 31.85 on buzz a large Indian IT company is eyeing acquisition of the firm. The stock surged as much as 109% to hit day's high of Rs 42. Hexaware Executive Chairman Atul Nishar, however, told a television channel that the company is not in a dialog for a sale. He told another television channel that neither the promoters nor large shareholders had sold any stake.

HOV Services (up 5.16% to Rs 29.55), Helios & Matheson (up 19.87% to Rs 27.15), KPIT Cummins (up 6.39% to Rs 21.65), Aztec Software (up 5.56% to Rs 31.30), Jetking Infotrain (up 6.92% to Rs 112), Sonata Software (up 9.82% to Rs 17.90), surged.

The Indian rupee was fell against the dollar on decline in Asian stock markets. The partially convertible rupee was at 48.77/78 per dollar, marginally weaker than Wednesday's close of 48.69/70. A weak rupee boosts operating margins of IT firms.

India's largest pharma company by sales Ranbaxy Laboratories lost 3.93% to Rs 212.50 after domestic brokerage house Reliance Money recommended a sell rating on the stock, with price target of Rs 189.

India's largest power generation firm by market capitalisation Tata Power Company fell 1.79% to Rs 793.50. Reportedly the company is scouting for other sources to import about 7 million tonnes of coal for its proposed power plants.

India's second largest cellular services provider by net profit Reliance Communications slipped 0.95% to Rs 171.65 despite reports the company is in talks with seven global strategic investors for offloading 5% stake in its tower arm Reliance Infratel for about $500 million.

Airline stocks slipped on profit booking after Civil Aviation Minister Praful Patel warned airline firms against cartelisation in the industry, forcing Jet Airways to rollback prices. Jet Airways (down 4.25%), Kingfisher Airlines (down 4.08%) and SpiceJet (down 5.63%), slipped.

Jet Airways had risen 1.15%, Kingfisher Airlines gained 3.67% and SpiceJet had surged 3.11% on Wednesday, 11 February 2009 following hike in airfares by almost all the airlines.

Consumer durable stocks rose on hopes of tax sops in the interim budget. Lloyd Electric (up 4.19%), Blue Star Industries (up 1.73%), Videocon Industries (up 0.90%), Titan Industries (up 0.34%), gained.

Spice Communications jumped 47.10% to Rs 77.30 on high volumes of 1.68 crore shares.

Bartronics India surged 3.07% on bagging an overseas order. The company announced the order win during trading hours today, 12 February 2009.

United Spirits topped the turnover chart on BSE with a turnover of Rs 251 crore followed by Reliance Industries (Rs 187.70 crore), Educomp Solutions (Rs 153.70 crore), Reliance Infrastructure (Rs 132 crore) and Reliance Capital (Rs 130.50 crore).

Cals Refineries led the volume chart on BSE with volume of 2.09 crore shares followed by Unitech (1.80 crore), Spice Telecom (1.68 crore), Satyam Computer Services (1.53 crore) and Hexaware Technologies (1.31 crore)