Heavyweights lead intraday rebound as govt cuts indirect taxes

Key benchmark indices surged to trade in green for a brief period and settled with small losses after the Indian government cut excise duties further and lowered service tax rates in a move to protect the economy from the impact of the global economic crisis. The BSE 30-share Sensex was down 21.15 points, or 0.24%, off close to 200 points from the day's low.

A bout of volatility was witnessed in the latter part of the trading session. The market slipped in mid-afternoon trade after the global rating agency Standard & Poor's revised the outlook on the long-term sovereign credit rating on India to negative from stable. Just before the news of S&P cutting the outlook which hit the market in mid-afternoon trade, a solid recovery was witnessed on the domestic bourses.

The BSE Sensex plunged as much as 2.53% in early trade on setback in Asian stocks. The sharp sharp slide took it to the lowest level in more than 2-1/2 months. It wiped out almost the entire losses at about 13:50 IST just before the news of the S&P cutting the outlook.

Government' announcement of the reductions in indirect taxes hit the market in late trade and took the Sensex in green. However, the barometer index slipped into the red again later.

Finance Minister Pranab Mukherjee in his reply to a debate on the 2009/10 interim budget cut excise duty across the board to 8% from 10 %, and reduced the service tax rate to 10% from 12% on all taxable services. Mukherjee also said excise duty cuts of 4% unveiled earlier as part of a government stimulus package would be extended into the new fiscal year. He also reduced the excise duty on bulk cement to 8% and extended the exemption on customs cut on naphtha beyond 31 March 2009.

Mukherjee also announced that goods that attract 10% excise duty will now be charged at 8%. However, excise rates on items that attract 8% and 4% excise duty will not be changed.

However, according to research head of a domestic brokerage, the impact of the latest government measures to either to prop up consumer demand or the economy at large would not be significant.

Higher US index futures also supported domestic bourses. Trading in the US index futures showed Dow could rise 60 points at the opening bell on Tuesday, 24 February 2009. But sustained selling by foreign institutional investors kept market sentiment edgy.

Meanwhile, S&P said the revision in rating outlook of India was due to deterioration of the fiscal positions of the government to level that is unsustainable in the medium term. S&P expects government deficit, including off-budget measures such as oil and fertilizer bonds, to increase to 11.4% in the fiscal year ending 31 March, 2009, from 5.7% in the previous fiscal year.

Standard & Poor's has, nonetheless, affirmed its 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India.

Volatility is likely to remain high in the near term ahead of the expiry of futures & options contracts for February 2009 series on Thursday, 26 February 2009. As per reports, rollover of Nifty positions from February 2009 series to March 2009 series stood at 40% while marketwide rollover of positions was 29%, as on Friday, 20 February 2009.

Heavy sales by foreign funds this year has hit market sentiment. Foreign funds were sellers through most of last week. FII outflow in February 2009 totaled Rs 1,180.70 crore (till 19 February 2009). FII outflow in calendar year 2009 totaled Rs 5,425.90 crore (till 19 February 2009).

European stocks slipped on Tuesday, echoing sharp losses on Wall Street and in Asia as lingering fears over the stability of the banking sector rattled investors. The key benchmark indices in France, Germany and UK fell by between 0.85% to 1.57%.

Asian shares slumped on Tuesday, some to multiyear lows, after a broad sell-off on Wall Street left the Dow Jones Industrial Average at levels not seen since 1997. Key benchmark indices in China, Singapore, Taiwan, South Korea, Hong Kong fell by between 1.06% to 4.56%.

Japan's Nikkei stock average fell 1.46% dragged lower by exporters such as Canon Inc.

Led by industrials and materials stocks, the US market fell on recessionary fears and heightened risk aversion, which also drove investors to the dollar. The Dow Jones industrial average dropped 250.89 points, or 3.41%, to 7,114.78, its lowest close since 7 May 1997. The Standard & Poor`s 500 index fell 26.72 points, or 3.47%, to 743.33, lowest finish since 11 April 1997. The technology-laden Nasdaq Composite index lost 53.51 points, or 3.71%, to 1,387.72.

Although US financial stocks actually rose on hopes that the government will move soon to secure its most troubled banks, the wider issue of the fragility of the US banking system remains to the fore.

The BSE 30-share Sensex was down 21.15 points, or 0.24%, to 8,822.06. At the day's high of 8,856.52 Sensex gained 13.31 points in late trade. At the day's low of 8,619.22, the Sensex lost 223.99 points in early trade and was the lowest level for the Sensex since 3 December 2008.

The S&P CNX Nifty was down 2.55 points, or 0.09%, to 2,733.90.

The barometer index BSE Sensex has lost 812.68 points or 8.43% to 8,822.06 from a recent high of 9,634.74 on 13 February 2009. The Sensex is down 825.25 points or 8.55% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

The market breadth, indicating the overall health of the market, was weak on BSE with 1,627 shares declining as compared with 810 that advanced. A total of 67 shares remained unchanged.

The BSE clocked a turnover of Rs 2,448 crore, lower than Rs 2,615.54 crore on Friday, 20 February 2009.

Nifty February 2009 futures were at 2726, at a discount of 7.90 points as compared to the spot closing of 2733.90. Turnover in NSE's futures & options (F&O) segment rose to Rs 45,693.52 crore from Rs 43,149.65 crore on Friday, 20 February 2009. The near-month February 2009 derivatives contract will expire on Thursday, 26 February 2009.

From the 30 share Sensex pack 17 stocks fell while rest gained.

The BSE Consumer Durables index (up 0.73%), the BSE FMCG index (up 0.21%), the BSE Auto index (up 0.06%), the BSE Oil & Gas index (up 0.03%), the BSE Realty index (down 0.06%), the BSE Power index (down 0.06%), the BSE IT index (down 0.14%) outperformed the Sensex.

The BSE Metal index (down 2.31%), the BSE Bankex (down 1.36%), the BSE PSU index (down 0.71%), the BSE Healthcare index (down 0.53%), the BSE Capital Goods index (down 0.48%), the BSE TECk index (down 0.3%) underperfomed the Sensex.

India's largest private sector company by market capitalization
and oil refiner Reliance Industries (RIL) fell 0.02% to Rs 1,253.30 on fears a worsening global economy will hit demand for petrochemicals. Nevertheless, the stock came off the day's low of Rs 1,201.10.

India's largest oil exploration firm by revenue ONGC rose 1.17% to Rs 680.60, off day's low of Rs 656.25, on reports the company has discovered oil in the hydrocarbon rich Krishna Godavari basin.

But other oil & gas stocks, GAIL (India), Essar Oil and Reliance Petroleum fell by between 0.26% to 1.65%.