Key indices end marginally higher

Gains in select stocks
helped the key benchmark indices edged higher in a truncated week. Still, the upside was capped as a disappointing quarterly GDP growth data announced on Friday, 27 February 2009, indicated the global financial crisis could have a greater impact on the domestic economy than initially expected. The market was closed on Monday, 23 February 2009, on account of Mahashivratri.

The gross domestic product (GDP) grew a slower than expected 5.3% in Q3 December 2008 over Q3 December 2007. The figure is sharply lower from 7.6% in Q2 September 2008 as the global economic crisis cut demand and exports. India has estimated the economy to grow 7.1% in 2008/09, slowing from the 9% in the previous year.

Inflation fell to 3.36% for the year through 14 February 2009 and is reported to be on course to turn negative by first week of April 2009 as falling commodity prices and shrinking demand build up downward pressure.

The 30-share BSE Sensex rose 48.40 points or 0.55% to 8,891.61 in the week ended 27 February 2009. The 50-unit S&P Nifty rose 27.2 points or 1% to 2763.65 in the week.

The BSE Mid-Cap index declined 1.20% to 2,758.29, while the BSE Small-Cap index fell 1.73% to 3,106.01. Both the indices underperformed the Sensex.

Key benchmark indices pared losses and settled with minor losses on 24 February 2009, after the Indian government cut excise duties and service tax rates. The move is aimed at protecting the economy from the impact of the global economic crisis. On that day, the BSE 30-share Sensex fell 21.15 points, or 0.24%, to 8,822.06. The S&P CNX Nifty fell 2.55 points, or 0.09%, to 2,733.90.

Key benchmark indices rose the next day on firm global markets. The BSE 30-share Sensex rose 80.50 points, or 0.91%, to 8,902.56. The S&P CNX Nifty rose 28.60 points, or 1.05%, to 2,762.50.

Key benchmark indices gained for the second straight day on 26 February 2009, led by buying in auto, IT and FMCG stocks. Hopes of a further cut in policy rates by the Reserve Bank of India aided the rally. The BSE 30-share Sensex rose 52.30 points, or 0.59%, to 8,954.86. The S&P CNX Nifty rose 23.15 points, or 0.84%, to 2,785.65.

Although the market managed to crawl back from the day's lows, it ended on a weak note on Friday, 27 February 2009. Realty, oil & gas and technology stocks were the biggest losers on that day. The BSE 30-share Sensex fell 63.25 points, or 0.71%, to 8,891.61. The S&P CNX Nifty declined 22 points, or 0.79%, to 2763.65.

Finance Minister Pranab Mukherjee, on 24 February 2009, announced a surprise cut indirect tax levies. Service tax has been cut to 10% from 12%. Excise duty on bulk cement has been reduced to 8% from 10%.

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. A previously announced 4% across-the-board cut in excise duty will continue beyond 31 March 2009, Mukherjee said in his reply to a debate on the interim budget for 2009-2010 in parliament.

With regard to cement, the rate of central excise on bulk cement has been cut from 10% or Rs 290 per metric tonne (PMT) whichever is higher to 8% or Rs 230 PMT whichever is higher. All changes in the indirect taxes are effective from 24 February 2009.

Oil exploration and production firms rose as they stand to benefit from lower service tax on exploration & production activities. India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 0.90% in the week. The company after market hours on Friday, 27 February 2009, said its board will meet on 2 March 2009 to consider amalgamation of Reliance Petroleum with the company

Reliance Petroleum, meanwhile, declined 2.56% in the week.

Among other oil & gas stocks, ONGC rose 2.74%, Cairn India gained 9.83% and GAIL India rose 1.57%. US light, sweet crude for April 2009 delivery surged $2.72 or 6.40% to $44.57 a barrel at New York Mercantile Exchange on Thursday, 26 February 2009 on signals that Organizations of Petroleum Exporting Countries (OPEC) may cut supplies further when it meets next month.

The world's sixth largest steel maker by sales Tata Steel rose 2.56%. On Friday, the company announced forecast-bearing consolidated results. On a consolidated basis, the company's net profit fell 44.18% to Rs 732.21 crore on 3.57% rise in total income to Rs 33,222.59 crore in Q3 December 2008 over Q3 December 2007. The market was expecting a loss.

India's largest drugmaker by sales Ranbaxy Laboratories fell 21.72% after an investigation by the US Food and Drug Administration (FDA) found that Ranbaxy had falsified data and test results of medicines manufactured at its Himachal Pradesh (HP) facility to obtain marketing approval in the United States. The stock was the major loser from the Sensex pack.

Drugmaker Piramal Healthcare rose 19.95% on reports French drug maker Sanofi-Aventis has emerged as the front-runner to buy a substantial stake in the Indian firm.

Drug maker Wockhardt fell 8.89%. The company got US Food and Drug Administration approval to sell an alcohol-free syrup of ranitidine hydrochloride, used to treat ulcers and hyper-acidity.

Banking stocks were mixed caught between fears of rising defaults in a weakening economy and hopes a further fall in interest rates may boost lending growth. State Bank of India (down 1.86%), and ICICI Bank (down 2.34%), fell. However, HDFC Bank (up 2.06%), and Kotak Mahindra bank (up 5.67%), rose.

Realty shares slipped after realtors cut prices on increasing risks of tight liquidity and slowing sales. DLF (down 2.16%), Housing Development & Infrastructure (down 5.17%), Omaxe (down 0.90%), fell.

However, Unitech rose 0.53%. The company is reported to have sold its Courtyard by Marriott hotel in Gurgaon, near New Delhi, to local businessman Roop Madan. The developer sold the hotel for about Rs 230 crore, reports added.

World's fifth largest wind turbine maker Suzlon Energy fell 1.93% on reports revenues from its US operations is likely to fall as the wind power growth in the country was likely to decline.

Construction company KNR Constructions jumped 8.35% after the company's joint venture with GVR Infra Projects won an order worth Rs 576 crore.

The Union Cabinet, on 26 February 2009, raised the dearness allowance (DA) paid to government employees to 22% of basic salary, from an earlier 16%. The hike will cost Rs 3514 crore to the government, Home Minister P Chidambaram said.

The decision to hike the DA is clearly aimed at wooing voters. The Election Commission is likely to shortly announce the dates for Lok Sabha elections which are likely to he held in April-May 2009. In another decision, the Cabinet allowed state government to run up higher fiscal deficits.

Meanwhile, Standard & Poor's (S&P) Ratings Services on 24 February 2009, warned it may cut India's credit rating to junk, saying the nation's fiscal position may be unsustainable in the medium term.

The warning followed a government forecast that fiscal deficit for current fiscal year ending 31 March 2009 will balloon to 6% of gross domestic product from the initial target of 2.5%. For the next fiscal year, it expects the fiscal deficit at 5.5% of gross dmestic product (GDP).