Market drifts lower on lingering concerns about the economy

Key benchmark indices drifted lower weighed by renewed concerns about the deteriorating state of the US economy and on selling pressure from foreign institutional investors. However the market cut losses in later part of the week on reports that the forthcoming interim budget may offer tax sops and sector-specific stimulus package. Market edged higher in three out of five trading sessions.

On 5 February 2009, Home Minister P Chidambaram said the interim budget may include some changes in the tax structure. The government will present an interim budget on 16 February 2009 before the parliament elections which are due by mid-May 2009. As per reports policymakers are examining all options, including tax cuts, aimed at giving a boost to the slowing economy and relief to industry to prevent job cuts.

Inflation based on the wholesale price index rose 5.07% in 12 months to 24 January 2009, below the previous week's annual rise of 5.64%, data released by the government on 5 February 2009, showed. It was the slowest annual rise since 9 February 2008 when inflation was at 4.98%. The Reserve Bank of India (RBI) said in its monetary policy review on 27 January 2009 it expected annual inflation to be below 3% by the end of the 2008/09 fiscal year in March 2009.

Foreign institutional investors (FIIs) are in selling mode after an inflow of Rs 1319.10 crore in December 2008. FII outflow in calendar year 2009 totaled Rs 4,396.70 crore (till 5 February 2009).

The BSE 30-share Sensex fell 123.38 points or 1.31% to 9,300.86 in the week ended 6 February 2009. The S&P CNX Nifty shed 31.70 points or 1.10% to 2843.10 in the week.

The BSE Mid-Cap index slipped 58.67 points or 1.99% to 2,882.80 and the BSE Small-Cap index fell 59.81 points or 1.79% to 3,279.24 in the week.

Trading for the week started on a downbeat note with the key benchmark indices sliding on Monday, 2 February 2009 on renewed concerns about the deteriorating state of the US economy. The BSE 30-share Sensex lost 357.54 points, or 3.79%, to 9,066.70 and the S&P CNX Nifty fell 108.15 points, or 3.76%, to 2,766.65.

Selling pressure at the higher level cut early gains in what was a highly volatile trading session on Tuesday, 3 February 2009. The BSE 30-share Sensex rose 82.60 points, or 0.91%, to 9,149.30 and the S&P CNX Nifty gained 17.25 points, or 0.62%, to 2,783.90.

Firm Asian stocks and hopes that the US stimulus package will be approved aided gains in the key benchmark indices on Wednesday, 4 February 2009. The BSE 30-share Sensex rose 52.55 points, or 0.57%, to 9,201.85 and the S&P CNX Nifty advanced 19.15 points, or 0.69%, to 2,803.05.

Lingering worries about the economic slowdown, weak global markets and sustained selling by foreign funds pulled the market lower on Thursday, 5 February 2009. The BSE 30-share Sensex lost 110.97 points, or 1.21%, to 9,090.88 and the S&P CNX Nifty fell 23 points, or 0.82%, to 2,780.05.

The BSE 30-share Sensex advanced 209.98 points, or 2.31%, to 9,300.86 and the S&P CNX Nifty surged 63.05 points, or 2.27%, to 2,843.10, on Friday 6 February 2009 boosted by reports the government's forthcoming interim budget on 16 February 2009 might offer tax sops and sector-specific stimulus package.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 1.38% to Rs 1343.50 after the Bombay High Court in its interim order lifted stay on sale of RIL gas till the final order.

Metal stocks rose as improved manufacturing data in China suggested its downturn may be bottoming out. Data on Wednesday, 4 February 2009 showed China's official purchasing managers' index rose, even though it remained below a reading of 50 that divides expansion from contraction. The index rose to 45.3 for January 2009, up from 41.2 in December 2008 and a record low of 38.8 plumbed in November 2008.

Bank stocks fell on concerns of rising defaults by their clients in a slowing economy. India's largest private sector bank by net profit ICICI Bank lost 2.3% to Rs 406.95. India's largest bank in terms of assets and branch network State Bank of India shed 2.9% to Rs 1118.35.

The RBI on Thursday extended forex swap facility for banks until the end of 2009-10 and raised interest rate ceiling on foreign currency export credit. Another trigger for the rally in banking stocks was buzz that the interim budget will provide Rs 2,000 crore for bank recapitalization and also on hopes the Reserve Bank of India may cut rates after the interim budget.

India's top small car maker by sales Maruti Suzuki India rose 1.46% to Rs 579.35 after it reversed three months of falling sales with a record sales in January 2009 on higher demand for its SX4 and D'zire sedans. Maruti posted a 5.4% rise in vehicle sales to 71,779 units in January 2009 over January 2008.

But India's largest commercial vehicle maker by sales Tata Motors plunged 8% to Rs 137.60. The company's vehicle sales fell 33% in January 2009 over January 2008. Commercial and passenger vehicle sales in India and overseas dropped to 36,931 units last month from 54,796 units a year earlier, Mumbai-based Tata Motors said.

India's largest realty player by market capitalization DLF slumped slumped to an all time low of Rs 124.15 on 4 February 2009. DLF reported 69% fall in consolidated net profit to Rs 670.79 crore on a 58.8% decline in total income to Rs 1502.79 crore in Q3 December 2008 over Q3 December 2008, before market hours on 2 February 2009.

IT pivotals dropped after the industry body viz. the National Association of Software and Service Companies (Nasscom) cut export growth target for the current year. The BSE IT index lost 32.35 points or 1.45% to 2,204.16

Market regulator Sebi late evening on Monday, 2 February 2009 said it will look at easing takeover rules in special cases, ahead of a possible acquisition of the mega fraud hit Satyam Computer Services. The regulator also tightened rules for warrant subscriptions, raising the upfront payment for buying warrants to 25% from 10%. It also eased rules for pricing equity offerings by allowing companies to set the price two days before the opening date of a public offer.

Rules for bonus share offerings were also modified, with the regulator stipulating all offers where shareholder approval is not required should be completed in 15 days.

India's exports fell an annual 1.1% in December 2008 to $12.69 billion, government data showed on Monday, 2 February 2009 as the global slowdown cuts demand for Indian goods. The trade deficit narrowed to $7.57 billion in December 2008 compared with $10.07 billion in November 2008, due to a sharp drop in the cost of oil imports. Imports were up an annual 8.8 % at $20.26 billion in December 2008, while oil imports fell 30.9% during the month from a year earlier to $4.71 billion.

Meanwhile, the direct tax collections were up by a slower-than-expected 12.5% on-year to Rs 247,000 crore for the period from 1 April 2008 to 31 January 2009, data released on 4 February 2009 showed. Despite the slower-than-expected collections, the government is hopeful of its annual target of Rs 365000 crore for the fiscal year.