RIL, Infy help market stage a strong intraday rebound

Key benchmark indices gained for the second straight day on buying in auto, IT and FMCG stocks. Firm opening of the European markets and higher US index futures aided a strong intraday rebound on the domestic bourses. Hopes of a further cut in policy rates by the Reserve Bank of India also aided the rally. Index heavyweight Reliance Industries (RIL) bounced back. But Ranbaxy Laboratories fell 18% after US regulators said one of its plants in India had falsified data and test results.

The BSE 30-share Sensex was up 52.30 points, or 0.59%, up close to 165 points from the day's low. The strong rebound took the Sensex within striking distance of the psychologically important 9,000 level. That 9,000 level is proving a strong resistance for the barometer index was evident once again as the Sensex cut gains at the fag end of the trading session after hitting an intraday high of 8,998.31. A sharp slide was witnessed in late trade yesterday, 25 February 2009, soon after the Sensex came within striking distance of the 9,000 level.

The market was volatile today, 26 February 2009, as traders squared positions in February 2009 contracts and created fresh positions in March 2009 contracts in the derivatives segment ahead of the expiry of February 2009 contracts.

After a steady opening, the market weakened in morning trade on concerns of higher borrowing costs for Indian Inc. It came off the lower level shortly. However, a sharp slide in Chinese markets weighed on the domestic bourses for a while in early afternoon trade. The market soon shrugged of the sharp slide in Chinese stocks as lower inflation raised rate cut hopes. The recovery gathered steam in late trade on firm opening of the European markets.

As per reports, rollover of Nifty positions from February 2009 series to March 2009 series stood at 62% while marketwide rollover of positions was 57%, as on Wednesday, 25 February 2009.

There are expectations that the Reserve Bank of India (RBI) will cut interest rates further to support faltering growth. Inflation rate slowed to 3.36% in mid-February 2009, the lowest in nearly 15 months, which would give the central bank more elbow room to loosen monetary policy. The government released the inflation data during trading hours today. As per reports, RBI governor D Subbarao will meet select heads of banks on Friday, 27 February 2009, to hold discussions on issues like credit flow and liquidity conditions.

But concerns about rising borrowing costs for Indian corporates linger in the minds of investors as fears of a downgrade of India's sovereign rating by global rating agencies loom large. Rating agency S&P on Tuesday, 24 February 2009, cut its outlook on India's long-term sovereign credit rating to negative from stable citing worsening government finances, which could raise Indian firms' overseas borrowing costs and weaken the rupee. Moody's Economy.com on Wednesday, 25 February 2009, said India's wider fiscal deficit will boost funding costs and weaken investor confidence.

The Union Cabinet today raised the cost of living allowance paid to government employees to 22% of basic salary, from an earlier 16%, Home Minister P Chidambaram said. The move would cost Rs 3514 crore ($700 million) to the government exchequer.

In another decision, the Cabinet allowed state government to run up higher fiscal deficits.

Meanwhile, in the interim trade policy, Union Commerce Minister Kamal Nath on Thursday announced a cut in customs duty to 3% from 5% under the export promotion capital goods (EPCG) scheme. He also announced that the duty entitlement pass book (DEPB) scheme for exporters has been extended till December 2009. Nath also said he is confident that India would achieve a target of $175 billion in exports in financial year ending March 2009 (FY 2009). He added that exports from SEZs in FY 2009 is seen at Rs 90,000 crore.

The global financial sector crisis and recession in key global economies have pushed economic growth in India down to a six-year low. The Central Statistical Organisation (CSO) has 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% rise. S&P, however, feels that India's medium term growth prospects remain strong.

Trading in US index futures indicated that the Dow could rise 83 points at the opening bell on Thursday, 26 February 2009.

European markets, which opened after Indian markets, rose on Thursday, snapping a four-day losing streak, as investors digested a flood of results and welcomed a UK government insurance scheme for banks' assets. The key benchmark indices in France, Germany and UK were up by between 1.47% to 1.8%.

But Asian markets, which opened before Indian market, edged lower after an early rally fizzled and investors found few incentives to make long-term bets with economic and corporate profit prospects worsening. Shanghai Composite index was down 3.87%. Key indices in Japan, South Korea, Singapore and Hong Kong were down by between 0.04% to 1.15%.

US stocks made a strong intraday bounce back on Wednesday, 25 February 2009. The Dow Jones Industrial Average, which had been off nearly 200 points earlier in the session, ended the day down 80.05 points, or 1.09%, at 7270.89. US bank stocks rose after US officials unveiled details of the Treasury's plan to convert stakes to common stock, although the wider index remained anchored by a bleak housing report from The National Association of Realtors.

The BSE 30-share Sensex was up 52.30 points, or 0.59%, to 8,954.86. At the day's high of 8,998.31 Sensex gained 95.75 points in late trade. At the day's low of 8,788.32 the Sensex lost 114.24 points in mid-morning trade.

The S&P CNX Nifty was up 23.15 points, or 0.84%, to 2,785.65.

The market breadth, indicating the overall health of the market was weak on BSE with 1,026 shares advancing as compared with 1,372 that declined. A total of 71 shares remained unchanged.

The BSE clocked a turnover of Rs 2,640 crore, higher than Rs 2,217.43 crore on Wednesday, 25 February 2009.

Nifty March 2009 futures were at 2767, at a discount of 18.65 points as compared to the spot closing of 2785.65. Turnover in NSE's futures & options (F&O) segment surged to Rs 50,142.32 crore from Rs 40,129.86 crore on Wednesday, 25 February 2009.

The barometer index BSE Sensex has gained 132.80 points or 1.5% in last two trading sessions. But it is down 692.45 points or 7.17% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

The BSE Auto index (up 2.74%), the BSE Oil & Gas index (up 1.28%), the BSE TECk index (up 1.21%), the BSE IT index (up 1.14%), the BSE FMCG index (up 1.02%), the BSE Power index (up 0.89%), the BSE Metal index (up 0.82%) outperformed the Sensex.

The BSE Bankex (down 2.15%), the BSE Consumer Durables index (down 1.33%), the BSE Realty index (down 0.07%), the BSE Healthcare index (up 0.2%), the BSE PSU index (up 0.32%), the BSE Capital Goods index (up 0.35%) underperfomed the Sensex

From the 30 share Sensex pack, 21 stocks rose while rest fell.

India's largest drugmaker by sales Ranbaxy Laboratories fell 18% 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.

But Piramal Healthcare rose 16.93% on report French drug maker Sanofi-Aventis has emerged as the front-runner to buy a substantial stake in the Indian firm.

Matrix Laboratories rose 4.66% after the company said it got approval from the World Health Organisation for generic version of a HIV drug.

Strides Arcolab jumped 4.32% on reporting a net profit of Rs 6.13 crore in the year ended December 2008 as compared to net loss of Rs 115.21 crore in the year ended December 2007.

Other healthcare stocks, Cipla, Dr. Reddy's Laboratories and Fortis HealthCare rose by between 0.48% to 3.19%.

Oil exploration and production firms rose as they stand to benefit from lower service tax on exploration & production activities which currently stands at 12.36%. India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 1.93% to Rs 1,290.45. The stock came off the day's low of Rs 1,252.40.

India's largest oil exploration firm by sales ONGC rose 2.66% as crude oil prices surged over 6% on the New York Mercantile Exchange on Wednesday, 25 February 2009. Other oil & gas stocks Cairn India and Gail India rose 0.93% and 2.21% respectively.

Seamec jumped 20% extending gains for the second day, on reporting a net profit of Rs 54.57 crore in Q4 December 2008 as compared to net loss of Rs 15.88 crore in Q4 December 2007.

Auto stocks extended recent gains on cut in excise duty by the government on Tuesday, 24 February 2009. India's largest commercial vehicle maker by sales Tata Motors jumped 7.26% after company said bookings for its Rs 1-lakh car Naco will commence from the second week of April 2009. India's second largest commercial vehicle maker by sales Ashok Leyland rose 4.97%.

Other auto stocks, Hero Honda Motors, Maruti Suzuki India and Mahindra & Mahindra rose by between 0.74% to 5.02%.

Ashok Leyland on Wednesday, 25 February 2009 said it had decided to pass on the full benefit of the tax reduction to customers, and that the average prices of its vehicles will be lowered by Rs 16,000. Tata Motors also reportedly cut vehicle prices by about 2%.

However, price cut alone is unlikely to revive sluggish demand for trucks. Currently, the commercial vehicles (CV) industry is struggling to source retail finance as banks and other financial institutions have refrained from lending to the sector. According the latest report from the Society of Indian Automobile Manufacturers (Siam), sales in the CV industry fell by almost 20% at 3,11,283 units for the period April 2008-January 2009 over the period April 2007-January 2008. High interest rates and a slowdown in the economy have impacted demand for trucks.

FMCG stocks gained on defensive buying. ITC, Dabur India, Nestle India, Hindustan Unilever and United Spirits rose by between 0.05% to 6.41%.

Outsourcing focussed IT stocks gained as rupee tumbled against the dollar. India's second largest software services exporter Infosys Technologies rose 1.65% to Rs 1,236.35 off the day's low of Rs 1,200.55. Its ADR slipped 0.65% overnight. India's third largest software services exporter, Wipro fell 0.69% to Rs 215.95, off the day's low of Rs 213.30. Its ADR fell 1.15% overnight.

India's largest software services exporter by sales TCS rose 0.42% after it said on Thursday Singapore Airlines had extended an IT services contract for three years.

The Indian rupee tumbled against the dollar as higher oil prices spurred demand for dollars from importers, while mixed Asian shares offered little comfort. The partially convertible rupee was at 50.46, weaker than Wednesday's close of 49.96/97. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports.

There have been concerns of cut back in technology spend by global firms amid a recession in the US economy and due to the global financial sector crisis. IT firms derive a lion's share of revenue from exports to US.

Banking stocks were volatile caught between fears of rising defaults in a weakening economy and hopes a further fall in interest rates may boost lending growth. India's largest private sector bank by net profit ICICI Bank fell 4.63% to Rs 324.75, off the day's low of Rs 318.60. Its American Depository Receipts (ADR) slipped 3.97% on Wednesday, 25 February 2009. Recently, Life Insurance Corporation of India hiked its stake in ICICI Bank by 2.04% to 9.38%.

India's second largest private sector bank by net profit HDFC Bank rose 1.03% to Rs 873.05, off the day's low of Rs 842.20. Its ADR fell 5.21% on Wednesday, 25 February 2009.

India's largest bank in terms of assets and branch network State Bank of India fell 1.31% to Rs 1,024.15, off the day's low of Rs 1,015.50. The Indian government on Tuesday 24 February 2009 introduced a bill in Parliament which will enable it to increase the capital base of State Bank of India's subsidiaries and issue preference and bonus shares of these entities.

PSU bank stocks, Indian Overseas Bank, Union Bank of India, Bank of Baroda, Bank of India fell by between 1.25% to 3.39%.

As per the latest data by the Reserve Bank of India, the banking sector lent over Rs 10000 crore in the fortnight ended 13 February 2009. Food credit rose Rs 547.82 crore, while non-food credit rose went up by Rs 9124.95 crore. This is the highest fortnightly growth in bank loans since November 2007.

Despite a steep cut in policy rates in India since October 2008, there has not been a commensurate reduction in lending rates by banks as fears of rising bad loans have made banks cautious in increasing advances.

Rate sensitive real estate shares reversed losses on hopes lower rates will spur housing demand. DLF, Unitech and Indiabulls Real Estate rose by between 0.29% to 3.02%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

Steel stocks extended recent gains on reports steel prices are set to come down by up to Rs 600 a tonne following the government cutting excise duty from 10% to 8%. Jindal Steel, Steel Authority of India, Tata Steel, Bhushan Steel rose by between 0.52% to 9.36%. The cut in prices may spur demand.

Madras Aluminium Company was locked at 5% upper limit at Rs 94.95 after Twin Star Holdings set a price of Rs 105 for acquiring 20% stake in the Indian aluminium maker as part of a delisting offer.

Cement shares extended yesterday's (25 February 2009) gain on reports cement prices are likely to drop by Rs 4 to Rs 5 per 50-kilogram bag following a reduction in excise duty which may boost demand for the commodity. UltraTech Cement, Grasim Industries, Birla Corporation India and ACC rose by between 0.27% to 8.36%. 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.

Everest Kanto Cylinder rose 6.76% after company said its US unit has received orders worth a total $5.8 million from National OilWell Vargo, Rig Solutions Group.

Unitech clocked the highest volume of 80.26 lakh shares on BSE. Satyam Computer Services (76.84 lakh shares), DLF (64.8 lakh shares), Cals Refineries (61.76 lakh shares) and Suzlon Energy (61.37 lakh shares) were the other volume toppers in that order.

Educomp Solutions clocked the highest turnover of Rs 193.16 crore on BSE. Akruti City (Rs 168.41 crore), United Spirits (Rs 146.98 crore), Reliance Industries (Rs 140.73 crore) and ICICI Bank (Rs 125.83 crore) were the other turnover toppers in that order.