Biggest rally in Sensex in more than three months

Banking stocks surged tracking global rally in financial stocks as key benchmark indices made hefty gains on latest effort by the US to revive the economy and stabilize its financial system. Ranbaxy Laboratories spurted and Index heavyweight Reliance Industries galloped. The BSE 30-share Sensex jumped 457.34 points, or 5.1%. It was the biggest single day rally in the Sensex in percentage terms since early December 2008. The barometer index today hit its highest level in more than a month.

Asian and European stocks rose and US index futures surged ahead of a US government announcement today, 23 March 20009, of plans to rid banks of toxic assets. The sentiment was bolstered by expectations that the US Treasury's efforts to stabilise the ailing financial system would speed up a recovery of the US economy. The United States offered financing for private investors as part of a plan to purge banks of up to $1 trillion in toxic assets in its drive to pull the world's biggest economy out of deep recession.

Buying by foreign funds also underpinned sentiment. Expectations of a further easing of the monetary policy remain with headline inflation at a record low.

The fall in headline inflation to a record low has raised expectations of further easing of the monetary policy by RBI to boost demand in the economy. Inflation based on the wholesale price index (WPI) rose 0.44% in the year through 7 March 2009, a record low for the current series, data released by the government during trading hours on Thursday, 19 March 2009, showed. The rate of growth in inflation was much lower than previous week's annual rise of 2.43%.

Interest rates in India have to fall further to channel more funds into infrastructure projects, Planning Commission member Kirit Parikh said on Friday, 20 March 2009. The Reserve Bank of India (RBI) has aggressively cut its policy lending rate by 400 basis points since October 2008, but banks are yet to reduce their individual lending rates to that extent.

Retail inflation is, however, ruling firm even as the whole sale price inflation has touched a record low. Retail inflation as measured by the Consumer Price Index for farm labourer (CPI-AL) and rural labourers (CPI-RL) eased to 10.79% in February 2009, a marginal dip from 11.62% and 11.35% respectively in January 2009. CPI-AL and CPI-RL were at 6.38% and 6.11% in corresponding period last year.

Annual inflation for food articles remains high even though it has eased from the 10 year high of 11.64% witnessed in first week of January 2009. Inflation for food articles stood at 7.35% for first week of March 2009 with double-digit price rise for many items including sugar and gur, pulses and cereals. At the time of announcing a reduction in key short-term interest rates, the RBI said early this month that though consumer price inflation has remained at elevated level due to increase in primary articles prices, it is expected to decline with a lag effect due to sharp fall in the wholesale price inflation.

Earlier the global financial crisis ends and sooner the risk appetite of global investors and global companies improves, better it will be for India Inc. An increase in risk appetite of global investors/global companies will help Indian firms raise overseas funds required for business expansion. The global financial crisis has chocked the overseas funding route for Indian firms.

Lack of funding has hit a slew of long-gestation infrastructure projects in India. World Bank Chief Economist & Senior Vice-President, Dr Justin Yifu Lin, on 13 March 2009, said if India can improve its infrastructure such as electricity, power, transportation and port facilities, it will be well on its path to achieve a 9-10% growth.

Meanwhile, foreign institutional investors are now in buying mode which follows easing of FII selling vigour in the past few days. FIIs bought shares worth a net Rs 1132.80 crore in five trading sessions from 13 March 2009 to 19 March 2009.

Foreign funds can take solace in the recent sharp rebound in the rupee against the dollar. However, the currency has been volatile. The partially convertible rupee was at 50.38 per dollar, above Friday's close of 50.66/68. A recent sharp slide in the rupee to a record low had resulted in a depreciation in the value of FIIs equity portfolio to the extent of the fall in rupee. The rupee hit a record low beyond 52 per dollar early this month.

Domestic institutional investors have been absorbing heavy selling by foreign funds in calendar year 2009.

However, the upside on the domestic bourses will be capped in the next two months due to political uncertainty ahead of parliamentary election to be held between mid-April 2009 to mid-May 2009. More so at a time when it is highly unlikely that either Congress or BJP will come to power on its own, i.e., without the support of other small/regional parties. An alliance led by the Congress party is ahead in pre-poll surveys carried out by several polls.

However, in a move which could undermine the chances of a Congress-led alliance getting more seats in the election, RJD supremo Lalu Prasad today announced candidates for 28 of the 40 constituencies in Bihar including from the three seats where Congress has sitting MPs. RJD is one of the key constituents of the current Congress-led UPA government at the Centre.

Meanwhile, a good news for the Asian emerging markets is that the region accounted for the bulk of the healthy inflow into emerging market equities funds during the week ended 18 March 2009, according to the latest data from fund tracker EPFR Global. Emerging market equities, among the riskier asset classes, saw a healthy net inflow of $350.3 million in the latest week. Funds focused on Asia ex-Japan made up the bulk of that overall amount, with a net inflow of $409.2 million.

However, the Indian market may remain volatile in the next few days ahead of the expiry of March 2009 derivatives on Thursday, 26 March 2009.

Meanwhile in a move that could boost turnover market regulator Security and Exchange Board of India (Sebi) plans to introduce new derivative products like lower-value contracts on individual stocks in the domestic derivative market in a bid to encourage retail investors in the option and future market. The derivatives market review committee has recommended mini contract that would be fourth or a tenth in size of a normal derivative contract besides some measures to increase participation and liquidity in the market. The Sebi panel also recommend increase in tenure of longer-term options up to three years to attract more investors and bring transparency in the system.

The Sebi's committee on derivatives market has also recommended making margining systems simpler. The committee has recommended that the margining system be made more straightforward through the introduction of portfolio-based and cross-margining systems.

European shares rose in early trade on Monday with financials the major gainers as investors trained their sights on a US Treasury plan to buy toxic assets from banks. Key benchmark indices in France, Germany and UK were up by between 1.61% to 1.95%.

Asian markets surged today, 23 March 2009 on optimism that the US government stimulus efforts will revive lending and ease the global economic slump. Key benchmark indices in China, Hang Seng, Japan, Singapore, South Korea and Taiwan were up by between 1.95% and 4.78%.

Trading in US index futures indicated the Dow could rise 205 points at the opening bell on Monday, 23 March 2009, as investors awaited the release of a US plan to stabilize the financial system. A Wall Street Journal report late Sunday, 22 March 2009, cited US Treasury Secretary Timothy Geithner as saying that the only way to resolve the financial crisis was to work with the private sector to remove troubled assets clogging banks' balance sheets.

US stocks declined on Friday, 20 March 2009 as the Federal Reserve's plan to rekindle consumer and small business lending fell short of expectations and General Electric was hit by analysts' bearish comments. The Dow Jones Industrial Average slipped 122.42 points, or 1.65%, to 7,278.38. The Standard & Poor's 500 Index shed 15.50 points, or 1.98%, to 768.54 and the Nasdaq Composite Index lost 26.21 points, or 1.77%, to 1,457.27.

The BSE 30-share Sensex jumped 457.34 points, or 5.1%, to 9,424.02, its highest closing since 13 February 2009 and its biggest one-day rise in percentage terms since early December 2008. At the day's high of 9,454,69, the Sensex rose 488.01 points in late trade. At the day's low of 9,040.30, the Sensex gained 73.62 points in early trade.

The S&P CNX Nifty gained 133.85 points or 4.73% at 2939.90.

From a three-year closing low of 8,160.40 on 9 March 2009, the BSE Sensex has risen 1,263.62 points or 15.48%.

The BSE clocked a turnover of Rs 3,709 crore, higher than Rs 2,942.83 crore on Friday, 20 March 2009.

Nifty March 2009 futures were at 2936.50, at a discount of 3.40 points as compared to the spot closing of 2939.90. Turnover in NSE's futures & options (F&O) segment surged to Rs 63,299.50 crore from Rs 43,647.51 crore on Friday, 20 March 2009

The BSE Mid-Cap index was up 2.73% and BSE Small-Cap index rose 2.01%. Both the indices underperformed the Sensex.

The BSE Bankex (up 6.66%), the BSE Oil & Gas index (up 6.4%), the BSE Metal index (up 6.31%) outperformed the Sensex.

The BSE PSU index (up 4.21%), the BSE Power index (up 3.66%), the BSE TECk index (up 3.35%), the BSE Healthcare index (up 3.35%), the BSE Capital Goods index (up 2.84%), the BSE IT index (up 2.44%), the BSE Auto index (up 2.35%), the BSE Consumer Durables index (up 2.31%), the BSE FMCG index (up 2.05%), the BSE Realty index (up 1.39%) underperfomed the Sensex.

The market breadth, indicating the overall health of the market, was strong on BSE with 1,630 shares advancing as compared with 923 that declined. A total of 60 shares remained unchanged.

From the 30 share Sensex pack, 29 stocks rose while rest fell. Reliance Infrastructure, HDFC, Reliance Communications, Jaiprakash Associates rose by between 6.19% to 9.88%.

Rate sensitive real estate shares rose on hopes lower rates will spur housing demand. Indiabulls Real Estate, Housing Development & Infrastrucutre and Unitech rose by between 3.71% to 3.81%. While India's largest realty major by market capitalization DLF fell 2.16%.Most of the realty deals including sale of commercial property and housing sales is driven by finance.

Some FMCG stocks rose on expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. Dabur India, Tata Tea, ITC, REI Agro, Marico rose by between 0.55% to 2.83%. India's largest FMCG firm by sales Hindustan Unilever rose 2.45%. The company's advance tax payment rose 30% to Rs 130 crore in Q4 March 2009 over Q4 March 2008.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) rose 3.35% on recent reports L&T and Grasim Industries are on the verge of settling their 7-year old legal dispute over Grasim`s 0.62% stake in L&T and the latter`s 11.49% stake in Ultratech, the Birla group cement firm. Grasim Industries and Ultratech Cement are Aditya Birla group companies. Other capital goods stocks, Bharat Heavy Electricals, ABB, Praj Industries, Crompton Greaves rose by between 0.64% to 6.54%.

India's largest drug maker by sales Ranbaxy Laboratories rose 10.8% after company said drug regulators in the UK and Australia had issued "good manufacturing practice" certificates for its Paonta Sahib facility in India. The stock was the top gainer form the Sensex pack. In February 2009, the US Food and Drug Administration halted reviews of drug applications from Paonta Sahib plant saying it had falsified data. Other healthcare stocks, Dr Reddy's Laboratories, Sun Pharmaceuticals Industries, Panacea Biotec, Cipla, Biocon, Pfizer, Lupin, rose by between 0.79% to 5%.

India's largest commercial vehicle maker by sales Tata Motors rose 3.2%. The company announced the launch of its much awaited Rs 1 lakh small car Nano in Mumbai after market hours today. Just ahead of the launch Chairman Ratan Tata said in Mumbai that Tata Motors will be allocating 1,00,000 cars through a system of lottery and this will be price protected. The actual deliveries of the cars would start from July 2009, he said. The company is also looking to develop an export model for the US market but that would not be until 2011, Tata said.

Meanwhile, Tata Motors Managing Director Ravi Kant said Tata Motors is seeing an upturn in automobile sales on month-on-month basis

Other auto stocks Mahindra & Mahindra, Hero Honda Motors Maruti Suzuki India, rose by between 0.39% to 3.78%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 7.56% to Rs 1,439.80 on reports it may get to use the gas it produces. The firm is expected to use the natural gas as fuel for its captive power projects, apart from other industrial uses such as heating. Under the current gas utilisation policy, RIL can't use its own gas.

The company is expected to start production of gas from KG basin, off the east coast, shortly. Meanwhile, RIL is reported to be in talks with Essar Oil to source petroleum products from the latter's refinery in Gujarat to restart its retail outlets that were shut for nearly a year.

RIL's advance tax payment fell 16.47% to Rs 370 crore in Q4 March 2009 over Q4 March 2008.

Cairn India gained 6.1% after the crude oil prices rose towards $53 a barrel in Asian electronic trading on Monday, 23 March 2009. India'a largest oil exploration firm by sales ONGC rose 5.35%. Rise in crude oil prices would result in higher realizations from crude sales for the oil exploration firm.

Metal stocks jumped on a surge in metal prices on London Metal Exchange. Steel Authority of India, Hindustan Zinc, Sterlite Industries, Tata Steel, National Aluminum Company and Hindalco Industries, rose by between 2.35% to 10.39%.

Banking shares surged on hopes lower interest rates may boost lending growth. India's largest private sector bank by net profit ICICI Bank rose 7.36% even as its American depository receipts (ADR) fell 6% on Friday, 20 March 2009. ICICI Bank's advance tax payment remained unchanged at Rs 250 crore in Q4 March 2009 when compared to Q4 March 2008.

India's second largest private sector bank by operating income HDFC Bank rose 5.6% even as its ADR fell 4.88% on Friday. Its advance tax payment rose 10% to Rs 275 crore in Q4 March 2009 over Q4 March 2008.

India's largest bank in terms of assets and branch network State Bank of India rose 7.33%. Its advance tax payment jumped 27.64% to Rs 1810 crore in Q4 March 2009 over Q4 March 2008.

Outsourcing focussed IT stocks rose hopes of a revival in the US economy, the biggest market for IT firms. India's largest software services exporter by sales TCS rose 1.96% The company's advance tax payment fell 54.3% to Rs 53 crore in Q4 March 2009 over Q4 March 2008. The company during trading hours on Monday 16 March 2009 said its promoter Tata Sons has pledged more than 12.06 crore shares or 12.33% of the equity capital of the firm.

India's fifth largest IT major by sales HCL Technologies fell 0.48%. India's third largest software services exporter, Wipro gained 3.28% even as its ADR fell 2.8% on Friday. Recently its unit Wipro Infotech won an outsourcing contract worth Rs 1,182 crore from the Employees State Insurance Corporation (ESIC).

India's second largest software services exporter Infosys Technologies rose 2.57% on reports it may win a large IT project from the government, which will run on a transaction-based pricing model, similar to the passport processing contract its larger rival Tata Consultancy Services (TCS) won last year. The contract is among the many large IT contracts that are up for bidding from government departments or public sector undertakings, reports suggest. Its ADR fell 3.21% on Friday.

The Indian rupee climbed on Monday as rising Asian stock markets revived hopes of capital inflows into the local share market. A stronger rupee affects operating margins of IT firms negatively as they earn most of their revenues from exports.

Reliance Infrastructure surged 9.88% on reports the company is open to bidding for the over Rs 12,000 crore Hyderabad Metro Rail project if Maytas Infra backs out.

Ballarpur Industries clocked the highest volume of 1.78 crore shares on BSE. Suzlon Energy (1.05 crore shares), Reliance Natural Resources (98.63 lakh shares), Satyam Computer Services (78.90 lakh shares) and GVK Power Infrastructure (78.40 lakh shares) were the other volume toppers in that order.

Akruti City clocked the highest turnover of Rs 561.60 crore on BSE. Reliance Industries (Rs 249.65 crore), Reliance Capital (Rs 178.08 crore), ICICI Bank (Rs 154.13 crore) and Educomp Solutions (Rs 133.12 crore) were the other turnover topper in that order.