Global stocks provide support

The key benchmark indices scored small gains on rebound in world stocks. Volatility was high and sentiment fragile. The BSE 30-share Sensex was up 19.20 points, or 0.23%, up close to 75 points from the day's low and but off close to 55 points from the day's high.

The market was choppy right from the onset of the trading session. Key benchmark indices opened firm tracking recovery in Asian stocks but soon slipped into the red for a brief period before regaining positive zone. The market weakened again in morning trade before cutting losses. It later moved between positive and negative zone. The market weakened again with Sensex hitting intraday low in early afternoon trade. The market soon cut loss. It later moved between positive and negative zone.

The market surged in afternoon trade as Chinese stocks soared. Market gave up all the gains to trade in red in mid-afternoon trade as the severe global economic crisis, a slowdown in the domestic economy, a weak rupee and sustained selling by foreign funds weighed on the investor sentiment. Stocks rose in choppy late trade as firm global markets.

There has been heavy selling by foreign funds this year. FII outflow in February 2009 totaled Rs 2707 crore. FII outflow in calendar year 2009 totaled Rs 8065.10 crore (till 3 March 2009). As per the provisional data on NSE, FIIs sold sares worth Rs 494.22 crore while domestic funds bought shares worth Rs 118.86 crore today, 4 March 2009.

Globally, investors are pulling out money from hedge funds, forcing hedge fund managers to dump assets. At the same time, global banks and insurers are selling assets after amassing $1.2 trillion of credit losses and writedowns since the start of 2007.

A steep slide in the rupee has added to the woes of FIIs. A fall in rupee reduces the valuation of the existing portfolio of foreign funds to the extent of the rupee's decline. The impact can be mitigated by hedging. Currently, foreign funds are dependent on the relatively less transparent over-the-counter markets for hedging. Foreign funds are not allowed to trade in currency futures market in India.

In fact, there appears to a vicious cycle - selling by foreign funds is pressuring the rupee which in turn is reducing FIIs' equity holding. That in turn is perhaps causing continued selling by FIIs so as to avoid further fall in valuation of the portfolio.

The Indian rupee settled firm but trading was choppy tracking domestic market which eked out small gains in a volatile trade. The partially convertible rupee settled at 51.52 compared with Tuesday's close of 51.95/97. The currency had on Tuesday hit a record low beyond 52. The rupee has declined sharply in the past few days.

Reserve Bank of India deputy governor Shyamala Gopinath on Tuesday, 3 March 2009, said the central bank is closely monitoring developments in the foreign exchange market and it will curb excessive volatility.

European equities rebounded on Wednesday after losses in the previous three sessions, with commodity shares gaining on firmer crude and metals prices, while banks advanced after recent declines. Key benchmark indices in France, Germany and UK were up by between 1.98% to 2.71%.

China's Shanghai Composite index was up 6.12% after the latest data showed the pace of contraction in the manufacturing sector eased in February 2009, signaling that government stimulus is taking effect. As per reports, China is set to announce a new stimulus package for the economy.

In fact, stocks were in green across Asia on optimism China and Japan will widen efforts to bolster growth in the region's two largest economies. Japan's lower-house of parliament today approved a bill that will free up about 5 trillion yen ($50 billion) for economic stimulus. Bank of Japan board member Miyako Suda said the central bank should signal that it's prepared to take bold measures to counter the recession. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 1.04% to 3.29%.

Trading in US index futures indicated the Dow could rise 112 points at the opening bell on Wednesday, 4 March 2009. Overnight, US stocks closed lower for the fifth straight session amid ongoing worries about the financial markets and the recession. The Dow Jones industrial average and S&P 500 ended at fresh 12-year lows, while the S&P 500 closed below the 700 level for the first time since 1996.

US economic data continued to surprise to the downside. US auto sales plunged in February 2009 and January pending home sales fell 7.7% verses an expected 3% fall. Federal Reserve chief Ben Bernanke painted a bleak picture of the US banking industry.

The BSE 30-share Sensex was up 19.20 points, or 0.23%, to 8,446.49. At the day's low of 8,373.24 the Sensex lost 54.05 points in early afternoon trade, its lowest since 20 November 2008. At the day's high of 8,501.46, Sensex rose 74.27 points in afternoon trade.

The S&P CNX Nifty was up 22.80 points, or 0.87%, to 2,645.20.

The Sensex is down 1,200.82 points or 12.44% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

The BSE clocked a turnover of Rs 2,859 crore, higher than Rs 2,550.59 crore on Tuesday, 3 March 2009.

Nifty March 2009 futures were at 2625.90, at a discount of 19.30 points as compared to the spot closing of 2645.20. Turnover in NSE's futures & options (F&O) segment was Rs 40,624.43 crore lower than Rs 41,297.48 crore on Tuesday, 3 March 2009.

The market breadth, indicating the overall health of the market, turned weak from positive breadth in early trade. On BSE, 1,004 shares advanced as compared with 1,458 that declined. A total of 67 shares remained unchanged.

The BSE Mid-Cap index (down 0.33%) and BSE Small-Cap index (down 0.64%) underperformed the Sensex.

The BSE Metal index (up 2.8%), the BSE Oil & Gas index (up 1.15%), the BSE Healthcare index (up 1.05%), the BSE Auto index (up 0.92%), the BSE IT index (up 0.67%), the BSE PSU index (up 0.59%), the BSE FMCG index (up 0.47%), the BSE Realty index (up 0.35%), the BSE TECk index (up 0.34%), outperformed the Sensex.

The BSE Bankex (down 1.5%), the BSE Consumer Durables index (down 1.46%), the BSE Capital Goods index (down 0.34%), the BSE Power index (down 0.09%) underperfomed the Sensex.

From the 30 share Sensex pack, 22 stocks gained while rest fell.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 0.88% to Rs 1,209.60 on bargain hunting after a sharp slide in the past two days. However, the stock was volatile. It had lost 5.21% in last two trading sessions after the company set the swap ratio for merger of Reliance Petroluem slightly in favour of Reliance Petroleum before trading hours on Monday, 2 March 2009.

The board of Reliance Industries on Monday approved the absorption of its unit Reliance Petroleum (RPL) and set a share swap ratio giving it direct control of the world's largest refinery complex. Reliance Industries said it would issue one share for every 16 held in RPL, which runs a refinery. Reliance Petroleum rose 0.89%.

Oil exploration firm Cairn India gained 2.92% as crude oil prices rose nearly 4% on the New York Mercantile Exchange on Tuesday, 3 March 2009. India's largest oil exploration firm by sales ONGC rose 2.48%.

Crude oil rose for a second day as global equities rose on speculation China and Japan will widen efforts to bolster growth. Oil for April delivery rose as much as 70 cents, or 1.7 %, to $42.35 a barrel in electronic trading on the New York Mercantile Exchange.

Crude oil had rebounded on Tuesday as bargain-hunters capitalized on a sharp sell-off in the previous session. Light sweet crude finished at $41.65 a barrel on the New York Mercantile Exchange, up $1.50 for the session.

Rate sensitive realty stocks fell as falling property prices will hit profit margins. Peninsula Land, Ansal Properties, Housing Development & Infrastructure and DLF fell by between 0.24% to 3.17%. But Unitech and Indiabulls Real Estate rose 0.94% and 3.14% respectively.

Property prices have slumped in the past few months as buyers have postponed purchases anticipating further fall in prices.

Metal stocks surged after Shanghai copper rallied by its 5% upside limit supported by China's plans to boost spending. Hindalco Industries, Steel Authority of India, Sterlite Industries India and National Aluminum Company rose by between 0.64% to 7.36%. China is the world's largest importer of metals.

As per reports, China will boost spending in areas including infrastructure and manufacturing on top of the 4 trillion yuan stimulus package unveiled in November 2008.

Auto Stocks rose in volatile trade on improved sales in February 2009. India's largest motorcycle maker by sales Hero Honda Motors rose 2.76%. Hero Honda's sales rose 24% to 3,29,055 units in February 2009 over February 2008. India's largest car maker by sales Maruti Suzuki India rose 1.39%. Maruti during trading hours on Monday 2 February 2009 reported 24.1% rise in sales to 79190 units in February 2009 over February 2008.

TVS Motor Company rose 4.19% after its two wheeler sales rose 13% to 1,07,301 units in February 2009 over February 2008.

India's largest tractor maker by sales Mahindra & Mahindra rose 0.7% on reports the company is looking to grow business from the defence sector through global partnerships. Recently, M&M recorded 10.8% growth in total volumes to 29,017 units in February 2009 over February 2008.

India's largest commercial vehicle maker by sales Tata Motors rose 0.81% on reports the company plans to bring the Nano, the world's cheapest car, to Europe by 2011. Tata Motors will begin selling the Rs 1-lakh car Nano in India in April 2009.

Recently, Tata Motors reported improved vehicle sales. Tata Motors' total domestic sales for the month of February 2009 at 42,493 units, were the highest in the last 4 months. Domestic commercial vehicle sales at 23,454 units were the highest since September 2008 and domestic passenger vehicle sale at 19,039 units were was the highest since May 2008. The total domestic sales, however, declined 15% in February 2009 over February 2008.

Outsourcing focussed IT stocks rose on a recent sharp slide in rupee. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports. However, the stocks were volatile. India's third largest software services exporter, Wipro rose 2.67%. Its ADR gained 4.28% on Tuesday. India's largest software services exporter by sales TCS rose 3.57%. India's second largest software services exporter Infosys Technologies rose 0.03% to Rs 1,197.90. Its ADR rose 1.32% overnight.

IT firms derive a lion's share of revenue from exports to US. 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.

Banking stocks fell in a choppy trade as fears of rising defaults in a weakening economy offset gains in American Depository Receipts (ADRs) overnight. India's largest private sector bank by net profit ICICI Bank fell 4.08% to Rs 284.30 on concerns the bank's Russian assets may be vulnerable as firms there struggle to stay afloat. Brokerage CLSA said in a recent note the Russian exposure under ICICI Bank Eurasia was $584 million, consisting largely of loans to customers and placements with banks. The subsidiary was formed in 2005 after ICICI Bank bought Russia's Investitsionno-Kreditny Bank.

Recently, Life Insurance Corporation of India hiked its stake in ICICI Bank by 2.04% to 9.38%.

India's largest bank in terms of assets and branch network State Bank of India fell 1.88%. The bank has reduced deposit rates by 40 to 50 basis points across maturities. The new rates would be effective from 9 March 2009. India's second largest private sector bank by operating income HDFC Bank gained 0.94%. Its ADR rose 2.85% overnight.

Despite a steep cut in policy rates by Reserve Bank of India (RBI) since October 2008, there has not been a commensurate reduction in lending rates by banks as fears of rising bad loans have made them cautious in increasing advances/lending. One reason why banks have not fully passed on the central bank rate cuts to customers is because higher bond yields are pushing up their funding costs. Bond yields and bond prices are inversely related.

After a steep decline in bond yields in Q3 December 2008, the yields have hardened considerably in calendar year 2009 on worries over government's borrowing programme. The yields have started easing since late last week buoyed by hopes the central bank will purchase more bonds at the buyback auction. The central bank is scheduled to buy back Rs 6000-crore of federal debt, with an option to buy an additional Rs 3000 crore on Thursday, 5 March 2009, ahead of a Rs 12000 crore government bond auction on Friday, 6 March 2009.

But a record government borrowing programme planned for the financial year starting from 1 April 2009, may continue to weigh on bond prices which in turn will cap gains in banks stocks.

Cement stocks extended gain on jump in February 2009 cement dispatches and on higher cement prices. Grasim Industries rose 3.39% while Ultratech Cement gained 3.53%. Aditya Birla Group said cement shipments rose 10.1% to 2.92 million tonnes in February 2009 over February 2008. Production for the month rose 9.5% to 2.92 million tonnes, the company said in a statement. The group's cement business includes flagship Grasim Industries and unit UltraTech Cement, with combined production capacity of 35 million tonnes a year.

India's largest cement maker by sales ACC rose 2.01% as cement dispatches were up 4% at 1.75 million tones (mt) in February 2009 over February 2008.

Ambuja Cement rose 2.73% as it reported 11.3 % increase in dispatches at 1.65 mt in February 2009 over February 2008.

As per reports, buoyed by an improved demand, cement makers have raised prices by Rs 5-8 per 50-kilogram bag in Mumbai and Gujarat from Sunday 1 March 2099. This has defeated the government move to pull down cement prices by cutting down excise duty.

Some of the FMCG stocks edged higher on defensive buying. Marico, Tata Tea, Nestle India, ITC, United Breweries rose by between 0.28% to 2.97%.

Some healthcare stocks rose on defensive buying. Cipla, Aurobindo Pharma, Pfizer, Ranbaxy Laboratories, Panacea Biotec, Sun Pharmaceuticals Industries rose by between 0.48% to 5.44%.

Capital goods stocks fell on worries a slowing economy will crimp orders. ABB, AIA Engineering, Bharat Heavy Electricals fell by between 1.3% to 3.39%. But India's largest engineering and costruction frm by sales Larsen & Toubro rose 0.97%.

Cals Refineries clocked the highest volume of 1.55 crore shares on BSE. ICICI Bank (72.95 lakh shares), Satyam Computer Services (69.35 lakh shares), Gateway Distripark (62.46 lakh shares) and Tata Steel (58.9 lakh shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 234.20 crore on BSE. Akruti City (Rs 229.61 crore), ICICI Bank (Rs 211.93 crore), State Bank of India (Rs 130.37 crore) and Educomp Solutions (Rs 119.57 crore) were the other turnover toppers in that order.