Investors heave a sigh of relief as Sensex recovers from 3-year trough

Key benchmark indices gained as investors mopped up battered blue chip stocks. IT, metal stocks and index heavyweight Reliance Industries led the rally. FMCG, realty and auto stocks were weak. The BSE 30-share Sensex rose 127.90 points, or 1.56%, off close to 280 points from the day's low.

The BSE Sensex had slumped 1,436.82 points or 14.91% to 8,197.92 on Thursday, 5 March 2009, from a recent high of 9,634.74 on 13 February 2009. It was the lowest closing level of the barometer index in more than three years.

Volatility was high today. After hitting a 4-month low at the onset of the trading session on weak global markets, Indian stocks staged a smart bounce back soon. The recovery gathered steam with the Sensex moving from green to red. After the strong rebound, the market slipped into the red again. Trade was choppy in afternoon trade.

The market surged in mid-afternoon trade on gains in European markets, which opened after Indian market. It extended gain in late trade on higher US index futures.

But a sustained selling by foreign funds amid the global financial sector crisis, a dire state of the global economy, slowdown in the domestic economy, weak rupee and uncertainty about the earnings outlook of India Inc continues to weigh on investor sentiment. That sentiments remains edgy is evident in from the continued weakness in the broad market - both the BSE Small and BSE Mid-cap indices were in the red today.

Chief economic adviser to the finance ministry Arvind Virmani today said the economic slowdown will continue until September 2009. He is, however, optimistic that the government will able to meet its fiscal responsibility targets.

The infrastructure sector output grew 1.4 %in January 2009 from a year earlier, below an unrevised 2.3% rise in December 2008, government data showed on Friday. Output rose an annual 3.6% in January 2008. The infrastructure sector accounts for 26.68% of India's industrial output.

On the flip side, lower interest rate have helped automobile sales rebound in the past few months. The stimulus packages announced by the government since December 2008 has started having some positive impact.

Meanwhile, volatility in the rupee and global commodity prices have added to the woes of India Inc. The slide in the rupee will increase in the cost of servicing overseas debt to the extent of the rupee's slide unless the company (which has overseas borrowings) has adopted an effective hedging strategy.

Foreign institutional investors (FIIs) have pressed heavy sales this year. FII outflow in February 2009 totaled Rs 2707 crore. FII outflow in calendar year 2009 totaled Rs 9128.30 crore (till 5 March 2009). Globally, investors are pulling out money from hedge funds, forcing hedge fund managers to dump assets. As per the proisional figures on NSE, FIIs sold shares worth Rs 274.68 crore and domestic funds bought shares worth Rs 298.94 crore today, 6 March 2009.

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. More recently, fears have intensified about the exposure of Western European banks and companies to deteriorating economic conditions in Eastern Europe.

Domestic institutional investors (DIIs) have been absorbing selling by foreign funds.

However, due to political uncertainty, investors are unlikely to build large positions with general election to be held in mid-April 2008 to mid-May 2009. More so at a time when it is highly unlikely that either Congress or BJP comes to power on its own i.e. without the support of other smaller/regional parties.

The market may recover if a coalition led either by Congress or BJP comes to power. But the recovery will be subject to BJP or Congress led coalition coming to power without a support from the Left front which is against key economic reforms. The market will then look for whether the new government which comes to power undertakes second generation reforms that could bring India back on a strong growth path witnessed in five years between 2003 and 2008.

European shares recovered after an initial slide in cautious trade ahead of the influential US monthly job data. Key benchmark indices in France, Germany and UK were up by between 0.41% to 0.8%.

Asian stocks slipped on Friday led by financial stocks following overnight steep slide in US stocks. Caution also prevail ahead of what is likely to be a dismal US non-farm pay report for February 2009 later in the day. Key benchmark indices in Hong Kong, China, Japan, South Korea, Singapore were down by between 0.3% to 3.5%. But Taiwan's Weighted index rose 0.35%.

Trading in US index futures indicated the Dow could fall 49 points at the opening bell on Friday, 6 March 2009. Earlier, the futures moved between red and green.

US stock indexes on Thursday fell to their lowest levels in more than 12 years, with notable declines in Citigroup (it dipped below $1 for the first time ever) and General Motors.

The global credit crisis sparked by a US housing slump has caused almost $1.2 trillion of losses at financial institutions worldwide. Mortgage delinquencies in the US climbed to the highest level on record, the Mortgage Bankers Association said on Thursday, 5 March 2009. More than 6,00,000 Americans filed claims for jobless benefits for the fifth-straight week, the worst performance since 1982, Labor Department figures showed on Thursday.

The BSE 30-share Sensex was up 127.90 points, or 1.56%, to 8,325.82. At the day's low of 8,047.17, the Sensex lost 150.75 points in early trade. At the day's high of 8,347.74, Sensex rose 149.82 points in late trade.

The S&P CNX Nifty was up 43.45 points, or 1.69%, to 2,620.15. It had hit a low of 2,539.45 in early trade, its lowest since 20 November 2008.

The Sensex is down 1,321.49 points or 13.69% in calendar 2009 from its close of 9,647.31 on 31 December 2008. The S&P CNX Nifty is down 339 points or 11.45% in calendar 2009 from its close of 2,959.15 on 31 December 2008.

The BSE clocked a turnover of Rs 3,329 crore, lower than Rs 3,423.79 crore on Thursday, 5 March 2009.

Nifty March 2009 futures were at 2616, at a discount of 4.15 points as compared to the spot closing of 2620.15. Turnover in NSE's futures & options (F&O) segment increased to Rs 48,734.94 crore from Rs 46,285.97 crore on Thursday, 5 March 2009.

The market breadth, indicating the overall health of the market, was weak on BSE with 1,005 shares advancing as compared with 1,445 that declined. A total of 66 shares remained unchanged.

The BSE Mid-Cap index (down 0.65%) and BSE Small-Cap index (down 0.83%) underperformed the Sensex.

The BSE IT index (up 3.05%), the BSE TECk index (up 2.44%), the BSE Oil & Gas index (up 1.76%), outperformed the Sensex.

The BSE Capital Goods index (up 1.54%), the BSE Power index (up 1.34%), the BSE Metal index (up 1.32%), the BSE Consumer Durables index (up 0.91%), the BSE PSU index (up 0.88%), the BSE Bankex (up 0.24%), the BSE Healthcare index (up 0.16%), the BSE Auto index (down 0.63%), the BSE Realty index (down 0.89 %), the BSE FMCG index (down 1.73%), underperfomed the Sensex

From the 30 share Sensex pack, 22 stocks rose while rest fell. Jaiprakash Associates, ONGC, Reliance Infrastructure, NTPC, Bharti Airtel, Larsen & Toubro rose by between 2.04% to 4.27%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 1.87% to Rs 1.170.55. The stock came off the day's low of Rs 1,118.05, on bargain hunting after a recent steep slide.

The combined crude processing at its two export-focused plants at Jamnagar in Gujarat dived 12.1% to 6,68,450 barrels per day (bpd) in January 2009 over January 2008, data during trading hours on Thursday showed. Reliance commissioned its new 5,80,000 bpd plant in December 2008, turning Jamnagar into the world's biggest refining complex with capacity of 1.24 million bpd.

The board of Reliance Industries on Monday, 2 March 2009, 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.

Outsourcing focussed IT firms surged in late trade on a recent steep slide in the rupee. India's third largest software services exporter, Wipro rose 3.37% even as its ADR fell 3.36% on Thursday. India's largest software services exporter by sales TCS rose 3.84%. India's second largest software services exporter Infosys Technologies rose 3.08% even as its ADR fell 4.73% overnight. But, India's fifth largest IT major by sales HCL Technologies rose 1.19%.

Satyam Computer Services surged 20% after company received approval from Securities and Exchange Board of India to kickstart a process to sell a 51% stake, in a move likely to attract more bidders. Satyam said it expects to soon invite expressions of interest from qualified investors, with more than $150 million in net assets, under a global bidding process.

Geodesic spurted 15.34% to Rs 52.25 after the company said it will buyback up to 25% of equity at a maximum price of Rs 75 per share

Zensar Technologies gained 4.76% after the company said it secured a multi million dollar deal from a UK based utility firm.

The rupee inched up on Friday as stronger shares bolstered hopes capital outflows may steady, but ended down 1% for the week in which it hit a record low as deepening global woes cast a pall over riskier assets. The partially convertible rupee ended at 51.63/65 per dollar, 0.25% stronger than Thursday's close of 51.76/78. On Tuesday, 3 March 2009 the rupee had dropped to an all-time low of 52.20. The rupee has declined sharply in the past few days.

A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports. The rupee is down 5.7% so far in 2009.

The Indian rupee was higher on Friday as a weak dollar overseas boosted sentiment and on gains in the domestic share market. The partially convertible rupee was at 51.70 per dollar, stronger than its previous close of 51.76/78. On Tuesday 3 March 2009, the rupee had hit a record low of 52.20. The rupee has declined sharply in the past few days. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports.

But 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.

India's largest FMCG major by sales Hindustan Unilever fell 2.65%, extending the losses for the second straight day after foreign brokerage JPMorgan Chase & Company cut its rating on the stock to 'underweight' from 'neutral', citing weakening growth and increasing competition.

Other FMCG stocks, REI Agro, ITC, Nestle India fell by between 1.61% to 5.12%.

Rate sensitive realty stocks fell on recent reports falling interest rates have failed to revive housing demand. DLF, Indiabulls Real Estate and Housing Development & Infrastructure , Phoenix Mills fell by between 0.94% to 4.86%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

India's largest car maker by sales Maruti Suzuki India fell 2.77% on reports it could slash the price of its largest-selling model, Alto, as it looks to take on rival Tata Motors's Rs 1-lakh car Nano.

India's largest commercial vehicle maker by sales Tata Motors fell 0.57% as Moody's Investors Service downgraded the corporate family rating of Tata Motors to B3 from B1. The outlook remains negative. The rating change reflects Tata Motor's limited financial flexibility, high gearing as well as imminent refinancing risk in the context of weak market conditions in India and overseas Moody's said.

But, India's largest tractor maker by sales Mahindra & Mahindra rose 1.78% after the company bought back foreign-currency convertible bonds worth $6.5 million at a discount.

Metal stocks reversed early losses supported by China's plans to boost spending. Hindalco Industries, National Aluminum Company, Steel Authority of India, Tata Steel, Sterlite Industries India fell by between 0.22% to 4.38%. China is the world's largest consumer of a number of industrial commodities. It is the world's biggest consumer of copper.

Fears of rising defaults in a weakening economy and hopes that lower lending rates will revive sluggish loan growth triggered volatility in bank stocks.

India's largest private sector bank by net profit ICICI Bank fell 0.11% to Rs 269.30. It hit a high of Rs 284.25 and a low of Rs 252.75. ICICI Bank today said it has cut rates on new home loans by 0.25% to 0.5%. Its American Depository Receipts (ADR) fell 12.26% on Thursday, 5 March 2009.

India's second largest private sector bank by operating income HDFC Bank gained 0.05% to Rs 801.10. It hit a high of Rs 828.45 and a low of Rs 774. Its ADR fell 7.67% overnight.

India's largest bank in terms of assets and branch network State Bank of India rose 0.67%. 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 largest dedicated housing finance firm by operating income HDFC rose 6.4% to Rs 1223.35 after 36.42 lakh shares or 1.28% equity changed hands in six different block deals on BSE and NSE combined.

Dewan Housing Finance Corp rose 10% after the company said its board approved raising Rs 105 crore via a rights issue.

Wall Street Finance soared 17.79% on reports Reliance Capital is set to take a controlling stake in the company.

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.

Bond yields were little changed in thin trade on Friday with sentiment cautious ahead of the Rs 12000-crore debt auction. The market sentiment was hurt after the central bank set a lower cut-off price of Rs 107.60 at the buyback auction of the 7.99% government bonds maturing in 2017, below market expectations of Rs 107.80, late on Thursday.

Between 19 December 2008 and 13 February 2009, commercial banks lent only Rs 8091 crore to firms, one-tenth of the Rs 86978 crore lent in the same period a year earlier, as per the latest RBI data.

India's largest drug maker by sales Ranbaxy Laboratories fell 2.15%, falling for the second straight day on reports the Australian drug regulator is investigating allegations by US drug regulators that one of Ranbaxy's plants falsified data for drug approvals. A recent investigation by the US food and drug administration had found that Ranbaxy Laboratories had falsified data and test results of medicines manufactured at its Himachal Pradesh facility in India to obtain marketing approval in the United States.

Other healthcare stocks, Piramal HealthCare, Panacea Biotech, Pfizer, Novartis India fell by between 0.27% to 8.74%.

Wockhardt rose 1.9% on reports foreign drug firms are vying a significant stake in Wockhardt's biotechnology business.

KEC International was locked at 5% upper limit at Rs 121.60 on bagging three orders aggregating to Rs 365 crore.

Alphageo India surged 4.61% on bagging an order worth Rs 39.01 crore.

Satyam Computer Services clocked the highest volume of 2.48 crore shares on BSE. ICICI Bank (1.52 crore shares), Cals Refineries (92.57 lakh shares), Unitech (81.79 lakh shares) and Jaiprakash Associates (73.26 lakh shares) were the other volume toppers in that order.

ICICI Bank clocked the highest turnover of Rs 411.03 crore on BSE. HDFC (Rs 410.04 crore), Reliance Industries (Rs 236.59 crore), Reliance Capital (Rs 159.71 crore) and Educomp Solutions (Rs 117.39 crore) were the other turnover toppers in that order.