Market vaults on signs of economic recovery

Indian equities jumped in a truncated week on signs that the stimulus packages announced by the government since December 2008 and an aggressive rate cuts announced by the central bank since October 2008 have started having some positive impact - lower interest rate have helped automobile sales rebound in the past few months. Interest rates
have dropped drastically over the past few months. Expectations of further rate cuts by the central bank after recent sharp fall in inflation also aided the rally.

The market gained in 2 out of 3 trading sessions in the week. The market remained shut on Tuesday, 10 March 2009 for Id-E-Milad and Wednesday, 11 March 2009 for the Holi festival.

Auto sales rose 10.61% to 10.4 lakh units in February 2009 over February 2008, data released by Society of Indian Automobile Manufacturers (SIAM) on 9 March 2009, showed.

Inflation based on the wholesale price index (WPI) rose 2.43% in the year through 28 February 2009, much lower than previous week's 3.03% rise, data released by the government on 12 March 2009, showed. It was the smallest annual rise in inflation since 8 June 2002 when inflation was at 2.18%. Its lowest ever was 1.13% on 2 February 2002.

Recovery in global stocks also supported the market. Most Asian markets gained for a fourth day on Friday, 13 March 2009, helped by a smaller-than-expected decline in US retail sales and hopes that the largest US banks will survive without a government takeover.

The BSE 30-share Sensex rose 430.79 points or 5.17% to 8,756.61 in the week ended 13 March 2009. The S&P CNX Nifty gained 99.10 points or 3.78% to 2,719.25 in the week.

The Sensex is down 890.70 points or 9.23% in calendar 2009 from its close of 9,647.31 on 31 December 2008. The S&P CNX Nifty is down 239.90 points or 8.1% in calendar 2009 from its close of 2,959.15 on 31 December 2008.

The BSE Mid-Cap index gained 54.06 points or 2.09% to 2,640.36 and the BSE Small-Cap index was up 22.33 points or 0.77% to 2, 934.06 in the week.

The BSE Metal index (up 7.24%), the BSE Bankex (up 6.34%), the BSE Auto index (up 6.81%), the BSE IT index (up 5.69%) outperformed the Sensex.

The BSE Realty index (up 4.58%), the BSE Capital Goods index (up 4.09%), the BSE Power index (up 1.92%), the BSE FMCG index (up 1.6%) underperformed the Sensex.

Foreign institutional investors (FIIs) outflow in March 2009 totaled Rs 2276.20 crore (till 12 March 2009). FII outflow in calendar year 2009 totaled Rs 9217.20 crore (till 12 March 2009).

The BSE 30-share Sensex lost 165.42 points or 1.99%, to settle at 8,160.40 its lowest closing since 2 November 2005 on Monday, 9 March 2009 as subdued-to-weak trend in global markets, a dismal US job data, a weak rupee and concerns of sustained outflow by foreign funds weighed on the domestic bourses.

The Sensex jumped 183.35 points, or 2.25%, to 8,343.75 on Thursday, 12 March 2009. Expectations of further cut in policy rates by the central bank helped the market shrug off a weak data on industrial output. Easing inflation raised hopes for further monetary-policy easing. Sell-off in Bharti Airtel capped sharp gains in the key benchmark indices triggered by rally in battered index pivotals Reliance Industries and ICICI Bank.

Key benchmark indices surged on Friday, 13 March 2009 led by a rally in global equities. The BSE 30-share Sensex jumped 412.86 points or 4.95% to 8,756.61. Equities across the global rallied on speculation the worst might be over for the financial sector. Apart from strong global markets, signs of a recovery in the domestic economy, bolstered investor sentiment.

India's third largest IT exporter by sales Wipro jumped 5.32% to Rs 224.55 in the week. The firm announced on 12 March 2009 that its unit won an outsourcing contract worth Rs 1,182 crore from an Indian government agency.

India's largest electric equipment maker by sales Bharat Heavy Electricals rose 4.69% to Rs 1,374.10. The company on 9 March 2009 announced bagging an order worth Rs 81 crore.

India's largest copper maker by sales Sterlite Industries (India) jumped 13.18% to Rs 283. Foreign brokerage Credit Suisse retained its 'outperform' rating on stock with a target price of Rs 500.

Auto shares were in demand on reports that the Indian defence forces are planning to place immediate orders to buy vehicles to meet their requirements for two years. The major vehicle suppliers for the three defence forces - Mahindra and Mahindra (up 8.8% to Rs 344.80), Ashok Leyland (up 8.75% to Rs 17.40), Maruti Suzuki (up 9.74% to Rs 712.35) advanced.

India's largest commercial vehicle maker by sales Tata Motors surged 16.68% to Rs 161.60. The British government announced a monetary grant to its Jaguar Land Rover unit for producing a new eco-friendly car.

India's largest cellular services provider by market share Bharti Airtel tumbled 7.22% to Rs 558.70 after the telecom regulator announced a cut in a key expense item for network operators, pressuring firms to lower call tariffs. The Telecom Regulatory Authority of India (Trai) reduced termination charges on all domestic phone calls by 33% to 20 paise per minute from 30 paise per minute.

Another reason why Bharti Airtel slumped was news of its chief executive, Manoj Kohli, offloading his holding in the telecom firm through open-market transactions. Kohli, who owned 1,23,000 shares, sold 53,000 shares on 6 March and 70,000 shares on 9 March 2009.

After trading hours on 12 March 2009, Kohli, however, clarified that he sold the shares for personal reasons and that he continues to be the chief executive officer and joint managing director of the company. He further said he still held 1,80,000 options in the company.

India's largest IT exporter by sales Tata Consultancy Services (TCS) spurted 5.36% to Rs 506.55. The company on 10 March 2009 announced signing a multi-year IT solutions contract with German semiconductor maker Infineon Technologies AG.

India's largest bank in terms of assets and branch network State Bank of India rose 1.3% to Rs 953.05. The biggest domestic institutional investor Life Insurance Corporation of India hiked its stake in the state-run bank to 9.16% through open market purchases.

Reliance Industries (up 9.55% to Rs 1,282.35), Larsen & Toubro (up 6% to Rs 614.95), ICICI Bank (up 14.63% to Rs 308.70) and Infosys Technologies (up 6.33% to Rs 1,296.35), were among the major gainers in the week.

Industrial production declined for the second month in a row in January 2009, data released by the government on 12 March 2009, showed. Industrial production declined 0.5% in January 2009 compared to a revised 0.6% fall in December 2008. Manufacturing production fell 0.8% in January 2009 from a year earlier.

The market regulator Securities & Exchange Board of India (Sebi) on Thursday 12 March 2009 proposed relaxing the disclosure norms for rights issues to reduce overall cost of issuance. Rights issues are further issuance of capital made by listed entities to its existing shareholders.

Sebi said it may suffice to have a more restricted set of disclosures rather than exhaustive disclosure requirements about the rights issue and the entity. The argument is that the certain information about the entities that are listed and traded on the exchanges is already available in the public domain.