Sensex at 2-1/2 month closing high

Key benchmark indices extended recent strong gains as buying by foreign funds and higher US index futures bolstered sentiment. Expectations of a further cut in policy rates by the Reserve Bank of India (RBI) also aided the surge in what a highly volatile trading session today.

Metal, realty, banking and capital goods stocks gained. Index heavyweight Reliance Industries galloped. The BSE 30-share Sensex jumped 196.85 points, or 2.08%, up about 235 points from the day's low. The barometer index today settled at its highest level in 2-1/2 months.

From a three-year closing low of 8,160.40 on 9 March 2009, the BSE Sensex has risen 1,507.50 points or 18.47%.

The market was highly volatile today ahead of the expiry of March 2009 derivatives contracts on Thursday, 26 March 2009. After opening weak, the market regained strength to trade in green for a brief period before losing steam once again. Investors resorted to profit booking after a recent solid surge in share prices. The market bounced back in morning trade as US index futures rose after US President Barack Obama said there are signs of progress in US efforts to revive the world's largest economy.

The market pared gains after surging to the day's high in early afternoon trade. It lost further ground in choppy trade later as US index futures slipped into the red. The market surged in mid-afternoon trade as US index futures once again moved into the green from red. The market extended gains in late trade.

Volatility may remain high tomorrow, 26 March 2009, ahead of the expiry of March 2009 derivatives contracts on Thursday, 26 March 2009. As per reports, rollover of Nifty positions from March 2009 series to April 2009 was around 50% as of Tuesday, 24 March 2009.

Prime Minister Manmohan Singh on Tuesday, 24 March 2009 said India's economy will revive in a big way in six to seven months as stimulus packages start to take effect. On the same day, Planning Commission Deputy Chairman Montek Singh Ahluwalia scaled down the GDP (gross domestic product) growth projection for the current fiscal to 6.5% from the 7.1% increase estimated by the government earlier during the year, owing to the ongoing global crisis.

Meanwhile, traders and brokers can now have a higher exposure in the currency futures market after the market regulator Sebi on Tuesday, 24 March 2009, doubled the gross outstanding limit to $10 million for small traders, $50 million for brokers. However, the limits for banks - the biggest participants in the market so far - have been left untouched at $100 million.

Europe stocks fell after a firm start. Key benchmark indices in France, Germany and UK were down by between 0.71% to 1.1%.

Asian shares were mostly lower today, 25 March 2009, as investors paused to assess whether a US plan to deal with banks' toxic debt would revive the financial system and help pull the economy out of recession. Key benchmark indices in Hong Kong, China, Japan and Singapore were down by between 0.1% and 2%. Key benchmark indices in South Korea and Taiwan were up by between 0.6% and 1.99%.

Japan reported a record fall in exports in February 2009, with no signs of a demand recovery in its key US and European markets. There was also a decline in Japanese imports in the month. The data pointed to more pain for an economy already mired in its worst recession since the 1974 oil shocks, showing both domestic consumption and overseas demand were crumbling under the weight of the global slowdown.

Trading in US index futures indicated the Dow could rise 3 points at the opening bell on Wednesday, 25 March 2009. The Dow futures moved between green and red.

US stocks ended lower on Tuesday, 24 March 2009 giving back some of the previous session's big gains, as investors paused to re-assess the likely success of the government's bank rescue plan. The Dow Jones industrial average fell 115.65 points, or 1.5%, to 7,659.97. The Standard & Poor`s 500 index fell 16.67 points, or 2.03%, to 806.35, while the Nasdaq Composite index fell 39.25 points, or 2.52%, to 1,516.52.

Closer home, fall in headline inflation to a record low has raised expectations of further easing of the monetary policy by the Reserve Bank of India (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%.

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.

Raising funds could become difficult for small and medium enterprises (SMEs) with new lending regulations for banks, popularly known as Basel II norms coming into practice from 1 April 2009. All business units, irrespective of their size, will need to take ratings for their enterprises to secure working capital, loans, and other funds from banks.

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 2,197.10 crore in eight trading sessions from 13 March 2009 to 24 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 has weakened in the past two days after a steep rebound. The rupee was at 50.76 per dollar today, below its previous close of 50.73/74.

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. Mutual funds are likely give support to prices to prop-up year end net asset values (NAVs). The financial year ends on 31 March 2009.

The recent steep volatility in the currency
does not augur well for corporate India as it may result in hedging losses for some firms.

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. Early estimates point a fractured mandate.

An alliance led by the Congress party is ahead in pre-poll surveys carried out by several polls. But in a move which could undermine the chances of a Congress-led alliance getting more seats in the election, RJD supremo Lalu Prasad has 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.

The Congress, meanwhile, has reported sealed a seat-sharing pact with the Nationalist Congress Party (NCP) in the populous Maharashtra state. Relations between the two parties have been prickly as the NCP negotiated with opposition parties to undercut Congress and boost its leader's prime ministerial ambitions. Congress will stand for 26 seats in the state and the NCP for 22. The allies are weighing up their options for a similar deal outside the state.

The Congress party on Tuesday 24 March 2009 said it would extend interest relief to farmers and build on the national job guarantee scheme. The focus on populist measures by Congress may weigh on the stock market sentiment especially at a time when the fiscal deficit has risen sharply. Releasing the party manifesto for the election, the Congress party on Tuesday said it would maintain government control over state-run firms in the manufacturing and finance sectors.

A group of smaller political parties, including the communists, have formally launched a Third Front in a bid to provide an alternative to the two main parties viz. the Congress and the BJP.

The BSE 30-share Sensex was up 196.85 points, or 2.08%, to 9,667.90, its highest closing since 6 January 2009. At the day's high of 9,706.47, the Sensex rose 235.43 points in late trade. At the day's low of 9,430.45, the Sensex fell 40.59 points in early trade.

The market breadth, indicating the overall health of the market, turned positive on BSE with 1,269 shares advancing as compared with 1,239 that declined. A total of 61 shares remained unchanged. The breadth was weak earlier in the day.

The S&P CNX Nifty jumped 45.65 points or 1.55% to 2,984.35. It touched a high of 2,996.50.

The BSE clocked a turnover of Rs 4,051 crore, lower than Rs 4,258.49 crore on Tuesday, 24 March 2009.

Nifty March 2009 futures were at 2990.55, at a premium of 6.20 points as compared to the spot closing of 2984.35. Turnover in NSE's futures & options (F&O) segment was Rs 74,456.63 crore, lower than Rs 78,270.59 crore on Tuesday, 24 March 2009.

The BSE Mid-Cap index was up 0.75% and BSE Small-Cap index rose 0.32%. Both the indices underperformed the Sensex.

The BSE Realty index (up 6.32%), the BSE Oil & Gas index (up 3.66%), the BSE Metal index (up 3.31%), the BSE Bankex (up 3%) outperformed the Sensex.

The BSE PSU index (down 0.01%), the BSE Healthcare index (up 0.16%), the BSE FMCG index (up 0.29%), the BSE Auto index (up 0.44%), the BSE TECk index (up 0.48%), the BSE Consumer Durables index (up 0.7%), the BSE IT index (up 1.02%), the BSE Power index (up 1.68%), the BSE Capital Goods index (up 1.85%) underperfomed the Sensex.

From the 30 share Sensex pack, 22 stocks rose while rest fell. Tata Power Company, Jaiprakash Associates, Reliance Infrastructure, Reliance Communications rose by between 3.96% to 7.51%. While Bharti Airtel, NTPC, Ranbaxy Laboratories fell by between 0.76% to 2.77%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) jumped 5.63% to Rs 1,533.40 ahead of production of gas from KG basin, off the east coast. But the stock came off the day's high of Rs 1,519.90. The company is reportedly expected to start natural gas production from its Krishna Godavari (KG) basin field in early April 2009.

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

GAIL India surged 3.57% on reports the company plans to invest Rs 1,000 crore in setting up 2,000 compressed natural gas dispensing stations on major national highways in the next three years.

Cairn India rose 3.69% on reports the firm is likely to pump out crude oil from its Barmer field in Rajasthan in a month.

Shares of oil marketing companies rose for the second straight day in a row after the government issued oil bonds worth Rs 10,000 crore to compensate them for under-recoveries on sale of petroleum products at a controlled price during the current financial year. BPCL and HPCL rose by between 0.01% and 0.59% respectively.

Indian Oil Corporation rose 0.59% after company said the government has approved a proposal to absorb its subsidiary Bongaigaon Refinery & Petrochemicals (BRPL). Indian Oil will issue four shares for every 37 shares in BRPL. BRPL rose 1.83%.

Indian Oil Corporation has been issued oil bonds worth Rs 5,817.27 crore, while Bharat Petroleum Corporation has been issued bonds worth Rs 2,144.32 crore. Hindustan Petroleum Corporation has got bonds worth Rs 2,038.41 crore.

India's largest commercial vehicle maker by sales Tata Motors fell 1.27% on profit taking after recent sharp gains. The world's cheapest car Tata Nano was unveiled in Mumbai by Tata Group Chairman Ratan Tata on Monday 23 March 2009. The Tata Nano was launched in three models - Base, CX and LX. The booking for Tata Nano will be held between 9 April 2009 and 25 April 2009. The first set of Tata Nano will be delivered in the first week of July 2009. Within 60 days of the closure of bookings, Tata Motors will process and announce the allotment of 1,00,000 cars in the first phase of deliveries, through a computerised random selection procedure.

India's largest car maker by sales Maruti Suzuki India fell 0.07%. As per reports, firm is working towards launching new cars and improvising the existing ones to counter attack Tata Motors' recently unveiled world's cheapest car Tata Nano. In a tussle to capture the Indian passenger car market, Maruti is likely to launch Maruti Splash or Ritz in the second week of May 2009. Ritz will mount a 1.2 litre (KB series) petrol or 1.3-litre diesel engine and will be priced at around Rs 4-5.5 lakh. India's largest tractor maker by sales Mahindra & Mahindra rose 1.55%. While India's largest motorbike maker by sales Hero Honda Motors rose 0.31%.

Some FMCG stocks rose on expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. United Spirits, Tata Tea, ITC, United Breweries rose by between 1.26% to 6.11%. India's largest FMCG firm by sales Hindustan Unilever fell 1.88%. The company's advance tax payment rose 30% to Rs 130 crore in Q4 March 2009 over Q4 March 2008.

Outsourcing focussed IT stocks rose on hopes of a revival in the US economy, the biggest market for IT firms and on a weaker rupee. India's largest software services exporter by sales TCS rose 0.87%. The company's advance tax payment fell 54.3% to Rs 53 crore in Q4 March 2009 over Q4 March 2008.

India's fifth largest IT major by sales HCL Technologies fell 0.48%. India's third largest software services exporter, Wipro rose 0.04% even as its ADR fell 2.99% on Tuesday. 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 1.26% even as its ADR fell 4.92% on Tuesday. Recent reports said 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.

The Indian rupee weakened for the second day on Wednesday, falling to its lowest in a week, weighed by gains in the dollar against the euro and Asian units and demand from importers and oil refiners. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports.

Rate sensitive real estate shares surged on hopes lower rates will spur housing demand. DLF, Indiabulls Real Estate, Housing Development & Infrastructure and Unitech rose by between 2.65% to 16.7%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

Metal shares rose on hopes of a recovery in the global economy and on recent imposition of a safeguard duty the Indian government recently on import of some aluminium products. Steel Authority of India, Sterlite Industries, Tata Steel and Hindalco Industries rose by between 0.5% to 6.48%.

Weak rupee also aided the recovery in metal shares. A slide in the rupee makes imports costlier, reducing the threat of cheap import of metals in India.

Banking stocks gained in volatile trade on hopes lower interest rates may boost lending growth. India's largest bank in terms of assets and branch network State Bank of India rose 1.49%. Its advance tax payment jumped 27.64% to Rs 1810 crore in Q4 March 2009 over Q4 March 2008.

India's largest private sector bank by net profit ICICI Bank rose 3% to Rs 365.75, off the day's low of Rs 347. Its American depository receipts (ADR) fell 3.09% on Tuesday 24 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 3.6%. Its ADR fell 5.85% on Tuesday. Its advance tax payment rose 10% to Rs 275 crore in Q4 March 2009 over Q4 March 2008.

India's biggest dedicated housing finance firm by operating income HDFC rose 2.1% after it announced a 50 basis points reduction in its retail prime lending rate (RPLR) to 14% effective Wednesday 25 March 2009.

Bond yields inched higher in early trade on Wednesday as investors pared positions ahead of the details of the government's borrowing plan for the first six months of the next fiscal year FY 2010. At 9:20 IST, the most traded 6.05% 2019 bond yield was at 6.76%, five basis points above Tuesday's close. It is up 24 points so far this week.

The government plans to borrow a record Rs 362000 crore in FY 2010 and a calendar for the first half will be finalised on Thursday, 26 March 2009. It may be recalled that a solid surge in bond prices (bond prices rise when yields fall) had boosted treasury profits of banks in Q3 December 2008.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) rose 2.54%. As per 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, Punj Lloyd, Praj Industries, ABB rose by between 1.55% to 4.37%.

Unitech clocked the highest volume of 3.66 crore shares on BSE. Cals Refineries (2.62 crore shares), Crompton Greaves (1.27 crore shares), Reliance Natural Resources (1.14 crore shares) and Suzlon Energy (1.12 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 445.36 crore on BSE. Akruti City (Rs 244.86 crore), ICICI Bank (Rs 203.19 crore), Reliance Capital (Rs 168.82 crore) and Reliance Infrastructure (Rs 152 crore) were the other turnover toppers in that order.