Sensex vaults 22.5% in 11 trading sessions

Fall in headline inflation to a record low and short covering in the derivatives segment ahead of the expiry of the near-month March 2009 contracts lifted the barometer index BSE Sensex above the psychological 10,000 mark in mid-afternoon trade. The Sensex had last had hit the 10,000 mark on 7 January 2009, the day Satyam Computer unveiled India's biggest corporate fraud and triggered a market slide. The S&P CNX Nifty breached the psychological 3,000 mark.

A slide in inflation to near zero reinforced expectations of a further easing of the monetary policy by the Reserve Bank of India (RBI). Stepping up of buying by foreign funds, overnight gains in US stocks, higher Asian markets and higher US index futures also bolstered sentiment.

However, the market came off the higher level in late trade soon after a steep surge took the Sensex past 10,000 mark in mid-afternoon trade. market slide. The BSE 30-share jumped 335.20 points, or 3.47%, off close to 60 points from the day's high.

Auto, capital goods, banking, IT and metal stocks surged. But index heavyweight Reliance Industries (RIL) came off the day's high in late trade.

Reserve Bank of India Governor D Subbarao today said the slowdown in India's economic expansion has been steeper than previously estimated and the challenge will be to arrest the moderation in growth. He said a painful adjustment was inevitable until the economy recovered and stimulus measures were the right step in the current extraordinary situation.

The RBI governor said there is a cost to further fiscal stimulus and more borrowings will put pressure on credit markets. The RBI governor said 2009/10 will be a challenging year unless business confidence and investment revived, and said earlier cuts in policy rates needed to flow through to the economy. "We set the policy rates but policy rates have to transmit through the banks," Subbarao said.

Inflation based on the wholesale prices rose 0.27% in the 12 months to 14 March 2009, a record low and below the previous week's annual rise of 0.44%, data released by the government in mid-morning trade showed. The 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.

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.

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, there are sings that the credit flow to businesses is improving. During the fortnight ended 13 March 2009, loans sanctioned by scheduled commercial banks (SCBs), including regional rural banks, went up by Rs 22423 crore. This was the third fortnight in a row when credit flow went up. Earlier, an extreme risk aversion by banks had chocked credit flow to the industry - the lifeline of business.

European shares moved in and out of positive zone after a five-day rally as investors remained worried about the health of the financial sector even as recent US data raised hope for a recovery. Key benchmark indices in UK and Germany were up by between 0.01% to 0.49%. But France's CAC 40 fell 0.08%.

Asian stocks rose today, 26 March 2009 lifting the region's benchmark index to a two-month high, as better-than- expected US economic reports fueled optimism that global growth is responding to government stimulus measures. Key benchmark indices in Hong Kong, Japan, Singapore, South Korea and Taiwan were up by between 0.75% and 3.78%.

Trading in US index futures indicated the Dow could rise 50 points at the opening bell on Thursday, 26 March 2009. US stocks advanced in a volatile session on Wednesday, 25 March 2009 as unexpected growth in durable-goods orders and new-home sales stimulated confidence the economy is improving. The Dow Jones industrial average rose 89.84 points, or 1.17%, to 7,749.81. The Standard & Poor`s 500 index rose 7.63 points, or 0.95%, to 813.88, while the Nasdaq Composite index rose 12.43 points, or 0.82%, to 1,528.95.

The US February 2009 new home sales increased by 4.7% to 337,000 compared with January 2009, as against an expected decline of 2.9%. Commerce Department's report showed durable goods orders rose 3.4% in February 2009 over the previous month to $165.6 billion, as against an estimated 2.5% fall.

Closer home, 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.

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 have stepped up buying of Indian stocks which follows easing of FII selling vigour in the past few days. FIIs bought shares worth a net Rs 2,494.70 crore in nine trading sessions from 13 March 2009 to 25 March 2009. According to provisional data on NSE, foreign institutional investors (FIIs) were net buyers worth Rs 348.65 crore while mutual funds bought shares worth Rs 8.92 crore on Wednesday, 25 March 2009.

Foreign funds can take solace in the recent sharp rebound in the rupee against the dollar. However, the currency has been volatile. 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.

The Indian currency rose in early trade on Thursday 26 March 2009 helped by gains in other Asian currencies but month-end demand for the US unit from refiners and importers could limit gains. The partially convertible rupee was at 50.72 per dollar, higher than its Wednesday's close of 50.74/75.

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.

Meanwhile, the National Advisory Committee on Accounting Standards (Nacas), has reportedly favoured suspending for two years a key rule that requires firms to mark-to-market (MTM) foreign exchange assets and liabilities, a decision which is favourable for corporate India.

Accounting Standard-11 mandates MTM provisioning in the P&L a/cs for forex-related gains and losses. It requires that forex assets & liabilities be recorded at a fair value on the date of preparation of the balance sheet. The demand to suspend this rule, known in accounting circles as AS-11, was made by the Confederation of Indian Industry (CII) on grounds that it could severely distort the earnings of many companies. It was contended that this accounting standard, designed to address normal conditions, should be suspended for the time being, as the present market conditions were not normal.

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.

As per reports, BJP's manifesto is likely to be even more populist than that of the Congress party. The BJP looks set to sell rice to families below the poverty line at the hugely subsidised price of Rs 2 a kilo. Congress has already promised to sell 25 kilos of wheat or rice per month at Rs 3 a kilo.

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.

A latest jolt to the Congress party came from a decision of the regional party in Tamil Nadu viz. the PMK on Thursday, 26 March 2009, to join hands with the All India Anna Dravida Munnetra Kazhagam (AIADMK). PMK is a part of the ruling Congress-led United Progressive Alliance at the centre. The PMK's decision to join AIADMK could give impetus to the Third Front if the PMK and AIADMK join it.

The BSE 30-share Sensex advanced 335.20 points, or 3.47%, to 10,003.10, its highest closing since 6 January 2009. At the day's high of 10,061.36, the Sensex rose 393.46 points in late trade. At the day's low of 9,739.93, the Sensex rose 72.03 points in early trade.

The BSE Sensex has risen 1,842.70 points or 22.58% in eleven trading sessions from a three-year closing low of 8,160.40 on 9 March 2009

The S&P CNX Nifty was up 97.90 points or 3.28% to 3,082.25.

The market breadth, indicating the overall health of the market, was strong on BSE with 1,394 shares advancing as compared with 1,163 that declined. A total of 56 shares remained unchanged.

The BSE clocked a turnover of Rs 4,607 crore, higher than Rs 4,097.44 crore on Wednesday, 25 March 2009.

Nifty April 2009 futures were at 3075.50, at a discount of 6.75 points as compared to the spot closing of 3082.25. Turnover in NSE's futures & options (F&O) segment increased to Rs 76,957.01 crore from Rs 74,456.63 crore on Wednesday, 25 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 Capital Goods index (up 5.42%), the BSE Power index (up 4.02%), the BSE Metal index (up 3.97%) outperformed the Sensex.

The BSE Realty index (down 4.54%), the BSE Healthcare index (up 1.21%), the BSE Consumer Durables index (up 2.26%), the BSE Oil & Gas index (up 2.42%), the BSE FMCG index (up 2.67%), the BSE PSU index (up 2.74%), the BSE Auto index (up 3.03%), the BSE TECk index (up 3.25%), the BSE IT index (up 3.29%), the BSE Bankex (up 3.38%) underperfomed the Sensex.

From the 30 share from the Sensex pack 27 stocks gained while rest fell. Reliance Infrastructure, ONGC, Tata Power Company, Bharti Airtel rose by between 4.91% to 5.57%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 2.16% to Rs 1,566.55. 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.

Shares of oil marketing companies rose for the third 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 2.6% and 2.31% respectively.

But Indian Oil Corporation fell 0.85% after company said on Wednesday, 25 March 2009 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.

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.

Rate sensitive real estate shares fell on recent reports falling interest rates have failed to revive housing demand. DLF, Indiabulls Real Estate, Akruti City fell by between 0.31% to 55.06%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

Some healthcare stocks rose on expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. Matrix Laboratories, Lupin, Dr Reddy's Laboratories, Lupin Pfizer, Cipla rose by between 0.22% to 4.29%.

Outsourcing focussed IT stocks rose on hopes of a revival in the US economy, the biggest market for IT firms. India's largest software services exporter by sales TCS jumped 5.94%. The company's advance tax payment fell 54.3% to Rs 53 crore in Q4 March 2009 over Q4 March 2008.

India's second largest software services exporter Infosys Technologies rose 3.06%. Its ADR rose 2.25% on Wednesday. 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.

India's third largest software services exporter, Wipro rose 5.03%. Its ADR gained 0.54% on Wednesday. Recently its unit Wipro Infotech won an outsourcing contract worth Rs 1,182 crore from the Employees State Insurance Corporation (ESIC).

The Indian rupee surged on Thursday helped by gains in other Asian currencies but month-end demand for the US unit from refiners and importers could limit gains. A stronger rupee affects operating profit of IT firms negatively as they earn most of their revenues from exports.

Metal stocks gained on a recent solid surge in metal prices on the London Metal Exchange and on imposition of a safeguard duty by the Indian government recently on import of some aluminium products. Steel Authority of India, National Aluminum Company, Tata Steel, Hindustan Zinc and Hindalco Industries rose by between 1.06% to 5.46%.

Rate sensitive auto shares gained on hopes lower interest rates and fall in fuel prices would spur demand for vehicles which is mainly driven by finance. India's largest commercial vehicle maker by sales Tata Motors rose 7.94%. The world's cheapest car Tata Nano was unveiled in Mumbai by Tata Group Chairman Ratan Tata on Monday 23 March 2009. Bookings for the Nano are expected to soothe the company's funding woes.

India's largest car maker by sales Maruti Suzuki India rose 5.07% on recent report 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 motorbike maker by sales Hero Honda Motors rose 1.79%. India's largest tractor maker by sales Mahindra & Mahindra rose 1.58%.

Banking stocks gained after Reserve Bank of India (RBI) on Wednesday 25 March 2009 issued fresh norms for the treatment of provisions for restructured accounts, standard assets, and non-performing assets (NPAs), a move that will help improve the financial health of banks. India's largest bank in terms of assets and branch network State Bank of India rose 4.17%. 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 2.31% to Rs 374.20. But the stock was off the day's high of Rs 376.70. Its American depository receipts (ADR) remained flat on Wednesday 25 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 1.37%. Its ADR rose 4.65% on Wednesday. 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 3.51%, extending gain for the second straight day after it announced a 50 basis points reduction in its retail prime lending rate (RPLR) to 14% effective Wednesday 25 March 2009.

The new RBI norms are expected to improve capital adequacy and bring down the level of net NPAs. Under the revised norms, the banks can use the provisions made for decline in the fair value of restructured advances (standard assets and NPAs) for netting from relative assets.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) rose 6.1%. 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, Crompton Greaves, Punj Lloyd, Praj Industries, ABB, rose by between 0.49% to 14.1%.

Some FMCG stocks rose on expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. Nestle India, Britannia Industries, Marico, Tata Tea, ITC, United Breweries rose by between 0.52% to 4.23%. India's largest FMCG firm by sales Hindustan Unilever rose 1.85%. The company's advance tax payment rose 30% to Rs 130 crore in Q4 March 2009 over Q4 March 2008.

Unitech clocked the highest volume of 3.7 crore shares on BSE. Motherson Sumi (3.42 crore shares), Cals Refineries (1.74 crore shares), GVK Power Infrastructure (1.09 crore shares) and IFCI (95.77 lakh shares) were the other volume toppers I that order.

Akruti City clocked the highest turnover of Rs 545.49 crore on BSE. Reliance Industries (Rs 370.53 crore), Motherson Sumi (Rs 206.66 crore), ICICI Bank (Rs 163.49 crore) and Reliance Infrastructure (Rs 135.79 crore) were the other turnover toppers in that order