Small-cap, mid-cap indices outperform Sensex

Key benchmark indices posted small gains as auto, banking and metal stocks rose. Volatility was immense. Index heavyweight Reliance Industries (RIL) dropped on profit taking after a recent sharp surge. The BSE 30-share Sensex rose 28.35 points, or 0.28%, up close to 120 points from the day's low but off close to 95 points from the day's high. The Sensex closed above the psychological 10,000 level. It moved moved in and out of the 10,000 level during the day.

Volatility was high. After a firm opening triggered by overnight rally in US stocks, on data showing stepping up of buying by foreign funds and on expectations of a further easing of the monetary policy, the market soon slipped into the red. It bounced back shortly in early trade. After the early surge, the market soon lost ground in morning trade. The market cut losses in early afternoon trade.

The market moved into positive zone in choppy trade on improved infrastructure output data for February 2009. It recovered after slipping closer to the day's in mid-afternoon trade on higher European markets. The market cut gains in late trade as European stocks slipped into the red.

Profit booking may cap upside on the bourses in the near term after a recent solid surge in share prices. The BSE Sensex has jumped 1888.09 points or 23.13% in twelve trading sessions from a three-year closing low of 8,160.40 on 9 March 2009.

The infrastructure sector output grew 2.2 % in February 2009 from a year earlier, above an upwardly revised 1.5% growth in January 2009, data released by government in early afternoon trade showed. Infrastructure sector output had risen an annual 7% in February 2008, and in the 2007/08 fiscal year it had risen 5.6%.The infrastructure sector accounts for 26.7% of industrial output.

Derivatives contracts for March 2009 series which expired on Thursday, 26 March 2009 painted a mixed picture in terms of rollovers. As per reports, marketwide rollover positions from March 2009 series to April 2009 stood at 77% compared with 75% in the previous series. Nifty rollover was 70% from 76%.

European shares were mostly lower in a choppy session on Friday, with energy shares losing ground on weaker crude oil prices. Key benchmark indices in France, UK and Germany fell by between 0.01% to 0.78%.

Asian markets were mixed today, 27 March 2009 as hopes the global economy could not get any worse kept investors buying riskier assets, though US and Japanese data left some doubts lingering. Key benchmark indices in China, Hong Kong and Taiwan were up by between 0.08% and 0.54%. However, key benchmark indices in Japan, Singapore, South Korea fell by between 0.11% and 0.75%.

The global recession, combined with a slide in oil prices, pushed Japanese consumer price inflation to zero in February 2009. Retail sales also fell further than expected, more evidence that slumping global appetite for Japanese exports is hurting demand in the world's second-largest economy.

Trading in US index futures indicated the Dow could fall 49 points at the opening bell on Friday 27 March 2009. US markets rallied on Thursday, 26 March 2009 as investors were encouraged by decent demand for a $24-billion auction of seven-year treasury notes and better-than-expected quarterly earnings from Best Buy. The Dow gained 174.75 points, or 2.25%, at 7,924.56. The S&P 500 index added 18.98 points, or 2.33%, to 832.86. The Nasdaq advanced 58.05 points, or 3.8%, to 1,587.

US GDP was down 6.3% in the fourth quarter beating economists expectation of a 6.2% fall.

Closer home, the Reserve Bank of India Governor D Subbarao on Thursday, 26 March 2009 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 during trading hours on Thursday, 26 March 2009 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 signs 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 22,423 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.

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.

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.

Indian bond and currency markets were closed on Friday for a local holiday. Trading resumes on Monday, 30 March 2009. The partially convertible rupee ended at 50.59/61 per dollar on Thursday off a high of 50.46 but up 0.3 % from the previous close.

Domestic institutional investors have been absorbing heavy selling by foreign funds witnessed in first two months of 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 was up 28.35 points, or 0.28%, to 10,031.45, its highest closing since 6 January 2009. At the day's high of 10,127.09, the Sensex rose 123.99 points in early trade. At the day's low of 9,913.40, the Sensex fell 89.70 points in mid-morning trade.

The S&P CNX Nifty was up 26.40 points or 0.86% to 3,108.65.

The BSE clocked a turnover of Rs 4,317 crore, lower than Rs 4,635.28 crore on Thursday, 26 March 2009.

Nifty April 2009 futures were at 3126.45, at a premium of 17.80 points as compared to the spot closing of 3108.65. Turnover in NSE's futures & options (F&O) segment was Rs 51,171.38 crore much lower than Rs 76,957.01 crore on Thursday, 26 March 2009.

The BSE Mid-Cap index was up 2.09% and BSE Small-Cap index rose 1.59%. Both the indices outperformed the Sensex.

The BSE Metal index (up 4.85%), the BSE Healthcare index (up 2.81%), the BSE Bankex (up 2.61%), the BSE Auto index (up 2.22%), the BSE Consumer Durables index (up 1.61%), the BSE PSU index (up 1.47%), the BSE Capital Goods index (up 1.29%), the BSE Realty index (up 1.23%), the BSE FMCG index (up 0.73%) outperformed the Sensex.

The BSE IT index (down 0.99%), the BSE Oil & Gas index (down 0.12%), the BSE Power index (up 0.32%), the BSE TECk index (up 0.39%), underperfomed the Sensex.

The market breadth, indicating the overall health of the market, was strong on BSE with 1,541 shares advancing as compared with 1,038 that declined. A total of 54 shares remained unchanged.

From the 30 stock Sensex pack 23 stocks gained while the rest fell. Jaiprakash Associates, ACC, Reliance Communications rose by between 3.34% to 8.95%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 1.18% to Rs 1,548 on profit taking after surging 35.67% in the preceding eleven trading sessions. 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.

India's largest oil exploration firm by sales Oil and Natural Gas Corporation rose 0.42% as the company's chairman R.S. Sharma today said in a television interview that the company plans to spend Rs 20000 crore ($3.9 billion) in the next financial year and has no intention of slowing investments.

Shares of oil marketing companies rose for the fourth 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 1.42% and 1.26% respectively.

Indian Oil Corporation rose 0.24% 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.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) rose 2.82%. 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, Crompton Greaves, Punj Lloyd, Praj Industries, ABB, rose by between 1.6% to 10.18%. But India's largest electric equipment maker by sales Bharat Heavy Electricals fell 1.19%.

Metal stocks gained after a measure of six primary metals traded on the London Metal Exchange rose 2.6% on Thursday, the first gain in three days. Steel Authority of India, National Aluminum Company, Sterlite Industries, Hindustan Zinc and Hindalco Industries rose by between 1.59% to 7.02%.

World's sixth largest steel maker by sales Tata Steel shot up 9.13% on reports it intends to partly roll back its recent production cut at UK subsidiary Corus. The stock came off the day's high of Rs 223.20.

Some FMCG stocks rose on expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. United Spirits, Britannia Industries, Tata Tea rose by between 0.97% to 2.3%. India's largest FMCG firm by sales Hindustan Unilever rose 0.4%. The company's advance tax payment rose 30% to Rs 130 crore in Q4 March 2009 over Q4 March 2008.

Banking stocks rose 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 2.88%. 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 2.94%. Its American depository receipts (ADR) rose 4.97% on Thursday 26 March 2009. ICICI Bank's advance tax payment remained unchanged at Rs 250 crore in Q4 March 2009 when compared to Q4 March 2008.

But, India's second largest private sector bank by operating income HDFC Bank rose 0.2. Its ADR rose 1.81% on Thursday. 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 fell 3.88% on profit taking after recent surge. 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 commercial vehicle maker by sales Tata Motors rose 9.32% on speculation a decision of National Advisory Committee on Accounting Standard to postpone implementation of accounting standard 11 until April 2011 is likely to benefit the auto major. he world's cheapest car Tata Nano was unveiled in Mumbai by Tata Motors on Monday 23 March 2009. Bookings for the Nano are expected to soothe the company's funding woes.

India's largest motorbike maker by sales Hero Honda Motors rose 5.54%.

But India's largest car maker by sales Maruti Suzuki India fell 0.69%. Recent report suggested 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 fell 0.01%.

Outsourcing focussed IT firms fell after US based technology outsourcing and consulting firm Accenture reported a drop in quarterly sales and lowered its full-year profit outlook due to a stronger dollar and a slower global economy. India's second largest software services exporter Infosys Technologies fell 2.46%. Its ADR rose 4.25% on Thursday. 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 fell 0.59%. Its ADR gained 4.27% on Thursday. Recently its unit Wipro Infotech won an outsourcing contract worth Rs 1,182 crore from the Employees State Insurance Corporation (ESIC).

But India's largest software services exporter by sales TCS rose 3.24%. The company's advance tax payment fell 54.3% to Rs 53 crore in Q4 March 2009 over Q4 March 2008.

Rate sensitive realty stocks fell on talks falling interest rates have failed to revive housing demand. Indiabulls Real Estate and Akruti City, Unitech fell by between 1.29% to 5%. 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. Ranbaxy Laboratories, Sun Pharmaceutical Industries, Matrix Laboratories, Lupin, Dr Reddy's Laboratories, Lupin Pfizer, Cipla rose by between 0.4% to 20%.

Reliance Natural Resources clocked a highest volume of 3.49 crore shares on BSE. Unitech (1.54 crore shares), GVK Power & Infrastrucutre (1.32 crore shares), IFCI (99.14 lakh shares) and Cals Refineries (89.13 lakh shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 299.37 crore on BSE. Financial Technologies (Rs 281.19 crore), Reliance Capital (Rs 197.59 crore), Reliance Infrastructure (Rs 188.64 crore) and Tata Steel (Rs 176.99 crore) were the other turnover toppers in that order.