Bulls call the shots

Key benchmark indices extended gains for the third day in a row after a near 5% fall on Monday 30 March 2009, led by gains in banking, capital goods, realty and metal stocks. Firm global equities and data showing resumption of buying by foreign funds triggered a solid rally on the domestic bourses today. Inflation hovered at near zero level reinforcing expectations of a further easing of the monetary policy by the central bank and boosting stocks.

The barometer index BSE Sensex settled at its highest level in nearly five months. The Sensex jumped 446.84 points, or 4.51%. The barometer index today also crossed the psychological 10,000 mark. The Sensex had hit 10,000 mark late last week. However, a near 5% slide on Monday, 30 March 2009, had pulled it below that level.

Expectations of a further easing of the monetary policy by the Reserve Bank of India (RBI) aided the rally. Inflation as measured by the wholesale price index rose 0.31% in the 12 months to 21 March 2009, marginally above the previous week's annual rise of 0.27%, government data showed today, 2 April 2009. The annual inflation rate was 7.85% during the corresponding week of the previous year.

Meanwhile, as per reports the Ministry of Corporate Affairs (MCA) has accepted the recommendation of the National Advisory Committee of Accounting Standards (Nacas) to defer implementation of Accounting Standard 11 (AS-11) which deals with accounting treatment of foreign currency transactions. According to AS-11, companies need to report a gain or loss every quarter after taking into account the value of their foreign exchange (forex) dent at the quarter-end currency rates. With MCA nod for the Nacas's decision, the companies need not report mark-to-market losses or gains in this regard.

Some of the companies which would benefit significantly from this step are Tata Steel, Tata Motors, JSW Steel, Mahindra & Mahindra (M&M) and Ranbaxy among others. The deferment could also include companies that import key raw materials and firms that pay royalty.

European shares rose on Thursday on hopes that an economic downturn is moderating, with investors training their sights on a G20 leaders' meeting in London. Key benchmark indices in France, Germany and UK were up by between 2.66% to 3.94%.

The European Central Bank (ECB) today cut its key interest rate to 1.25%, a fresh record low. Yet, it was a smaller-than-expected cut. Most economists had expected a half-point cut to 1%.

Meanwhile, the latest data in UK was positive. The Nationwide Building Society said UK house prices unexpectedly rose 0.9% in March 2009. The average house price rose for the first time since October 2007, Nationwide noted. The rise followed a 1.9% drop in prices in February 2009.

Asian stocks shot to a three-month high on Thursday, building a three-day rally on hopes the U.S. economy has bottomed. The key benchmark indices in China, Hong Kong, Singapore, Japan, South Korea, Singapore and Taiwan rose by between 0.72% to 7.41%.

US stocks surged on Wednesday, 1 April 2009, after the Institute for Supply Management said its factory index increased to 36.3 last month, a third consecutive advance. Another data showed US pending home resales rose 2.1% in February 2009, exceeding economists' forecasts.

The latest US data came after some other reports had recently suggested that the worst of the global economic recession may be over. US durable-goods orders rose in February 2009, Chinese urban investment surged 26.5% in the first two months of the year, and German investor confidence reached its highest level since July 2007 in March 2009. The latest data had also showed that the rate of contraction in European manufacturing and services industries is slowing. Japanese companies including automaker Nissan Motor Co. have said that they will increase production in coming months.

Even so, bad news still pervades. Data released yesterday showed that Japanese business confidence plunged to a record low, Chinese manufacturing is shrinking and German retail sales unexpectedly fell. Companies in the US cut an estimated 742,000 workers in March 2009, the most since records began in 2001, according to ADP Employer Services.

US auto sales continued sliding in March 2009 but the auto makers pointed to a sales rebound in the last week of the month.

Trading in US futures showed the Dow could rise 132 points at the opening bell on Thursday, 2 April 2009.

Closer home, Indian manufacturing activity contracted for a fifth straight month in March 2009 as demand remained depressed by the global economic downturn, although there were some signs of improvement, a survey showed on Wednesday, 1 April 2009. The new orders index rose to 49.5 in March 2009 from 45.9 in February 2009.

Signs of improvement in the manufacturing sector has helped offset dismal exports data. India's exports fell an annual 21.7% in February 2009 to $11.91 billion, data released by the government duding trading hours on Wednesday, 1 April 2009, showed. It was a fifth straight monthly fall in exports as the global slowdown slashed demand for Indian goods. The trade deficit narrowed to $4.9 billion in February 2009 from $6.1 billion in January 2009 due to a sharp fall in imports. Imports fell an annual 23.3% to $16.82 billion in February 2009. Oil imports fell 47.5% during the month from a year earlier to $4.05 billion.

Prime Minister Manmohan Singh on 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.

Indian corporate bonds sales posted their best quarter on record as government-backed infrastructure and finance companies raised funds to bolster their capital. Indian companies raised Rs 37800 crore from bonds in Q1 March 2009, 44% more than in the same period a year earlier. State-owned lender India Infrastructure Finance Co. raised Rs 7370 crore in the biggest bond sale of the quarter, followed by a Rs 3950-crore issue by the National Bank for Agriculture & Rural Development, known as Nabard.

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.

India's fiscal deficit for the April-February 2009 period was Rs 3,07,000 crore ($61 billion), or 94.1% of an upwardly revised budget target, a government statement said on Tuesday, 31 March 2009. In February 2009, the government revised upwards its fiscal deficit estimate for the year ending 31 March 2009 to Rs 3, 27, 000 crore, equivalent to 6% of gross domestic product from 2.5% estimated earlier. The deficit has widened after the government announced extra spending of close to Rs 1,50,000 to cover a farm debt scheme, subsidies and steps to stimulate a slowing economy.

Foreign funds have resumed buying of Indian stocks. As per the provisional data foreign funds bought shares worth a net Rs 173.75 crore on Wednesday, 1 April 2009. The inflow followed heavy sales in the preceding three trading sessions. Foreign funds dumped stocks worth a net Rs 1266.70 crore in three trading sessions from 27 March 2009 to 31 March 2009. Before the selling, foreign institutional investors had mopped up stocks worth Rs 3635 crore in a short span from 17 March 2009 to 26 March 2009.

However, a recent sharp volatility in the rupee may dissuade fresh buying by foreign funds. The rupee has bounced back after hit a record low beyond 52 per dollar early last month.

The Indian rupee rose for a second straight session on Thursday 2 April 2009 boosted by expectations of gains in domestic stocks which could bring in foreign fund flows while a weaker dollar overseas also helped. The partially convertible rupee was at 50.34 per dollar, stronger than Tuesday's close of 50.71/72. The currency market was closed on Wednesday for annual book closing of banks Domestic institutional investors have been absorbing heavy selling by foreign funds witnessed in first two months of calendar year 2009.

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 reportedly 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.

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 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.

Meanwhile, BJP president Rajnath Singh said in a recent interview to a news agency that the party will speed up foreign investment projects in the country if it wins the parliamentary elections in May 2009. The measure is part of the BJP's election manifesto to be unveiled this week.

Singh said the BJP would be more open to foreign investment than Congress, which was unable to pass major economic reforms and open the economy further up globally due to opposition from leftist allies. Singh said his party would also focus on agriculture, putting more money in the pockets of farmers. More than half of India's 1.1 billion population live in villages.

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 446.84 points, or 4.51%, to 10,348.83, its highest closing since 10 November 2008. At the day's high of 10,432.31, the Sensex rose 530.32 points in mid-afternoon trade. At the day's low of 10,107.25, the Sensex rose 205.26 points in early trade.

The S&P CNX Nifty was up 150.70 points or 4.92% to 3,211.05, its highest closing since 21 October 2008.

The BSE clocked a turnover of Rs 4,900 crore, higher than Rs 3,887.60 crore on Wednesday 1 April 2009.

Nifty April 2009 futures were at 3227.15, at a premium of 16.10 points as compared to the spot closing of 3211.05. Turnover in NSE's futures & options (F&O) segment increased to Rs 56,491.50 crore from Rs 52,145.14 crore on Wednesday, 1 April 2009.

From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 2,188.43 points or 26.81%.

Coming back to today's trade, the BSE Mid-Cap index rose 3.77% and the BSE Small-Cap index rose 2.91%. Both the indices underperformed the Sensex.

The BSE Realty index (up 9.13%), the BSE Metal index (up 6.85%), the BSE Oil & Gas index (up 5.73%), the BSE Capital Goods index (up 5.32%), the BSE Bankex (up 4.79%) outperformed the Sensex.

The BSE FMCG index (down 0.31%), the BSE Healthcare index (up 1.75%), the BSE Auto index (up 2.76%), the BSE Consumer Durables index (up 3.21%), the BSE IT index (up 4.1%), the BSE Power index (up 4.1%), the BSE TECk index (up 4.23%), the BSE PSU index (up 4.45%) underperfomed the Sensex.

The market breadth, indicating the overall health of the market, was strong on BSE with 2,014 stocks advancing as compared with 556 that declined. A total of 55 shares remained unchanged.

From the 30 share Sensex pack 29 stocks rose while 1 fell.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 5.26% to Rs 1,662.50 on reports the company has started pumping gas from the Krishna Godavari (KG) which is estimated to add close to $2 billion to the company's profit at peak production levels. However, the stock came off the day's high of Rs 1,678.80.

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 ONGC rose 8.28% while Cairn India jumped 9.96% on rise in crude oil prices. Rise in crude oil prices would result in higher realizations from crude sales for the oil exploration firm. Crude oil for May 2009 delivery surged $2.51 a barrel or 5.19% to $50.90 a barrel in Asian Electronic Trading on Thursday, 2 April 2009 on signs the world economy is stabilizing as leaders of the most powerful nations meet in London to address the financial crisis.

Shares of oil marketing companies extended recent gains after the government issued oil bonds worth Rs 10,000 crore recently 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 2.15% and 2.64% respectively.

Indian Oil Corporation rose 3.17% after company said on 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 extended gains on hopes lower rates will spur housing demand. DLF, Indiabulls Real Estate and Unitech rose by between 0.01% to 15.08%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

Housing Development & Infrastructure spurted 13.01% on reports the company is selling 4 lakh square feet of transferable development rights worth Rs 42 crore.

Metals stocks rose on firm metal prices on the London Metal Exchange. Tata Steel, Hindustan Zinc, Sterlite Industries, National Aluminum Company and Hindalco Industries, rose by between 2.22% to 9.96%.

Indian largest engineering and construction firm by sales Larsen & Toubro rose 6.65% to Rs 717.25 after it won two orders worth a total of Rs 1,344 crore ($265 million) from refiner Mangalore Refinery and Petrochemicals. It had earlier announced bagging two orders aggregating Rs 1,143 crore ($227 million) from Tata Steel. However the stock came off the day's high of Rs 735.

Other capital goods stocks, Crompton Greaves, Punj Lloyd, Praj Industries, Thermax, ABB, rose by between 0.89% to 16.36%.

India's largest equipment maker by sales Bharat Heavy Electricals rose 4.06% to Rs 1,531.85 after it reported a 6.06% rise in net profit to Rs 3,039 crore on 28.52% rise in turnover to Rs 27,505 crore for the financial year ended March 2009 over financial year ended March 2008, as per tentative figures. The stock came off the day's high of Rs 1,564.

Banking stocks rose on hopes a further fall in interest rates may boost lending growth. India's largest private sector bank by net profit ICICI Bank rose 3,09% to Rs 360.25 off the day's high of Rs 379. Its American depository receipts (ADR) rose 8.05% on Wednesday, 1 April 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 3.77% to Rs 1,034.75 off the day's high of Rs 379. Its ADR rose 2.38% on Wednesday. Its advance tax payment rose 10% to Rs 275 crore in Q4 March 2009 over Q4 March 2008.

India's largest bank in terms of assets and branch network State Bank of India rose 6.65% to Rs 1,145.35 off the day's high of Rs 1,172. Its advance tax payment jumped 27.64% to Rs 1810 crore in Q4 March 2009 over Q4 March 2008.

India's biggest dedicated housing finance firm by operating income HDFC rose 5.09% to Rs 1,562.50 off the day's high of Rs 1,619. It announced a 50 basis points reduction in its retail prime lending rate (RPLR) to 14% effective 25 March 2009.

Outsourcing focussed IT stocks rose on hopes aggressive measures by the United States to revive the economy may bear fruit. US is the biggest market for Indian IT firms. India's second largest software services exporter Infosys Technologies rose 3.26% as its ADR rose 1.35% overnight. 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 7.41% .Its ADR rose 2.53% on Wednesday. Recently its unit Wipro Infotech won an outsourcing contract worth Rs 1,182 crore from the Employees State Insurance Corporation (ESIC).

India's largest software services exporter by sales TCS rose 6.29% The company's advance tax payment fell 54.3% to Rs 53 crore in Q4 March 2009 over Q4 March 2008.

Cement stocks rose on reports cement firms have raised prices by Rs 3-7 per 50 kg bag in anticipation of higher demand. ACC, Birla Corporation India and India Cements 2.12% to 3.8%.

Ambuja Cements rose 3.28% after its shipments rose an annual 0.5% to 1.72 million tonnes in March 2009 over March 2008.

Grasim Industries rose 3.47% while UltraTech Cement gained 2.66%. Aditya Birla Group's cement shipments rose 11.2% to 3.37 million tonnes in March 2009 over March 2009. Production for the month rose 12.4% to 3.40 million tonnes. The group's cement business includes flagship Grasim Industries and unit UltraTech Cement, with combined production capacity of 35 million tonnes a year.

Commercial vehicle maker rose on recent reports the government plans to extend higher depreciation benefit of 50% on commercial vehicles by three months till June 2009. India's largest commercial vehicle maker by sales Ashok Leyland rose 2.17%.

India's largest commercial vehicle maker by sales Tata Motors rose 12.84%. Its domestic sales however fell 13% to 52,686 units in March 2009 over March 2008. Nevertheless, the domestic sales rose 24% in March 2009 over February 2009. The higher depreciation rate translates into lower tax liabilities and lower insurance premiums for buyers of commercial vehicles.

India's largest car maker by sales Maruti Suzuki India rose 0.14% as its total vehicle sales rose 21.9% to 85,669 units in March 2009 over March 2008.

India's largest tractor maker by sales Mahindra & Mahindra rose 6.46% after the company posted a 6% rise in total vehicles sales to 26,209 in March 2009 over March 2008.

India's largest motorbike maker by sales Hero Honda Motors fell 1.18% even as it reported 10.2% rise sales to 3.53 lakh unit in March 2009 over March 2008.

TVS Motor Company rose 0.22% after the company posted a 4.22% rise in its two-wheeler sales to 1,21,988 units in March 2009 over March 2008.

India's largest power generation firm by sales NTPC galloped 3% after the company said it will generate 217 billion units of electricity in the financial year 2009/10 that began on 1 April 2009.

Bharat Electronics rose 2.04% after the company said its turnover per employee and value added per employee rose in the year ended March 2009 over the year ended March 2008.

Reliance Natural Resources clocked the highest volume of 2 crore shares on BSE. Suzlon Energy (1.94 crore shares), Unitech (1.44 crore shares), Housing Development & Infrastructure (1.14 crore shares) and Ispat Industries (1.1 crore shares) were the other volume toppers in that order.

ICICI Bank clocked the highest turnover of Rs 329.44 crore on BSE. Reliance Industries (Rs 284.23 crore), Reliance Infrastructure (Rs 181.99 crore), Reliance Capital (Rs 176.41 crore) and State Bank of India (Rs 160.64 crore) were the other turnover toppers in that order.