New financial year begins on an upbeat note; Sensex gains nearly 2%

Key benchmark indices rose for the second straight day after falling nearly 5% on Monday 30 March 2009, led by rally in realty, banking and IT stocks. Index heavyweight Reliance Industries jumped. The BSE 30-share Sensex surged 193.49 points, or 1.99%, up close to 350 points from the day's low. The S&P CNX Nifty regained the psychological 3,000 mark after falling below the mark earlier in the day. Findings of a survey which showed an improvement in Indian manufacturing sector in March 2009 offset dismal exports data for February 2009.

Concerns about the credit-crisis eased a bit after a report said Indian corporates raised Rs 37800 crore in Q1 March 2009 through bond sales, a record quarterly collection. Expectations of a further easing of the monetary policy by the Reserve Bank of India also supported stocks.

The market was volatile. After an early slide triggered by data showing resumption of selling by foreign funds, lower US index futures and political uncertainty ahead of parliamentary elections, the market soon cut losses. The market extended gains after a survey showed an improvement in the manufacturing sector. Stocks pared gains in afternoon trade after the poor exports data hit the market.

The market again regained strength before cutting gains in mid-afternoon trade. The market surged in late trade.

There will be absence of support from mutual funds in the near term. Mutual funds had supported the market last month to prop-up their net assets value for the year ended 31 March 2009 (FY 2009) which ended on Tuesday. Domestic institutional investors which includes mutual funds and insurance firms had mopped up stocks worth a massive Rs 1039.07 crore on Tuesday, 31 March 2009, as per the provisional data released by the stock exchanges. Mutual funds bought shares worth a net Rs 849.90 crore in the month of March 2009, till 30 March 2009.

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 helped offset dismal exports data. India's exports fell an annual 21.7% in February 2009 to $11.91 billion, government data released today afternoon 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.

Meanwhile, 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.

European shares edged lower on Wednesday, weighed by banks and commodities, with investors cautious ahead of a summit of G20 leaders in London. Key benchmark indices in France, Germany and UK were down by between 0.02% to 0.53%.

Asian markets rose on speculation Japanese and South Korean automakers will benefit from the possible bankruptcies of US auto makers General Motors Corp. and Chrysler LLC. Key benchmark indices in Japan, China, South Korea, Singapore, Indonesia and Taiwan were up by between 0.13% to 2.25%. But Hong Kong's Hang Seng fell 0.42%.

Markets were also looking ahead to the G20 leaders' summit in London on Thursday, 2 April 2009, even though expectations were low for any concrete new steps to support global growth.

Trading in US index futures showed, the Dow could fall 32 points at the opening bell on Wednesday, 1 April 2009. Nevertheless, the Dow futures recovered from an earlier fall of over 100 points triggered by continued concerns about the fate of large US automakers General Motors and Chrysler. The futures were volatile.

Closer home, 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. 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.

Nonetheless, 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. 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.

Foreign funds have resumed selling after heavy purchases in the past few days. Foreign institutional investors (FIIs) sold shares worth a net Rs 531.40 crore on Tuesday, 31 March 2009. Foreign funds dumped stocks worth a net Rs 735.30 crore in two trading sessions from 27 March 2009 to 30 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.

A sharp fall in the rupee in the past few weeks will result in a depreciation in the value of FIIs' equity portfolio to the extent of the fall in the rupee. A sharp volatility in the rupee may also dissuade fresh buying by foreign funds. The Indian rupee declined sharply on Monday, 30 March 2009, weighed down by the dollar's strength against some currencies and weakness in regional stock markets. The rupee hit a record low beyond 52 per dollar early this month. It had bounced back later. It once again faltered later.

The partially convertible rupee closed at 50.71/72 per dollar on Tuesday, nearly 1% stronger than the previous close of 51.17/19. Indian bonds and currency markets are shut on Wednesday as banks close their accounts for the financial year that ended on Tuesday.

Domestic institutional investors have been absorbing heavy selling by foreign funds witnessed in first two months of calendar year 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 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 193.49 points, or 1.99%, to 9,901.99. At the day's high of 9,921.96, the Sensex rose 213.46 points in late trade. At the day's low of 9,546.29, the Sensex fell 162.21 points in early trade.

The S&P CNX Nifty was up 39.40 points or 1.3% to 3,060.35. It hit a high of 3,069.30 and a low of 2,965.70

The BSE clocked a turnover of Rs 3,871 crore, lower than Rs 3,993.40 crore on Tuesday, 31 March 2009.

Nifty April 2009 futures were at 3067.10, at a premium of 6.75 points as compared to the spot closing of 3060.35. Turnover in NSE's futures & options (F&O) segment surged to Rs 52,145.14 crore from Rs 48,987.44 crore on Tuesday, 31 March 2009.

The BSE Mid-Cap index was up 1.88%. It underperformed the Sensex. The BSE Small-Cap index rose 2.87%. It outperformed the Sensex.

The BSE Realty index (up 5.41%), the BSE IT index (up 3.17%), the BSE Oil & Gas index (up 2.88%), the BSE Bankex (up 2.48%), the BSE Consumer Durables index (up 2.36%) outperformed the Sensex.

The BSE Healthcare index (down 0.69%), the BSE FMCG index (down 0.18%), the BSE Capital Goods index (down 0.04%), the BSE Power index (up 0.51%), the BSE Metal index (up 0.52%), the BSE Auto index (up 0.65%), the BSE PSU index (up 0.75%), the BSE TECk index (up 1.66%) underperfomed the Sensex.

The market breadth, indicating the overall health of the market, was strong on BSE with 1,845 stocks advancing as compared with 584 that declined. A total of 67 shares remained unchanged.

From the 30 stock Sensex pack, 20 stocks gained while the rest fell.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 3.69% to Rs 1,579.45. Report suggests the firm will begin gas production from the Krishna Godavari (KG) basin shortly with gas production from the Dhirubhai 6 (D6) block estimated to add close to $2 billion to the company's profit at peak production levels.

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

Some of the FMCG stocks fell after recent gains on expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. Dabur India, Tata Tea, Marico, Britannia Industries and ITC fell by between 0.08% to 1.37%. India's largest FMCG firm by sales Hindustan Unilever fell 0.59%. The company's advance tax payment rose 30% to Rs 130 crore in Q4 March 2009 over Q4 March 2008.

Commercial vehicle maker were mixed on 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 1.95%. But India's largest commercial vehicle maker by sales Tata Motors fell 0.25% on profit taking after recent strong gains. The higher depreciation rate translates into lower tax liabilities and lower insurance premiums for buyers of commercial vehicles.

India's largest tractor maker by sales Mahindra & Mahindra rose 2.97% 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 2.71% even as it reported 10.2% rise sales to 3.53 lakh unit in March 2009 over March 2008.

TVS Motor Company rose 2.21% after the company has posted a 4.22% rise in its two-wheeler sales to 1,21,988 units in March 2009 over March 2008.

Some healthcare stocks fell after recent gains triggered by expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. Cipla, Dr Reddy's Laboratories, Lupin, Piramal HealthCare fell by between 0.26% to 3.65%.

Sun Pharmaceutical Industries fell 4.23% after a US unit said it has recalled generic heart tablets.

Wockhardt tumbled 11.11% as the drugmaker sought to restructure its debt and said it is evaluating a recast of certain businesses and units, suggesting a liquidity crunch.

Shares of two GSM-based telecom operators fell after the telecom tribunal allowed CDMA players to launch GSM-based telecom services India's largest GSM mobile services provider by market share Bharti Airtel fell 1.72%. India's second largest listed GSM operator by sales Idea Cellular fell 1.1%. Meanwhile, India's largest listed CDMA player by market share Reliance Communications (RCom) rose 3.06%.

Rate sensitive real estate shares rose on hopes lower rates will spur housing demand. Housing Development & Infrastructure, Anant Raj Industries and Unitech rose by between 1.25% to 19.15%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

DLF rose 5.68% on reports several companies have evinced interest in acquiring the wind power business of the company.

Banking stocks rose on hopes a further fall in interest rates may boost lending growth. However, they were volatile. India's largest private sector bank by net profit ICICI Bank rose 5.07% to Rs 349.45. It hit a high of Rs 354 and a low of Rs 324 so far in the day. Its American depository receipts (ADR) rose 4.81% on Tuesday, 31 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 3.03% to Rs 997.15. It hit a high of Rs 1,004 and a low of Rs 952 so far in the day. Its ADR rose 9.13% on Tuesday. 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 0.69% to Rs 1,073.95. It hit a high of Rs 1,079.70 and a low of Rs 980. 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 6.7%. It announced a 50 basis points reduction in its retail prime lending rate (RPLR) to 14% effective 25 March 2009.

SREI Infrastructure Finance galloped 14.78% on bargain hunting after the stock tumbled 20.65% in the preceding seven trading sessions.

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 3.88%. Its ADR rose 2.94% 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 2.53%. Its ADR fell 0.14% 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 largest software services exporter by sales TCS rose 0.8%. The company's advance tax payment fell 54.3% to Rs 53 crore in Q4 March 2009 over Q4 March 2008.

Metals stocks gained as a measure of six primary metals traded in London advanced 2.1% on Tuesday, 31 March 2009. Tata Steel, Sterlite Industries, National Aluminum Company and Hindalco Industries rose by between 0.98% to 1.87%.

Hindustan Zinc rose 3.23% after it hiked zinc prices more than 4%.

Cement shares rose on reports cement prices are likely to rise in western part of India from Wednesday, 1 April 2009. Birla Corporation of India, ACC, Ambuja Cements rose by between 0.62% to 1.85%. But Grasim Industries fell 1.83%.

Cement prices could reportedly strengthen in the range of Rs 3 to Rs 8 per 50-kilogram (kg) bag in Maharashtra and Gujarat from today, 1 April 2009. According to reports, the price hike is likely to be effected in other parts of the country also, depending on market response.

Unitech clocked the highest volume of 1.75 crore shares on BSE. Suzlon Energy (1.66 crore shares), Reliance Natural Resources (1.26 crore shares), Cals Refineries (1.13 crore shares) and IFCI (99.18 lakh shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 282.18 crore on BSE. Reliance Capital (Rs 246.44 crore), ICICI Bank (Rs 2227.63 crore), Reliance Infrastructure (Rs 174.75 crore) and State Bank of India (Rs 134.89 crore) were the other turnover toppers in that order.