Nifty scales 7-month high; Sensex regains 12,000

Firm global markets lifted the domestic bourses in what was a highly volatile trading session. Metal stocks surged on rally in global metal prices. Index heavyweight Reliance Industries was volatile. IT stocks fell even as banking and realty stocks gained. The BSE 30-share Sensex rose 164.19 points, or 1.37%, up close to 135 points from the day's low and off close to 25 points from the day's high.

Strong inflow from foreign institutional investors and a recovery in the Indian economy bolstered sentiment. But the market was volatile. After an early surge triggered by firm global equities, the market pared gains later. Market regained strength in early afternoon trade as Asian stocks rose. After firming up in late trade, the Sensex pared gains at the fag end of the trading session.

The barometer index BSE Sensex regained the psychological 12000 mark. A 1.47% slide had pulled the Sensex below the 12,000 level yesterday, 6 May 2009. The broader-based 50-share S&P CNX Nifty attained its highest closing in more than 7 months.

Buying by foreign funds supported domestic bourses. Foreign institutional investors (FIIs) are an aggressive buying mode after they made heavy sales in the first two months of calendar 2009. Foreign institutional investors (FIIs) bought shares worth a net Rs 688.30 crore on Wednesday, 6 May 2009. FII inflow in May 2009 totaled Rs 2,874.40 crore (till 6 May 2009). FII inflow in calendar year 2009 totaled Rs 3,587.20 crore (till 6 May 2009).

A recovery in the economy also supported the domestic bourses. Activity in Indian factories expanded for the first time in five months in April 2009 as a swelling orders pipeline pointed to a tentative recovery, a survey showed on Monday, 4 May 2009. The ABN AMRO Bank purchasing managers' index (PMI) based on a survey of 500 companies, rose to 53.3 in April 2009 from 49.5 in March 2009, climbing above the threshold of 50 that separates expansion from contraction. The latest reading is the highest in seven months and it has steadily risen after hitting a trough of 44.4 in December 2008.

Manufacturing makes up about 16% of India's gross domestic product. The boost in manufacturing index came from a surge in new orders. The new orders index rose to 54.9 in April 2009 from 49.5 in March 2009. Several research notes in the past few days have pointed to improvement in economic activity in the months ahead.

European shares rose on Thursday, 7 May 2009, extending a winning streak to seven days, with banks taking the lead. Key benchmark indices in France, Germany and UK were up by between 1.74% to 2.5%.

The Bank of England said on Thursday it would increase the size of its asset purchase program by 50 billion pounds to 125 billion pounds, and left interest rates at a record low 0.5% for a second month.

The European Central Bank cut its benchmark interest rate by 25 basis points to a new record low of 1% on Thursday, as expected.

Asian stocks rose today, 7 May 2009, on better-than-estimated US and Australian jobs reports and an assurance from US Treasury Secretary Timothy Geithner that none of the country's biggest banks are insolvent. Key benchmark indices in Taiwan, Hong Kong, Singapore, China, South Korea and Japan were up by between 0.09% to 4.55%. Key benchmark indices in China, Taiwan and South Korea regained strength after falling in red for the brief period.

The China Enterprises Index of top mainland companies listed in Hong Kong rose 1.5% to 9,896.93.

Geithner said results of bank stress tests will reassure investors. The results of the stress tests will be reassuring, Geithner said in an interview that's scheduled to air on PBS. While some banks will need to raise more capital, there are a number of ways they can do that and most should be able to do it in the private sector, he said.

Meanwhile, a report from the statistics bureau of Australia said employers unexpectedly added workers in April 2009, buoying optimism the economy will avoid the worst of the global recession.

In South Korea, the Ministry of Strategy and Finance said although some recent data were pointing to an improvement in the economy it was too early to say the recovery will continue.

Trading in US index futures showed the Dow could rise 57 points at the opening bell on Thursday, 7 May 2009. US markets surged on Wednesday, 6 May 2009, as investors speculated banks will need less capital than expected and ADP Employer Services said US companies eliminated fewer jobs in April 2009 than economists expectations. The Dow rose 101.63 points, or 1.2%, to 8,512.28. The S&P 500 index added 15.73 points, or 1.7%, to 919.53. The Nasdaq gained 4.98 points, or 0.3%, to 1,759.10.

In encouraging economic data in US, reports suggested planned layoffs in April 2009 fell to 132,590, while ADP National Employment Report said private employment decreased by 491000 in April 2009 against an expected 650000 private-sector job cuts.

Closer home, political uncertainty may cause volatility on the bourses in the next few days with polling underway for India's 15th Lok Sabha. The month-long a parliamentary elections that began on 16 April 2009 will conclude on 13 May 2009. Poll estimates point to a fractured mandate. Consumption and investment decisions will be significantly impacted by any signs that the new government is unstable. The counting of votes will take place on 16 May 2009. A party/alliance needs 272 seats in the 543-member parliament to claim power at the Centre.

Polling for the fourth phase for 85 Lok Sabha seats is being held today, 7 May 2009. At the end of the fourth phase, elections would be completed in 457 of the 543-member Lok Sabha.

The BSE 30-share Sensex rose 164.19 points, or 1.37%, to 12,116.94. The Sensex jumped 191.20 points at the day's high of 12,143.95 in early trade. At the day's low of 11,981.13, the Sensex gained 28.38 points in mid-morning trade.

BSE clocked a turnover of Rs 4,670 crore, lower than Rs 5,850.89 crore on Wednesday, 6 May 2009.

The S&P CNX Nifty gained 58.85 points or 1.62% to 3,683.90, its highest closing since 3 October 2008.

Nifty May 2009 futures were at 3682.40, at a discount of 1.50 points as compared to the spot closing of 3,683.90. Turnover in NSE's futures & options (F&O) segment was Rs 48,471.10 crore, lower than Rs 57,634.57 crore on Wednesday, 6 May 2009.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,702 shares rose as compared with 851 that fell. A total of 56 shares remained unchanged.

The BSE Mid-Cap index rose 2.75% and the BSE Small-Cap index gained 2.66%. Both these indices outperformed the Sensex.

The BSE Metal index (up 8.22%), the BSE Consumer Durables index (up 3.72%), the BSE Realty index (up 1.9%), BSE Bankex (up 1.85%), BSE Healthcare index (up 1.74%), the BSE Capital Goods index (up 1.55%), the BSE Oil & Gas index (up 1.5%) outperformed the Sensex.

The BSE FMCG index (down 0.71%), the BSE IT index (up 0.06%), the BSE Power index (up 0.29%), The BSE TECk index (up 1.16%),the BSE Auto index (up 1.23%) and the BSE PSU index (up 1.26%) underperfomed the Sensex.

Among the 30-member Sensex pack, 19 stocks gained while the rest fell.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 1.82% to Rs 1,914. The stock was volatile. It hit a high of Rs 1,922 and a low of Rs 1,880. Analysts expect strong growth in bottom line in coming quarters from sale of gas which it started pumping last month from its deep-sea field off the east coast.

Oil exploration firm Cairn India gained 7.02% on higher crude oil prices. India's biggest listed state-run oil exploration firm by sales Oil and Natural Gas Corporation (ONGC) rose 0.26%. Crude oil extended yesterday's 4.6% gain after an Energy Department report showed US refinery demand climbed. Crude oil for June 2009 delivery rose as much as 56 cents, or 1%, to $56.90 a barrel on the New York Mercantile Exchange.

But, PSU OMCs fell on rise in oil prices. Indian Oil Corporation HPCL and BPCL fell 1.1% to 1.6%. State-run oil marketing firms suffer revenue loss on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

Capital goods stocks rose after India's biggest engineering & construction firm by revenue Larsen & Toubro (L&T) recently said it expect a strong order flow in the year ending March 2010 (FY 2010). L&T rose 1.66%. Bharat Heavy Electricals, Thermax, Punj Lloyd, Praj Industries, Siemens, rose by between 0.28% to 4.8%.

L&T on 16 April 2009 said the company expects its order inflow to grow by 25-35% in FY 2010.

Real estate shares rose on reports commercial banks have stepped up lending to the real estate sector. Housing Development & Infrastructure, Indiabulls Real Estate and Unitech rose by between 2.62% to 4.8%. Most of the realty deals including sale of commercial property and housing sales is driven by finance and bank lending is therefore key.

According to RBI data, loans to the real estate sector grew 61% on a year-on-year basis, with Rs 90,765 crore outstanding as on 27 February 2009. During the corresponding period in the previous year, the growth was 26.7%.

Metal stocks surged after LMEX, a measure of six metals traded on the London Metal Exchange, jumped 4.14% to 2,255 on Wednesday, 6 May 2009. Hindustan Zinc, Tata Steel, Steel Authority of India, Sterlite Industries, Hindalco Industries and National Aluminum Company, rose by between 5.1% to 14.77%.

Outsourcing focussed IT stocks fell for the second straight day on US government plans to scrap tax incentives that encourage American firms to ship jobs overseas. A firm rupee also weighted on IT stocks. India's second largest software services exporter by sales Infosys slipped 0.86% as its ADR slipped 3.05% on Wednesday.

India's largest software services exporter by sales TCS fell 0.47%.

But, India's third largest software services exporter by sales Wipro rose 5.8% even as its ADR fell 2.75% on Wednesday.

Analysts feel that US government's plan to scrap tax incentives that encourages American firms to ship jobs overseas is unlikely to dent business for Indian outsourcers. US president Barack Obama on Monday, 4 May 2009, announced plans to reduce tax breaks for US-based multinationals shipping jobs to places like India. Instead, the tax incentives would now go to those creating jobs inside the US, in places like the Buffalo city, New York.

Currently, US businesses that invest overseas can take an immediate tax deduction for expenses supporting their overseas investments. They can also defer the payment of US taxes on the profits they make from such investments. But, now the Obama Administration wants to ensure that companies do not receive deductions for expenses supporting their offshore investments until they pay tax on their offshore profits. This is intended to disincentivise US companies from retaining profits abroad.

Infosys said the proposal, if implemented, was unlikely to reverse the outsourcing of a gamut of services by US firms to Indian companies. "The current proposal, as we understand, is to close corporate tax loopholes on US multinational corporations and crack down on their overseas tax havens," the company said in a statement. "We do not believe that it has anything to do with IT outsourcing done by US corporations.", Infosys said.

Meanwhile, the Indian rupee rose to fresh two and half month highs on Thursday on expectations foreigners would bring in funds into the local share market, with higher Asian units also supporting sentiment. The partially convertible rupee was at 49.24 per dollar, higher than Wednesday's close of 49.58/60.

A stronger rupee affects operating profit of IT firms negatively as they earn most of their revenues from exports.

Banking stocks rose in choppy trade on hopes falling interest rates will boost lending growth. India's largest private sector bank by net profit ICICI Bank rose 1.53% to Rs 549.10. It hit a high of Rs 557.75 and a low of Rs 538.15. Its ADR fell 5.79% on Wednesday.

India's largest bank in terms of assets and branch network State Bank of India (SBI) was up 3.27% to Rs 1,366.95. It hit a high of Rs 1,375 and a low of Rs 1,330.35. SBI announces Q4 March 2009 results on Saturday, 9 May 2009. A total 13 brokerages expect a between 15% fall to a 39% rise in SBI's net profit at between Rs 1601.20 crore to Rs 2626.60 crore in Q4 March 2009 over Q4 March 2008.

India's second largest private sector bank by operating income HDFC Bank rose 0.4% to Rs 1,176.75 . It hit a high of Rs 1,189 and a low of Rs 1,164. Its American depository receipts (ADRs) fell 0.15% on Wednesday, 6 May 2009.

India's biggest dedicated housing finance firm by operating income HDFC was up 3.86%.

Shipping firms rose after the Baltic Dry Index, which measures commodity-shipping rates, surged. Shipping Corporation of India, Varun Shipping Company, Essar Shipping, ABG Shipyard, Shreyas Shipping, GE Shipping Company, Mercator Lines rose by between 2.92% to 10.93%.

The Baltic dry index, which measures commodity-shipping rates, rose 8.85% to 2,065 in London yesterday, 6 May 2009, its highest closing level since mid-March 2009. The index rose after China, world's largest consumer of metals, said iron-ore imports at the country's major ports rose by a quarter in April 2009 to a record.

Auto stocks gained on strong sales figures posted by auto firms in April 2009. India's largest commercial vehicle maker by sales Tata Motors rose 3.05% after the British government said it is continuing talks with Tata Motors on providing aid to its UK's Jaguar Land Rover unit. Bajaj Auto, Maruti Suzuki India and Hero Honda Motors, rose by between 1.64% to 3.72%. But Mahindra & Mahindra fell 1.81% 2.83%

Cement stocks fell on reports cement prices could fall by up to 10% in the coming months, pushed lower by new supply and slower construction activity during the monsoon season. Ultratech Cements, Grasim Industries, ACC and Ambuja Cements, fell by between 1.41% to 2.7%.

Rates in Mumbai may see the steepest fall before the four-month-long monsoon season ends in September, dropping by about Rs 20 for a 50 kilogram bag, the report added.

Some healthcare stocks rose as most of the healthcare firms reported better than expected Q4 Marc 2009 result. Piramal Healthcare, Lupin, Biocon, Dr Reddy's Laboratories rose by between 0.71% to 8.72%.

Cals Refineries clocked the highest volume of 5.24 crore shares on BSE. Ispat Industries (3.19 crore shares), Unitech (1.68 crore shares), Birla Power Solutions (1.31 crore shares) and Suzlon Energy (1.21 crore shares) were the other volume toppers in that order.

Tata Steel clocked the highest turnover of Rs 222.33 crore on BSE. Reliance Industries (Rs 210.89 crore), DLF (Rs 207.33 crore), Reliance Capital (Rs 182.88 crore) and ICICI Bank (Rs 175.90 crore) were the other turnover topers in that order.