Sensex jumps nearly 4% on firm global equities

Bulls were in charge of the proceedings as key benchmark indices clocked smart gains after Finance Minister Pranab Mukherjee said reviving growth momentum is a top priority for the government. Media reports that the government is considering a proposal to do away with fringe benefit tax aided the rally. Firm global markets also supported the domestic bourses. World stocks rose on a strong reading of the US consumer confidence index.

Banking, metal and realty stocks led the rally. The BSE 30-share Sensex jumped 520.41 points or 3.83%. The barometer index moved past the psychological 14,000 mark.

The market was volatile. Stocks surged in early trade tracking firm Asian equities. After extending gains in mid-morning trade, the market came sharply off the higher level in early afternoon trade. The market firmed up again later. It surged in late trade.

Volatility may remain high over tomorrow ahead of the expiry of May 2009 futures and options (F&O) contract. Rollover in the S&P Nifty futures was 44% from May 2009 contracts to June 2009 at the end of Tuesday's (26 May 2009) trade. The rollover was 24% in Mini Nifty futures.

Among individual stocks, substantial rollover has been witnessed in Hindustan Unilever, GMR Infrastructure, Reliance Power, Bharat Heavy Electricals and Power Grid Corporation. Stocks where rollover has been low are Jaiprakash Associates, Housing Development & Infrastructure (HDIL), Nagarjuna Fertilisers, Ashok Leyland and Axis Bank.

Finance Minister Pranab Mukherjee today said that a sustained stimulus to economic growth is possible by next round of reforms. He said reviving growth momentum is a top priority for the government adding that fiscal prudence will also be kept in mind.

Mukherjee said the government will stick to fiscal deficit target of 5.5% of GDP in the current financial year that ends on March 2010 (FY 2010). He said the government is committed to fiscal consolidation in 2-3 years.

Mukherjee said the government will continue to step up spending this year to support growth, risking a wider budget deficit. Growth and employment are not possible without increased spending and borrowing, the Finance Minister said. The prophets of doom have been unduly focusing on increased public spending and a consequent increase in the fiscal deficit, Mukherjee said. "An early return to our recent growth performance will help us get back to our preferred path of fiscal prudence," he said.

The fiscal deficit jumped to an estimated 10.6% of the nation's gross domestic product in the year ended 31 March 2009. The government's financial strain prompted Moody's Investors Service to place India's long-term local currency rating at Ba2, two levels below investment grade, and lower than the ratings assigned to Colombia, Romania and Kazakhstan. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.

According to analysts the new government should give priority to reforming the subsidy mechanism aimed at improving delivery mechanism while at the same time reducing costs.

The FM today said he would be able to announce the full-budget for FY 2010 by the first week of July 2009 and try to get it approved by 31 July 2009. He said the common man will be the focus of the government policy.

Addressing a press conference, Mukherjee said the industry and business have been hurt by high cost of finance but added that coordinated steps taken by central bank and government have stabilised the economy. He said the liquidity situation eased considerably adding that international capital flows have resumed.

The FM said he hoped banks would take advantage of the monetary policy and make cheap credit available. "One of the first steps I propose to take is to meet bankers and get them committed to a more benign plan of action," he said. His comments came in the backdrop of a newspaper report that state-run banks plan to cut lending rates by 100-150 basis points within the next fortnight after a finance ministry directive to lower interest rates in line with falling cost of funds.

Meanwhile, the government is reportedly considering a proposal to do away with fringe benefit tax (FBT) the tax on all benefits and perks that companies provide to their employees introduced in the 2005-06 Finance Bill in the coming Union budget. FBT, at Rs 8,000 crore last year, accounted for just over 2% of the total direct tax collection of Rs 3.4 lakh.

From Day One, corporates opposed FBT not just on account of adding to the tax burden, but because of the huge additional paperwork and accounting complications involved in estimating a company's FBT outgo. FBT is levied on perquisites provided by the employer to the employee in addition to the regular salary. This is a tax paid by the employer on the benefits or perks that the employee receives. It includes components like the employee's accommodation, entertainment, travel expenses and phone calls. Later employee stock option plan (Esop), too, was brought under the FBT umbrella.

Bank stocks led gains in European shares on strong US consumer confidence report. Key benchmark indices in France, Germany and UK were up by between 0.01% to 0.47%.

French consumer confidence showed a reading of minus 40 in May 2009, improved from April's level of minus 41, according to French national statistics body Insee.

Asian stocks surged today, led by automakers and mining companies, after US consumer confidence jumped the most in six years and commodity prices climbed. Key benchmark indices in China, Hong Kong, Japan, Singapore and Taiwan were up by between 1.37% to 5.26%. South Korea's Seoul Composite fell 0.73%.

Hong Kong shares got an additional fillip from the government's announcement of a more than $2 billion stimulus package. Hong Kong's Financial Secretary John Tsang unveiled a 16.8 billion Hong Kong dollar ($2.2 billion) package of relief measures Tuesday that include one-time tax relief measures, loan guarantees for companies, a two-month suspension of rental payments for those in welfare housing, and the suspension on a wide range of government fees.

The measures were the fourth round of economic relief actions announced since February last year, and raised the government stimulus spending pledge to 87.6 billion Hong Kong dollars, or about 5.3% of gross domestic product. The budget was partly aimed at expanding tax breaks introduced by the government earlier this year.

Meanwhile, Japan's exports fell 39.1% in April 2009 from a year earlier, the Finance Ministry said today, less than the 42% decline economists had estimated.

Trading in US index futures showed the Dow could rise 18 points at the opening bell today, 27 May 2009.

US stocks surged on Tuesday 26 May 2009 after the Conference Board's index of US consumer confidence surged to 54.9, the biggest gain since April 2003. A reading above 50 indicates optimists outnumbered pessimists. The Dow gained 196.17 points, or 2.4%, to 8,473.49. The S&P 500 index added 23.33 points, or 2.6%, to 910.33. A brokerage upgrade on Apple triggered sharp gains on the Nasdaq Composite index. The tech-laden index jumped 58.42 points, or 3.5%, to 1,750.43.

Closer home, the Federation of Indian Export Organisations (FIEO) said on Wednesday that India's exports may have fallen by a third in April 2009 as a world-wide slump continued to hurt overseas demand for local goods. Earlier this month, government data showed India's exports declined by a third in March 2009, its sixth straight fall, dragging down the full year's growth to a paltry 3.4% at $168.7 billion in 2008/09.

Meanwhile, Prime Minister Manmohan Singh on Wednesday named 38 new ministers, including 14 of the cabinet rank, as he brought key allies into the government after his resounding general election victory. No portfolios had yet been allotted to the new ministers.

Former chief ministers Vilasrao Deshmukh, Vir Bhadra Singh and Farooq Abdullah were among the 14 politicians who were named as Cabinet ministers in the second list released on Wednesday.

DMK leaders Dayanidhi Maran, A Raja and M K Azhagiri will join the Manmohan Singh government as Cabinet ministers too. The list of Cabinet ministers also includes Mallikarjun Kharge, Kumari Selja, Subod Kant Sahay, M S Gill, G K Vasan, P K Bansal, Mukul Vasnik and Kantilal Bhuria.

As many as 45 politicians will join the government as Ministers of State. NCP leader Praful Patel and Congress leaders Prithviraj Chauhan, Sriprakash Jaiswal, Salman Khursheed, Dinsha Patel, Jairam Ramesh and Krishna Tirath will be Ministers of State with independent charge.

The notable omissions in the list of cabinet ministers are H.R. Bhardwaj, Shivraj Patil, Arjun Singh, Sis Ram Ola and P R Kyndiah.

Dr Manmohan Singh was on 22 May 2009 sworn-in as Prime Minister for a second consecutive term. A day after the swearing-in of the UPA government on Friday 22 May 2009, the Union cabinet met under the chairmanship of Prime Minister Manmohan Singh on Saturday 23 May 2009. The cabined took a decision to convene the Parliament session from 1 June to 9 June 2009. A meeting with leaders of various parties will be held in the first week of June 2009 for finalising the dates of the budget session, home minister P Chidambaram said after the cabinet meeting on Saturday. He said government is quite hopeful of passing the budget by 31 July 2009.

The Speaker's election would be held on 3 June 2009 and President Pratibha Patil will address the joint sitting on 4 June, the day Rajya Sabha will also be convened. This will be followed by the debate on motion of thanks. Explaining the process of passing the general budget, Chidambaram said this has to be completed by 31 July 2009 failing which a vote-on-account will have to be approved.

A comfortable victory for the Congress-led coalition government in election has raised expectations of a strong push for economic reforms by the government. Dr Manmohan Singh has reportedly prepared the broad contours of an economic revival plan to be taken up soon after the new government is formed, reports suggest. While recommendations to revive growth and ease the credit squeeze are likely to find a place in the plan, tax proposals are expected to be taken up as budget recommendations.

The telecom ministry has prioritised the much delayed auction of 3G airwaves and WiMAX spectrum. It has also prioritised introduction of a new spectrum policy.

The petroleum ministry has reportedly prepared a draft Cabinet note on a partial decontrol of petrol and diesel prices after which they will be linked to international movements. The new government is also likely to pursue disinvestment of state-run undertakings, reports suggest.

Financial sector reforms are likely to get a push in the coming days, which were relegated to the back seat due to persistent opposition from the Left parties.

The Congress party-led coalition has the support of 322 lawmakers, Prime Minister-elect Manmohan Singh said on Wednesday, 20 May 2009, giving it a clear majority in a new government. Congress said it has support of 274 members of the 15th Lok Sabha. In addition, the Bahujan Samaj Party, the Samajwadi Party and the Rashtriya Janata Dal sent letters of support for a Manmohan Singh-led government directly to the President, taking the support base to 322.

The Congress-led UPA defied predictions of a tight election and was only about 11 seats short of an majority from the 543 seats at stake in the recently concluded Lok Sabha election. Congress' alliance took 261 seats, sweeping aside its nearest rival, the bloc led by the Hindu-nationalist Bharatiya Janata Party (BJP), which won only 159 combined. Congress, which alone won 205 seats, needs a handful of partners to reach the 272 seats needed to take power, and is expected to seek the support of more smaller parties or independents.

The BSE 30-share Sensex jumped 520.41 points or 3.83% to 14,109.64. The Sensex gained 533.55 points at the day's high of 14,122.78 in late trade. At the day's low of 13,780.41, the Sensex rose 191.18 points in late trade.

The S&P CNX Nifty was up 159.35 points or 3.87% to 4,276.05. Nifty May 2009 futures were at 4287, at a premium of 10.95 points as compared to the spot closing of 4276.05. Turnover in NSE's futures & options (F&O) segment surged to Rs 83,564.87 crore from Rs 77,396.06 crore on Tuesday, 26 May 2009.

The Sensex is up 4,462.33 points or 46.25% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 5,949.24 points or 72.9%.

BSE clocked a turnover of Rs 6884 crore lower than Rs 6938.19 crore on Tuesday 26 May 2009.

The market breadth, indicating the overall health of the market, was strong. On BSE, 2,336 shares rose as compared with 461 that fell. A total of 36 shares remained unchanged.

The BSE Mid-Cap index was up 3.67% and the BSE Small-Cap index was up 3.37%. Both the indices underperformed the Sensex.

The BSE Realty index (up 6.09%), the BSE Bankex (up 5.42%), the BSE Power index (up 4.89%), the BSE PSU index (up 4.71%), the BSE Metal index (up 4.67%), the BSE Capital Goods index (up 4.24%), outperformed the Sensex.

The BSE FMCG index (up 0.27%), the BSE Healthcare index (up 2.31%), the BSE Auto index (up 2.49%), the BSE TECk index (up 2.82%), the BSE IT index (up 3.17%), %), the BSE Oil & Gas index (up 3.46%), the BSE Consumer Durables index (up 3.6%) underperfomed the Sensex.

From the 30 share Sensex pack, 27 stocks rose and rest fell.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 2.01% to Rs 2,187.20. 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.

RIL may have an estimated 20 trillion cubic feet of natural gas reserves in two areas off the east coast, more than double the quantity of its biggest field, partner Hardy Oil & Gas Plc said. The D-3 and D-9 fields may hold as much as 9.5 trillion cubic feet and 10.8 trillion cubic feet of gas, respectively, UK-based Hardy Oil said in a statement today, citing estimates by consultant Gaffney, Cline & Associates.

India's largest oil exploration firm by revenue Oil & Natural Gas Corp rose 9.42% after a newspaper report that the government may double the price of natural gas. The government may double the administered price of natural gas to $4.2 per million British thermal units. The increase will benefit ONGC and Oil India which sell the fuel at prices fixed by the government, according to the report.

Bank stocks surged on hopes the UPA government will pursue financial sector reforms. India's largest private sector bank by net profit ICICI Bank rose 6.59% even as its American depository receipt (ADR) fell 1.02% on Tuesday, 26 May 2009. India's second largest private sector bank by net profit HDFC Bank rose 5.32% as its ADR rose 3.98% overnight.

State-run banks rose on reports they plan to cut lending rates by 100-150 basis points within a fortnight following a finance ministry directive to lower interest rates in line with falling cost of funds.

India's biggest bank in terms of branch network State Bank of India (SBI) was up 6.08%. As per reports, the Congress-led UPA government may go ahead on a plan to merge six associate banks with State Bank of India to create a Indian banking behemoth. The government may also re-introduce the State Bank of India (Amendment) Bill that will enable Centre to reduce its stake in SBI to 51% from current 59.41%. Meanwhile, bank is reportedly expected to lower prime lending rate in next few weeks.

Other PSU stocks, Bank of India, Bank of Baroda, Union Bank of India, rose by between 0.4% to 3.02%.

India's biggest dedicated housing finance firm by operating income HDFC was up 4.36%. As per recent reports, HDFC is likely to cut deposit rates and follow it with a cut in lending rates.

With a decisive mandate, there are expectations that the UPA government may pursue financial sector reforms. There is likely to be some movement on passage of the Bill to amend the Insurance Act, 1938. Apart from raising the foreign investment ceiling to 49%, from 26% at present, the Bill had proposed to do away with the stipulation on Indian promoters having to mandatorily sell a part of their holdings after 10 years of operation.

There are two other Bills - for providing statutory backing to the pensions regulator and to amend the Banking Regulation Act which have been pending in Parliament for over five years, mainly due to the opposition from the Left parties. But now the Left is no longer an ally of the re-elected UPA, the Bills may finally be enacted.

The Pension Fund Regulatory & Development Authority Bill will allow the regulator to issue regulations, instead of the present system where it has to enter into agreements with service providers such as the fund managers. In addition, it will also help PFRDA regulate the pension products offered by life insurance companies. The new government may also announce tax benefits on investment in the New Pension Scheme, which will help make it attractive for investors, reports suggest

The amendments to the Banking Regulation Act will allow foreign investors to exercise voting rights in line with their shareholding. While the Reserve Bank of India has concerns on greater play for foreign banks, it will have no reservations in getting more powers for regulation of banks and supercession of borads, which are provided for in the Bill.

The government may also re-introduce the Micro-finance Development and Regulation Bill

Metal stocks rose on firm metal prices on London Metal Exchange. Tata Steel, National Aluminum Company, Hindalco Industries and Sterlite Industries rose by between 1.21% to 9.49%. LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.07% to 2,196.40 on Tuesday, 26 May 2009, on strong US consumer confidence report

Realty stocks rose on expectations that stability at the Centre will attract more money from foreign investors into the sector which in turn will boost growth. DLF, Unitech, Indiabulls Real Estate and Housing Development & Infrastrucutre rose by between 2.93% to 8.49%.

In the last six weeks, three realty firms Unitech, DLF and Indiabulls Real Estate, have together raised Rs 8000 crore through qualified institutional placements (QIPs).

Outsourcing focussed IT stocks rose on a strong reading of US consumer confidence index. US is the biggest market for Indian IT firms. India's second largest software services exporter by sales Infosys was up 2.68% as its American depository receipt (ADR) rose 2.56% overnight. India's third largest software services exporter by sales Wipro rose 1.68% as its ADR rose 1.92% overnight. India's largest software services exporter by sales TCS rose 3.34%.

Capital goods stocks rose on expectations of increased infrastructure spending by the Congress-led UPA government to boost growth. India's biggest engineering & construction firm by revenue L&T up 4.51% and India's biggest power equipment maker by revenue Bharat Heavy Electricals (Bhel) was up 4.28%. Other capital goods stocks, Thermax, ABB, Crompton Greaves, Praj Industries Siemens and Punj Lloyd rose by between 0.33% to 7.53%.

Reliance Infrastructure rose 14.79%. The board of Reliance Infrastructure on Sunday, 24 May 2009, approved a new preferential offer of 43 million warrants to the company's promoters, convertible at Rs 1,000 a share, cancelling the current offer of equal size which expires on 19 July 2009 and which carried a conversion price of Rs 1,822 a share. If fully exercised the promoters the Anil Dhirubhai Ambani group would raise their stake in the company to 48%, from 38% currently, at a price of Rs 4,300 crore (against over Rs 7,800 crore through the earlier one).

PSU power firms rose on reports the government may dilute stakes in power sector firms to 51% over the next few years to raised about Rs 60000 crore. Rural Electrification Corporation of India, Power Finance Corporation, NTPC, Power Grid Corporation of India rose by between 0.22% to 4.92%.

India's largest cigarette maker by sales ITC fell 0.19% on reports the company will suspend production at all its factories in a phased manner to introduce pictorial warnings on cigarette packs from 1 June 2009.

Healthcare stocks rose on hopes newly elected UPA government will give primary importance to healthcare segment and health of citizens. Cipla, Sun Pharmaceuticals Industries, Dr Reddy's Laboratories, Biocon, Wockhardt, rose by between 0.68% to 9.84%.

India's largest drugmaker by sales Ranbaxy Laboratories jumped 7.14% after a sharp slide of 8.36% yesterday triggered by reports the firm could take a hit of as much as $50 million due to a delay in supplying a key ingredient to UK's AstraZeneca used to make anti-ulcer drug, Nexium.

The stock had surged 20.73% on Monday 25 May 2009 after its chief executive officer resigned on Sunday, 24 May 2009, as part of efforts to turn around the company. In a swift and unexpected move, Japanese drug maker Daiichi Sankyo on Sunday, 24 May 2009, took complete control of Ranbaxy Laboratories in which it had acquired 63.9% stake in June 2008 after all representatives of the former Indian promoter family resigned from the board. Following a board meeting on Sunday morning, former promoter Malvinder Mohan Singh, whose term was originally supposed to run till 2013, resigned as Chairman and Managing Director.

Besides Singh, two other Singh-family Board nominees, Sunil Godhwani and Balvinder Dhillon, also resigned. Tsutomu Une from Daiichi has been appointed chairman. Atul Sobti, who was originally nominated on the board by the former Indian promoters, has been appointed as CEO and MD for three years.

Airlines stocks rose on hopes the newly elected government may allow foreign direct investment in the sector. Jet Airways , SpiceJet and Kingisher Airlines rose by between 1.43% to 5.57%.

The Indian aviation industry has been plagued by large losses, rising debt levels and a serious liquidity crunch. According to reports, measures like increasing the present cap on foreign direct investment (FDI) in the aviation sector as well as withdrawing the restrictions on investment by foreign airlines in the domestic carriers are important to save the industry from the current crisis that it finds itself in.

Currently, foreign airlines are not allowed to pick up equity in aviation companies while foreign investors and financial institutions can hold up to a 49% stake.

Shares of state-run companies rose on hopes of recommencement of the PSU disinvestment programme after the Congress-led UPA government got a clear mandate in the Lok Sabha election.

HMT, Shipping Corporation of India, Hindustan Copper, Power Finance Corporation and Central Bank of India rose by between 2.9% to 9.93%.

It may be recalled that the BJP-led National Democratic Alliance (NDA) had vigorously pursued PSU divestment. However, it was put in deep freeze in the last five years by the Congress-led United Progressive Alliance (UPA) government as the Left parties which supported the UPA government from outside, were bitterly opposed to the idea.

Consequently, in the past five years, the government raised just Rs 8,500 crore from disinvestment as against Rs 28,000 crore raised by the BJP-led government in the preceding five-year period.

Some sugar stocks fell after the commodities regulator suspended futures trade in sugar to drive prices lower. Bajaj Hindustan, Balrampur Chini and Shree Renuka Sugars fell by between 1.45% to 3.52%.

The Forward Markets Commission (FMC) on Tuesday, 26 May 2009, suspended futures trading in sugar till 31 December 2009, even as the trade was betting on further liberalisation after the Government recently lifted the two-year ban on wheat futures.

Cals Refineries clocked the highest volume of 12.76 crore shares on BSE. Alok Industries (2.43 crore shares), Idea Cellular (1.99 crore shares), Reliance Natural Resources (1.8 crore shares) and Unitech (1.64 crore shares) were the other volume toppers in that order.

Reliance Infrastructure clocked the highest turnover of Rs 388.64 crore on BSE. Reliance Capital (Rs 248.75 crore), Bharti Airtel (Rs 248.16 crore), DLF (Rs 243.48 crore) and Reliance Industries (Rs 199.97 crore) were the other turnover toppers in that order.