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Friday, May 29, 2009

Sensex, Nifty attain highest closing since early September 2008


The key benchmark indices rose for the straight third day as data showing a better-than-expected fourth quarter GDP growth strengthened expectations the economy will grow faster in the fiscal second-half of the year that began on 1 April 2009. Both the Sensex & S&P CNX Nifty today attained their highest closing levels in the last eight and half months. Also boosting the sentiment Oil Minister Murli Deora said his ministry will seek Cabinet approval for oil price deregulation. His comments reinforced expectations for economic reforms. Positive global cues also the rally.

The market, however, came off the higher level in late trade as banking stocks and index heavyweight Reliance Industries came off the day's highs. The BSE 30-share Sensex rose 329.24 points or 2.3%, off close to 100 points from the day's high. The Sensex today, 29 May 2009, crossed the 14,500 mark. The barometer index has risen 1,036.02 points or 7.62% in last three days.

It was the 12th straight weekly advance for the barometer index BSE Sensex.

Soon after taking charge, Oil Minister Deora today said a proposal to allow firms set retail fuel prices based on market prices would be sent to cabinet for discussion within six weeks. Currently the government sets prices for retail fuel such as petrol and diesel below actual prices, and partially subsidises state-run marketing firms for the difference.

Deora's comments come close on the heels of Finance Minister Pranab Mukherjee's comments on Wednesday, 27 May 2009, that the government would take advantage of its political stability and push long-pending reforms. Expectations of a strong push for economic reforms by the government have send stock prices surging ever since the outcome of the election on 16 May 2009.

Foreign funds have aggressively bought Indian stocks in past 2-1/2 months. FII inflow in May 2009 totaled Rs 17,643.50 crore (till 27 May 2009). FII inflow in calendar year 2009 totaled Rs 18,356.10 crore (till 27 May 2009).

On the back of higher government expenditure, India's economy expanded 5.8% in the fourth quarter ended March 2009 compared with a year earlier. That matched a revised gain of the previous quarter, government data announced at 11:00 IST today showed. Economists were expecting a 5% increase. The GDP grew 6.7% in the year ended March 2009, slowing from 9% in the previous year.

Meanwhile, Swiss bank UBS AG's lead India economic indicator was up for the fourth consecutive month in April 2009, pointing to a rebound in industrial activity by June 2009, it said in a note today, 29 May 2009.

European shares rose on Friday, tracking stock market gains in Japan and the United State, with banks in the lead ahead of a raft of US economic data due for release later in the session. Key benchmark indices in France, Germany and UK were up by between 1.32% to 1.67%.

In Asia, commodity stocks were helped by stronger prices for metals and crude oil. Key benchmark indices in Hong Kong, South Korea and Singapore were up by between 0.27% to 1.6%.

Japan's Nikkei rose 0.75% as Japan's industrial output rose 5.2% on month in April 2009, higher than economists' expectations of a 3.3% gain. On the flip side, the April data also showed a rising jobless rate and tepid household spending. Stock markets in China and Taiwan were closed.

Trading in US index futures showed the Dow could rise 66 points at the opening bell on today, 29 May 2009.

US stocks surged on Thursday 28 May 2009 helped by energy stocks amid rising crude prices and as concerns eased about a series of government debt sales. The Dow gained 103.78 points, or 1.3%, to 8,403.80. The S&P 500 index added 13.77 points, or 1.5%, to 906.83, and the Nasdaq composite index advanced 20.71 points, or 1.2%, to 1,751.79.

In the day's economic news, new-home sales ticked up 0.3% to a seasonally adjusted rate of 352,000 in April 2009, less than expected. March sales were revised sharply lower. Meanwhile, initial jobless claims dropped by 13,000 to 623,000 from a slightly revised 636,000.

Crude shot up to near a six-month high of $65 a barrel after the Organisation of Petroleum Exporting Countries (Opec) left production quotas unchanged and a report showed that US crude inventories were pared down by 5.413 million barrels last week.

Closer home, Finance Minister Pranab Mukherjee on Wednesday, 27 May 2009, said inflation is reasonably down and reviving growth will be the government's top priority. The wholesale price index rose 0.61% in the 12 months to 16 May 2009, matching the previous week's annual rise, government data on 28 May 2009 showed. The government, meanwhile, revised upwards the rate of inflation for the year through 21 March 2009 to 0.84% from 0.31%.

Mukherjee said on Wednesday that 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. India's credit rating may come under pressure if the government is not able to rein in a widening budget deficit, Moody's Investors Service said on, 28 May 2009, said. "The stable outlook on the ratings has recently faced growing pressure, mainly due to substantial deterioration in the fiscal position," Aninda Mitra, a senior analyst at Moody's in Singapore, said in a report today. "Inability of the newly re- elected government to meaningfully adjust fiscal policies and push ahead with reforms could pressurize the foreign currency credit rating".

Moody's Baa2 rating on India's long-term foreign debt is the second-lowest investment grade. The ranking is the highest in South Asia after Kazakhstan's, four levels below China's, two levels under Malaysia's and six levels above Pakistan's.

"If the newly re-elected government proves able to quickly outline and sustain a credible program for reducing consolidated deficits, then the sustainability prospects for general government debt would improve," Moody's said in its report. These trends could boost the outlook for the country's local currency credit ratings. Kamal Nath, trade minister in the previous government, would become minister for road transport and highways.

The comments from Moody's came after Fitch Ratings, which ranks India's debt BBB-, on 14 May 2009 said it expected the new government to step up spending to arrest slowing growth. That would widen India's national budget deficit, including state government finances, to more than 10% of GDP for a second year in a row, Fitch said.

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. Analysts also say labour reforms are needed as a number of youngsters enter the job market.

The FM on Wednesday 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.

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.

On the political front, ending nearly a fortnight of suspense, the United Progressive Alliance (UPA) cabinet under the leadership of Prime Minister Manmohan Singh finally took shape on Thursday. Key cabinet ministers who retained their portfolios are Jaipal Reddy (urban development), Sushil Kumar Shinde (power), Vayalar Ravi (overseas Indian affairs), A. Raja (communications and information technology), Murli Deora (petroleum and natural gas), Kumari Selja (housing and urban poverty alleviation), Subodh Kant Sahay (food processing industries) and M.S. Gill (youth affairs and sports).

Anand Sharma was made commerce and industry minister. Kamal Nath, trade minister in the previous government, would become minister for road transport and highways. Kapil Sibal has become the HRD minister and Veerappa Moily is the new law minister.

Vilasrao Deshmukh, who was removed as chief minister of Maharashtra after the 26/11 terror attacks in Mumbai, has got heavy industries and public enterprise and former Himachal Pradesh chief minister Virbhadra Singh the ministry of steel. Former Jammu and Kashmir chief minister Ghulam Nabi Azad was given health and family welfare.

Former Jammu and Kashmir chief minister Farooq Abdullah was allocated the ministry of new and renewable energy. Debutant C.P. Joshi from Rajasthan was given the portfolio of rural development and panchayati raj.

Another first-timer, Shashi Tharoor, was appointed minister of state (MoS) in the external affairs ministry, while Sachin Pilot will take charge as an MoS in the communications and information technology ministry and Agatha Sangma as his counterpart in the rural development ministry.

Jyotiraditya Scindia will now move to the commerce ministry as MoS. Dayanidhi Maran from Dravida Munnetra Kazhagam got textiles and B.K. Handique from Assam was made minister of mines as well as the development of north-eastern region. Among those with independent charge, Praful Patel retains civil aviation. Congress leader Prithviraj Chavan, too retained his post as MoS in the Prime Minister's Office and got additional charge as an MoS for science and technology, ministry of earth as well parliamentary affairs, among others. Salman Khurshid was made MoS with independent charge of corporate affairs, along with minority affairs.

The portfolio announcements came late in the evening, well after the conclusion of the second round of cabinet expansion. On Thursday, 14 cabinet ministers, seven ministers with independent charge and 38 ministers of state were sworn in, while 19 cabinet ministers were sworn in on 22 May. Of the 59 ministers inducted on Thursday, 42 are from the Congress, taking the total number of ministers from the party to 60, including the Prime Minister.

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. It remains to be seen whether the government undertakes privatisation of state-run firms.

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 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 rose 329.24 points or 2.3% to 14,625.25, its highest closing since 10 September 2008. The Sensex gained 431.27 points at the day's high of 14,727.28 in late trade. At the day's low of 14,319.87, the Sensex rose 23.86 points in early trade.

The S&P CNX Nifty rose 111.85 points or 2.58% to 4,448.95, its highest closing since 9 September 2008. Nifty June 2009 futures were at 4,442.60, at a discount of 6.35 points as compared to the spot closing of 4,448.95. Turnover in NSE's futures & options (F&O) segment was Rs 63,060.58 crore much lower than Rs 90,315.67 crore on Thursday, 28 May 2009.

The Sensex is up 4,977.94 points or 51.59% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 6,464.85 points or 79.22%.

BSE clocked a turnover of Rs 8,384 crore today, higher than Rs 7,032.24 crore on Thursday, 28 May 2009.

The BSE Mid-Cap index was up 2.46% and the BSE Small-Cap index was up 3.01%. Both the indices outperformed the Sensex.

The BSE Realty index (up 6.76%), %), the BSE Capital Goods index (up 4.13%), the BSE Consumer Durables index (up 3.55%), the BSE Auto index (up 3.41%), the BSE Oil & Gas index (up 3.31%), the BSE PSU index (up 3.3%), the BSE Metal index (up 3.11%), the BSE IT index (up 2.37%), the BSE TECk index (up 2.33%), outperformed the Sensex.

The BSE Healthcare index (down 1.36%), the BSE FMCG index (down 0.25%), the BSE Bankex (up 1.17%) and the BSE Power index (up 2.02%), underperfomed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 2,141 shares rose as compared with 647 that fell. A total of 55 shares remained unchanged.

From the 30 share Sensex pack, 26 stocks rose and rest fell.

Shares of state-run oil firms surged boosted by Deora's comments on deregulation of oil prices. PSU OMCs, BPCL and HPCL rose by between 3.75% to 8.33%.

Indian Oil Corporation rose 6.9% after it posted a net profit of Rs 6620 crore in Q4 March 2009 compared to a net loss of Rs 414 crore in Q4 March 2008. The company announced the result during the market hours today.

India's largest oil exploration firm by revenue Oil & Natural Gas Corp rose 3.99% on a recent 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.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 2.59% to Rs 2277.50 on reports it has struck gas in two blocks (D3 and D9), with estimates putting the natural gas reserves at 20 trillion cubic feet (tcf). But the stock came off the day's high of Rs 2,304. Hardy Oil & Gas Plc has 10% stake each in the two blocks where RIL is the operator with 90% interest.

Analysts expect strong growth in RIL's bottom line in coming quarters from sale of gas which it started pumping last month from its deep-sea field off the east coast.

Bank stocks pared gains as surging bond yields will result in diminution in the value of banks' bond portfolio. The yields on the benchmark 10-year paper climbed for a fifth week to trade at 6.7% at 13:30 IST after a finance ministry official said India may borrow more than planned in the first half of the fiscal year that started on 1 April 2009. Bond prices and bond yields are inversely related.

India's largest private sector bank by net profit ICICI Bank was up 1.54% to Rs 740.70, off the day's high of Rs 754. Its American depository receipt (ADR) rose 5.06% on Thursday, 28 May 2009. India's second largest private sector bank by net profit HDFC Bank was up 0.43% to Rs 1,442.35, off the day's high of Rs 1,459.50. Its ADR rose 2.6% overnight.

India's biggest bank in terms of branch network State Bank of India (SBI) was up 2.2% to Rs 1,869.10, off the day's high of Rs 1,891. 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.

India's biggest dedicated housing finance firm by operating income HDFC rose 0.18%. 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.

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. Housing Development & Infrastrucutre, Indiabulls Real Estate, Unitech rose by between 3.07% to 9.13%.

India's largest realty player by market capitalization DLF rose 8.41% on reports the founders of realtor DLF are planning to sell another 5.5% stake to raise Rs 1000 - 1500 crore. DLF has reportedly denied stake sale plan by promoters.

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).

Auto stocks rose ahead of monthly sales figures for May 2009 which auto firms will unveil next week. Hero Honda Motors, Maruti Suzuki India, Bajaj Auto rose by between 1.13% to 2.32%.

India's largest tractor maker by sales Mahindra & Mahindra spurted 5.67% extending recent gains after net profit jumped 89% to Rs 418.07 crore in Q4 March 2009 over Q4 March 2008. The results were announced during market hours yesterday, 28 May 2009, when the stock ended 2.16% higher at Rs 638.80.

Capital goods and construction stocks rose on expectations of increased infrastructure spending by the Congress-led UPA government to boost growth. Other capital goods stocks, Thermax, ABB, Praj Industries Siemens and Punj Lloyd rose by between 1.04% to 7.55%.

India's largest construction & engineering firm by sales Larsen & Toubro rose 4.75% after company's net profit rose 3.28% to Rs 998.52 crore on 24.01% rise in total income to Rs 10835.79 crore in Q4 March 2009 over Q4 March 2008. The company announced the results during trading hours yesterday when the stock had risen 2.32%.

Notwithstanding a slowdown in the Indian capital goods and infrastructure sectors, L&T's order intake rose 23% to Rs 51621 crore in the year ended March 2009 (FY 2009). The order book stood at Rs 70319 crore as on 31 March 2009, which is two times its revenue of Rs 34045 crore in FY 2009, giving a strong revenue visibility.

India's largest electric equipment maker by sales Bharat Heavy Electricals rose 2.71% as net profit rose 21.29% to Rs 1347.47 crore in Q4 March 2009 over Q4 March 2008. The company announced the results after trading hours on Wednesday, 27 May 2009

Reliance Infrastructure rose 0.46%. 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).

Construction stocks rose on expectations that the Congress-led UPA government will increase infrastructure spending, including new power plants, to boost growth. Hindustan Construction Company, Nagarjuna Construction Company, IVRCL Infrastructure & Projects and Gammon Infrastructure, rose by between 7.38% to 10.11%.

Cement stocks rose as a likely thrust on the infrastructure spending by the new government would boost demand. ACC, Ambuja Cements, India Cements and Ultratech Cements rose, by between 2.63% to 8.56%. Cement firms will announce their monthly sales figures for May 2009 next week.

Steel makers rose after the steel minister said he will consider additional tax on steel imports. Steel Authority of India, JSL, Tata Steel, JSW Steel, Jindal Steel & Power and Bhushan Steel rose by between 0.2% to 5.17%.

Virbhadra Singh, the new steel minister said today, 29 May 2009, that India will consider slapping additional import tax on steel to protect the domestic industries from cheap imports. He added that the issue has to be addressed immediately.

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. Dredging Corporation of India, HMT, Shipping Corporation of India, Central Bank of India rose by between 2.15% to 5%.

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.

Airlines stocks rose on hopes the newly elected government may allow foreign direct investment in the sector.Jet Airways, Kingfisher Airlines and SpiceJet rose by between 3.37% to 9.96%.

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.

Cals Refineries clocked the highest volume of 4.59 crore shares on BSE. Unitech (3.2 crore shares), Suzlon Energy (2.5 crore shares), Reliance Natural Resources (2.11 crore shares) and Ispat Industries (1.97 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 362.47 crore on BSE. DLF (Rs 298.44 crore), Unitech (Rs 256.57 crore), Indiabulls Real Estate (Rs 246.69 crore) and Suzlon Energy (Rs 244.64 crore) were the other turnover toppers in that order.