Sensex up 275 points from the day's low; breadth strong

Key benchmark indices recovered after last two days' losses on expectations of a strong push for economic reforms by the government. Higher US index futures and firm European markets also supported the domestic boruses in what was a choppy trading session. Banking and capital goods stocks rose. Index heavyweight Reliance Industries surged. The BSE 30-share Sensex rose 150.61 points or 1.1%, up close to 275 points from the day's low and off close to 50 points from the day's high.

The market was volatile. After a weak opening triggered by lower Asian stocks and overnight slide in US stocks, the market soon bounced back on expectations of a strong push for economic reforms by the Congress-led UPA government. It cut gains later. The market slipped into the red in mid-morning trade. The market cut losses after hitting fresh intraday low in early afternoon trade.

The market recovered in afternoon trade as European shares rose. The market pared gain after surging to fresh intraday high in mid-afternoon trade. Volatility was high after 14:00 IST. Volatility may remain high over the next few days ahead of the expiry of May 2009 futures and options (F&O) contract next Thursday, 28 May 2009.

A comfortable victory for the Congress-led coalition government in election has raised expectations of a strong push for economic reforms by the government. Investors are awaiting the allocation of the portfolio of key ministries in the new government

Once the economic growth picks up, there will be a need to roll back excess liquidity from the banking system, the Reserve Bank of India (RBI) governor D Subbarao, said on Friday, 22 May 2009. The government's borrowing program has already expanded rapidly, he said adding that the large government borrowing is going against the Reserve Bank's efforts in trying to maintain interest rates low.

Subbarao said that pressure to have further fiscal stimulus will persist and that the central bank will manage government borrowings using all tools available. Subbarao said the central bank continues to support its forecast of 6% economic growth in the year ending March 2010.

European shares rose as miners advanced tracking higher metal prices on the London Metal Exchange. Key benchmark indices in France, Germany and UK were up by between 0.77% to 1.05%. European stocks had declined sharply on Thursday, 21 May 2009

Asian stocks fell in a choppy trade today on speculation the US will lose its top credit rating after a warning on Thursday, 21 May 2009, from rating agency Standard & Poor's that it may downgrade the UK government's credit ratings. Key benchmark indices in China, Hong Kong, Japan, South Korea, and Indonesia were down by between 0.41% to 1.26%. Key benchmark indices in Taiwan and Singapore rose by between 0.28% to 1.55%.

The Bank of Japan acknowledged Friday for the first time in almost three years that there are signs of improvement in the economy. Economic conditions have been deteriorating, but exports and production are beginning to level out against the backdrop of progress in inventory adjustments, both at home and abroad, the central bank said at the conclusion of its two-day policy meeting. It added that government spending is set to increase, providing a further boost.

The pace of deterioration in economic conditions is likely to moderate gradually, leading to a leveling out of the economy, it said, marking a change from the Bank of Japan's previous gloomy assessments of continuing deterioration. The Bank of Japan kept the benchmark policy rate unchanged at 0.1%, as widely expected.

US markets finished off their lows of the session, but still logged a triple-digit losses yesterday 21 May 2009 as the Fed's lowered outlook and disappointing economic data shook investor confidence. The Dow fell 129.91 points, or 1.5%, to 8,292.13. The S&P 500 index fell 15.14 points, or 1.7%, to 888.33, and the Nasdaq composite index fell 32.59 points, or 1.9%, to 1,695.25.

Trading in the US index futures indicated Dow could rise 45 points at the opening bell on Friday, 22 May 2009. US market remains closed on Monday, 25 May 2009

US initial jobless claims dropped by 12,000 to a seasonally adjusted 631,000 in the week ended 16 May 2009, slightly higher than expected. The previous week's figures were revised higher.

US regulators on Thursday shut down BankUnited FSB, an ailing Florida lender, in the largest American bank failure this year. The Federal Deposit Insurance Corporation (FDIC) said the bank's assets had been acquired by a newly chartered federal savings bank, BankUnited. BankUnited, the successor institution, will be the largest independent bank in Florida, as was its predecessor (BankUnited, FSB), FDIC said in a statement.

BankUnited, FSB is the 34th FDIC-insured institution to fail in the United States this year, and the third in Florida. The last bank to be closed in the state was Riverside Bank of the Gulf Coast, Cape Coral on 13 February 2009. BankUnited is the second biggest US bank failure during the current financial crisis triggered by a home mortgage meltdown, after the collapse last July of Indymac, a California mortgage bank.

Closer home, foreign institutional investors have been aggressively buying in Indian stocks. Foreign institutional investors bought shares worth Rs 146.90 crore on Thursday.

FII inflow in May 2009 totaled Rs 15,281.60 crore (till 21 May 2009) while their inflow in calendar year 2009 totaled Rs 15,638.10 crore.

In political news, Prime Minister Manmohan Singh will be sworn in for a second term along with 19 other ministers, including Pranab Mukherjee and P.Chidambaram, at the Rashtrapati Bhavan on Friday evening, the Prime Minister's Office (PMO) has announced.

The two non Congress leaders to find a cabinet berth are Nationalist Congress Party (NCP) chief Sharad Pawar and Trinamool Congress leader Mamata Banerjee.

Besides Mukherjee and Chidambaram, the Congress ministers who will take oath are A.K. Antony, S.M. Krishna, Ghulam Nabi Azad, Sushil Kumar Shinde, M. Veerappa Moily, S. Jaipal Reddy, Kamal Nath, Vayalar Ravi, Meira Kumar, Murli Deora, Kapil Sibal, Ambika Soni, B.K. Handique, Anand Sharma and C.P. Joshi.

This will be followed by an expansion of the council of ministers, including ministers of state as well as those junior ministers who will hold independent charge of their portfolios, in the next few days, the PMO said in a statement.

DMK on Thursday said it has decided not join the the Congress-led UPA government but the party will provide support the government from outside. This after the talks between DMK and Congress over ministerial berth for DMK broke down

A major irritant was the Congress refusal to part with infrastructure ministries and instead offering the DMK portfolios of Labour, Food Processing and Textiles. The southern ally declared it would extend 'outside support' to the new government, preferring to sit out of the Ministry to accepting the same number of berths it had last time. The announcement came after three rounds of talks between leaders of the two parties and a telephonic conversation between Prime Minister Manmohan Singh and Mr. Karunanidhi.

Announcing the breakdown of talks, DMK leader T.R. Baalu said the Congress formula was unacceptable to his party. The Congress remained outwardly unfazed by the DMK decision. The DMK wanted five Cabinet berths to accommodate the two outgoing Union Ministers, A. Raja and Mr. Baalu, besides Mr. Karunanidhi's two children, M.K. Azhagiri and Kanimozhi, and his grand-nephew Dayanidhi Maran. Also, the DMK wanted four Ministries of State. Crowding the Ministry with members of one family was unacceptable to the Congress and this is an issue that it has taken up with the Nationalist Congress Party (NCP) also.

Meanwhile, 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 who will be sworn in as the Prime Minister today has reported 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. The disinvestment department under the finance ministry is reportedly working on expanding the list of companies in which the government could reduce its stake. Among these are Power Grid Corporation, Cochin Shipyard, and Rashtriya Ispat Nigam.

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. Dr Singh was renominated as Congress Parliamentary Party leader on Tuesday (19 May 2009).

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.

Meanwhile, the stock market will keep a close eye on the allocation of portfolios in the new government. It remains to be seen who get the key ministries viz. power, transport and education sectors. Analysts say growth in these three sectors are key for India to achieve strong economic growth. If those seen as strong performers are given charge of these three ministries, the market may extend gains.

As per reports, Congress's strong showing in election means reformers will almost certainly be named to key ministerial portfolios viz. finance, trade, defence and foreign affairs.

Veteran Congress leader Pranab Mukherjee is the frontrunner for the post of the finance minister. As per market talks, P Chidambaram could retain his home portfolio. Another senior leader Murli Deora may retain his old portfolio viz. petroleum. And A K Antony is also likely to retain defense portfolio. Jairam Ramesh may become Power minister

Trinamool Congress (TC) leader Mamata Banerjee is likely to be made Railway Minister

The BSE 30-share Sensex jumped 150.61 points or 1.1% to 13,887.15. The Sensex rose 200.39 points at the day's high of 13,936.93 in late trade. At the day's low of 13,611.30, the Sensex fell 125.24 points in early afternoon trade.

The S&P CNX Nifty was up 22.25 points or 0.53% to 4,233.15. Nifty May 2009 futures were at 4248, at a premium of 9.50 points over the spot closing of 4238.50. Turnover in NSE's futures & options (F&O) segment declined to Rs 68152.6 crore from Rs 71702.09 crore on Thursday, 21 May 2009.

BSE clocked a turnover of Rs 7086 crore lower than Rs 7,996.10 crore on Thursday 21 May 2009.

From a recent high of 14,302.03 on Tuesday, 19 May 2009, the Sensex had lost 566.49 points or 3.95% in two trading sessions to 13,736.54 on Thursday 21 May 2009. The Sensex is up 4239.84 points or 43.94% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 5,726.75 points or 70.17%.

Coming back to today's trade, the BSE Mid-Cap index was up 1.75% and the BSE Small-Cap index was up 3.19%. Both the indices outperformed the Sensex.

The BSE Capital Goods index (up 2.9%), the BSE Bankex (up 1.8%), the BSE Healthcare index (up 1.77%), the BSE Oil & Gas index (up 1.32%), outperformed the Sensex.

The BSE Consumer Durables index (down 1.13%), the BSE Auto index (down 1%), the BSE Realty index (down 0.2%), the BSE Metal index (down 0.18%), the BSE FMCG index (up 0.37%), the BSE PSU index (up 0.58%), the BSE TECk index (up 0.87%), the BSE Power index (up 1.03%), the BSE IT index (up 1.06%), underperfomed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 2,136 shares rose as compared with 593 that fell. A total of 49 shares remained unchanged.

From the 30 share Sensex pack, 15 stocks fell while rest gained.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 3.13%. 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.

India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) fell 2.74% on profit taking after the stock rose 8.41% yesterday, 21 May 2009. Oil prices sank Thursday, retreating from six-month highs reached in the previous session, as all three major US stock indexes fell hard and the US dollar gained ground. Light sweet crude for July delivery fell 99 cents, or 1.6%, to settle at $61.05 a barrel Thursday. The fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

PSU OMCs fell after Thursday's sharp surge triggered by reports the petroleum ministry has prepared a draft Cabinet note on freeing petrol and diesel prices from government control, after which they will be linked to international movements. HPCL and Indian Oil Corporation (IOC) fell by between 0.85% to 1.56%. But BPCL rose 0.67%.

With international crude oil prices hovering between $50 a barrel and $60 a barrel, the oil ministry reportedly feels it is the right time to free petrol and diesel prices from government control. Petrol prices may be raised by about Rs 2 per litre and diesel rates cut by Rs 0.30 a litre if the proposal to free auto fuel prices from state control is approved by the incoming Cabinet.

According to the proposal, state-run IOC, BPCL and HPCL will be given freedom to fix rates of petrol and diesel till the time crude oil stays below $75 a barrel. If it breaches this mark, the government will step in to protect the interests of consumers.

Capital goods stocks rose triggered by 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 4.73% to Rs 1,301.40 and India's biggest power equipment maker by revenue Bharat Heavy Electricals (Bhel) was up 0.9% to Rs 1981.95. Other capital goods stocks, ABB, Praj Industries and Punj Lloyd rose by between 2.11% to 12.11%.

India's largest thermal power generator by sales NTPC rose 1.93% after net profit rose 57.77% to Rs 2113.35 crore on 8.65% rise in total income to Rs 12,481.51 crore in Q4 March 2009 over Q4 March 2008. The company announced the results during the market hours today

Bank stocks rose in choppy trade on hopes the UPA government will pursue financial sector reforms. India's largest private sector bank by net profit ICICI Bank rose 4.54% to Rs 702.80. The stock hit a high of Rs 713 and a low of Rs 655. Its American depository receipt (ADR) fell 1.3% on Thursday 21 May 2009.

India's biggest bank in terms of branch network State Bank of India (SBI) rose 1.01% to Rs 1,731.70. The stock hit a high of Rs 1,740.90 and a low of Rs 1,678.10. 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%.

But, India's second largest private sector bank by operating income HDFC Bank rose 0.13% to Rs 1,369.05. The stock hit a high of Rs 1,391.45 and a low of Rs 1,345.

India's biggest dedicated housing finance firm by operating income HDFC rose 1.09%. 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 act 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

Outsourcing focussed IT stocks fell for the second straight day after the Federal Reserve disclosed in its minutes from the last rate-setting meeting that it lowered its forecast for growth of the US economy this year given the weakness in the first quarter. US is the biggest market for Indian IT firms. A firm rupee also weighed on IT stocks.

India's largest software services exporter by sales TCS fell 2.27%. TCS last week announced it has been selected for a five-year IT services contract for auto maker Volkswagen group's operations in the United Kingdom.

India's third largest software services exporter by sales Wipro fell 1.84% as its ADR fell 1.9% overnight.

But India's second largest software services exporter by sales Infosys rose 1.11% on reports the company is eyeing an acquisition of about $200-$300 million in the healthcare or lifestyle segment.

The Indian rupee rose today supported by the US unit's weakness overseas and on hopes for a jump in foreign investment after the ruling coalition won national elections. The partially convertible rupee was at 47.10 after strengthening as far as 46.90, compared with Thursday's close of 47.37/38. A firm rupee affects operating profit of IT firms negatively as they earn most of their revenues from exports.

Some FMCG stocks fell as investors pulled out from the so-called defensive stocks. United Spirits, Britannia Industries, Tata Tea and Dabur India, Nestle India fell by between 0.36% to 2.07%.

But India's largest cigarette maker by sales ITC rose 0.6% after net profit rose 9.97% to Rs 808.99 crore on 2.88% fall in total income to Rs 3979.66 crore in Q4 March 2009 over Q4 March 2008. The company announced the results during the market hours today

Metal stocks fell on fall in copper prices in New York. Metal prices, however, rose on the London Metal Exchange (LME) today, 22 May 2009. Hindalco Industries, Hindustan Zinc, Tata Steel, Sterlite Industries fell by between 0.72% to 4.32%.

Copper prices fell the most in a week yesterday after records showed that Federal Reserve policy makers saw risks last month to a US economic recovery, renewing concern that the global recession will erode metals demand. Copper futures for July delivery fell 5.55 cents, or 2.6 percent, to $2.051 a pound on the Comex division of the New York Mercantile.

Cement stocks fell on profit taking after recent surge triggered by hopes UPA government's likely thrust on infrastructure sector would boost cement demand. Grasim Industries, Ultratech Cement, ACC, Ambuja Cements fell by between 0.6% to 4.22%.

Some 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 1.59% to 8.76%.

Some realty stocks rose triggered by expectations that stability at the Centre will attract more money from foreign investors into the sector. Indiabulls Real Estate, Sobha Developers, Akruti City, Omaxe rose by between 2% to 5%.

Cals Refineries clocked the highest volume of 6.94 crore shares on BSE. Satyam Computer Services (5.57 crore shares), Kaashyap Technologies (2.38 crore shares), Firstsorce Solutions (2 crore shares) and Unitech (1.7 crore shares) were the other volume toppers in that order.

Reliance Capital clocked the highest turnover of Rs 310.92 croe on BSE. Satyam Computer Services (Rs 299.11 crore), ICICI Bank (Rs 282.65 crore), Reliance Industries (Rs 258.98 crore) and Housing Development & Infrastructure (Rs 215.41 crore) were the other turnover toppers in that order.