Sensex vaults 17% as market cheers UPA's thumping victory in election; trading halted for the day

A clear mandate for the Congress-led United Progressive Alliance (UPA) in Lok Sabha election send stocks surging with trading on the bourses halted for the day at about 11:55 IST. For the first time in the history of the stock markets trading was halted because the market-wide circuit were applied due to a solid surge. Earlier, there have been instances when trading was halted when market-wide circuit filters were applied due to a market crash.

The 30-share Sensex jumped 2110.79 points or 17.34% at 14,284.21 and the 50-unit S&P CNX Nifty gained 651.50 points or 17.74% to 4,323.15.

BSE clocked a paltry turnover of Rs 77 crore. The combined turnover in the cash and the derivatives segment of BSE and NSE totaled Rs 3103. Only 846 stocks were traded on the BSE while 202 stocks witnessed action on the NSE.

Trading was halted in just 16 seconds after the market re-opened at 11:55 IST. Earlier in the day, trading was halted within seconds of opening as the market soared following a clear mandate for the UPA in the Lok Sabha election. A clear mandate for the Congress-led United Progressive Alliance (UPA) boosted hopes a strong coalition would be able to push through economic reforms that would boost foreign investment. The 30-share Sensex surged 14.70% or 1,789.88 points to 13,963.30 and the 50-unit S&P CNX Nifty gained 531.65 points or 14.48% to 4203.30, when trading was halted within seconds of opening.

While the solid surge on the bourses in opening trade was not a big surprise, what created confusion among the market was the level at which the circuit filters were applied. The market-wide circuit filters are applied taking into consideration the Sensex or Nifty's closing level on the last trading day of the previous quarter - this time based on the closing of Nifty or Sensex on 31 March 2009. If that be so, the market wide circuit filters should have applied at a gain of 975 for Sensex or a gain of 300 of Nifty whichever was achieved earlier

The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers when triggered, bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier.

In a circular issued after market hours, the National Stock Exchange (NSE) said the existing policy will continue to govern trading on the exchanges. Accordingly, the first level of the circuit breaker at 10% will be triggered at 300 points for Nifty and 975 for Sensex over the respective closing level of the indices today, 18 May 2009, it said. The second circuit breaker at 15% and the third circuit breaker at 20%, will be triggered at 450 points and 600 points for the Nifty respectively and 1450 points and 1950 points for the Sensex respectively, over the closing levels of today, it said.

For the record, the BSE Sensex today attained its highest closing since 11 September 2008 and the S&P CNX Nifty attained its highest closing since 10 September 2008.

As per the provisional data released by the stock exchanges after trading hours, foreign funds today bought shares worth a net Rs 44.64 crore. Domestic institutional investors sold shares worth a net Rs 8.41 crore.

The market breadth, indicating the overall health of the market, was strong. On BSE, 833 shares rose as compared with 11 that fell. A total of 2 shares remained unchanged.

The BSE Mid-Cap index rose 12.06% and the BSE Small-Cap index rose 9.09%. However, both these indices underperformed the Sensex.

The BSE Realty index (up 25.37%), the BSE Capital Goods index (up 23.47%), the BSE Bankex (up 20.27%), the BSE Oil & Gas index (up 19.57%) outperformed the Sensex.

The BSE FMCG index (up 6.78%), the BSE Healthcare index (up 8.04%), the BSE IT index (up 11.41%), the BSE Auto index (up 12.12%), the BSE Consumer Durables index (up 13.63%), the BSE TECk index (up 14.95%), the BSE PSU index (up 15.76%), the BSE Metal index (up 16.64%), the BSE Power index (up 17.09%), underperfomed the Sensex.

The market soared today, 18 May 2009, following a thumping victory of the Congress-led United Progressive Alliance (UPA) government in the Lok Sabha elections. A clear mandate for the UPA boosted hopes a strong coalition would be able to push through economic reforms that would boost foreign investment

The Sensex has risen 4636.90 points or 48.06% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the has Sensex has surged 6,123.81 points or 75.04%.

Coming back to today's trade, Bharat Heavy Electricals, Reliance Industries, HDFC, Reliance Infrastructure, ICICI Bank, Bharti Airtel, Larsen & Toubro, DLF, Reliance Communications, Jaipraksh Associates, State Bank of India, rose by between 20.76% to 32.72%.

Infrastructure shares jumped on hopes the Congress-led UPA government may boost spending on infrastructure sector after emerging victorious in the general elections. India's biggest engineering & construction firm by revenue L&T rose nearly 30% to Rs 1280. India's biggest power equipment maker by revenue Bharat Heavy Electricals rose 32.7% to Rs 2266.

Among other infrastructure stocks, Jaiprakash Associates, Gammon India, GVK Power & Infrastructure, GMR Infrastructure, and IVRCL Infrastructures & Projects rose 20% to 38.3%

Punj Lloyd surged 23.2% ahead of the Q4 March 2009, ahead of the announcement its Q4 March 2009 results later today, 18 May 2009.

Shares of power and capital goods companies surged following a thumping victory of the Congress-led United Progressive Alliance (UPA) government in the Lok Sabha elections, clearing the way for the landmark civilian nuclear deal with the US. Areva T&D jumped 21%, Reliance Infrastructure rose 22%, Hindustan Construction Company rose 25%, Crompton Greaves rose 13.8%, Tata Power Company rose 13%, Rolta gained 13%, ABB rose 13.9%, NTPC gained 11.9%, and Walchandnagar Industries rose 10%

State-run companies advanced 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 rose 20%, Engineers India advanced 19.3%, HMT rose 20%, Neyveli Lignite Corporation advanced 17%, Shipping Corporation of India rose 10%, Hindustan Copper rose 10%, MMTC rose 20%, NMDC rose 20%, Power Finance Corporation rose 13.3% and Central Bank of India rose 18%

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.

The UPA government's thumping victory in the 15th Lok Sabha elections without the support of the Left parties has raised expectations that the government may revive disinvestment programme. The Congress party had in its manifesto released before polls promised to go ahead with disinvestment while retaining a majority holding in the state-run companies.

India's largest bank in terms of assets and branch network State Bank of India soared 20.76% on hopes 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 process of creating a Indian banking behemoth was set in motion two years ago, but got derailed due to resistance from the Left parties. Although the board of SBI and its associate bank, the State Bank of Saurashtra, had approved the merger in August 2007, the government approved it only in August 2008 after the Left withdrew its support to the government.

A merger of the associate banks with itself will give SBI the full benefit of size. SBI and its associate banks enjoy a fourth of the market share.

The SBI management may well be keen to merge the six associates at the earliest, but that will hinge on government approval since the government controls 59.41% of the equity in the bank.

India's largest motorbike maker by sales Hero Honda Motors soared 15.83% as index focused mutual funds took position in the stock ahead of its entry in the coveted BSE 30-share Sensex with effect from 29 June 2009. After trading hours on Friday, 15 May 2009, the BSE announced that Hero Honda will replace Ranbaxy Laboratories in the barometer index BSE Sensex with effect from 29 June 2009

prime minister Manmohan Singh's coalition defied predictions of a tight election and was only about 11 seats short of an majority from the 543 seats at stake, according to election commission data. 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. Congress leaders will meet on Tuesday to officially endorse Manmohan Singh as prime minister, after which the party will meet its coalition partners to decide potential new allies.

Armed with a popular mandate, the Congress led UPA government is going to stake claim today to run India for another five years. The Congress and its allies will go to meet President Pratibha Patil today to show that they have the numbers. The first meeting of the newly-constituted Congress Parliamentary Party (CPP) is expected to convened in a day or two to elect its leader. Singh, who is already the Prime Ministerial candidate of the Congress, is also likely to be elected by the MPs at a joint meeting of the UPA parties. The Congress must form a government by 2 June 2009.

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, with the Congress-led UPA set to form the next government. Left-less victory of the UPA over BJP-led National Democratic Alliance (NDA) would not only signify the formation of a stable government, but also revive hopes of a slew of pro-market policy changes.