Market extends rally for thirteenth week; settle at multi month high

Key benchmark indices surged to multi-month highs, extending gains for the thirteen straight week in anticipation of a strong push for economic reforms by the newly-elected United Progressive Alliance (UPA) government. The barometer index BSE Sensex raced past the psychological 15,000 mark. Besides strong inflow from foreign funds, positive global cues and further signs of recovery in domestic and global economy boosted the sentiment further. Strong buying momentum was seen in small and mid-cap stocks

There are signs of recovery in the Indian economy. Manufacturing activity in India expanded for a second straight month in May 2009 to its highest in eight months, a survey showed, reflecting a revival in domestic demand but export orders remained weak. The Market Purchasing Managers' Index (PMI) based on a survey of 500 companies, rose to 55.7 in May 2009 from April's 53.3, well above the threshold of 50 that separates expansion from contraction.

The manufacturing index was boosted mainly by the new orders index, which rose to 59.1 in May 2009 from 54.9 in April 2009. Manufacturing makes up about 15% of India's gross domestic product. Although domestic demand improved, the pricing power of manufacturers was hurt by intense competition, while higher commodity prices also pushed up input prices, Market economist Gemma Wallace said.

President Pratibha Patil addressed to a joint session of both houses on 4 June 2009 formally disclosing the agenda of the UPA coalition government. She said that the government would aim to revive economic growth with higher investments in sectors such as infrastructure, while adhering to fiscal prudence. Patil said steps would be taken to encourage foreign investment inflows, list shares of state-run firms and infuse more capital in banks. The government's immediate priority must be to focus on management of the economy that will counter the effect of the global slowdown, she added.

Patil said the new regime will develop a roadmap for listing public sector units, co-ordinate with other countries to bring back illegal money stashed in secret bank accounts, recapitalise public sector banks, and bring in the pension reforms bill.

On the economic front, the government's immediate focus would be on sectors that are adversely hit, especially small and medium enterprises, exports, textiles, commercial vehicles, infrastructure and housing.

Hopes of market friendly measures propelled key benchmark indices in the week ended Friday, 5 June 2009. The BSE Sensex advance 478.30 points or 3.27% to 15,103.5512, its highest closing since 12 August 2008. The S&P CNX Nifty gained 137.95 points or 3.1% to 4586.90 its highest closing since 11 August 2009.

The BSE Mid-Cap index gained 353.04 points or 6.98% to 5,409.78 and the BSE Small-Cap index advanced 471.83 points or 7.88% to 6,458.65 in the week ended Friday, 5 June 2009. Both these indices outperformed the Sensex

Trading for the week started on an upbeat note with markets advancing on Monday, 1 June 2009 in anticipation of a strong push for economic reforms by the newly-elected United Progressive Alliance (UPA) government. The BSE 30-share Sensex gained 215.38 points, or 1.47%, to 14,840.63 and the S&P CNX Nifty rose 80.95 points, or 1.82%, to 4,529.90

Key benchmark indices saw divergent trend on Tuesday, 2 June 2009 with the BSE Sensex logging small gains and Nifty ending slightly lower in what was a highly choppy trading day. The BSE 30-share Sensex rose 34.28 points, or 0.23%, to 14,874.91. However the S&P CNX Nifty fell 4.65 points, or 0.10%, to 4525.25

Indices continued to see divergent trend for the second running day on Wednesday, 3 June 2009 as the Sensex ended with marginal loss while the S&P CNX Nifty settled slightly higher. The BSE 30-share Sensex fell 4.01 points, or 0.03%, to 14,870.90 after surging past the psychological 15,000 mark, the level it reached for the first time in nearly 9 months in intra-day trade. However, the S&P CNX Nifty rose 5.45 points, or 0.12%, to 4,530.70, its highest closing since 12 August 2008.

Buying frenzy in late trade helped indices reverse early losses caused due to weak global cues and log decent gains on Thursday, 4 June 2009. The BSE 30-share Sensex rose 137.78 points, or 0.93%, to 15,008.68 and the S&P CNX Nifty shot up 41.95 points, or 0.93%, to 4,572.65

Market extended gains on Friday, 5 June 2009 on the back of firm global cues and continued buying demand for index pivotals. The BSE 30-share Sensex rose 94.87 points, or 0.63%, to 15,103.55 and the S&P CNX Nifty rose 14.25 points, or 0.31%, to 4,586.90

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) slipped 2.28% to Rs 2211.85 after its German unit Trevira, a specialty polyester manufacturer, went bankrupt. Reliance Industries had acquired Trevira five years ago for Rs 440 crore. This acquisition in 2004 had propelled Reliance to the position of the world's largest polyester fibre and yarn producer

Meanwhile, the Directorate General of Hydrocarbons has also reportedly contested the authenticity of claims of gas reserves at Krishna Godavari basin blocks D-3 and D-9 by Hardy Oil & Gas Plc. UK-based Hardy Oil, late last month, said 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. 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, it had said. Hardy Oil & Gas Plc has 10% stake each in the two blocks where RIL is the operator with 90% interest.

Metal shares advanced on strong domestic demand and firm prices on the London Metal Exchange (LME). Steel Authority of India (up 1.71%), Hindalco (up 9.68%), Sterlite Industries (up 7.95%), and Hindustan Zinc (up 9.55%), edged higher.

The world's sixth largest steel maker by sales Tata Steel jumped 14.18% to Rs 463.90 after its unit, Tata Steel UK, won approval from banks to ease conditions on a 3.7 billion pounds loans it took to buy Anglo-Dutch Corus. The announcement was made on Saturday, 30 May 2009.

India's top small car maker by sales Maruti Suzuki gained 5.99% to Rs 1082.25 after total sales rose 15.7% to 79,872 units in May 2009 over May 2008.

India's top truck marker by sales Tata Motors jumped 15.55% to Rs 389.05 after global credit rating agency Moody's on Tuesday, 2 June 2009 revised upwards outlook for its low investment grade rating on from negative to stable after the company successfully refinanced a bridge loan for Jaguar and Land Rover acquisition. Despite the sharp rise, the stock is off day's high of Rs 378.70

India's second largest listed cellular services provider by sales Reliance Communications (RCom) surged 10.81% to Rs 338.85 on the company's plans to raise funds through the qualified institutional placement route.

RCom will seek shareholders' approval to garner funds from qualified institutional investors, either through a share sale or an issue of a variety of instruments including fully convertible, partly convertible or non-convertible debentures with warrants or any other security. Although the company did not say how much it planned to raise reports suggested it may be around $500 million and will be used to strengthen financial position for a planned participation in the upcoming auction for nationwide 3G and Wi-Max spectrum allocation by the Indian government.

India's largest cellular services provider by sales Bharti Airtel rose 0.63% to Rs 824.80, on fears that the merger deal with MTN would lead to dilution in earnings per share. On 25 May 2009, Bharti Airtel said it is in talks to buy 49% of Johannesburg-based MTN, the first step in a potential $23 billion merger. The deal may also see MTN, Africa's largest mobile-phone company, buy 36% of Bharti Airtel

Infrastructure shares gained on hopes the Congress-led UPA government may boost spending on infrastructure sector. GVK Power & Infrastructure (up 1.86%), GMR Infrastructure (up 3.79%), Bhel (up 5.17%), IVRCL Infrastructures & Projects (up 11.21%), surged

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 (up 1.18%), Housing Development & Infrastructure (up 7.13%), and Unitech (up 22.63%), gained.

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).

India's largest bank by net profit and branch network State Bank of India (SBI) fell 2.74% to Rs 1817.90 on profit booking after the recent rally. Reportedly the bank hopes to earn more profit than the landmark figure of Rs 10,000 crore in the current fiscal

India's second largest bank by net profit ICICI Bank rose 1.41% to Rs 751.15 after it said on 4 June 2009 it will cut lending rates by 50 basis points from Friday, 5 June 2009. The benchmark advance rate, or the rate that it charges its top customers, will drop to 15.75% from 16.25%. It also cut floating reference rate (FRR) applicable to floating rate retail loans (including floating rate home loans) by 50 basis points. The revised FRR will be 12.75% from 13.25%. All the existing floating rate customers to benefit from the cut.

Shares of public sector firms gained on speculation the UPA government may revive disinvestment programme. Shipping Corporation of India (up 5.86%), HMT (up 4.87%), Hindustan Copper (up 26.55%), MMTC (up 24.09%), rose

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. Disinvestment programme was earlier put on the back burner due to stiff opposition from the Left front which provided support to the previous government for most part of the five-year term.

India's largest cement manufacturer by sales ACC gained 9.57% to Rs 857.95 after cement production rose 1.11% to 1.81 million tonnes and cement dispatches rose 1.11% to 1.82 million tonnes in May 2009 over May 2008.

India's second largest software firm by sales Infosys Technologies gained 5.53% to Rs 1690.55 on reports the firm is looking at three to four companies with annual revenue of $100 million to $200 million in the U.S. and Europe for a potential acquisition.

Wholesale price index rose 0.48 % in the 12 months to 23 May 2009 lower than previous week's annual rise of 0.61%, government data showed on Thursday, 4 June 2009. The annual inflation rate was 8.9% during the corresponding week of the previous year.

The National Stock Exchange (NSE) after trading hours on 29 May 2009, announced a reduction in the lot size of a number of derivatives contracts as a part of a periodic review to meet a previously set value of the contract at Rs 2 lakh. For most of the stocks, the changes will be applicable from July 2009 derivative contracts. The reduction in lot size may result in increased participation from retail investors.

Thus, the lot size of Maruti Suzuki has been slashed to 200 from 800 and that of Steel Authority of India (Sail) has been reduced to 1350 from 5400. The lot size of Axis Bank has been halved to 450 from 900 and for Reliance Industries also the lot size has been halved to 150 from 300. State Bank of India's lot size too has been halved to 132 from 264.

India's infrastructure sector output grew 4.3% in April from a year earlier, government data showed on Tuesday, 2 June 2009. Output had risen 2.3% in the same month last year, and climbed 2.7% in the fiscal year ended March 2009 compared with 5.9% growth in 2007/08. The infrastructure sector accounts for 26.7% of India's industrial output.

Data during trading hours on Monday 1 June 2009 showed that the Market Purchasing Managers' Index (PMI) based on a survey of 500 companies, rose to 55.7 in May 2009 from April's 53.3, well above the threshold of 50 that separates expansion from contraction.

The manufacturing index was boosted mainly by the new orders index, which rose to 59.1 in May 2009 from 54.9 in April 2009. Manufacturing makes up about 15% of India's gross domestic product. Although domestic demand improved, the pricing power of manufacturers was hurt by intense competition, while higher commodity prices also pushed up input prices, Market economist Gemma Wallace said

Globally, China's official purchasing managers' index, a key economic indicator, slipped slightly in May 2009, but stayed above the 50 reading indicating manufacturing activity continued to expand for the third consecutive month. The Purchasing Managers Index slipped to 53.1 in May 2009 from 53.5 in April 2009 but held over the expansionary 50 mark, the China Federation of Logistics & Purchasing said.

US Treasury Secretary Timothy Geithner today, 1 June 2009 said that the global recession seemed to be losing force but that it will be critical for the United States and China to institute major economic reforms to put the world on a more sustained footing. Geithner said that a successful transition to a more balanced and stable global economy will require substantial changes to economic policy and financial regulation around the world and especially in the world's largest and third largest economies.

US GDP decreased at an annual rate of 5.7% in the first quarter of 2009, according to preliminary estimates from the Bureau of Economic Analysis. Although a significant contraction, the fall was smaller than the 6.3% drop in the fourth quarter of last year, and also beat advance estimates which had suggested a decline of 6.1%