Market snaps three day losing streak

The key benchmark indices snapped last three days' losses on hopes for an economic recovery. The BSE 30-share Sensex rose 82.39 points, or 0.55%, up close to 335 points from the day's low and off close to 60 points from the day's high. The barometer index had lost 591.29 points or 3.82% in the last three trading sessions. Realty, metal and capital goods stocks rose. Higher European stocks and US index futures supported the domestic bourses.

The market was volatile. Recovery on the bourses began soon after a weak opening triggered by a setback in global equities. The Sensex moved into the green from red for a brief period in morning trade on hopes for an economic recovery. Reports that most companies that figure in the list of top taxpayers from Mumbai have paid higher advance tax for the April-June 2009 quarter also aided the intraday recovery. The higher advance tax payment indicates improved earnings.

The Sensex swung between positive and negative zones later. The market firmed up in mid-afternoon trade. It pared gains after jumping to fresh intraday high in late trade. The Sensex moved alternately above and below the psychological 15,000 mark in late trade.

Banking stocks recovered after Goldman, Sachs & Co. raised its rating on some state-run banks citing a likely a rebound in India's economy and the financial services industry. But index heavyweight Reliance Industries extended yesterday's fall following an unfavourable court ruling on gas sales. The court directed RIL and Reliance Natural Resources (RNRL) to sign gas supply deal.

The data on advance tax payments for the first quarter of the financial year indicated the manufacturing sector may take more time to recover, while the financial sector remains buoyant. Among manufacturing sector companies, Reliance Industries' first installment of advance tax payments fell by 7.65 % to Rs 314 crore. Similarly, almost all Tata group companies, barring Tata Power, have paid lower advance tax.

Engineering major Larsen and Toubro has seen a 15.79 % rise, while Mahindra and Mahindra's advance tax payment went up by 25%.Engineering major Larsen and Toubro has seen a 15.79 % rise, while Mahindra and Mahindra's advance tax payment went up by 25%.The banking sector has put up a healthy show. State Bank of India is the highest taxpayer during the first quarter of 2009-10 with a 61.09% jump to Rs 1,068 crore. HDFC Bank has paid 16.28% higher advance tax to Rs 250 crore.

Even smaller banks such as IndusInd Bank (122 % increase to Rs 20 crore), Dena Bank (75 % rise to Rs 35 crore) and Yes Bank (42 % increase to Rs 27 crore) have followed the trend.

European shares rose in volatile trade. The key benchmark indices in Germany, UK and France were up by between 0.48% to 0.77%.

The stability of the euro-zone's financial sector remains under threat, requiring banks to maintain adequate capital and liquidity buffers in the event of continued shocks, the European Central Bank (ECB) warned Monday in its biannual financial stability review. "There is no room for complacency because the risks for financial stability remain high, especially since the credit cycle has not yet reached a trough," the report warned.

The report encouraged banks to take advantage of government efforts across the euro zone to shore up the banking system. They should look to diversify their medium-term funding, enhance their capacities to absorb shocks and insulate credit lines to sound business borrowers from being affected by problems tied to toxic assets, the ECB said.

Asian stocks fell for a second day today led by automakers and mining companies and commodity prices sank. Key benchmark indices in China, Hong Kong, South Korea, Singapore and Taiwan fell by between 0.08% to 1.8%.

Japan's Nikkei 225 Stock Average fell 2.86% even as the central bank remained cautious on the future for Japan's economy. "The outlook is attended by a significant level of uncertainty stemming mainly from developments in overseas economies and global financial markets," it said. Nevertheless, it acknowledged that economic conditions have begun to stop worsening. The central bank left the overnight lending rate unchanged at 0.1%.

Trading in US index futures indicated Dow could rise 21 points at the opening bell today, 16 June 2009. US index futures fluctuated between gains and losses earlier in the day.

Wall Street logged its worst day in a month on Monday, 15 June 2009 as weak regional manufacturing data and rise in the dollar pulled the markets lower. The Dow slipped 187.13 points, or 2.1%, to 8,612.13. The S&P 500 index fell 22.49 points, or 2.4%, to 923.72, and the Nasdaq Composite Index fell 42.42 points, or 2.3%, to 1,816.38. Economic news disappointed markets yesterday after the empire state manufacturing index plunged to minus 9.41 in June 2009 against a 4.55 contraction last month.

Closer home, foreign funds turned sellers on Monday 15 June 2009 after aggressively buying in the past three months or so. Foreign institutional investors (FIIs) sold shares worth a net Rs 213.30 crore on Monday, 15 June 2009. FII inflow in June 2009 totaled Rs 5900.80 crore (till 15 June 2009). FII inflow in calendar year 2009 totaled Rs 27,220.20 crore (till 15 June 2009).

Finance Minister Pranab Mukherjee would present the Union Budget on 6 July 2009. The Railway Budget will be presented on 3 July 2009 and the Economic Survey would be presented on 2 July 2009.

Interest rates in India are falling thanks to ample liquidity in the banking system, low headline inflation and a loose monetary policy stance of the Reserve Bank of India. However, inflation may rise if oil and metal prices which have risen sharply in 2009 continue to rally.

As per recent reports, the government may cut interest rates on on small savings schemes which currently yields 8% by 50 to 75 basis ponits. A rate cut in the small savings scheme rate will allow banks to bring down their lending rates.

Finance minister Pranab Mukherjee last Wednesday said banks should provide credit at reasonable rates to spur growth, saying cuts in official rates by the Reserve Bank of India had not been passed on.

Indian stocks have soared in the past three months on a view that ample global liquidity and a return of risk appetite will help India Inc help raise funds for expansion which in turn will boost corporate profits. India Inc has already raised almost Rs 5,000 crore from three qualified institutional placements (QIPs) so far in 2009 and announced plans to raise another Rs 20,000 crore.

Many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will provide thrust on the infrastructure sector and push economic reforms to boost growth. Citigroup expects the economy to grow by 6.8% in 2009/10 and 7.8% in 2010/11.

A comfortable victory last month for the Congress-led United Progressive Alliance (UPA) government in elections for the 15th Lok Sabha has raised hopes for economic reforms. Reforms virtually came to a halt in the past five years of the Congress-led alliance government at the centre, when the Communists provided support to the government from outside for a large part of the five-year term. Left parties are opposed to economic reforms.

Investor expectations from the new government are high. Investors expect financial sector reforms such as increase in the cap on foreign direct investment in insurance sector to 49%, from 26% at present.

Unveiling the agenda of the government, President Pratibha Patil in her speech addressed to a joint session of both houses early this month had indicated government's intension to divest stake in state-run firms. The government, however, intends to retain control over state-run firms and will continue to hold at least 51% stake. But some investors are concerned that the government's two key allies viz. the DMK and Trinamool Congress (TC) may oppose economic reforms.

Finance minister Pranab Mukherjee recently said there was a need to find ways to bring the economy back to higher growth path without increasing the fiscal deficit. He said the government would focus on infrastructure, agriculture and employment generating sectors to protect growth and jobs.

But rising metal prices is a cause of concerns for manufacturing companies as their raw material costs may shoot up.

The government's oil subsidy bill may remain high and it could continue to put pressure on the already high fiscal deficit if the government does not resort to decontrol of oil prices. However, the surging rupee against the dollar may mitigate the impact to some extent as India is a major importer of crude.

Prime Minister Manmohan Singh recently said India will achieve an economic growth of at least 7% this fiscal and promised more resources for areas like infrastructure and public services. He said India will be able a growth rate of 8-9%, even when the world grows at a lower rate.

The Prime Minister said the reason behind his optimism was that India's savings rate, which determines the money that can be deployed for development projects, was still high at 35% of gross domestic product (GDP).

The BSE 30-share Sensex rose 82.39 points, or 0.55%, to 14,957.91. The Sensex rose 146.67 points at the day's high of 15,022.19 in late trade. At the day's low of 14,621.97, the Sensex fell 253.55 points in early trade.

The S&P CNX Nifty was up 33.80 points or 0.75% to 4,517.80. Nifty June 2009 futures were near spot price at 4517.60 as compared to the spot closing of 4517.80. Turnover in NSE's futures & options (F&O) segment was Rs 68,737.85 crore, lower than Rs 69,109.05 crore on Monday, 15 June 2009.

BSE clocked a turnover of Rs 6,863 crore lower than Rs 7,106.08 crore on Monday, 15 June 2009.

On the back of heavy buying by foreign funds recently, the Sensex has jumped 5,310.60 points or 55.04% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,797.51 points or 83.29%

Coming back to today's trade, the BSE Mid-Cap index was up 2.21%. The BSE Small-Cap index was up 2.13%. Both the indices outperformed the Sensex.

The BSE Bankex (up 2.26%), %), the BSE PSU index (up 2.26%), the BSE Power index up 1.92%), the BSE Metal index (up 1.81%), the BSE Realty index (up 1.63%), the BSE Consumer Durables index (up 1.36%), the BSE Capital Goods index (up 1.28%), the BSE Healthcare index (up 1.05%), the BSE FMCG index (up 0.97%), the BSE Auto index (up 0.93%), the BSE IT index (up 0.61%), the BSE TECk index (up 0.58%), outperformed the Sensex.

The BSE Oil & Gas index was down 0.98%. It was the only sectoral index which underperfomed the Sensex.

The market breadth turned positive in the latter part of the trading session from a weak breadth in early trade. On BSE, 1,647 shares rose as compared with 1,008 that declined. A total of 70 shares remained unchanged.

From the 30 share Sensex pack 24 rose while the rest fell.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 2.22% to Rs 2,132 extending yesterday's 7.48% fall after the Bombay High Court directed RIL and RNRL to sign gas supply deal. The court has asked RIL to supply 28 million metric standard cubic meters per day (mmscmd) of gas for 17 years at $2.34 per million metric British thermal unit (mmbtu) to RRNL. This is much lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 million per metric British thermal unit. The lower gas sale price will result in lower-than-expected earnings from gas sales for RIL.

RIL's advance tax payment fell 7.65% to Rs 1,068 crore in Q1 June 2009 over Q1 June 2008.

Shares of RNRL were down 7.15% after gaining 24.11% yesterday boosted by the favourable court ruling. Reliance Infrastructure rose 5.34% on speculation it will benefit from gas supply from Reliance Industries at a lower rate.

In January 2009, the Bombay High Court had issued an interim order saying Reliance Industries was allowed to sell gas at $4.2 per million British thermal units from its KG-D6 block in the Krishna Godavari basin off eastern India, pending a final judgment.

Bank stocks rose on higher Q1 June 2009 advance tax payments by top banks. India's biggest bank in terms of branch network State Bank of India (SBI) rose 4.39% as SBI's advance tax payment rose 61.09% to Rs 1,068 crore in Q1 June 2009 over Q1 June 2008. SBI on Saturday, 13 June 2009 said it will cut deposit rates across all tenors by 25 basis points, with effect from 15 June 2009.

SBI chairman O.P. Bhatt recently said SBI's first priority is to absorb its associate banks. It is also looking to grow by buying domestic banks.

India's second largest private sector bank by operating income HDFC Bank rose 1.14%. HDFC Bank's advance tax payment rose 16.28% to Rs 250 crore in Q1 June 2009 over Q1 June 2008.

India's largest private sector bank by net profit ICICI Bank was flat. Its American depository receipt (ADR) fell 4.24% on Monday, 15 June 2009. ICICI Bank cut prime lending rate by 50 basis points to 15.75% with effect from Friday, 5 June 2009. All the existing floating rate customers to benefit from the cut. ICICI Bank's advance tax payment rose 7.64% to Rs 366 crore in Q1 June 2009 over Q1 June 2008.

India's biggest dedicated housing finance firm by operating income HDFC rose 0.84%. HDFC plans to raise up to Rs 4000 crore after its board last Tuesday approved a proposal to raise Rs 4000 crore by selling bonds and warrants. The maximum dilution on conversion of all warrants to shares would be 3.5% of the expanded capital.

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. Peninsula Land, DLF, Indiabulls Real Estate, Unitech, Akruti City and Sobha Developers rose by between 0.26% to 5%.

Unitech and Indiabulls Real Estate, have already raised funds through qualified institutional placements (QIPs). A number of other realty funds have decided to raised funds by way of QIPs. The promoters of DLF last month sold a 10% stake in the secondary equity markets.

Metal stocks rose on strong domestic demand. National Aluminum Company, Steel Authority of India, Hindustan Zinc, Hindalco Industries and Steel Authority of India rose by between 1.8% to 4.71%.

India's largest steel maker by sales Tata Steel rose 3.88% even as its advance tax payment fell 36.39% to Rs 230 crore in Q1 June 2009 over Q1 June 2008.

But India's largest copper maker by sales Sterlite Industries fell 4.42% after the company approved raising long-term resources from domestic and international markets on Monday, 15 June 2009. As per reports, Sterlite would be looking to raise in the range of $2-2.5 billion by way of long term resources.

FMCG stocks rose on expectations the government to continue with its rural focus. FMCG firms derive substantial revenue from the rural market. Tata Tea, Nestle India, Dabur India, United spirits, ITC, rose by between 0.57% to 5.74%.

Outsourcing focussed IT stocks reversed early losses on hopes government may extend tax benefits in the Union Budget 2009-2010. The Indian IT industry has sought extension of the Software Technology Parks of India (STPI) scheme. The STPI scheme which offers 100% tax deduction on profits under Section 10 A and 10 B of the Income Tax Act, was extended by one year to March 2010 in the Budget last year.

India's second largest software firm by sales Infosys Technologies rose 0.22% even as its American depository receipt (ADR) fell 4.31% on Monday.

India's largest software services exporter by sales TCS rose 0.13% even as TCS's advance tax payment fell 33.33% to Rs 50 crore in Q1 June 2009 over Q1 June 2008. But, India's third largest software services exporter by sales Wipro fell 1.18% as its ADR fell 2.69% on Monday.

Capital goods stocks rose on hopes the government may boost spending on the infrastructure sector. Siemens, ABB, BEML, Punj Lloyd, rose by between 2.03% to 4.08%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 1.29% as its advance tax payment rose 15.79% to Rs 110 crore in Q1 June 2009 over Q1 June 2008.

Cement stocks rose on hopes government may boost spending on the infrastructure sector to boost economic growth. ACC, Ultratech Cements, Ambuja Cements, Grasim Industries rose by between 0.06% to 0.85%.

Telecoms stocks were mixed on hopes government may speed up the auction process for the third generation services. Idea Cellular, and Reliance Communications rose by between 2.87% to 4.03%. India's largest telecom player by sales Bharti Airtel fell 1.3%.

Auto stocks rose on improved sales in the month of May 2009. India's largest car maker by sales Maruti Suzuki India rose 0.7%.

India's largest tractor maker by sales Mahindra & Mahindra rose 2.45% as its advance tax payment rose 25% to Rs 17.5 crore in Q1 June 2009 over Q1 June 2008.

India's largest commercial vehicle maker by sales Tata Motors rose 2.03% as its advance tax payment remained flat at Rs 30 crore in Q1 June 2009 over Q1 June 2008.

Some healthcare stocks rose on hopes the government will give primary importance to healthcare segment and health of citizens. Biocon, Wockhardt, Ranbaxy Laboratories, Pfizer, Cipla rose by between 0.64% to 2.49%.

India's largest drug maker by sales Dr Reddy's Laboratories rose 0.28% after the company entered into a strategic alliance with GlaxoSmithKline plc to develop and market select products across emerging markets outside India.

Airline shares dropped after state-run oil marketing firms hiked jet fuel prices, thereby increasing operating cost of airline firms Jet Airways, and Kingfisher Airlines fell by between 1.8% to 5.51%.

State-run oil marketing firms on Monday, 15 June 2009 reportedly hiked jet fuel prices by over 12% on firming international crude oil prices, which struck a seven-month high of $72 per barrel last week. Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation raised aviation turbine fuel (ATF) price by Rs 3,949 to Rs 36,252 per kilolitre in Delhi effective midnight, 15 June 2009. ATF accounts for 40% of airlines' operating cost.

Cals Refineries clocked the highest volume of 16 crore shares on BSE. Reliance Natural Resources (4.53 crore shares), IFCI (2.2 crore shares), Unitech (2.14 crore shares) and Suzlon Energy (1.66 crore shares) were the other volume toppers in that order.

Reliance Natural Resources clocked the highest turnover of Rs 456.50 crore on BSE. Reliance Industries (Rs 263.16 crore), Reliance Capital (Rs 259.63 crore), Tata Steel (Rs 213.20 crore) and Reliance Infrastructure (Rs 200.99 crore) were the other turnover toppers in that order.