Sensex snaps 14-week rally

Key benchmark indices retreated from multi-month highs as profit booking emerged at higher level. The barometer index BSE Sensex fell below the psychological 15,000 mark to end its 14-week winning streak. Anticipation of a strong push for economic reforms by the newly-elected United Progressive Alliance (UPA) government, positive global cues and strong foreign fund inflow had triggered a solid recent rally. The market declined in 3 out of 5 trading days in the week ended Friday, 19 June 2009

World stocks fell after finance ministers from the Group of Eight leading industrialized countries on Saturday, 13 June 2009, said they have begun discussing how to unwind the fiscal and monetary policy measures undertaken in response to the financial and economic crisis that spread last year. Noting a recovery in stock markets, rising consumer and business confidence and improvement in financial markets, the group "discussed the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis once the recovery is assured," the finance ministers said in a statement.

"These 'exit strategies', which may vary from country to country, are essential to promote a sustainable recovery over the long term," they said.

Back home, India's industrial production for April 2009 bounced back into the positive zone after declining three times in the preceding four months. The index of industrial production (IIP) rose 1.4% in April from a revised 0.75% decline in March 2009, data released on 12 June 2009 showed. Industrial output rose 2.4% in the 2008/09 fiscal year (April-March), down from a revised 8.5% in 2007/08.

The BSE Sensex lost 716.05 points or 4.70% to 14,521.89 in the week ended Friday, 19 June 2009. The S&P CNX Nifty declined 269.80 points or 5.88% to 4313.60 in the week.

The BSE Mid-Cap index lost 276.30 points or 5.28% to 4,958.73 and the BSE Small-Cap index shed 396.70 points or 6.60% to 5,617.96 in the week ended Friday, 19 June 2009.

The BSE Sensex is up 4874.58 points or 50.52% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 6361.49 points or 77.95%.

Foreign institutional investors (FII) were the key drivers of the recent solid surge. After being heavy net sellers of Rs 4250.30 crore in January 2009 and to the tune of Rs 2707 crore in February 2009, foreign fund selling eased in March 2009, when they tuned net sellers of only Rs 1.1 crore. Their buying gathered steam in April 2009 when they pumped Rs 7384.50 crore. They continued their buying spree in May 2009 pouring Rs 20,606.80 in equities.

FII inflow in June 2009 totaled Rs 4,962.40 crore (till 17 June 2009) with their inflow in calendar year 2009 at Rs 26,281.80 crore.

Trading for the week began on weak note as weak global markets and slide in heavyweight Reliance Industries following an unfavourable court ruling on gas sales, dragged indices lower on Monday, 15 June 2009. The BSE 30-share Sensex lost 362.42 points, or 2.38%, to 14,875.52 and the S&P CNX Nifty slipped 99.40 points or 2.17% to 4,484

Upbeat advance tax paid by frontline companies for the April-June 2009 quarter helped key benchmark indices reverse intraday losses and end with decent gains on Tuesday, 16 June 2009. The BSE 30-share Sensex rose 82.39 points, or 0.55%, to 14,957.91 and the S&P CNX Nifty gained 33.80 points or 0.75% to 4,517.80

Weak global cues weighed on investor sentiment on Wednesday, 17 June 2009 as the key benchmark indices tumbled in late trade. The BSE 30-share Sensex slumped 435.07 points, or 2.91%, to 14,522.84 and the S&P CNX Nifty fell 161.65 points or 3.58% to 4,356.15

Reports the government may rollback excise duty cuts in a bid to return to fiscal prudence amid slack revenue collections and selling by foreign funds weighed on the bourses on Thursday, 18 June 2009. The BSE 30-share Sensex declined 257.31 points or 1.77% to 14,265.53 and the S&P CNX Nifty fell 104.75 points or 2.4% to 4,251.40.

Key benchmark indices spurted in late trade on Friday, 19 June 2009 led by rally in realty, metal and capital goods stocks. Higher European stocks and gains in US index futures boosted the market in was a highly volatile trading session. The BSE 30-share Sensex gained 256.36 points or 1.80% to 14,521.89 and the S&P CNX Nifty rose 62.20 points or 1.46% to 4,313.60

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) lost 13.46% to Rs 2039.60 in the week after the Bombay High Court directed RIL and Reliance Natural Resources (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 RNRL. 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. RIL's advance tax payment fell 7.65% to Rs 1,068 crore in Q1 June 2009 over Q1 June 2008.

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..

RNRL rose 5.96%. Reliance Infrastructure rose 7.06% on speculation it will benefit from gas supply from Reliance Industries at a lower rate.

India's largest oil exploration firm by sales ONGC fell 10.36% as its advance tax fell 33% to Rs 890.50 crore in Q1 June 2009 over Q1 June 2008.

Metal stocks corrected as LMEX, a gauge of six metals traded on the London Metal Exchange declined after recent sharp run-up. National Aluminum Company (down 2.94%), Hindalco Industries (down 12.39%), Tata Steel (down 9.66%), Sterlite Industries (down 1551%), declined

Advance tax payment of India's largest steel maker by sales Tata Steel's fell 36.39% to Rs 230 crore in Q1 June 2009 over Q1 June 2008.

Auto stocks fell on profit taking after recent surge triggered by improved sales in the month of May 2009. Tata Motors (down 3.18%), Mahindra & Mahindra (down 5.87%), Hero Honda Motors (down 0.32%), Bajaj Auto (down 3.58%), and Maruti Suzuki India (down 3.49%), fell.

Realty stocks fell on profit taking after a recent sharp surge triggered by expectations that stability at the Centre will attract more money from foreign investors into the sector which in turn will boost growth. DLF (down 10.30%), Indiabulls Real Estate (down 11.66%), and Unitech (down 6.96%), lost.

India's biggest bank in terms of branch network State Bank of India (SBI) rose 5.34% as its advance tax payment rose 61.09% to Rs 1,068 crore in Q1 June 2009 over Q1 June 2008. SBI on 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 largest electric equipment maker by sales Bharat Heavy Electricals (Bhel) slipped 5.66%. The minister of heavy industries Vilasrao Deshmukh said 19 June 2009 the government will consider selling 10% stake in the state-run engineering firm.

Telecom stocks slipped on selling pressure. Bharti Airtel (down 2.99%), Reliance Communications (down 8.03%), and Idea Cellular (down 3.66%), declined.

India's second-largest mobile operator by sales Reliance Communications added 2.4 million users in May 2009, taking its total mobile subscribers to more than 7.7 crore.

Outsourcing focussed IT stocks were mixed amid hopes government may extend tax benefits in the Union Budget 2009-2010 were offset by selling pressure. India's second largest software services exporter by sales Infosys rose 2.50%. But, India's third largest software services exporter by sales Wipro fell 7.14%

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.

Advance tax collections across the country recording an increase for the first time in the past six months, over the corresponding period last fiscal. Advance tax collection for the 1 April 2009 to 16 June 2009 reportedly rose 17% to over Rs 48,000 crore from Rs 41,800 crore a year ago. Out of the total collection of Rs 48,000 crore, Rs 26,000 crore came just from corporate tax. Increase in tax collection is counted as a sign of an economic recovery.

Meanwhile annual monsoon rains are seen reviving around 20 June 2009, reports quoting an unnamed official at India Meteorological Department (IMD) indicated on 18 June 2009. Monsoon rains for the week ended 10 June 2009 was 37% below normal as the progress of the annual rains, crucial to the farm sector, stalled after an early start, IMD said.