Sensex surges 49% in June 2009 quarter on FII buying

Key benchmark indices reversed early gains to edge lower as a rush to raise funds through share sales by corporate India took its toll on the secondary equity markets. In fact, a bunching of institutional placement of shares by corporate India forced GMR Infrastructure to withdraw its issue today, 30 June 2009. The BSE 30-share Sensex lost 291.90 points or 1.97%, off 413.64 points from the day's high, and up 73.43 from the day's low.

Volatility was high throughout the day. All BSE sectoral indices declined with shares from realty, metal and capital goods sector worst hit. Turnover on BSE's cash market segment surged to Rs 6750 crore today, 30 June 2009 from Rs 6065 crore on Monday, 29 June 2009.

After a strong opening triggered by firm global stocks, the market soon lost ground as the Sensex slipped into the red. The barometer index moved between positive and negative zone amid volatile trade. Volatility remained high as the market weakened in mid-morning trade. The market extended losses in early afternoon trade. The market weakened further in afternoon trade. The market cut losses after hitting a fresh intraday low in mid-afternoon trade.

Concerns that a glut in share sales will suck liquidity from the secondary market weighed on investor sentiment after Indian companies on Monday, 29 June 2009, launched shares sales worth nearly $2 billion. A number of firms have announced plans to raise funds through shares sales to institutional investors, taking advantage of a solid surge in share prices in the past three months. Brokers expect companies to raise over $10 billion in the current financial year by way of share placements and initial public offers. The large equity sales may keep a natural lid on share prices in the secondary market

The near term major trigger for the market is the Union Budget 2009-10 on 6 July 2009. The Annual economic survey is scheduled to be presented on 2 July 2009 followed by the Rail Budget on 3 July 2009.

The corporate sector is expecting a removal of the fringe benefit tax (FBT) in the budget. Under the current dispensation, an employer has to pay FBT at 30% on the fringe benefit, the taxable value of which is determined in accordance with a formula. FBT is a tax levied on perquisites-or fringe benefits -provided by an employer to his employees.

Meanwhile, domestic brokerages and fund houses want the government to remove securities transaction tax (STT) on trading in securities in the Budget. The Securities & Exchange Board of India (Sebi) members have already forwarded the demand of premier stock exchanges, BSE and NSE, to Finance Minister Pranab Mukherjee for scrapping STT in the Budget.

STT, which was introduced in the Union Budget 2004-05 by the then Finance Minister P Chidambaram, taxes every purchase and sale of securities entered into in a recognised stock exchange in India in securities like shares, debentures, bonds, and units of mutual funds. Equity investors pay an STT of 0.125% for every transaction in cash for the delivery of shares.

Meanwhile, before the budget, investors will also be keenly watching the outcome of the Employees' Provident Fund Organisation (EPFO's) apex advisory body meet on 4 July 2009. The Central Board of Trustees (CBT) will take a view on the Finance Ministry's proposal to invest 15% of its corpus in equity. The EPFO has a corpus of about Rs 1,82,000 crore and the permission to invest 15% funds in equity could have positive implications for the capital market. A proposal to park funds in the stock market was earlier rejected by the EPFO's Finance and Investment Committee (FIC) at its meeting on 26 March 2009.

Analysts expects that the government will provide a thrust to the infrastructure sector and push economic reforms to boost growth. Finance Minister Pranab Mukherjee would present the 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.

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.

European markets reversed early losses to post gains today, 30 June 2009. Key benchmark indices in UK, Germany and France were up by between 0.04% and 0.20%.

The UK economy shrank more than previously estimated in the first quarter March 2009 in the biggest contraction since 1958 as the recession choked industries from construction to services. Gross domestic product fell 2.4% from the final three months of 2008, compared with the prior measurement of a 1.9% drop, the Office for National Statistics said today in London.

Asian stocks turned mixed today, 30 June 2009. Key benchmark indices in Singapore, South Korea, and Taiwan were up by between 0.12% and 0.64%. However China's Shanghai Composite slipped 0.54% and Hong Kong's Hang Seng index fell 0.81%

Japan's Nikkei 225 Stock Average climbed 1.79% as the government said household spending unexpectedly increased in May, even as unemployment reached a five-year high.

Trading in the US index futures indicated the Dow could rise 19 points at the opening bell today, 30 June 2009.

US stocks rose on Monday, 29 June 2009 as higher oil prices lifted shares of energy companies and fund managers snapped up recent winners to embellish their portfolios a day before the close of the second quarter. The Dow Jones Industrial Average rose 90.99 points, or 1.08%, to 8,529.38. The Standard & Poor's 500 Index added 8.33 points, or 0.91% to 927.23 and the Nasdaq Composite index gained 5.84 points, or 0.32%, to 1,844.06

The BSE 30-share Sensex lost 291.90 points or 1.97% to 14,493.84. The Sensex opened points 45.23 higher at 14,830.97. At the day's high of 14,907.48, the Sensex rose 121.74 points in early trade. The Sensex lost 365.33 points at the day's low of 14,420.41 in late trade.

The S&P CNX Nifty was down 99.85 points or 2.27% to 4,291.10. Nifty July 2009 futures were at 4302.25, at a premium of 11.15 points as compared to the spot closing. Turnover on NSE's futures & options (F&O) segment surged to Rs 52,352.52 crore from Rs 47,588.96 crore on Monday, 29 June 2009.

The barometer index BSE Sensex gained 4785.34 points or 49.29% in the quarter ended June 2009 from its close of 9708.50 on 31 March 2009, on heavy buying by foreign funds. A strong global liquidity and increase in risk appetite boosted inflows after a comfortable victory for the Congress-led UPA government in parliamentary elections raised expectations of economic reforms. Foreign institutional investors (FIIs) bought shares worth a net Rs 2,996 crore in June 2009 (till 29 June 2009) while their inflow in calendar year 2009 totaled Rs 24,315.40 crore

The Sensex is up 4846.53 points or 50.23% in calendar year 2009 as on 30 June 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6333.44 points or 77.61% as on 30 June 2009

Coming back to today's trade, the market breadth, indicating the overall health of the market, was weak. On BSE, 1859 shares declined as compared with 764 that gained. A total of 71 shares remained unchanged.

The BSE Mid-Cap index slipped 2.94% to 5,076.34 and the BSE Small-Cap index declined 2.51% to 5,740.04. Both these indices underperformed the Sense

The BSE Capital Goods index (down 3.18%), BSE Bankex (down 2.45%), the BSE Realty index (down 7.42%), BSE Power index (down 3.19%), the BSE Oil & Gas index (down 2.32%), the BSE Metal index (down 3.42%), the BSE Healthcare index (down 2.03%), the BSE Auto index (down 1.98%), underperformed the Sensex

The BSE PSU index (down 1.70%), BSE Consumer Durables index (down 1.51%), BSE IT index (down 0.55%), the BSE TECk index (down 1.54%), the BSE FMCG index (down 0.56%), outperformed the Sensex.

Among the 30-member Sensex pack, 24 slipped while the rest gained.

India's second biggest realty firm in terms of sales, Unitech, led a broad-based decline in realty shares. Unitech was down 6.62% on concerns of equity dilution after the company allotted 22.75 crore convertible warrants at Rs 50.75 each to Harsil Projects, a promoter group company. If Harsil Projects decides to convert the entire warrants into equity shares, it will result into an 11.12% equity dilution.

India's largest real estate developer by sales DLF tumbled 7.49% to Rs 312.70 and was the top loser from the Sensex pack.

Housing Development & Infrastructure tanked 12.51% on concerns of a large equity dilution after reports the company has launched a share sale to qualified institutional investors. As per reports, Housing Development & Infrastructure (HDIL) plans to sell shares in the range of Rs 240-250 each. The offer is to raise a minimum of $300 million, but can go up depending on the response. The firm has received shareholder approval to sell shares worth up to $600 million. Assuming the company raises $300 crore at floor price of Rs 240, it will result into equity dilution of about 22%

Parsvnath Developers (down 4.95%), Sobha Developers (down 1.72%), Omaxe (down 5.42%), Akruti City (down 2.48%), edged lower.

Infrastructure stocks slipped on profit booking after a recent run up triggered by hopes the government may announce higher spending on the infrastructure projects in the Union Budget 2009-10. Bharat Heavy Electricals (down 0.82%), Jaiprakash Associates (down 6.33%), GVK Power Infrastructure (down 6.92%), Larsen & Toubro (down 2.98%), Reliance Infrastructure (down 4.56%), Punj Lloyd (down 5.20%), slipped.

GMR Infrastructure lost 9.18% after the company informed BSE that it has decided to withdraw a qualified institutional placement (QIP) due to 'existing market conditions'. The company made the announcement in late trade.

Cement shares slipped on recent reports prices are likely to soften by Rs 3-5 per 50 kilogram bag next month due to the twin effect of excess supply and lower demand. ACC (down 2.36%), Ambuja Cement (down 2.37%), India Cement (down 4.26%), UltraTech Cement (down 1.46%), slipped. However Grasim ended flat at Rs 2317

Post this price cut, retail cement prices will come down to Rs 255 in Mumbai, Gujarat, South India and to around Rs 245 in the northern and eastern markets. Grasim, ACC and Ambuja Cement are expected to announce price cut on 1 July 2009, reports added.

India's largest commercial vehicle maker by sales Tata Motors slumped 7.25%, extending yesterday's 7.77% slide triggered by weak financial performance. The company reported a net loss of Rs 2505.25 crore in the year ended March 2009 as compared with net profit of Rs 2167.70 crore in the year ended March 2008. The results were announced after market hours on 26 June 2009. It was the top loser from the Sensex pack.

Other auto shares were mixed. India's largest small car maker by sales Maruti Suzuki India rose 0.36%. However India's largest tractor maker by sales Mahindra & Mahindra dropped 1.75%.

Motherson Sumi Systems rose 1.26% after consolidated net profit jumped 98.6% to Rs 122.83 crore in Q4 March 2009 over Q4 March 2008. The company announced the results during trading hours on Monday, 29 June 2009, when the stock had galloped 11.97% to Rs 75.30.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) slipped 2.78% to Rs 2027.05 after striking day's high of Rs 2105.10. The Bombay high court on 15 June 2009 asked RIL to supply gas to Anil Ambani Group firm Reliance Natural Resources (RNRL) at rates much lower than approved by the government.

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. According to analysts the lower gas sale price will result in lower-than-expected earnings from gas sales for RIL.

Meanwhile, the Bombay High Court on Monday, 29 June 2009 approved the merger between RIL and Reliance Petroleum (RPL) but stayed its own order for four weeks to enable those objecting to the amalgamation to file appeal before division bench.

In March 2009, the boards of director of the two firms approved the merger, creating one of the world's largest petrochemical entities. The deal offered shareholders of RPL one RIL share for every 16 shares held by them.

Shares of offshore drilling firms advanced on expectations that firm oil prices will result in increase in exploration and production activities by oil firms which in turn could boost orders for offshore oil services firms. Selan Exploration (up 3.47%), Asian Oilfield (up 3.4%), Dolphin Offshore (up 5%), and Jindal Drilling (up 0.33%), edged higher

India's largest private sector aluminium maker by sales Hindalco slipped 1.94% after consolidated net profit declined 77.88% to Rs 485 crore in year ended March 2009 over year ended March 2008. Net sales rose 9.35% to Rs 65625 crore in year ended March 2009 over year ended March 2008. The results were announced during market hours today, 30 June 2009.

India's top cellular services provider by sales Bharti Airtel slipped 0.43%. As per reports, JP Morgan, BNP Paribas, HSBC and Barclays are in talks with Bharti Airtel to fund part of the $4 billion needed by Bharti Airtel to complete its $23-billion merger with MTN, Africa's largest mobile phone operator. The merger deal will see both Bharti and MTN offering equity stakes and cash to each other. Bharti will have to make a net cash payment of around $4 billion to complete the deal, which will see it acquiring a 49% stake in MTN, which, in turn, will get a 36% economic interest in the Indian firm. Both companies are in exclusive talks till 31 July 2009.

Tulip Telecom jumped 8.24%. Tulip's net profit rose 60% to Rs 105.73 crore on a 12% increase in sales to Rs 461.62 crore in Q4 March 2009 over Q4 March 2008. The result was announced during market hours yesterday, 29 June 2009.

India's largest software services exporter by sales TCS gained 1.06% to Rs 390 on reports the company is aggressively looking at deals in the life sciences and healthcare space, which is the fifth largest revenue generating vertical for the firm. It was the top gainer from the Sensex pack.

Other outsourcing focussed IT stocks also outperformed the Sensex on speculation the US recession is easing. US is the biggest market for Indian IT firms. India's second largest software firm by sales Infosys Technologies slipped 0.43% on a 1.12% fall in its ADR on Monday, 29 June 2009.

India's third largest software services exporter by sales Wipro gained 0.09% even as its ADR slipped 0.34% on Monday, 29 June 2009

Banking stocks, which were on a roll recently, fell on profit taking. India's biggest bank in terms of branch network State Bank of India (SBI) slipped 1.42% to Rs 1740. The stock came off the day's high of Rs 1781.70.

India's second largest private sector bank by net profit HDFC Bank slipped 0.41% to Rs 1500 after hitting a day's high of Rs 1525. India's largest private sector bank by net profit ICICI Bank shed 3.14% to Rs 725.20, off the day's high of Rs 800

Hopes banks may get tax relief on interest earned on infrastructure lending and other favorable announcements in the Union Budget 2009-2010 had triggered recent gains in bank shares

Select FMCG shares gained on defensive buying. Hindustan Unilever (up 0.85%), Nestle India (up 3.65%), Dabur India (up 3.13%), and Colgate Palmolive India (up 2.87%), gained

But United Spirits tumbled 4.84% after group firm Shaw Wallace & Company sold its entire 10.27% stake in the company in the open market via multiple block deals today, 30 June 2009. It was the top traded counter on BSE with turnover of Rs 686.54 crore. It was followed by Suzlon Energy (Rs 268.12 crore), HDIL (Rs 228.48 crore), Educomp Solutions (223.76 crore), and Reliance Communications (Rs 187 crore).

Cals was the volume topper on BSE clocking volume of 9.29 crore shares followed by Suzlon Energy (2.46 crore shares), Unitech (2.02 crore shares), Ispat Industies (1.42 crorre shares), and Reliance Natural Resources (1.33 crore shares)

India's top pharma firm by market capitalisation Sun Pharma fell 0.74%, extending two-day 15.25% slide. The stock had tumbled in the past two days hit by reports the US drug regulator has seized generic drugs made by Caraco Pharmaceutical Laboratories, a US subsidiary of Sun Pharma after the agency found manufacturing defects at company plants, including oversized tablets. Sun Pharma holds 70.21% stake in Caraco Pharmaceutical Laboratories.

Sugar shares declined sharply after the Centre on Monday, 29 June 2009 released 14.90 lakh tonnes of sugar to be sold in the open market in July 2009, to check rising prices. Bajaj Hindusthan (down 9.71%), Triveni Engineering (down 7.11%), Sakthi Sugar (down 2.47%), Shree Renuka Sugar (down 4.89%), and Balrampur Chini Mills (down 4.78%), slipped.

Zicom Electronic Security Systems was locked at upper limit of 5% at Rs 87.90 on the BSE after net profit surged 504.76% to Rs 2.54 crore on a 7.50% increase in sales to Rs 53.02 crore in Q4 March 2009 over Q4 March 2008. The result was announced after market hours yesterday, 29 June 2009.