Small-cap, mid-cap indices outperform Sensex

The barometer index the BSE Sensex snapped last two days' losses on positive cues from the global markets. Realty, capital goods and power stocks rose even as banking stock fell. Index heavyweight Reliance Industries was weak. The BSE 30-share Sensex rose 98.72 points or 0.69%, off close to 55 points from the day's high and up close to 215 points from the day's low. The market breadth, indicating the overall health of the market, was strong.

But the market was volatile as traders rolled over positions from June 2009 series to July 2009 ahead of the expiry of June 2009 contracts tomorrow, 25 June 2009. Rollover in the Nifty futures was 29.19% as at end of Tuesday's trade. The rollover was 34.47% in Mini Nifty futures. Among individual stocks, rollover has been low in Wipro, Ranbaxy Lab, GAIL India, Reliance Capital and Steel Authority of India.

The key benchmark indices edged higher in early trade as Asian stocks rose. However, the market soon pared gains on worries about agricultural production due to delay in monsoon. The market weakened in morning trade with the Sensex hitting intraday low before cutting losses. The Sensex regained positive zone in early afternoon trade. The barometer index fluctuated between gains and losses in afternoon trade. The market firmed up later with the Sensex hitting intraday high in mid-afternoon trade. The market pared gains in late trade.

The Sensex had lost 197.88 points or 1.36% in the past two trading sessions to 14,324.01 on 23 June 2009 from its close of 14,521.89 on 19 June 2009. The market may remain volatile tomorrow, ahead of the expiry of June 2009 derivatives contracts.

Prithviraj Chavan, the Minister of Science and Technology, said in a press conference, shortly after trading hours today, 24 June 2009, that India's monsoon, which runs from June to September, will be below normal this year. Monsoon rains will be 93% of long term average. Rain in the crucila sowing month of July will be 93% of long term average. The rains are likely to pick up in August in which month rains will be 101% of long term average, the minister said.

The June-September monsoon rains are a major influence on the economy, as two-thirds of Indians depend on agriculture and large areas of the vast south Asian country suffer from a lack of modern irrigation facilities. Below normal monsoon rains is bad news for policy makers, who were upbeat about the prospects of the farm sector, seen as a key motor for national demand in the economy. The farm sector accounts for nearly 17 percent of India's gross domestic product and provides a livelihood for most of the 1.1 billion population. Poor monsoon rains could dent rural demand, hurt corporate profitability and undermine sentiment in financial markets.

Overseas stocks were supported the domestic bourses. European stocks edged higher after fluctuating between gains and losses. Key benchmark indices in France, Germany and UK were up by between 0.11% to 0.75%. Worries that higher interest rates could choke off growth appeared to be on the backburner on Wednesday, with companies normally tied to growth, such as mineral extractors and banks, moving higher.

Asian stocks rose in choppy trade as gains among technology and energy shares overshadowed losses in financials. Key benchmark indices in China, South Korea, Hong Kong, Taiwan and Singapore were up by between 0.24% to 2.95%.

Japan's Nikkei rose 0.43% even after Japan's export slump deepened in May 2009, casting doubt on the nation's growth prospects as the economy struggles to emerge from its worst postwar recession. Shipments abroad dropped 40.9 % from a year earlier, more than April's 39.1 % decline, the Finance Ministry said today in Tokyo.

Trading in the US index futures indicated the Dow could rise 28 points today, 24 June 2009.

US stocks ended mixed on Tuesday. The market opened higher, but slipped after a report showed home sales rose but not as much as expected. Bank stocks gained. The Dow slipped 16.10 points, or 0.2%, to 8,322.91. The S&P 500 index rose 2.06 points, or 0.2%, to 895.10, and the Nasdaq composite index fell 1.27 points, or 0.1%, to 1,764.92.

Global investors are awaiting the outcome of the US Federal Reserve's two-day policy meet which ends today, 24 June 2009. Although the Federal Reserve is expected to keep interest rates unchanged, investors will examine the post-meeting statement for clues as to how long the interest rates will remain at the current near zero. Investors also want to know whether the Fed policymakers will say the US economy is recovering or still in need of aid.

US stocks have lost ground several times in the last month on fears that rising interest rates and inflation would upend an economic recovery.

The Paris-based Organization for Economic Cooperation and Development on Wednesday said the global recession is near its bottom, but warned that a recovery is likely to be "weak and fragile."

The World Bank on Monday predicted that the global economy will shrink 2.9% this year, a deeper fall than the 1.7% contraction it predicted in March 2009.

For India though, the World Bank has raised India's growth forecast for 2009 to 5.1% from earlier projection of 4%. It has projected an 8% growth for India in 2010 which will make it the fastest growing economy in the world in 2010, overtaking China's expected 7.7% growth relative to the robust performance prior to the current crisis.

On the flip side, the latest data showed the Consumer Price Index (CPI), inflation based on rural and agricultural workers rose to 10.2% in May 2009. The higher consumer inflation may cause Reserve Bank of India to reverse the expansionary monetary policy and might even curb the central government's spending plans which may cause hindrance in efforts to boost the slowing economy.

India's fiscal deficit in April 2009 was at Rs 54,158 crore ($11 billion), or 16.3 % of the full-year target, the government said in a statement on Tuesday.

The next major trigger for the market is the Union Budget 2009-2010. 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 the year ending March 2010 (FY 2010) and 7.8% in the year ending March 2011 (FY 2011).

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.

But foreign funds sold shares recently after aggressively buying during the past three months or so. Foreign funds sold shares totaling Rs 2,567.10 crore in seven trading sessions from 15 June 2009 to 23 June 2009. FII inflow in June 2009 totaled Rs 3,565.20 crore (till 23 June 2009). FII inflow in calendar year 2009 totaled Rs 24,884.60 crore (till 23 June 2009).

India's biggest domestic institutional investors viz. the Life Insurance Corporation of India (LIC) proposes to maintain its annual investments in the equity market at last financial year's levels at Rs 40,000 crore, LIC chairman T S Vijayan said on Tuesday.

Meanwhile, the data on advance tax payments reported last week for the first quarter of the financial year indicated banks and fast moving consumer goods (FMCG) firms have done well in the first quarter, but realty companies continue to perform badly. Automobile sector have also paid higher taxes this year, show the revenue department's initial estimates. Indian companies paid around Rs 23,000 croe in advance tax for the first quarter of FY 2010, almost flat at the previous year's receipts.

The BSE 30-share Sensex was up 98.72 points or 0.69% to 14,422.73. The Sensex rose 155.81 points at the day's high of 14,479.82 in mid-afternoon trade. At the day's low of 14,207.02, the Sensex fell 116.99 points in mid-morning trade.

The S&P CNX Nifty was up 45.95 points or 1.08% to 4,292.95. Nifty June 2009 futures were at 4305, at a premium of 12.05 points as compared to the spot closing of 4292.95. Turnover in NSE's futures & options (F&O) segment was Rs 82,940.03 crore, lower than Rs 85,073.05 crore on Tuesday, 23 June 2009.

BSE clocked a turnover of Rs 5,703 crore, higher than Rs 5,684.37 crore on Tuesday, 23 June 2009.

The barometer index the BSE Sensex is up 4,775.42 points or 49.5% in calendar year 2009 as on 24 June 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,262.33 points or 76.74% as on 24 June 2009.

Coming back to today's trade, the market breadth was strong. On BSE, 1,792 shares rose as compared with 799 shares that declined. A total of 71 shares remained unchanged.

From the 30 share Sensex pack 24 stocks rose and rest fell.

The BSE Mid-Cap index was up 2.38%. The BSE Small-Cap index was up 2.26%.

The BSE Power index (up 2.82%), the BSE Capital Goods index ( up 2.52%), the BSE Healthcare index (up 2.39%), the BSE Realty index (up 2.07%), the BSE Auto index (up 1.64%), the BSE TECk index (up 1.64%), the BSE Consumer Durables index (up 1.61%), the BSE IT index (up 1.42%), the BSE FMCG index (up 1.16%), the BSE Metal index (up 1.14%), outperformed the Sensex.

The BSE Bankex (down 0.12%), the BSE Oil & Gas index (up 0.03%), the BSE PSU index (up 0.52%), underperfomed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 0.79% to Rs 2,000.10 on reports Reliance Industries will incur a loss if gas from the D-6 block in the Krishna-Godavari basin is sold at $2.34 per million British thermal units, as ordered by the Bombay High Court. The stock was volatile. It hit a high of Rs 2,034.80 and a low of Rs 1,973.10.

The RIL stock had tumbled in the past few days hit by an unfavourable court ruling on gas sales. The Bombay High Court has 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 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. According to analysts the lower gas sale price will result in lower-than-expected earnings from gas sales for RIL.

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.

The RIL stock had risen 3.26% yesterday after NTPC Chairman R S Sharma said the company is open to buying Reliance Industries' gas at $4.2 per million metric British thermal unit (mmBtu) except for the plants under dispute in the court.

India's largest state-run oil exploration firm by sales ONGC rose 2.39%. The company announced after market hours today that its net profit fell 16% to Rs 2,206.76 crore on 16.85% fall in total income to Rs 15,113.13 crore in Q4 March 2009 over Q4 March 2008 .

Recent reports said ONGC has struck oil and gas in three new blocks. One of these blocks, off the eastern coast of India, could prove as rich as the Reliance Industries' D-6 block.

Capital goods stocks rose on hopes the government may boost spending on the infrastructure sector including increase in power generation. Larsen & Toubro, Thermax, ABB, Punj Lloyd, BEML rose by between 1.27% to 6.17%.

India's largest electric equipment maker Bharat Heavy Electricals Limited (BHEL) rose 2.67% on reports it has secured an order worth Rs 105 crore from Indian Oil Corporation (IOC) for setting up a captive power plant at its Barauni Refinery Complex.

Power stocks gained on hopes of a possible thrust on power generation in the Union Budget 2009-2010. Tata Power Company, Reliance Power, Reliance Infrastructure, Power Grod Corporation of India, NTPC rose by between 0.35% to 2.88%.

Construction and cement stocks rose on hopes the government may boost spending on the infrastructure sector. IVRCL Infrastructure & Projects, Gammon India, Hindustan Construction Company, Jaiprakash Associates, Valecha Engineering rose by between 0.59% to 7.39%.

Among cement shares, ACC, Grasim Industries, India Cements, Ultratech Cements, Ambuja Cements rose by between 3.24% to 5.54%.

Rate sensitive 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, Indiabulls Real Estate, Unitech, Omaxe, Akruti City rose by between 1.23% to 6.87%.

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.

Bank stocks fell after American depository receipts (ADR) fell overnight. India's second largest private sector bank by operating income HDFC Bank fell 1.97% as its American depository receipt (ADR) fell 3.24% on Tuesday. HDFC Bank's advance tax payment rose 16.28% to Rs 250 crore in Q1 June 2009 over Q1 June 2008.

India's biggest dedicated housing finance firm by operating income Housing Development Finance Corporation (HDFC) fell 1.96%.

HDFC and HDFC Bank recently reduced interest rates on term deposits by up to 0.25%.

India's largest private sector bank by net profit ICICI Bank fell 1.16%. Its ADR fell 0.67% on Tuesday. ICICI Bank's advance tax payment rose 7.64% to Rs 366 crore in Q1 June 2009 over Q1 June 2008. ICICI Bank is reportedly taking cost control measures that could save the bank up to Rs 1300 crore in the year to March 2010.

But, India's biggest bank in terms of branch network State Bank of India (SBI) rose 0.48% on reports it is looking at buying a mid-sized overseas bank in a deal worth $1.5-$2 billion.

Recently, the boards of State Bank of India and its associate State Bank of Indore have approved an acquisition of the latter by the former. State Bank of India has already absorbed State Bank of Saurashtra and has said it is progressively looking to merge its other associate banks.

SBI aims to keep interest margins steady and has no plans for any rights issue or share sale in any unit, Chairman O.P. Bhatt said on Friday 19 June 2009.

Auto stocks rose on hopes sales will rise if economy recovers. India's largest car maker by sales Maruti Suzuki India rose 0.74%. India's largest motorbike maker by sales Hero Honda Motors rose 0.39%.

India's largest commercial vehicle maker by sales Tata Motors, rose 4.2% after the company said on Tuesday that 55,021 applicants for its Nano who missed out on an allotment of the first 100,000 units of the small car had retained their bookings. The company said it expects to complete delivery of the first 100,000 Nanos, the world's cheapest car, by the last quarter of 2010. The company raised $500 million in April 2009 from consumer bookings for the Nano.

India's largest tractor maker by sales Mahindra & Mahindra rose 2.84%.

Outsourcing focussed IT stocks rose on reports India's top two software exporters TCS and Infosys are seeing the first signs of recovery in order flow. India's second largest software firm by sales Infosys Technologies rose 0.75% as its American depository receipt (ADR) rose 1.14% on Tuesday.

India's largest software services exporter by sales TCS rose 4.33%. TCS's advance tax payment fell 33.33% to Rs 50 crore in Q1 June 2009 over Q1 June 2008. India's third largest software services exporter by sales Wipro rose 1.23%. Its ADR rose 0.56% on Tuesday.

Some healthcare stocks rose on hopes the government will give primary importance to healthcare segment and health of citizens. Cipla, Biocon, Ranbaxy's Laboratories, Dr Reddy's Laboratories, Lupin, Pfizer, rose by between 0.11% to 8.82%.

India's largest aluminum producer by sales Hindalco Industries, rose 2.76% after the government imposed a safeguard duty on aluminium products imported from China in a bid to safeguard the interest of domestic producers. But, India's second largest aluminum producer by sales National Aluminum Company fell 1.96%.

After this duty imposition, aluminium foils will attract a safeguard duty of 25-30%, and aluminium sheets will attract a duty of 12-14%. The duty would be effective retrospectively from 23 March 2009 to 22 March 2010.

Safeguard duties are typically imposed over a shorter time period to safeguard the domestic industry against cheap imports. Lately, Indian markets were flooded with the import of cheap aluminium products from China, thus threatening the domestic producers, who are already under pressure due to the demand slowdown and sharp fall in aluminium prices.

Leading Indian telecom players Bharti Airtel and Reliance Communications rose by between 1.34% to 1.82% on recent reports they have joined the race to acquire the African business of Kuwait-based Zain Group.

FMCG stocks rose on hopes of government's rural focus in the forthcoming budget. FMCG firms derive a substantial revenue from rural markets. ITC, Hindustan Unilever, United Spirits, Nestle India, Marico, Britannia Industries rose by between 0.89% to 4.85%

Sugar stocks rose on reports global sugar prices have touched the highest level in three years. Bajaj Hindustan, Balrampur Chini, Shree Renuka Sugars rose by between 4.97% to 7.74%.

Shares of tyre companies rose on expectation of some favourable announcements in the Union Budget 2009-2010 on 6 July 2009. MRF, CEAT and Apollo Tyres rose by between 3.28% to 4.99%.The tyre industry wants reduction in customs duty on inputs as well as excise rebate on domestically manufactured radial truck and bus tyres to improve competitiveness against imports.

Cals Refineries clocked the highest volume of 2.77 crore shares on BSE. Suzlon Energy (2.37 crore shares), Reliance Natural Resources (2.29 crore shares), Unitech (1.89 crore shares) and Firstsource Solutions (1.64 crore shares) were the other volume toppers in that order.

Suzlon Energy clocked the highest turnover of Rs 277.47 crore on BSE. Reliance Industries (Rs 209.64 crore), Reliance Natural Resources (Rs 208.28 crore), Educomp Solutions (Rs 186.93 crore) and Reliance Capital (Rs 174.32 crore) were the other turnover toppers in that order.