Stock-specific buying continues

The key benchmark indices extended last week's losses tracking weak European stocks and lower US index futures. Nevertheless, stock-specific buying was evident in rally in select stocks outside the two key indices viz. the Sensex and the Nifty. But volatility was immense. Stocks fell in Europe and US index futures dropped after the World Bank on Monday predicted Monday that the global economy will shrink 2.9% this year, a deeper fall than the 1.7% contraction it predicted in March 2009.

The BSE 30-share Sensex lost 195.67 points or 1.35%, off close to 340 points from the day's high and off close to 60 points from the day's low. Oil & gas, metal, IT, realty and auto stocks led the decline. The market breadth turned weak from a positive breadth earlier in the day.

Last week, the market had snapped a winning streak of 14 weeks. The BSE Sensex lost 716.05 points or 4.70% to 14,521.89 and the S&P CNX Nifty declined 269.80 points or 5.88% to 4313.60 in the week ended Friday, 19 June 2009.

Coming back to today's trade, volatility was high. The market surged in early trade tracking higher Asian stocks. A revival of the south-west monsoon and reports that the government has doubled the base price for the long-overdue auction of third-generation (3G) spectrum to Rs 4040 crore also aided the early surge. However, the market gave up all the gains and slipped in the red for a brief period before bouncing back in mid-morning trade.

After surging to the fresh day's high in mid-morning trade, the Sensex once again slipped into the red in early afternoon trade. The Sensex moved between positive and negative zone later. The market weakened in afternoon trade tracking lower European stocks. A strong rebound from lower level was witnessed in mid-afternoon trade. But the recovery proved short-lived and the market weakened again later.

Volatility may remain high ahead of the expiry of June 2009 futures and options (F&O) contracts on Thursday, 25 June 2009.

As per reports during trading hours on Friday, 19 June 2009, the government has doubled the base price for the long-overdue auction of third-generation (3G) spectrum to Rs 4040 crore. The Government will earn a minimum of Rs 36860 crore from the auctions which will help reduce the high fiscal deficit.

Meanwhile, the south-west monsoon, which had been stalled since 7 June 2009, revived on 21 June 2009 and is likely to cover more parts of Maharashtra, Karnataka and Andhra Pradesh, the weather department said on Monday morning. The revived monsoon may cover Maharashtra and Madhya Pradesh by first week of July 2009.

A weak initial phase of the monsoon has stoked fears of fall in agricultural production and a surge in prices of essential commodities which may spur inflation. The country's monsoon rainfall during 1 June 2009 to 17 June 2009 was at 39.5 millimeter, 45% below the normal, the India Meteorological Department said on 18 June 2009. A weak monsoon in this season may cast its shadow on a likely recovery in India's economy. Rural demand has been strong in recent years due to good monsoon in the past few years.

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.

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.

But foreign funds sold shares last week after aggressively buying during the past three months or so. Foreign funds sold shares totaling Rs 1,711.90 crore in five trading sessions from 15 June 2009 to 19 June 2009. FII inflow in June 2009 totaled Rs 4,420.30 crore (till 19 June 2009). FII inflow in calendar year 2009 totaled Rs 25,739.70 crore (till 19 June 2009).

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.

European shares fell on Monday, as weakness in energy stocks overshadowed gains in miners. The key benchmark indices in France, Germany and UK were down by between 1.35% to 1.59%.

A higher than expected reading of business climate index in Germany failed to lift spirits among investors. The German Ifo business climate index rose to 85.9 in June 2009 from a reading of 84.2 in May 2009, the Mannheim-based Ifo Institute reported Monday. Economists had forecast a rise to 85.3.

Asian stocks rose today as banks and electronics makers rose after the International Monetary Fund said it will lift its world growth forecasts, overshadowing declines among commodity companies on lower copper and oil prices. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.41% to 1.77%.

Asian stocks shrugged off a World Bank prediction on Monday that the global economy will shrink 2.9% in 2009, a deeper fall than the 1.7% contraction it predicted in March 2009. It also warned that international capital will continue to flow out of developing nations, with international capital flows projected to fall to $363 billion in 2009 from their peak of $1.2 trillion in 2007. The world has entered an era of slower growth that will require tighter and more effective oversight of the financial system, the bank said in a statement.

US futures reversed gains. Trading in the US index futures indicated Dow could fall 50 points at the opening bell today, 22 June 2009.

US markets closed Friday's (19 December 2009) session mixed after indices surrendered early gains. Nonetheless, financial stocks and tech rose in late trade. The rebound though was not enough to reverse the stock market's weekly loss of 2.6%, the first weekly decline in five weeks. The Dow Jones was down 15.87 points, or 0.2%, to 8,539.73. The broader S&Ps 500 index rose 2.86 points, or 0.3%, to 921.23 and the Nasdaq Composite Index gained 19.75 points, or 1.1%, to 1,827.47.

The BSE 30-share Sensex lost 195.67 points or 1.35% to 14,326.22. The Sensex rose 146.51 points at the day's high of 14,668.40 in early afternoon trade. At the day's low of 14,269.77, the Sensex fell 252.12 points in late trade.

The S&P CNX Nifty was down 78.35 points or 1.82% to 4,235.25. Nifty June 2009 futures were at 4226, at a discount of 9.25 points as compared to the spot closing of 4235.25. Turnover in NSE's futures & options (F&O) segment was Rs 71,601.05 crore, much lower than Rs 79,597.86 crore on Friday, 19 June 2009.

BSE clocked a turnover of Rs 5,130 crore, lower than Rs 5,959.89 crore on Friday, 19 June 2009.

The Sensex has jumped 4,678.91 points or 48.49% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,165.82 points or 75.55%

Coming back to today's trade, the market breadth turned weak from a positive breadth earlier in the day. On BSE, 1,112 shares rose as compared with 1,498 shares that declined. A total of 70 shares remained unchanged.

From the 30 share Sensex pack 23 stocks fell and rest rose.

The BSE Mid-Cap index was down 0.57% and the BSE Small-Cap index was down 0.33%. Both these indices outperformed the Sensex.

The BSE FMCG index (up 0.49%), the BSE Capital Goods index (up 0.36%), the BSE Bankex (up 0.16%), the BSE Healthcare index (down 0.67%), the BSE IT index (down 0.97%), the BSE Auto index (down 1.11%), outperformed the Sensex.

The BSE Oil & Gas index (down 3.33%), the BSE Power index (down 2.47%), the BSE Metal index (down 2.38%), the BSE Realty index (down 2.33%), The BSE PSU index (down 1.73%), the BSE Consumer Durables index (down 1.56%), the BSE TECk index (down 1.42%), underperfomed the Sensex.

Oil stocks fell on reports oil and gas producers could be forced to pay royalties to the government on the basis of sale prices in the future rather than the present system of 'wellhead value', threatening profits of oil companies such as ONGC, Reliance Industries and Cairn India. The new method, which is now being examined by the oil ministry, could represent a fundamental overhaul of the system of calculating royalties, and boost revenues for the cash-strapped exchequer, weighed down by mounting deficits, reports suggest.

India's largest private sector firm by market capitalisation Reliance Industries was down 4.27% to Rs 1,952.45. The stock declined extending last week's losses 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. 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.

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.

India's largest oil exploration firm by sales ONGC fell 1.62%. ONGC's advance tax fell 33% to Rs 890.50 crore in Q1 June 2009 over Q1 June 2008. Cairn India fell 2.67%.

Lower oil prices also weighed on oil exploration shares. Oil fell towards $69 a barrel on Monday, extending the previous session's drop of more than 2%, as bearish sentiment over gasoline markets in the United States. US crude for July delivery fell 39 cents to $69.16. The fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

Metal stocks reversed early gains on profit taking after a sharp surge in the past few months. Hindustan Zinc, Sterlite Industries, Tata Steel, Hindalco Industries, Jindal Steel, Steel Authority of India, National aluminum Company fell by between 0.02% to 4.84%.

IT stocks fell on profit taking after recent rally triggered by reports the forthcoming Union Budget may extend the corporate tax holiday enjoyed by export-oriented units and software parks by three more years, as the government looks forward to clearing the air for companies in these segments reeling under a demand slump in key Western markets.

India's second largest software firm by sales Infosys Technologies fell 0.3% even as its American depository receipt (ADR) rose 2.52% on Friday.

India's largest software services exporter by sales TCS fell 2.91%. 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 fell 0.63% as its ADR fell 1.05% on Friday.

Auto stocks fell on profit taking after recent surge triggered by likely focus of the new government on the rural economy in the forthcoming budget. A rural focus may boost demand for vehicles in the rural market. India's largest commercial vehicle maker by sales Tata Motors fell 3.39%

India's largest tractor maker by sales Mahindra & Mahindra fell 3.8%. Its advance tax payment rose 25% to Rs 17.5 crore in Q1 June 2009 over Q1 June 2008.

But, India's largest car maker by sales Maruti Suzuki India rose 1.45%.

Rate sensitive realty stocks fell on profit taking after a recent 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, Indiabulls Real Estate, Unitech, Akruti City fell by between 2.21% to 3.18%.

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 on profit taking after recent gains triggered by higher advance tax payment in Q1 June 2009. Higher advance tax numbers indicate good Q1 June 2009 results. India's biggest bank in terms of branch network State Bank of India (SBI) fell 1.72% to Rs 1,694.75. The stock came off the day's high of Rs 1,759.50. 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.

India's second largest private sector bank by operating income HDFC Bank fell 0.99% to Rs 1,540.20, off the day's high of Rs 1,568. Its ADR rose 1.67% on Friday. The stock turned ex-dividend today, 22 June 2009 for a dividend of Rs 10 per share. HDFC Bank's advance tax payment rose 16.28% to Rs 250 crore in Q1 June 2009 over Q1 June 2008.

But India's largest private sector bank by net profit ICICI Bank rose 1.84% to Rs 726.90 as its American depository receipt (ADR) rose 3.15% on Friday, 19 June 2009. Nonetheless, the stock came off the day's high of Rs 747.80. 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.

India's biggest dedicated housing finance firm by operating income Housing Development Finance Corporation (HDFC) rose 0.31%.

HDFC and HDFC Bank are reportedly set to reduce interest rates on term deposits by up to 0.25%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.96% as advance tax payment rose 15.79% to Rs 110 crore in Q1 June 2009 over Q1 June 2008.

India's largest electric equipment maker by sales Bharat Heavy Electricals rose 0.24% after company said on Monday it had got a contract worth Rs 105 crore ($21.7 million) from refiner Indian Oil Corporation.

Construction stocks rose on hopes the government may boost spending on the infrastructure sector. Nagarjuna Construction Company, Gammon Infrastructure, Hindustan Construction Company rose by between 0.29% to 2.06%.

Cement stocks fell on profit taking after a recent surge triggered on hopes the government may boost spending on the infrastructure sector. ACC, Grasim Industries, Ultratech Cement, India Cements fell by between 1.35% to 4.8%.

Shares of select firms whose businesses are associated with Indian railways on expectation of some positive announcement in the forthcoming Railway Budget on 3 July 2009. Kalindee Rail Nirman Engineers, Simplex Casting, Kernex Microsystems, Titagarh Wagons, Texmaco, Stone India, Hind Rectifiers rose by between 2.93% to 5.03%.

The newly seated Railway Minister Ms Mamata Banerjee will present the railway budget for 2009-10 in Parliament on 3 July 2009. According to reports, Ms Banerjee aspires to introduce populist measures in the rail budget amid the impact of Sixth Pay Commission and the economic slowdown.

Some healthcare stocks rose on hopes the government will give primary importance to healthcare segment and health of citizens. Ranbaxy's Laboratories, Dr Reddy's Laboratories, Lupin, Sterling Biotech, Piraml HealthCare rose by between 0.37% to 5.99%.

Some FMCG stocks rose on hopes the government will focus on the rural sector in the forthcoming budget. FMCG firms derive substantial revenue from the rural markets. ITC, Marico, United Breweries, Dabur India rose by between 0.63% to 3.03%.

Cals Refineries clocked the highest volume of 3.39 crore shares on BSE. IFCI (2.46 crore shares), Unitech (1.65 crore shares), Ispat Industries (1.5 crore shares) and Suzlon Energy (Rs 1.38 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 317.53 crore on BSE. Reliance Capital (Rs 218.05 crore), Tata Steel (Rs 154.86 crore), Suzlon Energy (Rs 150.94 crore) and Reliance Infrastructure (Rs 135.55 crore) were the other turnover toppers in that order.