Oil stocks lead rally

Stock and sector-specific buying was the order of the day based on expectations of sops in the Union Budget 2009-2010. Oil stocks rose after the government unexpectedly hiked petrol and diesel prices. Shares of state-run firms rose on hopes the government will revive stake sale in the current year. Construction shares were in demand on a likely thrust of the budget on the infrastructure sector which may boost orders for construction firms.

The 30-share BSE Sensex rose 148.41 points or 1.01% to 14,913.05 in the week ended Friday, 3 July 2009. The BSE Small-Cap index rose 24.20 points or 0.42% to 5,824.95 in the week. The BSE Mid-Cap index 16.32 points or 0.32% to 5,187.22 in the week.

Stocks have risen sharply in the past four months or so, on heavy buying by foreign funds. The Sensex is up 5,265.74 points or 54.58% in calendar year 2009 as on 3 July 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,752.65 points or 82.74% as on 3 July 2009.

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 25,109.90 crore in calendar 2009 (till 2 July 2009).

Trading for the week began on a positive note as the Sensex inched up 21.10 points or 0.14% on Monday, 29 June 2009. But the market dropped the next day as a rush to raise funds through share sales by corporate India raised concerns that a glut in share sales will suck liquidity from the secondary market. The BSE Sensex lost 291.90 points or 1.97%, on Tuesday, 30 2009.

Brokers expect companies to raise over $10 billion in the current financial year by way of share placements and initial public offers. The raising of funds will help corporates finance expansion and reduce debt. But it will result in equity dilution which the stock market normally does not like due to earnings dilution.

Data showing strong auto sales in the month just gone by, firm global markets and speculative build up of positions in the run up to the budget, triggered a recovery the next day. The BSE 30-share Sensex gained 151.63 points or 1.05%, on Wednesday, 1 July 2009

The latest macro data confirmed that the economy is recovering. The Markit Purchasing Managers' Index (PMI) based on a survey of 500 companies, held above the threshold of 50 in June 2009 that separates expansion from contraction.

The key benchmark indices ended a choppy trading session flat on Thursday, 2 July 2009. The BSE 30-share Sensex rose 13.02 points or 0.09%. The annual economic survey by the finance ministry in parliament during trading hours suggested a strong push for policy reforms. The survey also called for sweeping tax reforms.

Stocks surged on Friday, 3 July 2009, after the Railway Minister Ms Mamta Banerjee announced a number of new initiatives in the 2009-2010 Rail Budget including a plan to improve infrastructure facilities across a large number of railway stations. The progress of India's annual monsoon also aided sentiment. The Indian meteorological department said that monsoon has covered the entire country. The quantum and distribution of rain in this crucial sowing month holds key.

India's biggest commercial vehicles maker by market share Tata Motors came under selling pressure after reporting a net loss of Rs 2505.25 crore in the year ended March 2009 on consolidated basis as compared with net profit of Rs 2167.70 crore in the year ended March 2008. Net sales jumped 98.73% to Rs 70370.40 crore in the year ended March 2009 over the year ended March 2008. However the figures are not comparable as the year-ago numbers did not include that of Jaguar and Land Rover, as well as some other assets the company bought and sold during the year.

PSU OMCs rose after the government announced a hike petrol and diesel prices after trading hours Wednesday, 1 July 2009. BPCL rose 9.22% to Rs 459.80, HPCL rose 9.4% to Rs 330.95 and Indian Oil Corporation rose 4.59% to Rs 562.60 in the week.

Higher fuel prices will reduce underrecoveries at the state-run oil firms on domestic sale of petrol and diesel at a controlled price. Petrol price was hiked by Rs 4 per litre and diesel by Rs 2 per litre.

India's biggest state-run oil exploration firm ONGC surged after chairman and Managing Director R. S. Sharma said the company's fuel subsidy burden for the current year will be significantly lower than the previous year, if the crude prices stay around the current level. India's largest private sector firm by market capitalisation Reliance Industries (RIL) was almost unchanged in the week. The company said on Wednesday, 1 July 2009, it would appeal to the Supreme Court against a ruling that it should enter into a gas supply agreement with former group firm Reliance Natural Resources (RNRL).

RIL had said on Tuesday, 30 June 2009, it could not sign a gas supply agreement with Reliance Natural Resources (RNRL) as there was no clarity on government approval for the terms. RIL said it wanted the terms such as price, quantity and tenure to be subject to government approval. The Bombay High Court, in its order dated 15 June 2009, had directed that Anil Ambani's RNRL will get assured gas supply of 28 million metric standard cubic metre per day (mmscmd) of gas from RIL's Krishna-Godavari basin for 17 years at $2.34 million per metric British thermal unit (mmbtu). This is 44.28% less 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.

Shares of India's biggest dedicating housing finance firm by operating income rose 6.19% to Rs 2586.25 in the week on market talks the government may increase tax sops on housing loan.

India's largest private sector aluminium maker by sales Hindalco lost 3.35% to Rs 83.75 in the week 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 on Tuesday, 30 June 2009.

The company's board of directors approved raising funds upto $500 million by selling shares to institutional investors.

Power stocks rose on expectations of a thrust to the power sector in the Union Budget 2009-2010. India's biggest thermal based power generation firm by revenue NTPC rose 4.82% to Rs 204.35. One of the expectations is that the government may extend income tax benefit under section 80-IA. The tax benefit available to project developers ends this year.