Post Session Commentary - July 28 2009

The domestic market extended its previous session’s movement to end slightly below the dotted line after exhibiting volatility throughout the session. Market ignored positive cues from Asian markets and remained choppy after the announcement of the RBI’s quarterly monetary policy review. The RBI in its quarterly monetary policy review on 28th July, has kept the key rates unchanged. On the other hand, RBI remained optimistic about the GDP growth as it expected GDP to grow at 6% in FY10 with an upward bias. Further the RBI has increased the inflation forecast to 5%. The Realty index remained in the lime light during the session on account of the government’s latest announcement of tax benefits as well as keeping the policy rates unchanged by RBI in its quarterly monetary policy review. However, market recovered during afternoon session on a little buying before slipping again. Meanwhile, benchmark indices also exhibited volatility ahead of F&O expiry on 30th July 2009. BSE Sensex ended below 15,350 level and NSE Nifty closed around 4,560 mark.

Market opened on upbeat note though pared all gains soon after start and turned negative on selling pressure emerged in key stocks. Meanwhile, the US stocks markets ended marginally higher on Monday, as investors sentiments were carried away by the biggest jump in new-home sales data in more than eight years. Further, Indian benchmark witnessed instability and continued to trade with negative bias till mid session ahead of F&O expiry on coming Thursday. Stocks fluctuated also after interest rates left unchanged in RBI’s quarterly monetary policy review. However, market managed to recover during afternoon trade on some bouts of buying but was unable to sustain the momentum and slipped again to close near unchanged level. From the sectoral front, FMCG, Bank, Consumer Durable and Oil & Gas stocks witnessed most of the selling from these baskets. However, Realty, Auto, Metal and Power stocks managed to gain favour from the market. BSE Mid Cap and BSE Small Cap indices remained in limelight as closed with gains of more than 1% each.

Among the Sensex pack 20 stocks ended in green territory and 10 in red. The market breadth indicating the overall health of the market remained positive as 1709 stocks closed in green while 945 stocks closed in red and 91 stocks remained unchanged in BSE.

The BSE Sensex closed slightly lower by 43.10 points at 15,331.94 and NSE Nifty ended marginally down by 8.20 points or at 4,564.10. BSE Mid Caps and Small Caps closed with gains 61.87 and 103.07 points at 5,531.37 and 6,245.81 respectively. The BSE Sensex touched intraday high of 15,463.46 and intraday low of 15,240.53.

The RBI on Tuesday kept the key policy rates unchanged but increased the inflation forecast to 5%. RBI kept the repo rate, at which the central bank lends cash to banks, at 4.75% and the reverse repo rate, at which it absorbs surplus cash from the banking system, stays at 3.2%, according to the Q1 Monetary Policy. Moreover, the RBI also kept the cash reserve ratio unchanged at 5.00%t. The deposit growth is seen at 19% and the review has said that there is scope for the banks to slash interest rates. The SLR also remains unchanged at 2%. Besides, the GDP is expected to grow at 6% while the money supply growth is seen at 1%, according to the quarterly review of the economy.

On 28th July 2009, the government had announced some additional steps to bolster the economy, as lowered the interest rates on homes loans for affordable housing and extended a tax holiday given to industrial parks. Finance minister Pranab Mukherjee on Monday told the Lok Sabha that Home loans of up to Rs. 10 lakh for properties provided the value of home doesn’t exceed double that amount will now come with a 1% subsidy on the interest. Profits from housing projects approved by a local authority between April 1, 2007 and March 31, 2008 will be tax free if they are completed before March 31, 2012. Further, companies working out of industrial parks can now plan long-term with the tax breaks being extended to two more years, till March 31, 2011.

Gainers from the BSE Sensex pack are Tata Motors (10.47%), Reliance Infra (3.91%), DLF Ltd (3.40%), Rcom (2.98%), Maruti Suzuki (2.84%), Tata Steel (2.54%), Tata Power (2.30%), ACC Ltd (2.10%), NTPC Ltd (1.33%), Bharti Airtel (0.97%), Wipro Ltd (0.92%), M&M Ltd (0.81%), Sterlite Indutries (0.75%), Sun Pharma (0.74%) and ITC Ltd (0.73%).

Losers from the BSE Sensex pack are HUL (7.28%), ICICI Bank (0.27%), Grasim Industries (1.77%), SBI (1.70%), Infosys Tech (1.51%), Reliance (1.43%), HDFC Bank (0.66%), Herohonda Motors (0.56%) and L&T Ltd (0.34%).

On the global markets front the Asian markets that opened before the Indian market, ended mostly higher. Shanghai Composite, Hang Seng, Straits Times and Seoul Composite ended up by 3.16, 372.92, 47.38 and 1.98 points at 3,438.37, 20,624.54, 2,624.04 and 1,526.03 respectively. However, Nikkei 225 lost 1.40 points at 10,087.26.

European markets, which opened after the Indian market, are trading in green. In Frankfurt the DAX index is trading up by 15.98 points at 5,267.53 and in London FTSE 100 is trading higher by 5.54 points at 4,591.67.

The BSE FMCG index closed lower by (1.33%) or 35.49 points at 2,638.09. HUL (7.28%), Godrej Cons (3.44%), Britania Indus (1.60%) and Tata Tea Ltd (0.73%) ended in red territory.

The BSE Bank index dropped by (1.22%) or 101.98 points to close at 8,227.35 after RBI revised its wholesales price inflation forecast to 5% by end March 2010 as against 4% projected earlier. Main losers are Bank of India (4.21%), ICICI Bank (2.37%), Oriental Bank (1.81%), SBI (1.70%) and Karnataka Bank (1.55%).

The BSE Consumer Durable index ended down by (0.82%) or 26.08 points at 3,164.98. Losers are Blue Star L (3.08%), Titan Ind (1.59%) and Rajesh Export (0.24%).

The BSE Realty index surged (4.64%) or 181.81 points at 4,090.12 on government’s latest announcement of tax benefits. Unitech Ltd (8.81%), Mahindra Life (8.10%), Sobha Dev (5.77%), Pheonix Mill (5.08%) and Housing Dev (4.72%) closed in positive territory.

The BSE Auto index ended higher by (1.92%) or 105.71 points at 5,622.99. Scrips that gained are Tata Motors (10.47%), Bosch Ltd (4.45%), MRF Ltd (4.33%), Maruti Suzuki (2.84%) and Bharat Forge (2.78%).

Tata Motors ended higher by 10.47% as posted better-than-expected quarterly earnings. The company reported a 58% growth in net profit to Rs. 514 crore in the first quarter ended June 30 as against Rs. 326 crore in the previous corresponding quarter.

Reliance Power advanced by 0.34%. The company has raised more than Rs 20,000 crore for funding its three projects of total capacity of 5,000 MW. This includes Rs 15,000 crore for the 4,000 MW Sasan thermal power project in Madhya Pradesh.

Escorts Ltd zoomed 2.59% after net profit increased in triple digit 138.7% to Rs 22.22 crore in Q3 June 2009 over Q3 June 2008.