Post Session Commentary - July 6 2009

Indian markets revealed its worst performance in the recent weeks today and closed with huge losses after going through bloodbath during the trading session as the Union Budget failed to motivate the investor’s sentiments. The budget focused more on infrastructure growth as the Finance Minister increased spending on roads, power and aid to the poor that raised dissatisfaction on the economic reforms. Finance Minister Pranab Mukherjee did not announced any major policy and eliminated the commodities transaction tax (CTT) along with fringe benefit tax (FBT). Besides, he had not made any change in the corporate tax and hiked the minimum alternate tax to 15% from 10% of book profit that led to negative reaction in the market. BSE Sensex ended below 14,100 level and NSE Nifty closed below 4,200 level.

The market opened today on positive note ahead of Union Budget for the current financial year. Meanwhile, the US stock markets remained closed on Friday on the celebration of Independence Day. The domestic stocks pared all opening gains slipped into red after Pranab Mukherjee started presenting the Union Budget 2009 in Lok Sabha. There was lack of clarity for disinvestment and the budget was not as per market expectations and consequently was unable to encourage sentiments. Further, benchmark indices continued to extend losses and slipped sharply lower during final trading hours on sustained selling pressure led by budget disappointment. Negative European market also fueled the weak sentiments. From the sectoral front all indices ended in red barring Consumer Durables stocks. Besides, Bank, Metal, IT, Teck, Power, Realty and Pharma contributed to most the selling pressure. BSE Mid Cap and Small Cap stocks also witnessed huge selling pressure.

Finance minister Pranab Mukherjee presented the Union Budget 2009 in Lok Sabha today. He said PSU banks and Insurance Companies would remain under government control. He abolished the surcharge on personal Income tax by 10% and increased IT exemption to Rs 2,40,000 for senior citizens. He added that there will be exemption of Rs.10,000 for all other categories. Also, the government has increased the allocation for its rural job scheme by 144% to Rs 39,000 crore and allocation for the Jawaharlal Nehru National Urban Renewal Mission by 87% to Rs 12,887 crore. Meanwhile, total budget expenditure for 2009-10 will Rs 10,28,032 crore. Further, plan expenditure, for both Centre and States, to go up by Rs 61,000 crore and fiscal deficit in 2009-10 is proposed at 6.8% of GDP.

Among the Sensex pack 28 stocks ended in red territory and 2 in green. The market breadth indicating the overall health of the market remained weak as 2020 stocks closed in red while 551 stocks closed in green and 62 stocks remained unchanged in BSE.

The BSE Sensex closed lower by 869.65 points or 5.83% at 14,043.40 and NSE Nifty ended down by 258.55 points or 5.84% at 4,165.70. BSE Mid Caps and Small Caps closed with losses of 268.34 and 262.08 points at 4,918.88 and 5,562.87 respectively. The BSE Sensex touched intraday high of 15,097.87 and intraday low of 13,959.44.

Losers from the BSE Sensex pack are Reliance Infra (12.17%), ICICI Bank (10.09%), JP Associates (9.93%), Tata Steel (9.55%), HDFC (9.00%), L&T Ltd (8.94%), SBI (8.60%), DLF Ltd (8.23%), RCom (7.87%), Tata Power (7.15%), Hindalco (6.69%), Sterlite Industries (6.54%), Reliance (6.53%), HDFC Bank (5.88%), Tata Motors (5.71%) and ONGC Ltd (5.67%).

Only two gainers from the BSE Sensex pack are ITC Ltd (3.13%) and HUL (0.99%).

On the global markets front the Asian markets that opened before the Indian market, ended mostly lower on growth concerns. Hang Seng, Nikkei 225, Straits Times index and Seoul Composite ended lower by 223.99, 135.20 and 33.66 at 17,979.41, 9,680.87 and 2,266.09 respectively. However, Shanghai Composite and Seoul Composite gained 36.30 and 8.90 points at 3,124.67 and 1,428.94 respectively.

European markets, which opened after the Indian market, are trading in red. In Frankfurt the DAX index is trading down by 73.45 points at 4,634.76 and in London FTSE 100 is trading lower by 50.36 points at 4,185.92.

The BSE Bank stocks dropped by (8.17%) or 391.07 points to close at 7,768.63 as government stated that banks and insurance sector will be excluded from the divestment plan. Major losers are Indus Ind Bank (11.56%), ICICI Bank (10.09%), IDBI Bank (9.56%), Axis Bank (8.90%) and SBI (8.60%).

The BSE Reality index closed with decrease of (7.28%) or 250.04 points at 3,185.19. Scrips that lost are Unitech Ltd (9.26%), DLF Ltd (8.23%), Indiabull Real (6.26%), Omaxe Ltd (5.99%) and Housing Dev (5.27%).

The BSE Capital Goods index tumbled (7.02%) or 913.30 points to close at 12,099.76. Main losers are Areva (11.19%), Alstom Proje (9.91%), Punj Lloyd (9.84%), Reliance Industrial Infra (8.97%) and L&T Ltd (8.94%).

The BSE Metal ended down by (6.57%) or 743.12 points at 10,560.22. Losers are Tata Steel (9.55%), Ispat Industries (8.45%), Hindalco (46.69), Sterlite Industries (6.54%) and Steel Authority (6.50%).

The BSE Power index lost (6.36%) or 186.40 points to close at 2,743.83. Losers are Reliance Infra (12.47%), Power Grid (8.07%), Torrent Power (7.69%), Suzlon Energy (7.58%) and Tata Power (7.15%).

The BSE Oil & Gas index ended lower by (5.81%) or 558.04 points to close at 9,039.22. Aban Offshore (8.88%), RNRL (8.66%), Essar Oil Ltd (6.98%), Reliance (6.53%) and ONGC Ltd (5.67%) ended in negative territory.

Reliance Capital closed lower by 11.13%. However, the company has unveiled an ambitious plan for the next three-five years including entering the banking sector as and when regulations permit, globalizations of operations and to increase its customer base from 15 million to 50 million.

Prakash Industries Ltd fell 4.96% despite report the company will raise $100 million through issuing foreign currency convertible bonds to fund its proposed 625 megawatt thermal power project at Chhattisgarh.

DLF Ltd plunged 8.23% despite reports the company has raised Rs. 1,000 crore through sale of land parcels across four cities in the past 4-5 weeks.

Ashok Leyland Ltd plunged 8.15%, after total sales declined 44.41% to 3,971 units in June 2009 over June 2008.

Hindustan Dorr Oliver Ltd ended lower by 0.42%. The company has bagged an order from CIDCO (City & Industrial Corporation of Maharashtra Ltd), Navi Mumbai, for Design, Engineering, Supply, Construction, Erection and Commissioning of their 70 MLD Sewage Treatment Plant coming up in Kharghar, Navi Mumbai. The project value is 60.3 crores and completion period is 24 months.