Sensex extends gains for the fifth day; IT pivotals rally

Key benchmark indices extended gains for the fifth straight sessions after strong economic data from the US suggested that the world's biggest economy is emerging from the longest recession since the 1930s. The BSE 30-share Sensex was up 111.30 points or 0.71%, up 61.58 points from the day's low and off 19.03 points from the day's high. IT stocks were in demand after strong US economic data. The market breadth was strong.

Volatility may rise in the near term as traders roll over positions in the derivatives segment from August 2009 series to September 2009 series, ahead of the expiry the August 2009 series on Thursday, 27 August 2009. Rollover was a little over 54% in Nifty futures at the end of Tuesday's (25 August 2009) trading. The rollover in Mini Nifty futures was about 44%.

Encouraging statement from the Finance Minister Mukherjee indicating that reforms would continue in right earnest to get the economy back to its 9% growth also boosted sentiment. At an event on Tuesday, 25 August 2009 on 'Mission 2010: The Reform Road Map', the finance minister said that the green shoots were visible in industry with basic goods, intermediates and consumer durables doing better in the first quarter.

Mr Mukherjee made it clear that public spending won't push interest rates higher. Nor would the government's huge debt appetite leave private industry high and dry.

Both Mukherjee and C Rangarajan, chief of the Prime Minister's Economic Advisory Council, pegged the GDP growth for this fiscal at 6-6.5% after factoring in the drought damage. Mr Rangarajan, a former Reserve Bank of India governor, said growth should pick up speed to hit 7-8% next fiscal. To accelerate to 9%, though, it was vital to boost domestic consumption, he added.

Planning Commission Deputy Chairperson Montek Singh Ahluwalia said on Monday, 24 August 2009 that India's fiscal deficit this year will not exceed 6.8% despite rising concerns that high government spending. In the budgetary estimates for 2009-10, the fiscal deficit was projected at 6.8%. The first full meeting of the Planning Commission will be held on 1 September 2009 and the main topic of discussion will be the state the economy.

Most Asian markets were trading higher today, 26 August 2009, helped by solid US data on Tuesday and a stronger Wall Street. Key benchmark indices in China, South Korea, Japan, Hong Kong, Singapore were up by between 0.16% and 1.52%. However, Taiwan's Taiwan Weighted slipped 1.19%

Japan's Nikkei 225 index rose 1.37% were supported by news that the country's merchandise trade surplus in July 2009 widened, from the year ago period, for the second straight month.

On Wall Street, stocks finished modestly higher on Tuesday, 25 August 2009 as better-than-expected economic reports on housing prices and consumer confidence and news of Ben Bernanke's reappointment as the Fed Chief for a second term generated some upbeat sentiment.

The three major indices closed at 2009 highs, although they were off the intraday highs reached after the stronger-than-expected economic data. The Dow Jones Industrial Average advanced 30.01 points, or 0.32%, to 9,539.29. The Standard & Poor's 500 Index gained 2.43 points, or 0.24%, to 1,028.00. The Nasdaq Composite Index rose 6.25 points, or 0.31%, to 2,024.23.

The Consumer Confidence Index for August 2009 jumped to 54.1, rising for the first time in three months. This marked an improvement from an upwardly revised 47.4 in July 2009. Meanwhile, the S&P/Case-Shiller home-price index declined 15.4% in June 2009 from a year earlier, less than estimated by economists.

Trading in US index futures showed the Dow could fall 15 points at the opening bell on Wednesday, 26 August 2009.

Closer home, the Central Board of Direct Taxes (CBDT) has advised its field formations to scrutinise all cases in which companies have amortised foreign exchange losses under the one-time discretion allowed by the government through an amendment to Accounting Standard 11 (AS-11).

The temporary relief on AS-11 was permitted on 31 March 2009 against the background of the sharp depreciation of the rupee against the dollar, euro, pound and Swiss franc in 2008. As a result of this, several companies with significant foreign currency loans had to suffer mark-to-market losses.

Under AS-11, gains or losses from foreign exchange fluctuations have to be recognised in the profit and loss account. The amendment to AS-11 provided an option to capitalise or amortise exchange differences on long-term foreign currency positions (typically overseas borrowings) with retrospective effect from December 2006. This was done by adding or deducting such losses from the cost of fixed assets if, and only if, the money was borrowed for acquiring an asset. This treatment enabled companies to make adjustments directly on the balance-sheet by bypassing provisioning in the profit and loss account.

At 10:25 IST, the BSE 30-share Sensex was up 111.30 points or 0.71% to 15,798.81. The Sensex opened 74.62 points higher at 15763.09. The barometer index gained 129.37 points at the day's high of 15,817.84 in early trade. The Sensex rose 48.76 points at the day's low of 15,737.23 in early trade.

The S&P CNX Nifty rose 30.70 points or 0.66% to 4,690.05

The market surged in the past four days supported by positive global cues. The BSE Sensex jumped 878.83 points or 5.93% in the past four trading days from 14,809.64 on 19 August 2009 to 15688.47 on Tuesday, 25 August 2009.

The BSE clocked a turnover of Rs 1296 crore at 10:25 IST

The market breadth, indicating the overall health of the market, was strong. On BSE, 1276 shares advanced as compared with 286 that declined. A total of 35 shares remained unchanged.

Among the 30-member Sensex pack, 22 advanced while the rest slipped.

IT stocks dominated gainers from the Sensex pack on solid readings for US home prices and US consumer confidence on Tuesday. US is the key market for Indian IT firms.

India's largest software services exporter TCS jumped 4.44% to Rs 551.05 and was the top gainer from the Sensex pack. India's second largest software services exporter Infosys rose 3.68%.

India's third largest software services exporter Wipro gained 3.21%, extending Tuesday's 3.7% advance triggered by reports Australian beer and wine giant Fosters Group will outsource much of its internal IT department to Wipro, with the transition to occur before the end of the year. As per reports, Foster's is planning to move its internal service desk to India by November 2009, with the rest of the support teams spread out in different locations.

HCL Technologies rose 1.79% after the company's net profit rose 26.45% to Rs 192.94 crore on 9% rise in total income to Rs 1191.71 crore in Q4 June 2009 over Q3 March 2009. The company announced its result before market hours on Tuesday, 25 August 2009.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 0.67% to Rs 2037.40. A panel of ministers has reportedly decided to protecting NTPC's interests with regard to a gas dispute. As per reports, the government has decided to spell out its position in the two disputes involving the Krishna-Godavar Basin D6 block gas supplies — NTPC-Reliance Industries Ltd (RIL) and RIL-Reliance Natural Resources Ltd (RNRL).

On Friday, 21 August 2009 the government had clarified that it was not correct that it would earn Rs 500 crore from the KG basin gas, as claimed by Anil Ambani in the media. It said it would get Rs 84,000 crore.

The dispute between Reliance Industries and Reliance Natural Resources (RNRL) is centered around the price and supply of gas from KG basin operating by RIL to RNRL for the power plants of Anil Dhirubhai Ambani group. NTPC-RIL case also deals with price and supply of gas to NTPC's power plants from RIL. NTPC was up 0.93% while RNRL rose 1.04%

India's largest truck marker by sales Tata Motors was up 0.36%. At its annual general meeting in Mumbai on Tuesday, 25 August 2009, Ratan Tata, Chairman of Tata Motors, said that Tata Motors and Jaguar Land Rover will come through this tough period as leaner and more cost-efficient companies.

Bank stocks rose on bargain hunting after recent slide. India's biggest bank in terms of branch network State Bank of India (SBI) rose 0.74%.

India's largest private sector bank by net profit ICICI Bank gained 0.49% mirroring a 1.16% rise in its ADR on Tuesday, 25 August 2009.

But India's second largest private sector bank by net profit HDFC Bank fell 0.83% despite a 0.61% rise in its ADR on Tuesday, 25 August 2009.

India's top car maker by sales Maruti Suzuki India lost 1.22% on profit booking after four straight days of rise.