Sensex scales 15-1/2 month high on surge in Q2 advance tax payment

The key benchmark indices resumed its upward march after taking a breather on Monday, 14 September 2009, on reports of higher advance tax payment by some top Indian firms. The BSE 30-share Sensex rose 240.26 points or 1.48%. A survey showing an improvement in business confidence in India also boosted sentiments. Realty, metal and banking stocks gained. A likely boost to consumer spending from release of the pay arrears to government employees has supported equities in the past few days

The two key indices - the Sensex and the S&P CNX Nifty today, 15 September 2009, hit their highest closing level in 15-1/2 months. Index heavyweight Reliance Industries rose. The market breadth was strong.

The market opened on a firm note tracking higher Asian stocks. The rally gathered further strength in mid-morning trade with the Sensex hitting a fresh intraday high. The market continued uptrend in early afternoon trade with the Sensex and Nifty hitting multi-month highs. The market pared gains in early afternoon trade. It regained strength in mid-afternoon trade, hovering near the day's high. The Sensex hit fresh intraday high in late trade.

Higher advance tax payment by some of the top firms in the second installment of 15 September 2009 means their profits may rise in Q2 September 2009 over Q2 September 2008. As per reports, State Bank of India, India's biggest commercial bank by branch network, has paid 71.5% higher advance tax at Rs 1,832 crore in the second quarter of 2009-10 over the corresponding period last year.

Software major TCS has reportedly paid 315% higher advance tax at Rs 220 crore in the second installment. Tractor major Mahindra & Mahindra has reportedly paid 540% higher advance tax at Rs 112 crore in the second installment.

Tata Motors paid advance tax of Rs 100 crore in the second installment, much higher than Rs 19 crore last year. But Larsen & Toubro paid Nil advance tax agains Rs 150 crore paid in the corresponding period last year.

Among public sector banks like Bank of India paid Rs 470 crore as against Rs 230 crore and Bank of Baroda paid Rs 412 crore compared to Rs 255 crore. Private sector lender Yes Bank paid Rs 58 crore as against Rs 33 crore in the corresponding period last year.

During the second quarter BPCL and Lupin paid Rs 312 crore and Rs 49.7 crore respectively as against Rs 40 crore, and 11.4 crore in the same period a year ago.Ambuja Cements paid an advance tax of Rs 150 crore for the July-September quarter vs Rs 70 crore in the previous quarter.

Also boosting the sentiment was a surge in the National Council of Applied Economic Research (NCAER) business confidence index to 118.6 points in the June 2009 quarter, up 37 points from previous quarter, when it was at its the lowest level since February 1998. The business sentiments have improved reflecting signs of economic recovery, NCAER said.

The think-tank said economic conditions are further expected to improve in the coming months as the impact of the Union budget 2009-2010 (FY 2010) begins to be realised. The increased government spending may provide some impetus to the domestic investment and consumption.

Comments by the Reserve Bank of India (RBI) governor D Subbarao after trading hours that the central bank will not unwind its accommodative monetary policy before ensuring recovery may further boost bourses tomorrow, 16 September 2009. Subbarao also said the RBI has to take a call on supporting recovery and stemming inflationary pressures.

A trigger for the stock market's rally in the past few days has been expectations that the government will release pay arrears to government employees in the second and final installment ahead of big festivals in October 2009. The payout would boost demand for consumer goods, appliances, cars and motorcycles. Consumer demand is a key driver of the Indian economy.

Remaining 60% of the arrears have to be paid as the government implemented the new pay scales with effect from 1 January 2006 after the 6th Pay Commission report was approved by the Cabinet with modifications. The government in August last year had decided to pay the arrears in two instalments of 40% and 60%. According to government calculations, the total arrears are estimated to cost Rs 29,373 crore.

Finance Minister Pranab Mukherjee said on Monday, 14 September 2009, said late monsoon rains have eased drought conditions in India. The South West monsoon delivered the season's heaviest rain in the week to 9 September 2009, boosting reservoirs and prospects of winter crops. But the monsoon is still a fifth below normal this year.

India's drought has spread to nearly half its more than 600 districts, particularly in sugar-producing areas, but the government said its grain stocks were bigger than last year and sugarcane output would not fall. Mukherjee had recently said the country had enough grains to face the drought but there was a shortfall in lentils and edible oils.

Meanwhile, a Securities & Exchange Board of India (Sebi) panel has recommended rotation of audit partners, selection of the chief financial officer by a company's audit committee and standardisation of earnings disclosure, in an attempt to prevent another accounting scandal such as Satyam Computer.

The committee has also proposed that companies publish their balance sheets, which show the assets and liabilities, half yearly, against the present annual system. This would help investors know the company's solvency position, instead of just the profitability which comes out in quarterly results. The committee has invited comments and suggestions from the public on these proposals before a final recommendation.

Global stocks were mixed on the first anniversary of the collapse of Lehman Brothers, a 158-year-old US investment bank, which filed for bankruptcy on 15 September 2008, setting off a scramble by authorities across the world to avert global financial meltdown.

European shares were trading flat after moving between positive and negative zone. A gauge of sentiment among German finance professionals rose at a smaller-than-expected pace in September 2009. Key benchmark indices in Germany, CAC 40 and UK rose by between 0.07% to 0.36%.

Asian stocks surged near one-year high on Tuesday as investors looked past a trade spat between the United States and China, with exporter shares in Japan getting a lift as the yen's surge relented. Key benchmark indices in Japan, South Korea, Singapore and Taiwan rose by between 0.15% to 1.23%. Hong Kong's Hang Seng was down 0.31% after a late opening due to a typhoon warning.

The Shanghai Composite rose 0.23% in volatile trade. A US decision to impose added duty on Chinese-made tires is an abuse of World Trade Organization safeguard measures, the Chinese commerce ministry said on Tuesday. The Ministry of Commerce said on Sunday it would launch its own investigation into chicken parts and automotive imports from the United States.

Trading in US index futures indicated Dow could fall 5 points at the opening bell today, 15 September 2009. US index futures moved between positive and negative zone.

US markets rose on Monday 14 September 2009 with the S&P 500 closing at the highest level in almost a year. Gains in industrial and financial shares helped the market overcome an early slump.

The Dow added 21.39 points, or 0.2%, to 9,626.80. The S&P 500 index rose 6.61 points, or 0.6%, to 1,049.34. The Nasdaq Composite Index rose 10.88 points, or 0.5%, to 2,091.78.

The BSE 30-share Sensex rose 240.26 points or 1.48% to 16,454.45, its highest closing since 28 May 2008. The Sensex rose 262.94 points the day's high of 16,477.23 in late trade. The barometer index rose 41.23 points at the day's low of 16,255.42 in early trade.

The S&P CNX Nifty was up 83.90 points or 1.74% to 4892.10, its highest closing since 28 May 2008. It hit a high of 4899.45 in late trade. Nifty September 2009 futures were at 4897.20 at a premium of 5.10 points as compared to the spot closing of 4892.10. Turnover in NSE's futures & options (F&O) segment surged to Rs 68,394.42 crore from Rs 58,031.55 crore on Monday, 14 September 2009.

The market breadth indicating the overall health of the market, was strong. On BSE, 1796 shares rose as compared with 993 that declined. A total of 79 shares remained unchanged.

Among the 30-member Sensex pack, 27 rose while the rest declined.

BSE clocked a turnover of Rs 5453 crore, higher than Rs 5125.14 crore on Monday, 14 September 2009.

Stocks have risen sharply this year on increased global risk appetite triggered by hopes of a recovery in the global economy after a setback from a financial sector crisis. The Sensex is up 6807.14 points or 70.55% in calendar year 2009 as on 15 September 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8294.05 points or 101.63% as on 15 September 2009. FII inflow in calendar year 2009 totaled Rs 42,962.70 crore (till 14 September 2009).

Coming back to today's trade, the BSE Mid-Cap index rose 1.83% and outperformed Sensex. The BSE Small-Cap index rose 1.33% and underperformed Sensex.

All the sectoral indices on BSE were in green. The BSE Realty index (up 3.91%), the BSE Metal index (up 3.74%), The BSE Bankex (up 2.5%), the BSE Auto index (up 2.33%), the BSE Capital Goods index (up 1.49%), outperformed the Sensex.

The BSE PSU index (up 0.73%), the BSE Teck index (up 0.84%), the BSE Healthcare index (up 0.95%), the BSE IT index (up 1.03%), the BSE Oil & Gas index (up 1.05%), the BSE FMCG index (up 1.21%), the BSE Consumer Durables index (up 1.41%), the BSE Power index (up 1.43%), underperformed the Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 1.55% to Rs 2180.15. The company said on Monday 14 September 2009 that the Bombay high court has sanctioned a scheme of amalgamation of Reliance Petroleum (RPL) with Reliance Industries and consequently RPL stands dissolved without winding-up.

RIL executive director P.M.S. Prasad on Monday said the company's new 5,80,000 barrel-per-day (bpd) refinery in Gujarat is operating at close to full capacity.

RNRL last week told the Supreme Court that the government has no role to play either in the utilisation or the fixation of gas price as per its contract with Mukesh-led RIL. The two sides - RIL and RNRL had approached Supreme Court challenging a decision by the Bombay High Court on 15 June 2009, which said RIL should provide 28 million cubic metres of gas per day to RNRL at $ 2.34 per mmBtu and both the parties should sign a necessary agreement for the same within a month.

RIL, however, is pleading that it was only a contractor for the gas from the Krishna-Godavari basin's D6 block and did not have the power to fix the price, while the government has also moved a special leave petition in the case asserting its right on pricing and distribution of natural gas. The apex court has decided to commence hearing on this matter on 20 October 2009.

Oil exploration stocks were mixed. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) fell 0.93%. As per reports, ONGC's Russian unit has substantially cut oil production due to increase in cost. Cairn India rose 0.15%.

Crude oil fell for a second day on Monday as refineries on speculation that US fuel stockpiles will climb as consumption declines. Crude oil for October delivery fell 43 US cents, or 0.6%, to $US68.86 a barrel on the New York Mercantile Exchange. Fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

PSU OMCs rose as the fall in crude oil prices will result in lower under-recoveries for the PSU OMCs on domestic sale of petrol, diesel, kerosene and LPG at controlled prices. BPCL and HPCL rose by between 0.45% to 2.33%.

Indian Oil Corporation rose 1.43% after company's board approved a liberal 1:1 bonus issue on Monday.

Realty stocks rose as demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and a recovery in the job market. Realty market had slumped last year amid a global credit crunch and buyers fearing job losses.

DLF, Ackruti City, Indiabulls Real Estate and Unitech rose by between 1.16% to 5.2%.

Housing Development & Infrastructure (HDIL) rose 2.7% on bargain hunting after Monday's 3.57% fall. The company on Monday said that the Income tax Department had conducted a raid on the company's office premises and promoters' residences on 10 and 11 September 2009. During the course of raid, HDIL has agreed to offer close to Rs 350 crore as income to be booked in remaining quarters of financial year ending March 2010.

Further, the company also clarified that, there is no undisclosed income, tax evasion, levy of penalty for any previous years or current year as reported in various newspaper and media. There will not be any substantial change to tax liability or revision in income booked of earlier accounting years, the company said.

Metal stocks rose on strong domestic demand. India's largest copper maker by sales Sterlite Industries rose 3.34%. The company on Friday said it had raised its open offer price for bankrupt US copper miner Asarco by a fifth to $2.565 billion. Sterlite, a unit of India-focused mining company Vedanta Resources, has been facing off with Mexican miner Grupo Mexico for the assets of Asarco, which has been under bankruptcy protection since 2005.

Among other metal stocks, Hindalco Industries, National Aluminum Company, Hindustan Zinc, Steel Authority of India, rose by between 0.99% to 3.3%.

India's largest steel maker by sales Tata Steel rose 2.4% extending recent gains after Steel Minister Virbhadra Singh on 10 September 2009 said domestic consumption of steel could rise 6% this quarter.

Domestic steel makers raised prices of flat steel products such as plates and sheets, mainly used in manufacturing automobiles, refrigerators and washing machines, by about 3-5% from Tuesday, 1 September 2009, in line with international prices.

Tata's steel sales from Indian operations rose 25% to 4,92,000 tonnes in August 2009 over August 2008. The local operations contribute about a quarter of the group's total annual global capacity of 30 million tonnes, which includes Corus, Europe's second-largest steelmaker.

Bank shares rose for the second day in a row after a central bank official said on Monday that a decision had to be taken on a proposal to ease mark-to-market rules for some of banks' debt holdings. Higher advance tax payment by banks in the second quarter also aided the rally in bank stocks.

India's largest bank by net profit and branch network State Bank of India rose 2.71% after jump in Q2 advance tax numbers. Chairman O.P. Bhatt on 8 September 2009 said the bank's earnings are likely to grow 30-35% in Q2 September 2009 over Q2 September 2008. SBI's retail loan growth is likely to be twice of what it was in the year-ago quarter, he said.

Among other PSU banks, Bank of India, Punjab National Bank, Bank of Baroda, rose by between 2.8% to 8.88%.

India's second largest private sector bank by net profit HDFC Bank rose 1.27% as its ADR rose 0.8% on Monday. India's largest private sector bank by net profit ICICI Bank rose 0.98% even as its ADR fell 0.23% on Monday. The bank's managing director Chanda Kochhar said on 8 September 2009 credit growth in India is likely to pick up in the second half of this year.

As per reports, commercial banks are likely to make a strong case before the central bank to increase the portion of government securities that can be parked by them in the held to maturity (HTM) category. The reason why banks are seeking such a change is because they do not have to make any mark-to-market provisions on securities held in this basket in case prices of securities fall. Provisions have to be made out of profits and therefore impact a bank's bottomline. Government bond prices has risen sharply this year on concerns about a huge borrowing programme of the government.

Telecom stocks were mixed. India's largest telecom player by sales Bharti Airtel fell 0.8% after South Africa's communications regulator said on Tuesday it was unsure if mobile phone group MTN's proposed tie-up with Bharti Airtel would get approval before the end of the year. The deal, which would create the world's third-largest mobile group by subscribers, is subject to an end-September deadline.

India's second largest telecom player by sales Reliance Communications rose 2.8%.

The government plans to hold a much-awaited auction on 7 December 2009 to sell airwave spectrum bands to the country's mobile operators for use in third-generation wireless services, the Department of Telecommunications said on Monday.

The auction for 3G spectrum will allow operators a chance to offer mobile-phone access to high-speed Internet, video downloads and other 3G services in the world's second-largest wireless market by subscribers. The move is also expected to earn the government billions of dollars in revenue in a year when it is expected to borrow a record amount to bridge its fiscal deficit.

The government said it will issue a notice inviting applications from interested bidders on 26 October 2009, with the final date for receiving the applications set for 13 November 2009.

Cement stocks rose on bargain hunting after recent losses triggered by reports cement makers have cut prices by Rs 3 per 50 kilogram bag in Mumbai. ACC, Grasim Industries, Ultratech Cement, Ambuja Cements rose by between 0.14% to 2.01%.

India's largest engineering & construction firm by sales Larsen & Toubro rose 1.35% even as it paid no advance tax in the second installment.

Among other capital goods stocks, Praj Industries, Siemens, Thermax, ABB rose by between 1.42% to 5.36%.

India's largest electric equipment maker by sales Bharat Heavy Electricals rose 0.52%. As per recent reports the company has won an order worth Rs 1300 crore for an upcoming Vallur Thermal Power project at Ennore in Tamil Nadu. The power project is being set up by a joint venture between NTPC and the Tamil Nadu Electricity Board (TNEB).

IT stocks rose on hopes of faster recovery in US economy. US is the biggest market for Indian IT companies. India's largest software services exporter by sales Tata Consultancy Services rose 1.92% on jump in advance tax in second installment. TCS's Chief Executive S. Ramadorai on 7 September 2009 said TCS is seeing stability on the ground and the company's demand pipeline is good.

India's third largest software services exporter by sales Wipro rose 0.23% after the company won a three-year outsourcing contract from All Nippon Airways, Japan's No.2 carrier. Its ADR fell 0.24% on Monday.

India's second largest software services exporter by sales Infosys rose 0.87% even as its ADR fell 0.71% on Monday. Infosys still finds the business situation quite challenging and decision making by clients continues to be slow, Chief Operating officer S.D. Shibulal said today. He also said last month' s outsourcing contract from oil and gas major British Petroleum Plc was worth $116 million over five years.

FMCG pivotals rose on revival in India's annual monsoon. FMCG firms derive substantial revenue from the rural sector. Marico, Dabur India, Tata Tea, ITC, Hindustan Unilever rose by between 0.2% to 1.94%.

Auto stocks rose on hopes of strong sales in the upcoming festive season. India's largest tractor maker by sales Mahindra & Mahindra rose 1.32%. Mahindra & Mahindra reportedly plans to invest Rs 700-800 crore to develop a new sports utility vehicle (SUV) expected to be launched before the end of the next fiscal year.

Two-wheeler makers gained. India's largest bike maker by sales Hero Honda Motors rose 3.47%. Bajaj Auto rose 7.87% on reports it has paid advance tax of Rs 170 crore in the second installment this year, much higher than Rs 50 crore in the corresponding period last year.

India's largest truck maker by sales Tata Motors rose 1.33%. The company raised Rs 236.5 crore on Monday by selling nearly half of its current investment in group firm Tata Steel. In a block deal on the Bombay Stock Exchange, the company sold 50 lakh shares of Tata Steel to group holding firm Tata Sons for Rs 473 a share.

The company has a huge debt largely related to the purchase of Ford Motor's marquee brands Jaguar Land Rover last year, for which it took a loan of $3.2 billion and other debt to keep the loss-making unit running.

India's top small car maker by sales Maruti Suzuki rose 1.44% on hopes of robust sales in the upcoming festival season.

Tyre stocks rose on surge in auto sales in August 2009. MRF, CEAT, Apollo Tyres rose by between 0.45% to 5.43%.

Car sales rose 26% to 120,669 units in August 2009 over August 2008 boosted by new launches and availability of cheaper loans, data released by the industry body Society of Indian Automobile Manufacturers on 8 September 2009, showed. Sales of trucks and buses rose 18.5% to 40,624 units and motorcycle sales rose 26% to 611,173 units.

Auto component makers rose on expectations of a double digit growth owing to huge orders from Europe and other nations and strong domestic demand. Gabriel India, Amtek Auto, Exide Industries rose by between 0.21% to 1.63%.

Cals Refineries clocked a highest volume of 6.37 crore on BSE. Unitech (1.26 crore shares), SpiceJet (1.23 crore shares), Pennar Industries (1.14 crore shares) and IFCI (1..08 crore shares) were other volume toppers in that order.

Jindal Steel & Power clocked the highest turnover of Rs 190 crore on BSE. Bank of India (Rs 156.92 crore), Unitech (Rs 140.24 crore), DLF (Rs 136.25 crore) and Tata Steel (Rs 125.72 crore) were other turnover toppers in that order.