Sensex settles above 17,000 for the first time in 16 months

The key benchmark indices extended gains for second straight day on optimism about Q2 September 2009 which will start trickling in from the second week of October 2009. A decent listing of Oil India which settled at a premium of 8.62% over the initial offer price (IPO) of Rs 1,050 also supported market. A decent listing of Oil India comes after tepid debut of two large IPOs in recent months. Gains in European stocks and higher US index futures also bolstered sentiment. The BSE 30-share Sensex rose 273.93 points or 1.63%.

The barometer index closed above the psychological 17,000 level after crossing that level in morning trade for the first time in more than 16 months. The 50-unit S&P CNX Nifty also today hit its highest closing level in more than 16 months. Metal, banking, capital goods and auto stocks led the rally.

After a modest start, the market surged in mid-morning trade. The market extended gains later. The market hit a fresh intraday high in afternoon trade. A small correction pulled the market lower later. The market surged in mid-afternoon trade with the Sensex hitting a fresh intraday high on higher US index futures. The market extended gains in late trade.

There is optimism about Q2 September 2009 results after advance tax collections registered a positive growth in the second quarter after witnessing a negative growth in the first quarter. Corporate advance tax and advance personal income-tax were up by 14.7% and 1.7%, respectively in the September 2009 quarter. Infosys kickstarts the reporting season on 9 October 2009.

Latest economic data has been strong. The index of six core industries having a combined weight of 26.7% in the index of industrial production (IIP) registered a growth of 7.1% in August 2009 compared to a growth of 2.1% in August 2008. During April-August 2009-10, six core industries registered a growth of 4.8% as against 3.3% during the corresponding period of the previous year. Coal and cement sector boosted overall growth in the six infrastructure industries in August 2009.

Meanwhile, the Reserve Bank of India (RBI) deputy governor K C Chakrabarty has said that rising inflationary pressures could limit the scope for a sustained growth supported monetary policy stance. The central bank has aggressively cut policy rates and pumped huge liquidity in the system in the aftermath of the global financial crisis last year. It may be recalled Finance Minister Pranab Mukherjee recently spoke of the need for the fiscal stimulus to continue for a few more quarters until the economy is back on track.

Coming back to equities, a section of the market is, however, concerned that a glut in share sales may suck liquidity from the secondary market. The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.

As per one report, companies plan to raise at least Rs 40,000 crore through initial public offers (IPOs)/follow on public offers (FPOs) in the second half of the current financial year. Power companies such as GMR Energy, Indiabulls Power and JSW Energy and state-run Bharat Heavy Electricals and NTPC are likely to tap the primary market. Reliance Infratel also announced on Tuesday, 22 September 2009, its intention to raise Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest.

S. Pradhan, the joint secretary of the department of disinvestment, Government of India, today said the government plans to sell stakes in at least five state-run firms by the end of the fiscal year in March 2010 following successful IPOs of two firms that raised $1.8 billion. His statement comes close on the heels of media reports that the government is planning to announce a blueprint for selling its stake in state-owned firms in the first week of October 2009. The policy is expected to suggest how the government will eventually bring down its stake in public sector companies to 75% over a period of time.

European shares rose on Wednesday powered by gains in energy and mining stocks, as commodity prices firmed on the final day of the quarter, offsetting weakness in banks. Key benchmark indices in France, Germany and UK were up by between 0.08% to 0.35%.

Germany's unemployment rate edged lower in September, surprising the market which was expecting an increase, official data showed on Wednesday. German seasonally adjusted unemployment declined by 12,000 over the month, bringing the jobless rate to 8.2% from 8.3% in the previous month, the Federal Labor Office reported.

Most Asian stocks rose shrugging off a surprise fall in US consumer confidence. Key benchmark indices in Japan, China, Taiwan, South Korea were up by between 0.37% to 1.07%. Key benchmark indices in Hong Kong and Singapore were down by between 0.28% to 1%.

A gauge of China's manufacturing activity released Wednesday indicated expansion for the sixth straight month in September, although conditions cooled slightly from August, suggesting the rebound in industrial activity remains intact but is beginning to level off.

Japanese manufacturers increased production for a sixth month in August, capping the longest stretch of gains in 12 years, as emergency spending by governments worldwide rekindled global trade. Factory output rose 1.8% last month after climbing 2.1% in July, the Trade Ministry said today in Tokyo.

The International Monetary Fund (IMF) will reportedly raise its 2010 growth forecast for the world economy to 3.1% from 2.5% to reflect improving economic conditions. The IMF is due to update its forecasts in its World Economic Outlook to be released in Istanbul on Thursday, 1 October 2009. The IMF is likely to revise its global forecast for this year to a 1.1% contraction from a negative 1.4% predicted earlier.

The IMF on Wednesday said it cut its estimate of global bank losses by 15% due to rising asset values, but warned that credit will continue to deteriorate and that banks have yet to recognize more than half their expected write-downs.

Trading in US index futures indicated the Dow could gain 32 points at the bell on Wednesday, 30 September 2009.

US markets ended lower on Tuesday, 29 September 2009 as a drop in consumer confidence dragged on the market. The Dow Jones Industrial Average fell 47.16 points, or 0.5%, to 9,742.20. The S&P 500 index dropped 2.38 points, or 0.2%, to 1,060.60, and the Nasdaq Composite index shed 6.70 points, or 0.3%, to 2,124.04.

The US consumer-confidence index dropped to 53.1 in September from 54.5 in August. Economists had expected the gauge to rise to 57.

Meanwhile, the S&P/case-shiller home price report for July was better-than-expected. The report showed a 13.3% year-over-year decline, which was better than the 14.2% decline expected. Home prices continued to rebound, up for a third straight month in July, after a three-year slide.

The BSE 30-share Sensex rose 273.93 points or 1.63% to 17126.84, its highest closing since 21 May 2008. The Sensex rose 289.61 points at the day's high of 17,142.52 in late trade. The barometer index rose 15.55 points at the day's low of 16,868.46 in early trade.

The S&P CNX Nifty rose 77.10 points or 1.54% to 5,083.95, its highest closing level since 21 May 2008. Nifty October 2009 futures were at 5073, at a discount of 10.95 points as compared to the spot closing of 5083.95. Turnover in NSE's futures & options (F&O) segment surged to Rs 55,412.81 crore from Rs 45,244.04 crore on Tuesday, 29 September 2009.

BSE clocked a turnover of Rs 5642 crore, higher than Rs 5,006 crore on Tuesday, 29 September 2009.

The market breadth, indicating the overall health of the market was strong. On BSE, 1,593 shares rose as compared with 1,183 that declined. A total of 76 shares remained unchanged.

Among the 30-member Sensex pack, 26 rose and rest fell.

The Sensex rose 2,633 points or 18.16% to in the quarter ended 30 September 2009 from its closing of 14,493.84 on 30 June 2009. The Sensex is up 7,479.53 points or 77.52% in calendar year 2009 as on 30 September 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8,966.44 points or 109.87% as on 30 September 2009. FII inflow in the calendar year 2009 totaled Rs 57,525.70 crore (till 25 September 2009).

Coming back to today's trade, the BSE Mid-Cap index rose 0.95% and the BSE Small-Cap index rose 0.94%. Both the indices underperformed the Sensex.

The BSE Bankex (up 3.69%), the BSE Auto index (up 2.13%), the BSE Capital Goods index (up 1.74%), outperformed the Sensex.

The BSE FMCG index (down 0.42%), the BSE Consumer Durables index (down 0.26%), the BSE Healthcare index (up 0.55%), the BSE Oil & Gas index (up 0.77%), the BSE Power index (up 0.98%), the BSE PSU index (up 1%), the BSE Teck index (up 1.03%), the BSE IT index (up 1.28%), the BSE Realty index (up 1.43%), the BSE Metal index (up 1.55%), underperformed the Sensex.

Index heavyweight Reliance Industries (RIL) rose 1.63% to Rs 2201.20. In the face of opposition from the Power Ministry and Anil Ambani group firm Reliance Infrastructure on the marketing margins charged, Reliance Industries (RIL) has justified the levy saying it was essential to cover risks and costs incurred in marketing of gas.

Terming as illegal the market margin, Reliance Infra had refused to pay the levy prompting RIL to issue a notice for suspension of fuel supply for "default". NTPC has sought to know whether the margins levied by RIL had government's approval.

RIL had said on 24 September 2009 it has signed gas supply agreement with state-run utility NTPC to supply gas for some of its power plants for five years. Reliance will supply 0.61 million standard cubic metres a day (mscmd) to NTPC, and expects to start supplies within a week.

Meanwhile, recent report suggest the outlook for Asian oil refiners, previously hit by a sharp fall in margins, is now improving on a likely ramp-up in demand and slowing capacity expansion.

Oil exploration stocks were mixed on a decent debut of Oil India. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) fell 1.25% to Rs 1171.30 off the day's high of Rs 1213. ONGC on 23 September 2009 said it will invest over Rs 5000 crore in the next two years in bringing new oil and gas finds into production. Cairn India rose 0.31%.

India's second biggest oil and gas exploration firm by revenue Oil India settled at Rs 1,140,55, a premium of 8.62% over the IPO price of Rs 1050. The stock debuted on the BSE at Rs 1019, a discount of 2.95% over the IPO price of Rs 1050.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange gained 0.25% on Tuesday, 29 September 2009. Tata Steel, Steel Authority of India, National Aluminum Company, Hindustan Zinc, Hindalco Industries, JSW Steel rose by between 0.39% to 1.58%.

India's largest copper maker by sales Sterlite Industries rose 3.46%. A US bankruptcy judge on 24 September 2009 rejected attempts by India's Sterlite Industries to sweeten its offer for U.S. copper miner Asarco LLC, and recommended for the second time that rival bidder Grupo Mexico SAB de CV regain control of the company. Sterlite, however, maintained it was still in the race to acquire the copper miner.

Sterlite said on 21 September 2009 said that it would release Grupo Mexico from a potential legal liability of nearly $8 billion if the Indian miner can win control of bankrupt US copper miner Asarco LLC.

In a court document filed on Monday, Sterlite said that if a federal court approves its plan to acquire Asarco over rival bidder Grupo Mexico's offer, it would not hold Grupo Mexico liable for more than about $900 million of liability related to the 2003 transfer of a Peruvian mine. Sterlite, a unit of India-focused mining company Vedanta Resources, has been facing off with Mexican miner Grupo Mexico for acquiring control Asarco, which has been under bankruptcy protection since 2005.

Banking stocks rose after Finance secretary Ashok Chawla on Tuesday said there is a need to look at consolidation of banks and that government is not discouraging Indian banks from making acquisitions abroad. Bank stocks also got support on higher advance tax payment by some top banks in the second installment this fiscal.

India's largest bank by net profit and branch network State Bank of India rose 5.01%. 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.

India's largest private sector bank by net profit ICICI Bank rose 4.63%. Its ADR rose 0.28% on Tuesday. India's second largest private sector bank by net profit HDFC Bank rose 2.05% even as its ADR fell 0.26% on Tuesday.

Auto stocks rose on expectations of a pick up in demand in the ongoing festive season which began with Dussehra on Monday, 28 September 2009. Leading auto firms will release their monthly sales data for September 2009 over the next two days.

India's largest tractor maker by sales Mahindra & Mahindra rose 3.46%. India's top small car maker by sales Maruti Suzuki India rose 3.7%. India's largest motorbike maker by sales Hero Honda Motors rose 1.01%. Bajaj Auto rose 4.66%.

As per reports, the government will release pay arrears to government employees under the second and final installment ahead of big festivals in October 2009. The payout would boost demand for cars and motorcycles.

India's largest truck maker by sales Tata Motors rose 0.1%. Tata Motors-owned Jaguar Land Rover on 24 September 2009 unveiled a new business plan for the next decade, under which it will invest substantially in a new range of eco-friendly vehicles. The plan, designed to increase global competitiveness, drive growth and sustain profitability, envisages an investment of £800 million (over Rs 6,200 crore) on environmental innovation alone, part-supported by the European Investment Bank.

The plan will also see the company shutting down of one of its plants, in a bid to cut costs and to improve its financial health.

India's largest engineering and construction firm by sales Larsen & Toubro rose 2.15% on reports company is close to launching a $600 million share sale to institutional investors. Citigroup, Morgan Stanley and Bank of America Merrill Lynch are the arrangers to the offer.

Meanwhile, Larsen & Toubro is reportedly eyeing big bucks from the nuclear power business with annual revenue projections of Rs 7,000-8,000 crore. The company, has already entered into agreement with four major global vendors of nuclear power equipment.

India's largest power equipment maker by sales Bharat Heavy Electricals rose 2.3% after the company said on Wednesday it had won a Rs 270 crore ($56 million) contract in Belarus to build a 120 megawatts power plant.

IT stocks rose for the second straight day as an increase in the mergers & acquisitions in the United States suggested that companies are more optimistic about the business outlook. US is the biggest market for Indian IT firms. India's third largest software services exporter by sales Wipro rose 3.3% as its American depository receipt (ADR) rose 1.45% on Tuesday.

India's second largest software services exporter by sales Infosys rose 0.9% as its ADR rose 0.42% on Tuesday.

India's largest IT exporter by sales Tata Consultancy Services rose 1.47% after the company said before market hours today it had signed a multi-million dollar deal with a Singapore state organisation to provide annual application management services for two years.

A news agency recently quoted TCS chief executive S. Ramadorai as saying that the company expects a recovery in the global banking sector to boost its revenues this year. Ramadorai said the company was seeing some signs of a recovery in the demand for outsourcing, especially from the banking, financial services and insurance sectors that account for 43% of its business.

Construction shares rose as higher government spending on infrastructure sector in the Union Budget 2009-2010 to provide a stimulus to the economy, may result in increase order flow for construction. Nagarjuna Construction Company, Gayatri Projects, Valecha Engineering, Era Infra Engineering rose by between 0.37% to 6.72%.

The government has set a target of spending $20 billion a year on road construction.

Jaiprakash Associates rose 1.32%. The company on 23 September 2009 raised around Rs 1,190 crore through sale of 5 crore treasury shares by way of bulk deals on the bourses.

Cement stocks rose as a thrust on the infrastructure sector in the Union Budget 2009-2010 may keep cement demand strong. Birla Corporation, Ambuja Cements, Ultratech Cement and ACC rose by between 0.6% to 3.31%. Cement makers recently cut prices by Rs 3 per 50 kilogram bag in Mumbai.

Power stocks rose as the government has planned a huge expansion in power generation capacity over the next few years in a bid to reduce the power shortage in the country. Tata Power Company, Reliance Power, NTPC, Torrent Power, Power Grid Corporation of India, Reliance Infrastructure, rose by between 0.33% to 4.51%.

India's largest mobile services provider by sales Bharti Airtel was flat at Rs 418.55 as the deadline for the exclusivity of talks for a proposed $24 billion tie-up with South Africa's MTN expires today, 30 September 2009. Last week, India's market regulator unexpectedly altered the country's takeover rules, meaning that South Africa's MTN might be required to make an offer for an additional 20% stake in Bharti. The two parties have already twice extended deadlines for the talks aimed at creating an emerging-markets giant with more than 200 million customers across India, Africa and the Middle East.

Some FMCG stocks rose on revival of annual monsoon since mid-August. FMCG firms derive substantial revenue from the rural sector. Hindustan Unilever, United Spirits, Britannia Industries, Nestle India rose by between 0.08% to 2.54%.

Sugar stocks rose as white sugar hit a record high in London on Tuesday as excessive rains in top grower Brazil fed fears of a supply shortage. Balrampur Chini Mills, Shree Renuka Sugars, Bajaj Hindustan rose by between 1.4% to 2%.

Cals Refineries clocked highest volume of 2.13 crore shares on BSE. Sanraa Media (1.25 crore shares), Asian Films (0.89 crore shares), Oil India (0.87 crore shares) and Karuturi Global (0.82 crore shares) were other volume toppers in that order.

Oil India clocked highest turnover of Rs 996.6 crore on BSE. Reliance Industries (Rs 240.27 crore), Axis Bank (Rs 204.62 crore), ICICI Bank (Rs 167.49 crore) and State Bank of India (Rs 137.09 crore) were other turnover toppers in that order.