Sensex scales one-month high as dollar weakens; RIL jumps

Volatility ruled the roost as the key benchmark indices pared gains after striking one-month highs in mid-afternoon trade. The BSE 30-share Sensex rose 158.33 points or 0.93%, up close to 135 points from the day's low and off about 35 points from the day's high. The Sensex and the 50-unit S&P CNX Nifty attained their highest closing levels in more than a month. Firm global stocks and weak US index aided the rally on the domestic bourses

Index heavyweight Reliance Industries (RIL) led the rally. The stock surged more than 3% today, 23 November 2009, after the company said it has put a bid to acquire bankrupt chemicals maker LyondellBasell Industries. Metal, FMCG and banking and auto stocks rose. The market breadth was strong.

Intraday volatility was high as traders rolled over positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry of the near month November 2009 contracts on Thursday, 26 November 2009. The key benchmark indices scaled one-month highs in early trade on higher Asian stocks. The market pared gains in morning trade. The market surged later with the Sensex hit a fresh one-month high in early afternoon trade. A bout of volatility was witnessed later on alternate bouts of buying and selling. The market pared gains after hitting fresh one-month high in mid-afternoon trade.

A weak dollar boosted world stocks, as traders borrow against the low-yielding greenback to reinvest elsewhere in what's known as the carry trade. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell 0.7% to 75.153 in recent trading. The dollar has tumbled this year on speculation the US Federal Reserve will keep interest rates low for a prolonged period of time to aid recovery in the US economy.

Dovish comments from a US Federal Reserve official on Sunday, 22 November 2009, added weight to expectations that US monetary policy would stay ultra-loose for a prolonged period. St. Louis Federal Reserve President James Bullard said on Sunday that the central bank should keep alive its mortgage-related asset purchase programme beyond a planned end date to help stimulate the economy.

Those remarks contrasted with comments on Friday, 20 November 2009, from European Central Bank President Jean-Claude Trichet that banks risked becoming addicted to easy money. The euro-zone central bank on Friday announced its first step in making it tougher for commercial banks to get loans. Trichet said he would make sure extraordinary liquidity measures would be phased out in a timely and gradual fashion.

The International Monetary Fund chief Dominique Strauss-Kahn said on Monday that the global economy is in a holding pattern and vulnerable to more upheaval. He said a lasting recovery will depend on policymakers taking the proper steps in the coming months.

Closer home, junior finance Minister Namo Narain Meena said on Friday that the government has not yet chalked out a roadmap to withdraw stimulus in the first half of 2010. Early in November, Prime Minister Manmohan Singh had said the government would take appropriate action next year to wind down stimulus.

Mass protests by sugarcane farmers backed by political opposition parties forced the parliament to adjourn for a second day on Friday, 20 November 2009, a major headache for the ruling Congress party. The standoff over price deregulation highlights the difficulty Congress faces to balance the implementation of long-stalled financial reforms with the demands of its large rural base.

The government has set reform of the insurance sector as a priority for the winter parliament session that began on 19 November 2009. The bill, which was stalled in the last parliament, proposes raising the foreign investment limit in insurance companies from 26 % to 49%. The government also wants to open up the pension sector to private and foreign firms and give equal voting rights to foreigners in private-sector banks, which are currently limited to 10% irrespective of their actual holding.

Meanwhile, the government and the Reserve Bank of India (RBI) have reportedly decided to withdraw starting next January 2010 a facility that allowed Indian firms to buy back foreign currency convertible bonds (FCCBs) issued to overseas investors, in yet another move to unwind measures introduced last year at the height of the global credit crisis. Companies that have issued such bonds, which have both debt and equity features, will have to convert them into shares or redeem them at face value, depending on investor preference.

In addition to the decision to discontinue the special facility for buying back FCCBs, the government has also reportedly proposed doing away the relaxation on pricing foreign borrowings, another measure announced last year to help Indian companies raise funds during the credit crunch. This is aimed at containing capital flows, which continue to be strong this year and have crossed the $15-billion mark.

The government is not considering imposing a tax to curb an influx in overseas funds, and indeed wants an increase in inflows, the deputy chairman of the government's planning commission Montek Singh Ahluwalia said on Friday. He said foreign funds were needed for developing infrastructure such as road projects and were unlikely to create asset price bubbles.

Higher capital inflows have resulted in currency appreciation mainly in Asia and Latin America, prompting central banks contemplate a range of measures to hold back the tide.

The Institute of International Finance (IIF) forecasts that private capital flows will almost double over the next year, with Asia seeing the biggest surge. Global capital inflows from private and official sources will double from $349 billion in 2009 to $672 billion in 2010, the Washington-based association of financial institutions said in a recent research note. Emerging Asia, already the "unambiguous" leader of the global business cycle, will continue to dominate the private capital flow cycle, it concluded after surveying 30 key emerging economies.

Meanwhile, Prime Minister Manmohan Singh arrives in Washington on Monday for a state visit set to boost the burgeoning economic relationship between two countries, which had relatively marginal commercial dealings a decade ago.

European equities rose on Monday, snapping a four-day losing streak, with firmer crude and metal prices boosting commodity shares. The key benchmark indices in France, Germany and UK rose by between 1.42% to 1.78%.

The Markit flash German purchasing managers index rose to 53.5 in November from 52.3 in October, a three-month high. The manufacturing PMI rose to 52.0 from 51, which is a 17-month high, while the services PMI rose to 51.5 from 50.7.

Activity in the French private sector grew at its fastest pace in 37 months in November, a key survey showed today, in a sign that economic recovery will continue in the fourth quarter. The Markit/CDAF flash composite purchasing managers' index (PMI), which combines data from both the manufacturing and services sectors, rose to 59.8 in November 2009, its highest since October 2006, from 58.6 the previous month.

Private-sector activity across the 16-nation euro zone grew at the fastest pace in two years this month, according to the preliminary composite Markit purchasing managers index for November released Monday. The composite PMI rose to 53.7 in November 2009 from 53.0 in October 2009, the highest reading in 24 months. A reading of more than 50 indicates growth, while a reading of less than 50 signals contraction.

Some Asian stocks edged higher on Monday for first time in three days, on signs the economic recovery is gathering pace. The key benchmark indices in China, Taiwan, Hong Kong, Singapore rose by between 0.05% to 1.41%. But the key benchmark indices in South Korea and Indonesia fell by between 0.1% to 0.41%. Japanese markets were closed on Monday for a holiday.

China's annual economic growth will reach 10% this quarter and grow even faster in the first quarter of 2010, said Yu Bin, a government researcher with the State Council Development Research Centre in remarks published on Monday.

Trading in US index futures indicated Dow could rise 90 points at the opening bell on Monday, 23 November 2009.

In US on Friday, unease about the economy's prospects drove investors to snap up defensive stocks seen better able to withstand an uncertain economy, limiting the Dow's losses. The Dow slipped 14.28 points, or 0.1%, to 10,318.16. The S&P 500 index was down 3.52 points, or 0.3%, to 1,091.38, while the Nasdaq Composite Index fell 10.78 points, or 0.5%, to 2,146.04.

A group of US business economists boosted their forecast for economic growth over the next year, but said the jobless rate will remain stubbornly high, a survey released on Monday showed. The National Association for Business Economists predicted real growth in gross domestic product for 2010 would be 2.9%, up from its October forecast for 2.6% growth.

The BSE 30-share Sensex rose 158.33 points or 0.93% to 17180.18, its highest since 20 October 2009. The Sensex rose 192.73 points at the day's high of 17214.58 in mid-afternoon trade. The Sensex rose 23.17 points at the day's low of 17045.02 in morning trade.

The S&P CNX Nifty rose 51.10 points or 1.01% to 5,103.55, its highest closing since 20 October 2009. It hit a high of 5,113.10. Nifty November 2009 futures were at 5,101.50, at a discount of 2.05 points as compared to spot closing of 5,103.55. Turnover in NSE's futures & options (F&O) segment was Rs 80,777.38 crore, sharply lower than Rs 98,015.39 crore on Friday, 20 November 2009.

BSE clocked a turnover of Rs 4346 crore, lower than Rs 5399.05 crore on Friday, 20 November 2009.

The market breadth, indicating the overall health of the market was strong. On BSE, 1562 shares advanced as compared with 1176 that declined. A total of 88 shares remained unchanged.

From the 30 share Sensex pack, 20 rose and rest fell.

A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression.

The Sensex is up 7532.87 points or 78.08% in calendar year 2009, as on 20 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 9019.78 points or 110.53% as on 20 November 2009.

Coming back to today's trade, the BSE Mid-Cap index rose 0.31% and the BSE Small-cap index rose 0.84%. Both the indices underperformed the Sensex.

The BSE Oil & Gas index (up 2.65%), the BSE FMCG index (up 2.09%), the BSE Metal index (up 1.58%), the BSE Healthcare index (up 1.41%), outperformed the Sensex.

The BSE Teck index (down 0.87%), the BSE IT index (down 0.3%), the BSE Realty index (down 0.28%), the BSE Consumer Durables index (down 0.22%), the BSE Capital Goods index (up 0.11%), the BSE Power index (up 0.22%), the BSE Auto index (up 0.46%), the BSE PSU index (up 0.66%), the BSE Bankex (up 0.73%), underperformed the Sensex..

Energy major Reliance Industries (RIL) rose 3.31% to Rs 2195.50. The company said it has put a bid to acquire bankrupt chemicals maker LyondellBasell Industries. RIL said that it had submitted a preliminary non-binding offer to acquire, for cash, a controlling interest in Rotterdam, Netherlands-based LyondellBasell.

RIL also said it is "reviewing a number of global opportunities for growth in its core business," including LyondellBasell. The conglomerate said its offer is "preliminary and subject to customary conditions, including conduct of due diligence, documentation and receipt of creditor support."

Meanwhile, RIL plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions as India's top company by market capitalisation prepares itself for the next phase of growth. The company will work towards attaining global scale for its conventional energy platform petrochemicals, refining and oil and gas exploration and invest in its new businesses such as retailing and alternative energy, chairman Mukesh Ambani said at the company's annual meeting of shareholders on 17 November 2009.

RIL has set 27 November 2009 as the record date for a liberal 1:1 bonus share issue.

FMCG stocks rose on bargain hunting. United Spirits, Hindustan Unilever, ITC, Dabur India, Tata Tea rose by between 0.21% to 4.38%.

Metal stocks rose after a gauge of six metals traded on the London Metal Exchange, rose 0.73% on Friday, 20 November 2009. Sterlite Industies National Aluminum Company and Hindustan Zinc rose by between 0.78% to 9.23%.

Steel Authority of India (Sail) rose 1.57%. The government said on 19 November 2009 it is considering a 20% stake sale in steel major Sail, proceeds of which would partly fund the company's Rs 70000 crore expansion projects.

India's largest steel maker by sales Tata Steel rose 3.92% The company last week said it issued $ 546.9 million in new convertible bonds in exchange for $ 493 million of securities as part of a plan to reduce costs and ease repayment obligations. The company had said earlier this month the new foreign currency convertible bonds will have a yield-to-maturity of 4.5% and will mature in November 2014.

JSW Steel rose 1.33%. Japan's JFE Steel, the world's sixth-largest steelmaker, said on 19 November 2009 it will team up with JSW Steel on automotive steel production in India.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.

Rate sensitive auto stocks rose as low interest rates and attractive benefits offered by companies pushed up auto sales in October 2009.

India's largest commercial vehicle maker by sales Tata Motors rose 0.52%. Jaguar Land Rover received as much as 170 million pounds ($286 million) as a five-year working capital facility from General Electric Co.'s GE Capital division, the lender said on 16 November 2009. Tata Motors the owner of Jaguar Land Rover, is hopeful of turning around the unprofitable luxury unit as it cuts costs to battle a slump in sales during the global recession.

India's largest small car marker by sales Maruti Suzuki India rose 1.01%. The company's total sales grew 32.4% to 85415 units in October 2009, compared with 64490 units posted in the same month a year ago. India's largest bike marker by sales Hero Honda Motors rose 0.1%. The company reported a marginal increase in October sales at 354,156 units as against 352,449 units in the same month last year

India's largest tractor maker by sales Mahindra & Mahindra rose 0.24%. The company's overall sales climbed 32% in October this year to 18,410 units against 13,935 units in the same month last year.

But, India's second largest bike marker by sales Bajaj Auto fell 0.71%. Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan Motor Co, said, recently that an agreement had been signed with Bajaj Auto for a low-cost car which would come to India in 2012.

Car sales in India rose an annual 34% to 132,615 units in October 2009, boosted by festival demand and easier availability of loans, an industry body said on Wednesday 11 November 2009. Sales of trucks and buses, a gauge of economic activity, rose 52% to 42,562 units in October 2009, the data showed.

Banking shares rose on gains in American depository receipts on Friday 20 November 2009. India's second largest private sector bank by net profit HDFC Bank rose 0.5% as its ADR rose 2.92% on Friday.

India's largest private sector bank by net profit ICICI Bank rose 2.18% as its ADR rose 2.64% on Friday. The bank said on Saturday it raised $750 million (about Rs 3,500 crore) through an overseas bond issue, at an yield of 5.5%. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

Hopes of consolidation among PSU banks boosted shares of state-run banks for the second straight day. Union Bank, Bank of Baroda and Punjab National Bank, Bank of India rose by between 0.13% to 1.8%.

As per reports, Union Bank, Bank of Baroda and Punjab National Bank are keen on acquiring Corporation Bank whereas Canara Bank and Punjab National have shown interest in acquiring Dena Bank. As per reports, chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda met Finance Ministry official on Wednesday, 18 November 2009, to discuss the pros and cons of consolidation among banks in India.

But, India's largest bank by net profit State Bank of India (SBI) fell 0.64%. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced on 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) rose 0.69%. The lender announced on 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

Meanwhile, the Reserve Bank of India Deputy Governor Usha Thorat said on Monday 16 November 2009 the central bank will soon issue guidelines on provisioning for bad loans by banks

Banks and co-operatives have reportedly disbursed farm loans to the tune of Rs 1.38 lakh crore in the first half of 2009-10, meeting over 42% of the target set by the government for the whole financial year.

India's largest thermal power generator by sales National Thermal Power Corporation (NTPC) rose 0.12%. The company said after market hours on 19 November 2009 that a joint venture agreement has been executed amongst NTPC, Power Finance Corporation, Power Grid Corporation of India and Rural Electrification Corporation for formation of a public limited company to carry out and promote the business of energy efficiency, energy conservation and climate change. In this joint venture company, all the four promoters shall contribute 25% equity each it said.

Among other power stocks, Torrent Power, Reliance Power, Tata Power Company, CESC rose by between 0.17% to 2.84%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.14%. The company on 17 November 2009 said Gilbarco Inc. has bought its petroleum dispensing pump business.

Telecom stocks fell as the tariff war in the sector intensified after Tata Teleservices extended its per-second billing scheme to roaming calls. The ongoing price war has hit profitability of mobile operators. India's largest mobile telecom services provider by sales Bharti Airtel fell 4.48%. The company reduced roaming rates by up to 60% on Friday. Bharti Airtel has slipped to third position in terms of monthly additions, data from an industry body showed. Bharti Airtel in October 2009 added about 27 lakh new users, lower than 29 lakh added by Vodafone Essar and over 38 lakh added by Tata Teleservices.

Bharti expects the current state of stiff competition to continue into 2010, as the government worked on new rules that may allow faster consolidation.

Among other telecom stocks, Reliance Communications and Idea Cellular fell by between 1.04% to 2.85%.

Rate sensitive realty shares fell after the RBI, late last month, raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% at a regular monetary policy review. Indiabulls Real Estate, Unitech, DLF fell by between 0.16% to 0.69%.

The latest RBI move will result in increase in borrowing costs for realty firms which depend heavily on borrowing. In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said in its quarterly policy review.

IT stocks fell on a stronger rupee. India's second largest software company by sales Infosys fell 0.82% even as its ADR rose 0.55% on Friday. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, recently announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made on 12 November 2009.

India's third largest software company by sales Wipro fell 0.55% as its ADR fell 0.15% on Friday. Wipro subsidiary Infocrossing signed a five-year deal with the US-based Cliffs Natural Resources Inc, an international mining and natural resources firm, to provide IT infrastructure services, the global software major said Thursday 19 November 2009.

Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

India's largest software company by sales Tata Consultancy Services (TCS) rose 0.12%. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

The rupee gained on Monday boosted by the dollar's drop against major units overseas and tracking higher Asian stocks. The partially convertible rupee was at 46.47/48, stronger than 46.60/61 at close on Friday. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports

UltraTech Cement, a unit of conglomerate Aditya Birla Group rose 3.39%. The company absorbed sister unit Samruddhi Cement, to form the country's biggest cement firm. The move, flagged in October 2009, was approved by the boards of both companies on Sunday. In October, the group said it will hive off the cement business of flagship firm Grasim Industries into unit Samruddhi in a cashless transaction and later merge it with group firm UltraTech. Samruddhi shareholders will receive four shares of UltraTech for every seven held in Samruddhi. UltraTech will also issue 14.95 crore new shares, boosting its capital to Rs 274 crore.

Among the other cement stocks, Ambuja Cements and ACC rose by between 1.61% to 2.97%.

Sugar stocks fell after the government restored the cane pricing power of the states. Bajaj Hindustan, Balrampur Chini, Dhampur Sugars and Shree Renuka Sugars fell by between 2.46% to 6.12%.

The government has said that SAP or the state administered price will prevail. While the Fair and Remunerative Price (FRP) is unlikely to be scrapped the subsection 3(B) of the sugar ordinance which asked state governments to pay the difference between SAP and FRP is likely to be done away with. The difference now will be borne by the mills as was the earlier practice rather than the states.

Cals Refineries clocked the highest volume of 4.79 crore shares on BSE. Suzlon Energy (0.98 crore shares), Dena Bank (0.76 crore shares), GMDC (0.7 crore shares), Unitech (0.69 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 276.19 crore on BSE. State Bank of India (Rs 160.97 crore), Tata Steel (Rs 154.56 crore), Bharti Airtel (Rs 126.55 crore) and Housing Development & Infrastructure (Rs 109.59 crore) were the other turnover toppers in that order.