Market snaps two-day slide on robust Q2 GDP data

Key benchmark indices surged, ending a two-day losing streak, as the latest data showed the economy expanded at a stronger-than-expected 7.9% pace in the second quarter. However, intraday volatility was high. The barometer index BSE Sensex fell below the psychological 17,000 mark soon after a sharp surge took it above that level in afternoon trade. Today's rally was on the back of lower turnover.

Asian stocks surged after United Arab Emirates central bank on Sunday, 29 November 2009, offered additional liquidity to local and international banks in the UAE and reassured investors it "stands behind" the lenders. Also boosting the sentiments, global banks outside the Gulf said they were not heavily exposed to Dubai debt. The BSE 30-share Sensex was up 294.21 points or 1.77%, off 100.69 points from the day's high and up 270.47 points from the day's low.

Government data released today showed the gross domestic product (GDP) grew by 7.9% in Q2 September 2009, from 7.1% in the previous year, shattering forecasts as stimulus measures boosted demand and manufacturing activity surged. The economy had registered a 6.1% growth in the first quarter.

The bulk of the recovery was led by a 9.2% growth in manufacturing, while mining and construction activities also expanded by 9.5% and 6.5%, respectively. But agriculture continued to me a major drag with a mere 0.9% growth.

Reacting to the GDP figures Montek Singh Ahluwalia, Deputy Chairman, Planning Commission said economic growth forecast for the year to March 2010 may have to be revised upwards as data released today showed a faster expansion in September quarter. He added that there was no serious concern on inflation as of now and conventional monetary policy was unlikely to be effective in curbing food price rise.

Subir Gokarn, a central bank deputy governor said today that the recovery of the economy was gaining strength but December quarter numbers could be lower than the 7.9% annual growth recorded in the September quarter. Gokarn also said food price inflation was a matter of concern and authorities would keep a watch on capital inflows.

Finance minister Pranab Mukherjee today said he expects the economy to grow around 7% in the fiscal year ending March 2010. During the weekend, the finance minister said that Dubai's debt crisis would not affect India much, but the government is keeping a close watch and will act to prevent any fallout.

India's fiscal deficit during the April to October 2009 period was Rs 2.45 lakh crore ($52.7 billion), or 61% of the full-year target, the government said in a statement on Monday. Tax receipts were Rs 2.14 lakh crore and total expenditure was Rs 5.37 lakh crore for the first seven months of 2009/10 fiscal year.

Coming back to stocks, the market breadth was strong today. A total of 26 shares from the 30-member Sensex pack advanced. Metal stocks were at the forefront of the rally on fresh buying after the recent steep fall. Telecom pivotals extended Friday's gains on fresh buying. Cement and IT shares also gained on fresh buying. Index heavyweight Reliance Industries retraced from the day's high. Banking shares also retraced from day's high on profit booking.

Intraday volatility on the bourses was high. The market pared gains in morning trade after an initial rally triggered by firm Asian stocks. The market surged later on robust Q2 GDP growth data. The market struck fresh intraday high in afternoon trade as buying demand for index pivotals intensified. The market pared gains later as European stocks dropped. The market strengthened again in mid-afternoon trade. Profit booking in late trade capped gains in the market. The market once again pared gained again in late trade.

European markets were mostly lower today, 30 November 2009, weighed by financial and oil stock. Key benchmark indices in Germany, and France were down 0.70% and 0.90% respectively. However, UK's FTSE 100 index rose 0.35%. Trading in US index futures showed the Dow could fall 24 points at the opening bell today, 30 November 2009.

Earlier in the global day Asian stocks rose after the United Arab Emirates offered emergency assistance to banks in Dubai, soothing the market fears about a looming debt default. Key benchmark indices in China, Hong Kong, Japan, South Korea and Taiwan were up by between 1.22% to 3.25%. However, Singapore's Straits Times index fell 1.09%

Chinese shares surged after Beijing late Friday said it will maintain an active fiscal policy and moderately loose monetary policy next year, allaying investor concerns over a tightening policy bias.

Japanese manufacturing activity fell to a four-month low in November 2009, a survey showed today, suggesting growth in production is moderating as the effect of global stimulus measures fades. The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 52.3 in November 2009 from 54.3 in October 2009. The index remained above the 50 threshold that separates contraction from expansion for the fifth month in a row but declined for the second consecutive month from a three-year high set in September.

Japan's industrial production rose less than economists estimated in October 2009. Factory output increased 0.5% last month from September 2009, the slowest pace in eight months, the Trade Ministry said today, 30 November 2009, in Tokyo.

Dubai's Nakheel, developer of man made islands in the shape of palms, said on Monday it has asked for three of its listed Islamic bonds, or sukuk, on Nasdaq Dubai to be suspended until it is in a position to inform the market more fully. Nakheel is one of two flag ship companies, along with Dubai World, which announced last week that they would seek a debt standstill agreement from creditors, until May 2010.

United Arab Emirates' (UAE) central bank said on Sunday, 29 November 2009, it would back the country's lenders from a possible default by Dubai World. Abu Dhabi-based UAE central bank said financial institutions will be able to borrow using a special facility tied to their current accounts.

Meanwhile, the International Monetary Fund (IMF) said it welcomes the announcement by the central bank of the UAE to make available a special additional liquidity facility to back local and international banks operating there. The IMF said it will continue to monitor the situation following the unexpected announcement by the government of Dubai regarding a standstill on the debt of Dubai World and its Nakheel subsidiary, which has had an adverse impact on financial markets.

The UAE is a "strong resource-based economy," the fund also said. "We look forward to further clarification by the authorities towards a cooperative mechanism to address the issues between these debtors and their creditors," the IMF said

Markets from Asia to the US fell last week after Dubai World announced on 25 November 2009 that it was seeking to delay loan repayments. Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said it would seek a standstill agreement with creditors and an extension of loan maturities until at least 30 May 2010. That raised the prospects of rising loan losses for UAE and foreign banks.

Trading in US index futures indicated a flat opening of US stocks on Monday, 30 November 2009. US index futures pared initial strong gains

In US on Friday, 27 November 2009, the Dow Jones Industrial Average fell 154.48 points, or 1.48%, to 10,309.92. The Standard & Poor`s 500 Index slid 1.72% to 1,091.49 and the Nasdaq Composite index declined 37.61 points, or 1.73%, to end at 2,138.44.

Back home, many companies were quick to play down their exposure to Dubai on Friday, 27 November 2009. Engineering conglomerate Larsen & Toubro said it had exposure to Dubai of $20 million to $25 million. India's largest listed realty firm, DLF, and second ranked Unitech said they had no exposure to Dubai, and leading private bank ICICI Bank said it had no material exposure. While Indian banks are heavily focused on the domestic market, they are active in handling remittances from overseas workers. State-run Bank of Baroda (BoB) has exposure of 7-8% of its loan book in the United Arab Emirates. BoB said the assets are good performing assets

Meanwhile, India and Canada have reached a landmark agreement on civil nuclear cooperation after months of hectic negotiations, paving the way for supply of Canadian atomic technology, equipment and uranium to India after a gap of 34 years. The negotiations on the deal were concluded at a meeting between Prime Minister Manmohan Singh and his Canadian counterpart Stephen Harper during the weekend.

Canada, the world's largest producer of uranium, is the eighth country to have reached a civil nuclear agreement with India since the Nuclear Suppliers Group lifted the 34-year-old ban on India to join the global nuclear trade in September last year.

Meanwhile, the government has reportedly decided to crackdown on corporates and individuals that have defaulted on payment of their self-assessment in the year in a bid to boost direct tax collections that are well below the target for the year.

The Central Board of Direct Taxes (CBDT), the apex direct tax body that administers corporate tax, personal income tax and wealth tax, has asked its field officials to crack down on companies that have not paid self-assessed tax for the year. In a letter sent last week, the CBDT has asked its field forces to investigate about Rs 90,000 crore of tax exemption claimed by various corporate taxpayers on account of various tax holidays in their returns.

The board's letter to the field comes in the backdrop of a dismal 3.92% growth in direct tax collections in first seven months from April to October 2009. Corporate tax collections grew by 4.59% in same period, meaning that the rate of growth has to be over 18% for the rest of the year for CBDT to achieve this target for the year 2009-10.

There are concerns that a glut in share sales may suck liquidity from the secondary market. A foreign brokerage firm expects Indian firms to raise roughly $70 billion through share sales over the next three years. The brokerage expects stake sales in state-run firms will account for $10-$15 billion of the total funds to be raised. The upcoming auction of third-generation mobile spectrum will also spur potentially billions of dollars in equity raising, although not necessarily from the public markets.

Indian companies have raised about $18 billion in equity thus far this year to repay high cost debt or to fund expansion plans. Last year, Indian firms raised $7.2 billion in equity.

The Reserve Bank of India (RBI) governor Duvvri Subbarao on Friday 27 November 2009 said an assessment of the impact of Dubai's debt problems was needed before deciding on a response. India's financial integration with the global economy is deeper than its trade integration, the central bank governor said.

Subbarao said that there was no benign policy option and that inflationary pressures were building up. The government on Thursday said it was concerned about rising prices, especially of food articles, and would take appropriate fiscal and monetary measures to contain them. "We are deeply concerned when prices go high," Finance Minister Pranab Mukherjee said on Thursday. "It will have to be done by us: control of monetary policy, control of credit policy, control of fiscal policy."

The six core industries grew 3.5% in October 2009 from a year earlier, slower than upwardly revised annual growth of 4.1% in September 2009, government data showed on Friday. During April-October, the first half of the 2009/10 fiscal year, output rose 4.7% from 3.3% in the same period in 2008/09. The infrastructure sector accounts for 26.7% of India's industrial output.

The BSE 30-share Sensex was up 294.21 points or 1.77% to 16,926.22. The Sensex opened 23.74 points higher at 16,655.75, also its day's low. It gained 394.90 points at the day's high of 17,026.91 in afternoon trade.

The S&P CNX Nifty was up 90.95 points or 1.84% to 5,032.70. Nifty December 2009 futures were at 5023, at a discount of 9.70 points as compared to the spot closing. Turnover in NSE's futures & options (F&O) was Rs 67,547.79 crore, sharply lower than Rs 96,075.18 crore on Friday, 27 November 2009.

The BSE Sensex had lost 566.94 points or 3.41% in the past two trading sessions on worries about Dubai's debt problems. Debt worries in Dubai sparked fears that the global financial markets have not healed properly since last year's crisis and that the Dubai problem could expose these weaknesses.

The Sensex gained 1,029.94 points or 6.47% in November 2009. 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 7278.91 points or 75.45% in calendar year 2009, as on 30 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8765.82 points or 107.41% as on 30 November 2009.

Coming back to today's trade, the BSE Mid-Cap index rose 1.63%, underperforming the Sensex. The BSE Small-cap index gained 2.08%, outperforming the Sensex.

All sectoral indices on BSE ended higher. The BSE Metal index (up 3.66%), the BSE Teck index (up 2.55%), the BSE IT index (up 2.10%), outperformed the Sensex.

The BSE FMCG index (up 0.73%), the BSE Healthcare index (up 0.87%), the BSE Auto index (up 1.04%), the BSE Power index (up 1.05%), the BSE Bankex (up 1.23%), the BSE Realty index (up 1.28%), the BSE PSU index (up 1.51%), the BSE Capital Goods index (up 1.55%), the BSE Oil & Gas index (up 1.60%), the BSE Consumer Durables index (up 1.72%), underperformed the Sensex.

The market breadth, indicating the overall health of the market was strong. On BSE, 2062 shares advanced as compared with 761 that declined. A total of 72 shares remained unchanged.

Today's rally came on the back of lower turnover. The total turnover on BSE amounted to Rs 4311 crore as compared with Rs 5,353.31 crore on Friday, 27 November 2009.

Among the 30-member Sensex pack, 26 gained while only 4 of them declined. NTPC (up 0.92%), HDFC (up 2.25%), and Tata Power (up 1.76%), edged higher from the Sensex pack.

Telecom pivotals extended Friday's gains on fresh buying. India's largest cellular services provider by sales Bharti Airtel surged 5.69% to Rs 299.80 and was the top gainer from the Sensex pack. The company's chairman Sunil Mittal in a television interview on Friday said the company has no plans to cut SMS charges as of now and also ruled out any global acquisitions at present.

India's second largest cellular services provider by sales Reliance Communication (RCom) rose 3.06%. On Friday, the company had slashed SMS charges, further heating up an ongoing price war in the telecom market.

RCom said it would charge customers just 1 paisa per SMS in a new bill plan. The company also launched another plan where customers can send unlimited text messages by paying Re 1 per day. Currently mobile operators charge Re 1 for local SMSes.

Metal stocks extended early gains on fresh buying. India's largest private sector aluminium maker by sales Hindalco Industries surged 3.81%. On Friday, the Reserve Bank of India allowed the company to enhance foreign institutional investors (FII) limit to 40%.

Sterlite Industries (up 3.23%), Tata Steel (up 5.54%), Hindustan Zinc (up 8.01%), Sesa Goa (up 1.57%), Steel Authority of India (up 2.96%), JSW Steel (up 5.21%), advanced

Jindal Saw gained 6.44% after the company fixed 11 December 2009 as the record date for a 5-for-1 stock split. The company announced the record date after market hours on Friday, 27 November 2009.

Kalyani Steels spurted 5% after one of the promoter group companies hiked its stake in the firm. The company made this announcement during trading hours today, 30 November 2009.

Gujarat Mineral Development Corporation (GMDC) spurted 10.38%. As per recent reports, Gujarat State Petroleum Corporation (GSPC) is raising around Rs 900 crore by placing 5% equity stake with a clutch of financial institutions and Gujarat government-owned public sector enterprises (PSEs) including IDFC, LIC, State Bank of India and PSEs like Gujarat Mineral Development Corporation (GMDC), Gujarat State Investment (GSIL), Gujarat Industrial Development Board (GIDB) and others.

India's largest oil exploration firm by sales Oil & Natural Gas Corporation (ONGC) rose 2.73% on reports it has found traces of a new oil reserve in Gujarat in western India that could raise its onshore oil production by 20%. The new hydrocarbon structure is likely to produce at least 1 million tonnes per annum (mmtpa) of oil. This could be the largest onshore oil find for ONGC in the last one decade.

India's largest private sector firm by market capitialisation Reliance Industries (RIL) advanced 1% to Rs 1059.40. But the stock retraced from the day's high of Rs 1078. RIL has reportedly offered between US$10 billion and US$12 billion for acquiring LyondellBasell Industries.

Oil exploration stocks gained following rise in crude oil aided by a weaker US dollar. Cairn India (up 2.98%), and Oil India (up 2.92%), rose after US crude for January 2010 delivery rose 50 cents to $76.55 a barrel today, 30 November 2009, retracing some of Friday's $1.91 losses. Rise in crude oil prices will boost realizations from crude sales for oil exploration firms

Banking shares slipped from day's high on profit booking. Bank stocks had surged earlier in the day following buoyant economic data.

India's largest private sector bank by net profit ICICI Bank gained 0.88% to Rs 858.70 after striking day's high of Rs 884. India's second largest private sector bank by net profit HDFC Bank rose 0.49% to Rs 1756.25, retracing from day's high of Rs 1786. India's largest bank by branch network State Bank of India fell 0.42% to Rs 2233, after striking a day's high of Rs 2290

IT stocks rose on fresh buying on reports IT firms are on a hiring spree following revival in demand. India's largest software services exporter Tata Consultancy Services (TCS) gained 2.29%. TCS reportedly plans of employing about 25,000 new people for the year 2010-11.

India's second largest software services exporter Infosys Technologies rose 2.22%. As per reports, the company Infosys last month raised its hiring target to 20,000 for the fiscal year that ends in March 2010, up from its earlier forecast of 18,000.

India's third largest software services exporter Wipro rose 0.74%. The partially convertible rupee was trading at 46.49/50 per dollar, higher than 46.64/65 on Friday. A firm rupee negatively impacts operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

Geometric rose 4.16% after one of the promoter group companies hiked its stake in the firm. The company made this announcement during trading hours today, 30 November 2009.

India's top truck maker by sales Tata Motors surged 5.16%. The company is reportedly planning to produce hybrid versions of its low cost car Nano to join in the environment-friendly trend.

The company reported a better-than-expected performance on a consolidated basis, thanks to a pick-up in sales volumes on a sequential basis for the Land Rover brand, coupled with reduced raw material costs. On consolidated basis, Tata Motors reported a net profit of Rs 21.78 crore in Q2 September 2009, compared to a loss of Rs 941.8 crore a year earlier.

Consolidated total income declined 8.20% to Rs 21506.94 crore in Q2 September 2009 over Q2 September 2008. The results were announced at the fag end of the trading session on Friday, 27 November 2009.

Other auto stocks saw mixed trend. India's largest small car maker by sales Maruti Suzuki India fell 0.58% whereas India's top tractor maker by sales Mahindra & Mahindra gained 1.64% on reports car makers plan to raise prices in two phase from next year following rise in input costs.

India's largest bike maker by sales Hero Honda Motors lost 1.71% to Rs 1715.90 and was the top loser from the Sensex pack

Cement shares rose following recent reports of hike in prices by Rs 8-10 per 5 kg bag in Maharashtra and Gujarat. Sanjay Ladiwala, the president of Cement Stockists and Dealers Association of Mumbai was quoted as saying that the price rise was due unavailability of railway wagons.

ACC (up 0.38%), Ambuja Cements (up 3.31%), UltraTech Cement (up 3.39%), Madras Cement (up 1.47%), and India Cement (up 1%), advanced

Select real estate shares extended Friday's recovery. Housing Development & Infrastructure (up 4.24%), Indiabulls Real Estate (up 1.84%), Orbit Corporation (up 1.22%), parsvnath Developers (up 0.53%), and Anant Raj Industries (up 0.97%), gained

However India's largest real estate firm by sales DLF fell 0.29%. The company said on Friday it had no exposure to Dubai. Unitech's slipped 0.50% despite saying it had no exposure to Dubai on Friday.

India's largest engineering & construction firm by sales Larsen & Toubro (L&T) gained 1.36%. L&T during market hours today announced the formation of a joint venture with the state-run Nuclear Power Corporation of India (NPCIL) for making nuke forgings, a crucial component in the construction of nuclear reactors. NPCIL would hold 26% in the venture and L&T the remainder.

Nitco fell 1.15% after the company reported net loss of Rs 8.27 crore in Q2 September 2009 as compared to net profit of Rs 9.74 crore in Q2 September 2008. The company announced the results during trading hours today.

Shriram EPC rose 3.29% after the company announced signing of a memorandum of understanding with China based NorthWest Electric Power Design Institute for executing thermal power projects. The company made the announcement during market hours today, 30 November 2009.

Construction stocks saw an across the board rally on fresh buying. India's biggest builder of dams Jaiprakash Associates surged 5.17% after its price target was raised to Rs 288 from Rs 211 earlier by a foreign brokerage firm.

Hindustan Construction Company (up 1.99%), Gammon India (up 0.56%), Unity Infraprojects (up 5.45%), IVRCL Infrastructures (up 3.88%) and IRB Infrastructures (up 4.33%), gained.

Valecha Engineering jumped 3.14% after the company's board approved raising funds upto $20 million. The company made this announcement after trading hours on Friday, 27 November 2009.

The construction sector grew 6.5% in the September quarter versus 9.6% in the year-ago quarter, government data showed today.

Tea stocks saw an across the board rally after Tea Board of India chairman Basudeb Banerjee was quoted as saying that tea production in India will be marginally lower this year than in the year before due to erratic weather.

Dhunseri Tea (up 9.34%), Goodricke Group (up 9.92%), Warren Tea (up 6.17%), McLeod Russel (up 7.12%), Assam Company (up 1.74%), and Tata Tea (up 1.60%), surged.

Jay Shree Tea and Industries rose 2.94% on reports the company is close to announcing its first overseas acquisition in Uganda.

Adani Enterprises rose 0.11% after the company fixed 11 December 2009 as the record date for a liberal 1:1 bonus issue. The company announced the record date after market hours on Friday, 27 November 2009.

Span Diagnostics jumped 10% after the company bagged an order worth Rs 22.96 crore. The company announced the new order win after market hours on Friday, on 27 November 2009.

Tata Steel was the top traded counter on the BSE with a turnover of Rs 230.14 crore followed by Suzlon Energy (Rs 176.14 crore), State Bank of India (Rs 170.35 crore), HDIL (Rs 163.56 crore), and Thinksoft Global Solutions (Rs 114.51 crore).

Cals Refineries led the volumes charts on BSE clocking volume of 3.81 crore shares followed by Suzlon Energy (2.27 crore shares), IFCI (1.62 crore), Unitech (1.14 crore shares) and Gujarat Mineral Development Corporation (58.21 lakh shares).

Suven Life Sciences was locked at 5% upper limit after the company secured three European patents on new chemical entities. The company made this announcement during trading hours today, 30 November 2009.