Sensex, Nifty scale new highs

The key benchmark indices extended early gains to hit their highest level in nearly 20 months tracking firm Asian stocks and higher US index futures. Index heavyweight Reliance Industries extended early gains. Power, auto and realty stocks, also edged higher. The BSE 30-share Sensex was up 158.34 points or 0.93%. The Sensex and S&P CNX Nifty scaled their highest level in nearly 20 months. The market breadth was strong. All the sectoral indices on BSE rose.

Volatility may remain high today, 31 December 2009, ahead of the expiry of the near month December 2009 futures & options (F&O) contracts. Rollover in Nifty futures from December 2009 series to January 2010 stood at 58% at the end of Wednesday's (30 December 2009) trade. Rollover in Mini Nifty futures stood at about 50% and the market wide rollover was about 67%

From 4 January 2010, trading will start at 9:00 IST and end at 15:30 IST compared to the current timing of 9:55 IST to 15:30 IST. The market remains closed on Friday, 1 January 2010, for the New Year holiday.

The government will today unveil data on some wholesale price indices for the year through 19 December 2009 viz. the food price index, the primary articles index and the fuel price index.

The government is reportedly expected to sell shares in 17 to 18 state firms in each of the next two fiscal years, with an issue happening every two to three weeks. The ministry of disinvestment was consulting with administrative ministries of more than 50 state-owned firms to assess the preparedness for public offer, report said.

Meanwhile, the Thirteenth Finance Commission has suggested the path of fiscal consolidation and sharing of tax revenues between the Centre and the states, in its report submitted to President Pratibha Patil on Wednesday. The report has assessed the impact of the proposed goods and services tax (GST) on trade. It has also suggested steps to deal with the growing off-Budget expenditure, especially, oil bonds, the implications of environment and climate change, and ways to improve outcomes and outputs of public expenditure.

The report of the Thirteenth Finance Commission, headed by former finance secretary Vijay Kelkar, will be given by the President to the finance ministry, which will take it up with the Cabinet.

Finance Minister Pranab Mukherjee said on Wednesday that the government needs to strike a balance between economic growth and cutting fiscal deficit. India's fiscal deficit is estimated at 6.8% of gross domestic product for 2009/10 (April-March), higher than 6.2% in the previous year as the government cut tax rates and boosted spending.

Recently C. Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister, raised concern over the rising food inflation, which is at an 11-month high now, stating that the task ahead was to check food inflation. He indicated that the Reserve Bank of India could look at raising the cash reserve ratio (CRR) to suck out excess liquidity from the system, even though the central bank may watch the price movements for some more time before taking any decision on rate hike.

The focus of India's monetary policy is shifting to managing recovery and containing inflation from one concentrated on fostering growth after the global downturn, Reserve Bank of India deputy governor Shyamala Gopinath said early this week. She said rising food prices were fuelling concerns of broader price pressures in India and the policy challenge was to address the supply-side constraints.

She said effective assessment of the inflation process and using monetary policy actions at the right time would be critical. Gopinath's comments follow those from fellow Deputy Governor Subir Gokarn on Thursday, 24 December 2009, who said the January 2010 policy review would focus both on growth and inflation, instead of the previous policy focus on growth.

Food price index rose 18.65% in the 12 months to 12 December 2009, data released by the government on 24 December 2009, showed. The primary article index jumped 14.66% and the fuel price index rose 3.95%. The worst monsoon in nearly four decades and flooding in some parts of the country have pushed up food prices.

Finance Minister Pranab Mukherjee said last week that containing inflation and cutting fiscal deficit are the major challenges for the government in the short-to-medium term. The Indian economy can grow at 7.75% in the fiscal year ending March 2010, the Finance Minister said.

Data earlier this month showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

In global news, encouraging US economic data helped lift Asian stocks on Thursday. The key benchmark indices in China, Hong Kong, Singapore and Taiwan rose by between 0.44% to 1.75%.

Markets in Japan, South Korea, Thailand, Indonesia and the Philippines were closed. Most markets in the world will be closed on Friday for the New Year day holiday.

Beijing will stick to its loose monetary stance, but will try to be more flexible in implementing its policies, People's Bank of China Governor Zhou Xiaochuan said on Thursday.

Trading in US index futures indicated the Dow could gain 12 points at the opening bell on Thursday, 31 December 2009.

US stocks spent almost the entire session trading with moderate losses until some late support helped the major indices improve their position on Wednesday. Better-than-expected report on Midwest manufacturing helped sentiment. The Dow Jones industrial average added 3.10 points, or 0.03%, at 10,548.51. The Standard & Poor's 500 Index was up 0.22 point, or 0.02%, to finish at 1,126.42. The Nasdaq Composite Index gained 2.88 points, or 0.13%, to close at 2,291.28.

The Chicago purchasing-manager's index jumped to 60 in December 2009 from 56.1 in November 2009, the highest since January 2006 and well above expectations. The employment gauge also rose, hitting its highest since November 2007.

With many of the major market players done for the year, prices were moderately higher Wednesday for US interest rate futures even as data revealed a significant pick-up in the economy. The July 2010 fed-funds contract priced in a 76% chance for the Federal Open Market Committee to raise the Fed funds rate to 0.5% at its meeting in late June 2010. On Tuesday, the July 2010 contract had priced in a 78% chance for a 0.5% rate. The funds rate has stayed inside a record low range of 0% to 0.25% for the past year, one of many Fed actions designed to stimulate the economy.

Closer home, at 11:20 IST, the BSE 30-share Sensex was up 158.34 points or 0.93% to 17,502.16. The Sensex gained 170.08 points at the day's high of 17,513.90 in mid-morning trade, its highest level since 5 May 2008. The Sensex opened with an upward gap of 21.55 points at 17,365.37, also the day's low so far.

The S&P CNX Nifty was up 44.75 points or 0.87% at 5214.20. It hit a high of 5218 its highest since 5 May 2008.

The BSE Mid-Cap index rose 0.9% and the BSE Small-Cap index rose 1.36%.

The market breadth, indicating the overall health of the market was strong. On BSE, 1791 shares advanced as compared with 600 that declined. A total of 64 shares remained unchanged.

Among the 30-member Sensex pack, 29 rose while only one declined.

India's largest engineering & construction firm by sales Larsen & Toubro rose 1.27% after it won an order worth Rs 580 crore.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) rose 1.58%. RIL has successfully tested the design capacity of its massive eastern offshore Krishna-Godavari basin D6 field production facilities. A flow rate of 80 million standard cubic meters was achieved through the KG-D6 facilities and delivered to the pipeline, the company said in a statement recently.

India's largest thermal power generator by sales NTPC jumped 2.77% on reports the government plans to allow the firm to sell around 10% of its power capacity at market-determined prices.

Among other power stocks, Reliance Power, Tata Power Company, Reliance Infrastructure rose by between 0.62% to 0.94%.

Auto stocks extended recent gains on the back of strong sales in the month of November 2009 and higher advance tax payment in the third quarter.

India's top truck maker by sales Tata Motors advanced 0.25%. The company has reportedly commenced trial production of the first batch of the Nano at the new mother plant at the Sanand facility last week. The company will start commercial production of the 'People's Car' from March 2010 onwards.

Tata Motors had shifted its mother plant to Gujarat last year after facing local protests in West Bengal spearheaded by Trinamool Congress leader Mamata Banerjee.

India's largest tractor marker by sales Mahindra & Mahindra (M&M) advanced 1.67%. After announcing its entry into the medium and heavy commercial space, the company is reportedly making new inroads in the mini truck segment. It is set to launch one tonner Maxximo at the upcoming Auto Expo from its light commercial vehicle (LCV) space.

From two wheeler space, Hero Honda Motors and Bajaj Auto rose by between 0.25% to 1.74%. But, India's top small car marker by sales Maruti Suzuki India fell 0.17%.

Rate sensitive realty shares gained on fresh buying boosted by a recent Cushman & Wakefield report that the real estate sector, particularly the retail space, will perform better in the year 2010 as a number of mall projects are getting back on track.

India's largest realty player by market capitalization DLF rose 0.6%. On 16 December 2009, the company's board approved merger of its commercial realty arm DLF Assets (DAL) with itself, a move aimed at repaying some of DAL's debt.

Among other realty stocks, Ackruti City, Indiabulls Rela Estate and Unitech rose by between 0.8% to 2.93%.

Strides Arcolab rose 0.83% , after the company said it has bought back foreign currency convertible bonds aggregating $1.5 million.

HCL Infosystems gained 3.26%, after the company secured a radio network contract worth Rs 100 crore.