Sensex scales 2-month closing high as heavyweights rally

The key benchmark indices spurted after Finance Minister Pranab Mukherjee that the economy can grow 7.75% in the fiscal year that ends in March 2010 (FY 2010). Higher advance tax payment by India Inc and firm global stocks, also underpinned sentiment. The BSE Sensex jumped 539.11 points or 3.23%.

The BSE Sensex breached the psychological 17,000 mark and the 50-unit S&P CNX Nifty moved past the psychological 5,000 mark. The Sensex attained its highest closing level in more than two months. The Nifty struck a 2-week closing high.

Index heavyweight Reliance Industries (RIL) spurted on a new gas find in the prolific KG basin. Three other index heavyweights - ICICI Bank, Infosys and L&T, also surged. Metal, power, capital goods, realty, banking and IT stocks, jumped. All the sectoral indices on BSE were in green. All the 30 Sensex stocks rose. The market breadth was strong.

After opening with a modest upward gap, the Sensex surged in early trade. The market extended gains in mid-morning trade. The uptrend continued later. The market soared in early afternoon trade boosted by the finance minster's comments on strong growth this year. The market extended gains later.

The market remains closed for four days in a row from Friday, 25 December 2009 to Monday, 28 December 2009. The market remains closed on Friday on account of Christmas. It remains closed on Monday on account of Moharram.

India VIX, a volatility index based on the S&P CNX Nifty index option prices, declined further after Tuesday's sharp slide. It declined 2.77% to 23.84. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

The government will wait until the February 2010 budget to consider withdrawing some of the fiscal stimulus measures, Finance Minister said on Wednesday. Mukherjee said on Wednesday that inflation and fiscal consolidation are major challenges in short to medium term. Growth outlook for the second half of FY 2010 looks better, he added. The finance minister said farm output must grow 4% for the economy to expand 9-10% annually. He said industrial production has started picking up.

The finance minister said sustaining higher growth remains a priority for the government. The government is open to making changes in the draft direct tax code, Mukherjee said. The draft code has proposed various reform measures, including cutting in corporate tax rate to 25% and streamlining tax laws.

Meanwhile, the latest data 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.

Planning Commission deputy chief Montek Singh Ahluwalia said on Wednesday FY 2010 GDP growth is likely to be better than 7% and that negative impact of drought will be evident in third quarter.

Ahluwalia said on Tuesday the sharp surge in food prices reflects the impact of the drought and inefficient distribution, which could not be addressed by monetary policy. While the increase in food prices was to some extent expected, it was a concern -- food prices rose an annual 20 % in early December -- but they should decline in January 2010, Ahluwalia said.

Ahluwalia said food prices are likely to decline from January 2010. He attributed the surge in food prices to speculation. The stock situation is relatively OK, Ahluwalia aid. Price increase at the retail level is much more than the increase at the wholesale level. This is because of dysfunctionality in the distribution system, Ahluwalia said.

India's food-price inflation cannot be tackled through monetary and other policy steps, while inflationary expectations will not stay long, Finance Secreatary Ashok Chawla said on Monday. Earlier on Monday, the Prime Minister's economic advisor C Rangarajan said India's central bank may have to raise the cash reserve ratio (CRR) to drain money from the banking system if prices do not decline in December.

India's central bank governor D Subbarao had earlier said that monetary policy is not the right tool to fix supply problems such as food shortages, but added that if not contained soaring food prices would stoke inflationary pressures in the broader economy.

Food prices surged an annual 20% in early December and rising food prices contributed to a faster-than-expected 4.78% increase in the wholesale price index in November 2009. Finance Minister Pranab Mukherjee, last week, said containing inflation is high on the government's agenda and it is monitoring the price situation.

In overseas news, Moody's Investors Service cut Greece's debt rating on Tuesday but partially reassured financial markets by saying the country remained far from a crisis. Moody's downgraded Greece to A2 from A1, citing the country's swelling budget deficit. It was Greece's third downgrade by a major credit rating agency this month; Fitch took action early this month, followed by Standard & Poor's.

European shares rose on Wednesday, the last full trading day before the Christmas holiday, extending a recent rally, with banks leading. The key benchmark indices in France, Germany and UK rose by between 0.46% to 0.83%.

Members of the Bank of England's Monetary Policy Committee unanimously backed the decision earlier this month to maintain the size of the bank's asset-purchase plan at 200 billion ($318.7 billion), according to minutes of the committee's Dec. 9-10 meeting released Wednesday. The panel also unanimously backed the decision to keep its key lending rate at a historic low of 0.5%.

Asian shares edged higher on Wednesday tracking overnight gains in US stocks after stronger-than-expected existing home sales data in the US. The key benchmark indices in Indonesia, South Korea, Singapore, Taiwan, China and Hong Kong rose by between 0.35% to 1.12%. Japan's markets were closed for the Emperor's Birthday.

The People's Bank of China (PBOC) on Wednesday said the economic recovery is still insufficient and that correcting structural problems for the nation's growth is urgent, in a statement on its Web site, citing the fourth-quarter Monetary Policy Committee meeting. The PBOC said it will seek to keep policy flexible and focus on decreasing economic volatility and manage the pace of loan growth.

Trading in US index futures indicated Dow could gain 30 points at the opening bell on Wednesday, 23 December 2009.

Broad-based buying sent the S&P 500 to fresh 52-week high on Tuesday despite a surprise downward revision to third quarter GDP and a gain by the greenback. Better-than-expected existing home sales report supported sentiment. The Dow Jones Industrial Average added 50.79 points, or 0.5%, to 10,464.93. The Standard & Poor's 500 index rose 3.97 points, or 0.4%, to 1,118.02, while the Nasdaq Composite Index was up 15.01 points, or 0.7%, to 2,252.67.

The market mood was tempered by news that third quarter GDP was determined to have increased at a slower-than-expected annualized rate of 2.2%, lower than consensus prediction.

The housing data provided some relief. It showed that existing home sales climbed at a stronger-than-expected jump of 7.4% to 6.54 million units in November 2009. That lifted the annualized rate to 6.54 million units.

US Treasury Secretary Timothy Geithner expressed confidence on Tuesday that the US economy was on a solid recovery path, but said tight lending practices by banks still pose a risk.

A trade group for the lenders that finance half the capital equipment investment in the United States said on Tuesday the sharp pullback in business borrowing that marked the recent downturn moderated markedly in November 2009 - an encouraging sign companies may be growing more confident in the sustainability of the recovery.

Fed-funds futures for July 2010 registered a slightly higher probability for a boost in the short-term funds rate by the middle of next year. The July 2010 contract priced in a 50% chance for the Federal Reserve to raise the Fed funds rate to 0.5% at its policy meeting in late June 2010. The same contract had priced in a 46% chance at Monday's (21 December 2009) settlement and a 38% chance at Friday's (18 December 2009) settlement.

The BSE Sensex rose 539.11 points or 3.23% to 17231.11, its highest closing since 17 October 2009. The Sensex rose 560.09 points at the day's high of 17252.09 at the fag end of the trading session. The Sensex opened with an upward gap of 31.96 points at 16723.96 which was also the day's low.

The S&P CNX Nifty rose 158.75 points or 3.18% to 5,144.60, its highest closing since 8 December 2009. Nifty December 2009 futures were at 5,157.50, at a premium of 12.90 points as compared to the spot closing of 5,144.60. Turnover in NSE's futures & options (F&O) segment spurted to Rs 117607.57 crore from Rs 60289.04 crore on Tuesday, 22 December 2009.

The market breadth, indicating the overall health of the market was strong. On BSE, 1898 shares advanced as compared with 931 that declined. A total of 92 shares remained unchanged.

All the stocks from 30-member Sensex pack rose.

BSE clocked a turnover of Rs 4933 crore, higher than Rs 3640 crore on Tuesday, 22 December 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 7583.80 points or 78.61% in calendar year 2009, as on 23 December 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 9070.71points or 111.15% as on 23 December 2009.

Coming back to today's trade, the BSE Mid-Cap index rose 1.57% and the BSE Small-cap index rose 1.51%. Both these indices underperformed the Sensex.

The sectoral indices on BSE showed a mixed trend. The BSE Metal index (up 4.05%), the BSE Oil & Gas index (up 3.43%), the BSE Power index (up 3.37%), outperformed the Sensex.

The BSE Consumer Durables index (up 0.79%), the BSE Healthcare index (up 0.84%), the BSE Auto index (up 1.84%), the BSE FMCG index (up 1.91%), the BSE PSU index (up 2.36 %), the BSE Teck index (up 2.47%), the BSE Bankex (up 2.64%), the BSE Realty index (up 2.79%), the BSE IT index (up 2.95%), the BSE Capital Goods index (up 2.99%), underperformed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) rose 4.62%. Reliance Industries said on Tuesday it had made a gas discovery in one of its exploration blocks in the Krishna Godavari basin, off the country's east coast. Reliance Industries holds a 90% interest in the block, which covers an area of 3,288 square kilometres, and Hardy Exploration and Production India holds the rest.

Meanwhile, RIL's plans to gain control of the bankrupt petrochemical major LyondellBasell may reportedly come undone if rival billionaire Len Blavatnik has his way. Reliance Industries' (RIL) bid fails to factor in the potential turnaround gains of the bankrupt petrochemicals-maker, said a top official of the part-owner of the LyondellBasell, signalling that RIL may have to revisit its offer, if it has to realise its dream of becoming one of the world's biggest petrochem players. The official from Access Industries, promoted by Russian-born billionaire Len Blavatnik, said the $12 billion at which RIL has reportedly valued LyondellBasell was too low.

Meanwhile, the Ministry of Corporate Affairs (MCA) has asked the Securities and Exchange Board of India (Sebi) for details of its investigation pertaining to Reliance Industries (RIL). The market regulator had acted on a complaint that RIL had allegedly routed funds to dummy companies to buy its own shares nine years ago. The ministry's response came after Sebi, in a letter on 1 December 2009, wanted MCA to take appropriate action on the alleged routing of money from RIL and erstwhile Reliance Petroleum (RPL) to 34 private companies to enable them to subscribe to RIL's equity shares.

RIL's advance tax payment rose 82.89% to Rs 834 crore in Q3 December 2009 over Q3 December 2008.

India's largest thermal power generator by sales NTPC rose 6.96% extending Tuesday's 3.27% gains. The company's Q3 advance tax payment rose 67.93% to Rs 1078 crore. As per reports the government plans to mop up around Rs 11000 crore from the disinvestment of 5% stake in the utility giant.

Among other power stocks, Reliance Power, Reliance Infrastructure, Tata Power Company rose by between 1.37% to 3.31%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 3.37%. The company's Q3 advance tax declined 13.46% to Rs 270.crore.

India's largest power equipment maker by sales, Bharat Heavy Electricals (Bhel), rose 2.95%. The company's Q3 advance tax fell 21.88% to Rs 500 crore. Bhel on Monday said it had got orders worth Rs 640 crore.

Among other capital goods stocks, ABB, Siemens and Praj Industries rose by between 1.07% to 5.85%.

Metal stocks rose on strong domestic demand. Sterlite Industries, Hindalco Industries, Hindustan Zinc, Steel Authority of India rose by between 2.81% to 7.77%.

India's largest steel maker by sales Tata Steel rose 4.45%, extending Tuesday's nearly 4% rally. The company's Q3 advance tax rose 160% to 650 crore. The company's European unit Corus recently secured a 350 million euro contract to supply rails tracks to French railway operator SNCF.

National Aluminium Company gained 4.5%, after the company hiked prices of aluminium products by Rs 3,500 a tonne on the back of higher metal prices on the London Metal Exchange.

IT stocks rose on jump in existing home sales in November 2009 in the US. US is the biggest market for Indian IT firms. India's largest IT exporter by sales Tata Consultancy Services rose 2.8%. The company's Q3 advance tax surged 37.21% to Rs 177 crore. India's third largest IT exporter by sales Wipro rose 2.11% even as its ADR fell 0.45% on Tuesday.

India's second largest software services exporter Infosys Technologies rose 3.28%. Its ADR rose 0.68% on Tuesday. The company's Q3 advance tax surged 166.7% to Rs 400 crore. Infosys Technologies expects revenue growth in the fiscal year starting in April to be better than 2009/10 as a recovery in the global economy spurs investments by its clients, Subhash Dhar, senior vice-president and head of global sales and marketing said recently.

Realty stocks rose on bargain hunting after recent fall. Indiabulls Real Estate, Unitech and Omaxe rose by between 1.95% to 2.89%.

India's largest realty player by market capitalization DLF rose 2.9% extending Tuesday's 1.47% gains. DLF recently announced a merger of its commercial realty arm DLF Assets (DAL) with itself, a move aimed at repaying some of DAL's debt. The new structure involves the merger of DLF subsidiary DLF Cyber City Developers with Caraf Builders and Constructions, which is the holding company of DAL. The valuation ratio approved by the board for Cyber City and Caraf is in the ratio of 60:40.

This means that DLF shareholders will have access to 60% and promoters to 40% of the merged entity. However, this will be a cashless transaction. DLF sells commercial property to DAL, which is controlled by KP Singh who owns 78% in the latter along with his son and DLF promoter Rajeev Singh. DAL buys commercial property from DLF and collects lease rentals from it. With this merger, the debt on DLF's books would be an additional Rs 2,460 crore.

Banking shares rose on firm American depository receipts on Tuesday. Banking stocks had drifted lower in the past few days on a likely monetary tightening by the RBI. India's largest private sector bank by net profit ICICI Bank rose 4.3% as its ADR rose 4.03% on Tuesday. ICICI Bank has launched a home-loan scheme under which 8.25% interest rate will be fixed for the first two years. The floating rates will apply after 2 years. These rates will be applicable to loans sanctioned between December 2009 and January 2010.

ICICI Bank's advance tax payment declined by 51.8% to Rs 301 crore in Q3 December 2009 as compared with Rs 625 crore in Q3 December 2008.

India's largest bank by net profit and branch network State Bank of India rose 2%. The state-run bank's Q3 advance tax rose 5.59% to Rs 1795 crore over a year ago.

Among other PSU stocks, Punjab National Bank, Bank of Baroda and Bank of India rose by between 0.87% to 1.89%.

India's second largest private sector bank by net profit HDFC Bank rose 2.5% as its ADR rose 1.27% on Tuesday.

Telecom stocks extended Tuesday's gains after telecom Minister Andimuthu Raja said on Monday that the government plans to start auctioning third-generation wireless spectrum as scheduled from 14 January 2010. India's largest mobile services provider by sales Bharti Airtel rose 1.27%, extending Tuesday's near 4% rally. The company's Q3 advance surged to Rs 272 crore compared to Rs 5.5 crore last year.

Among other telecom stocks, Reliance Communications, Idea Cellular and Spice Communications rose by between 0.82% to 2.49%.

Cement stocks rose on bargain hunting after recent losses. ACC, Ultratech Cements and Ambuja Cements, rose by between 2.17% to 2.97%.

Cement prices are reportedly seen hardening in the January-March 2010 quarter as demand from state projects picks up and rural housing drives volume growth. Prices went up by Rs 8-10 for a 50 kg bag southern India late November to Rs 155-175, while a similar hike in Mumbai on 2 December 2009 raised prices to Rs 240-245 per bag.

Construction shares rose on government's thrust on infrastructure. Hindustan Construction Company, Nagarjuna Construction Company, Jaiprakash Associates, Valech Engineering, Gayatri Projects rose by between 1.88% to 3.88%. The government has set a target of spending $20 billion a year on road construction.

Auto stocks rose on strong sales in the month of November 2009 and higher advance tax payment in the third quarter. India's largest small car maker by sales Maruti Suzuki India rose 1.83% after Chief General Manager, Marketing, Shashank Srivastava said Maruti will launch a new multi-purpose vehicle EECO on 7 January 2010. The vehicle, available in 5-seater and 7-seater versions, is expected to initially sell 40,000 units annually, he said. Maruti's Q3 advance tax rose 196.3% to Rs 400 crore.

Maruti's total vehicle sales spurted 66.60% to 87,807 units in November 2009 over November 2008. Domestic sales spurted 60.10% to 76,359 units, while exports surged 128.60% to 11,448 units in November 2009 over November 2008.

India's second largest bike maker by sales Bajaj Auto rose 0.61%. Bajaj Auto on 9 December 2009 launched a 135 cc Pulsar, pushing the Pulsar brand into the mass segment. Bajaj expects a sell a minimum 30,000 units per month of the new Pulsar model. The automaker had recently refreshed the entire Pulsar lineup and expects total Pulsar sales to cross 80,000 units per month.

The company's total vehicle sales rose 73% to 2.76 lakh units in November 2009 over November 2008. Motorcycles sales jumped 84% to 2.42 lakh units.

India's largest motorcycle maker by sales Hero Honda Motors rose 0.79%. The company's Q3 advance tax rose 44.1% to Rs 213 crore. The company's total vehicle sales jumped 32% to 3.81 lakh units in November 2009 over November 2008.

India's top truck maker by sales Tata Motors rose 2.91%. The company on Thursday reported a 62% jump in its total global sales in November 2009 to 75,775 units. The company paid Rs 100 crore as advance tax in third quarter versus Nil same quarter last year.

India's top tractor marker by sales Mahindra & Mahindra (M&M) rose 3.04%. M&M on Monday signed a joint venture agreement with Yueda Group, China's second largest tractor producer, to set up a tractor company with a combined investment of Rs 175 crore. The new company, Mahindra Yueda (Yancheng) Tractor Company (MYYTCL) will be a 51:49 joint venture, where M&M will hold the majority. Investments by both companies will be in the ratio of their stakes in the venture. The plant will be operational in the next 12-15 months.

Car sales in India rose an annual 61% to 1,33,687 in November 2009 over November 2008, boosted by improved consumer sentiment, easier availability of loans and a low sales base a year earlier, an industry body said on Tuesday. Sales of trucks and buses, a gauge of economic activity, doubled to 40,847 units in November from 20,631 a year earlier, data from the Society of Indian Automobile Manufacturers showed.

Shares of public sector oil marketing companies rose after Finance Secretary Ashok Chawla on Tuesday said the government is likely to offer cash instead of bonds to state-run oil firms before 31 March 2010 for compensating them for selling fuel at lower than market price. Indian Oil Corporation, BPCL and HPCL rose by between 0.42% to 1.5%.

Cals Refineries clocked the highest volume of 6.45 crore shares on BSE. Suzlon Energy (1.63 crore shares), NHPC (1.27 crore shares), Radhe Developers (1.08 crore shares) and Unitech (0.85 crore shares) were the other volume toppers in that order.

Tata Steel clocked the highest turnover of Rs 218.90 crore on BSE. Reliance Industries (Rs 149.07 crore), Suzlon Energy (Rs 144.14 crore), Zandu Pharmaceuticals (Rs 129.29 crore) and Housing Development & Infrastructure (Rs 111.26 crore) were the other turnover toppers in that order.