Market gains for the second straight day; Sensex above 17000 mark

Selling pressure in second half of the day's trade curtailed strong initial gains in key benchmark indices tracking firm Asian stocks in what was a volatile trading session. The market gained for the second straight day. The BSE 30-share Sensex rose 108.11 points or 0.64%, off close to 75 points from the day's high. The Sensex closed above the psychological 17,000 mark after regaining that mark in opening trade on the back of positive global cues. European stocks slipped in to the red after a firm start.

The market breadth was strong. Shares from banking, auto and healthcare sectors led gains. Shares of State Bank of India (SBI) and rose after the Finance Minister introduced a bill in the Lok Sabha on Monday to allow the bank to raise more capital from the market. IT stocks rose on strong US economic data. Telecom shares dipped on selling pressure after the recent rise. Index heavyweight Reliance Industries reversed early gains to slip in negative zone.

The Samajwadi Party and Lalu Prasad's Rashtriya Janata Dal (RJD) on Monday decided to withdraw support to the Congress-led United Progressive Alliance (UPA) Government after earlier disrupting the proceedings in both House of Parliament demanding quotas for Dalits, backward classes and Muslims within the Women's Reservation Bill. Both parties disrupted Question Hour in Rajya Sabha over non-implementation of Ranganath Misra Commission report on minority welfare, leading to adjournment of the House for three times. The Samajwadi Party has 23 MPs while the RJD has only 4 members of Parliament in the Rajya Sabha.

Meanwhile, major Opposition parties like the Bharatiya Janata Party and the Left Front have pledged their support to the Bill while many smaller parties, too, are likely to vote in its favour.

European markets reversed early gains triggered following forecast-beating US jobs data. Key benchmark indices in France, UK and Germany were down 0.09% and 0.22%.

Asian stocks rose Monday as better-than-estimated US jobs data and a pledge by French President Nicolas Sarkozy to support Greece boosted confidence in the global recovery. The key benchmark indices in Hong Kong, South Korea, Singapore, Taiwan, Indonesia, China and Japan rose by between 0.73% to 2.09%.

Japan's current account surplus totaled 899.8 billion yen in January 2010, a sharp reversal from the 132.7 billion yen deficit year earlier, shows preliminary data released Monday by the Finance Ministry. The trade and services balance was 37.3 billion yen in the black, compared with 1.05trillion yen in the red the previous year. The trade portion logged a surplus of 197.2billion yen, while services posted a deficit of 159.9 billion yen. In the previous year, both categories were in the red, at 844.8 billion yen for trade and 212.4 billion yen for services. The income balance shrank 8.1% to 911 billion yen. Imports were up 7.1% on year to 4.4 trillion yen, while exports surged 40.6% on year to 4.6 trillion yen.

US stocks jumped and the Nasdaq soared to its highest close in 18 months on Friday, 5 March 2010, as US employers cut fewer jobs than expected and consumers' appetite for credit showed signs of stabilizing. The Dow Jones Industrial Average climbed 122.06 points, or 1.17%, to 10,566.20 and the Standard & Poor's 500 Index gained 15.73 points, or 1.40%, to 1,138.70. Both these indices ended at the highest levels since 20 January 2009.

The Nasdaq Composite Index rose 34.04 points, or 1.48%, to 2,326.35, its highest closing since 3 September 2008.

Economic data showed US employers cut a net total of 36,000 jobs in February 2010, after jobs fell by 26,000 in January 2010, the government reported. That was short of the expected 68,000 jobs lost, according to a consensus of economists.

The unemployment rate, generated by a separate survey, held steady at 9.7%, versus forecasts for a rise to 9.8%.

Federal Reserve data showed that consumer credit rose to $4.96 billion in January 2010, its first increase in a year and the largest for any month since mid-2008.

In global fund news, investors pulled money out of Chinese and European equity funds last week following policy risks and fears about Greece's debt problems, EPFR Global said on Friday. Emerging equity funds had a third straight week of inflows, with a relatively modest $240 million flowing into the funds. Year-to-date net inflows have grown to $2.2 billion. Asia ex-Japan, Latin America and EMEA Equity Funds had net inflows ranging from $42 million to $169 million.

China equity funds had $17 million moving out of the door, while BRIC equity funds enjoyed inflows. The year-to-date average weekly inflow into BRIC funds however is less than half of the $190 million averaged in the fourth quarter of 2009.

Economic growth in the 16 countries that use the euro slowed in the fourth quarter, revised official data showed on Thursday, 4 March 2010. Quarterly gross domestic product growth slowed to 0.1% in the final three months of last year from 0.4% in the three months to the end of September, the European Union's Eurostat statistics agency said. However, the yearly drop in GDP in the third quarter was revised to show a deeper decline of 4.1% from the previous reading of 4%.

US index futures reversed initial gains. Trading in US index futures indicated that the Dow could fall 7 points at the opening bell on Monday, 8 March 2010.

Back home, the Securities and Exchange Board of India (Sebi) has mandated 100% application money for qualified institutional buyers (QIBs) in public issues from 1 May 2010, with a view to bringing about a level playing field for both large and small investors. In a move to bring greater stability and depth to the stock market, Sebi has decided in principle to allow stock exchanges to introduce physical settlement of equity derivatives. Sebi has also allowed, in principle, the introduction of equity derivatives contracts with tenures of up to five years as well as derivative products based on the volatility indices.

These announcements were made after a Sebi board meeting on Saturday, 6 March 2010 which was also marked by the Finance Minister's visit to the regulator's Mumbai head office.

Meanwhile, Rajan Bharti Mittal, the newly elected president of industry body FICCI said there's no room for hardening of interest rates and the Reserve Bank of India should maintain status quo on the rates to allow the industry to make fresh investments. He added that fresh investment announcement have begun across sectors and further increase in interest rates will only hamper economic growth.

Going forward liquidity will be a major concern with a spate of new and follow-on offerings and initial public offers to flood the market over the next few months. The government has estimated Rs 40000 crore from disinvestment for FY 2010-11. In the Union Budget on 26 February 2010 the government said it would raise Rs 25,958 crore through disinvestment in the fiscal to March 2010.

The follow on public offer (FPO) of NMDC is scheduled to open for subscription on Wednesday, 10 March 2010. The pricing for the disinvestment of 8.38% stake in NMDC will be decided on Monday, 8 March 2010 by an empowered group of ministers headed by finance minister Pranab Mukherjee.

The Indian market would act as a safe heaven for foreign investors as the state of the economy remains quite encouraging. The recent economic data showed surge in manufacturing and services activity in the month of February and rise in exports for the third consecutive month in January 2010.

The government will announce the industrial output data for the month of January 2010 on Friday, 12 March 2010. The data is expected to be robust after the infrastructure sector output which accounts for 26% of the industrial output showed a growth of 9.4% in January 2010 from a year earlier. Industrial output grew 16.8% in December 2009.

Also the fourth and the last installment of advance tax by India Inc due on 15 March 2010 will give a broad indication of fourth quarter earnings.

The government said on Friday it will seek parliamentary approval to spend an extra Rs 31780 crore for the fiscal year to end-March 2010, which it plans to fund through savings.

There is no risk that the government will borrow more than planned to fund supplementary spending, Revenue Secretary Sunil Mitra said on Friday. Of the additional spending, Rs 12000 crore would be spent on oil subsidy, Rs 8000 crore on fertiliser subsidy and Rs 2459 crore on food subsidy, among others. The government also sought parliament's nod for Rs 13.67 lakh crore of debt repayment in 2009-10. He further said that no difficulty will arise in achieving divestment target of Rs 40000 crore for FY 2011.The government has estimated Rs 35000 crore from sale of third generation telecom auctions in FY 2011.

Prime Minister Manmohan Singh said on Friday the economy would grow by at least 8% in the year through March 2011. Asia's third largest economy would expand 7.2-7.5% in 2009-10, he told parliament. Singh said prospects for the winter-sown crop are 'very encouraging'. He also said the government must pay good prices to farmers to ensure higher farm production. The prime minister said the government will take all practical measures to bring down food prices.

He said the government will continue commitment to pubic and private investment in agriculture. The prime minster said there is need to find ways and means to stabilise the sugar economy.

A good harvest is likely to bring down food inflation, which accelerated to nearly 18% in late February. The government, facing mounting criticism for rising food prices, is struggling to meet conflicting aims of controlling food inflation and trying to please farmers by paying them attractive prices.

Last week's hike in petrol and diesel prices will further increase headline inflation. Higher inflation will put further pressure on interest rates which in turn may impact corporate and consumer confidence. However, Prime Minister Manmohan Singh on Monday tried to allay fears of fuel price hike stoking inflation. He said the direct effect on the Wholesale Price Index (WPI) will be no more than 0.4%.

Food prices will be keenly watched in coming weeks for the second and third round impacts of the fuel price rise. Market men see a 25 basis points hike in the repo and reverse repo rates each by the RBI at the April 2010 policy review.

Meanwhile, Congress president Sonia Gandhi has reportedly signaled her support for a move to raise taxes on fuel in last year's Budget. The Congress president has reportedly praised finance minister Pranab Mukherjee for a well-balanced budget and said growth is the engine of the Budget

Prime Minister Manmohan Singh had earlier ruled out rolling back a price hike in fuel prices despite pressure from his main allies, saying populist policies would hurt the economy in the long-term. Petrol prices rose about 6% and diesel prices by 7.75% after the government increased factory-gate taxes and import duties on the fuels as part of last week's 2010-11 union budget 2010-11, which stressed fiscal prudence to cut a wide deficit

The government has set its gross market borrowing target for 2010/11 at a record Rs 4.57 lakh crore, up by 1.3% percent from the previous year, sending bond yields into a tizzy and sparking fresh worries on liquidity.

Business activity among Indian service companies grew at its fastest pace in 17 months in February 2010, climbing for the third straight month as both output and new orders increased, a survey showed on Wednesday, 3 March 2010. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 60.9 in February 2010, its highest since September 2008, and compared with 59 in January 2010. The business expectations sub-index rose for the second straight month to 73.1 in February 2010, its highest in four months. It stood at 66.6 in January 2010.

Finance minister Pranab Mukherjee's budgetary proposals last week offered a progressive cut in fiscal deficit over the next three fiscal years, changed personal tax rates lifting disposable incomes in the hand of individuals and reduced surcharge on corporate tax for domestic companies to 7.5% from 10%.

The Finance Minister in his budget speech on Friday, 26 February 2010 said the government aims to introduce the Goods and Services Tax (GST) and implement the direct tax code from 1 April 2011.

The fiscal deficit is pegged at 5.5% of GDP for 2010-2011, lower than an estimated 6.8% for the current fiscal year. The finance minister said the government also aimed to reduce the deficit further to 4.8% of GDP in the year starting 1 April 2011, and to 4.1% in the year from 1 April 2012. He said there is a need to review stimulus and move towards fiscal consolidation and review public spending.

A thrust on the infrastructure sector augurs well from a long-term growth perspective. The Finance Minister has provided Rs 1.73 lakh crore for infrastructure development in 2010-2011, which accounts for over 46% of the total plan expenditure for the year.

The stock market has applauded the Union Budget 2010-2011 due to its thrust on infrastructure development, government's pledge to reduce fiscal deficit over the next three years, a smaller-than-expected 2% hike in excise duties, and reduction in taxes for individuals which will boost disposable income. The Finance Minister has assumed a modest GDP of about 8% and inflation of about 4.5% for 2010-2011.

Going ahead, the key triggers for the stock market are structural reforms such as decontrol of petrol and diesel prices, targeting of food subsidies, and financial sector reforms such as increase in foreign direct investment in insurance sector.

Finance Minister Pranab Mukherjee on Wednesday, 3 March 2010 said India's economic recovery is still being driven by public spending and is not yet broad-based, further clouding the debate on the timing of rate hikes by the central bank.

The economy is likely to do better in the quarter to March than the three preceding quarters, Finance Secretary Ashok Chawla said on Friday, 26 February 2010. The economy grew a slower than expected 6% annually in the December quarter, data showed on Friday.

The manufacturing industry in February 2010 grew at its fastest pace in 20 months, expanding for the third month thanks to expanding output and new orders, a survey showed. The HSBC Markit Purchasing Managers' Index , based on a survey of 500 companies, rose to 58.5 in February, its strongest reading since June 2008, from 57.7 in January. A reading above 50 means activity is expanding.

Exports rose an annual 11.5% in January 2010 to $14.3 billion, the third consecutive rise after 13 straight months of decline, the government said on Tuesday. Imports rose 35.5% from a year earlier to $24.7 billion. The trade deficit stood at $10.4 billion in January compared with $5.4 billion a year earlier. Exports for April-January, the first 10 months of the 2009/10 fiscal year, were down 17.8% at $131.9 billion from the same period in the previous year.

The BSE 30-share Sensex rose 108.11 points or 0.64% to 17,102.60. The index rose 193.06 points at the day's high of 17,187.55 in early trade. The Sensex gained 40.43 points at the day's low of 17,034.92 in early trade.

The S&P CNX Nifty rose 35.30 points or 0.69% to 5124.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1731 shares advanced as compared with 1100 that declined. A total of 86 shares remained unchanged.

Among the 30-member Sensex pack, 20 advanced while the rest of them slipped.

The BSE Mid-Cap index rose 0.71% and the BSE Small-Cap index rose 1.09%. Both the indices outperformed Sensex.

The BSE Auto index (up 1.79%), the BSE Bankex (up 1.09%), the BSE HealthCare index (up 0.9%), the BSE Capital goods index (up 0.89%), the BSE FMCG index (up 0.76%), the BSE IT index (up 0.7%) outperformed Sensex.

The BSE Realty index (down 0.59%), the BSE Consumer Durables index (down 0.13%), the BSE Metal index (down 0.07%), the BSE PSU index (down 0.03%), the BSE Oil & Gas index (up 0.05%), the BSE Teck index (up 0.24%) and the BSE Power index (up 0.41%) underperformed the Sensex.

BSE clocked a turnover of Rs 5088 crore lower than turnover of Rs 5907.01 crore on Friday, 5 March 2010.

Auto stocks gained on follow-up buying after the government announced hike in excise duty by 2% to 10% from 8%. This came as a relief as the industry feared a 4% hike. A thrust on infrastructure and higher rural spending also augurs well for the auto sector. The rise in vehicle sales in the month of February 2010 also supported stocks.

India's largest tractor maker by sales Mahindra & Mahindra surged 4.33% and was the top gainer from the Sensex pack

India's largest two-wheeler maker by sales Hero Honda Motors jumped 3.09% to Rs 1913.45. The stock hit a 52-week high of Rs 1921 in intra-day trade today, 8 March 2010.

India's largest car maker by sales Maruti Suzuki India gained 1.39%. As per reports, Suzuki Motor Corporation has raised its stake in Maruti Suzuki to 55%, triggering speculation about the Japanese firm's intentions for its Indian subsidiary. Suzuki raised its stake in Maruti by 0.8% through secondary market purchases very recently and is set to increase its stake further, reports indicated. India's largest truck maker by sales Tata Motors rose 0.18%

Domestic passenger car sales jumped 33.20% to 1,53,845 units in February 2010 over February 2009, Society of Indian Automobile Manufacturers (SIAM) data showed. Sales of trucks and buses rose 87% to 58,024 units in the month.

Index heavyweight Reliance Industries (RIL) declined 0.47% to Rs 1005.20. The stock moved in volatile trade between Rs 1024 and Rs 1003.20 during the day. As per recent reports, RIL has no plans to increase its bid for bankrupt chemicals maker LyondellBasell Industries after creditors rejected a $14.5 billion offer.

Banking shares saw mixed trend. India's largest bank by net profit and branch network State Bank of India (SBI) jumped 1.16% to Rs 2070.25. The stock spurted to day's high of Rs 2114 after a bill, seeking to reduce Centre's shareholding in the State Bank of India from 55% now to 51% and to allow the bank to raise more capital from the market through preference shares, was introduced in the Lok Sabha on Monday.

The amendment bill seeks to provide for enhancement of the capital of SBI by issue of preference shares, to enable it to raise resources from the market by public issue or preferential allotment or private placement. The bill also aims to provide for flexibility in the management of the bank

India's largest private sector bank by net profit ICICI Bank rose 2.32% after the bank's American depository receipt, or ADR rose 3.51% to $40.96 on the New York Stock Exchange on Friday, 5 March 2010.

However, India's second largest private sector bank by net profit HDFC Bank fell 0.23% to Rs 1780.35. The stock reversed early gains after striking day's high of Rs 1799.

The Reserve Bank of India (RBI) said on Friday the new base lending rate for banks, to bring more transparency to loan pricing, will take effect from 1 July 2010. The actual lending rate charged to borrowers would be the base rate plus borrower-specific charges including operating costs. After the implementation of the new loan pricing system, existing borrowers would continue to pay at existing rates, while the base rate would apply to new customers. The new base rate system is intended to allow cuts in interest rates by banks to be passed on to all customers rather than a few large corporate clients.

IT stocks rose on strong US economic data. US is the biggest export market for the Indian IT firms. Infosys (up 0.98%), and Wipro (up 1.52%), rose. Tata Consultancy Services fell was flat.

Telecom shares dipped on selling pressure after the recent rise. India's largest cellular services provider by sales Bharti Airtel slumped 2.13% to Rs 292.20 and was the top loser from the Sensex pack. India's second largest cellular services provider by sales Reliance Communications declined 0.55%.

Shares of pharmaceutical firms rose. The finance minister Pranab Mukerjee in thee budget increased the weighted deductions for in house research and development from 150% to 200%. Lupin, Cipla, Dr Reddy's Laboratories, Sun Pharmaceutical Industries, Jubilant Organosys, Glenmark Pharma, Venus Remedies, Piramal Healthcare, Biocon and Suven Life Sciences 0.14% to 3.14%.

Realty shares fell on profit taking. Ackruti City, Unitech, Indiabulls Real Estate, HDIL, Omaxe fell by between 0.35% to 2.58%.

The Finance Minister allowed pending projects to be completed within a period of five years instead of four years for claiming a deduction on profits. The norms for built-up area of shops and other commercial establishments in housing projects is also proposed to be relaxed to enable basic facilities for their residents. On the negative side, the construction services have now been brought under the ambit of the service tax in an unexpected move that would raise cost of apartments that are still under construction. As per the Budget proposal, the finance ministry has suggested that construction would be deemed to be a taxable service if the building or complex is still under construction and approval from the concerned regulatory authority which in most cases is the resident municipal authority, hasn't yet been granted.

Consumer durables stocks extended recent gains on hopes rise in disposable income following widening of tax slabs in the Union Budget 2010-11 may boost sales. Videocon Industries, Lloyd Electric, Rajesh Exports, Gitanjali Gems, Asian Star Company and Blue Star Industries rose by between 0.38% to 1.28%.

Shares of oil exploration firms rose after crude oil prices gained nearly 2% on the New York Mercantile Exchange on Friday, 5 March 2010. Oil India (up 0.06%), Oil & Natural Gas Corporation (ONGC) (up 0.57%), and Cairn India (up 1.06%), gained.

Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms. Light, sweet crude oil gained $1.29 or 1.61%, to $81.50 a barrel on the New York Mercantile Exchange on Friday, 5 March 2010 as US government data showed a smaller cut in jobs than expected & bolstering economic recovery hopes.

Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.66% on Friday, 5 March 2010. Tata Steel, Steel Authority of India, Jindal Saw, Hindustan Zinc, Sesa Goa, and Sterlite Industries rose by between 0.04% to 1.6%.

Cals Refineries clocked the highest volume of 7.95 crore shares on BSE. Shree Ashtavinayak Cine Vision (1.71 crore shares), Jagran Prakashan (1.59 crore shares), Sanraa Media (1.41 crore shares) and Suzlon Energy (0.82 crore shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 259.94 crore on BSE. ARSS Infra (Rs