Market gains for the third straight day; Sensex regains 17k mark

The key benchmark indices extended gains for the third straight day on Wednesday on higher Asian stocks. The BSE 30-share Sensex rose 227.45 points or 1.36% to 17,000.01. The BSE Sensex regained psychological 17000 mark. Market shrugged weak European stocks. Finance minister Pranab Mukherjee's bold budgetary proposals which offered to progressively cut fiscal deficit over the next three fiscal years, changed personal tax rates which will lift disposable incomes in the hand of individuals and reduced surcharge on corporate tax for domestic companies to 7.5% from 10% in Union Budget 2010-2011 aided sentiment.

The data showing a jump in services and manufacturing activity in the month of February and rise in exports for the third consecutive month in January further supported market.

Metal stocks gained after rise in metal prices on the London Metal Exchange on Tuesday, 2 March 2010. Realty, FMCG, healthcare, banking and power stocks also rose. Index heavyweight Reliance Industries jumped. The market breadth was strong. All the sectoral indices on BSE were in the green.

European shares edged lower on Wednesday after hitting a near six-week closing high in the previous session, with banking and energy stocks slipping ahead of some U.S. jobs pointers The key benchmark indices in France, Germany and UK fell by between 0.04% to 0.14%.

Asian shares rose for a fourth straight session and the euro extended its rebound against the dollar on Wednesday 3 March 2010 as investors held out hope for a bailout package for debt-ridden Greece. The key benchmark indices in Hong Kong, Japan, South Korea, Singapore, China and Taiwan rose by between 0.31% to 0.78%. But key benchmark indices in Hong Kong and Singapore fell by between 0.14% to 0.37%.

Australia's economy grew last quarter at the fastest pace in almost two years, underscoring the central bank's decision yesterday to boost borrowing costs for the fourth time in five meetings Gross domestic product climbed 0.9% from the third quarter, when it gained a revised 0.3%, the Bureau of Statistics said in Sydney today.

Trading in US markets indicated US markets could see a flat opening on Wednesday, 3 March 2010.

In US markets- stocks erased most of their gains on Tuesday 2 March 2010 as tech stocks retreated. The Dow Jones rose 0.02% to 10405.98. Nasdaq gained 0.32% to 2280.79 and the S&P 500 rose 0.23% to 1118.31 on that day.

On to the monthly auto sales in US - GM kicked it off, reporting its US auto sales rose 11.5% in February, about half of what analysts had expected. Ford reported its US sales jumped 43% last month, much higher than the 30.1% expected. Toyota reported its sales fell 8.7%, not as bad as the 10-to-15% drop expected.

Closer home, 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 peak rate of excise duties has been raised to 10% from 8% as a first step towards the winding down of fiscal stimulus measures. However, the service tax was retained at 10%. The government has estimated Rs 40000 crore from disinvestment for FY 2010-11. It has estimated Rs 35000 crore from sale of third generation telecom auctions.

The finance minister has raised personal income tax slabs which will result in increase in disposable incomes which in turn may boost consumption. The minimum alternate tax (MAT) has been raised to 18% from 15% of book profits. 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 planned expenditure will rise 15% in 2010-2011. The increase in non-plan expenditure is only 6% for 2010-2011. 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.

Though the Finance Minister said that the government will implement the Direct Tax Code from 1 April 2011, there is no clarity on actual changes in direct taxes from 1 April 2011. Further, there is also uncertainty with regards to rates under the new GST. One really does not know what the Central GST rate will be in April 2011. States also will charge State GST on the same base as that of Central GST. So the States will have a big say in fixing the rate. It has also to be a revenue neutral rate (RNR) which therefore will involve a lot of arithmetical exercise involving all the taxes which will be subsumed in the GST. It is most uncertain what it will be.

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.

Meanwhile, the latest 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.

The winter-sown crops output will be good and will help high food prices ease, Farm Minister Sharad Pawar told parliament on Wednesday.

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.

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. 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 59.0 in January.

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 227.45 points or 1.36% to 17,000.01. The barometer index rose 240.05 points at the day's high of 17012.61 in late trade. The Sensex rose 5.73 points at the day's low of 16,778.29 in early trade.

The 50-unit Nifty rose 71.10 points or 1.42% to 5,088.10. Nifty March 2010 futures were at 5,082, at a discount of 6.10 points over spot closing of 5,088.10. Turnover in NSE's futures & options (F&O) segment was Rs 67,620.30 crore, lower than Rs 70,716.46 crore on Tuesday, 2 March 2010.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1938 shares rose as compared with 890 that declined. A total of 86 shares remained unchanged.

From the 30 share Sensex pack, 24 rose while rest declined.

The BSE Mid-Cap index rose 1.58% and outperformed Sensex. The BSE Small-Cap index rose 1.29% and underperformed Sensex.

BSE clocked a turnover of Rs 4204 crore higher than Rs 4199.13 crore on Tuesday, 2 March 2010.

Index heavyweight Reliance Industries (RIL) rose 3.9% gaining for the third straight day after the reports board of LyondellBasell Industries has rejected an acquisition bid by Reliance Industries (RIL). Investors were worried that RIL may be paying too much for the Rotterdam-based chemicals maker.

RIL's offer to buy Lyondell for $14.5 billion was pitted against the foreign company's creditors, including the New York-based private equity fund Apollo Management, which had backed an earlier reorganisation plan that would give them an equity stake in the chemicals maker. A successful deal would have created the world's largest petrochemical company ahead of BASF and Dow Chemical, with revenues of more than $80 billion and would have provided RIL access to better technology and refineries in Europe and the US.

FMCG stocks rose after a strong push for the rural sector in the Budget. Britannia Industries, Hindustan Unilever, Tata Tea, Nestle India, Hindustan Unilever, United Spirits and Marico rose by between 0.2% to 4.52%.

Shares of pharmaceutical firms rose after finance minister Pranab Mukerjee increased the weighted deductions for in house research and development from 150% to 200%. DR Reddy's Laboratories, Cipla, Lupin, Wockhardt, Sun Pharmaceuticals Industries, Jubilant Organosys, Glenmark Pharma, Venus Remedies, Biocon and Suven Life Sciences rose by between 0.5% to 2.8%.

Tata Power Company rose 5.08% on reports of plans to increase coal mining capacity in Indonesia by a fourth starting in the latter half of fiscal 2011. Capacity will be increased to 75 metric ton (mt) a year from the current 60 mt. The stock was the top gainer from the Sensex pack. Among other power stocks, CESC, NTPC, Reliance Infrastructure and Torrent Power rose by between 0.92% to 3.01%.

Banking stocks gained after the finance minister said RBI is considering giving some additional banking licenses to private sector players. ICICI Bank, State Bank of India and HDFC Bank rose by between 1.24% to 1.8%.

Shares of state-run bank got a boost from the Finance Minister's proposal to provide Rs 16500 crore for recapitalisation to enable them to maintain minimum capital adequacy at 8% in tier I capital by 31 March 2011.

Realty shares rose after 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. Ackruti City, Indiabulls Real Estate, DLF, HDIL, Omaxe, Parsvnath Developers, Sobha Developers rose by between 0.96% to 3.5%.

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.

Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.45% on Tuesday, 3 March 2010. JSW Steel, Jindal Steel & Power, Sterlite Industries, Hindalco Industries, National Aluminum Company rose by between 0.25% to 3%.

Steel Authority of India rose 0.56% after the company raised product prices by Rs 500 - 600 a tonne, after factory-gate duties were raised in the Union Budget on 26 February 2010.

But, India's largest steel maker by sales Tata Steel fell 0.08% reversing early gains. Tata Steel's European unit Corus has sold its stake in a joint venture operating a tar distillation plant in the Netherlands for an undisclosed sum. The joint venture operates a 140,000-tonnes-a-year plant, which processed coal tar generated from Corus's IJmuiden steelworks. Corus, along with partner Cindu BV, have sold their stake to US carbon-compounds maker Koppers Holdings and have tied up a long-term arrangement for tar supply with the new owner, said Tata steel in a statement. Cindu reported sales of about 50 million euros in 2008.

The government's proposal to introduce a competitive bidding process for allocating coal blocks for captive mining would ensure greater transparency and increased participation in production from these blocks. Coal is one of the key raw materials for the metal producers. The FM has also proposed to take steps to set up a "Coal Regulatory Authority" to create a level playing field in the coal sector. This would facilitate resolution of issues like economic pricing of coal and benchmarking of standards of performance.

Steel demand is seen rising by 10% in the fiscal year to March 2011, helped by higher spending on infrastructure, Steel Secretary Atul Chaturvedi said on Wednesday.

IT stocks rose on strong US economic data. US is the biggest export market for the Indian IT companies. Hexaware Technologies, Financial Technologies and Infosys rose by between 0.77% to 4.38%.

India's largest IT exporter by sales Tata Consultancy Services rose 0.49%. The company is to administer the UK's National Employee Savings Trust (NEST) scheme's administered services under a 10-year deal, worth around £600 million (approximately Rs 4,150 crore). The contract is awarded by the UK's Personal Accounts Delivery Authority (PADA).

But, India's largest IT exporter by sales Wipro fell 0.13%.

Auto stocks extended recent gains as the government hiked the excise duty by 2% to 10% from 8% earlier. This came as a relief as the industry feared a 4% hike. A thrust on infrastructure and higher rural spending also augur well for the auto sector. The spurt in February vehicle sales also supported stocks.

India's largest two-wheeler maker Hero Honda Motors rose 0.25% after company on Tuesday reported a 16.13% increase in its sales at 3,82,096 units in February 2010 over February 2009, the best-ever reported by the company for the month of February.

India's largest tractor maker by sales Mahindra & Mahindra rose 2.11%, The company's total vehicle sales surged 39.51% to 27,894 units in February 2010 over February 2009.

India's largest commercial vehicle maker by sales Tata Motors rose 1.3% after jumping 12.1% on Tuesday. The company's total vehicle sales rose 58.46% to 69,427 units in February 2010 over February 2009.

Bajaj Auto gained 1.64% extending Tuesday's 1.73% gains. The total vehicle sales surged 75% to 2.68 lakh units in February 2010 over February 2009.

TVS Motor Company fell 1.95% after jumping 9.52% on Tuesday. TVS Motor Company has reportedly increased the prices of its vehicles by Rs 350 to Rs 1,500 across various models effective 1 March 2010. The hike follows an increase in excise duty by 2% in the union budget announced on Friday, 26 February 2010.The company's total two wheeler sales rose 31% to 1,40,544 units in February 2010 over February 2009.

But, India's largest car maker by sales Maruti Suzuki India fell 0.83% after gaining for the last two days. The total vehicle sales rose 22% to 96,650 units in February 2010 over February 2009. The company has raised vehicle prices by Rs 3,000-Rs 13,000 following increase in excise duty in the Budget

Another minor positive for auto companies was higher slabs for personal income tax that would leave more finance in hands of individuals.

Construction firms gained after the finance minister allocated Rs 1.73 lakh crore for infrastructure development in FY 2010-2011. Valech Engineering, Era Infra Engineering, Hindustan Construction Company, Nagarjuna Construction Company Punj Lloyd rose by between 0.58% to 2.39%.

India's largest power equipment maker by sales Bharat Heavy Electricals rose 1.02% after gaining 3.31% on Tuesday after the company secured orders aggregating Rs 5778 crore to set up two coal-based power plants in Maharashtra.

But, India's largest engineering and construction firm by sales Larsen & Toubro fell 0.39%.

Shares non-banking financial firms spurted after finance minister said the central bank is considering granting banking licenses to non-banking financial companies if they meet the criteria. Bajaj Auto Finance, IDFC, IFCI and Reliance Capital rose by between 0.93% to 1.94%.

Consumer durables rose on hopes increase in personal income tax slabs in the budget may boost domestic consumption. Titan Industries, Gitanjali Gems, Blue Star, Lloyd Electric, Videocon Industries rose by between 0.1% to 1.88%.

India's largest drug maker by sales Ranbaxy Laboratories fell 1.3% after the firm said it would not be able to launch a generic version of a urinary drug in the United States as per schedule in the absence of a final approval from the regulator.

ACC fell 0.21%, after the company's cement dispatches declined 2.29% to 17.1 lakh tonnes in February 2010 over February 2009.

Jaiprakash Associates rose 6.14% after company's cement shipments in February 2010 jumped 61% from a year earlier to 11.6 lakh tonnes. The engineering and construction firm, which also has interests in hospitality and power, can currently produce 1.71 crore tonnes of cement a year.

ARSS Infrastructure Projects ended at Rs 736.30 on the BSE, a 63.60% premium over the initial public offer price of Rs 450. The stock debuted at Rs 640, a 42.2% premium over the initial public offer (IPO) price

Cals Refineries clocked the highest volume of 2.62 crore shares on BSE. ARR Infra (1.15 crore shares), Shree Ashtavinayak Cine Vision (0.99 crore shares), SpiceJet (0.81 crore shares) and Unitech (0.75 crore shares) were the other volume toppers in that order.

ARSS Infra clocked the highest turnover of Rs 847.78 crore on BSE. Reliance Indusrtries (Rs 146.83 crore), Tata Motors (Rs 143.16 crore),Ranbaxy Laboratories (Rs 96.90 crore) and Tata Steel (Rs 94.92 crore) were the other turnover toppers in that order.