Sensex settles a tad below 17,000; breadth strong

The key benchmark indices ended slightly higher in a volatile trading session as profit taking emerged in frontline stocks after strong intraday gains. The BSE 30-share Sensex was up 22.79 points or 0.13%, off 103.22 points from the day's high and up 58.37 points from the day's low. The barometer index settled below the psychological 17,000 mark after alternatively moving above and below that level in intraday trade. Global cues were positive with European and Asian markets and US index futures trading firm.

The market breadth was strong. Realty shares extended Thursday's gains on follow-up buying. Banking and telecom stocks advanced on fresh buying. IT stocks were mixed. Metal stocks declined mirroring a fall in metal prices on the London Metal Exchange (LME) on Thursday. Index heavyweight Reliance Industries (RIL) also edged lower.

The market was volatile. The market opened on a firm note tracking gains in Asian stocks. It moved in a narrow range till mid-morning trade. The market cut gains in early afternoon trade after the government sought additional spending plan for the current year. The market slipped into the red later. The market regained strength in mid-afternoon trade as world stocks rose. The market pared gains in late trade.

India VIX, a volatility index based on the S&P CNX Nifty index option prices, shed 1.14% to 20.74. The index has witnessed a steep fall in the last few trading sessions after the government tabled the Union Budget for 2010-2011 in the parliament on Friday, 26 February 2010. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days. Typically, volatility surges ahead of a major event such as the Budget. It falls after the event.

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.

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.

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.

Banking shares led gains in European stocks on Friday. The key benchmark indices in UK, Germany and France were up by between 0.49% to 0.76%.

In meetings held on 4 March 2010, both Bank of England (BOE) and European Central Bank (ECB) left their key lending rates at record low levels amid sluggish and uncertain economic recovery. BOE maintained its key lending rate at 0.5% while ECB left its key lending rate unchanged at 1%.

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%.

Asian stocks rose on Friday, 5 March 2010 after US jobless claims fell and the yen weakened on speculation the Bank of Japan will expand its monetary easing measures. The key benchmark indices in Hong Kong, South Korea, Singapore, Taiwan, Indonesia, China and Japan, rose by between 0.25% to 2.20%.

Chinese shares in Shanghai and Hong Kong ended higher after Premier Wen Jiabao said the government will maintain its moderately loose policies and set an 8% economic growth target for this year. Wen said China's GDP grew 8.7% to 33.5 trillion yuan in 2009. The Chinese Premier also pledged additional measures to curb speculation in the nation's housing market, signaling tighter lending to the sector, targeted taxes, and stricter enforcement real-estate laws.

US markets logged modest gains on Thursday, 4 March 2010 after better-than-expected retail-sales reports. The Dow Jones industrial average gained 47.38 or 0.5%, to 10,444.14. The Nasdaq Composite index rose 11.63 points or 0.51% to 2,292.31 and the S&P 500 index gained 4.18 points or 0.37% to 1,122.97

In US economic data, initial jobless claims for the week ended 27 February 2010 totaled 469,000, which was in-line with the consensus call. Continuing claims dropped more than expected to 4.50 million.

A key economic data due later in the global days is US non-farm payrolls for February 2010. Economists expect payrolls to decline by a seasonally adjusted 90,000, in part because of debilitating snow storms that hit the eastern half of the nation on 4 February and 9 February. They think the unemployment rate probably ticked up to 9.8%

Factory orders for January 2010 increased 1.7%, which was in stride with the 1.8% increase that had been widely expected.

Trading in US index futures indicated that the Dow could rise 38 points at the opening bell on Friday, 5 March 2010.

Closer home, 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.

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.

Food price index rose 17.87% in the 12 months to 20 February 2010, faster than the annual rise of 17.58% in the previous week, government data released on 4 March 2010 showed. The fuel price index was up 9.59%. The primary articles index rose 15%. Higher inflation is likely to add pressure on the central bank to raise interest rates in April 2010.

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

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 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. Revenue secretary Sunil Mitra today said he does not see any difficulty 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.

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.

The Finance Minister plans to tighten his belt on non-plan expenditure that includes heads like subsidies and administrative costs etc. He has forecast a small 6% growth in non-plan expenditure. The budget projects an 11% reduction in the government's subsidy bill for 2010-11, driven essentially by a massive drop in petroleum subsidies and some decline in fertiliser subsidies.

However, any sharp surge in crude oil prices will result in higher oil subsidies. The Finance Minister has provided only Rs 3108 crore towards oil subsidy for 2010-2011 and also indicated that he will not issue bonds this year as well. This means that he is either assuming that crude oil prices are going to remain very low or he is making an implicit assumption that the Kirit Parikh Committee report in some form will be implemented. It may be recalled that the Kirit Parikh Committee has suggested freeing of auto fuel prices and raising kerosene prices by Rs 6 a litre and cooking gas Rs 100 per 14.2-kg cylinder.

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.

The government will introduce legislation for a direct tax code in the monsoon session of parliament, revenue secretary Sunil Mitra said on Friday.

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 was up 22.79 points or 0.13% to 16,994.49. The index rose 126.01 points at the day's high of 17,097.71 in morning trade. The Sensex declined 35.58 points at the day's low of 16,936.12 in afternoon trade.

The S&P CNX Nifty was up 8.45 points or 0.17% to 5088.70

The BSE Mid-Cap index rose 0.62% to 6,735.49 and the BSE Small-Cap index rose 0.82% to 8,499.64. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1684 shares advanced as compared with 1206 that declined. A total of 93 shares remained unchanged.

The total turnover on BSE amounted to Rs 5881 crore, as compared with Rs 5240 crore on Thursday, 4 March 2010

Most sectoral indices on BSE advanced. The BSE Auto index index ended unchanged. The BSE Realty index (up 1.77%), the BSE Teck index (up 0.47%), and the BSE HealthCare index (up 0.31%), outperformed the Sensex.

The BSE PSU index (down 0.55%), and the BSE Consumer Durables index (down 0.54%), underperformed the Sensex.

Among the 30-member Sensex pack, 16 advanced while the rest declined.

Sun Pharma (up 1.51%), Jaiprakash Associates (up 1.01%), and Reliance Infrastructure (up 0.88%), edged higher from the Sensex pack

Bhel (down 1.10%), NTPC (down 0.53%), and ITC (down 0.43%) edged lower from the Sensex pack.

Realty shares extended Thursday's gains on follow-up buying. The Finance Minister while presenting the Union Budget 2010-11 on 26 February 2010 said pending projects will be allowed 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.

India's largest real estate developer by sales DLF jumped 4.29% to Rs 317.50 and was the top gainer from the Sensex pack.

Indiabulls Real Estate (up 1.04%), HDIL (up 1.58%), Orbit Corporation (up 0.90%), Omaxe (up 2.45%), and Parsvnath Developers (up 0.12%), gained.

Index heavyweight Reliance Industries (RIL) was down 0.37% to Rs 1010. The stock was off the day's high of Rs 1027.90. 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.

Petronet LNG surged 6.46% on reports that the government is looking to exempt natural gas from import duties.

India's largest private sector housing firm by net profit ICICI Bank rose 0.54%. The bank has raised auto loans by 25-50 basis points for different tenors and segments, effective from 5 March 2010. The bank has also discontinued its special home loan rate of 8.25% for two years. The bank will now charge 8.75% for loans up to Rs 30 lakh, 9% for loans of Rs 30 to Rs 50 lakh and 9.5% for loans over Rs 50 lakh.

Other banking shares also edged higher. India's largest bank by net profit and branch network State Bank of India rose 0.57%. The bank's chairman will review home loan rate by 31 March 2010

India's second largest private sector housing firm by net profit HDFC Bank rose 0.20%.

India's largest mortgage lender by income Housing Development Finance Corporation (HDFC) fell 0.29% to Rs 2580.10, after hitting a day's high of Rs 2625. The firm has withdrawn special home loan schemes on Thursday, 4 March 2010.

The Reserve Bank of India (RBI) said on Friday the new base lending rate for banks will take effect from 1 July 2010. In mid-February, the RBI had said it would introduce the base rate from 1 April 2010. According to the draft guidelines, the actual lending rate charged to borrowers would be the base rate plus borrower-specific charges including product-specific operating cost, credit-risk premium and tenure premium

Telecom shares were in demand on fresh buying. India's largest cellular services provider by sales Bharti Airtel jumped 1.83%. India's second largest cellular services provider by sales Reliance Communications gained 0.46%.

The Centre on 25 February 2010 issued notices inviting bids from private telecom players to participate in the auction of radio frequency spectrum for third generation (3G) telephony. The schedule calls for the process to end on 10 April 2010. The government also said auction for spectrum for broadband services will also be held two days after the process concludes for 3G spectrum.

3G or third generation telecom services allow faster connectivity than what is available now, and will enable applications such as internet TV, video-on-demand, audio-video calls and high-speed data exchange.

India's largest truck maker by sales Tata Motors slipped 1.93% to Rs 796 and was the top loser from the Sensex pack. The stock declined on high volume of 47.85 lakh shares, most of which came on the back of bulk deals executed in early trade.

Other auto stocks were mixed. India's largest two-wheeler maker by sales Hero Honda Motors rose 3.38%. India's second largest two-wheeler maker by sales Bajaj Auto advanced 0.37%.

India's largest tractor maker by sales Mahindra & Mahindra was unchanged at Rs 1076. India's largest car maker by sales Maruti Suzuki India slipped 0.48%.

IT pivotals were mixed after the rupee rose to its highest level in more than six weeks against the dollar on Friday as stronger regional peers cheered sentiment.

India's second largest software firm by sales Infosys Technologies was up 0.21% and India's largest software firm by sales TCS fell 0.11%.

India's third largest software firm by sales Wipro declined 1.22% to Rs 685, off day's high of Rs 700.80. The company's IT services division Wipro Technologies entered into a 7-year deal with The Main Street America Group to provide software services. The announcement was made after market hours on Thursday, 4 March 2010.

The partially convertible rupee was at 45.68/69 per dollar, above its previous close of 45.80/81 on Thursday. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports.

Metal stocks declined after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 1.80% on Thursday, 4 March 2010.

Tata Steel (down 0.07%), Steel Authority of India (down 1.18%), Hindalco Industries (down 0.74%), Hindustan Zinc (down 0.42%), Sesa Goa (down 1.97%), National Aluminum Company (down 0.46%), and Sterlite Industries (down 0.99%), edged lower.

NMDC was down 4.62% to Rs 415.05 on reports the government may set the floor price for the stake sale in the company at about Rs 300 a piece, a huge discount to the ruling market price. The follow-on public offer (FPO) of NMDC is scheduled to open on 10 March 2010 and end on 12 March 2010 and the indicative price range is expected to be set on Monday, 8 March 2010, after a meeting of a panel of ministers.

JSW Steel rose 3.03% after the company's crude steel production rose 69% to 5.02 lakh tonnes in February 2010 over February 2009. The announcement was made after market hours on Thursday, 4 March 2010.

Shipping shares extended gains for the second running day after the Baltic dry index, which tracks rates to ship dry commodities, jumped 7.21% to 3,121 in London on Thursday, 4 March 2010.

Mercator Lines (up 2.27%), Shipping Corporation of India (up 1.02%), SKS Ship (up 1.85%), Varun Shipping Company (up 1.75%), GE Shipping Company (up 2.07%), and Essar Shipping (up 1.20%), edged higher.

The Baltic Dry Index (BDI) is showing signs of recovery in the New Year. During the depth of the global economic crisis in 2008, the BDI shed 90% of its value. In fact, from an all time high of 11,793 on 20 May 2008, the index nosedived to an all-time low of 663 in October 2008 as the global demand for raw materials slumped.

Gujarat Gas Company rose 1.76% after net profit surged 46.60% to Rs 46.31 crore on 17.94% rise in net sales to Rs 377.94 crore in Q4 December 2009 over Q4 December 2008. The company announced the results after trading hours on Thursday, 4 March 2010.

Hindustan Construction Company gained 3.40% after the company bagged two orders aggregating Rs 299.36 crore. The company announced the fresh orders after market hours on Thursday, 4 March 2010.

Pidilite Industries jumped 5.53% after the company fixed 17 March 2010 as the record date for a liberal 1:1 bonus issue. The company announced the record date after market hours on Thursday, 4 March 2010.

Suzlon Energy rose 3.41% after the company's North American subsidiary said it plans to generate 728 megawatts of clean power in the US in 2010 through nine wind farms.

Shree Renuka Sugars moved up 4.92%. The company on 4 March 2010 fixed 17 March 2010 as the record date for a liberal 1:1 bonus issue.

Sulzer India was locked at upper circuit limit of 20% after the company's board approved the delisting proposal by its parent company. The announcement was made before trading hours today, 5 March 2010.

Zicom Electronic Security Systems jumped 13.58% after the company announced a strategic restructuring business to refresh its focus on the home & SME electronic security markets. The company made this announcement during trading hours today, 5 March 2010.

ARSS Infrastructure clocked the highest turnover of Rs 568.68 crore on BSE. Tata Motors (Rs 387.78 crore), Suzlon Energy (Rs 150.21 crore), Sesa Goa (Rs 119.92 crore) and Jubilant Foodworks (Rs 110.05 crore) were the other turnover toppers in that order.

Suzlon Energy clocked the highest volume of 1.87 crore shares on BSE. Cals Refineries (1.36 crore shares), Shree Ashtvinayak Cine Vision (1.04 crore shares), Pipavav Shipyard (1.02 crore shares) and Unitech (85.38 lakh shares) were the other volume toppers in that order.