Sensex vaults 5.6% since Budget on buying by foreign funds

The key benchmarks settled at their highest level in a month and a half as sustained buying by foreign funds since the presentation of the Budget late last month underpinned sentiment. Banking and IT stocks rose. But auto stocks fell. Index heavyweight Reliance Industries edged higher. The BSE 30-share Sensex rose 69.63 points or 0.41%, up close to 135 points from the day's low. The Sensex and the 50-unit S&P CNX Nifty struck their highest level since 21 January 2010. Most Asian stocks rose.

The market was volatile. Stocks moved between positive and negative territory near the flat line in early trade. The Sensex recovered from lower level in morning trade after hitting a fresh intraday low. The intraday recovery gathered steam with the Sensex surging to the day's high later. The market pared gains after hitting fresh intraday high in early afternoon trade. The market once again pared gains soon again after jumping to day's high in mid-afternoon trade. The Sensex surged at the fag end of the trade as European stocks recovered from early lows.

Sustained buying by foreign funds since the presentation of the Union Budget 2010-2011 on 26 February 2010 has lifted investor sentiment. As per data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 7511.10 crore this month, till 10 March 2010. The Sensex has garnered 913.76 points or 5.6% since the presentation of the Budget on 26 February 2010.

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.

The food price index rose 17.81% in the 12 months to 27 February 2010, while the fuel price index was up 11.38%, the latest government data showed. The rise in the food price index was marginally lower than an annual rise of 17.87% in the previous week. The primary articles price index was up 15.08% year-on-year as on 27 February 2010.

Food prices will be keenly watched in coming weeks for the second and third round impacts of the recent fuel price rise.

The wholesale price inflation is unlikely to touch double digits by end-March, M. Govinda Rao, a member of the Prime Minister's Economic Advisory Council, said on Wednesday. The wholesale price index inflation, reached 8.56 % in January 2010.

Chief Economic Advisor Kaushik Basu on Tuesday, 9 March 2010, said inflation would ease by April 2010, with low fiscal deficit and a good rabi (winter) crop improving food supplies. In a couple of months, the slightly lower fiscal deficit will begin to counter inflation, he added. Speaking on the sidelines of a conference in New Delhi Basu said inflation is likely to average 4% in the current financial year.

The government will unveil industrial output data for January 2010 on Friday, 12 March 2010. Industrial production is expected to rise more than 16% in January 2010 from a year earlier. Industrial output rose at a robust 16.8% in December 2010

A strong rise in the output, a 7.2% government growth forecast for the 2009-10 financial year and inflation worries would make for a strong case for the central bank to hike benchmark rates like repo and reverse repo rates at its April policy review.

Market expectations regarding a possible rate hike in April remain unchanged, after the Reserve Bank of India (RBI) resorted to a sharper than expected 75 basis point hike in cash reserve requirements for banks at its January meeting. Market watchers expect the RBI's next move will be to raise both its benchmark lending and borrowing rates rates by at least 25 bps each to 5% and 3.50% respectively.

The government's record borrowing plan for the fiscal year starting 1 April 2010 is unlikely to be a huge challenge, Reserve Bank of India (RBI) Deputy Governor Subir Gokarn said on Thursday, 11 March 2010

A newly elected president of industry body FICCI Rajan Bharti Mittal said on Monday 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.

Reserve Bank of India (RBI) Governor D Subbarao on Monday, 8 March 2010, said inflation should moderate in the coming months. He said the central bank will ensure that interest rate levels do not have a negative impact on the competitiveness of the economy. Should India need to manage inflationary expectations, the central bank could turn to its traditional mix of policy tools including use of both liquidity and cash reserve requirements, he said.

Meanwhile, the follow-on public offer (FPO) of iron ore miner NMDC received tepid response. The issue was subscribed 20% by 16:00 IST on the second day of the issue on Thursday. The FPO ends on Friday, 12 March 2010. The government is divesting 8.38% stake in NMDC through the FPO as a part of its aggressive divestment drive to raise funds in a bid to bring fiscal deficit down. The price band has been fixed between Rs 300 and 350.

Meanwhile, the board of state-owned telecom company Bharat Sanchar Nigam (BSNL) on Wednesday cleared a proposal for the divestment of 30% government equity in it, as suggested by a committee set up under Sam Pitroda, the prime minister's telecom and infrastructure advisor. The board also accepted the three-member Pitroda panel's proposal to reduce BSNL's 300,000 staffers by a third. In addition, it accepted the Pitroda recommendation to have a contract-based appointment system for top management, separate positions for MD and CEO and a formation of an advisory board.

Meanwhile, 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.

National Stock Exchange (NSE) and Singapore Exchange have signed a preliminary agreement to explore possible listing of more India-linked products on the latter, the NSE said in a release late Wednesday. Both exchanges aim to explore future collaboration in the expansion, development and promotion of India-linked products and services to be listed on Singapore Exchange, the NSE said. The NSE said these products may include equity and other asset classes and the two exchanges would also look into a bilateral securities trading link to enable investors in one country to trade on the other country's exchange.

European shares moved off early lows on Thursday, helped by an advance in the auto sector after German auto giant Volkswagen reported fiscal-year results. Germany's DAX rose 0.07%. The key benchmark indices in France and UK were down by between 0.21% to 0.24%.

Most Asian markets rose in choppy trade on Thursday. Many Asian markets had fallen earlier in the day as investors fretted over tighter monetary policy in China on the back of strong loan growth and quickening inflation. The key benchmark indices in China, Hong Kong, Indonesia and Singapore rose by between 0.08% to 0.41%. China's inflation spiked in February 2010, driven by a surge in food prices, raising the chances of Beijing taking more steps to cool the country's economic recovery.

China's industrial production in the first two months of the year expanded 20.7% from a year earlier, picking up from an 18.5% rise in December 2009. That exceeded median estimates of 19.5% for the period.

Japan's Nikkei ended nearly 1% higher. The government reported Thursday that Japan's economy, the world's second biggest, expanded at a slower pace in the final three months of last year than initially estimated.

South Korea's benchmark index Kospi fell 0.34% after the country's central bank left its key interest rate at a record low Thursday. The Taiwan Weighted index fell 0.38%.

Trading in US index futures indicated that the Dow could shed 15 points at the opening bell on Thursday, 11 March 2010.

US stocks closed higher on Wednesday, 10 March 2010 led by financials and technology stocks. Staples and telecoms were the biggest decliners. The Dow closed flat at 10,567. The Nasdaq Composite index rose 0.75% and the S&P 500 index gained 0.45%. In economic news, wholesales inventories unexpectedly fell 0.2% in January as sales rose to their highest level since October 2008. In other data, mortgage applications rose last week even as mortgage rates rose.

The industry output figures for Italy and France were stronger than expected in January but analysts said there was little in the data to suggest a broader pick-up in euro zone economic growth.

The Greek economy is set to shrink by more than expected this year, the government said on Wednesday, as it braced for nationwide strikes protesting its plans for bringing the country's budget deficit under control.

Close home, the BSE 30-share Sensex rose 69.63 points or 0.41% to 17,167.96, its best close since 20 January 2010. The barometer index jumped 116.74 points at the day's high of 17,215.07 at the fag end of the trade. The Sensex lost 44.05 points at the day's low of 17,054.26 in early trade.

The 50-unit S&P Nifty rose 17.15 points or 0.34% to 5133.40, its highest level since 20 January 2010. Nifty hit a high of 5152.60.

The market breadth, indicating the overall health of the market was weak. On BSE, 1782 shares declined as compared with 1058 that advanced. A total of 81 shares remained unchanged. The breadth was positive in early trade.

The BSE Mid-Cap index fell 0.15% and the BSE Small-Cap index fell 0.5%. Both the indices underperformed the Sensex.

The BSE IT index (up 1%), the BSE Teck index (up 0.93%), the BSE Bankex (up 0.69%), the BSE Consumer Durables index (up 0.69%), the BSE Oil & Gas index (up 0.49%), the BSE HealthCare index (up 0.42%), outperformed the Sensex.

The BSE Auto index (down 0.95%), the BSE FMCG index (down 0.79%), the BSE PSU index (down 0.59%), the BSE Metal index (down 0.32%), the BSE Realty index (down 0.18%), the BSE Power index (down 0.1%), the BSE Capital goods index (was flat), underperformed the Sensex.

Among the 30-member Sensex pack, 15 rose while the rest fell.

BSE clocked a turnover of Rs 3799 crore, lower than Rs 4641.82 crore on Wednesday, 10 March 2010.

India's largest FMCG maker by sales Hindustan Unilever fell 4.21% after the company's competitor Procter & Gamble raised the weight of its 'Tide Naturals' detergent powder by 25%, effectively offering consumers lower pricing. Among other FMCG stocks, United Spirits, Britannia Industries, Nestle India fell by between 0.54% to 2.29%.

Index heavyweight Reliance Industries (RIL) advanced 0.84%, adding to Wednesday's 1.8% gains. As per reports, RIL is close to striking hydrocarbon at its Palar deepwater block in the Cauvery basin. In the Palar block, RIL is said to be testing a well. The hydrocarbon success would be known only after testing is completed.

Auto stocks fell on reports auto makers are in for a rough ride ahead as a rise in raw material prices coupled with costs associated with new emission norms could force them to increase prices further, which may hit volumes. India's largest bike maker by sales Hero Honda Motors fell 0.98% to Rs 1911.05. It had hit a all time high of Rs 1940 on Wednesday, 10 March 2010. Hero Honda has shortlisted Karnataka as one of the states for setting up its fourth manufacturing plant. Hero Honda Motors has reportedly proposed an investment of Rs 2,000 crore for the upcoming plant.

India's largest truck maker by sales Tata Motors fell 0.97%. The stock fell 3.24% on Tuesday after Germany's Daimler AG offloaded its entire stake in Tata Motors in bulk deals. Daimler AG sold its entire about 2.56 crore shares at an average price of Rs 751.67 in Tata Motors through various bulk deals on Tuesday, 9 March 2010.

Tata Sons, the holding entity for Tata Group firms, and Citigroup have acquired a total of 86.5 lakh shares of Tata Motors from Germany's Daimler AG. Tata Sons bought 40 lakh Tata Motors shares at Rs 750 each, while Citi bought 46.5 lakh shares at Rs 752.41 each

India's largest tractor maker by sales Mahindra & Mahindra (M&M) fell 0.52%. Mahindra & Mahindra is reportedly in talks with the Sonalika group to pick up a stake in the unlisted firm's unit which makes sports utility vehicles.

India's largest car maker by sales Maruti Suzuki India fell 0.91%, extending Wednesday's 1.34% losses on fears of rise in competition after rival firm Ford on Tuesday entered the small car market with 'Figo'.

The government raised excise duties on large cars and sport utility vehicles by 2%, which was immediately passed on by vehicles makers, including top carmaker Maruti Suzuki and utility vehicle makers Mahindra & Mahindra and Tata Motors. From 1 April 2010, all vehicles will have to comply with Euro IV emission norms across 13 major cities, adding to costs and setting the stage for another round of price hikes.

Banking stocks rose after credit offtake rose 15.5% at Rs 31.78 lakh crore for the fortnight ended 26 February 2010, raising expectations that credit growth could breach the Reserve Bank of India's projection of 16% by March-end. India's largest private sector bank by net profit HDFC Bank rose 0.72% India's largest private sector bank by net profit ICICI Bank rose 1.4%.

India's largest bank by net profit and branch network State Bank of India (SBI) rose 0.45%, recovering from last two days' slide. State Bank of India (SBI) chairman OP Bhatt said the bank is looking at tapping the retail bond market next year with a 10-year issue, although the initial issue size may be as small as Rs 50-100 crore. Meanwhile, a bill seeking to reduce Centre's shareholding in the SBI 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

IT stocks rose on upbeat US economic data. US is the biggest market for Indian IT firms. India's third largest software services exporter by sales Wipro rose 1.73%. India's second largest software services exporter by sales Infosys rose 0.92%.

India's largest software services exporter by sales Tata Consultancy Services (TCS) gained 1.31% extending Wednesday's 1.49% rise. Girja Pande, TCS's Asia-Pacific chairman reportedly indicated that the company hopes to quadruple its market share in Asia outside India within five to seven years.

Realty shares fell as the Budget proposed to impose service tax on the realty sector both on commercial rentals as well as on sale of under-construction housing units. The service tax would come to be about 3.5% of the cost of the apartment that includes the value of the land and also the cost of construction, realty body Credai said recently. Omaxe, Unitech, DLF, HDIL and Phoenix Mills fell by between 0.18% to 1.46%.

Some infrastructure stocks gained following the government's on the infrastructure sector in the latest Budget. The Finance Minister 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. Gammon India, Valecha Engineering, Jaiprakash Associates, Valecha Engineering, Nagarjuna Construction Company rose by between 0.03% to 1.12%.

Metal stocks edged lower as a gauge of six metals traded on the London Metal Exchange, fell 0.94% on Wednesday, 10 March 2010. JSW Steel, Tata Steel, Jindal Steel & Power, National Aluminum Company, Hindalco Industries fell by between 0.32% to 1.72%.

State-run miner NMDC fell 5.13% after the company's follow-on offering (FPO) received a tepid response.

Consumer durables stocks gained on hopes rise in disposable income following widening of tax slabs in the Union Budget 2010-11 may boost sales. Titan Industries, Asian Star Company, Blue Star and Rajesh Exports rose by between 0.76% to 2.06%.

Infrastructure developer Man Infraconstruction settled at Rs 348.25 on BSE, at a premium of 38.2% over the initial public offer price of Rs 252. The stock debuted at Rs 335, a 32.9% premium over the initial public offer (IPO) price.

Cals Refineries clocked the highest volume of 2.39 crore shares on BSE. Texmo Pipes (2.03 crore shares), Man Infrastructure (1.65 crore shares), IKF Technologies (0.77 crore shares) and Shree Ashtavinayak Cine Vision (0.61 crore shares) were the other volume toppers in that order.

Man Infrastructure clocked the highest turnover of Rs 574.91 crore on BSE. Texmo Pipes (Rs 299.53 crore), ICICI Bank (Rs 64.32 crore), State Bank of India (Rs 63.62 crore) and Reliance Industries (Rs 62.99 crore) were the other turnover toppers in that order.