Market snaps three-day losses ahead of Budget

The key benchmark indices edged higher amid intense volatility, snapping last three days' losses, as the government's Economic Survey for 2011-11 tabled in the parliament noted that deepening the reform process would hold the key to sustaining the fiscal consolidation process. The BSE 30-share Sensex was up 68.50 points or 0.39%, off close to 120 points from the day's high and up close to 230 points from the day's low. The market recovered after hitting 2-week lows as government's forecast of a strong about 9% economic growth for the year ending March 2012 offset a populist rail budget where passenger fares were kept unchanged. Firm global stocks also supported Indian equities. All eyes are now on the Union Budget 2011-2012 to be presented by Finance Minister Pranab Mukherjee on Monday, 28 February 2011.



Index heavyweight Reliance Industries edged higher in volatile trade. Auto, banking and retail stocks rose. Reliance Communications hit record low as some Reliance Anil Dhirubhai Ambani (ADA) group shares tumbled. Stocks of firms whose fortunes are linked to orders from Indian Railway fell after the rail budget. The market breadth, indicating the health of the market, was negative, compared with positive breadth earlier in the day.

Wild intraday gyrations were witnessed in the second half of the trading sessions after the Economic Survey was tabled at about 12:00 IST and during the presentation of Rail Budget which began at the same time. The market pared gains after a firm start triggered by higher Asian stocks and easing of global crude oil prices. The market regained positive terrain after slipping into the red to hit fresh intraday lows in morning trade. The Sensex hit a fresh intraday high later. The market pared gains in mid-morning trade.

The market held positive zone in early afternoon trade after the Economic Survey was presented in parliament today. Market pared gains in volatile trade after striking the day's high in afternoon trade. The market hit two-week low in mid-afternoon trade. The market regained strength after moving between positive and negative terrain in late trade.

The BSE 30-share Sensex was up 68.50 points or 0.39% to 17,700.91. The index gained 180.03 points at the day's high of 17,812.44 in early afternoon trade. The Sensex fell 162.44 points at the day's low of 17,469.97 in mid-afternoon trade, its lowest since 11 February 2011.

The S&P CNX Nifty was up 40.85 points or 0.78% to 5,303.55. The Nifty hit low of 5,232.75 in mid-afternoon trade, its lowest since 11 February 2011.

The BSE Mid-Cap index fell 0.22% and the BSE Small-Cap index declined 0.31%. Both of these indices underperformed the Sensex.

The market breadth, indicating the health of the market, was negative. The breadth was positive breadth earlier in the day. On BSE, 1601 shares declined while 1269 shares advanced. A total of 94 shares remained unchanged.

Among the 30-member Sensex pack, 17 fell while the rest rose.

BSE clocked turnover of Rs 3478 crore lower than Rs 3647.61 crore on Thursday, 24 February 2011.

Index heavyweight Reliance Industries (RIL) was flat at Rs 965.95 in volatile trade. The stock hit high of Rs 981.15 and low of Rs 954. RIL recently announced a major deal with BP whereby BP will take 30% stake in 23 oil and gas blocks of RIL. RIL would also be entitled to future performance payments of up to $1.8 billion based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to $20 billion.

Reliance Industries is likely to hit peak output of 80 million standard cubic meters per day from its eastern offshore KG-D6 fields in 2012-13 fiscal, the Economic Survey said today.

Some Reliance Anil Dhirubhai Ambani (ADA) group tumbled. Reliance Infrastructure, Reliance MediaWorks and Reliance Power fell by between 1.62% to 4.58%. Reliance Communications tumbled 5.4%. The stock hit record lows of Rs 85.20 today.

Most auto stocks rose after after Finance Minister Pranab Mukherjee said Indian markets need not worry over global oil price uncertainty, indicating Monday's budget may ease taxes and rationalise subsidies to cushion the impact of surging global oil prices. Truck and car maker Tata Motors rose 4.43% on reports car companies likely to raise prices by up to 2-3% next month to pass on higher input costs. Meanwhile, Tata Motors has reportedly denied TV reports that it plans to list its Jaguar Land Rover unit in London. Tata Motors bought the British luxury brand from Ford Motor Co for $2.3 billion in 2008.

Bajaj Auto rose 0.39%, reversing initial losses. The company has launched a new variant of its bike Discover 100. Hero Honda Motors and Ashok Leyland rose 0.66% and 0.97% respectively.

Some infrastructure stocks rose on expectations of more orders after the finance ministry in the annual economic survey stressed on infrastructure development. Hindustan Construction Company, Jaiprakash Associates, Nagarjuna Construction Company and IVRCL Infrastructure and Projects rose by between 0.3% to 5.54%.

The finance ministry's annual economic survey, a precursor to Monday's (28 February 2011) budget, said there was an urgent need to streamline land acquisition and environmental clearances to encourage the development of infrastructure projects. Infrastructure stocks also rose after the railway budget announced a Rs 57,630 crore outlay for 2011-12. Railways minister Mamata banerjee proposed to build a strong railroad infrastructure.

Some FMCG stocks rose on possible announcement of reforms in agriculture sector and populist majors in Union budget 2011-12. Dabur India, Nestle India, ITC and United Spirits rose by between 0.76% to 6.16%.

Most bank shares rose after the Economic Survey proposed to consider separate licences for basic and full banking services. ICICI Bank, Bank of Baroda, Bank of India, State Bank of India, Union Bank of India, Canara Bank, Oriental Bank, IDBI Bank, Axis Bank, Allahabad Bank, Yes Bank, Indian Overseas Bank and Punjab National Bank rose by 0.31% to 3.84%.

Pitching for industrial houses wanting to set up banks, the Economic Survey today said that they should be given banking licences to promote the goal of financial inclusion.

Retail stocks surged after the Economic Survey on Friday favoured a phased opening of foreign direct investments in multi-brand retail saying it could help address concerns of consumers and farmers, besides bringing technical know-how. Pantaloon Retail and Shoppers Stop jumped 5.67% and 3.47% respectively.

India's largest steel maker by sales Tata Steel rose 0.97% in volatile trade after the company signed an agreement to sell some assets of Teesside Cast Products to Sahaviriya Steel Industries, UK in a deal valuing the business at $469 million. TCP is based in the northeast of England and has a production capacity of 3.5 million tonnes of steel per year. The plant was mothballed about a year ago after a consortium of offtakers withdrew from a 10-year supply agreement.

India's biggest engineering & construction firm by sales Larsen & Toubro fell 0.66% extending Thursday's 4.94% losses on concerns unrest in West Asia and North Africa could impact operations in the region. L&T has orders from the Middle East.

Among other capital goods stocks, Bhel, BEML, Gammon India, Thermax and Siemens gained by between 0.53% to 2.9%.

Marketmen expect the government to continue thrust on development spending in the Union Budget 2011-12 to be unveiled on 28 February 2011. The capital goods sector expects the government to selectively raise import barriers for capital equipment, especially power equipment to facilitate domestic players.

Airline stocks recovered as oil retreated. Kingfisher Airlines, SpiceJet and Jet Airways rose by between 3.37% to 7.4%. Airline shares had tumbled recently as on fears of hike in jet fuel prices which are linked to crude oil prices. Jet fuel forms 40% of operation cost of airliners.

Software stocks extended recent losses on worries tax benefits under the Software Technology Parks of India (STPI) and export-oriented unit schemes may not be extended beyond March 2011. India's second largest software firm by sales Infosys Technologies lost 0.57%. India's largest software firm by sales TCS declined 0.45%. India's third largest software firm by sales Wipro rose 1.73%.

Stocks of firms whose fortunes are linked to orders from Indian Railway fell after the rail budget. Kalindee Rail Nirman, BEML, Stone India, Texmaco, Titagarh Wagon, Kernex Microsystem fell by between 2.9% to 13.74%.

Railway Minister Mamata Banerjee presenting the rail budget for 2011-12 in the Lok Sabha today, 25 February 2011 has kept passenger fares and freight rates unchanged. She promised to invest Rs 57630 crore in the network in the financial year 2011/12. She said the railways has got 85 proposals for public private partnership (PPP). As many as 442 stations are to be completed and 584 upgraded by 2012 and new railway line capacities are to be increased to 700 kilometres, she said.

Banerjee announced that the first coach from the new rail factory at Rae Bareli will roll out in the next three months. Also, there is a plan to set up a rail industrial park in Nandigram and a metro coach factory in Kolkata. A coach factory is also planned to come up at Singur as is a track-machine industry in Uluberia. A locomotive centre is to come up in Manipur's Imphal. Railways is to set up a bridge factory in J&K considering need for large number of bridges on railway projects in the state, Banerjee said.

Cals Refineries clocked highest volume of 2.28 crore shares on BSE. Unitech (1.06 crore shares), Kalindee Rail Nirman (69.56 lakh shares), Reliance Communications (61.01 lakh shares) and SpiceJet (56.76 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 214.64 crore on BSE. MphasiS (Rs 197.88 crore), Tata Steel (Rs 118.50 crore), Titagarh Wagons (Rs 106.08 crore) and Larsen & Toubro (81.15 crore) were the other turnover toppers in that order.

The Economy Survey tabled in parliament said the Indian economy could grow about 9% in FY 2012. The survey said a persistent anti-inflationary monetary stance was needed given current high inflation and economic growth. The survey also said farm output must be increased to combat high food prices. The spiralling crisis in the West Asia and rising global commodity prices could increase inflationary pressures at home, the Economic Survey today warned, observing food inflation has been in double digits for 76 weeks since 5 June 2009

The Economic Survey also said that the Direct Tax Code (DTC) is proposed to be introduced in April 2012. The continuing debt turmoil in the euro zone area could have an adverse fallout on the Indian economy, hurting its capital flows as well as exports, the Economic Survey said. The Survey said a slowdown in foreign direct investment inflows as well as tepid growth in developed countries could hit the country's exports and strain its balance of payments. The Survey said there was an urgent need to streamline land acquisition and environmental clearances to encourage the development of infrastructure projects. The Survey also called for early introduction of the Good and Service Tax

Crude-oil futures have surged in recent sessions to levels not seen since the latter half of 2008, and have breached the key $100-a-barrel level. However, the contract ended on a weak note on Thursday after several countries in the crisis hit oil-rich Middle East and North Africa region announced actions that could work to limit the spread of political unrest. Algeria officially lifted decades-old political restrictions and Saudi Arabia announced a $36 billion package of new programs and benefits for its citizens. US crude oil futures for April 2011 delivery were at $97.94 a barrel, up 66 cents, or 0.68%.

India imports majority of its crude oil requirements. Surging global oil prices have kept the spotlight on inflation pressures and the possibility of more monetary tightening from the Reserve Bank of India. Higher global oil prices may force the Indian government to raise diesel prices. This could add to inflationary pressures as diesel is a key transportation fuel.

European stocks inched higher on Friday, taking a breather after a week-long retreat, but ongoing turmoil in OPEC producer Libya kept gains in check. The key benchmark indices in France, Germany and UK rose by between 0.35% to 1.35%.

Asian markets rose on Friday as a sharp pullback in oil prices calmed concerns that their recent surge could derail the global recovery, nudging investors back toward riskier assets. The key benchmark indices in Hong Kong, Japan South Korea, Taiwan, Indonesia and Singapore were up by between 0.13% to 1.82%. China's Shanghai Composite was flat.

Trading in US index futures indicated that the Dow could gain 67 points at the opening bell on Friday, 25 February 2011.

US markets mostly closed lower but well off the day's lows in a volatile session on Thursday. In economic news, new US claims for jobless aid fell last week, hinting at an improvement in the labor market, but declines in new home sales and orders for a range of factory goods in January showed the economy still faced headwinds.