BSE Small-Cap, Mid-Cap indices outshine Sensex

The market logged gains for third straight week on a slew of economic reforms announced by the government recently. The barometer index, BSE Sensex, reached its highest closing level in nearly 14 months. The S&P CNX Nifty attained its highest closing level in almost 14-1/2 months. The BSE Mid-Cap and the BSE Small-Cap indices outperformed the BSE Sensex. The market logged gains in two of four trading days during the week ended Friday, 21 September 2012. The stock market was closed on Wednesday, 19 September 2012, on account of Ganesh Chaturthi. The BSE Sensex gained 288.56 points or 1.56% to 18,752.83 in the week ended 21 September 2012, its highest closing level since 25 July 2011. The 50-unit S&P CNX Nifty surged 113.50 points or 2.03% to settle at 5,691.15, its highest closing level since 7 July 2011. The BSE Mid-Cap index advanced 3% and the BSE Small-Cap index gained 2.81% in the week. Both these indices outperformed the Sensex. Trading for the week began on an upbeat note as key benchmark indices advanced on Monday, 17 September 2012, as the government after market hours on Friday, 14 September 2012, announced liberalization of foreign investment rules in retail, aviation and broadcasting sectors. The BSE Sensex advanced 78.04 points or 0.42% to 18,542.31. Key benchmark indices edged lower on Tuesday, 18 September 2012, as euro zone debt worries resurfaced following further rise in Spanish government bond yields on Monday, 17 September 2012. The BSE Sensex lost 46.30 points or 0.25% to 18,496.01. The market edged lower for the second straight day on Thursday, 20 September 2012, on weak global stocks and amid political crisis at home following Trinamool Congress' decision to pull out from the government to protest economic reforms introduced by Prime Minister Dr. Manmohan Singh. The BSE Sensex lost 146.76 points or 0.79% to 18,349.25. Key benchmark indices surged on Friday, 21 September 2012, with the market sentiment boosted by the government on Thursday notifying the rules for allowing greater foreign investment in retail, aviation and broadcasting sectors. The BSE Sensex jumped 403.58 points or 2.2% to 18,752.83. From the 30-share Sensex pack, 20 stocks rose and the rest of them fell in the week ended Friday, 21 September 2012. India's largest sponge iron steel maker by capacity Jindal Steel & Power (JSPL) surged 14.6% to Rs 426.60 and was the top gainer from the Sensex pack. The stock recovered on bargain hunting after a recent steep slide. Index heavyweight Reliance Industries (RIL) rose 1.06% to Rs 849.90. DSP Merrill Lynch and Citigroup Global Markets India, who are the managers of RIL's buyback programme, have announced that RIL has purchased 3.90 crore shares and spent Rs 2794.73 crore (excluding brokerage, service tax, Securities Transaction Tax, Stamp Duty, Exchange Transaction Charges and Sebi fees) till 18 September 2012 under the company's ongoing share buyback program. RIL has set maximum buyback price of Rs 870 per share. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in June 2012 that the company's buyback program represents a highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future. Index heavyweight and cigarette maker ITC shed 2.41% to Rs 261.65. The stock had scaled a record high of Rs 272.50 in intraday trade on 14 September 2012. L&T gained 6.54% to Rs 1584.20. The stock hit a 52-week high of Rs 1595 in intraday trade on Friday. The company last week said it has restructured its IT and L&T Integrated Engineering Services businesses with a view to accelerate growth in the technology space. L&T Infotech has been reorganised around two business clusters, "industrial" and "services". L&T Integrated Engineering Services (IES) will be rebranded as L&T Technology Services. As a part of this strategy, three US-based professionals - Keshab Panda, Mukesh Aghi and Vivek Chopra will join as directors on the L&T Infotech board. L&T believes this restructure will help the company in growing these businesses, the company said in a statement. Bank stocks rose across the board on speculation that as part of the renewed push to big bang economic reforms, the Manmohan Singh government is likely to clear a proposal to restructure the debt of state electricity boards (SEBs) and power distribution companies (discoms) to revive the ailing sector. According to Reserve Bank of India data, the power sector has a total outstanding debt of Rs 344980 crore, or 7.94% of the banking sector's non-food credit as on 27 July 2012. State Bank of India jumped 12.28%. The bank said on Thursday, 20 September 2012, that it has decided to revise downwards its Base Rate by 25 basis points (bps) from 10% per annum to 9.75% per annum effective from September 20, 2012. HDFC Bank rose 2.15% to Rs 625.25 after striking a record high of Rs 628 on Friday, 21 September 2012 ICICI Bank gained 5.85% to Rs 1065.25. The stock hit a 52-week high of Rs 1085 on Friday, 21 September 2012 India's largest software services exporter by revenues Tata Consultancy Services (TCS) fell 7.70%. The company announced during trading hours Tuesday, 18 September 2012, the official opening of the TCS Solutions Center - Minneapolis in Bloomington, Minnesota. The 50,000 square foot facility will be home t0 roughly 300 TCS employees. The center will serve as a hub for delivering technology services to customers in the region and is an integral part of TCS' Global Network Delivery Model. Bhel (up 13.54%), Bharti Airtel (up 9.41%) and Sterlite Industries India (up 5.63%) edged higher from the Sensex pack. Dr Reddy's Laboratories (down 5.87%), Hindustan Unilever (down 3.26%) and Wipro (down 3.22%) edged lower from the Sensex pack. The government on Friday, 21 September 2012, approved the operational features of the Rajiv Gandhi Equity Savings Scheme, allowing an income-tax waiver of 50% on new equity investments of up to Rs 50,000 by retail investors who have annual income of less than Rs 10 lakh. The government had first made the announcement of the Rajiv Gandhi Equity Savings Scheme in the Union Budget for 2012-13 announced in March 2012. The tax-saving plan is part of the steps the government announced the Budget to encourage the flow of India's significant household savings into financial markets. The scheme is open to new retail investors, identified on the basis of their PAN numbers. This includes those who have opened the Demat account but have not made any transaction in equity and/or in derivatives till the date of notification of this scheme and all those account holders other than the first account holder who wish to open a fresh account. The maximum investment permissible under the Scheme is Rs 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year. To benefit the small investors, the investments are allowed to be made in installment in the year in which tax claims are made. Under the scheme, those stocks listed under the BSE 100 or CNX 100, or those of public sector undertakings which are Navratnas, Maharatnas and Miniratnas would be eligible. Follow-on public offers (FPOs) of the above mentioned companies would also be eligible under the scheme. IPOs of PSUs, which are getting listed in the relevant financial year and whose annual turnover is not less than Rs 4000 crore for each of the immediate past three years, would also be eligible. Exchange Traded Funds (ETFs) and Mutual Funds (MFs) that have RGESS eligible securities as their underlying and are listed and traded in the stock exchanges and settled through a depository mechanism have also been brought under RGESS. The total lock-in period for investments under the scheme would be three years, including an initial blanket lock-in period of one year, commencing from the date of last purchase of securities under RGESS. After the first year, investors would be allowed to trade in the securities in furtherance of the goal of promoting an equity culture and as a provision to protect them from adverse market movements or stock specific risks as well as to give them avenues to realize profits. Investors would, however, be required to maintain their level of investment during these two years at the amount for which they have claimed income tax benefit or at the value of the portfolio before initiating a sale transaction, whichever is less, for at least 270 days in a year. The calculation of 270 days includes those days pursuant to the day on which the market value of the residual shares/units has automatically touched the stipulated value after the date of debit. The general principle under which trading is allowed is that whatever is the value of stocks/units sold by the investor from the RGESS portfolio, RGESS compliant securities of at least the same value are credited back into the account subsequently. However, the investor is allowed to take benefits of the appreciation of his RGESS portfolio, provided its value, as on the previous day of trading, remains above the investment for which they have claimed income tax benefit. For the purpose of valuation of shares, the closing price as on the previous day of the date of trading will be considered so that new investors are certain about their debits and credits into the account. In case the investor fails to meet the conditions stipulated, the tax benefit will be withdrawn. The finance ministry on Friday, 21 September 2012, announced reduction in the tax rate on the interest paid to overseas lenders by local companies to 5% from 20%. The rate is applicable from July 2012 until June 2015. "This lower rate of taxation will apply to interest paid to a non-resident by an Indian company for money borrowed in foreign currency from a source outside India, either under a loan agreement or by way of long-term infrastructure bonds," the Finance Ministry said in a statement. The tax reduction will encourage corporates to borrow more for funding expansion projects. Over the past few weeks, the Reserve Bank of India has eased curbs on overseas borrowing for companies in the manufacturing and infrastructure sectors to boost growth The government on Thursday evening braved intense political opposition to notify the rules for allowing 51% foreign direct investment (FDI) in multi-brand retail. The government also notified on Thursday the relaxed conditions for single brand retail as well as the norms for allowing 49% investment by foreign airlines in Indian carries and permitted greater foreign investment in some sections of the broadcasting sector. Samajwadi Party chief Mulayam Singh Yadav has hinted at continuing giving outside support to the UPA saying he does not want 'communal forces' to come to power. The UPA government, which has been reduced to a minority after the Trinamool Congress decided to withdraw its support, can safely cross the half-way mark in the Lok Sabha with Samajwadi Party's support. Samajwadi Party has 22 MPs. "We are giving support to the Congress so as not to allow the communal forces to come to power," Mulayam said on Friday. When asked about his reactions to the government's policies, Mulayam said he was against the government's policies, but wanted to keep 'criminal forces' at bay. "We are against the policies of Congress. We are not in UPA, but we support them to keep criminal forces away," Mulayam said. However, Mulayam also endorsed a Third front for the next elections. "The third front will win next elections. Who will lead the Third front will be decided later, Mulayam said. The next general election is due in May 2014. Six ministers of Trinamool Congress are set to formally submit their resignation letters to President Pranab Mukherjee today, 21 September 2012. Trinamool Congress early this week decided to withdraw from the government due to a recent hike in diesel prices, the government's decision to cap subsidised LPG for households and to allow 51% FDI in multi-brand retail. As per media reports, Prime Minister Manmohan Singh will addresses the nation today, 21 September 2102, to explain the economic rationale behind the government's decisions to hike fuel prices and allow foreign supermarkets into the country. The Reserve Bank of India Monday, 17 September 2012, announced a reduction of 25 basis points in the cash reserve ratio (CRR) of scheduled banks to 4.5% of their net demand and time liabilities (NDTL) effective the fortnight beginning 22 September 2012 from current 4.75% after mid-quarter review of monetary policy. The reduction in CRR will inject around Rs 17000 crore of primary liquidity into the banking system, RBI said in a statement. The RBI kept its policy rate viz. the repo rate unchanged at 8%, stating that inflationary pressures, both at wholesale and retail levels, remain strong. As inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflation expectations, RBI said. Finance Minister P. Chidambaram, Monday, 17 September 2012, said the government will unveil more measures to narrow fiscal deficit and to boost economic growth, which may encourage the central bank to cut interest rates at its next monetary policy review on 30 October 2012. He didn't elaborate on what the measures could be. RBI is scheduled to undertake Second Quarter Review of Monetary Policy - 2012-13 on 30 October 2012.