Tuesday, May 12, 2009

Sensex Regain 12000 Mark with Strong Pull Back

Speculation that the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) is gaining momentum in the ongoing parliamentary elections triggered a solid surge on the domestic bourses. Firm global stocks and buying by foreign funds supported the rally. Index heavyweight Reliance Industries galloped. Banking, IT, capital goods and realty stocks surged. The BSE 30-share Sensex jumped 475.04 points or 4.07% up close to 535 points from the day's low.

The Sensex crossed the psychological 12,000 mark as the market witnessed a sharp surge in late trade. The Sensex attained its highest closing in more than seven months.

Data showing a strong growth in consumer durables production in March 2009 reinforced expectations of a recovery of the economy. Production of consumer durables jumped 8.3% in March 2009 as compared to a 2% decline in March 2008. Overall, India's industrial output fell a steeper-than-expected 2.3% in March 2009 over March 2008, its third fall in four months. The manufacturing segment shrank by 3.3%. Mining rose by a modest 0.4% and electricity output climbed by a decent 6.3%.

The industrial production figure for February 2009 was revised to a 0.7% drop from a preliminary estimate of a 1.2% decline. Industrial output rose 2.4% the 2008/09 fiscal year (April-March), down from a revised 8.5% in 2007/08.

The stock market was volatile. Data showing heavy buying by foreign funds on Friday, 8 May 2009, helped domestic bourses shrug off weak global equities in early trade. But the market slipped into the red for a brief period in morning trade. It soon bounced back. Data showing a steeper-than-expected fall in industrial output in March 2009 pulled the market off the higher level in early afternoon trade.

The market regained strength shortly after the industrial production data showed a sharp surge in production of consumer durables in March 2009. The market extended gains in afternoon trade as some European stocks moved into the green from red. The market soared in late trade.

Fears of a fractured mandate from the parliamentary polls had triggered a 3.58% fall in the BSE Sensex in the past two trading sessions. The the month-long parliamentary elections that began on 16 April 2009 will conclude on Wednesday, 13 May 2009. Exit polls will be announced after the last round of voting ends on Wednesday and the election results are due on Saturday, 16 May 2009.

A party/alliance needs 272 seats in the 543-member parliament to claim power at the Centre. Consumption and investment decisions will be significantly impacted by any signs that the new government is unstable.

Heavy buying by foreign funds has bolstered sentiment on the stock markets. Foreign funds are aggressively buying Indian stocks. FIIs bought shares worth a net Rs 182.50 crore on Monday, 11 May 2009. FII inflow in May 2009 totaled Rs 4,692.70 crore (till 11 May 2009). FII inflow in calendar year 2009 totaled Rs 5,405.50 crore (till 11 May 2009).

European shares rose on a view that the worst may be over for the global economy. A latest stronger-than-expected economic data in China reinforced that view. Key benchmark indices in France and Germany rose by between 0.07% to 0.69%. But UK's FTSE 100 fell 0.37%.

UK same-store sales rose 4.6% in April 2009, the fastest rate of growth in three years, the British Retail Consortium (BRC) said. In April 2008, sales were very weak in the cold wet weather after Easter fell in March, the BRC said.

Asian stocks were mixed. Key benchmark indices in Japan, South Korea and Taiwan fell by between 0.82% to 3.23%. Key benchmark indices in Singapore and Hong Kong rose by between 0.38% to 0.56%.

China's Shanghai Composite rose 1.49% in choppy trade after the latest data showed China's urban fixed-asset investment climbed 30.5% during January-April 2009 from a year earlier as the government pumped money into building railways, oil pipelines and low-cost housing.

China's copper imports rose 7% to a record in April as buyers replenished stockpiles. Aluminum shipments almost tripled, the Beijing-based customs office said today. The Chinese government is spending 4 trillion yuan ($586 billion) to stimulate growth.

On the flip side, China's exports contracted 22.6% in April 2009 from a year earlier, accelerating from a 17.1% slide March 2009. Imports were down 23% on year, compared to a 25.1% decline in March 2009, according to data released Tuesday by the National Bureau of Statistics.

Meanwhile, the Bank of Korea's monetary policy committee left interest rates unchanged on Tuesday at a record low of 2% for a third-straight month on continued signs of improvement in the South Korean economy. The move was widely expected.

Trading in US index futures showed the Dow could rise 5 points at the opening bell on Tuesday, 12 May 2009. Dow futures were in the red earlier in the day.

US stocks fell on Monday 11 May 2009 due to profit taking after a two-month run-up, while news of several share offerings weighed on banks as investors worried about their dilutive impact on current shareholders. The Dow declined 155.88 points, or 1.8%, to 8,418.77. The S&P 500 index declined 19.99 points, or 2.2%, to 909.24. The tech-focused Nasdaq composite index was down 7.76 points, or 0.5%, to 1,731.24.

The BSE 30-share Sensex jumped 475.04 points or 4.07% to 12,158.03, its highest closing since 3 October 2008. The Sensex rose 511.64 points at the day's high of 12,194.63 in late trade. At the day's low of 11,625.39, the Sensex fell 57.60 points in early trade.

The S&P CNX Nifty was up 126.50 points or 3.56% to 3,681.10.

From 9,647.31 on 31 December 2008, the BSE Sensex has risen 2510.72 points or 26.02% in calendar year 2009.

The market breadth, indicating the overall health of the market, turned positive from a negative breadth earlier in the day. On BSE, 1,416 shares rose as compared with 1,119 that fell. A total of 56 shares remained unchanged.

From the 30 share Sensex pack, 29 stocks rose and rest fell.

BSE clocked a turnover of Rs 4,919 crore, higher than Rs 4,380.10 crore on Monday, 11 May 2009.

Nifty May 2009 futures were at 3,697.40, at a premium of 16.30 points as compared to the spot closing of 3,681.10. Turnover in NSE's futures & options (F&O) segment surged to Rs 53,677.79 crore from Rs 45,810.47 crore on Monday, 11 May 2009.

The BSE Mid-Cap index rose 0.94% and the BSE Small-Cap index gained 1.32%. However, both the indices underperformed the Sensex.

The BSE IT index (up 5.19%), the BSE TECk index (up 5.04%), the BSE Bankex (up 4.83%), outperformed the Sensex.

The BSE FMCG index (up 1.02%), the BSE Healthcare index (up 1.33%), the BSE Auto index (up 1.76%), the BSE PSU index (up 1.79%), the BSE Consumer Durables index (up 1.8%), the BSE Metal index (up 2.12%), the BSE Capital Goods index (up 2.72%), the BSE Power index (up 3.02%), the BSE Realty index (up 3.77%), the BSE Oil & Gas index (up 3.97%), underperfomed the Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 5.32% to Rs 1,958.30. Analysts expect strong growth in bottom line in coming quarters from sale of gas which it started pumping last month from its deep-sea field off the east coast.

Ratnagiri Gas & Power, which supplies electricity to the western Indian state of Maharashtra, on Friday, 8 May 2009, agreed to buy natural gas from an offshore field operated by Reliance Industries.

PSU OMCs rose on fall in oil prices. BPCL, Indian Oil Corporation and HPCL rose by between 1.53% to 3.67%. Oil fell for a second day in a row on Monday, 11 May 2009, as a drop in US equities signaled the global economy and fuel consumption may not recover anytime soon. Crude oil for June delivery fell as much as 69 cents, or 1.2%, to $57.81 a barrel, and traded at $58.01 on the New York Mercantile Exchange. Lower oil prices will reduce underrecoveries at the state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

Bank stocks surged boosted by strong Q4 March 2009 results by State Bank of India (SBI), India's biggest bank in terms of branch network, during the weekend. State Bank of India (SBI), India's biggest bank in terms of branch network rose 2.76%. State Bank of India reported a forecast-beating 45.6% rise in net profit to Rs 2742.31 crore on a 34.6% increase in operating income to Rs 22060.61 crore in Q4 March 2009 over Q4 March 2008. Profit was boosted after gains from trading trebled and loan demand soared as borrowers scrambled for funds in a slowing economy. The bank announced the results on Saturday, 9 May 2009.

India's largest private sector bank by net profit ICICI Bank rose 6.72% even as its American depository receipt (ADR) fell 3.52% on Monday, 11 May 2009.

India's second largest private sector bank by operating income HDFC Bank gained 3.92% even as its ADR fell 1.46% on Monday.

India's biggest dedicated housing finance firm by operating income HDFC rose 7.66%.

Outsourcing focussed IT stocks spurted on talks the worst may be over for the US economy. US is the biggest market for Indian IT firms. India's second largest software services exporter by sales Infosys rose 5.51% even as its American depository receipt (ADR) fell 0.35% on Monday, 11 May 2009.

India's largest software services exporter by sales TCS rose 3.57%. India's third largest software services exporter by sales Wipro gained 7.4% even as its ADR slipped 4.8% on Monday.

Meanwhile, analysts feel that US government's plan to scrap tax incentives that encourages American firms to ship jobs overseas is unlikely to dent business for Indian outsourcers. On 4 May 2009, US president Barack Obama announced plans to reduce tax breaks for US-based multinationals shipping jobs to places like India. Instead, the tax incentives would now go to those creating jobs inside the US, in places like the Buffalo city, New York.

Currently, US businesses that invest overseas can take an immediate tax deduction for expenses supporting their overseas investments. They can also defer the payment of US taxes on the profits they make from such investments. But, now the Obama Administration wants to ensure that companies do not receive deductions for expenses supporting their offshore investments until they pay tax on their offshore profits. This is intended to disincentivise US companies from retaining profits abroad.

Infosys said the proposal, if implemented, was unlikely to reverse the outsourcing of a gamut of services by US firms to Indian companies. "The current proposal, as we understand, is to close corporate tax loopholes on US multinational corporations and crack down on their overseas tax havens," the company said in a statement. "We do not believe that it has anything to do with IT outsourcing done by US corporations.", Infosys said.

Realty stocks rose on recent reports banks have stepped up lending to real estate firms. According to Reserve Bank of India (RBI) data, loans to the real estate sector grew 61% with Rs 90,765 crore outstanding during the year upto 27 February 2009 over the same period previous year. DLF, Unitech, Indiabulls Real Estate, Phoenix Mills, Omaxe, rose by between 1.13% to 6.03%.

Capital goods stocks rose after India's biggest engineering & construction firm by revenue Larsen & Toubro (L&T), last month, said it expects a strong order flow in the year ending March 2010 (FY 2010). L&T rose 1.97%. Bharat Heavy Electricals, Thermax, Punj Lloyd, Praj Industries, Siemens, rose by between 0.02% to 5.12%. L&T on 16 April 2009 said the company expects its order inflow to grow by 25-35% in FY 2010.

Some healthcare stocks rose as most of the healthcare firms reported better than expected Q4 March 2009 result. Dr Reddy's Laboratories, Pfizer, Biocon, Cipla, Sun Pharmaceutical Industries rose by between 0.2% to 6.28%.

FMCG stocks rose triggered by expectations of a surge in sales due to forecast of a good monsoon this year. ITC, United Spirits and United Breweries rose by between 1.77% to 5.01%. FMCG firms derive a substantial revenue from rural markets.

But, India's largest FMCG major by sales Hindustan Unilever fell 0.44% as it reported a lower-than-expected rise of 3.68% in net profit to Rs 394.99 crore on a 6% rise in sales to Rs 3988.33 crore in Q4 March 2009 over Q4 March 2008. Profit fell short of expectations mainly due to provision for retirements and restructuring costs. The company announced the result on Monday, 11 May 2009.

Auto stocks gained on improved sales in April 2009. Tata Motors Bajaj Auto and Mahindra & Mahindra, rose by between 1.18% to 4.13%.

India's largest car maker by sales Maruti Suzuki India rose 3.36%. The company said on Saturday, 9 May 2009, it will be launching its premium compact car Ritz on 15 May 2009 in Delhi.

Metal stocks gained as copper and aluminum rose for the first time in four days on the London Metal Exchange on stronger-than-expected economic data in China. Tata Steel, Steel Authority of India, Sterlite Industries, Hindalco Industries, National Aluminum Company, rose by between 1.37% to 5.31%.

ChinaĆ¢€™s copper imports rose 7% to a record in April 2009 as buyers replenished stockpiles. Aluminum shipments almost tripled, the Beijing-based customs office said today. The nation accounts for 33% of global aluminum consumption and 26% of copper demand, according to Royal Bank of Scotland Group Plc.

Cals Refineries clocked the highest volume of 3.67 crore shares on BSE. Unitech (3.01 crore shares), Suzlon Energy (2.16 crore shares), Housing Development & Infrastructure (1.11 crore shares) and Ispat Industries (1.04 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 253.59 crore on BSE. ICICI Bank (Rs 222.20 crore), Reliance Capital (Rs 192.47 crore), Housing Development & Infrastructure (Rs 191.35 crore) and Suzlon Energy (Rs 166.69 crore were the other turnover toppers in that order.