Bears on the mat

A solid surge in Bajaj Auto and gains in index heavyweights Infosys and ICICI Bank sent the BSE Sensex surging. The government today estimated GDP growth of 9.2% in the financial year ending March 2007, above RBI’s forecast between 8.5 - 9%, spreading more cheer in the market.

In the first official growth estimate for 2006/07, the Central Statistics Office said manufacturing output growth was estimated at 11.3%, compared with 9.1% a year ago. India had last week revised upwards growth for the fiscal year 2005/06 to 9% from a previous reading of 8.4%.

However, the same strength was not reflected by the broader market. The market-breadth turned negative in the latter part of trading. The breadth held strong till the afternoon.

The Sensex’s provisional closing was 14,650.46, a gain of 172.27 points (1.1%). A bout of volatility afflicted the Sensex after it had struck an all-time high above 14,600 in afternoon trade.

After cooling from this record high, the market firmed up once again in late-trading, striking a lifetime high of 14,663.26 at 15:21 IST, and surpassing an earlier all-time high of 14,564.80 struck of Tuesday (6 February 2007).

The S&P CNX Nifty’s provisional closing was 4,223.70, a gain of 27.80 points (0.66%). The relatively muted gains in Nifty compared to those in the Sensex were due to a fall in oil exploration major, ONGC, which is a heavyweight in the Nifty.

The BSE clocked a turnover of Rs 4641 crore.

Bajaj Auto, which is one of the leading players in the life insurance sector, spurted nearly 9% to Rs 3078. As per reports, the group of ministers (GoM) on insurance headed by external affairs minister Pranab Mukherjee is scheduled to meet on 13 February 2007 to decide the fate of amendments to the insurance bill.

The bill, which proposes to hike the foreign direct investment (FDI) cap for insurance companies to 49% from the present 26%, was referred to the GoM after the Cabinet deferred a decision on the contentious issue in December 2006. Once the GoM forms a view on it, the issue will be taken up by the Cabinet. The government wants to introduce the bill in the forthcoming Budget Session of Parliament.

IT bellwether Infosys gained nearly 4% to Rs 2360. BSE has raised Infosys’ free float factor for the purpose of calculating its weightage to 0.85% from 0.8% with effect from 12 February 2007. Free float factor is used for calculating weightage of a scrip in a free-float index like the Sensex. Index funds tracking the Sensex will have to make adjustments in their holdings following the changes in the free-float factor.

Oil exploration major ONGC lost 1.6% to Rs 893.70, after the government halted moves to confirm the appointment of R S Sharma as chairman.

Copper and aluminium major Hindalco 4% to Rs 181.45, following a recovery in global copper prices.

ICICI Bank gained 2.5% to Rs 982, after the largest private sector bank on Tuesday, said it had raised the reference rate by 1% for corporate loans and home loans, from 9 February 2007.

Engineering & construction major L&T gained nearly 3% to Rs 1749. The stock hit a lifetime high of Rs 1767. As per reports, L&T will sign a deal with European aerospace and defence group, EADS, on Thursday to sell components for the latter's defence systems.

Reliance Industries rose 0.2% to Rs 1392. The stock came off a session’s high of Rs 1399. The BSE has reduced Reliance Industries (RIL)’s free float factor to 0.5% from 0.55%.

The government’s robust GDP growth forecast for the current fiscal year triggered buying in select cement pivotals. Grasim gained 3% to Rs 2877 and ACC rose 1.5% to Rs 1060.90. The demand for cement is closely linked to economic growth. Cement scrips had plunged in late-January 2007, after the government got rid of import duty on cement in a bid to rein in inflation.

European markets were slightly firmer in early trade. Key benchmark indices in London, Germany and France were up between 0.05 - 0.27%. Asian markets were mixed. Japan’s Nikkei 225 average shed 0.6%. Hong Kong’s Hang Seng was up 0.12%. It had moved between positive and negative zone during the session.

Nymex crude was up 60 cents at $59.48 a barrel.