Sensex up 60% in 2009 as FII inflow crosses Rs 25000 crore

Firm global markets and higher US index futures helped Indian stocks register strong gains for the second straight day. The barometer index BSE Sensex attained its highest closing in nearly 10 months and the S&P CNX Nifty scales highest closing in more than a year. Comments by Petroleum Secretary R.S. Pandey that the government is committed to reforms in fuel pricing also boosted the sentiment. However, the market breadth, indicating the overall health of the market, turned negative in late trade compared to a strong breadth earlier in the day.

Realty stocks fell even as capital goods stocks rose. Banking stocks pared intraday gains. The BSE 30-share Sensex rose 339.81 points, or 2.25%, up close to 300 points from the day's low and off close to 110 points from the day's high.

Volatility was high. A sharp surge pushed the BSE Sensex to its highest level in nearly 10 months in morning trade. The market came off the higher level later before regaining strength. The Sensex surged to its highest level in nearly an year in mid-afternoon trade. It pared gains later.

Indian stocks today extended their recent strong gains on a view that ample global liquidity and a return of risk appetite will help India Inc help raise funds for expansion which in turn will boost corporate profits. India Inc has already raised almost Rs 5,000 crore from three qualified institutional placements (QIPs) so far in 2009 and announced plans to raise another Rs 20,000 crore.

Foreign funds are aggressively buying Indian stocks. FII inflow in June 2009 totaled Rs 4,718.80 crore (till 9 June 2009). FII inflow in calendar year 2009 totaled Rs 25,192.30 crore (till 9 June 2009).

Net inflows into domestic equity mutual funds rose to Rs 1,930 crore in May 2009, the highest in 14 months, and more than twice the amount in the first four months of 2009, according to data from the Association of Mutual Funds in India.

Finance Minister Pranab Mukherjee today said banks should provide credit at reasonable rates to spur growth, saying cuts in official rates by the Reserve Bank of India had not been passed on. "I would urge the banks to address these concerns expeditiously and in adequate measure," Mukherjee said after a meeting with chiefs of state-run banks. "This will help restore the environment for rapid growth and ensure that the growth process benefits," he said.

Mukherjee said banks have agreed to explore the possibility of reducing rates after a meeting with chiefs of state-run banks.

Interest rates in India are falling thanks to ample liquidity in the banking system, low headline inflation and a loose monetary policy stance of the Reserve Bank of India. However, inflation may rise if oil and metal prices which have risen sharply in 2009 continue to rally.

A change in the Reserve Bank of India's current loose monetary policy stance if and when it takes place may weigh on equities. Investors have been betting that falling interest rates in India may help sustain strong domestic demand and also support a larger capital expenditure programme of India Inc. Late last week, India's biggest private sector bank by net profit ICICI Bank cut prime lending rate by 50 basis points.

Rising metal prices is a cause of concerns for manufacturing companies as their raw material costs may shoot up.

The government's oil subsidy bill may remain high and it could continue to put pressure on the already high fiscal deficit if the government does not resort to decontrol of oil prices. However, the surging rupee against the dollar may mitigate the impact to some extent as India is a major importer of crude.

Petroleum Secretary R.S. Pandey today said the government is committed to reforms in fuel pricing but it wants to ensure affordable fuel supply. Pandey's comments come in the backdrop of a newspaper report on Tuesday that the government may defer a proposal to decontrol pricing of gasoline and diesel because of the increase in crude oil prices. Trinamool Congress (TC), a key ally in Prime Minister Manmohan Singh's government, opposes lifting controls on fuel pricing. With her eye on a series of local elections coming up in West Bengal, she told a Bengali television channel on Monday that her party would protest against any move which would result in higher fuel prices.

The government fixes the price of petrol and diesel and compensates state refiners, such as Indian Oil Corporation, HPCL and BPCL by supplying domestic crude oil at a discount and by issuing bonds to shore up their balance sheets.

Any disappointment on reforms may weigh on the stock market at a time when many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will push economic reforms to boost growth.

The petroleum minister had recently said he will submit a proposal for deregulation of oil products to the Cabinet in six to eight weeks. If government removes price controls on petrol and diesel, it would benefit PSU OMCs and also the government, which has been issuing oil bonds to share PSU OMC's burden. It would also persuade private refiners, such as Reliance Industries and Essar Oil, to reenter the oil-marketing business.

Finance Minister Pranab Mukherjee on 26 May 2009 said that a sustained stimulus to economic growth is possible by next round of reforms. He said reviving growth momentum is a top priority for the government adding that fiscal prudence will also be kept in mind. Investor expectations from the new government are high. Investors expect financial sector reforms such as increase in the cap on foreign direct investment in insurance sector to 49%, from 26% at present.

Unveiling the agenda of the government, President Pratibha Patil in her speech addressed to a joint session of both houses had last week indicated government's intension to divest stake in state-run firms. The government, however, intends to retain control over state-run firms and will continue to hold at least 51% stake. But some investors are concerned that the government's two key allies viz. the DMK and Trinamool Congress (TC) may oppose economic reforms.

Prime Minister Manmohan Singh on Tuesday said India will achieve an economic growth of at least 7% this fiscal and promised more resources for areas like infrastructure and public services. He said India will be able a growth rate of 8-9%, even when the world grows at a lower rate.

The Prime Minister said the reason behind his optimism was that India's savings rate, which determines the money that can be deployed for development projects, was still high at 35% of gross domestic product (GDP).

Manmohan Singh also sought to allay fears that pump priming of the economy by way of stimulus packages announced earlier and measures that will follow in the ensuing months would fuel inflation. "It (expenditure towards infrastructure) will not add to inflation, but to our economic growth."

According to the Prime Minister, fiscal deficit had increased sharply but even then India had enough resources to spend on flagship programmes thanks to the average annual growth of 8.6% achieved during the past five years. He also said that his government was deeply committed to the agenda listed in the President's address, adding flagship programmes will be further strengthened and public delivery system made more transparent.

European stocks surged today as higher commodity prices and a report on Australian consumer confidence added to evidence that the global recession is easing. Key benchmark indices in France, Germany and UK were up by between 1.82% to 2.35%.

Asian stocks rose for the first time in three days, as higher metal and oil prices boosted commodity companies and the biggest gain in Australian consumer confidence in 22 years added to evidence the global recession is easing. Key benchmark indices in Hong Kong, Singapore, South Korea and Taiwan rose by between 0.75% to 4.03%.

An Australian consumer sentiment index compiled by Westpac Banking Corp. and the Melbourne Institute that was released today showed an increase of 12.7% in June 2009 from the previous month to 100.1 points. It's the first time since January 2008 that the index was above 100, indicating optimists outnumber pessimists.

Japan's Nikkei rose 2.09% even as a key indicator of Japanese corporate capital investment slipped far more than expected. Orders for Japanese machinery fell to a 22-year low and producer prices tumbled the most since 1987 as dwindling profits forced companies to cut costs amid the worst postwar recession. Bookings, an indicator of capital investment in the next three to six months, fell 5.4 % to 688.8 billion yen ($7.1 billion) in April 2009, the lowest since 1987, the Cabinet Office said today in Tokyo. Wholesale prices, the costs companies pay for energy and raw materials, slid 5.4 % in May 2009 from a year earlier, the Bank of Japan said.

China's Shanghai composite rose 1.02% as consumer prices fell for a fourth month, making it easier for the government to keep interest rates low and boost spending to revive the world's third-largest economy. Prices dropped 1.4% in May 2009 from a year earlier, after falling 1.5% in April 2009, the statistics bureau said today.

Also aiding the rally, two Chinese newspapers reported that China's industrial production and retail sales data due later in the week will come in ahead of economist expectations.

US stock futures on Wednesday pointed to a strong start as investors went back into equities and commodities on confidence surrounding the US and Chinese economies. Trading in the US index futures indicated Dow could rise 116 points at the opening bell today, 10 June 2009.

Most US stocks rose on Tuesday, 9 June 2009, as a better-than-estimated forecast at Texas Instruments Inc. spurred gains in technology companies. The broader S&P 500 index added 3.29 points, or 0.4%, to 942.43, and Nasdaq Composite Index rose 17.73 points, or 1%, to 1,860.13. But the Dow Jones Industrial average was down 1.43 points, or less than 0.1%, to 8,763.06.

The BSE 30-share Sensex rose 339.81 points, or 2.25%, to 15,466.81 its highest closing since 11 August 2008. The Sensex rose 453.81 points at the day's high of 15,580.81 in mid-afternoon trade, its highest level since 18 June 2008. At the day's low of 15,168.18, the Sensex rose 41.18 points in early trade.

The S&P CNX Nifty was up 104.95 points, or 2.31%, to 4,655.90 its highest closing since 5 June 2008. Nifty June 2009 futures were at 4665, at a premium of 9.75 points as compared to the spot closing of 4655.25. Turnover in NSE's futures & options (F&O) segment surged to Rs 73,359.99 crore from Rs 69,273.85 crore on Tuesday, 9 June 2009.

BSE clocked a turnover of Rs 8,302 crore higher than Rs 8,002.02 crore on Tuesday, 9 June 2009.

On the back of heavy buying by foreign funds, the Sensex has jumped 5,819.50 points or 60.32% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 7,306.41 points or 89.53%.

Coming back to today's trade, the market breadth, indicating the overall health of the market turned negative in contrast to a strong breadth seen earlier in the day. On BSE, 1,212 shares rose as compared with 1,549 that declined. A total of 55 shares remained unchanged.

From the 30 share Sensex pack 23 rose while the rest fell.

The BSE Mid-Cap index was up 1.59%. The BSE Small-Cap index was up 0.34%. Both these indices, however, underperformed the Sensex.

The BSE Power index (up 3.62%), the BSE Capital Goods index (up 3.46%), the BSE Consumer Durables index (up 2.74%), the BSE Bankex (up 2.49%), the BSE Healthcare index (up 2.31%), outperformed the Sensex.

The BSE Realty index (down 1.14%), the BSE PSU index (up 0.97%), the BSE IT index (up 1.06%), the BSE Auto index (up 1.53%), the BSE TECk index (up 1.68%), the BSE Oil & Gas index (up 2.07%), the BSE FMCG index (up 2.08%), the BSE Metal index (up 2.14%), underperfomed the Sensex.

Oil stocks rose as crude oil raced towards $71 a barrel on Wednesday, after settling above $70 on Tuesday for the first time in seven months on a larger-than-expected fall in crude oil stocks and a forecast that falling oil demand may have bottomed. India's largest state-run oil exploration firm by sales ONGC rose 2.93%. Cairn India rose 4.82%. US light crude for July delivery rose 84 cents to $70.85 a barrel on Tuesday. The rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) was up 2.13% to Rs 2,320.25. The stock hit a high of Rs 2,341.40 and a low of Rs 2,280.30. The stock rose for the second day in a row on market talks the government may extend a seven-year tax holiday given to crude oil explorers to producers of natural gas in the Union Budget 2009-2010

Analysts expect strong growth in RIL's bottom line in coming quarters from sale of gas which it started pumping last month from its deep-sea field off the east coast.

The Bombay High Court is likely to deliver the final judgement on the legal tussle over the supply of gas from Reliance Industries (RIL) to Reliance Natural Resources (RNRL) this week when the court re-opens after summer vacations.

The basic argument in the RIL-RNRL case pertains to the pricing and quantum of gas RIL has to supply s from its Krishna Godavari basin to RNRL for RNRL's upcoming 7400 megawatt (MW) power project at Dadri in Uttar Pradesh.

PSU OMCs rose after Petroleum Secretary R.S. Pandey said today the government is committed to reforms in fuel pricing but it wants to ensure affordable fuel supply. BPCL and IOCL rose by between 0.53% to 0.92%. HPCL fell 0.67%.

Capital goods stocks rose on a likely focus of the government on the infrastructure sector. Bharat Heavy Electricals, Larsen & Toubro , Punj Lloyd, ABB rose by between 4.61% to 6.65%.

Bank stocks rose on recent reports the Reserve Bank of India may standardise the way banks calculate their prime lending rates (PLRs) and bar them from lending below their respective PLRs for more transparency. India's largest private sector bank by net profit ICICI Bank rose 1.67% to Rs 747.80 off the day's high of Rs 761.80. Its American depository receipt (ADR) rose 1.47% on Tuesday, 9 June 2009.

ICICI Bank cut prime lending rate by 50 basis points to 15.75% with effect from Friday, 5 June 2009. All the existing floating rate customers to benefit from the cut.

India's second largest private sector bank by operating income HDFC Bank was up 5.56% to Rs 1,494.20 off the day's high of Rs 1,550. Its ADR rose 3.11% on Tuesday.

But, India's biggest bank in terms of branch network State Bank of India (SBI) fell 0.37% to Rs 1,756.75 off the day's high of Rs 1,799. As per recent reports, SBI may cut lending rates by 25 basis points. SBI chairman O.P. Bhatt today said SBI's first priority is to absorb its associate banks. It is also looking to grow by buying domestic banks.

India's biggest dedicated housing finance firm by operating income HDFC fell 0.23% as the firm plans to raise up to Rs 4000 crore after its board yesterday approved a proposal to raise Rs 4000 crore by selling bonds and warrants. The maximum dilution on conversion of all warrants to shares would be 3.5% of the expanded capital, HDFC said in a statement to the stock exchange after trading hours on Tuesday

Realty stocks fell on profit taking after a recent surge triggered by expectations that stability at the Centre will attract more money from foreign investors into the sector which in turn will boost growth. Orbit Corporation, Indiabulls Real Estate and Omaxe fell by between 3.52% to 5%.

DLF the country's largest-listed real estate firm, fell 1.71% on profit taking after gaining more than 10% yesterday after the firm said it saw signs of recovery in the beaten down residential property sector and expected prices to start climbing.

Unitech and Indiabulls Real Estate, have already raised funds through qualified institutional placements (QIPs). A number of other realty funds have decided to raised funds by way of QIPs. The promoters of DLF last month sold a 10% stake in the secondary equity markets.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Stock Exchange jumped 3.8% yesterday. Copper surged 5% in New York yesterday. Tata Steel, Hindustan Zinc, Steel Authority of India, National Aluminum Company, Hindalco Industries rose by between 0.22% to 3.35%.

FMCG stocks rose on hopes government may take steps to boost the employment opportunities in rural market. Tata Tea, ITC, Hindustan Unilever and United Spirits rose by between 0.15% to 5%. FMCG companies derive a substantial revenue from rural markets.

Cement, construction and capital goods rose on a likely focus of the government on the infrastructure sector. India Cements, Ultratech Cements, ACC, Ambuja Cements rose by between 2.72% to 10.94%.

Bharat Heavy Electricals, Larsen & Toubro, Punj Lloyd, ABB rose by between 4.61% to 6.65%.

Among construction stocks, Nagarjuna Construction Company, IVRCL Infrastructure & Projects and Gammon Infrastructure, rose by between 1.06% to 3.14%.

Healthcare stocks rose on hopes the government will give primary importance to healthcare segment and health of citizens. Ranbaxy Laboratories, Biocon, Wochardt, Pfizer, Dr Reddy's Laboratories, Cipla rose by between 0.66% to 5.44%.

Outsourcing focussed IT stocks rose on talks worst may be over for the US economy. Nobel Prize-winning economist Paul Krugman on Monday, 8 May 2009, said US recession will end by September 2009. US is the biggest market for Indian IT firms.

India's second largest software firm by sales Infosys Technologies rose 0.47%. The company said yesterday it had won a new IT outsourcing contract from Telstra Corp, Australia's top phone company. The total value of the outsourcing contract is A$450 million ($355 million) over five years, Infosys said in a statement, but didn't disclose its share in the deal. EDS, a unit of Hewlett-Packard Co, and US technology major IBM are also part of the project. Its American depository receipt (ADR) gained 3.62% on Tuesday.

India's third largest software services exporter by sales Wipro rose 2.11% as its ADR rose 4.66% on Tuesday. But India's largest software services exporter by sales TCS was unchanged

Satyam Computer Services hit 10% upper circuit after it posted a standalone net profit of Rs 181 crore ($38 million) on revenue of Rs 2290 crore in Q3 December 2008, it said in a filing to the stock exchange during trading hours on Tuesday. The stock hit 10% upper circuit after it announced the result during the market hours yesterday. Tech Mahindara rose 5.46%, extending yesterday's 25.46% rally.

It said it had total bank balances of Rs 373 crore as at 31 March 2009. Satyam was plunged into crisis after its founder quit in saying profits and assets had been falsified. Outsourcer Tech Mahindra won an auction in April 2009 for a controlling stake in Satyam in a deal worth about $580 million.

The Indian rupee rose for the second straight day, as a firm stock market renewed hopes for more inflows and the dollar's weakness versus majors also supported the domestic currency. The partially convertible rupee was at 47.25/26 per dollar, stronger than Tuesday's close of 47.48/49. A firm rupee affects operating profit of IT firms negatively as they earn most of their revenues from exports.

Unitech clocked the highest volume of 2.61 crore shares on BSE. Reliance Natural Resources (1.69 crore shares), Suzlon Energy (1.68 crore shares), Ispat Industries (1.5 crore shares), JP Hydro Power (1.46 crore shares) were the other turnover topeprs in that order.