Market pares gains in late trade

Key benchmark indices retraced from 19-month highs as profit booking emerged in late trade. Nevertheless, the market extended their gains for fourth straight session on sustained buying demand for pivotals. Global cues were positive with European stocks and most Asian markets trading firm. Volatility rose as trading progressed. The BSE 30-share Sensex was provisionally up 34.91 points or 0.20%, off 90.53 points from the day's high but up 22.89 points from the day's low. The BSE Sensex and the S&P CNX Nifty today, 29 December 2009, hit their highest level in 19 months.

The market breadth was strong. Power generation stocks witnessed an across the board rally on fresh buying. Telecom shares gained. However, software pivotals also declined on profit booking after a recent strong upmove which had propelled some of the counters to a 52-week high. Auto stocks were mixed. Two index viz. heavyweights Reliance Industries and ICICI Bank rose.

The BSE Sensex hit its highest in 19 months in early trade, as the market played a catch-up with to gains in Asian stocks on Monday, 28 December 2009 when the Indian markets were closed. A bout of volatility was witnessed in early trade as Sensex pared gains after an initial rally. The market firmed up again in early trade. The Sensex dipped to an intra-day low in mid-morning trade only to rebound thereafter. The Sensex and Nifty hit fresh 19-month highs in afternoon trade. The market extended gains in mid-afternoon trade tracking higher European markets and further recovery in Asian stocks. A sell-off pulled the market off the higher level in late trade.

Trading resumed today after a four-day break. The market had remained closed on Friday, 25 December 2009 for Christmas holiday and on Monday, 28 December 2009 on account of Moharram

Trading volumes are likely to remain low this week as most foreign fund managers are on year-end vacation. The market is closed on Friday, 1 January 2010 for the New Year holiday.

Volatility may zoom as traders roll positions in the derivative segment from December 2009 series to January 2010 series ahead of the expiry of the near-month December 2009 contracts on Thursday, 31 December 2009. Rollover in Nifty futures was about 36% at the end of Thursday's trading (24 December 2009). Rollover in Mini Nifty futures was about 41%.

The focus of India's monetary policy is shifting to managing recovery and containing inflation from one concentrated on fostering growth after the global downturn, Reserve Bank of India deputy governor Shyamala Gopinath. She said rising food prices were fuelling concerns of broader price pressures in India and the policy challenge was to address the supply-side constraints.

She said effective assessment of the inflation process and using monetary policy actions at the right time would be critical. Gopinath's comments follow those from fellow Deputy Governor Subir Gokarn on Thursday, 24 December 2009, who said the January 2010 policy review would focus both on growth and inflation, instead of the previous policy focus on growth.

Meanwhile, reacting to media report, petroleum secretary R S Pandey today said the government has no immediate plans to raise fuel prices. A recent media report had indicated that auto fuel prices could increase anytime early next year.

Prime Minister Manmohan Singh said on 28 December 2009 that the economy will grow at 7% or a little more in 2009-10. Inaugurating the 92nd annual conference of Indian Economic Association (IEA), Manmohan Singh put a strong defence saying in post-liberalisation the economy all along looked up till the global meltdown hit the growth pace.

India's infrastructure sector grew an annual 5.3% in November 2009, Trade Minister Anand Sharma said on Thursday. Infrastructure sector output grew 3.5% in October 2009 from a year earlier. The sector accounts for 26.7% of the country's industrial output.

Food price index rose 18.65% in the 12 months to 12 December 2009, data released by the government on 24 December 2009, showed. The primary article index jumped 14.66% and the fuel price index rose 3.95%. The worst monsoon in nearly four decades and flooding in some parts of the country have pushed up food prices.

Finance Minister Pranab Mukherjee said last week that containing inflation and cutting fiscal deficit are the major challenges for the government in the short-to-medium term. Mukherjee added that the government is open to altering the proposed draft direct tax code further informing that sustaining high economic growth remains a priority for the government. The draft code has proposed various reform measures, including cutting in corporate tax rate to 25% and streamlining tax laws.

The Indian economy can grow at 7.75% in the fiscal year ending March 2010, the Finance Minister said. He also told an industry conference in New Delhi that agriculture output must grow 4% for the economy to expand 9-10% annually. The government will wait until the February 2010 budget to consider withdrawing some of the fiscal stimulus measures, the Finance Minister said.

The latest data showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

Coming back to stocks, record fund raising plans by Indian firms could suck liquidity from the secondary market. As per one report, Indian companies have lined up equity raising plans of Rs 150000 crore in calendar 2010, close to two-and-a-half times of what they raised through share sales in the year about to end on 31 December 2009.

Emerging-market equity funds inflows tripled last week as the outlook improved for developing-nation exporters, EPFR Global said on Monday. The funds attracted $1.7 billion in the week ended 23 December 2009 from $571.4 million in the previous week, EPFR said in a statement. That added to a record $80.3 billion of investments in emerging-market stock funds so far this year, compared with outflows of $48 billion in the same period in 2008, EPFR said.

Asia ex-Japan Equity Funds also posted modest inflows of $179 million for the week, with investors in this region rotating some exposure from smaller markets like Taiwan and Singapore to bigger ones such as China. China Equity Funds took in another $153 million, maintaining their record-setting pace, and dedicated BRIC Equity Funds also remain on track for a record setting year after absorbing another $451 million.

Meanwhile, India and Japan signed two important agreements on Monday for implementing the ambitious Rs 3.6 lakh crore Delhi-Mumbai Industrial Corridor (DMIC) project which seeks to create integrated investment regions and industrial areas across six states.

The agreements include collaborating in the development of eco cities that are environmentally and ecologically sustainable along the corridor and setting up of a project development fund to undertake activities like master planning & feasibility studies, preparing project reports and obtaining approvals and bid process management for projects.

European markets were trading firm led by mining and oil stocks. Key benchmark indices in Germany, France and UK were up by between 0.08and 0.44

Asian shares had advanced on Monday after China raised its economic growth forecast and Japan's industrial production increased. Chinese Premier Wen Jiabao indicated on Sunday, 27 December 2009 that the government is unlikely to withdraw its stimulus package until a recovery is well cemented.

Most Asian indices rebounded in positive zone on Tuesday, recovering from an early decline, helped by higher oil and metal prices. Key benchmark indices in Singapore, Japan and China were up by between 0.04% and 0.72%. However indices in South Korea and Taiwan were down 0.05% and 0.78% respectively.

Japanese industrial production rose for the ninth straight month in November on increased output of cars for foreign customers, but the nation's retail sales continued to fall, signaling that Japan's economic recovery remains fragile.

Data released Monday by the Ministry of Economy, Trade and Industry showed that output at Japanese factories and mines gained a seasonally adjusted 2.6% last month from October.

Hong Kong's exports rose for the first time in more than a year, helped by the global economic recovery, the government said Monday. Exports rose 1.3% in November 2009 from a year earlier to HK$234.1 billion, the government said, the first increase since October 2008. Imports in November also increased 6.5% from a year earlier to HK$254.8 billion.

Trading in US index futures indicated the Dow could rise 13 points at the opening bell on Tuesday, 29 December 2009.

US markets logged modest gains on Monday, 28 December 2009, with better holiday sales and rising commodities prices pushing US stocks to their sixth straight gain and new highs for 2009. US markets were closed on 25 December 2009 for Christmas holiday.

The Dow Jones industrial average rose 26.98, or 0.3%, to 10,547.08, its highest close since 1 October 2008. The Standard & Poor's 500 index rose 5.39, or 0.2%, to 1,127.78, while the Nasdaq composite index advanced 5.39, or 0.2%, to 2,291.08.

Figures from MasterCard Advisors' SpendingPulse, which track all forms of payment, show retail sales rose 3.6% from 1 November 2009 to 24 December 2009, compared with a 2.3% drop a year ago. Consumer spending is one of the biggest drivers of economic growth and is vital to a sustained recovery.

Data on US house prices from October and December consumer confidence are due later on Tuesday.

Short-term US interest rate futures prices fell Monday, continuing a trend from before Christmas that had the market participants believing that an improving economy will require higher rates. The July 2010 fed-funds contract, at Monday's settlement, priced in a 76% chance for the Fed to raise the Fed funds rate to 0.5% at its late June 2010 policy meeting, from the current historically low range of 0% to 0.25%. The same contract priced in a 64% chance for a 0.5% rate, as factored into the Christmas Eve settlement price, and a 50% chance as priced into Wednesday's (23 December 2009) settlement.

Even the May 2010 fed-funds contract is not ruling out the possibility of a rate increase as soon as the late April 2010 Federal Open Market Committee (FOMC) meeting. May 2010 fed funds, at Monday's settlement, priced in a 14% chance for a 0.5% rate, up from only a 6% chance on Christmas Eve.

The US Federal Reserve on Monday pressed ahead toward the creation of a new mechanism it says could be used to withdraw money from the banking system once policymakers decide to tighten monetary policy. The program, called the term deposit facility, would allow financial institutions to earn interest on loans of longer maturities to the central bank. The Fed already pays interest on banks' overnight reserves.

Back home, the BSE 30-share Sensex was up 34.91 points or 0.20% to 17,395.52, as per provisional closing. The Sensex opened 28.06 points higher at 17,388.67. It gained 125.44 points at the day's high of 17,486.05 in mid-afternoon trade, its highest level since 16 May 2008. The Sensex rose 12.02 points at the day's low of 17,372.63 in mid-morning trade

The S&P CNX Nifty was up 7.90 points or 0.15% to 5186.30 as per provisional closing. Nifty struck an intra-day high of 5214.60, its highest level since 5 May 2008.

The market breadth, indicating the overall health of the market was strong. On BSE, 1866 shares advanced as compared with 984 that declined. A total of 85 shares remained unchanged.

The total turnover on BSE amounted to Rs 3924 crore, lower than Rs 4,908.86 crore on Thursday, 24 December 2009.

Among the 30-member Sensex pack, 19 advanced while the rest declined.

Power generation stocks were in demand on renewed buying. India's second largest private sector power generation firm by net profit Reliance Infrastructure jumped 3.49% to Rs 1138.50 on reports its subsidiary Reliance Power Transmission has bagged two transmission projects worth Rs 4100 crore. It was the top gainer from the Sensex pack.

India's largest power generation firm by capacity NTPC advanced 1.13%. As per reports, NTPC has entered into a preliminary agreement with Bhutan government to construct a 600 megawatt reservoir-based hydel project on the Amo Chhu river in the neighboring country as part of its plans to expand into hydel sector.

Reliance Power jumped 4.97% on reports the first unit of the firm's 1,200 megawatt Rosa power plant in Uttar Pradesh started supplying electricity to UP Power Corporation, ahead of schedule.

India's largest private sector bank by net profit ICICI Bank gained 1.59% following a 0.81% rise in its American depository receipt on Monday. Reportedly the lender is raising up to Rs 1200 crore by selling bonds.

India's largest bank by net profit and branch network State Bank of India (SBI) was up 0.18%. SBI chairman O.P. Bhatt on 28 December 2009 said the bank does not foresee any immediate change in lending rates in the next six months. He claimed there was enough liquidity in the market and added that the banks are not facing any difficulties in providing credit to customers at this point of time.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) rose 0.17% to Rs 1077. The stock moved in a narrow band of Rs 1075.20 and Rs 1088.70 during the day. RIL has successfully tested the design capacity of its massive eastern offshore Krishna-Godavari basin D6 field production facilities. A flow rate of 80 million standard cubic meters was achieved through the KG-D6 facilities and delivered to the pipeline, the company said in a statement released before market hours today.

Meanwhile, RIL during market hours today said that R. Ravimohan, an executive director who joined the company's board in August 2009, died at the age of 52 on Monday evening due to cardiac arrest. Ravimohan was involved in RIL's bid for the petrochemicals company LyondellBasell, media reports said.

India's largest oil exploration firm by sales Oil & Natural Gas Corporation dropped 1.04%. As per reports the company will lend Rs 4000 crore to its overseas unit ONGC Videsh for investing in a gas field off Myanmar's coast and a pipeline to carry the fuel to China.

Telecom shares gained on fresh buying, shrugging off reports that the auction of spectrum for third generation (3G) mobile services would be delayed by over a month and is likely to start by the end of February 2010.

India's largest listed cellular services provider by subscribers Bharti Airtel advanced 1.82%. The company on Monday said it had launched wholesale data services for the Middle East.

India's second largest listed cellular services provider by subscribers Reliance Communications gained 0.29%. India's third largest listed cellular services provider by subscribers Idea Cellular Services rose 0.51%.

Meanwhile as per a report, the Indian telecom industry had an awesome run in 2009, adding some 170 million phone connections to take the subscriber base to nearly 550 million. The country's tele-density went up to an impressive 46.32% at the end of November 2009, against 32.34% a year ago.

Select auto stocks erased early gains on profit booking after a recent advance on the back of strong sales in the month of November 2009 and higher advance tax payment in the third quarter. India's top small car marker by sales Maruti Suzuki India was unchanged Rs 1565.15 after striking day's high of Rs 1583.75.

India's largest tractor marker by sales Mahindra & Mahindra (M&M) was down 0.62% to Rs 1055.25, retracing from day's high of Rs 1074.

However India's top truck maker by sales Tata Motors advanced 0.90% to Rs 787. The stock hit a 52-week high of Rs 792.75 in intra-day trade.

Software pivotals declined on profit booking after a recent strong upmove which had propelled some of the pivotals to 52-week highs.

India's third largest software services exporter Wipro lost 1.74%. The stock had struck a 52-week high of Rs 699 on 24 December 2009.

India's second largest software services exporter Infosys fell 0.40%. The stock retraced from a lifetime high of Rs 2600 in intra-day trade today, 29 December 2009. India's largest software services exporter TCS declined 0.75%.

The rupee was trading at 46.67/68 against the dollar, slightly weaker than 45.65/66 on Thursday, 24 December 2009. A weak rupee boosts revenues of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

Ranbaxy Laboratories rose 0.10% to Rs 520.55. The stock had declined to day's low of Rs 499 after a plant in Gloversville, New York, run by its unit Ohm Laboratories Inc. received a warning letter from the US drug regulator for manufacturing problems. The Food and Drug Administration cited violations of Good Manufacturing Practices between July and August at the plant's liquid manufacturing facility, Ranbaxy said.

India's largest pharma firm by market capitalisation Sun Pharmaceuticals lost 2.15% to Rs 1530 on selling pressure. It was the top loser from the Sensex pack.