Saturday, June 20, 2009

Market review report 19th June 2009

Market surges in late trade

The key benchmark indices spurted in late trade led by rally in realty, metal and capital goods stocks. Higher European stocks and gains in US index futures boosted the market it was a highly volatile trading session. Index heavyweight Reliance Industries was flat after witnessing wild intraday swings. The BSE 30-share Sensex was provisionally up 259.39 points or 1.82%, up close to 345 points from the day`s low. A series of measures by the market regulator to attract investors and boost confidence in the stock market aided the rally.

The market breadth improved in late trade. The breadth had turned weak in afternoon trade in contrast to a positive breadth in early trade.

Volatility was immense. After opening firm on higher Asian stocks, the market came sharply off the higher level. The market bounced back soon with the Sensex hitting fresh intraday high in mid-morning trade. The market pared gains later. It firmed up again in early afternoon trade. A sell-off pulled the market to the day`s low in afternoon trade. The market came off the lower level in mid-afternoon trade. The market extended gains in late trade

European shares edged higher on Friday, with banks rising, but carmaker Porsche falling after its results, and following overnight gains in the United States. Key benchmark indices in France, Germany and UK were up by between 0.5% to 1.81%.

Asian stocks snapped a four-day slide on Friday after upbeat US factory and jobs data provided more evidence that the global economy is recovering from its deep recession. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.55% to 1.61%.

The World Bank yesterday raised its growth forecast for China to 7.2% in 2009, from an earlier prediction of 6.5%.

Trading in the US index futures indicated Dow could rise 27 points at the opening bell today, 19 June 2009.

US markets rose on Thursday, 18 June 2009, after the New York- based Conference Board said its leading economic index rose 1.2% last month, exceeding the 1% gain estimated by economists. The Federal Reserve Bank of Philadelphia`s general economic index jumped to the highest level in nine months. The Dow Jones industrials rose 58.42 points, or 0.7%, to 8,555.60. The S&P 500 index added 7.66 points, or 0.8%, to 918.37. But the tech-laden Nasdaq Composite Index slipped 0.34 points, or less than 0.1%, to 1,807.72.

In other economic data in US, even as initial weekly jobless claims nudged higher, continuing claims dropped for the first time since January this year, to 6.69 million.

Closer home, the Indian government is reportedly examining a proposal to enhance accelerated depreciation benefits on companies` investment in new plant and machinery. If accepted, it could give a fillip to fresh investment in productive capital goods, largely plant and machinery, as companies can reduce their tax outgo in that year. At present, the normal depreciation rate for plant and machinery is at 15% but in the first year in which the investment is made, companies have the option of claiming accelerated depreciation of 35%.

Meanwhile, the stock market regulator the Securities and Exchange Board of India (Sebi) on Thursday unveiled a series of measures to attract investors and boost confidence in the stock market. The market regulator approved the "anchor investor" concept under which an investor can subscribe to up to 30% of the quota for institutional investors in an initial public offering. This is in response to the requests of issuers that there was a need for investors with prior commitment who will enhance their ability to sell the issue and bring more confidence.

Sebi has also decided to rationalise disclosure in the rights issues offer documents as information relating to the listed company offering such an issue was already available in public domain for investors. The revised disclosure would make the process of rights issue faster for companies and also reduce overall costs for such issues.

The market regulator also said entry load for investments in mutual funds would be removed, which is expected to result in increased participation. It would also cut registration fees for market intermediaries by about 50%.

Interest rates are falling thanks to ample liquidity in the banking system, low headline inflation which has now slipped into negative zone 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.

Finance minister Pranab Mukherjee last Wednesday 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.

Meanwhile, the data on advance tax payments reported this week for the first quarter of the financial year indicated banks and fast moving consumer goods (FMCG) firms have done well in the first quarter, but realty companies continue to perform badly. Automobile sector have also paid higher taxes this year, show the revenue department`s initial estimates. Indian companies paid around Rs 23,000 croe in advance tax for the first quarter of FY 2010, almost flat at the previous year`s receipts.

Foreign funds have sold shares in last four days after aggressively buying in the past three months or so. As per the provisional data on NSE, the foreign funds sold shares worth Rs 584.87 crore yesterday, 18 June 2009. Foreign funds sold shares totaling Rs 1,169.80 crore in three trading sessions from 15 June 2009 to 17 June 2009. FII inflow in June 2009 totaled Rs 4,962.40 crore (till 17 June 2009). FII inflow in calendar year 2009 totaled Rs 26,281.80 crore (till 17 June 2009).

Finance Minister Pranab Mukherjee would present the Union Budget on 6 July 2009. The Railway Budget will be presented on 3 July 2009 and the Economic Survey would be presented on 2 July 2009.

Indian stocks have soared in the past three months 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.

A comfortable victory last month for the Congress-led United Progressive Alliance (UPA) government in elections for the 15th Lok Sabha has raised hopes for economic reforms. Reforms virtually came to a halt in the past five years of the Congress-led alliance government at the centre, when the Communists provided support to the government from outside for a large part of the five-year term. Left parties are opposed to economic reforms.

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 early this month had 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.

Finance minister Pranab Mukherjee recently said there was a need to find ways to bring the economy back to higher growth path without increasing the fiscal deficit. He said the government would focus on infrastructure, agriculture and employment generating sectors to protect growth and jobs.

As per the provisional figures, the BSE 30-share Sensex was up 259.39 points or 1.82% to 14,524.92. The Sensex rose 293.55 points at the day`s high of 14,559.08 in late trade. At the day`s low of 14,179.77, the Sensex fell 85.76 points in mid-afternoon trade.

The S&P CNX Nifty was up 61.70 points or 1.45% to 4,313.10 as per the provisional figures.

BSE clocked a turnover of Rs 5,916 crore lower than Rs 7,163.33 crore on Thursday, 18 June 2009.

The market breadth improved in late trade. On BSE, 1,346 shares rose as compared with 1,292 shares that declined. A total of 66 shares remained unchanged. Earlier, the breadth had turned weak in afternoon trade in contrast to a positive breadth in early trade.

From the 30 share Sensex pack 24 stocks rose and rest fell.

The BSE Mid-Cap index was up 1.96% and the BSE Small-Cap index was up 0.94%.

India`s largest private sector firm by market capitalisation and was almost unchanged at Rs 2,026.25. The stock witnessed high intraday volatile. It hit a high of Rs 2,060 and a low of Rs 1,976.50. The stock declined sharply in the past four days hit by an unfavourable court ruling on gas sales. The Bombay High Court has directed RIL and Reliance Natural Resources (RNRL) to sign gas supply deal.

The court has asked RIL to supply 28 million metric standard cubic meters per day (mmscmd) of gas for 17 years at $2.34 per million metric British thermal unit (mmbtu) to RRNL. This is much lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 million per metric British thermal unit. The lower gas sale price will result in lower-than-expected earnings from gas sales for RIL.

RIL`s advance tax payment fell 7.65% to Rs 1,068 crore in Q1 June 2009 over Q1 June 2008.

In January 2009, the Bombay High Court had issued an interim order saying Reliance Industries was allowed to sell gas at $4.2 per million British thermal units from its KG-D6 block in the Krishna Godavari basin off eastern India, pending a final judgment.

India`s largest oil exploration firm by sales ONGC fell 0.53%. ONGC`s advance tax fell 33% to Rs 890.50 crore in Q1 June 2009 over Q1 June 2008.

Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.54% yesterday, recovering from a four day slide. Sterlite Industries, Hindustan Zinc, Hindalco Industries, Jindal Steel, Steel Authority of India rose by between 0.29% to 3.88%.

India`s largest steel maker by sales Tata Steel rose 6.17% on reports the company has raised prices of hot-rolled and cold-rolled coils by up to 2%. Its advance tax payment fell 36.39% to Rs 230 crore in Q1 June 2009 over Q1 June 2008.

Capital goods stocks rose on hopes the government may boost spending on the infrastructure sector. Siemens, Thermax, BEML, ABB, Punj Lloyd, rose by between 0.02% to 7.24%.

India`s largest engineering and construction firm by sales Larsen & Toubro rose 6.14% as advance tax payment rose 15.79% to Rs 110 crore in Q1 June 2009 over Q1 June 2008.

India`s largest electric equipment maker by sales Bharat Heavy Electricals (BHEL) rose 3.3% after the minister of heavy industries Vilasrao Deshmukh said the government will "positively" consider selling stake in the state-run engineering firm. The government will also encourage big state engineering firms to expand globally, Deshmukh told reporters. Separately, the ministry said Bhel would sign agreements with two state utilities for power joint ventures and extend its agreement with Siemens AG for steam turbines and generators.

Rate sensitive realty stocks rose on expectations that stability at the Centre will attract more money from foreign investors into the sector which in turn will boost growth. DLF, Omaxe, Indiabulls Real Estate, Unitech rose by between 1.9% to 6.14%.

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.

Telecom stocks rose after the telecom minister said on Friday the Indian government is likely to take a decision within a week on the reserve price for the pending 3G spectrum auction. Bharti Airtel, Reliance Communications and Idea Cellular rose by between 0.04% to 2.69%.