Monday, January 4, 2010

Weekly Review 31 Dec 2009

Sensex vaults 81% in 2009 on ample global liquidity, higher risk
appetite

The key benchmark indices attained their highest closing level in
nearly 20 months on the last trading day of calendar 2009 as Asian
stocks rose. Volatility surged in late trade as traders rolled over
positions in the derivatives segment, to January 2010 series from the
near-month December 2009 series. The December 2009 derivatives
contracts expired today, 31 December 2009. The BSE 30-share Sensex
rose 120.99 points or 0.7%, off close to 65 points from the day's
high.

The Sensex and S&P CNX Nifty today, 31 December 2009, scaled their
highest closing level in nearly 20 months. Reliance Industries rose.
Capital goods and auto stocks, also edged higher. But banking stocks
pared gains. Telecom stocks were mixed. The market breadth was strong.
Rollover in Nifty futures from December 2009 series to January 2010
stood at 58% at the end of Wednesday's (30 December 2009) trade.
Rollover in Mini Nifty futures stood at about 50% and the market wide
rollover was about 67%.

From 4 January 2010, trading will start at 9:00 IST and end at 15:30
IST compared to the current timing of 9:55 IST to 15:30 IST. The
market remains closed on Friday, 1 January 2010, for the New Year
holiday.

The Reserve Bank of India (RBI) will review interest rates at its next
policy review scheduled for 29 January 2010 and not before, K.C.
Chakrabarty,a deputy RBI governor said on Thursday. He further said
credit growth will rise to 17-18% when GDP growth reaches 8-9%.
The government is reportedly expected to sell shares in 17 to 18 state
firms in each of the next two fiscal years, with an issue happening
every two to three weeks. The ministry of disinvestment was consulting
with administrative ministries of more than 50 state-owned firms to
assess the preparedness for public offer, report said.

Meanwhile, the Thirteenth Finance Commission has suggested the path of
fiscal consolidation and sharing of tax revenues between the Centre
and the states, in its report submitted to President Pratibha Patil on
Wednesday. The report has assessed the impact of the proposed goods
and services tax (GST) on trade. It has also suggested steps to deal
with the growing off-Budget expenditure, especially, oil bonds, the
implications of environment and climate change, and ways to improve
outcomes and outputs of public expenditure.

The report of the Thirteenth Finance Commission, headed by former
finance secretary Vijay Kelkar, will be given by the President to the
finance ministry, which will take it up with the Cabinet.
Food price index rose 19.83% in the 12 months to 19 December 2009,
data released by the government today, 31 December 2009, showed. The
primary article index jumped 15.49% and the fuel price index rose
4.45%. 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 on Wednesday that the
government needs to strike a balance between economic growth and
cutting fiscal deficit. India's fiscal deficit is estimated at 6.8% of
gross domestic product for 2009/10 (April-March), higher than 6.2% in
the previous year as the government cut tax rates and boosted
spending.

Recently C. Rangarajan, Chairman of the Economic Advisory Council to
the Prime Minister, raised concern over the rising food inflation,
which is at an 11-month high now, stating that the task ahead was to
check food inflation. He indicated that the Reserve Bank of India
could look at raising the cash reserve ratio (CRR) to suck out excess
liquidity from the system, even though the central bank may watch the
price movements for some more time before taking any decision on rate
hike.

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 said early this week. 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.

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. The Indian economy can grow at
7.75% in the fiscal year ending March 2010, the Finance Minister said.
Data earlier this month 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.

European shares gained on Thursday on the final day of the year, as
banks and commodity stocks gained ground amid firm risk appetite. The
key benchmark indices in France and UK rose by between 0.12% to 0.29%.
Stock markets in Germany were closed.

Asia stocks rose on Thursday, racking up a 68% gain for the year, as a
jump in US consumer confidence reinforced views that the world's
largest economy is gradually recovering. The key benchmark indices in
China, Hong Kong, Singapore and Taiwan rose by between 0.45% to 1.75%.
Markets in Japan, South Korea, Thailand, Indonesia and the Philippines
were closed. Most markets in the world will be closed on Friday for
the New Year day holiday.

Beijing will stick to its loose monetary stance, but will try to be
more flexible in implementing its policies, People's Bank of China
Governor Zhou Xiaochuan said on Thursday.

Trading in US index futures indicated the Dow could gain 15 points at
the opening bell on Thursday, 31 December 2009.

US stocks spent almost the entire session trading with moderate losses
until some late support helped the major indices improve their
position on Wednesday. Better-than-expected report on Midwest
manufacturing helped sentiment. The Dow Jones industrial average added
3.10 points, or 0.03%, at 10,548.51. The Standard & Poor's 500 Index
was up 0.22 point, or 0.02%, to finish at 1,126.42. The Nasdaq
Composite Index gained 2.88 points, or 0.13%, to close at 2,291.28.
The Chicago purchasing-manager's index jumped to 60 in December 2009
from 56.1 in November 2009, the highest since January 2006 and well
above expectations. The employment gauge also rose, hitting its
highest since November 2007.

With many of the major market players done for the year, prices were
moderately higher Wednesday for US interest rate futures even as data
revealed a significant pick-up in the economy. The July 2010 fed-funds
contract priced in a 76% chance for the Federal Open Market Committee
to raise the Fed funds rate to 0.5% at its meeting in late June 2010.
On Tuesday, the July 2010 contract had priced in a 78% chance for a
0.5% rate. The funds rate has stayed inside a record low range of 0%
to 0.25% for the past year, one of many Fed actions designed to
stimulate the economy.

Closer home, the BSE 30-share Sensex rose 120.99 points or 0.7% to
17,464.81 its highest closing since 5 May 2008. The Sensex gained
187.12 points at the day's high of 17,530.94 in afternoon trade. The
Sensex opened with an upward gap of 21.55 points at 17,365.37, also
the day's low.

The S&P CNX Nifty gained 31.60 points or 0.61% at 5201.05, its highest
closing since 2 May 2008. It hit a high of 5221.85 in intraday trade
BSE clocked a turnover of Rs 4618 crore, higher than Rs 4327.29 crore
on Wednesday, 30 December 2009.

The market breadth, indicating the overall health of the market was
positive. On BSE, 1672 shares advanced as compared with 1210 that
declined. A total of 83 shares remained unchanged.

Among the 30-member Sensex pack, 22 rose while rest declined.
A deluge of global liquidity boosted stocks across the globe this
year. Governments and central banks around the world have injected
trillions of dollars in the past one year to pull the world out of a
most severe recession since the 1930s Great Depression. The Sensex
rose 7817.50 points or 81.03% in calendar year 2009. From a 3-year
closing low of 8,160.40 on 9 March 2009, the Sensex was up 9304.41
points or 114.01% as on 31 December 2009. The S&P CNX Nifty rose
2241.90 points or 75.76% in calendar year 2009.

FII inflow in December 2009 totaled Rs 10,233.10 crore (till 30
December 2009). FII had bought equities worth Rs 5469 crore in
November 2009. FII inflow in the calendar year 2009 totaled Rs
83,423.90 crore (till 30 December 2009).

Coming back to today's trade, the BSE Mid-Cap index rose 0.31% and the
BSE Small-Cap index rose 0.6%. Both these indices underperformed the
Sensex.

Sectoral indices on BSE showed mixed trend. The BSE Power index (up
1.16%), the BSE Capital Goods index (up 1.1%), the BSE Consumer
Durables index (up 1.07%), the BSE Oil & Gas index (up 1%), the BSE
Auto index (up 0.96%), the BSE IT index (up 0.73%), the BSE PSU index
(up 0.71%), outperformed the Sensex.

The BSE FMCG index (down 0.19%), the BSE Healthcare index (down
0.14%), the BSE Realty index (down 0.09%), the BSE Bankex (up 0.19%),
the BSE Metal index (up 0.23%), the BSE Teck index (up 0.55%),
underperformed the Sensex.

India's largest private sector firm by market capitalisation Reliance
Industries (RIL) rose 1.34%. 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 recently.

Oil exploration firms rose, after the crude oil moved past $79 a
barrel. India's second biggest oil and gas exploration firm by
revenue, India's biggest state-run oil exploration firm by revenue Oil
& Natural Gas Corporation (ONGC) rose 0.23%. Cairn India advanced
1.19%. But, Oil India, fell 0.35%. Rise in crude oil prices would
result in higher realizations from crude sales for oil exploration
firms. Light, sweet crude oil gained 41 cents, or 0.52%, to $79.28 a
barrel on the New York Mercantile Exchange on Wednesday, 30 December
2009 after US government inventory data showed a draw down in
stockpiles last week.

Banking stocks pared early gains triggered by reports credit offtake
has picked up this month. According to the latest Reserve Bank of
India (RBI) figures, total loans, including food credit loans to Food
Corporation of India for foodgrain procurement and non-food credit
(all other loans) amounted to Rs 29,41,293.07 crore as on 19 December
2009. This represents a sequential growth of Rs 34,028 crore since 27
November 2009 compared to a growth of Rs 7,698 crore in the whole of
November 2009.

India's largest bank by net profit and branch network State Bank of
India rose 1.99% to Rs 2269.45. But the stock came off the day's high
of Rs 2283.80. The state-run bank paid advance tax of Rs 1795 crore
versus Rs 1700 crore. India's second largest private sector bank by
net profit HDFC Bank rose 0.55% to Rs 1700.40. The stock came off the
day's high of Rs 1708.70.

India's largest private sector bank by net profit ICICI Bank fell
0.49% to Rs 875.70. The stock came off the day's high of Rs 890. The
bank is reportedly raising up to Rs 1200 crore by selling bonds.
India's largest engineering & construction firm by sales Larsen &
Toubro rose 0.67% after it won two orders totaling Rs 580 crore.
Among other capital goods stocks, ABB, Bharat Heavy Electricals, BEML
and Praj Industries rose by between 1.47% to 4.91%.

Auto stocks extended recent gains on the back of strong sales in the
month of November 2009 and higher advance tax payment in the third
quarter.

India's largest tractor marker by sales Mahindra & Mahindra (M&M)
advanced 1.73%. After announcing its entry into the medium and heavy
commercial space, the company is reportedly making new inroads in the
mini truck segment. It is set to launch one tonner Maxximo at the
upcoming Auto Expo from its light commercial vehicle (LCV) space.
From two wheeler space, Hero Honda Motors and Bajaj Auto rose by
between 0.54% to 3.72%.

India's top truck maker by sales Tata Motors rose 0.61%. The company
has reportedly commenced trial production of the first batch of the
Nano at the new mother plant at the Sanand facility last week. The
company will start commercial production of the 'People's Car' from
March 2010 onwards.

Tata Motors had shifted its mother plant to Gujarat last year after
facing local protests in West Bengal spearheaded by Trinamool Congress
leader Mamata Banerjee.

But, India's top small car marker by sales Maruti Suzuki India fell
0.64%.

Telecom stocks were mixed after government said it will introduce
mobile number portability across the country by 31 March 2010, pushing
back its introduction by up to 3 months. India's largest mobile
services provider by sales Bharti Airtel rose 1.01%. India's second
largest mobile services provider by sales Reliance Communications fell
0.52%.
Mobile Number Portability (MNP), which allows users to retain their
number even if they switch operators, was to be introduced in metro
cities and the so-called Category A telecom zones from 31 December
2009 and in other areas by March 20, 2010.

India's largest thermal power generator by sales NTPC rose 1.2% on
reports the government plans to allow the firm to sell around 10% of
its power capacity at market-determined prices.

Among other power stocks, Tata Power Company, Torrent Powr and Power
Grid Corporation of India rose by between 1.19% to 2.72%.
Consumer durables stocks gained on hopes higher sales in the ongoing
festive season will boost profitability. Lloyd Electric, Videocon
Industries, and Gitanjali Gems gained by between 0.98% to 5.98%.
Some FMCG stocks fell on profit taking. Tata Tea, Hindustan Unilever
and United Spirits fell by between 0.26% to 1.57%.
Cement shares gained on speculation cement prices will increase in the
first quarter of calendar year 2010 on rise in infrastructure
activity. Ambuja Cement, UltraTech Cement, Birla Corporation ACC (up
1.17%), rose by between 0.07% to 2.92%.

Software pivotals rose on encouraging economic data in the United
States. US is the biggest market for Indian IT firms. India's second
largest software services exporter Infosys rose 1.01%. India's largest
software services exporter TCS rose 0.91%. But, India's third largest
software services exporter Wipro fell 0.26%.

Rate sensitive realty realty stocks fell on profit taking. India's
largest realty player by market capitalization DLF fell 1.27%. On 16
December 2009, the company's board approved merger of its commercial
realty arm DLF Assets (DAL) with itself, a move aimed at repaying some
of DAL's debt.

Among other realty stocks, Housing Development & Infrastructure,
Parsvanath Developers and Unitech fell by between 0.42% to 2.01%.
Metal stocks rose as the base metals traded on the Shanghai Futures
Exchange racing higher as the April 2010 copper, zinc, aluminum
contracts all hit new 2009 highs on fund buying. Steel makers rose as
steel companies are reportedly eyeing higher prices in 2010 as
stronger economic growth worldwide drives up demand for the critical
building material. Tata Steel, Steel Authority of India, JSW Steel
rose by between 0.01% to 1.18%.

Last week, Tata Steel raised prices by Rs 2,000 a tonne, while state-
owned Steel Authority of India (SAIL) withdrew the Rs 750-1,500 per
tonne rebate it had started offering in November 2009, following the
increase in raw material cost.

Among non ferrous stocks, National Aluminum Company, Stelite
Industries, Hindalco Industries rose by between 0.44% to 7.29%.
Cals Refineries clocked the highest volume of 2.64 crore shares on
BSE. Radhe Developers (1.42 crore shares), Triplate Company (1.32
crore shares), Gammon Infrastructure (1.18 crore shares) and Ispat
Industries (0.92 crore shares) were the other volume toppers in that
order.

State Bank of India clocked the highest turnover of Rs 153.01 crore on
BSE. Tata Steel (Rs 130.79 crore), Triplate Company (Rs 119.66 crore),
Reliance Industries (Rs 78.70 crore) and Larsen & Toubro (Rs 77.94
crore) were the other turnover toppers in that order.

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