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Posted on: Nov 20, '09

Market Commentary

Sensex regains 17,000 mark as RIL jumps.

The key benchmark indices extended gains to hit fresh intraday highs at the fag end of the trading session on firm European stocks. Comments by the deputy chairman of the government's planning commission that the government is not considering imposing a tax to curb an influx in overseas funds also helped ease worries of likely measures from policymaker to stem inflows. The BSE 30-share Sensex was provisionally up 246.60 points or 1.47%, up close to 395 points from the day's low.

The BSE Sensex regained psychological 17000 mark. The S&P CNX Nifty regained the psychological 5,000 mark after falling below that level on Thursday, 19 November 2009. Metal, banking and IT stocks jumped. Index heavyweight Reliance Industries (RIL) vaulted.

Intraday volatility was high. The market cut losses in early after a weak start triggered by lower Asian stocks and overnight fall in US stocks. The market once again slipped into the red after moving into positive zone for a brief period in morning trade. The market recovered from lower level in mid-morning trade. However, the intraday recovered proved short-lived. The market lost ground later. The Sensex hit a fresh intraday low in afternoon trade. A solid intraday rebound was witnessed later as European stocks rose. The market extended gains in late trade.

Plan panel deputy chairman Montek Singh Ahluwalia said in an interview to a news agency on Friday, 20 November 2009 that he does not see capital flows creating asset bubble. He also doesn't see possibility of the government imposing tax to curb capital flows. Ahluwalia said foreign funds are needed for developing infrastructure such as road projects and are unlikely to create asset price bubbles.

Bubbles only happen if you can't use the money productively, Ahluwalia said. We should be able to use the money productively, he said. On Wednesday, 18 November 2009, Finance Minister Pranab Mukherjee said India would have the tools to deal with an influx of foreign capital inflows if they become disruptive, but they are not a concern yet.

Fears that policymakers may consider measures to curb excessive capital inflows had spooked equities on Thursday, 19 November 2009. A latest move by Brazil to try to contain the appreciation of its currency triggered such concerns. Brazil took another step on Wednesday, 18 November 2009, to try to contain the appreciation of its currency, unveiling a 1.5% tax on certain trades involving American Depositary Receipts issued by Brazilian companies. The Brazilian government, last month, implemented a 2% financial tax on foreign inflows into stocks and fixed income investments.

Among other overseas markets, South Korea announced measures on Thursday aimed to tightening controls over currency liquidity to make the banking system less vulnerable to the capital flight. The Financial Services Commission said it will limit the size of forward foreign exchange transactions that South Korean companies can enter into, to a total value of not more than 125% of the underlying transactions they are hedging against, which could mean less-than-expected selling of dollar-forwards by exporters in the future. Taiwan has already banned foreigners from investing in time deposits

A global glut of liquidity has pushed stock markets across the globe sharply higher since March this year. Governments and central banks around the world have injected trillions of dollars in the past one year or so to pull the world out of a most severe recession since the 1930s Great Depression.

The industry body Assocham on Tuesday, 17 November 2009, suggested that foreign institutional investors (FIIs) should be charged a tax of 2% of their money pumped into the stock market to prevent further rise of the rupee and also an asset-bubble. At a quarterly policy review late last month, the Reserve Bank of India (RBI) said there were signs excess liquidity is seeping into asset prices.

Imposing the tax would help the RBI to manage rupee at reasonable levels to safeguard and support Indian exporters, hit hard by rising input cost and appreciating rupee, Assocham said. The rupee has appreciated over 5% against the US dollar in the last six months. Indian stocks have risen sharply this year on robust inflow from foreign funds. Foreign funds have bought stocks worth Rs 73786.80 crore so far in calender 2009.

Meanwhile, Prime minister Manmohan Singh leaves for a landmark visit to Washington on Saturday. Though there are no big-ticket items on the agenda, it is being pitched as an important event in the diplomatic calendar of both countries.

In overseas news, the Bank of Japan (BoJ) Governor Masaaki Shirakawa said there was no change in the BoJ's stance on maintaining very low interest rates to support the economy. The Boj at a regular policy meeting on interest rates today, 20 November 2009, unanimously left its overnight call-rate target at 0.1% as widely expected. The BoJ also offered an upbeat outlook on the nation's overall economy, saying that financial conditions continue to show signs of improvement, exports and production continue to increase, and the decline in corporate-capital outlays appears to be ending.

But although economic downside risks have diminished somewhat, the bank said a self-sustaining domestic-demand recovery was still not assured, and that it will maintain its accommodative policies and provide steady support to help the economy recover. Analysts expect the BoJ to maintain its extremely accommodative policy at least through the end of 2010.

Closer home, equities may remain volatile over the next few days as traders rollover positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry of the near month November 2009 contracts on Thursday, 26 November 2009.

The business confidence in India has reportedly surpassed the level that prevailed before the financial crisis seized economic growth prospects, according to the latest NCAER (National Council of Applied Economic Research)-MasterCard Worldwide Index of Business Confidence. The Business Confidence Index (BCI) reported a sharp rise of 21%, with a rating of 143.7 points in October 2009, compared with 118.6 points in July 2009. BCI ratings in April 2009 were at their lowest, at 81.6 points, after the global financial crisis hit world economies.

While the business confidence index continued on the upward trajectory, the political confidence index released by NCAER showed a slight dip from the previous quarter. As it was at its all-time high in the previous quarter, since its inception in October 2004, the marginal downward correction is on expected lines.

Asia is leading the global economy out of the deepest downturn in decades but the recovery will be marred by high unemployment and huge government debt across the industrialised countries, the Organisation for Economic Co-operation and Development (OECD) said on Thursday.

Central banks and governments in major Western economies should prepare for a gradual upwards shift in ultra-low interest rates and for fiscal consolidation once recovery is stronger, but they will only need to move in late 2010 at the earliest given that inflation is so low, it said in its Economic Outlook. The Paris-based Organisation for Economic Co-operation and Development raised its global growth forecast for 2010 to 3.4% from the 2.3% it was predicting as recently as June, after an estimated contraction of 1.7 % in 2009.

In the twice-yearly report, the OECD lowered its estimates of the scale of this year's recession and substantially raised most of its forecasts for growth in 2010, when it said the economy would remain dependent on government life-support. India, which likewise weathered the crisis with growth of an estimated 6.1 % in 2009, could expect 7.3% growth in 2010 and a bit more in 2011 it said.

The winter session of Parliament on Thursday got off to a stormy start with an aggressive Opposition disrupting Lok Sabha proceedings on the issue of a `bitter' harvest of sugarcane in the wake of inadequate support price. However, Prime minister Manmohan Singh said the government will amend sugarcane pricing ordinance in farmers' interest. The government has agreed to change a new sugarcane pricing rule, Railways Minister Mamata Banerjee said after a meeting of senior government ministers on Friday, 20 November 2009.

Meanwhile, the bill to reform the insurance sector is unlikely to be cleared by the parliament's winter session, a finance ministry official said on Thursday. The government has set reform of the insurance sector as a priority for the winter parliament session that began on 19 November 2009. The bill, which was stalled in the last parliament, proposes raising the foreign investment limit in insurance companies from 26 % to 49%. The government also wants to open up the pension sector to private and foreign firms and give equal voting rights to foreigners in private-sector banks, which are currently limited to 10% irrespective of their actual holding.

Meanwhile, the initial public offer of Cox and Kings, a global tour operator, was subscribed 3.59 times at 15:00 IST, on the last day of the bidding for the issue on Friday, 20 November 2009.

European shares on Friday rebounded from the previous session's sharp falls and snapped a three-day losing run, aided by gains in commodity stocks on firmer raw material prices but Fiat fell on a UBS downgrade. The key benchmark indices in France, Germany and UK were up by between 0.67% to 0.77%.

Asian stocks were trading mixed on Friday after Merrill Lynch & Co. cut its outlook on the global semiconductor industry and commodities retreated. The key benchmark indices in China, Hong Kong, Japan, and Taiwan fell by between 0.37% to 0.99%. But some markets were in green. The key benchmark indices in South Korea, Indonesia and Singapore were up by between 0.01% to 0.63%.

Japan's deputy prime minister Naoto Kan Friday said the nation's economy is in a deflationary phase and that the government will convey its view to the central bank.

Bank of Japan Governor Masaaki Shirakawa said on Friday there is no big gap in the views of the central bank and the government that the country is experiencing sustained price falls.

Trading in US index futures indicated Dow could indicated a steady opening of US stocks on Friday, 20 November 2009 after Thursday's steep slide.

Senior US Federal Reserve officials said on Thursday inflation is not an immediate threat as a weak economic recovery and a grim outlook for jobs keep price pressures in check. The sanguine nature of the central bankers' views on inflation reaffirmed investor expectations near-term rate hikes are not in the cards. Charles Plosser, head of the Federal Reserve Bank of Philadelphia and Richard Fisher, his counterpart at the Dallas Fed, said the US recovery was underway but noted risks to growth remain.

US markets lost ground on Thursday as semiconductors dragged tech shares lower after a brokerage's bearish view of the industry and doubts about the strength of the economic recovery cut the appetite for risk. The Dow plunged 93.87 points, or 0.9%, to 10,332.44. The S&P 500 index was down 14.90 points, or 1.3%, to 1,094.90, while the Nasdaq Composite index fell 36.32 points, or 1.7%, to 2,156.82.

The US economic news was mixed. Jobless claims were unchanged last week but the prior week was revised up by 3,000 claims. Continuing claims came in at 5.61 million. There was some disappointing news on the housing front - mortgage delinquencies rose to 9.64% of all loans outstanding in the third quarter and foreclosures jumped to 4.47% to a total of 14.41%, another new record.

Leading indicators rose 0.3% in October 2009, slightly lower than expected. And the Philadephia Fed branch said its gauge of regional manufacturing activity rose to 16.7 in November 2009 from 11.5 in October 2009, beating expectations.

As per provisional figures, the BSE 30-share Sensex was up 246.60 points or 1.47% to 17032.25. The Sensex fell 149.90 points at the day's low of 16,635.75 in afternoon trade. The Sensex rose 255.74 points at the day's high of 17041.79 at the fag end of the trading session.

The S&P CNX Nifty was up 70.95 points or 1.42% to 5059.95 as per provisional figures.

The market breadth, indicating the overall health of the market was positive. On BSE, 1458 shares advanced as compared with 1230 that declined. A total of 99 shares remained unchanged. The breadth moved alternatively between negative and positive zone throughout the day.

From the 30 share Sensex pack, 26 rose and rest fell.

The BSE Mid-Cap index rose 1.22% and the BSE Small-cap index rose 0.41%.

BSE clocked a turnover of Rs 5371 crore, higher than Rs 5092.15 crore on Thursday, 19 November 2009.

Energy major Reliance Industries (RIL) rose 2.41% to Rs 2132.15. The stock came off the day's low of Rs 2051. Reliance Natural Resources (RNRL) told the Supreme Court on Thursday that Reliance Industries had the full marketing freedom for Krishna-Godavari gas and accused it of influencing oil ministry officials in getting the price hiked for state-run NTPC.

The company also sought to drive home the point that the government's contract with RIL was to share the production of gas from Krishna-Godavari basin with the option to take such a share either in cash or kind. The court is hearing the dispute over the supply of 28 million units of gas for 17 years at $2.34 per unit to Anil Ambani-led RNRL from the gas fields off the Andhra Pradesh coast, awarded to Mukesh Ambani's RIL. The price, tenure and quantity were based on a family re-organisation pact of 2005, but RIL subsequently said it could only sell the gas for $4.20 per unit, as this was the price, the company claimed, fixed by the government.

Meanwhile RIL plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions as India's top company by market capitalisation prepares itself for the next phase of growth. The company will work towards attaining global scale for its conventional energy platform petrochemicals, refining and oil and gas exploration and invest in its new businesses such as retailing and alternative energy, chairman Mukesh Ambani said at the company's annual meeting of shareholders on 17 November 2009.

RIL has set 27 November 2009 as the record date for a liberal 1:1 bonus share issue.

IT stocks reversed early losses triggered by a US brokerage downgrade on health of the global chips industry. India's second largest software company by sales Infosys rose 0.6% to Rs 2423.90even as its ADR fell 2.11% on Thursday. The stock came of the day's low of Rs 2382. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, last week, announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made on 12 November 2009.

India's largest software company by sales Tata Consultancy Services (TCS) rose 2.27% to Rs 695. The stock came off the day's low of Rs 670.20. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

India's third largest software company by sales Wipro rose 1.03% to Rs 652.05. The stock came off the day's low of Rs 630.40. Wipro subsidiary Infocrossing signed a five-year deal with the US-based Cliffs Natural Resources Inc, an international mining and natural resources firm, to provide IT infrastructure services, the global software major said Thursday.

Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

Banking shares reversed early losses. Hopes of consolidation among PSU banks boosted shares of state-run banks. Union Bank, Bank of Baroda and Punjab National Bank, Bank of India and Canara Bnank rose by between 1.73% to 4.66%.

As per reports, Union Bank, Bank of Baroda and Punjab National Bank are keen on acquiring Corporation Bank whereas Canara Bank and Punjab National have shown interest in acquiring Dena Bank. As per reports, chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda met Finance Ministry official on Wednesday, 18 November 2009, to discuss the pros and cons of consolidation among banks in India.

India's largest bank by net profit State Bank of India (SBI) rose 2.74% to Rs 2343. The stock came off the day's low of Rs 2242. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced on Friday 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

India's second largest private sector bank by net profit HDFC Bank rose 2.21% to Rs 1757.55 even as its ADR fell 2.75% on Thursday. The stock came off the day's low of Rs 1710.10.

India's largest private sector bank by net profit ICICI Bank fell rose 1.21% to Rs 896.30 even as its ADR fell 4.51% on Thursday. The stock came off the day's low of Rs 859.The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) rose 2.45%. The lender announced on 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

Meanwhile, the Reserve Bank of India Deputy Governor Usha Thorat said on Monday 16 November 2009 the central bank will soon issue guidelines on provisioning for bad loans by banks.

Banks and co-operatives have reportedly disbursed farm loans to the tune of Rs 1.38 lakh crore in the first half of 2009-10, meeting over 42% of the target set by the government for the whole financial year.

Metal stocks rose on gains in commodity prices on the London Metal Exchange on Friday. National Aluminum Company and Hindalco Industries rose by between 1.48% to 3.47%.

Steel Authority of India (Sail) rose 3.24%. The government said on Thursday it is considering a 20% stake sale in steel major Sail, proceeds of which would partly fund the company's Rs 70000 crore expansion projects.

India's largest steel maker by sales Tata Steel rose 2.66% after company said it issued $ 546.9 million in new convertible bonds in exchange for $ 493 million of securities as part of a plan to reduce costs and ease repayment obligations.

The company had said earlier this month the new foreign currency convertible bonds will have a yield-to-maturity of 4.5% and will mature in November 2014.

But, JSW Steel fell 0.16%. Japan's JFE Steel, the world's sixth-largest steelmaker, said on Thursday it will team up with JSW Steel on automotive steel production in India.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.

India's largest drug maker by sales Ranbaxy Laboratories rose 1.23% after the company received US Food & Drug Administration approval for Acetaminophen tablets in 650 miligram strengh for over the counter sales.

Gammon Infrastructure Projects spurted 8.11% after the company received a Rs 850-crore order from the National Highways Authority of India for upgradation work in Bihar.

Other Stories:
1. Market trims losses in late trade; breadth weak (19-Nov 15:50 Hrs IST)
2. RIL, L&T lead decline (18-Nov 15:42 Hrs IST)
3. L&T, bank stocks lead strong intraday rebound (17-Nov 15:46 Hrs IST)
4. Market surges as dollar weakens (16-Nov 15:50 Hrs IST)
5. Maruti, Hero Honda in top gear (13-Nov 15:51 Hrs IST)
6. Rate sensitive stocks lead decline (12-Nov 15:43 Hrs IST)
7. Nifty regains 5,000 mark (11-Nov 15:51 Hrs IST)
8. Telecom stocks tumble in choppy market (10-Nov 15:45 Hrs IST)
9. Equities rally as G20 pledges to keep stimulus measures in place (9-Nov 15:48 Hrs IST)
10.Small-cap, mid-cap indices outperform Sensex (6-Nov 15:45 Hrs IST)

Tags: market commentary

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milan_48 said:
Great detailed post.

November 21, '09

SPIRITUALS said:
EXCELLENT COMMENTARY ON A POSITVE NOTE !!
DISINVESTMENT IN SAIL IS ALSO CONSIDERED AS A FOLLOW UP STEP OF FINANCIAL REFORMS !!!

THANX SWEETY !!!!

November 20, '09

gentlemoon said:

November 20, '09

sriangood said:
It crossed 17000 today

November 20, '09

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