The key benchmark indices surged in afternoon trade, amid a bout of volatility. Buzz that the Reserve Bank of India (RBI) may announce steep rate cuts in a week or so and reports that the government has decided to inject a whopping Rs 50,000 crore for funding infrastructure projects in a bid to pump-prime the economy, triggered a rebound on the domestic bourses.The barometer index regained the psychological 9,000 mark, within a day after it had fallen below that level on Tuesday, 18 November 2008.
The Reserve Bank of India (RBI) is expected to announce another round of rate cuts in a week or so in an effort to ease liquidity and reduce borrowing costs to counter slowing economic growth. The RBI is also likely to create a special repo window to allow banks to borrow up to 100 basis points of the statutory liquidity ratio (SLR) - the percentage of deposits invested in government securities - to make available Rs 40,000 crore for infrastructure like national highway projects.
The Reserve Bank of India (RBI) on, 1 November 2008, had cut its repo rate or main short-term lending rate by 50 basis points (bsp) to 7.5% and banks' cash reserve ratio (CRR) by 100 basis points to 5.5%. The repo rate is the rate at which the RBI lends cash to banks. The CRR is the percentage of deposits which the banks must keep with the central bank.
Some other reports suggest that the government will inject Rs 50000 crore on infrastructure projects that would be built through the public-private partnership.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,025 shares rose as compared with 945 that declined. A total of 63 shares remained unchanged.
The BSE Mid-Cap index jumped 0.51% to 3,07603 and the BSE Small-Cap index was flat at 3,558.73. However, both the indices underperformed the Sensex.
India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) jumped 5.03% to Rs 1,198.10 on reports it may raise Rs 5,000 crore from the Life Insurance Corporation via 11.5% non-convertible debentures.
Sterlite Industries (up 5.3% to Rs 230.50), Grasim Industries (up 4.64% to Rs 1,021) and ITC (up 4.23% to Rs 167.50) were the other major gainers from the Sensex pack.
Auto stocks rose on hopes a further cut in interest rates will spur demand which is mainly driven by finance. Maruti Suzuki India, Mahindra & Mahindra, Hero Honda Motors, Tata Motors rose by between 0.65% to 4.24%.
Steel stocks rose after the government on Tuesday, 18 November 2008, imposed a 5% duty on imports of steel and iron products to protect domestic makers from cheaper imports. Tata Steel, Steel Authority of India, JSW Steel and Bhushan Steel rose by between 1.53% to 3.18%. The announcement was made after trading hours on Tuesday.
Jindal Steel & Power (JSPL) jumped 3.53% on reports it has no intention to slash production because of the ongoing economic slowdown and its capital expenditure plans for the year are on track.
Banking stocks rose as buzz of further rate cuts by the Reserve Bank of India to infuse liquidity in the system offset weak American Depository Receipts (ADRs). India's largest private sector bank by net profit ICICI Bank rose 1.48%. Its ADR lost 3.26% on Tuesday, 18 November 2008. India's second largest private sector bank by net profit HDFC Bank rose 2.07% even as ADR slumped 2.33% on Tuesday. India's largest commercial bank State Bank of India (SBI) rose 1.15%.
IT stocks fell on mounting worries about the US economy highlighted by data overnight showing confidence at US home builders plunging to a record low. India's third largest IT exporter by sales Satyam Computer Services fell 3.18% as ADR fell 4.37% overnight. India's second largest IT exporter by sales Infosys lost 2.45%, as ADR fell 1.23% on Tuesday. India's fourth largest IT exporter by sales Wipro fell 1.85% as ADR slipped 2.91% on Tuesday. India's largest IT exporter by sales Tata Consultancy Services was slipped 1.1%.
But HCL Technologies gained over 1% on extending its strategic alliance with a US based software firm.
Weak US economic data offset a weaker rupee. The Indian rupee was weaker on Wednesday but off a three-week low struck in early trade after the local stock market halted a five-day slide. At 10:22 IST, the partially convertible rupee was at 49.72/73 per dollar, 0.1% weaker than 49.66/67 at close on Tuesday. A weaker rupee augurs well for the sector as IT firms earn most of their revenues from exports.
Infrastructure stocks rose on hopes the government will focus on infrastructure projects to pump-prime the economy. Gammon India, Era Infra Engineering, Larsen & Toubro, Hindustan Construction Company, Nagarjuna Construction Company and IVRCL Infrastructure & Projects gained by between 0.29% to 6.16%.
Airline stocks were mixed after reports government is examining the possibility of notifying jet fuel as a 'declared good.' Jet Airways rose 1.43% while Kingfisher Airlines and Spicejet fell by between 0.47% to 2.75%.
The move would ensure that jet fuel attracts uniform sales tax of 4% across the country against prevailing average sales tax rate of 21%. This is likely to benefit airline companies as jet fuel accounts more than 50% of operating cost for airliners.
Supreme Industries surged 4.80% on share buyback plan.
ABG Infralogistics rose 1.37% after the company said its board will meet on 19 November 2008 to consider sale of bulk cargo handing business to its subsidiary ABG Bulk Handling.
The domestic bourses shrugged off subdued-to-weak trend in Asian stocks. Asian stocks dropped as fears of a global recession persisted. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 0.22% to 1.87%. But China bucked the trend with the Shanghai Composite index surging 2.46%. Market players were also spooked after US automakers gave a dire warning to lawmakers about their outlook while pleading for $25 billion of bailout funds from Congress.
The US housing market collapse at the heart of the crisis showed signs of deteriorating further, with the National Association of Home Builders index plunging to a record low of 9 in November 2008. Japan's recession could last even longer than feared, the country's economy minister warned today, 18 November 2008. Japan slid into its first recession in seven years in the third quarter as the financial crisis curbed demand for Japanese exports, data on Monday, 17 November 2008 showed.
Citigroup Inc, the No. 2 US bank, on Monday, 17 November 2008, said it would cut 15% of its global workforce or 52,000 jobs, far more than had been expected.
The slide in Asian stocks was despite overnight gains in US stocks. US stocks staged a late fight back on Tuesday, 18 November 2008, after a choppy session in which stronger-than-expected results and outlook from computer maker Hewlett-Packard offset fears that more losses at Citigroup and other banks are yet to come. The Dow Jones industrial average rose 151.17 points, or 1.83%, to 8,424.75. The Standard & Poor's 500 Index .SPX gained 8.37 points, or 0.98%, to 859.12. The Nasdaq Composite Index added just 1.22 points, or 0.08%, to 1,483.27.
Oil was steady at $54.34, near a 22-month low, on mounting worries about a deep global economic recession, highlighted by data overnight showing confidence at US home builders plunging to a record low.
Fears of a global recession, slowdown in the domestic economy and selling by foreign funds pulled the Sensex down 1,598.96 points or 15.17% in the last five trading sessions to 8,937.20 on Tuesday, 18 November 2008 from 10,536.16 on 10 November 2008.