Key benchmark indices continued to remain firm in afternoon trade. Indian stocks rose, participating in the recovery in Asian stocks triggered by speculation governments will step up efforts to revive economies. Hopes of a further rate cut by the Reserve Bank of India (RBI) to shield the domestic economy from the global economic slowdown, also aided the rebound on the domestic bourses after a recent steep slide.
A further fall in inflation has raised hopes the central bank will cut interest rates further to shield the domestic economy from the global economic slowdown. Lower interest rates boost stocks as lower borrowing costs help lift corporate profits. Inflation based on the wholesale price index rose 8.90% in the 12 months to 8 November 2008, marginally below the previous week's annual rise of 8.98%, data on Thursday, 20 November 2008 showed. Inflation has been softening since peaking at 12.91% on 2 August 2008.
Meanwhile, Prime Minister Manmohan Singh said today, 21 November 2008, India will emerge strong from the global economy crisis and global institutions must be made more representative of developing nations.
Asian stocks rose for the first time in five days, led by finance companies, as a variety of rumors such as China cutting interest rates later in the day prompted investors to cover short positions before the weekend. Speculation that Citigroup, the number two US bank, will merge with a rival which will help shore up the global financial system, also aided the rebound in Asian shares from an slide caused by weak US economic data.
The Nikkei share average turned positive after falling three percent earlier. It was now up 2.7%. Singapore's Straits Times index rose 2.36% even as the government today said the economy could shrink next year, as financial services and its exports are expected to be hit by a weaker global economy. Key benchmark indices in Hong Kong, South Korea, China and Taiwan were up by between 0.68% to 5.8%.
One such rumour floating in the market was that China will cut interest rates later in the day. Speculation was also rife that the Federal Reserve could cut interest rates in an emergency move later in the day and global central banks could conduct another round of joint interest rate cuts in the face of renewed market volatility.
Better-than-expected results by the world's No. 2 PC maker Dell Inc and decision by two biggest home loan finance companies to staunch the wave of evictions and home losses in the United States, also aided recovery in Asian stocks and the positive news aided surge in US index futures. Trading in US futures suggested the Dow could rise 201 points at the opening bell.
Dell shares surged 6.3% to $10.43 in after hours trading in the United State on Thursday, after the world's No. 2 PC maker reported better-than-expected profit as cost cuts tempered lower revenue. In another positive development after hours, Fannie Mae and Freddie Mac, the two biggest home loan finance companies, said they would suspend foreclosures of occupied homes until early 2009 -- one of the biggest moves to date by the government to staunch the wave of evictions and home losses.
At 12:19 IST, the BSE 30-share Sensex was up 259.06 points, or 3.07%, to 8,710.07. At the day's high of 8,820.96 hit in early afternoon trade, the Sensex rose 369.95 points. The Sensex gained 4.27 points at the day's low of 8,446.74 in early trade.
The S&P CNX Nifty rose 76.95 points, or 3.01%, to 2,630.10.
The market breadth, indicating the overall health of the market, turned positive from negative breadth earlier in the day. On BSE, 1,083 shares rose as compared with 1,069 that declined. A total of 85 shares remained unchanged.
The BSE Mid-Cap index up 0.49% to 2,909.97and the BSE Small-Cap index up 0.4% to 3,400.43. Both the indices underperformed the Sensex.
Hindalco Industries (up 6.5% to Rs 53.10), Reliance Communications (up 5.57% to Rs 192.40), Sterlite Industries (up 5.05% to Rs 210.90), Bharat Heavy Electricals (up 5.26% to Rs 1,256) were the major gainers from the Sensex pack.
Ranbaxy Laboratories (down 0.94% to Rs 216), Jaiprakash Associates (down 1.76% to Rs 58.20) and Hindustan Unilever (down 1.39% to Rs 230.50) were the major losers from the Sensex pack.
India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) extended gains rising 4.57% to Rs 1,105.90, on recent reports the company is seeking nod to restart fuel retailing.
India's largest oil exploration firm by revenues ONGC rose 3.71% after it along with its partners bagged 20 out of the 44 blocks that have been awarded under the seventh round of the New Exploration Licensing Policy (NELP-VII). The government announced awarding the blocks after trading hours on Thursday.
Cairn India fell 2.12% as a slide in crude oil price and the government rejecting a proposal to award an oil block to the company weighed on the stock.
PSU OMCs rose as crude oil traded near the lowest level since May 2005, as a deepening recession slows demand for autos and prompts factories to curb output. Hindustan Petroleum Corporation, Indian Oil Corporation and Bharat Petroleum Corporation rose by between 2.99% to 4.88%.
US crude oil for January delivery edged up 31 cents to $49.74 a barrel after the December 2008 contract settled down $4 at $49.62, the lowest settlement since mid-May 2005. Oil has tumbled by nearly $100 from record highs in July 2008. Lower oil prices will reduce under-recoveries at the state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.
Banking stocks extended gains as hopes of a further cut in interest rates on easing inflation offset fall in American Depository Receipts (ADRs). India's second largest private sector bank by net profit HDFC Bank rose 2.6% even as ADR slumped 9.66% on Thursday.
India's largest commercial bank State Bank of India (SBI) rose 4.32% after it got Reserve Bank of India's approval for a proposed joint venture with a unit of French bank Societe Generale for offering custodial and related services. India's largest private sector bank by net profit ICICI Bank rose 1.9%. Its ADR lost 9.72% on Thursday, 20 November 2008.
The RBI has aggressively cut rates over the past two months. The repo rate has been cut by 150 basis points to 7.5% since October this year and the cash reserve ratio, the proportion of deposits that banks have to keep with the central bank, has been reduced by 350 basis points to 5.5%. In response, government owned banks lowered prime lending rates by up 75 basis points, but large private lenders like ICICI Bank and HDFC Bank are yet to do so.
Auto stocks rose on hopes a further cut in interest rates could spur demand which is mainly driven by finance. Maruti Suzuki India, Mahindra & Mahindra, Hero Honda Motors, Tata Motors rose by between 0.2% to 4.76%.
Banco Products India declined 5.41% on its decision to reduce the number of working days of operations due the slowdown in automobile industry.
Most IT stocks rose as the rupee was trading near its record low against the dollar. India's third largest IT exporter by sales Satyam Computer Services rose 2.74% even as ADR fell 5.81% overnight. India's fourth largest IT exporter by sales Wipro rose 3.94% even as ADR lost 8.19% on Thursday. India's largest IT exporter by sales Tata Consultancy Services jumped 5.71%.
India's second largest IT exporter by sales Infosys gained 3.61%, even as ADR fell 5.67% on Thursday.
The Indian rupee opened near its record low on Friday but recovered its losses as state-run banks stepped in to sell dollars. The partially convertible rupee was at 50.13/16 per dollar, off an early low of 50.53 and a touch stronger than its close of 50.18/22 on Thursday, when it had hit a record low of 50.60. A weaker rupee augurs well for the sector as IT firms earn most of their revenues from exports.
Meanwhile latest data in the United States raised concerns of a deep and protracted global economic recession. The number of American workers on the unemployment rolls surged to the highest in a quarter century, government data on Thursday showed, while a regional manufacturing gauge slumped as the economic misery intensified.