Firm opening of European stocks and gains in US index futures lifted Indian stocks to intraday high in afternoon trade. But high volatility was the hallmark of the day's trading session so far. The BSE 30-share Sensex was up 142.10 points or 0.98%, up 276.72 points from the day's low, but off 63.83 points from the day's high.
Realty and banking shares were at the forefront of the rally. But the market breadth was still negative.
Volatility was immense. After opening slightly higher key benchmark indices slipped into the negative zone only to rebound later in early volatile trade. But a sell-off pulled gripped the market soon on concerns that a glut in share sales by corporate India will suck liquidity from the secondary market. The market cut losses later as an index showing expansion in the manufacturing activity in June 2009 offset dismal exports for May 2009.
Firm opening of European stocks and higher US index futures boosted Indian stocks in early afternoon trade. The market pared gains later
Following withdrawal of an institutional placement by GMR Infrastructure on Tuesday, 30 June 2009, realty firm Unitech said on Wednesday, 1 July 2009, it would raise Rs 2789 crore ($580 million) by issuing shares to qualified institutional buyers.
Corporate India appears to be a hurry to raise funds. A number of firms have announced plans this week to raise funds through shares sales to institutional investors, taking advantage of a solid surge in share prices in the past three months. Brokers expect companies to raise over $10 billion in the current financial year by way of share placements and initial public offers.
Raising of funds will help corporates finance expansion and reduce debt. On the flip side, it will result in equity dilution which the stock market normally does not like due to earnings dilutions. Realty firm Housing Development & Infrastructure (HDIL) has reportedly raised $350.30 million by QIP issue on the same day.
Institutional investors also bought $150 million of shares from sugar maker Bajaj Hindusthan this week, as well as $110 million from realty firm Sobha Developers and $100 million from construction firm Hindustan Construction Company.
Meanwhile, the Indian government on Tuesday, 30 June 2009 eased overseas borrowing rules for developers of tax-free special economic zones, township projects and non-banking finance firms engaged in funding infrastructure projects.
The latest macro data confirmed that the economy is recovering. The Markit Purchasing Managers' Index (PMI) based on a survey of 500 companies, fell slightly to 55.34 in June 2009 from 55.7 in May 2009, which was the highest in eight months, data released a little while ago showed. Still, it is above the threshold of 50 that separates expansion from contraction. It hit a trough of 44.4 in December 2008 and has steadily risen since then. The new orders index fell to 58.6 in June 2009 from 59.1 in May 2009.
On the flip side, India's exports slipped 29.2% to $11 billion whereas imports declined 39.2% to $16.2 billion in May 2009, government data toady, showed.
The near-term major trigger for the stock market is the Union Budget 2009-10 on 6 July 2009. The Annual economic survey is scheduled to be presented on 2 July 2009 followed by the Rail Budget on 3 July 2009.
The corporate sector is expecting a removal of the fringe benefit tax (FBT) in the budget. Under the current dispensation, an employer has to pay FBT at 30% on the fringe benefit, the taxable value of which is determined in accordance with a formula. FBT is a tax levied on perquisites-or fringe benefits -provided by an employer to his employees.
Meanwhile, domestic brokerages and fund houses want the government to remove securities transaction tax (STT) on trading in securities in the Budget. The Securities & Exchange Board of India (Sebi) members have already forwarded the demand of premier stock exchanges, BSE and NSE, to Finance Minister Pranab Mukherjee for scrapping STT in the Budget.
STT, which was introduced in the Union Budget 2004-05 by the then Finance Minister P Chidambaram, taxes every purchase and sale of securities entered into in a recognised stock exchange in India in securities like shares, debentures, bonds, and units of mutual funds. Equity investors pay an STT of 0.125% for every transaction in cash for the delivery of shares.
Meanwhile, before the budget, investors will also be keenly watching the outcome of the Employees' Provident Fund Organisation (EPFO's) apex advisory body meet on 4 July 2009. The Central Board of Trustees (CBT) will take a view on the Finance Ministry's proposal to invest 15% of its corpus in equity. The EPFO has a corpus of about Rs 1,82,000 crore and the permission to invest 15% funds in equity could have positive implications for the capital market. A proposal to park funds in the stock market was earlier rejected by the EPFO's Finance and Investment Committee (FIC) at its meeting on 26 March 2009.
Analysts expects that the government will provide a thrust to the infrastructure sector and push economic reforms to boost growth. Finance Minister Pranab Mukherjee would present the 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.
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.
European markets opened on an upbeat note today, 1 July 2009, with oil, banks, and telecom shares leading the rally. Key benchmark indices in UK, Germany and France were up by between 1.38% and 1.74%.
Asian markets were mostly in the green. Key benchmark indices in South Korea, China, Singapore, and Taiwan were up by between 0.11% and 2.28%. However, key indices in Hong Kong and Japan fell 0.81% and 0.19% respectively
China's manufacturing growth accelerated in June 2009, adding to a picture of an improving economy as the effects of stimulus spending and new bank lending fueled activity. Brokerage CLSA's PMI rose to 51.8 in June 2009 from 51.2 in May 2009, the highest level since July 2008. The CLSA figures suggest China's manufacturing sector has expanded for three straight months.
A reading above 50 in either index indicates conditions are in an expansionary mode, while anything below 50 signals contraction.
Trading in the US index futures indicated the Dow could rise 41 points at the opening bell today, 1 July 2009. Earlier, the US index futures data showed the Dow could open slightly lower.
US markets declined on Tuesday, 30 June 2009, after consumer confidence unexpectedly slid and delinquencies on the least-risky mortgages more than doubled. The Dow Jones industrial average slipped 82.38 points, or 0.97%, to 8,447, the S&P 500 fell 7.91 points, or 0.85%, to 919.32, and the Nasdaq Composite index declined 9.02 points, or 0.49%, to 1,835.04.
The June 2009 US job data would be closely watched. The data will be unveiled on Thursday, 2 July 2009 instead of the usual Friday, 3 July 2009 as the US markets will be closed on Friday, 3 July 2009, for independence day holiday. The Job data could have a huge impact on US and global stock markets as positive data would confirm an improvement in the US economy. US non-farm payrolls are forecast to lose 355,000 jobs in June 2009 versus May's 2009 slide of 345,000. The US unemployment rate is projected to jump to 9.6% in June 2009 from 9.4% in May 2009.
At 13:25 IST, the BSE 30-share Sensex was up 142.10 points or 0.98% to 14,632.24. The Sensex opened 12.59 points higher at 14,506.43. At the day's high of 14,696.07, the Sensex rose 202.23 points in afternoon trade trade. The Sensex lost 138.32 points at the day's high low of 14,355.52 in early afternoon trade
The S&P CNX Nifty was up 49 points or 1.14% to 4,340.20
The BSE clocked a turnover of Rs 3422 crore at 13:25 IST as compared with Rs 2486 crore by 12:25 IST
The market breadth, indicating the overall health of the market, was negative on contrast to a positive start. On BSE, 1340 shares declined as compared with 1021 that advanced. 96 shares remained unchanged.
Among the 30-member Sensex pack, 26 advanced while only 4 of them slipped
Rate sensitive realty stocks rose after reports Housing Development & Infrastructure (HDIL) and Sobha Developers successfully raised funds through share sales to foreign institutions. HDIL rose 0.55% to Rs 234.10, rebounding from day's low of Rs 224.10. Though Sobha Developers was still down 1.05% to Rs 207, the stock came off the session's low of Rs 201.20. Unitech, India's second largest real estate developer by sales, rose 1.95% to Rs 81.15
India's largest real estate developer by sales DLF jumped 3.84% to Rs 322.75 and was the top gainer from the Sensex pack.
But infrastructure firm GMR Infrastructure lost 1.87% after it was on Tuesday, 30 June 2009 forced to abandon its attempt to raise $500 million in off-market share sales to institutional investors after they showed little interest in the offering.
Nagarjuna Construction Company rose 0.65% after the company bagged fresh orders aggregating Rs 797 crore. The company announced the new order win during trading hours today, 1 July 2009.
India's largest private sector firm by market capitalisation Reliance Industries (RIL) rose 0.67% to Rs 2037 after sliding to day's low of Rs 1989. Reports the government is contemplating penal action against RIL for committing 28 million standard cubic meters of gas per day (mmscmd) from its KG basin block to Reliance Natural Resources (RNRL) at a price of $2.34 per million British thermal units (mmBtu) as part of the Ambani family settlement without the permission of the government, had led the early slide.
Gujarat State Petronet rose 1.53% after net profit rose 23.5% to Rs 123.41 crore on 16.7% rise in net sales to Rs 487.50 crore in the year ended March 2009 over the year ended March 2008. The company announced the results after market hours on Tuesday, 30 June 2009.
India's top cellular services provider by sales Bharti Airtel advanced 2.86%. As per recent reports, JP Morgan, BNP Paribas, HSBC and Barclays are in talks with Bharti Airtel to fund part of the $4 billion needed by Bharti Airtel to complete its $23-billion merger with MTN, Africa's largest mobile phone operator. The merger deal will see both Bharti and MTN offering equity stakes and cash to each other. Bharti will have to make a net cash payment of around $4 billion to complete the deal, which will see it acquiring a 49% stake in MTN, which, in turn, will get a 36% economic interest in the Indian firm. Both companies are in exclusive talks till 31 July 2009.
India's biggest bank in terms of branch network State Bank of India (SBI) reversed early losses and was now up 2.54%. The bank on Tuesday, 30 June 2009 introduced a new home loan scheme under which it offer loans up to Rs 30 lakh at fixed rates of 8% for the first year and 9% for the next two years. The bank's earlier offer of home loans at a fixed rate of 8% for the first year ended on Tuesday, 30 June 2009.
Under the new scheme, customers will have two options in the fourth year: a floating rate at 2% below State Bank Advance Rate (SBAR), which is currently at 11.75%, or a fixed rate of 1% below SBAR with a five year re-set. A re-set means new rates will come into effect at the end of the specified period.
India's largest commercial vehicle maker by sales Tata Motors gained 2.70%, reversing two-day slide of over 15% triggered by weak financial performance, The company reported a net loss of Rs 2505.25 crore in the year ended March 2009 as compared with net profit of Rs 2167.70 crore in the year ended March 2008. The results were announced after market hours on 26 June 2009.
India's largest private sector aluminium maker by sales Hindalco tumbled 4.40% to Rs 82.65, extending yesterday's 1.59% fall, after consolidated net profit declined 77.88% to Rs 485 crore in year ended March 2009 over year ended March 2008. Net sales rose 9.35% to Rs 65625 crore in year ended March 2009 over year ended March 2008. The results were announced during market hours on Tuesday, 30 June 2009. It was the top loser from the Sensex pack
Meanwhile, the company's board of directors in its meet held on 30 June 2009 approved raising funds upto $500 million by selling shares to institutional investors.
ACC (down 1.42%), ONGC (down 1.16%), and NTPC (down 0.21%), edged lower from the Sensex pack
Shipping stocks gained on reports the Shipping Ministry will award 6 port projects worth Rs 3319 crore under the ministry's 100-day agenda. Varun Shipping (up 2.58%), GE Shipping (up 2.43%), Mercator Lines (up 3.13%), Garware Shipping (up 4.95%), and Essar Shipping (up 2.11%), rose.
Shipping Corporation of India jumped 6.03% on reports the Shipping Minister is examining divestment in the company.
Shares of firms which rely on orders from Indian railways rose on expectation of some positive announcement in the forthcoming Railway Budget on 3 July 2009. Kernex Microsystems (up 5%), Texmaco (up 1.72%), Titagarh Wagons (up 0.34%), Kalindee Rail Nirman Engineers (up 1.02%), Beml (up 1.39%), spurted.
Glodyne Technoserve was locked at 5% upper limit after the company's board of directors recommended a liberal 1:1 bonus issue. The company made this announcement before trading hours today, 1 July 2009.
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