The key benchmark indices pared gains soon after surging to the fresh day's high after the announcement of economic survey by the finance minister which indicated a strong policy reforms in forthcoming budget. The BSE 30-share Sensex was up 10.72 points or 0.07% up close to 86 points from the day's low and off close to 110 points from the day's high. The market breadth was strong. Index heavyweight Reliance Industries was weak. But volatility was high. India's largest state-run oil exploration firm by sales ONGC rose close to 8% as the company expects subsidy burden for the current year to be significantly lower following the fuel price hike.
The market was volatile. The key benchmark indices dropped after a positive start triggered by higher Asian markets. Concerns arising from a glue in share sales weighed on the bourses in early trade. Worries over inflation was another reason for nervousnesses in early trade after the hike in fuel price announced by the government after market hours on Wednesday, 1 July 2009. The market bounced back in mid-morning trade. Market pared gains from the day's high in early afternoon trade.
Economic Survey announced by the finance Minister just a while back by the finance minister in parliament said economy could grow around 7% in FY 2010 if US economy bottoms by September 2009. It further said economy could return to 8.5-9% growth in medium terms if reforms are pursued. It said government should free diesel and petrol prices at the earliest.
Economic Survey called for introduction of standardized credit default swaps on exchanges subject to strict contols, introduction of exchange traded derivatives such as interest rates swaps, foreign direst investment in multi format retail starting with food retail, raising foreign equity share in insurance to 49%, rationalising dividend distribution tax, revival of disinvestment plan to generate atleast Rs 25,000 crore a year, auctioned spectrum must be freey tradeable, reforms in petroleum, fertilizers, food subsidies to reduce leakages, ensure targeting, ensuring new target of zero fiscal deficit on cyclically adjusted basis among other suggestions.
India's wholesale price index (WPI) in the 12 months to 20 June 2009 stood at -1.3% compared to a fall of 1.14% last week government data showed at 12:00 IST . Inflation had dipped to negative in early June 2009 for the first time since 1977-78. India revised WPI for week ended 25 April 2009 to 1.75% from 0.7%.
A hike in fuel prices stoked concerns about inflation. The government hike petrol price by Rs 4 per litre and diesel by Rs 2 per liter with effect from Wednesday. The government will today announce data on inflation based on the wholesale price index (WPI) for the year through 20 June 2009. WPI inflation declined 1.14% in the year through 13 June 2009. The decline was however, smaller than a 1.61% fall in the year through 6 June 2009. Inflation had dipped to negative in early June 2009 for the first time since 1977-78.
Investors expect the Congress party, emboldened by its recent unexpected strong election victory, may soon consider a proposal to end state controls on transport fuel prices, one of many important reforms expected from a government now unshackled from the constraints of its erstwhile Communist partners.
Meanwhile, corporate India appears to be in a rush to raise funds by share sales to institutional investors. Bajaj Hindusthan (BHL) on Wednesday raised Rs 723 crore through a qualified institutional placement (QIP). 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.
A glut in share sales by companies may keep a lid on share prices in the secondary market. On the flip side, the raising of funds will help corporates finance expansion and reduce debt. But it will result in equity dilution which the stock market normally does not like due to earnings dilution.
Many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will provide thrust on the infrastructure sector and push economic reforms to boost growth.
Asian stocks were trading mixed today, 2 July 2009. The key benchmark indices in China, Hong Kong and Taiwan rose by between 0.81% to 1.42%. While, Key benchmark indices in Japan, Singapore and South Korea fell by between 0.01% to 0.64%.
Trading in the US index futures indicated Dow could fall 21 points at the opening bell today, 2 July 2009.
US markets shut in the green but off highs yesterday, 1 June 2009 after a barrage of economic reports. The Dow gained 57.06 points, or 0.7%, to 8,504.06. The S&P 500 index rose 4.01 points, or 0.4%, to 923.33. The Nasdaq composite index was up 10.68 points, or 0.6%, to 1,845.72.
In economic news, the June 2009 ISM manufacturing index rose to 44.8 from 42.8 in May 2009, slightly higher than expected. Meanwhile, the ADP employment change report showed more than-expected job losses for June 2009 at 4,73,000 jobs.
Back home, the near-term major trigger for the stock market is the Union Budget 2009-10 on 6 July 2009. The broad expectations from the budget are thrust on infrastructure, including easier financing of long-gestation infrastructure projects, a plan for disinvestment, some reforms such as hiking foreign direct investment limit for insurance and a clear road map to rein in the high fiscal deficit in the future. Consumption is likely to be shored up through the various rural spending programmes. At the same time, the government may rollback tax sops given to sectors doing well such as services sector.
At 12:24 IST, the BSE 30-share Sensex was up 10.72 points or 0.07% to 14,692.44. The Sensex opened 48.84 points higher at 14,694.31. At the day's high of 14,764.35, the Sensex rose 118.88 points in early afternoon trade. The Sensex lost 76.82 points at the day's low of 14,568.65 in early trade.
The S&P CNX Nifty was up 7 points or 0.16% to 4,341.60.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1,512 shares rose as compared with 754 that fell. 86 shares remained unchanged.
Among the 30-member Sensex pack, 14 fell while rest advanced.
The BSE Mid-Cap index gained 0.62% and the BSE Small-Cap index gained 1.51%.
India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell after the company said on Wednesday, 1 July 2009, it would appeal to the Supreme Court against a ruling that it should enter into a gas supply agreement with former group firm Reliance Natural Resources (RNRL). The stock was now down 2.06% to Rs 2,015.
RIL had said on Tuesday, 30 June 2009, it could not sign a gas supply agreement with Reliance Natural Resources (RNRL) as there was no clarity on government approval for the terms. RIL said it wanted the terms such as price, quantity and tenure to be subject to government approval. The Bombay High Court, in its order dated 15 June 2009, had directed that Anil Ambani's RNRL will get assured gas supply of 28 million metric standard cubic metre per day (mmscmd) of gas from RIL's Krishna-Godavari basin for 17 years at $2.34 million per metric British thermal unit (mmbtu). This is 44.28% less than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 million per metric British thermal unit.
PSU OMCs rose as government hiked petrol and diesel prices yesterday. BPCL, HPCL and IOCL rose by between 0.56% to 3.78%. Higher fuel prices will reduce underrecoveries at the state-run oil firms on domestic sale of petrol and diesel at a controlled price.
India's largest oil exploration firm by sales ONGC rose 8.21% after company's chairman and Managing Director R. S. Sharma said the company's fuel subsidy burden for the current year will be significantly lower than the previous year, if the crude prices stay around the current level. GAIL India jumped 12.04%.
The current government-controlled fuel pricing regime in India forces state-run producers such as ONGC to partially subsidise state oil marketing companies to sell products at low prices to consumers.
Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 2.9% yesterday, 1 July 2009. Sterlite Industries, Hindustan Zinc, Tata Steel, Hindalco Industries, Jindal Steel, Steel Authority of India rose by between 0.23% to 1.91%.
Banking stocks fell on profit taking after the recent gains on hopes they may get tax relief on interest earned on infrastructure lending and on other favorable announcements in the Union Budget 2009-2010.
India's biggest bank in terms of branch network State Bank of India (SBI) fell 0.83%. 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.
India's second largest private sector bank by net profit HDFC Bank fell 0.8% even as its American depository receipt (ADR) rose 0.96% yesterday, 1 July 2009. India's largest private sector bank by net profit ICICI Bank fell 0.57% even as its ADR gained 4.17% overnight.
Some rate sensitive realty stocks fell on profit taking after the recent surge on expectations that stability at the Centre will attract more money from foreign investors into the sector which in turn will boost growth. DLF, Housing Development & Infrastructure, Unitech, Phoenix Mills fell by between 0.15% to 1.14%. But Indiabulls Real Estate rose 0.5%.
Unitech, Housing Development & Infrastructure. Sobha Developers and Indiabulls Real Estate, have already raised funds through qualified institutional placements (QIPs). A number of other realty funds have decided to raised funds by way of QIPs. The promoters of DLF recently sold a 10% stake in the secondary equity markets.
Capital goods stocks fell on profit taking after the recent surge tiggered on hopes the government may boost spending on the infrastructure sector. Siemens, Thermax, Siemens, ABB, Larsen & Toubro, Bharat Heavy Electricals, fell by between 0.15% to 2.27%.
Healthcare stocks rose on hopes the government will give primary importance to healthcare segment and health of citizens. Ranbaxy's Laboratories, Dr Reddy's Laboratories Lupin, Sun Pharmaceutical Industries, Piramal HealthCare rose by between 0.05% to 4.04%.
FMCG stocks fell on poor start for the India's annual monsoon.. FMCG firms derive substantial revenue from the rural markets. ITC, REI Agro, Nestle India, United Breweries, Hindustan Unilever fell by between 0.21% to 3.83%.
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, Hind Rectifiers, Texmaco, Titagarh Wagons, Kalindee Rail Nirman Engineers, Stone India, Container Corporation of India (Concor) and Simplex Casting rose by between 0.36% to 2.97%.
Shares of public sector companies rose on expectations that the government may announce divestment plan in the Union Budget 2009-2010. Hindustan Copper, Bharat Electronics, State Trading Corporation Of India, Dredging Corporation Of India, Mahanagar Telephone Nigam, IDBI Bank, Rural Electrification Corporation of India, PowerGrid Corporation of India and Engineers India rose by between .03% to 16.5%.
Finance Minister Pranab Mukherjee will present the Union Budget 2009-2010 on Monday, 6 July 2009. Market men are anticipating that public sector units (PSUs) where the government stake is much higher than 51% may be the ones where stake sales will be pushed through first.
Tulip Telecom rose 6.18% extending recent strong gains triggered by good Q4 March 2009 results.
Indiabulls Financial Services rose 2.84% to Rs 195.70 after a block deal of eight lakh shares was executed on NSE at Rs 193 per share.
Gitanjali Gems rose 2.05% after the company said it will acquire 70% stake in unlisted MobileNXT Teleservices, a mobile retail chain.
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