The key benchmark remained firm in rangebound afternoon trade. Firm global stocks supported market. The BSE 30-share Sensex was up 135.69 points or 0.81% up close to 130 points from the day's low and off close to 85 points from the day's high. Bharat Heavy Electricals fell despite good Q2 result. Index heavyweight Larsen & Toubro extended Thursday's fall. Another index heavyweight, Reliance Industries (RIL) extended losses as the hearing on a gas dispute with Reliance Natural Resources (RNRL) will resume in the Supreme Court early next week. But, banking, IT and power stocks rose. Cement stocks fell.
The S&P CNX Nifty regained the psychological 5,000 mark after falling below that mark on Thursday, 22 October 2009.
The BSE Sensex was trading below the psychological 17000 mark after breaching that mark at the onset of the trading day. The Sensex had fallen below that mark on Thursday. The market breadth was strong.
The market surged at the onset of the trading session, recovering from a 3% slide in the past three days, on firm global stocks. It pared gains in mid-morning trade. The market regained strength in early afternoon trade before paring gains. Market remained firm in rangebound afternoon trade.
On the political front, the ruling Congress party-led alliance won two state polls on Thursday and was set to form the government in a third, a result that gives more room for the alliance to push economic reforms. Elections were held last week in Maharashtra, northern Haryana and Arunachal Pradesh in polls seen as a major test for the Congress coalition after a strong victory in Lok Sabha polls in May this year. The party retained power in Maharashtra and Arunachal Pradesh, and was expected to hold on to power in Haryana.
On the macro front, the RBI in its report on trend and progress of banking in India for 2008/09 released on Thursday, 22 October 2009, said managing the heavy government borrowing in a non-disruptive way is a major challenge for the central bank, as hardening bond yields run counter to its low rate policy needed for lifting growth
Inflation based on the wholesale price index (WPI) rose 1.21% in the year through 10 October 2009, higher than previous week's annual rise of 0.92%, date released by the government on Thursday showed. Within the WPI, the food articles index rose 13.34%. The government revised upwards inflation for the year through 27 August 2009 to a much smaller fall of 0.21% from an estimated 0.95% decline.
The Prime Minister's economic advisory council said on Wednesday that it sees inflation at around 6% by the end of the current fiscal year to March 2010. Faster industrial output growth and rising inflationary pressures have strengthened case for an end to the RBI's accommodative monetary stance next year. Industrial output grew at its fastest pace in 22 months in August 2009 at 10.4%.
The RBI pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. While as exit from the loose monetary policy is imminent, speculation on the bourses is the timing of the exit policy. The RBI is expected to keep its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on 27 October 2009.
RBI on Thursday said financial reforms need to be carried out in a re-calibrated manner after the global financial crisis following Lehman Brothers' collapse last year. The central bank also sounded a note of caution on securitisation and asset derivative deals.
Stock and sector-specific activity may dominate trade on the bourses in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.
Cement firms, too, are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.
Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.
Banks are seen reporting a sedate growth in core lending amid sluggish credit offtake. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.
Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.
European stocks rose on Friday, reversing most of their previous session's drop, with French food group Danone rising after results pleased investors. The key benchmark indices in Frnace, Germany and UK were up by between 0.93% to 1.4%.
Asian shares nudged higher on Friday on the back of upbeat earnings reports from the United States while the dollar resumed a broad slide after a Fed official indicated US interest rates would remain low. The key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.15% to 1.62%.
Auto makers and banks led rally in Chinese stocks on a view the economic recovery would continue. The Shanghai Composite rose 1.85%.
China's exports are likely to resume year-on-year growth this quarter as global trade slowly recovers, a Ministry of Commerce researcher said in remarks published on Friday. Exports have been falling from year-earlier levels since last November. In September 2009, the decline narrowed to 15.2% from 23.3% in August 2009.
That improvement was likely to continue because of the low base of comparison in the October-December quarter of 2008, researcher Liu Xueqin was quoted as saying by the International Business Daily, a Ministry of Commerce newspaper
Meanwhile, China's banking watchdog has reportedly instructed lenders to carry out quarterly stress tests as part of a drive to strengthen credit controls and liquidity management. A recent circular from the China Banking Regulatory Commission orders banks to measure their capacity to withstand liquidity risks and work out a corresponding strategy to handle those risks
US index futures pared gains. Trading in US index futures indicated Dow could rise 4 points at the opening bell on Friday, 23 October 2009.
US markets rallied on Thursday as investors cheered some better than expected earnings and shrugged off a disappointing jobless report. Financials led the rally. The Dow jumped 131.95 points, or 1.3%, to 10,081.31. The S&P 500 index rose 11.51 points, or 1.1%, to 1,092.91. The Nasdaq rose 14.56 points, or 0.7%, to 2,165.29.
In the day's economic news, jobless claims rose 11,000 to a seasonally adjusted 531,000 last week, more than expected. An index of leading economic indicators rose 1% in September 2009, touching a two-year high and more than the 0.8% expected.
Nobuo Tanaka, executive director of the IEA, said in a interview to a news agency on Thursday that a rapid rise in oil prices could hamper the global economic recovery. He, however, added that it was too early to say if that scenario was unfolding now. The IEA has previously expressed concerns of a possible price spike if insufficient investment is made to add new sources of oil to keep up with demand. Crude is hovering close to a one-year high.
Closer home, the supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary equity market. As per reports, Indian firms have garnered about $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April 2009. Indian companies are taking advantage of a surge in liquidity to recapitalize and fund capital expenditure after being starved of cash last year.
Most of these companies - from industries ranging from liquor and spirits to infotech - issued equity shares to a select group of investors by way of qualified institutional placement or QIP. If the enabling resolutions passed by the companies are any indication, Indian firms are gearing up to raise $15 billion (Rs 69,427 crore) in the next six months. The list includes Hindalco (Rs 2,900 crore), JSW Steel ($1 billion), India Cements ($100 million), Essar Oil ($2 billion), Tata Steel (Rs 5,000 crore), Jet Airways ($ 400 million) and Bharat Forge ($150 million).
Unlisted Reliance Infratel announced on 22 September 2009 its intention to raise Rs 5,000 crore from the primary market. Divestment of state-run firms by the government may also increase the supply of paper in the market.
The government on Monday approved stake sales in state-run power producer NTPC and another unlisted power firm Satluj Jal Vidyut Nigam which reflects the country's resolve to speed up reforms and raise more resources for social schemes. On Monday, Trade Minister Anand Sharma said the Union Cabinet had approved a 5% stake sale in NTPC, and 10% in, an unlisted power producer. On Friday, 16 October 2009, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.
The government has approved a follow-on public offering of 20% of state run Steel Authority of India, the steel minister said on Wednesday, 21 October 2009. The Government of India owns nearly 86% of Sail.
At 13:20 IST, the BSE 30-share Sensex was up 135.69 points or 0.81% to 16925.43. The Sensex rose 217.03 points at the day's high of 17,006.77 in early trade. The barometer index rose 5.92 points at the day's low of 16,795.66 in early trade.
The S&P CNX Nifty was up 42.35 points or 0.85% to 5030.95.
The market breadth, indicating the overall health of the market was strong. On BSE, 1766 shares advanced as compared with 821 that declined. A total of 92 shares remained unchanged.
Among the 30-member Sensex pack, 23 rose while rest fell.
The BSE Mid-Cap index rose 1.7% and the BSE Small-Cap index rose 1.54%.
Energy major Reliance Industries fell 1.62% to Rs 2099 after the company told the Supreme Court on Thursday it had no knowledge of the pact between its chairman Mukesh Ambani and his younger brother Anil. The stock came off the day's high of Rs 2154. On the third day of hearing on the gas supply dispute between the group firms of the Ambani brothers, Justice R.V. Raveendran asked RIL to satisfy the bench that the MoU, signed in 2005, was not between two companies, but two individuals. The bench also enquired if the pact, which has not been made public till date, could be produced before the court.
Mukesh Ambani-controlled Reliance Industries, India's top conglomerate, is fighting with Reliance Natural Resources, led by younger brother Anil Ambani, over the terms of a deal to sell gas to Reliance Natural at below the price set by the government. Reliance Industries has been presenting initial arguments in the case before the Supreme Court since Tuesday, saying the private deal between the Ambani brothers is not binding on the company, and it can sell the gas only at the government-approved price.
The government, which has the power to decide who can buy gas and at what price, had filed an application asserting it is the rightful owner of the disputed gas.
Anil Ambani's Reliance Natural Resources claims the contract is valid and wants the court to direct Reliance Industries to supply it with 28 mmscmd of gas for 17 years at almost half the government-set price of $4.2 per mmBtu.
The Supreme Court will resume hearing the case next Tuesday, with Reliance Industries expected to conclude its initial arguments by Thursday, 29 October 2009. The court will then hear arguments by Reliance Natural, following which it will consider a petition by the government to become a party to the dispute.
India's largest power maker by sales Bharat Heavy Electricals fell 1.45% even as its net profit rose 39.31% to Rs 857.88 crore in Q2 September 2009 over Q2 September 2008. The company announced result during market hours today. Bhel's order book stood at 1,26,000 crore.
India's largest engineering and construction firm by sales Larsen & Toubro fell 2.14%, extending Thursday's 3.86% fall, on muted sales growth in Q2 September 2009. L&T's net profit rose 26.1% to Rs 580.4o crore on 3.54% rise in total income to Rs 8136.39 crore in Q2 September 2009 over Q2 September 2008. The result hit the market during trading hours on Thursday.
L&T attributed the muted sales growth to delay in clearances of infrastructure projects from some clients and lower offtake of industrial and machinery products. The company said order backlog is at Rs 81623 crore, which is 2.4 times its revenue of Rs 33926.37 crore in the year ended March 2009, giving strong revenue visibility.
The company is likely to see order inflows rise over 30% in 2009/10 and sales rise of 15%, Chief Financial Officer Y.M. Deosthalee said on Thursday at the time of announcing Q2 results.
L&T said the recent surge in crude oil prices may boost orders from the hydrocarbon sector. The company said revival of infrastructure development in the Gulf augurs well as the company has a significant presence in the region.
Bank stocks rose on bargain hunting after a recent slide triggered by concerns a proposed new interest rate system will intensify competition among lenders. A Reserve Bank of India (RBI) panel on Tuesday proposed a transparent pricing structure for floating rate loans wherein benchmark rates get automatically revised on shrinking cost of funds. India's largest private sector bank by net profit ICICI Bank rose 1.23% as its ADR rose 0.64% on Thursday. The bank recently reduced auto loan rates by 50 basis points.
India's largest bank by branch network State Bank of India rose 1.75%. SBI has reportedly raised $750 million (around Rs 3500 crore) in the overseas market through five-year bonds as part of its medium-term note programme (MTN). SBI's $5 billion MTN programme was launched in 2004. It targets investors, including banks, insurance companies, hedge funds and private equities in the global market.
Among other PSU stocks, Punjab National Bank, Bank of India, Bank of Baroda, rose by between 0.69% to 1.52%.
India's second largest private sector bank by net profit HDFC Bank rose 0.92% as its ADR rose 1.76% on Thursday. The bank's net profit rose 30.2% to Rs 687.46 crore in Q2 September 2009 over Q2 September 2008. The results, which hit the market last week, were more or less in line with market expectations.
The committee headed by RBI executive director Deepak Mohanty has suggested discontinuing the usage of a bank's prime lending rate (PLR) as the benchmark for variable rate loans. Instead, it wants banks to arrive at a base rate that reflects the cost of one-year deposits and price loans over this base rate.
The panel has also proposed a ceiling on the extent of loans that can be granted below the benchmark rate. Most banks typically pass on the benefit of falling rates only to fresh customers. RBI governor D Subbarao has repeatedly said though the central bank has slashed its repo rate (at which it lends to banks) by 425 basis points in the last one year, prime lending rates of banks have fallen by only around 200 basis points.
Lenders currently offer loans at less than the benchmark prime lending rate to about 10 categories of borrowers, according to the central bank. Some of these loans are at rates that don't make much commercial sense for the banks, according to the report.
Meanwhile, the central bank may hike the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM) category, possibly at a quarterly monetary policy review on 27 October 2009. Banks do not have to make any mark-to-market provisions on securities held this basket if prices of securities fall. Provisions have to be made out of profit and therefore, impact a bank's bottom line. Yields on ten-year government bonds have risen sharply this year. Bond prices and bond yields are inversely related.
Indian banks can put bonds equal to 25% of the value of deposits in their HTM accounts. The market expectations is for an increase in the ceiling by up to 2 percentage points.
Global rating agency Moody's on Wednesday assigned moderate credit risk rating to 13 Indian commercial banks, including the country's largest public sector lender State Bank of India and private entity ICICI Bank. The agency has given the supported ratings an assessment of the government's ability to support the banks to the 13 entities, following the review of systemic support for individual banking systems. Moody's Investor Service in a statement said it has changed the systemic support input for Indian banks' ratings to Baa2 from the A1 local currency deposit ceiling. Baa2 generally refers to moderate credit risk.
The RBI in its report on trend and progress of banking in India for 2008/09 released on Thursday, 22 October 2009, said it needs to assess and initiate measures to raise the capital base of state-run banks. The central bank said off-balance sheet exposures of local banks declined by 26% in 2008/09, but it was necessary to monitor and evaluate risks from such exposure
India's largest dedicated housing finance firm HDFC rose 1.84%. HDFC, last week, announced its net profit rose 24.27% to Rs 663.94 crore in Q2 September 2009 over Q2 September 2008. The results beat market expectations.
India's largest thermal power producer by sales NTPC rose 1.4% ahead of its Q2 result today. The government on Monday approved a 5% stake sale in NTPC.
Among other power stocks, Reliance Power, Tata Power Company, Reliance Infrastructure rose by between 0.6% to 2.24%.
Ultratech Cement fell 0.53% after the company issued a cautious outlook at the time of announcing Q2 results late last week. Net profit jumped 53% to Rs 251 crore in Q2 September 2009 over Q2 September 2008.
UltraTech said the performance was affected on a sequential basis due to lower demand in Southern India. The net profit dropped 39.94% to Rs 250.90 crore in Q2 September 2009 over Q1 June 2009.
The company said the cement demand may grow 9% in the year ending March 2010 on the back of government's initiative to boost rural development, infrastructure and housing. It, however, said new capacities which at various stages of implementation will result in pressure on margins.
The company said its focus on higher volume growth, captive power generation and capital productivity will help offset the impact of lower prices on margins.
Among other cement stocks, Grasim Industries and Birla Corporation fell by between 0.82% to 1.55%.
Jaiprakash Associates fell 1.89% after falling 6.84% on Thursday even as net profit rose 327.9% to Rs 870.19 crore on 53% rise in sales to Rs 1824.26 crore in Q2 September 2009 over Q2 September 2008. The company announced result after market hours on Wednesday. The company also announced 1:2 bonus issue.
Hindustan Construction Company was up 0.58% to Rs 130, off the session's high of Rs 134.15, after net profit tumbled 72.37% to Rs 5.51 crore in Q2 September 2009 over Q2 September 2008.
IT stocks rose on increased optimism over the growth outlook for the sector. India's largest software services exporter TCS rose 2.63%. The company after market hours on 16 October 2009, reported stronger-than-expected Q2 September 2009 results. Consolidated net profit as per US accounting standards rose 6.81% to Rs 1623.90 crore on 3.16% growth in revenue to Rs 7435.10 crore in Q2 September 2009 over Q1 June 2009.
TCS has a good business pipeline and is pursuing 20 to 25 large outsourcing deals, chief executive N. Chandrasekaran said at the time of announcing Q2 results. The management is seeing signs of recovery but it believes it will be slow. The discretionary spent is still tight but there is spent seen in banking, finance services and insurance (BFSI), retail, utility and pharma verticals, TCS said at a conference call after the results. However, a continuous improvement in volumes cannot be expected, it said. The company is seeing stability in demand environment. The management expects to maintain margins at current levels provided there is no adverse rupee movement.
India's third largest software services exporter Wipro rose 2.71% even as its ADR fell 1.26% on Thursday. Wipro has bagged a 10-year total outsourcing contract from Delhi International Airport (DIAL) to provide information technology infrastructure and services for the Indira Gandhi International Airport (IGIA).
IT bellwether Infosys Technologies rose 1.97% as its ADR rose 0.75% on Thursday. Infosys raised its earnings and revenue guidance in both dollar and rupee terms for the year ending March 2010 (FY 2010) at the time of announcing Q2 September 2009 results before trading hour on 9 October 2009. Infosys, however, said strengthening rupee is a big concern for its earnings.
A foreign brokerage said in a recent note that it expects 2010 IT budgets to be strong given a significant pent-up demand
Sugar stocks rose on bargain hunting after recent losses triggered by the government's decision that day to extend tax free white sugar imports till December 2010 to improve supplies to tide over a shortage. Dhampur Sugars, Bajaj Hindustan, Shree Renuka Sugars rose by between 3.85% to 4.83%.
Nippo Batteries Company gained 3.16%, after net profit rose 29.50% to Rs 4.96 crore in Q2 September 2009 over Q2 September 2008.
Piramal Healthcare jumped 6.68% after net profit flared up 64.5% to Rs 114.22 crore on a 11.1% increase in sales to Rs 707.70 crore in Q2 September 2009 over Q2 September 2008.
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