Friday, February 13, 2009

Budget hopes, firm global stocks aid rally

Profit booking in late trade cut sharp early gains in key benchmark indices. The BSE 30-share Sensex provisionally rose 151.24 points or 1.60%, off 78.52 points from the day`s high. Expectations of further rate cuts by the central bank and hopes of stimulus package for the economy in the interim general budget on Monday, 16 February 2009, lifted the bourses. Strong global cues further bolstered the sentiment

There expectations of a government stimulus for the economy in the interim general budget. The stock market expects the acting Finance Minister Pranab Mukherjee to offer tax sops and sector-specific stimulus package to revive growth when he presents the interim budget on Monday, 16 February 2009. The government has so far announced two stimulus packages including tax cuts and the capital injections for banks.

The Reserve Bank of India (RBI) announced on Thursday, 12 February 2009, it will continue to closely monitor the developments in the global and domestic financial markets and will take swift and effective action, as appropriate. Marketmen expect the RBI to cut policy rates further after the interim general budget

Meanwhile, Lalu Prasad presenting the interim railway budget 2009- 10 in the parliament today said the Railways will invest Rs 2.3 lakh crore in the year ending March 2010. Indian Railways generated a cash surplus of Rs 90,000 crore in the last five years. The Railway Minister announced fare cut in AC and mail express trains by 2% while keeping freight rates unchanged.

The railways posted a 13.17% increase in its total earning in April-January 2009 at Rs 64,876.34 crore, compared to Rs 57,327 crore in the corresponding period last year. While its freight revenue during this period jumped by 13.64% to Rs 44,016.26 crore, passenger revenue went up by 11.82% to Rs 18,042.82 crore.

Firm global markets aided gains in domestic stocks. European markets surged led by financials on news of a US plan to subsidise mortgage payments for troubled homeowners. Key benchmark indices in UK, Germany and France were up by between 1.57% and 2.46%.

Asia-Pacific stocks surged on hopes that government efforts worldwide, including talks of a US subsidy for mortgage payments, would soften the blow of the global downturn. Key benchmark indices in Japan, Hong Kong, South Korea, Singapore, Taiwan and China rose by between 0.96% and 3.23%.

The All Ordinaries index in Australia surged 1.1% on approval of a A$42 billion ($27.4 billion) economic stimulus package.

US stocks rebounded nearly 3% from day`s low in last one hour of trade to end mixed on Thursday, 12 February 2009, on reports the Obama administration was working on a new program to subsidize mortgage payments for troubled homeowners.

The Dow Jones Industrial Average fell 6.77 points, or 0.09% at 7,932.76. However the Standard & Poor`s 500 Index rose 1.45 points, or 0.17% at 835.19 and the Nasdaq Composite index gained 11.21 points, or 0.73% to 1,541.71.

According to reports, the housing plan will use government money to help reduce interest rates for struggling borrowers, while asking lawmakers to approve more ways to modify mortgages. US Treasury Secretary Timothy Geithner intends to announce the plan in coming days.

Meanwhile, US retail sales rose 1% in January 2009, for the first time in 7 months, beating economist`s expectation of a decline. Another data showed, US Initial Jobless claims for the week ending 7 February 2009 fell 8,000 at 623,000, though they still remain near 26-year high.

The BSE 30-share Sensex rose 151.24 points, or 1.60%, to 9,617.07, as per provisional closing. The Sensex opened points 74.77 higher at 9,540.60, also its day`s low. At the day`s high of 9,695.59, the Sensex gained 229.76 points in mid-afternoon trade.

The S&P CNX Nifty advanced 47.25 points, or 1.63%, to 2,940.30 as per provisional closing

The market breadth, indicating the overall health of the market, was strong on BSE with 1456 shares advancing as compared with 985 that declined. A total of 102 shares remained unchanged.

BSE clocked a turnover of Rs 3088 crore as compared to Rs 2228 crore by 14:25 IST

Among the 30-member Sensex pack, 24 advanced while the rest slipped. ACC (up 6.06%), Grasim (up 1.25%), and NTPC (up 1.11%), edged higher from the Sensex pack.

Ranbaxy (down 0.59%), Tata Power (down 0.47%), and Hindustan Unilever (down 0.02%), edged lower from the Sensex pack.

India`s largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) jumped 2.69% to Rs 1388.10 on reports the company is lining up further $6 billion to develop nine satellite discoveries in the Krishna Godavari (KG) basin.

India`s largest oil exploration firm by sales Oil & Natural Gas Corporation (ONGC) rose 0.24% to Rs 696.50 on reports the company may offer a 15-20% stake in its planned petrochemical project in western India to GAIL (India). The stock came off day`s high of Rs 714.35

Metal shares gained following rise in key base metal prices on the London Metal Exchange. India`s largest private sector steel maker by sales Tata Steel jumped 4.88% to Rs 194.50 and was the top gainer from the Sensex pack. Tata Steel`s managing director today said the company is not looking at new acquisitions as of now. He forecasts February 2009 sales to rise 10-15% over January 2009.

Hindalco (up 0.89%), Nalco (up 5.69%), Jindal Steel & Power (up 4.02%), Sesa Goa (up 2.03%), gained from the steel pack.

Sterlite Industries India gained 2.66% to Rs 276.10 after a block deal of 2.01 lakh shares constituting 0.03% of the company`s equity was executed on NSE at Rs 276 per share.

Most IT pivotals gained on hopes that government efforts worldwide, including talk of a US subsidy for mortgage payments, would soften the blow of the global downturn. However, a firm rupee caped gained. TCS, India`s largest software services exporter by sales rose 0.28%. India`s third largest software services exporter, Wipro gained 0.31% after its ADR rose 2.55% on Thursday, 12 February 2009. However, India`s second largest software services exporter Infosys Technologies fell 0.19%.

IT firms derive a lion`s share of revenue from exports. The rupee rose to 48.73/74 per dollar, from its previous close of 48.85/86, as gains in Asian stocks raised hopes of capital inflows to the domestic shares. A stronger rupe affects operating margin of IT firms negatively as they earn most of their revenues from exports.

India`s top power equipment maker by sales Bharat Heavy Electricals (Bhel) jumped 3.02% to Rs 1455 after its chairman said that the company expects to get a contract worth Rs 1000 crore from NTPC for a 500 megawatt power plant.

Investors were bullish on bank stocks, betting on a rate cut next week that would boost treasury income and boost demand. India`s second largest private sector bank by net profit HDFC Bank rose 1.66% to Rs 947.25 as its ADR rose 2.68% on Thursday, 12 February 2009. India`s largest private sector bank by net profit ICICI Bank gained 3.16% to Rs 434.60 on a 0.23% gain in its ADR on Thursday, 12 February 2009.

India`s largest bank in terms of assets and branch network State Bank of India advanced 2.30% to Rs 1186.20.

Realty shares advanced on hopes the forthcoming interim budget may include sops to the housing sector. India`s largest real estate firm by market capitalisation DLF rose 3.84% to Rs 162.25 despite reports the company has pulled out of its Rs 2800 crore satellite township project in West Bengal.

Indiabulls Real Estate (up 1.17%), Anant Raj Industries (up 5%), and HDIL (up 2.15%), advanced.

As per reports, the government may announce tax sops aimed at boosting the housing sector, which has been identified as a potential driver for the economy and job creation during a slowdown. As things stand, taxpayers are allowed to deduct up to Rs 1.5 lakh of interest paid on home loans from their taxable income. This limit could be raised to Rs 2 lakh. This, if it happens, will enable those who have bought a house for self-use to save up to Rs 68,000 in tax. At present, the maximum anyone can save through this deduction is Rs 51,000.

Another possible sop for the housing sector could be reintroduction of Sec 80IA, under which corporates building dwelling units of less than 1,000 square feet area were exempted from tax on the profits from these units. This move may prompt developers towards constructing smaller houses, making houses more affordable for the lower segment of the market.

Auto stocks gained on hopes the government may announce some tax sops to the automobile sector in the forthcoming interim budget on Monday, 16 February 2009.

India`s top tractor maker by sales Mahindra & Mahindra jumped 7.05% to Rs 321 and was the top gainer from the Sensex pack.

Tata Motors (up 1.43%), Hero Honda Motors (up 1.75%), Maruti Suzuki (up 3.32%), gained.

While an across-the-board 4% cut in excise in December 2008 makes any drastic concessions difficult, excise duty on big cars with engine capacities of 1200 cubic centimeter (cc) or more in petrol is likely to get reduced to 16% from the existing 20%.

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