INDIAN STOCK MARKET REVIEW

Market ends choppy trading session higher:

The key benchmark indices extended gains in late trade on rebound in European markets and higher US index futures. The BSE Sensex was provisionally up 251.12 points or 1.48%, up close to 270 points from the day's low. The market surged soon after the government today, 8 December 2009, said it will seek parliamentary approval to spend an extra Rs 25725 crore for the fiscal year to end-March 2010.

The Sensex jumped well above the psychological 17,000 mark after falling below that level for a brief period in early afternoon trade. The barometer index had settled below the psychological 17,000 mark on Monday, 7 December 2009. Metal, banking, IT and realty stocks gained. The market breadth was strong.

Energy giant Reliance Industries (RIL) rose close to 2.5% on reports the company is in talks with more than a dozen banks to ready a $8-10 billion war chest for the acquisition of LyondellBasell

Intraday volatility on the bourses was quite high. The market surged in early trade as bargain hunting emerged after a recent slide in share prices. The market pared gains in mid-morning trade. It strengthened once again in early afternoon trade. The market gave up almost its entire intraday gains by afternoon trade. The Sensex slipped into the red for a short while in afternoon trade. A solid intraday rebound took the Sensex to a fresh intraday high in mid-afternoon trade. The market extended gains in late trade.

The Sensex had lost 215.13 points or 1.2% in four trading sessions to settle at 16,983.14 on Monday, 7 December 2009, from a recent high of 17198.27 on 1 December 2009.

India's fiscal deficit for the current fiscal year ending in March 2010 will be around the targeted 6.8% of gross domestic product, a senior finance ministry official said on Tuesday. The official said that direct tax receipts would exceed expectations while total tax receipts will meet target.

The government does not need to borrow more than planned to fund its additional proposed expenditure, Finance Minister Pranab Mukherjee said on Tuesday. The government said on Tuesday it will seek parliamentary approval to spend an extra Rs 25725-crore ($5.5 billion) for the fiscal year to end-March 2010. The gross additional expenditure would be Rs 30943 crore, of which 5217 crore would be met through savings, the government said. The government will spend an extra Rs 3000 crore on fertiliser subsidies and Rs 3460 crore on food subsidies. The government would also spend Rs 800 crore on an equity infusion in state-run carrier Air India.

The government will complete share sales through public offers in three state companies by the end of March 2010, the finance minister said on Tuesday. Divestment of 5% each in NTPC and Rural Electrification Corp and 10 % in unlisted Satluj Jal Vidyut Nigam is under implementation, Pranab Mukherjee said. The Finance Minister said there is a need to adhere to fiscal prudence as early as possible.

Capital inflows into India reflect investor confidence in the economy, the Reserve Bank of India (RBI) governor D Subbarao said on Monday at a televised panel discussion, although measures to control them could not be ruled out in case there was a surge in foreign funds that needed to be contained. "Going ahead should there be a surge of capital flows, I think we cannot rule out active capital management," Subbarao said. The RBI governor said he is not willing to debate at this time on the instruments or timing, as this will depend on how the situation evolves.

"In the medium term, task is to improve absorptive capacity of the economy. But going forward calibrating reserves roughly corresponding to current account deficit is the task," Subbarao said. C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said in the discussion that inflows in the current year would be manageable. Rangarajan had said late last month that India could absorb as much as $100 billion of capital flows in 2009/10, well above a projected $57-$60 billion.

Securities & Exchange Board of India (Sebi) chairman C B Bhave on Monday said in an a newspaper interview that overseas fund flows into Indian stock markets were manageable and foreign portfolio investors should be allowed smooth entry and exit to boost equity investments.

India's food price inflation is a supply-side issue and monetary policy is an inefficient tool to rein it in, Subbarao said on Monday. The food price index rose 17.5% in the 12 months to 21 November 2009.

Meanwhile, the government has partially lifted the ban on rice and wheat exports by allowing organic varieties of these grains for overseas sale, two separate statements on the trade ministry website showed on Monday.

The initial public offer (IPO) of JSW Energy, a part of Sajjan Jindal-led JSW Group, was oversubscribed subscribed 1.26 times by 13:00 IST today. The price band for the IPO is Rs 100 to Rs 115. The issue will close on 9 December 2009.

Meanwhile, Russia and India stressed their strategic partnership on Monday, agreeing to boost military ties and cooperate in the civilian use of nuclear technology. The two delegations signed agreements on "military-technical cooperation", for the period 2011-12 and agreed that Russia would build more nuclear reactors in India.

Stocks in Dubai again slumped on Tuesday, 8 December 2009, as the debt woes of one of the emirate's key investment companies continued to reverberate. On the Dubai Financial Market, the DFM Index was recently down 6.23% at 1636.15. Leading the decliners by value was Emaar, a government-related entity engaged in property development, including the Burj Tower, the world's tallest building, set to open early in January 2010.

Meantime, the general index in Abu Dhabi dropped 3.2%. Markets in the Arab states have been roiled for almost two weeks since the emirate's Dubai World holding company sought a six-month delay in payments on $60 billion of debt.

European shares drifted higher on Tuesday in volatile trade, with drugmakers in demand as banks came under pressure after subdued comments on prospects for the economy from the US Federal Reserve Chairman Ben Bernanke on Monday. The key benchmark indices in France, Germany and UK were up by between 0.19% to 0.39%.

Industrial production in Great Britain was unchanged in October from the previous month, the Office for National Statistics reported Tuesday. Compared to the same month last year, production fell 8.4%. Economists had forecast a 0.4% monthly rise and a 7.7% year-on-year decline. Manufacturing output was also flat on the month, marking a 7.8% fall from the level seen in October 2008. Economists had forecast a 0.4% monthly rise and a 7.2% annual fall.

Most Asian stocks declined on Tuesday after Bernanke said the US economy faces formidable headwinds. The key benchmark indices in China, Hong Kong, Japan, South Korea, Taiwan Indonesia fell by between 0.09% to 1.18%. But, key benchmark indices in Indonesia andSingapore rose by between 0.01% to 0.3%.

The Japanese government today unveiled a 7.2 trillion yen ($81 billion) economic stimulus package, aimed at countering problems threatening the country's flagging economic recovery, such as the yen's strength and deflation.

Trading in US index futures indicated Dow could rise 23 points at the opening bell on Tuesday, 8 December 2009.

US stocks ended little changed on Monday as investors paused to gauge prospects for the US economic recovery and interest rates after Bernanke said the economy faced "formidable headwinds." The Dow Jones industrial average was up 1.21 points, or 0.01 % at 10,390.11. The Standard & Poor's 500 Index was down 2.73 points, or 0.25%, at 1,103.25. The Nasdaq Composite Index was down 4.74 points, or 0.22 % at 2,189.61.

As per provisional figures, the BSE Sensex was up 251.12 points or 1.48% to 17,234.26. The Sensex rose 254.65 points at the day's high of 17237.79 in late trade. The Sensex fell 19.03 points at the day's low of 16,964.11 in early trade.

The S&P CNX Nifty was up 82.45 points or 1.63% to 5149.15 as per provisional figures.

BSE clocked a turnover of Rs 4937 crore, higher than Rs 4763.47 crore on Monday, 7 December 2009.

The market breadth, indicating the overall health of the market was strong. On BSE, 1827 shares advanced as compared with 979 that declined. A total of 82 shares remained unchanged.

Among the 30-member Sensex pack, 27 rose while the rest fell.

The BSE Mid-Cap index rose 1.3% and the BSE Small-cap index rose 1.4%.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) rose 2.42% to Rs 1081.20. The stock was volatile. It hit a high of Rs 1084.05 and a low of Rs 1050.10. Reliance Industries is reportedly in talks with more than a dozen banks to ready a $8-10 billion war chest for the acquisition of LyondellBasell, the world's third-largest petrochemical company that has filed for bankruptcy in the US.

The RIL stock had tumbled 3.07% on Monday after bonus shares issued by the company were admitted to trading. The company has issued one fully paid bonus equity share for every one existing fully paid equity share of Rs 10 each.

Banking shares rose in a volatile trade on hopes of financial sector reforms. India's largest private sector bank by net profit ICICI Bank 1.18% to Rs 871.20 on reports the bank is in discussions to sell its entire 27% holding in software-services provider 3i Infotech. Its ADR fell 4.08% on Monday, 7 December 2009. The stock hit a high of Rs 877.40 and a low of Rs 852.35.

India's second largest private sector bank by net profit HDFC Bank rose 1.87% to Rs 1831 even as its ADR fell 0.98% on Monday. The stock hit a high of Rs 1836 and a low of Rs 1780.10.

But India's largest bank by net profit and branch network State Bank of India fell 0.83%. The UPA government last week cleared the introduction of State Bank of India (Amendment) Bill in the current session of Parliament. The Bill seeks to bring the government's holding in the country's largest public sector bank on a par with other public sector banks at 51 %. Currently, the Union government holds 59% stake in SBI. At present, the stake of the promoter, that is Government of India, cannot fall below 55 %.

India's largest mortgage lender by total income Housing Development Finance Corporation (HDFC) rose 1.04% on bargain hunting after recent losses triggered by investor worry a dual interest rate scheme on home loans introduced by the company would hit margins.

HDFC, last week, announced a dual-rate loan scheme under which a borrower will be charged a fixed rate up to March 2012 and a floating rate thereafter. For a 20-year loan of Rs 30 lakh, a borrower will pay a fixed rate of 8.25% up to March 2012 and then a floating rate that's 500 basis points below the prime lending rate (PLR) - the institution's benchmark rate. Currently, the PLR is 13.75%.

IT stocks rose on a weaker rupee. India's second largest software services exporter Infosys Technologies rose 2.18% to Rs 2442 even as its ADR fell 1.54% on Monday. The stock came off the day's low of Rs 2380. Infosys Technologies is reportedly partnering the Council of Scientific and Industrial Research for its open source drug discovery project that focuses on an efficient way to look for tuberculosis drugs.

India's third largest software services exporter Wipro rose 1.46% even as its ADR fell 0.98% on Monday. India's largest software services exporter Tata Consultancy Services (TCS) was flat.

The Indian rupee fell on Tuesday after a firmer start as oil refiners bought dollars, following the US unit's rise the previous day. The partially convertible rupee was at 46.65/66 per dollar, weaker than Monday's close of 46.56/57. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

Metal stocks rose on strong domestic demand. Hindalco Industries rose 2.56%. The company hiked product prices by Rs 3000 a tonnes, with effective from 1 December 2009. Steel Authority of India, National Aluminum Company, Sterlite Industries and Hindustan Zinc rose by between 0.72% to 1.88%.

Tata Steel, the world's eighth-largest steelmaker by sales, rose 2.2% after the company said on Monday its sales rose 34.5% to 498,000 tonnes, in November 2009 over November 2008.

The company on 4 December 2009 announced a partial closure of Corus' Teesside Cast Product (TCP) plant in north England, after four companies stopped buying metal from it. Operations will be suspended at the end of January 2010 forcing the loss of 1,700 jobs around 600 fewer than envisaged earlier, Tata Steel said in a statement.

Realty shares rose on bargain hunting. Omaxe, DLF, Indiabulls Real Estate, Unitech and Sobha Developers, rose by between 0.39% to 4.78%.

Piramal Healthcare fell 1.43% on profit booking after the stock rose 5.01% to Rs 419.50 on Monday, 7 December 2009.

BF Utilities was locked at 10% upper limit at Rs 1237.65, on bargain hunting after the stock plunged nearly 22% in the preceding ten trading sessions.

Mundra Port and Special Economic Zone rose 2.33% to Rs 571 after a leading foreign broker raised its rating on the stock to 'neutral' from 'sell' and set a share price estimate at Rs 640.

Kiri Dyes & Chemicals rose 5.59% after the company through its special purpose vehicle Kiri Holindg Singapore executed a purchase agreement to acquire DyStar Group and its selective assets.