Sensex off 200 points from the day's high:
The key benchmark indices retraced from 1-1/2 month highs after comments by a top economic adviser and data showing a surge in food price inflation reinforced market expectation of a hike in cash reserve ratio by the central bank to suck out excess liquidity in the banking system. The BSE 30-share Sensex was provisionally down 11.76 points or 0.07%, off close to 200 points from the day's high and up close to 30 points from the day's low.
Even as the market pared gains the sentiment was upbeat which was reflected in strong market breadth. The sentiment got a lift from media reports the Union Cabinet will today, 3 December 2009, clear the Pension Fund Regulatory & Development Authority Bill that seeks to bring foreign direct investment (FDI) into the sector.
The market surged in early trade on firm Asian stocks. The market extended gains later with the Sensex hitting 1-1/2 moth high in early afternoon trade. The market pared gains later. A sell-off pulled the market into the red in mid-afternoon trade. The market moved between positive and negative zone later.
Metal stocks rose on gains in metal prices on the London Metal Exchange. Realty stocks also rose. Index heavyweight Reliance Industries reversed early gains. Other index heavyweights, ICICI Bank, Larsen & Toubro and Infosys, edged lower.
In a move that is aimed at signalling the UPA government's intent to aggressively push the reform agenda, the Cabinet will on Thursday 3 December 2009 clear the Pension Fund Regulatory & Development Authority Bill that seeks to bring foreign direct investment (FDI) into the sector. The Bill proposes to allow foreign players to hold up to 26% stake in Indian pension fund companies. It would also permit pension funds to deploy part of their corpus abroad in approved instruments.
The pension bill, originally introduced in Parliament in 2005, could not be cleared due to stiff opposition from Left parties. It was then referred to the Parliamentary Standing Committee on Finance, which recommended the Bill with some modifications.
India needs reforms in product and labour markets for high economic growth, Organisation for Economic Cooperation and Development (OECD) Secretary General Angel Gurria said on Thursday. OECD has forecast the Indian economy to expand more than 7% in 2010 and 7.5% in 2011.
Business activity among Indian services companies expanded in November 2009 but at a slower pace than in the previous month, with broad growth across all sectors, a survey released on Thursday showed. The HSBC Markit Business Activity Index, based on a survey of 400 firms, fell to 55.20 in November after having climbed to a 13-month-high of 56.78 in October. The index has been above 50, which separates expansion from contraction, for seven months as the economy shakes off the impact of the global slowdown.
The Reserve Bank of India (RBI)'s main function is to maintain price stability, Governor D Subbarao said on Thursday. Subbarao said the central bank would revisit its growth target of 6% with an upward bias at its 27 January 2010 monetary policy review.
The Reserve Bank of India (RBI) is likely to revise upwards the economic growth forecast for the current fiscal year to March when it reviews policy in January, a deputy governor Usha Thorat said on Thursday. Thorat also said that money supply growth, which was very low this year compared with in the previous two years, have implications for monetary policy. The RBI at its last review in October forecast economic expansion of 6% with an upward bias. India's exit from its loose monetary policy will be a challenge and managing the crisis was easier than managing the recovery now, Thorat said.
The food price index rose 17.47% in year to 21 November 2009, accelerating from previous week's 15.6% rise, data released by the government today showed. The primary article index rose 12.53%. The fuel price index was unchanged. The worst monsoon rains since 1972 and floods in some parts of the country have hurt summer crops and pushed up food prices.
Inflation based on the wholesale price index was a moderate 1.34% in October, but is expected by economists to raise to as much as 8% by the end of the fiscal year in March 2010, fuelled by high food prices which tend to be beyond the scope of monetary policy. In October, the RBI withdrew emergency liquidity measures and increased some loan provisioning requirements, but left its key policy rates unchanged.
C. Rangarajan, chairman of the prime minister's Economic Advisory Council, today said high inflation would require monetary action on liquidity and food prices must be controlled through supply side measures. His comments reinforced market expectation of a hike in the cash reserve ratio (CRR) by the central bank to suck out excess liquidity in the banking system. Rangarajan also said tax receipts were expected to pick up and the government was likely to maintain its fiscal deficit target.
Rangarajan had recently said the economy could grow 7% this fiscal year with industrial output and services offsetting an expected decline in farm output, but it will be inflation that determines the Reserve Bank's monetary policy.
Data early this week showed the economy grew a robust 7.9% in the quarter through September, its fastest rate in 18 months, beating expectations and adding pressure on the central bank and government to bring forward a rate rise and roll back fiscal stimulus amid mounting inflation.
Rangarajan, a former RBI governor, also reiterated the government stance that fiscal stimulus would remain in place through the end of the fiscal year in March. The central bank holds its next policy meeting in late January 2010.
Indian exports, meanwhile, fell for the 13th straight month in October on an annual basis, but the rate of decline narrowed to 6.6% and economists expect a return to growth in coming months thanks to last year's low base effect and an improving global economy.
Manufacturing activity in India expanded for the eighth consecutive month in November 2009 but at its weakest pace since March on a slowdown in growth of output, new business and employment, a survey released on Tuesday found.
The government may reportedly give more powers to the disinvestment department, allowing it to override the administrative ministries in disinvestment-related decision, as it seeks to fast-track the disinvestment process. The government is aiming to raise up to Rs 14,000 crore via sale of its stake in NTPC, hydel firm Satluj Vidyut Nigam and Rural Electrification Corporation and public offerings will be made by these firms from January to March 2010.
Bank credit for the fortnight ended 20 November 2009 increased by Rs 7,056.63 crore to Rs 28,98,769.90, according to the latest statement of position of commercial banks from the Reserve Bank of India. This is the second fortnight in a row that bank credit has increased. In the preceding fortnight, bank credit increased by Rs 23,147.6 crore. Bankers said that credit growth is likely to pick up following the better than expected second quarter GDP growth numbers.
The World Bank has committed to increase its lending to India to about $7 billion this year from an average $2.3 billion in the previous four years, the finance ministry said in a statement. In September 2009, the World Bank approved $4.3 billion in loans for India to help finance infrastructure building and to shore up the capital of some state-run banks as the economy recovers from the global financial crisis. The loans are part of the bank's $14 billion lending for Asia's third-largest economy over three years through 2012.
European shares rose on Thursday, building on gains in the previous two sessions, with banks up after Bank of America said it would repay government debt. The key benchmark indices in France, Germany and UK were up by between 0.61% to 0.95%.
Most of Asian stocks rose on Thursday as a weaker yen boosted Japanese makers of cars and electronics and the Federal Reserve said the US economy improved. The key benchmark indices in Hong Kong, Singapore, Japan, Indonesia, Taiwan, South Korea rose by between 0.09% to 3.84%. But China's Shanghai Composite fell 0.16%.
Trading in US index futures indicated Dow could gain 52 points at the opening bell on Thursday, 3 December 2009.
US markets ended mixed on Wednesday, 2 December 2009 with the Dow finishing slightly lower, as oil prices fell and investors worried about bank profits. The Dow was down 18.90 points, or 0.2%, to 10,452.68. The S&P 500 was up 0.38 points, or 0.1%, to 1,109.24, and the Nasdaq Composite Index rose 9.22 points, or 0.4%, to 2,185.03.
In economic data, reports showed an improvement in the jobs picture. The ADP reported that private employers shed 1,69,000 jobs from their payrolls in November 2009. This was less than jobs lost in October 2009 but more than expected.
The Fed's beige-book report was the most upbeat in about two years. The report showed consumer spending up moderately, and an improvement in both home sales and construction. However, commercial real estate activity was noted as deteriorating and labor conditions remain weak.
Federal Reserve officials sounded a relatively upbeat note on the US economy on Wednesday, but warned timing withdrawal of the bank's extraordinary support for the economy will prove difficult. Richmond Federal Reserve Bank President Jeffrey Lacker told a conference in Charlotte, North Carolina that US central bankers should not let pockets of economic weakness distract them from fighting inflation as growth recovers.
Lacker said a worldwide pick-up in economic activity was boosting demand for US exports, while housing and autos were no longer a drag on growth. Employment and commercial real estate continue to present serious hurdles, he cautioned. But Lacker appeared confident the risk of an inflation spike was greater than the threat of a persistent decline in consumer prices.
James Bullard, president of the St. Louis Fed, told CNBC he thought the economy would grow more strongly in the fourth quarter than in the third, when gross domestic product expanded at a 2.8 percent annual rate. Bullard said the policy-setting Federal Open Market Committee is determined to keep inflation low, but cautioned that it is a "rough time" for monetary policy. Bullard also cautioned that the Fed's balance sheet - which more than doubled to over $2 trillion during the crisis - poses some medium-term inflation risk.
A senior official at the New York Fed, speaking at a dinner in New York, said the Fed is developing exit strategy tools, including two cash draining instruments.
Meanwhile, the European Central Bank (ECB) is expected to outline a sketch of its exit strategy at a meeting on Thursday, 3 December 2009. The ECB is likely to keep its key lending rate unchanged at a record low 1%
ECB president Jean-Claude Trichet's is expected to signal that the bank is going slowly as it prepares to unwind hundreds of billions of euros in loans it has provided the financial system. The ECB president is expected at the same time to take pains to reassure traders that the central bank won't be lifting interest rates anytime soon, reports suggest.
As per provisional figures, the BSE 30-share Sensex was down 11.76 points or 0.07% to 17,158.15. The Sensex gained 191.36 points at the day's high of 17,361.27 in afternoon trade, its highest since 20 October 2009. The Sensex fell 41.70 points at the day's low of 17,128.21 in late trade.
The S&P CNX Nifty was down 1.15 points or 0.02% to 5122.10 as per provisional figures. It hit a high of 5,181 in intraady trade, its highest since 20 October 2009.
BSE clocked a turnover of Rs 5195 crore, lower than Rs 5763.60 crore on Wednesday, 2 December 2009.
The BSE Mid-Cap index rose 0.38% and the BSE Small-cap index gained 0.87%.
The market breadth, indicating the overall health of the market was positive. On BSE, 1599 shares advanced as compared with 1166 that declined. A total of 73 shares remained unchanged.
Among the 30-member Sensex pack, 18 rose while the rest declined.
India's largest private sector firm by market capitialisation Reliance Industries (RIL) fell 0.23% to Rs 1097.70. The stock came off the day's high of Rs 1120. The government has reportedly said that the price at which Reliance Industries supplies natural gas to some power plants of state-owned utility NTPC would have to be approved by it. That price, $2.34 per million British Thermal units (mmBtu), was arrived at through a competitive bidding in 2003. In 2007, the government fixed a price of $4.20 per mmBtu for sale of natural gas from the Krishna-Godavari basin to some power and fertiliser companies.
The price of $2.34 per mmBtu and the question of government approval is at the heart of the epic legal battle between Anil Ambani's Reliance Natural Resources (RNRL) and Mukesh Ambani's Reliance Industries (RIL). The famous memorandum of understanding signed between the estranged Ambani brothers provides for supply of gas at the price no greater than price payable to NTPC. RNRL has argued that RIL is free to sell gas to customers without the government approval. RIL contests this, saying the price needs the sanction of the Union government. The government in its affidavit seemed to support the RIL position
India's second largest software services exporter Infosys Technologies fell 0.77%. Its ADR rose 0.13% on Wednesday.
India's largest engineering and construction firm by sales Larsen & Toubro fell 0.13% to Rs 1620. The stock came off the day's high of Rs 1634.
Banking shares fell on profit taking, reversing early gains. India's second largest private sector bank by net profit HDFC Bank fell 0.31% to Rs 1800 even as its ADR rose 1.68% on Wednesday. The stock came off the day's high of Rs 1823.50.
India's largest private sector bank by net profit ICICI Bank fell 1% to Rs 883.90. The stock came off the day's high of Rs 905.
But, India's largest bank by net profit and branch network State Bank of India gained 2.02%.
India's largest mortgage lender by total income Housing Development Finance Corporation (HDFC) fell 0.65%. After market hours on Tuesday, 1 December 2009 the firm 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%.
Metal stocks rose as the LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.18% on Wednesday, 2 December 2009.
Hindalco Industries gained 2.42%, after the company hiked product prices by Rs 3000 a tonnes, with effective from 1 December 2009.
Hindustan Zinc, Sterlite Industries, Steel Authority of India, National Aluminum Company, Tata Steel rose by between 0.57% to 7.16%.
Realty shares gained after some brokerages recently gave buy recommendation on frontline realty shares. Indiabulls Real Estate, Unitech and Sobha Developers rose by between 0.31% to 4.06%.
India's largest realty player by market capitalization DLF fell 0.16% reversing early gains on reports the company's founders plan to list their real estate investment trust, DLF Assets in Singapore in June 2010, to raise about $1.2 billion.
Plethico Pharmaceuticals rose 1.46% to Rs 347 at 13:53 IST on BSE, after the company said a promoter revoked a portion of the shares pledged earlier
Eicher Motors jumped 6.61% after the Indian promoters of the company bought out Japan's Mitsubishi Motor Corporation's 3.18% stake in the firm.
Nakoda Textile Industries jumped 5.56%, after the company's board approved a liberal 1:1 bonus and a 2-for-1 stock split.
Fedders Lloyd Corporation was locked at 5% upper limit at Rs 77.30, extending gains for the second consecutive day, after a consortium of the company received an order worth Rs 120 crore.
