Market at close 26-2-2009

Firm opening of the European markets and higher US index futures helped the domestic bourses extend recovery in mid-afternoon trade. Hopes of a further cut in policy rates by the Reserve Bank of India aided the recovery on the domestic bourses. Index heavyweight Reliance Industries and Infosys Technologies extended gains and ICICI Bank cut losses. But Ranbaxy Laboratories fell more than 17% after US regulators said one of its plants in India had falsified data and test results. The BSE 30-share Sensex was down 25.56 points, or 0.29%, off 90 points from the day's low.
The market was volatile. After a steady opening, the market weakened in morning trade on concerns of higher borrowing costs for Indian Inc. It came off the lower level shortly. However, a sharp slide in Chinese markets weighed on the domestic bourses for a while in early afternoon trade. The market soon shrugged of the sharp slide in Chinese stocks as lower inflation raised rate cut hopes. The recovery gathered steam on firm opening of the European markets
Volatility may remain towards the close of trading ahead of the expiry of of February 2009 derivatives contracts. As per reports, rollover of Nifty positions from February 2009 series to March 2009 series stood at 62% while marketwide rollover of positions was 57%, as on Wednesday, 25 February 2009.
There are expectations that the Reserve Bank of India (RBI) will cut interest rates further to support faltering growth. Inflation rate slowed to 3.36% in mid-February 2009, the lowest in nearly 15 months, which would give the central bank more elbow room to loosen monetary policy. As per reports, RBI governor D Subbarao will meet select heads of banks on Friday, 27 February 2009, to hold discussions on issues like credit flow and liquidity conditions.
But concerns about rising borrowing costs for Indian corporates weighed on the market as fears a downgrade of India's sovereign rating by global rating agencies loom large. Raging agency S&P on Tuesday, 24 February 2009, cut its outlook on India's long-term sovereign credit rating to negative from stable citing worsening government finances, which could raise Indian firms' overseas borrowing costs and weaken the rupee. Moody's Economy.com on Wednesday, 25 February 2009, said India's wider fiscal deficit will boost funding costs and weaken investor confidence.
The Union Cabinet today raised the cost of living allowance paid to government employees to 22% of basic salary, from an earlier 16%, Home Minister P Chidambaram said. The move would cost Rs 3514 crore ($700 million) to the government exchequer.
In another decision, the Cabinet allowed state government to run up higher fiscal deficits.
The global financial sector crisis and recession in key global economies have pushed economic growth in India down to a six-year low. The Central Statistical Organisation (CSO) has pegged India's projected GDP growth for the year ending March 2009 at 7.1%, the slowest in six years and below the previous year's 9% rise. S&P, however, feels that India's medium term growth prospects remain strong.
Trading in US index futures indicated that the Dow could rise 68 points at the opening bell on Thursday, 26 February 2009.
European shares rose in early trade on Thursday, snapping a four-day losing streak, as investors digested a flood of results and welcomed a UK government insurance scheme for banks' assets. The key benchmark indices in France, Germany and UK were up by between 1.57% to 2.06%.
Asian stocks edged lower on Thursday after an early rally fizzled and investors found few incentives to make long-term bets with economic and corporate profit prospects worsening. Shanghai Composite index was down 3.87%. Key indices in Japan, South Korea, Singapore and Hong Kong were down by between 0.04% to 1.15%.
US stocks made a strong intraday bounce back on Wednesday, 25 February 2009. The Dow Jones Industrial Average, which had been off nearly 200 points earlier in the session, ended the day down 80.05 points, or 1.09%, at 7270.89. US bank stocks rose after US officials unveiled details of the Treasury's plan to convert stakes to common stock, although the wider index remained anchored by a bleak housing report from The National Association of Realtors.
At 14:26 IST, the BSE 30-share Sensex was down 25.56 points, or 0.29%, to 8,876.32. At the day's high of 8,905.56 Sensex gained 3 points in early trade. At the day's low of 8,788.32 the Sensex lost 114.24 points in mid-morning trade.
The S&P CNX Nifty was down 1.45 points, or 0.05%, to 2,761.05.
The market breadth, indicating the overall health of the market, was weak on BSE with 913 shares advancing as compared with 1,371 that declined. A total of 81 shares remained unchanged.
From the 30 share Sensex pack 17 stocks rose while rest fell.
Oil exploration and production firms rose as they stand to benefit from lower service tax on exploration & production activities which currently stands at 12.36%. India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 0.91% to Rs 1,277.50. The stock came off the day's low of Rs 1,252.40.
India's largest oil exploration firm by sales ONGC rose 0.57% as crude oil prices surged over 6% on the New York Mercantile Exchange on Wednesday, 25 February 2009.
Outsourcing focussed IT stocks gained as rupee tumbled against the dollar. India's second largest software services exporter Infosys Technologies rose 1.05% to Rs 1,228.60 off the day's low of Rs 1,200.55. Its ADR slipped 0.65% overnight. India's third largest software services exporter, Wipro fell 1.36% to Rs 214.80, off the day's low of Rs 213.30. Its ADR fell 1.15% overnight
India's largest software services exporter by sales TCS rose 1.59% to Rs 487.25, off the day's low of Rs 477.20 after it said on Thursday Singapore Airlines had extended an IT services contract for three years.
The Indian rupee tumbled against the dollar as higher oil prices spurred demand for dollars from importers, while mixed Asian shares offered little comfort. The partially convertible rupee was at 50.24, weaker than Wednesday's close of 49.96/97. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports.
There have been concerns of cut back in technology spend by global firms amid a recession in the US economy and due to the global financial sector crisis. IT firms derive a lion's share of revenue from exports to US.
Some of the FMCG stocks rose on defensive buying. ITC, Dabur India, Marico, United Spirits and Tata Tea rose by between 0.17% to 3.3%.
Auto stocks extended recent gains on cut in excise duty by the government on Tuesday, 24 February 2009. India's largest commercial vehicle maker by sales Tata Motors jumped 2.5% after company said bookings for its Rs 1-lakh car Naco will commence from the second week of April 2009. India's second largest commercial vehicle maker by sales Ashok Leyland rose 4.26%.
Other Auto stocks, Hero Honda Motors Maruti Suzuki India and Mahindra & Mahindra rose by between 1.42% to 1.79%.
Ashok Leyland on Wednesday, 25 February 2009 said it had decided to pass on the full benefit of the tax reduction to customers, and that the average prices of its vehicles will be lowered by Rs 16,000. Tata Motors also reportedly cut vehicle prices by about 2%.
However, price cut alone is unlikely to revive sluggish demand for trucks. Currently, the commercial vehicles (CV) industry is struggling to source retail finance as banks and other financial institutions have refrained from lending to the sector. According the latest report from the Society of Indian Automobile Manufacturers (Siam), sales in the CV industry fell by almost 20% at 3,11,283 units for the period April 2008-January 2009 over the period April 2007-January 2008. High interest rates and a slowdown in the economy have impacted demand for trucks.
India's largest drugmaker by sales Ranbaxy Laboratories fell 17.25% after an investigation by the US Food and Drug Administration (FDA) found that Ranbaxy had falsified data and test results of medicines manufactured at its Himachal Pradesh (HP) facility to obtain marketing approval in the United States. The stock was the major loser from the Sensex pack.
India's largest engineering and construction firm by sales Larsen & Toubro rose 0.69% on bagging new orders aggregating to Rs 1162 crore.
Banking stocks were volatile caught between fears of rising defaults in a weakening economy and hopes a further fall in interest rates may boost lending growth. India's largest private sector bank by net profit ICICI Bank fell 4.49% to Rs 325.15, off the day's low of Rs 318.60. Its American Depository Receipts (ADR) slipped 3.97% on Wednesday, 25 February 2009. Recently, Life Insurance Corporation of India hiked its stake in ICICI Bank by 2.04% to 9.38%.
India's second largest private sector bank by net profit HDFC Bank fell 0.6% to Rs 859, off the day's low of Rs 842.20. Its ADR fell 5.21% on Wednesday, 25 February 2009.
India's largest bank in terms of assets and branch network State Bank of India fell 0.75% to Rs 1,025.55, off the day's low of Rs 1,015.50. The Indian government on Tuesday 24 February 2009 introduced a bill in Parliament which will enable it to increase the capital base of State Bank of India's subsidiaries and issue preference and bonus shares of these entities.
PSU bank stocks, Indian Overseas Bank, Union Bank of India, Bank of Baroda, Bank of India fell by between 0.85% to 2.54%.
As per the latest data by the Reserve Bank of India, the banking sector lent over Rs 10000 crore in the fortnight ended 13 February 2009. Food credit rose Rs 547.82 crore, while non-food credit rose went up by Rs 9124.95 crore. This is the highest fortnightly growth in bank loans since November 2007.
Despite a steep cut in policy rates in India since October 2008, there has not been a commensurate reduction in lending rates by banks as fears of rising bad loans have made banks cautious in increasing advances.
India's largest realty player by market capitalization DLF slumped 0.81% to Rs 153.40 after the Income-Tax department reportedly ordered a special audit of the accounts of the real estate giant. Nevertheless, the stock came off the day's low of Rs 146.20.

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