Small-cap, mid-cap indices outperform Sensex outperform

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 rose 15.77 points or 0.09%, off close to 170 points from the day's high and up close to 55 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 that 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.
As per provisional data, foreign funds today, 3 December 2009, bought equities worth a net Rs 334.07 crore. Domestic funds sold stocks worth a net Rs 199.91 crore
The market surged in early trade on firm Asian stocks. The market extended gains later with the Sensex hitting 1-1/2 month 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 0.19% to 0.57%.
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 53 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.
The BSE 30-share Sensex rose 15.77 points or 0.09% to 17,185.68. The Sensex jumped 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 rose 8.45 points or 0.16% to 5131.70. It hit a high of 5,181 in intraday trade, its highest since 20 October 2009. Nifty December 2009 futures were at 5,122, at a discount of 9.70 points as compared to the spot closing of 5,131.70. Turnover in NSE's futures & options (F&O) increased to Rs 60,660.28 crore from Rs 56,715.28 crore on Wednesday, 2 December 2009.
BSE clocked a turnover of Rs 5195 crore, lower than Rs 5763.60 crore on Wednesday, 2 December 2009.
The market breadth, indicating the overall health of the market was strong. On BSE, 1648 shares advanced as compared with 1119 that declined. A total of 73 shares remained unchanged.
Among the 30-member Sensex pack, 18 rose while the rest declined.
A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex is up 7538.37 points or 78.13% in calendar year 2009, as on 3 December 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 9025.28 points or 110.59% as on 3 December 2009.
Coming back to today's trade, the BSE Mid-Cap index rose 0.39% and the BSE Small-cap index gained 0.92%. Both these indices outperformed the Sensex.
Sectoral indices on BSE displayed mixed trend. The BSE Healthcare index (up 1.66%), the BSE Metal index (up 1.19%), the BSE Realty index (up 0.58%), the BSE PSU index (up 0.56%), the BSE Oil & Gas index (up 0.51%), the BSE Power index (up 0.59%), the BSE Teck index (down 0.44%), the BSE Consumer Durables index (up 0.42%), the BSE IT index (up 0.25%), outperformed the Sensex.
The BSE Auto index (down 0.31%), the BSE Capital Goods index (down 0.06%), the BSE FMCG index (up 0.05%), the BSE Bankex (up 0.06%), underperformed the Sensex.
India's largest private sector firm by market capitialisation Reliance Industries (RIL) rose 0.12% to Rs 1101.55. But, 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
Capital goods stocks fell on profit taking. India's largest engineering and construction firm by sales Larsen & Toubro fell 0.1% to Rs 1620.60. The stock came off the day's high of Rs 1634.
Among other capital goods stocks, Praj Industries, ABB and Thermax fell by between 0.11% to 2.8%.
Banking shares fell on profit taking, reversing early gains. 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.
India's second largest private sector bank by net profit HDFC Bank was flat at Rs 1806.05 even as its ADR rose 1.68% on Wednesday. The stock came off the day's high of Rs 1823.50.
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 for the second day in a row on investor worry a dual interest rate scheme on home loans introduced by the company would hit margins. The stock lost 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%.
But, 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.
India's largest mobile services provider by sales Bharti Airtel rose 0.67%. The company's chief executive Manoj Kohli said today that Bharti Airtel's overseas acquisition plans are still on hold. Among other telecom stocks, Idea Cellular and Reliance Communications rose by between 0.84% to 2.54%.
India's largest thermal power generator by sales NTPC was flat at Rs 209.05. Among other power stocks, CESC, Tata Power Company, Reliance Power rose by between 0.5% to 4.88%.
IT pivotals rose after Federal Reserve said the US economy improved. US is the biggest market for Indian IT companies. India's largest software services exporter Tata Consultancy Services (TCS) rose 0.91%. India's third largest software services exporter Wipro rose 0.87%. Its ADR fell 0.15% on Wednesday. But, India's second largest software services exporter Infosys Technologies fell 0.81%. Its ADR rose 0.13% on Wednesday.
Mahindra Satyam rose 5.04% after the company's American depository receipt, or ADR, jumped 8.35% to $4.80 on the New York Stock Exchange on Wednesday, 2 December 2009.
Cement stocks rose on reports a second wave of cement price hike is likely within a fortnight. There have already been two prices hikes within a week. After prices were up by Rs 5-10 for a 50 kg bag in the last week of November in western and southern India, prices rose by Rs 8-11 a bag in the Mumbai region on Wednesday, 2 December 2009. The next set of price rises would happen in the north which is enjoying comparatively stable prices till now vis-a-vis the south and the west, reports suggest.
India's largest cement producer by capacity ACC rose 2.05%. The company's cement shipments fell 4.04% to 1.66 million tonnes in November 2009 from 1.73 tonnes in November 2008.
Aditya Birla Group's cement shipments rose 15.3% to 2.93 million tonnes in November 2009 over November 2008. Aditya Birla Group last month said it was combining its cement operations under group firm UltraTech Cement to make India's largest cement firm. UltraTech Cement rose 0.81%.
But, India's largest dam builder Jaiprakash Associates fell 1.11% The company posted 48.77% jump in its cement sales to 1.03 million tonnes in November 2008 over November 2008.
FMCG shares rose on renewed buying. Hindustan Unilever, Marico, Nestle India, Dabur India and United Spirits rose by between 0.49% to 7.06%.
Auto stocks were trading mixed after a sharp rally in recent trading sessions triggered by strong monthly sales figures for November 2009.
India's top tractor marker by sales Mahindra & Mahindra (M&M) rose 0.17%. The company's domestic auto sales soared 105.1% to 21,387 units in November 2009 over November 2008. M&M sold a total of 22,587 vehicles (domestic plus exports) in November 2009 as against 11,515 vehicles sold in November 2008.
India's largest small car maker by sales Maruti Suzuki India rose 1.4%. Maruti Suzuki, reportedly plans to raise production by up to 75% over the next five years in a bid to hold on to its 50% market share. The company's total vehicle sales spurted 66.60% to 87,807 units in November 2009 over November 2008. The announcement was made during trading hours on Tuesday. Domestic sales spurted 60.10% to 76,359 units, while exports surged 128.60% to 11,448 units in November 2009 over November 2008.
India's second largest bike maker by sales Bajaj Auto fell 0.39%. The company's total vehicle sales rose 73% to 2.76 lakh units in November 2009 over November 2008. Motorcycles sales jumped 84% to 2.42 lakh units.
India's top truck maker by sales Tata Motors fell 3.34% on profit taking. The company's total sales zoomed 65.49% to 54,108 units in November 2009 over November 2008.
Tata Motors' total passenger vehicle sales in the domestic market grew by 44.52% at 20,706 units last month, against 14,327 units in the same month last year, the company said in a statement released after market hours on Tuesday. Exports jumped by 86.64% at 3,994 units, compared with 2,140 units in the same month last year, it added.
India's largest motorcycle maker by sales Hero Honda Motors fell 0.95%. The company's total vehicle sales jumped 32% to 3.81 lakh units in November 2009 over November 2008.
Ashok Leyland fell 1.38% even after the company's total sales jumped 103.51% to 4,695 units in November 2009 over November 2008.
Shares of state-run oil marketing companies rose after crude oil prices fell on the New York Mercantile Exchange on Wednesday, 25 November 2009. Hindustan Petroleum Corporation (HPCL), Indian Oil Corporation (IOC) and Bharat Petroleum Corporation rose by between 0.68% to 2.14%.
Fall in crude oil prices will reduce under recoveries of state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price. Crude oil futures ended lower Wednesday after US government data showed a larger-than-expected rise in US oil inventories. Light, sweet crude oil for January delivery on the New York Mercantile Exchange lost $1.71 a barrel at $76.66 a barrel
Cals Refineries clocked highest volume of 5.28 crore shares on BSE. Unitech (1.3 crore shares), Mahindra Satyam (1.28 crore shares), SpiceJet (1.24 crore shares) and Suzlon Energy (1.05 crore shares) were the other volume toppers in that order.
State Bank of India clocked the highest turnover of Rs 154.36 crore on BSE. Jet Airways (Rs 132.88 crore), Tata Steel (Rs 123.56 crore), Mahindra Satyam (Rs 123.47 crore) and Unitech (Rs 117.50 crore) were the other turnover toppers in that order.