TRADE 2.INFO

Weak global cues weighed on investor sentiment today as the key benchmark indices tumbled in the last one hour of trade recording their steepest drop in seven weeks. Index heavyweight Reliance Industries (RIL) declined sharply. Heavy selling was also witnessed in realty, metal and capital goods stocks. The BSE 30-share Sensex plunged 435.07 points, or 2.91%. The market breadth turned very weak in late trade in contrast to a positive breadth earlier in the day.

Selling by foreign funds in last two days after the recent aggressive buying also dampened sentiment.

The market was volatile. After an early slide triggered by weak global cues, the market cut losses in morning trade. It weakened again later. The market recovered from lower level again later. It extended recovery in early afternoon trade as Chinese stocks surged. The market lost ground once again in afternoon trade on weak European markets. The market cut losses after it slumped to fresh intraday low in mid-afternoon trade. A sell-off gripped the market in the last one hour of trade.

European shares were lower on Wednesday, extending a losing run to four days, with miners in the doldrums. Key benchmark indices in France, Germany and UK were down by between 0.65% to 0.77%.

The British unemployment rate in the three months ending in April 2009 rose to 7.2%, up from 6.5% in the three months to January, the Office for National Statistics reported Wednesday. The number of unemployed totaled 2.26 millions in the three months ending in April, a rise of 232,000 from the previous three-month period and a rise of 605,000 from the same period a year earlier. The seasonally-adjusted number of persons claiming jobless benefits rose 39,300 in May, equal to 4.8% of the workforce, the ONS said. Economists had forecast a 65,000 rise to 4.9% of the workforce.

Asian stocks fell after fluctuating between gains and losses in choppy trade. Key benchmark indices in South Korea, Hong Kong, Singapore and Taiwan were down by between 0.4% to 0.73%.

But Chinese shares rose after President Hu Jintao said Beijing’s stimulus is showing results and China was determined to take the lead in emerging from the global economic crisis. The Shanghai Composite Index rose 1.23%.

Japan’s Nikkei rose 0.9%. The Bank of Japan (BoJ) said Wednesday that in the coming months, Japan’s economy is “likely to show clearer evidence of leveling out over time,” according to the central bank’s June report of Recent Economic and Financial Developments. The BoJ also reiterated comments made following the monetary policy meeting Tuesday that the nation’s economic conditions have “begun to stop worsening.”

US index slipped into the red from green. Trading in the US index futures indicated Dow could fall 21 points at the opening bell today, 17 June 2009.

US stocks dropped on Tuesday, 16 June 2009 after Best Buy Co., the world’s largest electronics retailer, posted disappointing sales. The Dow declined 107.46 points, or 1.3%, to 8,504.67. The S&P 500 index fell 11.75 points, or 1.3%, to 911.97, while the Nasdaq Composite Index fell 20.20 points, or 1.1%, to 1,796.18.

In economic data, a report showed that the US housing starts surged 17.2% in May 2009 after sliding 12.9% in April 2009. In other data, producer prices rose at a slower pace at 0.2% while core prices dropped 0.1%. Industrial production fell 1.1% in May 2009, after a 0.7% drop in April 2009.

In an interview with Bloomberg News, US President Barack Obama predicted a 10% unemployment rate even as he said the engines of an economic recovery have begun to turn. Obama is due to unveil his plan to revamp financial market regulation later today, 17 June 2009.

Back home, the data on advance tax payments reported on Monday for the first quarter of the financial year indicated the manufacturing sector may take more time to recover, while the financial sector remains buoyant. Indian companies paid around Rs 23,000 croe in advance tax for the first quarter of FY10, almost flat at the previous year’s receipts. Among manufacturing sector companies, Reliance Industries’ first installment of advance tax payments fell by 7.65 % to Rs 314 crore. Similarly, almost all Tata group companies, barring Tata Power, have paid lower advance tax.

Engineering major Larsen and Toubro has seen a 15.79 % rise, while Mahindra and Mahindra’s advance tax payment went up by 25%.Engineering major Larsen and Toubro has seen a 15.79 % rise, while Mahindra and Mahindra’s advance tax payment went up by 25%.The banking sector has put up a healthy show. State Bank of India is the highest taxpayer during the first quarter of 2009-10 with a 61.09% jump to Rs 1,068 crore. HDFC Bank has paid 16.28% higher advance tax to Rs 250 crore.

Even smaller banks such as IndusInd Bank (122 % increase to Rs 20 crore), Dena Bank (75 % rise to Rs 35 crore) and Yes Bank (42 % increase to Rs 27 crore) have followed the trend.

ACC posted 11% rise in advance tax to Rs 600 crore. India Oil Corporation paid advance tax of Rs 1.30 crore, HPCL paid advance tax of Rs 0.15 crore and BPCL paid advance tax of Rs 0.4 crore advance tax in Q1 June 2009. These three PSU OMC had paid nil advance tax in Q1 June 2008.

Foreign funds have sold shares in last two days after aggressively buying in the past three months or so. Foreign funds sold shares totaling Rs 943.20 crore on Monday and Tuesday.

FII inflow in June 2009 totaled Rs 5189 crore (till 16 June 2009). FII inflow in calendar year 2009 totaled Rs 26,508.40 crore (till 16 June 2009).

Finance Minister Pranab Mukherjee would present the Union Budget on 6 July 2009. The Railway Budget will be presented on 3 July 2009 and the Economic Survey would be presented on 2 July 2009.

Interest rates in India are falling thanks to ample liquidity in the banking system, low headline inflation and a loose monetary policy stance of the Reserve Bank of India. However, inflation may rise if oil and metal prices which have risen sharply in 2009 continue to rally.

As per recent reports, the government may cut interest rates on small savings schemes which currently yields 8% by 50 to 75 basis ponits. A rate cut in the small savings scheme rate will allow banks to bring down their lending rates.

Finance minister Pranab Mukherjee last Wednesday said banks should provide credit at reasonable rates to spur growth, saying cuts in official rates by the Reserve Bank of India had not been passed on.

Indian stocks have soared in the past three months on a view that ample global liquidity and a return of risk appetite will help India Inc help raise funds for expansion which in turn will boost corporate profits. India Inc has already raised almost Rs 5,000 crore from three qualified institutional placements (QIPs) so far in 2009 and announced plans to raise another Rs 20,000 crore.

Many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will provide thrust on the infrastructure sector and push economic reforms to boost growth. Citigroup expects the economy to grow by 6.8% in 2009/10 and 7.8% in 2010/11.

A comfortable victory last month for the Congress-led United Progressive Alliance (UPA) government in elections for the 15th Lok Sabha has raised hopes for economic reforms. Reforms virtually came to a halt in the past five years of the Congress-led alliance government at the centre, when the Communists provided support to the government from outside for a large part of the five-year term. Left parties are opposed to economic reforms.

Investor expectations from the new government are high. Investors expect financial sector reforms such as increase in the cap on foreign direct investment in insurance sector to 49%, from 26% at present.

Unveiling the agenda of the government, President Pratibha Patil in her speech addressed to a joint session of both houses early this month had indicated government’s intension to divest stake in state-run firms. The government, however, intends to retain control over state-run firms and will continue to hold at least 51% stake. But some investors are concerned that the government’s two key allies viz. the DMK and Trinamool Congress (TC) may oppose economic reforms.

Finance minister Pranab Mukherjee recently said there was a need to find ways to bring the economy back to higher growth path without increasing the fiscal deficit. He said the government would focus on infrastructure, agriculture and employment generating sectors to protect growth and jobs.

But rising metal prices is a cause of concerns for manufacturing companies as their raw material costs may shoot up.
Source : Capital Market