Market Commentary Wednesday, February 07, 2007 17:14 Hrs IST

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END-SESSION

Market in Bradmanesque form

After a shallow correction of 38 points on Tuesday (6 February 2007), the market shot back up today. The two key indices, the Sensex and the Nifty, set their third records in the last four trading sessions. The government today estimated GDP growth of 9.2% in the financial year ending March 2007, above RBIís forecast between 8.5 - 9%, spreading more cheer in the market.

In the first official growth estimate for 2006/07, the Central Statistics Office said manufacturing output growth was estimated at 11.3%, compared with 9.1% a year ago. India had last week revised upwards growth for the fiscal year 2005/06 to 9% from a previous reading of 8.4%.

The 30-share BSE Sensex jumped 164.94 points (1.1%), to a lifetime closing high of 14,643.13. A bout of volatility afflicted the Sensex after it had struck an all-time high above 14,600 in afternoon trade. After cooling from this record high, the market firmed up once again in late-trading, striking a lifetime high of 14,663.26 at 15:21 IST, and surpassing an earlier all-time high of 14,564.80 of Tuesday (6 February 2007).

The S&P CNX Nifty rose 28.35 points (0.68%), to an all-time closing high of 4,224.25, a gain of 27.80 points (0.66%). The relatively muted gains in the Nifty compared to those in the Sensex were due to a fall in oil exploration major, ONGC, which is a heavyweight in the Nifty.

The market-breadth turned negative in the latter part of trading. The breadth held strong till the afternoon. Against 1,337 shares declining on BSE, 1,320 rose. Just 51 shares were unchanged.

The BSE Mid-Cap Index rose just 4.51 points (0.07%), to 6,186.86. The BSE Small Cap Index gained 35.06 points (0.46%), to 7,697.81.

All sectoral indices of BSE, other than the Oil & Gas Index and the FMCG Index, ended in the green. The BSE IT Index jumped 118.53 points (2.1%), to 5,524.22. It was the top gainer among sectoral indices in percentage terms. The BSE Metal Index gained 142.56 points (1.5%), to settle at 9,426.33.

The BSE clocked a turnover of Rs 5340 crore, lower than Tuesdayís Rs 6103 crore.

With todayís rise, the Sensex has added 552.21 points (3.9%) in the past five trading sessions, from 14,090.92 on 31 January 2007. The barometer index is up 856.22 points (6.2%) in calendar 2007.

FIIs have stepped up buying of late. Their inflow was Rs 1665.60 crore in three trading sessions, from 2 February to 6 February 2007.

Healthy corporate earnings' growth in a booming Indian economy, along with strong global liquidity, has been a key driver of the bull-run on the Indian bourses, which is now in its fourth year. The Q3 December 2006 corporate results were strong.

Although the RBI raised short-term interest rates by 25 basis points in its quarterly monetary policy review on 31 January 2007, it also raised its GDP growth forecast for the current fiscal year. A day before, ratings agency Standard & Poor's (S&P), on 30 January 2007, raised India's sovereign local currency credit ratings to investment grade BBB-/A-3, with a stable outlook, citing strong economic prospects and an improving fiscal situation.

A lot of funds, for instance, pension funds in foreign countries, which were not allowed to invest in Indian equities hitherto, will now become eligible to purchase Indian equities. The development will be instrumental in carrying the rally on the stock market forward.

The near-term trend on the bourses will be determined by expectations regarding the Union Budget 2007-08. Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget. According to a pre-budget report of Man Financial, though the 10% surcharge on corporate tax may be eliminated, the effective tax burden for corporates may go up if certain open-ended exemptions are removed.

In todayís trade, insurance firms hogged the limelight. Bajaj Auto jumped nearly 9% to Rs 3078, Aditya Birla Nuvo gained 9.6% to Rs 1392 and Max India gained 5% to Rs 1115. As per reports, the group of ministers (GoM) on insurance headed by Minister of External Affairs, Pranab Mukherjee, will meet on 13 February 2007 to decide the fate of amendments to the insurance bill.

The bill, which proposes to hike the foreign direct investment (FDI) cap for insurance companies to 49% from the present 26%, was referred to the GoM after the Cabinet deferred a decision on the contentious issue in December 2006. Once the GoM forms a view, the issue will be taken up by the Cabinet. The Union Government wants to introduce the bill in the forthcoming Budget Session of Parliament.

IT bellwether Infosys gained nearly 4% to Rs 2360. The BSE has raised Infosysí free float factor for calculating its weightage in the Sensex from 0.8% to 0.85% with effect from 12 February 2007. Free float factor is used to calculate the weightage of a scrip in a free-float index like the Sensex. Index funds tracking the Sensex will have to make adjustments in their holdings following the changes in the free-float factor.

Oil exploration major ONGC lost 1.6% to Rs 893.70, after the government halted moves to confirm the appointment of R S Sharma as chairman.

Copper and aluminium major Hindalco 4% to Rs 181.45, following a recovery in global copper prices.

ICICI Bank gained 2.5% to Rs 982, after the largest private sector bank on Tuesday, said it had raised the reference rate by 1% for corporate loans and home loans, from 9 February 2007. HDFC Bank gained 1.7% to Rs 1107.

Engineering & construction major L&T gained nearly 3% to Rs 1749. The stock hit a lifetime high of Rs 1767. As per reports, L&T will sign a deal with European aerospace and defence group, EADS, on Thursday to sell components for the latter's defence systems.

Reliance Industries rose 0.2% to Rs 1392. The stock came down from a sessionís high of Rs 1399. The BSE has reduced Reliance Industries (RIL)ís free float factor from 0.55% to 0.5%.

Cipla surged 3% to Rs 257.65. As many as 2.5 lakh shares changed hands in the counter on BSE.

IFCI rose 6.5% to Rs 32.15. The rally materialised on heavy volumes, of 3.9 crore shares, on BSE. With effect from 23 February 2007, NSE has slashed the lot size of IFCI in the derivatives segment to 7,875 from 31,500.

NSE also reduced the lot size of a number of contracts in the derivatives segment, including that of the briskly traded Nifty contract. The decision has been taken based on the prescribed minimum contract value of Rs 2 lakh as per a Securities & Exchange Board of India (Sebi) circular of 2004. The premier stock exchange has simultaneously raised the lot size of some stocks, in order to comply with the same criteria.

Auto parts maker Amtek India jumped 7% to Rs 167, on renewed buying.

Autoline Industries jumped 10% to Rs 430.35, extending what has been a solid surge in the past few days, in the newly-listed entity. The stock rose on high early volume of 21.9 lakh shares on BSE.

Punjab Tractors (PTL) jumped 9% to Rs 309.50, on news that Mahindra & Mahindra had submitted a non-binding bid to buy a stake in the company. Private equity firm Actis has put its 29% stake in PTL on the block.

Akruti Nirman settled at Rs 564. The stock declined sharply after a strong debut at Rs 701.35 on BSE compared to the IPO price of Rs 540.

Software firm, Silverline Technologies gained 2.5% to Rs 23.85, after it said its board will meet on 8 February 2007 to consider setting up a joint venture in Oman for animation, IT education and training services. The board estimates an investment of $10 million in this venture.

Valecha Engineering dropped 1.7% to Rs 271.35, after the company said on Wednesday it will own 60% of Singapore's Koon Holdings, in return for a 5% stake, 48% of its unit Valecha Infrastructure and transfer of international assets.

Aircraft maker Taneja Aerospace & Aviation jumped 5% to Rs 249.15 after the company said on Wednesday it planned to form a joint venture with Belgium's Sabena Technics for maintenance, repair and overhaul services.

The IPO of state-run Power Finance Corporation received bids for 77 times the shares offered. The 117.32-million-equity share offer aimed to raise Rs 997 crore at the top of the Rs 73 - Rs 85 price-band. Qualified Institutional Buyers (QIBs) have applied for 137.2 times the shares reserved for the segment, while retail investors have tendered requests for 8.5 times the shares in their category. The IPO closed on Tuesday (6 February 2007).

European markets were slightly firmer in early trade. Key benchmark indices in London, Germany and France were up between 0.05 - 0.27%. Asian markets were mixed. Japanís Nikkei 225 average shed 0.6%. Hong Kongís Hang Seng was up 0.12%. It had moved between positive and negative zone during the session.

Nymex crude was up 60 cents at $59.48 a barrel.

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