The latest positive data on the infrastructure sector failed to spark a market rally

Indian markets finally ended the day on a flat note after the finance ministry’s Economic Survey for 2009-10 predicted that India would bounce back to a high 9% growth in 2011-12 and is on its way to becoming the world’s fastest-growing economy in four years. The latest data on the infrastructure sector for January 2010 also helped the market to bounce back. At the end of the day, the Sensex declined 2 points from the previous day’s close to 16,254 while the Nifty gained 1 point to close at 4,860. Yesterday, we had said that the market would move sideways until the Union Budget, and it did so today. However, tomorrow, the Budget will be tabled and the market is getting ready for a major move, probably downward.

At 12:00 hrs IST, the Sensex was trading down 58 points from the previous day’s close at 16,198. At 14:00 hrs, the index was trading at 16,220, down 36 points.

At the end of the day, Banco Products gained 2%, after the company clarified that it does not supply the specific gasket fitted in the recalled A-star model of Maruti Suzuki.

Aurobindo Pharma ended flat after the company received tentative approval from the US Food & Drug Administration for Nevirapine tablets in oral suspension form.

PAE Ltd has entered into a distribution agreement with Schneider Electric India for the Xantrex range of products, which consists of solar invertors, solar chargers and charge controllers. The stock gained 1%.

Kerala Ayurveda has signed an expression of interest with Arya Vaidya Pharmacy (Coimbatore) to evaluate the integration of both businesses. The stock declined 1%.

During trading hours, the government announced that the infrastructure sector output grew 9.4% in January 2010 from a year earlier, higher than an upwardly revised annual growth of 6.4% in December 2009. During April-January, the first 10 months of the 2009-10 fiscal year, output rose 5.4% from 3% a year ago. The infrastructure sector accounts for 26.7% of India's industrial output.

The Economic Survey said capital inflows from advanced economies could be a challenge for India as they might lead to overheating of the economy. With interest rates at historic lows in most advanced economies, capital flows from these countries are finding their way into the fast-growing Asian economies, including India. It added that if inflows exceed the domestic absorptive capacity, it could lead to overheating of the economy. The Survey showed that this can also be looked at as the “impossible trinity” dilemma of policy choice between price stability, exchange-rate stability and capital mobility.

The economic survey for the 2009-10 financial year urged a calibrated exit from fiscal stimulus, which cushioned India’s economy from the worst of the global downturn. The report, presented in Parliament ahead of tomorrow’s general Budget, forecast economic growth at 8.25%-8.75% in 2010-11, accelerating to over 9% the year after, compared with projected growth of 7.2%-7.5% in the current year.

The economic survey said the risk of a double-dip recession in advanced economies has a direct implication for India. The survey said production of farm and allied sectors fell 0.2% in 2009-10, adding that there is a need for serious policy initiatives to achieve 4% annual agriculture growth. The survey suggested direct food subsidy via food coupons to households and favours making available food in the open market. The survey also favours issuing monthly ration coupons for the poor.

During the day, Asia’s key benchmark indices in Indonesia, Japan, South Korea, Hong Kong, Singapore and Taiwan fell between 0.49%-1.57%, but China’s rose 1.27%.

On Wednesday 24 February 2010, in the US markets, the Dow Jones Industrial Average was up 92 points while the S&P 500 and the Nasdaq Composite gained 11 points and 22 points, respectively.