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Bank shares surge on assurance that the government’s stimulus measures would continue into the next fiscal
The Indian stock market gained for the fourth consecutive session on Monday, on the back of strong global cues and prime minister Manmohan Singh’s assurance on Sunday that financial reforms would be accelerated and the government’s economic stimulus measures would continue into the next fiscal year. The Sensex closed at 16,499, gaining 340 points, while the Nifty rose 102 points to 4,898.
Banking stocks were among the top gainers on Monday as the prime minister asserted that growth in the next fiscal year, assuming a normal monsoon season, was expected to be more than 7.0% compared with a 6.5% forecast for the current year. State Bank of India (SBI) rose 5%. Bank of Baroda (BoB) and Punjab National Bank (PNB) were up 3% and 2%, respectively, on news that they have entered into an agreement with T Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company.
Sensex heavyweight Reliance Industries (RIL) was up 3% on reports that the firm is planning to acquire some of the assets of US petrochemical major LyondellBasell, which is undergoing reorganisation under the protection of a US court.
Telecom stocks fell on worries that the ongoing price war would result in a sharp fall in revenues and profits. Reliance Communications was down 2% while Bharti Airtel declined 4% after chairman Sunil Mittal told the media that the company was not actively seeking acquisitions, after talks for a tie-up with South Africa’s MTN collapsed recently.
On Sunday, the prime minister had stated that the government would push through legislative changes in the insurance sector to attract more foreign investment. He added that the government would push through stake sales in profitable state-run firms, implement measures to deepen the corporate bond market, strengthen the insurance and pensions sectors and improve the futures market for better price discovery and regulation.
By December 2009, the government plans to introduce bills proposing to raise the foreign stake limit in insurance companies to 49% from the present 26% and to open up the pension sector to private and foreign firms. It will also propose a law to cut its holding in top lender State Bank of India to 51%.
The timing of the withdrawal of the economic stimulus measures would be decided when it becomes clear the economy is recovering, but there will be no fresh stimulus, finance minister Pranab Mukherjee said on Sunday.
Asian markets ended in the green on Monday on strong global cues. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.28%-2.25%. Praising China’s economic performance in the past year during the global financial crisis, Moody’s Investors Service raised the outlook on China’s A1 rating to positive from stable. The agency said the country’s strong credit fundamentals would resume its improving trend as the economy emerged from the effects of the global recession.
— Swapnil Suvarna [email protected]
The Indian markets remained green on strong global cues. During the day Asian markets shot up on reports that Australia’s central bank more than tripled its economic-growth forecast while US unemployment claims and worker productivity beat estimates.
The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.28% - 1.63%. At the end of the day the Sensex closed at 16,158, gaining 94 points from the previous day’s close while the Nifty closed at 4,796, 30 points up. At one point of time in the morning the Sensex was up 220 points before a selloff took the index to a low of 16,075 during the day. On Thursday the Dow Jones Industrial Average was up 204 points to close above 10,006 while the S&P 500 Index and the Nasdaq Composite Index were up 20 points, and 50 points.
The US market was up as the Labour Department announced that productivity surged at a 9.5% annual rate as companies squeezed more output from a smaller pool of labour to hold the line on costs. They also reported that initial claims for state unemployment benefits dropped to 512,000 in the week ended October 31, the lowest level since early January. Markets had expected a decline to only 523,000, from the 530,000 reported in the prior week.
During the day, IT stocks remained red on fears of rupee appreciation affecting their operating profit margins. TCS was down 1% while Infosys remained flat. Garware Offshore Services was up 2% after the company’s platform vessel, M V Mana, won a two-year contract worth approximately Rs22.50 crore a year in the North Sea, from an exploration and production company.
Mangalam Timber Products shot up 7% after one of the promoter group companies hiked its stake in the firm while Indiabulls Power rose 6% on reports that Morgan Stanley had acquired 21 lakh shares of the company. The stock continues to trade below issue price. Fedders Lloyd jumped 5% on securing an export order worth Rs52 crore from Ethiopian Electric Corporation (EEPCO), Ethiopia, towards supply of power distribution material. Aurobindo Pharma was up 1%, after the company received approval from the US Food & Drug Administration for Lamotrigine tablets in 5 milligram and 25 milligram strengths.
Steel stocks rose on reports that major steel producers have posted strong sales volumes for the month of October 2009. Steel Authority of India (SAIL) which has posted 28% growth in saleable steel volumes to 0.85 million tonnes in October 2009 over the corresponding period rose 1% while Tata Steel, rose 3% after it announced that steel sales at its Indian operations rose 38% to 4,62,000 tonnes in October 2009 over the corresponding period. However, JSW Steel fell 2%.
As per media reports the government is expected to consider a proposal to allow foreign airlines to pick up to 49% equity in Indian carriers, despite stiff opposition from the country’s largest private airline Jet Airways. Currently, the government allows 49% foreign direct investment in domestic carriers but bars foreign airlines from holding any stake directly or indirectly.
The United States on Thursday slapped preliminary anti-dumping duties ranging up to 99% on $2.63 billion in Chinese-made pipes used in the oil and gas industry, which is the biggest US trade action against China. However, China’s ministry of commerce commented that it would protect its industry’s interests and accused Washington of double-standards in denouncing new US anti-dumping duties imposed shortly before a visit by President Barack Obama to Asia on a trip that includes stops in Shanghai and Beijing. The US non-farm payrolls report due later today may show 175,000 jobs cut in October 2009. The unemployment rate is tipped to rise from 9.8% to 9.9%. In the premarket trading, the Dow Jones is trading 16 points higher.
—Swapnil Suvarna [email protected]
The company has received 80% to 90% orders from the private sector. Analysts believe markets gained from Chinese players as the main reason for BHEL’s order book overflowing
While Bharat Heavy Electricals Ltd. (BHEL) current order book stands at Rs125,800 million, as per analysts 80% to 90% of the orders received in the first half of the current fiscal have been from the private sector. All thanks to a combination of weakened presence of Chinese players in the Indian power sector and reduced orders from the public sector.
Historically, being a public sector undertaking, BHEL’s major chunk of orders has been from public sector utilities. This trend of more order inflow from the private sector companies has been witnessed recently in the first two quarters of this fiscal and analysts expect this to continue.
“BHEL has received a lot of private sector orders, especially from the second quarter onwards. If you study the first half of this fiscal as a whole, 80% to 90% orders for BHEL are from the private sector,” said an analyst.
Market players say this new trend is a result of the private sector companies now moving towards domestic companies like BHEL and L&T, rather than the Chinese players who were predominant last year. Introduction of new product categories has also helped BHEL gain more market from the Chinese players.
“Unlike last year, wherein lot of Chinese companies were taking the market away from BHEL, this year BHEL has gained on the private sector. BHEL has introduced a lot of new product categories like the super-critical 600MW unit and the 500MW unit; these moves have helped it gain market share. There is pricing advantage if you do a 660MW plant, compared to a 500MW plant. It could prove cheaper by 3% to 4%,” added the analyst.
In addition, price cuts announced by BHEL in the beginning of this year have also helped it gain more orders. “The price cuts were announced due to low cost of raw material,” added the analyst.
This new trend of orders from the private sector for Indian power companies is likely to continue for the next two quarters of this fiscal. “There were 70% to 80% orders from the private sector in the first two quarters; the second half of the fiscal is likely to witness around 30% to 40% orders from the private sector,” said the analyst.
Analysts believe this market gain from the Chinese players will be helpful to both the players in the power sector —BHEL and L&T. While L&T is strongly increasing its presence in the power sector, BHEL has the largest market share of 60%. Analysts believe BHEL will continue to retain this market share and enjoy more orders, while L&T is likely to witness an incremental advantage in orders, as it is a new power sector entrant.
In addition, the new statutory norms for the Indian power sector are likely to help Indian companies like BHEL and L&T further. As per analysts, Chinese players in the power sector are unlikely to match the new heat rates to be proposed for boilers in India. This in turn, would translate into more orders for Indian companies, which were earlier contracted to the Chinese players. Officials from BHEL were unavailable for immediate comments.
— Amritha Pillay [email protected]