Oil India, NHPC initial public offer soon: Finance Secy

State-owned Oil India Ltd and National Hydroelectric Power Corporation (NHPC) will tap the capital market with their initial public offering (IPOs) in August/September this fiscal.

This was stated by the Finance Secretary, Mr Ashok Chawla, at a post-Budget press conference here today.

“Four more companies based on overall framework and design will be identified (for disinvestment) by the Department of Disinvestment in consultation with ministries,” he said.

Mr Chawla also noted that disinvestment would proceed in a phased manner. The Centre expects to realise at least Rs 1,854 crore from the planned ‘offer for sale’ in Oil India and NHPC Ltd.

Commenting on the Budget, Mr Chawla said that the short-term objective of the Budget was to boost economic growth. The Budget has focused on increased public spending and picked up the spaces vacated by the private sector due to the impact of the global economic downturn.

Mr Chawla said he expected the economy to record close to 7 per cent growth in 2009-10. Indian economy grew 6.7 per cent in 2008-09.

On the issue of tax rates, Mr Chawla noted that the time was not ripe for raising rates and going back to the pre-stimulus rates.

Hence, the Government decided to retain median Cenvat rate at 8 per cent and the service tax rate at 10 per cent.

“We have not raised excise duty and service tax rates to the last year level. Only in certain items, the rates have gone up from 4 per cent to 8 per cent,” Mr Chawla said.

Meanwhile, the Centre has not met the excise duty target of Rs 1,37,874 crore that it had set for itself for 2008-09. At the revised estimate stage, excise duty collections in 2008-09 stood at 1,08,359 crore.

The Centre has been unable to meet its excise duty targets in the recent years, especially during the earlier UPA Government regime.

The global economic downturn had compelled the Government to come up with stimulus packages last fiscal and this could be one of the reasons that came in the way of the Government meeting the excise duty target for 2008-09.

The Finance Secretary also noted that the tax relief given to individuals would boost consumption. He also saw fiscal deficit as a percentage of GDP at 5.5 per cent in fiscal 2010-11 and 4 per cent in fiscal 2011-12.

Meanwhile, official sources said that the Finance Ministry has assumed GDP growth of 10.05 per cent for 2009-10. The Budget projections have been made after factoring in this growth rate, they said.

On the direct tax side, while giving away revenues of about Rs 10,000 crore (surcharge on personal income-tax), fringe benefit tax (7,000 crore), the Finance Minister has made good this revenue loss by raising the minimum alternate tax by 5 percentage points.

Riding on expected increase in economic growth, the Budget 2009-10 has also projected a Rs 10,000-crore increase in surcharge on corporate tax. In 2009-10, the Government expects to collect surcharge (corporation tax) of Rs 26,090 crore compared with Rs 16,001 crore in the previous year, reports The Hindu Business Line.

Source : Moneycontrol.com

Auto, cement, FMCG stocks lead recovery

The key benchmark indices snapped Monday's (6 July 2009) near 6% post-budget losses on a view that a sharply higher government spending in the Union Budget 2009-2010 will aid a recovery in the economy. Higher European stocks and US index futures also supported the domestic bourses.

The BSE 30-share Sensex advanced 127.05 points or 0.9%, off close to 85 points from the day's high and up close to 175 points from the day's low. Index heavyweight Reliance Industries extended Monday's (6 July 2009)'s losses following an increase in the Minimum Alternate Tax (MAT) in the Budget. The market breadth, indicating the overall health of the market, was weak.

As per the provisional data, foreign funds today, 7 July 2009, dumped shares worth a net Rs 921.39 crore. On the other hand, domestic institutions mopped up stocks worth a net Rs 790.16 crore

The market was volatile. The market pared gains after a firm start triggered by higher Asian equities. It regained strength later after falling in the red for a brief period in mid-morning trade. The market once again pared gains in early afternoon trade. Volatility was immense in afternoon trade. Volatility continued in mid-afternoon trade.

Transport minister Kamal Nath said today the government aims to attract $10 billion a year in overseas funding for roads and targets investment of $ 20 billion a year for road building.

Finance Minister Pranab Mukherjee said government spending has to fill a gap left by lower private investment, a day after he sharply raised government spending in the Union Budget 2009-2010 on Monday, 6 July 2009. Higher government spending on infrastructure sector and rural economy will help facilitate recovery in the economy.

Reduction in personal income tax will leave more money in consumers hand which may boost consumer spending. The basic exemption limit on personal income tax was raised by Rs 15,000 for senior citizens and by Rs 10,000 for others. The 10% surcharge on personal income tax was also abolished in the Budget.

Analysts said continuance of previously provided indirect tax breaks will also help help facilitate a recovery in the economy. There was no across-the-board increase in excise duties after a sharp reduction in duties in two stages since December 2008 which was announced as a part of the government's stimulus package for the economy.

The Finance Minister said today that manufacturing is showing better performance but the economic slowdown is not over yet. He further said tax receipts are on a downward path and there is a need to boost spending. He said India must come back to higher growth path at the earliest.

Absence of any big bang economic reforms in the Union Budget 2009-2010 had triggered a nearly 6% slide on the bourses amid heavy volumes on Monday. The Union Budget 2009-2010 did not contain any major reforms such as a roadmap to increase foreign direct investment in insurance sector and decontrol fuel prices. Lack of financial sector reforms and a clear roadmap on divestment were other sources of disappointment. The government set an very small target of Rs 1120 crore from divestment for the financial year ending March 2010. A surge in fiscal deficit target added to the market's woes. Finance Minister (FM) Pranab Mukherjee set a sharply higher fiscal deficit target to 6.8% for the financial year ending March 2010 after he increased spending on roads, power and aid to the poor.

The market had expected some announcement on decontrol on fuel prices but the FM only said that a panel will be set up to look into the pricing of petrol and diesel. The market was also surprised by the FM keeping a mum on Foreign Direct Investment (FDI) policy at a time when expectations were running high that the government will announce a roadmap for hike in foreign direct investment in insurance sector to 49% from 24%.

The next major trigger for the market is earnings of India Inc. for the quarter ended June 2009. India's second largest IT major by sales Infosys kickstarts the result season on 10 July 2009.

European shares turned positive after a subdued start. Key benchmark indices in France, Germany and UK rose by between 0.46% to 0.8%.

Asian markets were mixed. Key benchmark indices in Singapore, South Korea, Taiwan were up by between 0.27% to 0.98%. The key benchmark indices in Hong Kong, China and Japan fell by between 0.34% to 1.13%.

US index futures reversed early losses. Trading in the US index futures indicated Dow could rise 17 points at the opening bell today, 7 July 2009.

Wall Street ended Monday's session mixed. Gloomy earnings expectations weighed on sentiment. The Dow Jones gained 44.13 points, or 0.5%, to 8,324.87. S&P 500 index rose 2.30 points, or 0.3%, to 898.72. The Nasdaq Composite Index fell 9.12 points, or 0.5%, to 1,787.40.

Back home, the projected FY 2010 fiscal deficit is much higher than the 5.5% deficit forecast by Mukherjee in an interim budget in February 2009, and also higher than the 6.2% deficit recorded by the government in the previous year ended 31 March 2009.

While Standard & Poor's said the fiscal deficit was within the boundary of their expectation, Fitch Ratings said the budget doesn't alleviate pressure on India's ratings. Moody's Investors Service said on Tuesday that India's budget for 2009/10 is consistent with a stable outlook on its sovereign ratings, although it said the commitment to cut a debt overhang was weak.

S&P ranks India's long-term local-currency rating at BBB-, their lowest investment grade. Fitch has a BBB- long-term rating on India, also their lowest investment-grade level. Moody's has a Baa3 foreign currency rating and Ba2 local currency sovereign rating, which is non-investment grade, on India.

The BSE 30-share Sensex was up 127.05 points or 0.9% to 14,170.45. The Sensex rose 208.48 points at the day's high of 14,251.88 in early trade. At the day's low of 14,000.68, Sensex fell 42.72 points in mid-morning trade.

The S&P CNX Nifty was up 36.45 points or 0.88% to 4,202.15. Nifty July 2009 futures were at 4193, at a discount of 9.15 points as compared to the spot closing of 4202.15. Turnover in NSE's futures & options (F&O) segment was Rs 60,222.63 crore, sharply lower than Rs 96,656.53 crore on Monday, 6 July 2009.

BSE clocked a turnover of Rs 5,285 crore, lower than Rs 7,330.76 crore on Monday, 6 July 2009.

The market breadth, indicating the overall health of the market, turned weak from positive breadth in early trade. On BSE, 1,061 shares rose as compared with 1,464 that fell. A total of 97 shares remained unchanged.

From the 30 shares Sensex pack, 18 rose and rest fell.

The BSE Sensex is up 4,523.14 points or 46.88% in calendar year 2009 as on 7 July 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,010.05 points or 73.64% as on 7 July 2009.

Coming back to today's trade, the BSE Mid-Cap index was up 0.92% and outperformed the Sensex. The BSE Small-Cap index was down 0.33% and underperformed the Sensex.

The BSE Auto index (up 3.92%), the BSE FMCG index (up 3.83%), the BSE Capital Goods index (up 1.67%), outperformed the Sensex.

The BSE PSU index (down 1.75%), the BSE Oil & Gas index (down 1.32%), the BSE IT index (down 0.38%), the BSE Metal index (down 0.14%), the BSE Realty index (down 0.1%), the BSE Bankex (up 0.46%), the BSE Consumer Durables index (up 0.49%), the BSE TECk index (up 0.5%), the BSE Healthcare index (up 0.57%), the BSE Power index (up 0.97%), underperformed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 2.02% to Rs 1,855.35. The Supreme Court today declined to stay the Bombay High Court's verdict in a dispute over the sale of natural gas by Reliance Industries (RIL to Reliance Natural Resources (RNRL).

The Supreme Court didn't grant Reliance Industries' plea to stay the order of the Bombay High Court until the resolution of the case and issued notices to the companies and the Centre. Both companies have to reply to appeals filed by each other by 20 July 2009, when the matter is scheduled to be heard, a bench headed by Chief Justice K.G. Balakrishnan said in New Delhi today. The government must also respond by then, the court said.

RIL, late last week, moved the Supreme court, challenging the Bombay High Court judgment asking it to supply gas to the former at a price that is 44% lower than fixed by the government. In its appeal filed in the Supreme Court on Saturday 4 July 2009, Reliance Industries contended that the high court had erred in deciding the three terms - quantity, tenure and price of gas supply to power plants of Reliance Natural Resources (RNRL) affiliates.

Meanwhile, RIL's tax liability would rise after Finance Minister Pranab Mukherjee increased the rate of minimum alternate tax (MAT) to 15% from 10% of book profit. RIL pays taxes under MAT. RIL's total tax liability stood at Rs 3028 crore in the year ended March 2009 (FY 2009), which included deferred taxes of Rs 900 crore and fringe benefit tax of Rs 54 crore. While higher MAT may result in increase in tax outgo, the scrapping of the fringe benefit tax (FBT) may help mitigate the impact to some extent. The government has scrapped FBT in the Union Budget 2009-2010.

Meanwhile, the government has restored tax holiday to natural gas producers which will benefit RIL. In the last financial year's budget, the government had removed seven-year tax holiday on natural gas production while continuing the same for oil production. However, the tax benefit on natural gas will be available only for future gas discoveries i.e from the forthcoming New Exploration Licensing Policy (NELP) round VIII onwards.

Oil stocks were mixed as crude oil fell for a fifth day in New York today on a stronger dollar and concerns that slow fuel consumption will lead to an increase in US stockpiles. India's largest oil exploration firm by revenue ONGC fell 1.91%. But Cairn India rose 0.3%. The fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms. Oil for August 2009 delivery fell as much as 50 cents, or 0.8%, to $63.58 a barrel in electronic trading on the New York Mercantile Exchange.

Shares of three state-run oil marketing firms BPCL and Indian Oil Corporation rose by between 0.14% to 0.42% on fall in crude oil prices. But HPCL fell 0.19%. Lower crude oil prices will reduce underrecoveries at the state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price. The government had recently hiked petrol prices by Rs 4 per liter and diesel prices by Rs 2 per liter.

But contrary to market expectations, the Union Budget 2009-2010 did not include a roadmap for decontrol of fuel prices in the country but only said it will set up a expert panel to look into the matter of fuel pricing.

Capital goods and construction stocks rose after the budget laid major emphasis on infrastructure development. Siemens, Praj Industries, Siemens, ABB, Larsen & Toubro, Bharat Heavy Electricals rose by between 0.21% to 2.52%.

Among construction stocks, Hindustan Construction Company, IVRCL Infrstructure &Projects and Nagarjuna Construction Company rose by between 3.11% to 9.04%.

Finance Minister Pranab Mukherjee on 6 July 2009, provided a thrust on various infrastructure projects in the budget which will benefit construction firms in the form of increased orders. The government announced more spending for urban, water and road projects. The allocation to National Highway development program allocation was increased 23% to Rs 15948 crore.

To ensure that infrastructure projects do not face financing difficulties arising from the current downturn, the government has decided that India Infrastructure Finance Company (IIFCL) will refinance 60% of commercial bank loans for Public Private Partnership (PPP) projects in critical sectors over the next fifteen to eighteen months.

Cement stocks rose on thrust on the infrastructure sector in the Budget which may boost cement demand. ACC, Ambuja Cements, Ultratech Cement and Grasim Industries rose by between 3.87% to 5.34%.

Meanwhile, the differential excise duty structure for the cement industry was kept unchanged. Besides there was no change in the import duty of basic inputs like coal, petroleum coke, gypsum etc.

Steel stocks fell as the Finance Minister did not announce measures to safeguard the domestic industry against cheap imports in the budget. Bhushan Steel, JSW Steel, Steel Authority of India, Jindal Steel fell by between 0.04% to 4.3%.

But, India's largest steel maker by sales Tata Steel rose 0.42% after the company said on Tuesday that steel sales from its Indian operations rose 19 % to 497,000 tonnes in June 2009 over June 2008. The Indian operations account for about a quarter of the group's total annual global capacity of 30 million tonnes, which includes its Anglo-Dutch unit Corus.

Auto stocks rose on retention of lower excise duties in the Budget. Mahindra & Mahindra, Maruti Suzuki India, Hero Honda Motors rose by between 4.34% to 5.8%.

There was no across-the-board increase in excise duties after a sharp reduction in excise duties in two stages since December 2008 which was announced as a part of the government's stimulus package for the economy. A section of the market was fearing rollback of excise duties due to signs of a recovery in the Indian economy.

The specific excise duty applicable to big cars and utility vehicles of engine capacity 2,000 cc and above was reduced to Rs 15000 per per vehicle from Rs 20000 per vehicle.

FMCG stocks rose as the finance minister reiterated the government's thrust on the agriculture sector. FMCG firms derives a substantial revenue from rural sector. Aries Agro, Advanta India, Jain Irrigation, Tata Tea, Marico, United Spirits, Dabur india rose by between 1.13 % to 12.68%.

Finance Minister Pranab Mukherjee, while presenting the Union Budget for 2009-10, said the government will ensure that agriculture grows by at least 4% per year.

The government has announced additional interest rate subvention of 1% to farmers who pay short-term farm loans on schedule. The government has also decided to extend agriculture debt waiver by six months and to provide additional Rs 1000 crore over interim budget for irrigation.

India's largest cigarette maker by sales ITC rose 6.77%, extending Monday's 3.13% gains after the Finance Minister left excise duty on cigarettes unchanged in the Union Budget 2009-2010.

Shares of drug makers rose after the Finance Minister Pranab Mukherjee reduced customs duty on life saving drugs in the Budget. Dr Reddy's Laboratories, Lupin, Piramal Healthcare, Biocon, Sun Pharmaceutical Industries rose by between 1.16% to 4.45%.

Finance minister on 6 July 2009, reduced basic customs duty on influenza vaccine and nine other specified life-saving drugs used for treating breast cancer, hepatitis-B, rheumatic arthritis, etc.

The government has also reduced basic customs duty for two bulk drugs used in manufacturing these medicines from 10% to 5%. Bulk drugs are processed raw materials used in manufacturing the final doses of medicines.

Bank stocks fell as government did not announce financial sector reforms in the Budget. Market expectations on financial sector reforms were high. The government's annual economic survey released ahead of the Budget had called for a phased increase in the foreign direct investment limit in banks. Voting rights in banks should be aligned with equity holdings, the Survey had said

India's biggest bank in terms of branch network State Bank of India (SBI) fell 1.13%. India's second largest private sector bank by net profit HDFC Bank fell 0.1% as its ADR fell 2.2% overnight. But, India's largest private sector bank by net profit ICICI Bank rose 2.51% even as its American depository receipt (ADR) fell 0.9% on Monday, 6 July 2009.

India's biggest dedicated housing finance firm by operating income Housing Development Finance Corporation rose 0.24%. The finance minister did not announce a hike in tax sops for housing loans contrary to market expectations.

Some realty stocks extended Monday's steep losses as finance minister made no major announcement to boost the debt ridden sector reeling under slump in demand for new homes. DLF, Omaxe, Housing Development & Infrastructure, Akruti City fell by between 0.37% to 5.34%.

India's largest cellular services provider in terms of market share Bharti Airtel rose 3.48% after the stock market regulator Securities & Exchange Board of India (Sebi) said Bharti is considering issuing global depositary receipts (GDRs) to South Africa's MTN and its shareholders. Sebi said MTN would need to make an open offer under Indian takeover rules only when the GDRs are converted by the South African firm and its shareholders to local shares with voting rights.

Bharti and MTN have been in exclusive talks that could lead to a merger creating the world's No. 3 wireless group with more than 200 million subscribers and combined revenue of $20 billion.

IT stocks rose as the Finance Minister extended deduction in respect of export profits under the Software Technologies Parks of India (STPI) scheme available under sections 10A and 10B of the Income-tax Act till the financial year 2010-11. IT majors, TCS and Wipro rose by between 1.34% to 1.94%. But, India's second largest IT major by sales Infosys fell 1.18%. In order to tide over the slowdown in exports, the Finance Minister proposed to extend the sun-set clauses for these tax holidays by one more year i.e. for the financial year 2010-11. Last year, the benefit under this section was extended to one year till 2009-2010.

Shares of fertiliser makers fell after the Finance Minister proposed a change in the method of subsidising fertiliser prices. Rashtriya Chemicals and Fertilizers, Nagarjuna Fertilizers & Chemicals, Zuari Industries, Chambal Fertilizers & Chemicals, National fertilizers, Gujarat State Fertilizers Company, Deepak Fertilisers and Petrochemicals Corporation, Tata Chemicals fell by between 0.03% to 8.8%.

Finance Minister Pranab Mukherjee, while presenting the Union Budget for 2009-10, proposed a change in the method of subsidising fertiliser prices by shifting to a 'nutrient based subsidy regime' from a 'product pricing regime'.

Cals Refineries clocked the highest volume of 4.53 crore shares on BSE. Reliance Natural Resources (1.89 crore shares), Unitech (1.72 crore shares), Suzlon Energy (1.51 crore shares) and IFCI (1.14 crore shares) were the other major volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 278.27 crore on BSE. Educomp Solutions (Rs 245.96 crore), ICICI Bank (Rs 207.19 crore), Reliance Infrastructure (Rs 194.17 crore) and Reliance Capital (Rs 189.48 crore) were the other turnover toppers in that order.

Source : Capitalmarket.com

RIL-RNRL war of words continues

The bitter tussle between Reliance Industries Limited (RIL) and Reliance Natural Resources (RNRL) continues. CNBC-TV18’s Siddharth Zarabi reports.

A background: in the spat over KG basin D6 gas, RIL had, during the de-merger, agreed to supply gas to RNRL at USD 2.34 per unit, a move it later backtracked on and said it could supply gas at only USD 4.2 per unit. A legal battle pursued, round one of which was won by RNRL when the Bombay High Court upheld its plea and asked RIL to honour the family MoU.

Yesterday, RIL sent a letter to RNRL saying it would not agree to a gas pact without the nod of the government. Today, RNRL wrote back a letter to the oil giant reminding it to uphold the HC verdict. The letter said: “Your (RIL’s) letter demonstrates the intention of deliberately and wantonly defying and avoiding compliance with the directions of the honorable court and delaying the implementation of the order.” The letter further said that the price at which RIL would supply gas to RNRL need not require the government’s approval.

The letter further says that the HC’s directions were clear and unambiguous and were required to be incorporated in the gas supply agreement between RIL and RNRL. “The unjust conjunction that the government approval is required for price, quantity or tenure has been unequivocally rejected by the honorable court and hence your stand in the letter is in violation of the orders of the court,” it said.

“You are requested to immediately comply with the orders of the court and co-operate in execution of a suitable and bankable agreement in co-operating the above terms in line with the Bombay High Court Judgment dated 15th June 2009,” RNRL addressed RIL.

RIL replies

Later on Wednesday evening, RIL’s spokesperson that the company had already replied to RNRL’s letter and that RIL would move the Supreme Court next week. RIL has said it does not concur with RNRL’s interpretation of the HC order and that there was no deliberate intention to delay the order’s implementation.

RNRL has replied it is ready to fight out the case in the Supreme Court.

Source : Moneycontrol.com

Govt planning Cochin Shipyard IPO

The Shipping Ministry has said the Government would consider divestment in Shipping Corporation and was planning IPO (initial public offering) of Cochin Shipyard, reports CNBC-TV18 quoting NewsWire18.

The Ministry added that awarding six port projects was under the government's 100-day agenda and that the six planned port projects would cost Rs 3,320 crore.

Shipping Corp would buy 32 ships in FY10, the Shipping Secretary said.

Source : Moneycontrol.com

Mah Holidays IPO priced at Rs 300/sh, to list in 21 days

he initial public offer of Mahindra Holidays has been priced at Rs 300 per share. The IPO had a price band of Rs 275-325 per share.

Commenting on the same, Arun Nanda, Chairman, Mahindra Holidays Resorts, said the IPO has been priced lower as a gesture to retail investors. He said the company will be listed in the next 21 days.

According to him, two large insurance companies subscribed the IPO book one times.

Also see: Mahindra Holidays IPO subscribed 9.8 times

Here is a verbatim transcript of the exclusive interview with Arun Nanda on CNBC-TV18.

Q: Did you just as a gesture of goodwill leave Rs 25 on the table for investors?

A: Although our book was more than seven times oversubscribed at the upper end, we left it primarily for retail investors because they need to make some money in the market.

Q: How did the nine times oversubscription break up by way of retail and HNI?

A: The oversubscription was 9.8 times. The QIB book was 12 times oversubscribed. High networth individuals was a little over a 10 times oversubscribed and retail was little over 3.3 times oversubscribed. So, all buckets were totally oversubscribed. But what was more heartening was that the upper end of the book was more than seven times oversubscribed.

Q: When do you list?

A: We should list 21 days from today. I think we have got a good set of investment bankers like Kotak and HSBC, so we should list. I think your readers should be very happy because we have left quite a lot on the table purely as a goodwill gesture.

Q: We were wondering if you could have gone all the way down to Rs 275 and left some more?

A: There are two ways to look at it. We could have done it at Rs 325 and still people would have got one tenth of the allocation, but we did it purely for goodwill. I think people should be happy. If you look at out book, we really have some very high quality investors and that was very satisfying for me.

Q: Who would be the top five allottees?

A: I really do not know whether I can give you names but there are two large insurance companies which are nearly at one time book. All the top mutual fund ‑ both domestic and international fund ‑ that you can think of are there. On the high networth individuals, we were 11 times oversubscribed at the top end. I have been in this business for a long time and understand the value of quality of books. As I said that for a QIB there was no need for us to do it. We did it purely for retail investors. I talked about it and we felt that we should leave something for the retail investor.

Q: Two large global insurance companies?

A: No. They have local tie-up. I must confess that I must give you part of the credit. In fact, the investors should give you part of the credit. Although I argued with you, I think you had that perception in mind that we should do something for retail investors. I must confess that you were on the top of my mind when I was agonizing whether it is Rs 300 or Rs 325.

Source : Moneycontrol.com

RIL firms up in choppy market

Key benchmark indices settled with small gains in what was a highly choppy trading session. After striking day's high in mid-afternoon trade, the key benchmark indices retreated sharply in late trade to sink into negative zone only to end with marginal gains. The BSE 30-share Sensex rose 21.10 points or 0.14% to 14,785.74, off 169.81 points from the day's, high but up 100.29 points from the day's low.

IT pivotals weighed dropped on fears a US economic recovery may take longer time than expected. Realty shares advanced as concerns of tight liquidity eased further. Index heavyweight Reliance Industries (RIL) rose.

The market was volatile. The market moved between positive and negative zone in early trade. It weakened in morning trade on lower US index futures. The market cut losses later as investors took fresh positions on hopes of a reform-oriented budget. The Sensex surged in early afternoon trade. The market pared gains after hitting fresh intraday high in afternoon trade.

The market firmed up again in mid-afternoon trade on firm European stocks. A sell-off pushed the Sensex into the red in late trade. The market regained positive zone at the fag end of the trading session

A fresh build of positions had triggered a near 3% rally in Sensex on Friday, 26 June 2009, following a reduction in lot sizes of derivative contracts on the National Stock Exchange. Lower lot size has made the contracts affordable to small traders and retail investors.

The National Stock Exchange (NSE) has reduced the lot size of a number of derivatives contracts as a part of a periodic review to meet a previously set value of the contract at Rs 2 lakh. Thus, the lot size of Maruti Suzuki has been reduced to 200 from 800 and that of Steel Authority of India (Sail) has been cut to 1350 from 5400. The lot size of Axis Bank has been halved to 450 from 900 and for Reliance Industries to 150 from 300. State Bank of India's lot size, too, has been halved to 132 from 264.

Finance Minister Pranab Mukherjee would present the 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.

The corporate sector is expecting a removal of the fringe benefit tax (FBT) in the budget. Under the current dispensation, an employer has to pay FBT at 30% on the fringe benefit, the taxable value of which is determined in accordance with a formula. FBT is a tax levied on perquisites-or fringe benefits -provided by an employer to his employees.

Meanwhile, domestic brokerages and fund houses want the government to remove securities transaction tax (STT) on trading in securities in the Budget. The Securities & Exchange Board of India (Sebi) members have already forwarded the demand of premier stock exchanges, BSE and NSE, to Finance Minister Pranab Mukherjee for scrapping STT in the Budget.

STT, which was introduced in the Union Budget 2004-05 by the then Finance Minister P Chidambaram, taxes every purchase and sale of securities entered into in a recognised stock exchange in India in securities like shares, debentures, bonds, and units of mutual funds. Equity investors pay an STT of 0.125% for every transaction in cash for the delivery of shares.

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 the year ending March 2010 (FY 2010) and 7.8% in the year ending March 2011 (FY 2011).

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.

Meanwhile, before the budget, investors will be keenly watching the outcome of the Employees' Provident Fund Organisation (EPFO's) apex advisory body meet on 4 July 2009. The Central Board of Trustees (CBT) will take a view on the Finance Ministry's proposal to invest 15% of its corpus in equity. The EPFO has a corpus of about Rs 1,82,000 crore and the permission to invest 15% funds in equity could have positive implications for the capital market. A proposal to park funds in the stock market was earlier rejected by the EPFO's Finance and Investment Committee (FIC) at its meeting on 26 March 2009.

European markets were trading firm today, 29 June 2009 on buying in pharma shares. Key benchmark indices in UK, Germany and France were up by between 0.11% and 0.76%.

Most Asian markets were trading lower today, 29 June 2009 despite encouraging economic reports from Japan. Key benchmark indices in South Korea, Singapore, Taiwan, Japan, Hong Kong were down by between 0.03% and 1.12%. But China's Shanghai Composite rose 1.61%

Trading in the US index futures indicated the Dow could rise 30 points at the opening bell today, 29 June 2009. Earlier in the day, the US index futures were in the red.

US markets ended mixed on Friday, 26 June 2009 with the Nasdaq Composite index rising on strong demand for Palm's Inc's Pre smartphone, while the Dow took a hit on account of falling oil prices. Strength in some financial stocks helped cushion the S&P 500's decline.

The Dow Jones industrial average dropped 34.01 points, or 0.40%, to 8,438.39. The Standard & Poor's 500 Index fell 1.36 points, or 0.15%, to 918.90. But the Nasdaq Composite Index gained 8.68 points, or 0.47%, to 1,838.22.

The BSE 30-share Sensex rose 21.10 points or 0.14% to 14,785.74. The Sensex opened 51.26 points higher at 14,815.90. At the day's high of 14,955.55, the Sensex rose 190.91 points in mid-afternoon trade. The Sensex lost 79.19 points at the day's high low of 14,685.45 in morning trade

The S&P CNX Nifty was up 15.45 points or 0.35% to 4390.95. Nifty July 2009 futures were at 4389, at a discount of 1.95 points as compared to the spot closing of 4390.95. Turnover in NSE's futures & options (F&O) segment was Rs 47,588.96 crore, lower than Rs 48,071.62 crore on Friday, 26 June 2009.

The barometer index BSE Sensex is up 5,138.43 points or 53.26% in calendar year 2009 as on 29 June 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,625.34 points or 81.18% as on 29 June 2009

Coming back to today's trade, the BSE clocked a turnover of Rs 5969 crore, higher than Rs 5,541.06 crore on Friday, 26 June 2009.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1684 shares advanced as compared with 987 that declined. 65 shares remained unchanged.

The BSE Mid-Cap index rose 1.14% to 5,230.09 and the BSE Small-Cap index advanced 1.50% to 5,887.86. But both these indices outperformed the Sensex

Sectoral indices on BSE displayed mixed trend. The BSE Capital Goods index (up 0.87%), BSE Bankex (up 1.24%), and the BSE Realty index (up 2.94%), the BSE Consumer Durables index (up 4.24%), BSE Power index (up 1.10%), the BSE Oil & Gas index (up 2.40%), the BSE PSU index (up 1.73%), the BSE Metal index (up 2.59%), outperformed the Sensex

The BSE IT index (down 2.07%), the BSE TECk index (down 1.26%), the BSE Healthcare index (down 0.33%), the BSE Auto index (down 0.42%), the BSE FMCG index (down 0.37%), underperformed the Sensex.

Among the 30-member Sensex pack, 16 gained while the rest slipped

Metal shares rose on strong domestic demand. India's largest zinc and copper maker by sales Sterlite Industries galloped 8.49% to Rs 664 after its American depository receipt (ADR) jumped 5.48% on Friday, 26 June 2009. It was the top gainer from the Sensex pack.

Tata Steel (up 2.38%), JSW Steel (up 1.43%), Hindalco Industries (up 1.44%), Hindustan Zinc (up 1.43%), and Nalco (up 2.90%), edged higher

Rate sensitive realty stocks rose after successful fund raising by Unitech through a second round of qualified institutional placement. Unitech, India's second largest real estate company by sales, gained 3.52% to Rs 85.25. As per reports, Unitech has raised $575 million through qualified institutional placement (QIP) with overseas private equity funds at Rs 81 per share.

India's largest real estate developer by sales DLF jumped 3.69% to Rs 337.55.

Among other realty firms, Parsvnath Developers (up 4.95%), Sobha Developers (up 4.99%), Omaxe (up 3.37%), Akruti City (up 2.10%), HDIL (up 4.54%), edged higher.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) advanced 2.62% to Rs 2081.90 on recent reports the company is evaluating options for future course of action after the Bombay high court on 15 June 2009 asked RIL to supply gas to Anil Ambani Group firm Reliance Natural Resources (RNRL) at prices lower than the government-approved. The stock slipped from day's high of Rs 2011.90

The Bombay High Court has directed RIL and Reliance Natural Resources (RNRL) to sign gas supply deal. The court has asked RIL to supply 28 million metric standard cubic meters per day (mmscmd) of gas for 17 years at $2.34 per million metric British thermal unit (mmbtu) to RNRL. This is much lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 million per metric British thermal unit. According to analysts the lower gas sale price will result in lower-than-expected earnings from gas sales for RIL.

Some PSU stocks were in demand. India's largest oil exploration firm by net profit ONGC jumped 2.70% on reports it would get the coveted 'Mahanavaratna' status conferring greater operational autonomy.

Shares of other companies likely to get 'Mahanavaratna' status such as Indian Oil Corporation (up 1.13%) and Steel Authority of India (up 3.73%), also logged gains.

A total of 5 companies including 2 unlisted firms - BSNL and Coal India may get Mahanavaratna status. According to the criteria set by Department of Public Enterprises (DPE), only five pubic sector enterprises (PSUs) could meet the qualifying norm in turnover, profitability and networth. As per reports Mahanavaratna status would be given to PSUs who had clocked Rs 30,000 crore or more turnover in the past three years and earned more than Rs 5,000 crore profit after tax in three consecutive years.

Also, the Mahanavaratna-eligible PSU should have an average networth of Rs 15,000 crore and global presence, according to the cabinet note circulated by DPE.

BEML jumped 17.80% after net profit surged 45.2% to Rs 172.02 crore 20.4% rise in net sales rose 20.4% to Rs 1,262.51 crore in Q4 March 2009 over Q4 March 2008. The company announced the results after market hours on Friday, 26 June 2009.

India's largest commercial vehicle maker by sales Tata Motors tumbled 7.80% to Rs 313.75 and was the top loser from the Sensex pack. The company reported a net loss of Rs 2505.25 crore in the year ended March 2009 as compared with net profit of Rs 2167.70 crore in the year ended March 2008. Net sales jumped 98.73% to Rs 70370.40 crore in the year ended March 2009 over the year ended March 2008.

However the figures are not comparable as the year-ago numbers did not include that of Jaguar and Land Rover, as well as some other assets the company bought and sold during the year. The results were announced after market hours today, 26 June 2009.

Meanwhile, Tata Motors, on 28 June 2009, launched in India its marquee car brands Jaguar and Land Rover. The company had completed the acquisition of the two British marquee car brands last year for $2.3 billion from Ford Motor Company.

India's top tractor maker by sales Mahindra & Mahindra (M&M) rose 1.08% after its unit Mahindra Holidays & Resorts India reportedly priced shares in its initial public offer (IPO) at Rs 300 each. The Mahindra Holidays IPO was subscribed nearly 10 times. The issue closed on Friday, 26 June 2009

Source : Capitalmarket.com

Market on the brink of a new bull run: Raamdeo Agrawal

When two of the country’s biggest analysts meet to do what they do best — discuss stocks markets — it makes for an interesting exchange. In an exclusive discussion with Ramesh Damani, another market veteran, on his CNBC-TV18 special RD 360, Raamdeo Agrawal of Motilal Oswal and Ridham Desai of Morgan Stanley differed on whether the indices were on the cusp of another bull run.

Ridham Desai said he was still not convinced if this was the start of another bull market. The same sectors that led the 2003-2008 bull run were the out-performers in this rally, he said and added that for a new bull market, new sectors will need to emerge. “The market may see a new leadership [of sectors],” Desai said. “Sectors like auto, media and consumer goods could be the next leaders.”

Agrawal said we may be seeing the start of a new bull market. He added that he was bullish on infrastructure, cement, domestic steel, FMCG and two wheelers ahead.

Also read: Rally to end in few weeks; buy metals, oil: Shankar Sharma

Here’s a slice of the conversation. Also watch the video.

Riddham Desai [on what constitutes a bull market]: Firstly, liquidity and second thing is valuations. There is a lot of fear in the market place, market participants are not interested because they think that stock prices are going to fall further because earnings estimates are going to fall further and we get to a point where they say stocks are trading at six-seven times earnings — big deal — they are going to trade at three times and then there is a infusion of liquidity, which comes out of the macro cycle. That is very normal because growth has slowed down and there is excess liquidity in the system. This combination then leads to the first rally in stock prices and then as these rallies build up, confidence grows, growth forecast improves, the economy improves and then ultimately you get a raging bull market.

Q: How would the fact that you also need a technological change or productivity change, is it enough just that valuations are cheap? Cannot they remain cheap?

Desai: You need a fundamental change and that is quite important to the market. Every bull market is accompanied by change in fundamentals, whether that is a change in technology or in the growth outlook of an economy because of demographic change — whatever that change is — that fundamental change is important otherwise it peters out and proves to be a bear market rally. So you get these three things going together and I think that is how a bull market gets created.

Q: You have studied bull markets, you have studied yearly analysis; in your opinion what is it that lights the match?

Raamdeo Agrawal: The first fundamental thing is there should be enough pessimism to lay the foundation for the bull market. The pessimism, which leads to irrationally low valuations is the starting point of a bull market. For example in 2002-2003, after the dotcom bust after two years of sustained bear market — almost third year of bear market which is a history in itself — valuations were crazy. The whole market was available at 7-8 P/E multiple, Reliance was at 6-7 times P/E multiples and there were no takers for Reliance. The market itself was at 1.5 times book. Pessimism was all over and there was a belief that nothing could happen. Back then, I wished that out of the 40 stocks, two-three must reach a new. And it was a dream — in the next 24 months, we saw half the market was in a new high.

Q: How important is liquidity? Is liquidity the mother’s milk of a bull market?

Agrawal: Yes, definitely liquidity is a starting point because you need money to buy stocks. Liquidity is very important, I have been ignoring liquidity as a propellant for the markets to move but it is important. In 2008, we saw margins of safety to be negative at the peak of the market but liquidity was huge, all over the world — a USD 1 billion cheque was a small thing for inflow into India and again in January 2009, it was the other way round. You couldn’t even get USD 10 million.

Q: GE also couldn't raise money.

Agrawal: Yes, GE couldn’t raise money and that too even for an ultra mega power project (UMPP), you can't get USD 100 million credit.

Q: Liquidity itself cannot assure a bull market? That would be a bubble right?

Desai: Absolutely. It is a combination, you need all factors in place and fundamentals tend to decide how long and how much the bull market will run. Liquidity provides that fire to drive it. So at the start of the bull market, liquidity is important. Very few bull markets start without good liquidity conditions. Liquidity tends to be a corollary to a bear market, which is that once growth slows down, money supply does not shrink as much as growth shrinks. So there is always that excess money stock in the market and that is how central banks and government try to work around a recession.

Source : Moneycontrol.com

Avoid Mahindra Holidays' IPO: Hem Securities

Hem Securities has come out with its research report on Mahindra Holidays and Resorts India's initial public offering (IPO). Mahindra Holidays has opened for subscription with an IPO of 92,65,275 equity shares of Rs 10 each, at a price band of Rs 275-325 a share. The issue will close on June 26, 2009. Hem Securities is of the view that for the investment purpose due to high pricing, the research firm has recommended the investor to ignore issue.

Hem Securities’ report on Mahindra Holidays’ IPO:

The company at a price band of Rs 275-325 per share will have the p/e multiple of 27.02-31.93 at FY09 eps of Rs 10.18. Though the company with its strong brand name and reputed promoter base is well poised to cater financial markets but looking after the valuations of the company , issue looks overpriced at present level. However in January 2008, company has made pre ipo placement at Rs 479 of 16, 49,130 equity

shares and 8, 24,565 equity shares to SBI & Nylim Jacob Ballas India Fund III, LLC respectively. Hence high risk apetite investors can look at the issue for listing gains purpose. But for investment purpose due to high pricing, we recommend the investor to “Avoid” the issue.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source : Moneycontrol.com

Small-cap, mid-cap indices outperform Sensex

The barometer index the BSE Sensex snapped last two days' losses on positive cues from the global markets. Realty, capital goods and power stocks rose even as banking stock fell. Index heavyweight Reliance Industries was weak. The BSE 30-share Sensex rose 98.72 points or 0.69%, off close to 55 points from the day's high and up close to 215 points from the day's low. The market breadth, indicating the overall health of the market, was strong.

But the market was volatile as traders rolled over positions from June 2009 series to July 2009 ahead of the expiry of June 2009 contracts tomorrow, 25 June 2009. Rollover in the Nifty futures was 29.19% as at end of Tuesday's trade. The rollover was 34.47% in Mini Nifty futures. Among individual stocks, rollover has been low in Wipro, Ranbaxy Lab, GAIL India, Reliance Capital and Steel Authority of India.

The key benchmark indices edged higher in early trade as Asian stocks rose. However, the market soon pared gains on worries about agricultural production due to delay in monsoon. The market weakened in morning trade with the Sensex hitting intraday low before cutting losses. The Sensex regained positive zone in early afternoon trade. The barometer index fluctuated between gains and losses in afternoon trade. The market firmed up later with the Sensex hitting intraday high in mid-afternoon trade. The market pared gains in late trade.

The Sensex had lost 197.88 points or 1.36% in the past two trading sessions to 14,324.01 on 23 June 2009 from its close of 14,521.89 on 19 June 2009. The market may remain volatile tomorrow, ahead of the expiry of June 2009 derivatives contracts.

Prithviraj Chavan, the Minister of Science and Technology, said in a press conference, shortly after trading hours today, 24 June 2009, that India's monsoon, which runs from June to September, will be below normal this year. Monsoon rains will be 93% of long term average. Rain in the crucila sowing month of July will be 93% of long term average. The rains are likely to pick up in August in which month rains will be 101% of long term average, the minister said.

The June-September monsoon rains are a major influence on the economy, as two-thirds of Indians depend on agriculture and large areas of the vast south Asian country suffer from a lack of modern irrigation facilities. Below normal monsoon rains is bad news for policy makers, who were upbeat about the prospects of the farm sector, seen as a key motor for national demand in the economy. The farm sector accounts for nearly 17 percent of India's gross domestic product and provides a livelihood for most of the 1.1 billion population. Poor monsoon rains could dent rural demand, hurt corporate profitability and undermine sentiment in financial markets.

Overseas stocks were supported the domestic bourses. European stocks edged higher after fluctuating between gains and losses. Key benchmark indices in France, Germany and UK were up by between 0.11% to 0.75%. Worries that higher interest rates could choke off growth appeared to be on the backburner on Wednesday, with companies normally tied to growth, such as mineral extractors and banks, moving higher.

Asian stocks rose in choppy trade as gains among technology and energy shares overshadowed losses in financials. Key benchmark indices in China, South Korea, Hong Kong, Taiwan and Singapore were up by between 0.24% to 2.95%.

Japan's Nikkei rose 0.43% even after Japan's export slump deepened in May 2009, casting doubt on the nation's growth prospects as the economy struggles to emerge from its worst postwar recession. Shipments abroad dropped 40.9 % from a year earlier, more than April's 39.1 % decline, the Finance Ministry said today in Tokyo.

Trading in the US index futures indicated the Dow could rise 28 points today, 24 June 2009.

US stocks ended mixed on Tuesday. The market opened higher, but slipped after a report showed home sales rose but not as much as expected. Bank stocks gained. The Dow slipped 16.10 points, or 0.2%, to 8,322.91. The S&P 500 index rose 2.06 points, or 0.2%, to 895.10, and the Nasdaq composite index fell 1.27 points, or 0.1%, to 1,764.92.

Global investors are awaiting the outcome of the US Federal Reserve's two-day policy meet which ends today, 24 June 2009. Although the Federal Reserve is expected to keep interest rates unchanged, investors will examine the post-meeting statement for clues as to how long the interest rates will remain at the current near zero. Investors also want to know whether the Fed policymakers will say the US economy is recovering or still in need of aid.

US stocks have lost ground several times in the last month on fears that rising interest rates and inflation would upend an economic recovery.

The Paris-based Organization for Economic Cooperation and Development on Wednesday said the global recession is near its bottom, but warned that a recovery is likely to be "weak and fragile."

The World Bank on Monday predicted that the global economy will shrink 2.9% this year, a deeper fall than the 1.7% contraction it predicted in March 2009.

For India though, the World Bank has raised India's growth forecast for 2009 to 5.1% from earlier projection of 4%. It has projected an 8% growth for India in 2010 which will make it the fastest growing economy in the world in 2010, overtaking China's expected 7.7% growth relative to the robust performance prior to the current crisis.

On the flip side, the latest data showed the Consumer Price Index (CPI), inflation based on rural and agricultural workers rose to 10.2% in May 2009. The higher consumer inflation may cause Reserve Bank of India to reverse the expansionary monetary policy and might even curb the central government's spending plans which may cause hindrance in efforts to boost the slowing economy.

India's fiscal deficit in April 2009 was at Rs 54,158 crore ($11 billion), or 16.3 % of the full-year target, the government said in a statement on Tuesday.

The next major trigger for the market is the Union Budget 2009-2010. 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 the year ending March 2010 (FY 2010) and 7.8% in the year ending March 2011 (FY 2011).

Finance Minister Pranab Mukherjee would present the 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.

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.

But foreign funds sold shares recently after aggressively buying during the past three months or so. Foreign funds sold shares totaling Rs 2,567.10 crore in seven trading sessions from 15 June 2009 to 23 June 2009. FII inflow in June 2009 totaled Rs 3,565.20 crore (till 23 June 2009). FII inflow in calendar year 2009 totaled Rs 24,884.60 crore (till 23 June 2009).

India's biggest domestic institutional investors viz. the Life Insurance Corporation of India (LIC) proposes to maintain its annual investments in the equity market at last financial year's levels at Rs 40,000 crore, LIC chairman T S Vijayan said on Tuesday.

Meanwhile, the data on advance tax payments reported last week for the first quarter of the financial year indicated banks and fast moving consumer goods (FMCG) firms have done well in the first quarter, but realty companies continue to perform badly. Automobile sector have also paid higher taxes this year, show the revenue department's initial estimates. Indian companies paid around Rs 23,000 croe in advance tax for the first quarter of FY 2010, almost flat at the previous year's receipts.

The BSE 30-share Sensex was up 98.72 points or 0.69% to 14,422.73. The Sensex rose 155.81 points at the day's high of 14,479.82 in mid-afternoon trade. At the day's low of 14,207.02, the Sensex fell 116.99 points in mid-morning trade.

The S&P CNX Nifty was up 45.95 points or 1.08% to 4,292.95. Nifty June 2009 futures were at 4305, at a premium of 12.05 points as compared to the spot closing of 4292.95. Turnover in NSE's futures & options (F&O) segment was Rs 82,940.03 crore, lower than Rs 85,073.05 crore on Tuesday, 23 June 2009.

BSE clocked a turnover of Rs 5,703 crore, higher than Rs 5,684.37 crore on Tuesday, 23 June 2009.

The barometer index the BSE Sensex is up 4,775.42 points or 49.5% in calendar year 2009 as on 24 June 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,262.33 points or 76.74% as on 24 June 2009.

Coming back to today's trade, the market breadth was strong. On BSE, 1,792 shares rose as compared with 799 shares that declined. A total of 71 shares remained unchanged.

From the 30 share Sensex pack 24 stocks rose and rest fell.

The BSE Mid-Cap index was up 2.38%. The BSE Small-Cap index was up 2.26%.

The BSE Power index (up 2.82%), the BSE Capital Goods index ( up 2.52%), the BSE Healthcare index (up 2.39%), the BSE Realty index (up 2.07%), the BSE Auto index (up 1.64%), the BSE TECk index (up 1.64%), the BSE Consumer Durables index (up 1.61%), the BSE IT index (up 1.42%), the BSE FMCG index (up 1.16%), the BSE Metal index (up 1.14%), outperformed the Sensex.

The BSE Bankex (down 0.12%), the BSE Oil & Gas index (up 0.03%), the BSE PSU index (up 0.52%), underperfomed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 0.79% to Rs 2,000.10 on reports Reliance Industries will incur a loss if gas from the D-6 block in the Krishna-Godavari basin is sold at $2.34 per million British thermal units, as ordered by the Bombay High Court. The stock was volatile. It hit a high of Rs 2,034.80 and a low of Rs 1,973.10.

The RIL stock had tumbled in the past few days hit by an unfavourable court ruling on gas sales. The Bombay High Court has directed RIL and Reliance Natural Resources (RNRL) to sign gas supply deal. The court has asked RIL to supply 28 million metric standard cubic meters per day (mmscmd) of gas for 17 years at $2.34 per million metric British thermal unit (mmbtu) to RRNL. This is much lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 million per metric British thermal unit. According to analysts the lower gas sale price will result in lower-than-expected earnings from gas sales for RIL.

In January 2009, the Bombay High Court had issued an interim order saying Reliance Industries was allowed to sell gas at $4.2 per million British thermal units from its KG-D6 block in the Krishna Godavari basin off eastern India, pending a final judgment.

The RIL stock had risen 3.26% yesterday after NTPC Chairman R S Sharma said the company is open to buying Reliance Industries' gas at $4.2 per million metric British thermal unit (mmBtu) except for the plants under dispute in the court.

India's largest state-run oil exploration firm by sales ONGC rose 2.39%. The company announced after market hours today that its net profit fell 16% to Rs 2,206.76 crore on 16.85% fall in total income to Rs 15,113.13 crore in Q4 March 2009 over Q4 March 2008 .

Recent reports said ONGC has struck oil and gas in three new blocks. One of these blocks, off the eastern coast of India, could prove as rich as the Reliance Industries' D-6 block.

Capital goods stocks rose on hopes the government may boost spending on the infrastructure sector including increase in power generation. Larsen & Toubro, Thermax, ABB, Punj Lloyd, BEML rose by between 1.27% to 6.17%.

India's largest electric equipment maker Bharat Heavy Electricals Limited (BHEL) rose 2.67% on reports it has secured an order worth Rs 105 crore from Indian Oil Corporation (IOC) for setting up a captive power plant at its Barauni Refinery Complex.

Power stocks gained on hopes of a possible thrust on power generation in the Union Budget 2009-2010. Tata Power Company, Reliance Power, Reliance Infrastructure, Power Grod Corporation of India, NTPC rose by between 0.35% to 2.88%.

Construction and cement stocks rose on hopes the government may boost spending on the infrastructure sector. IVRCL Infrastructure & Projects, Gammon India, Hindustan Construction Company, Jaiprakash Associates, Valecha Engineering rose by between 0.59% to 7.39%.

Among cement shares, ACC, Grasim Industries, India Cements, Ultratech Cements, Ambuja Cements rose by between 3.24% to 5.54%.

Rate sensitive realty stocks rose on expectations that stability at the Centre will attract more money from foreign investors into the sector which in turn will boost growth. DLF, Indiabulls Real Estate, Unitech, Omaxe, Akruti City rose by between 1.23% to 6.87%.

Unitech and Indiabulls Real Estate, have already raised funds through qualified institutional placements (QIPs). A number of other realty funds have decided to raised funds by way of QIPs. The promoters of DLF last month sold a 10% stake in the secondary equity markets.

Bank stocks fell after American depository receipts (ADR) fell overnight. India's second largest private sector bank by operating income HDFC Bank fell 1.97% as its American depository receipt (ADR) fell 3.24% on Tuesday. HDFC Bank's advance tax payment rose 16.28% to Rs 250 crore in Q1 June 2009 over Q1 June 2008.

India's biggest dedicated housing finance firm by operating income Housing Development Finance Corporation (HDFC) fell 1.96%.

HDFC and HDFC Bank recently reduced interest rates on term deposits by up to 0.25%.

India's largest private sector bank by net profit ICICI Bank fell 1.16%. Its ADR fell 0.67% on Tuesday. ICICI Bank's advance tax payment rose 7.64% to Rs 366 crore in Q1 June 2009 over Q1 June 2008. ICICI Bank is reportedly taking cost control measures that could save the bank up to Rs 1300 crore in the year to March 2010.

But, India's biggest bank in terms of branch network State Bank of India (SBI) rose 0.48% on reports it is looking at buying a mid-sized overseas bank in a deal worth $1.5-$2 billion.

Recently, the boards of State Bank of India and its associate State Bank of Indore have approved an acquisition of the latter by the former. State Bank of India has already absorbed State Bank of Saurashtra and has said it is progressively looking to merge its other associate banks.

SBI aims to keep interest margins steady and has no plans for any rights issue or share sale in any unit, Chairman O.P. Bhatt said on Friday 19 June 2009.

Auto stocks rose on hopes sales will rise if economy recovers. India's largest car maker by sales Maruti Suzuki India rose 0.74%. India's largest motorbike maker by sales Hero Honda Motors rose 0.39%.

India's largest commercial vehicle maker by sales Tata Motors, rose 4.2% after the company said on Tuesday that 55,021 applicants for its Nano who missed out on an allotment of the first 100,000 units of the small car had retained their bookings. The company said it expects to complete delivery of the first 100,000 Nanos, the world's cheapest car, by the last quarter of 2010. The company raised $500 million in April 2009 from consumer bookings for the Nano.

India's largest tractor maker by sales Mahindra & Mahindra rose 2.84%.

Outsourcing focussed IT stocks rose on reports India's top two software exporters TCS and Infosys are seeing the first signs of recovery in order flow. India's second largest software firm by sales Infosys Technologies rose 0.75% as its American depository receipt (ADR) rose 1.14% on Tuesday.

India's largest software services exporter by sales TCS rose 4.33%. TCS's advance tax payment fell 33.33% to Rs 50 crore in Q1 June 2009 over Q1 June 2008. India's third largest software services exporter by sales Wipro rose 1.23%. Its ADR rose 0.56% on Tuesday.

Some healthcare stocks rose on hopes the government will give primary importance to healthcare segment and health of citizens. Cipla, Biocon, Ranbaxy's Laboratories, Dr Reddy's Laboratories, Lupin, Pfizer, rose by between 0.11% to 8.82%.

India's largest aluminum producer by sales Hindalco Industries, rose 2.76% after the government imposed a safeguard duty on aluminium products imported from China in a bid to safeguard the interest of domestic producers. But, India's second largest aluminum producer by sales National Aluminum Company fell 1.96%.

After this duty imposition, aluminium foils will attract a safeguard duty of 25-30%, and aluminium sheets will attract a duty of 12-14%. The duty would be effective retrospectively from 23 March 2009 to 22 March 2010.

Safeguard duties are typically imposed over a shorter time period to safeguard the domestic industry against cheap imports. Lately, Indian markets were flooded with the import of cheap aluminium products from China, thus threatening the domestic producers, who are already under pressure due to the demand slowdown and sharp fall in aluminium prices.

Leading Indian telecom players Bharti Airtel and Reliance Communications rose by between 1.34% to 1.82% on recent reports they have joined the race to acquire the African business of Kuwait-based Zain Group.

FMCG stocks rose on hopes of government's rural focus in the forthcoming budget. FMCG firms derive a substantial revenue from rural markets. ITC, Hindustan Unilever, United Spirits, Nestle India, Marico, Britannia Industries rose by between 0.89% to 4.85%

Sugar stocks rose on reports global sugar prices have touched the highest level in three years. Bajaj Hindustan, Balrampur Chini, Shree Renuka Sugars rose by between 4.97% to 7.74%.

Shares of tyre companies rose on expectation of some favourable announcements in the Union Budget 2009-2010 on 6 July 2009. MRF, CEAT and Apollo Tyres rose by between 3.28% to 4.99%.The tyre industry wants reduction in customs duty on inputs as well as excise rebate on domestically manufactured radial truck and bus tyres to improve competitiveness against imports.

Cals Refineries clocked the highest volume of 2.77 crore shares on BSE. Suzlon Energy (2.37 crore shares), Reliance Natural Resources (2.29 crore shares), Unitech (1.89 crore shares) and Firstsource Solutions (1.64 crore shares) were the other volume toppers in that order.

Suzlon Energy clocked the highest turnover of Rs 277.47 crore on BSE. Reliance Industries (Rs 209.64 crore), Reliance Natural Resources (Rs 208.28 crore), Educomp Solutions (Rs 186.93 crore) and Reliance Capital (Rs 174.32 crore) were the other turnover toppers in that order.

Source : Capitalmarket.com

How to earn better returns from your MF portfolio

Pick up any mutual fund portfolio of an active investor and you will usually find it beset with typical problems. These can affect the overall performance. If we can understand, identify and rectify these common blunders, we can make much better returns out of our money.

A bloated Portfolio

Many people have the habit of collecting funds. Over time, therefore, you will find such portfolios having 40-50 funds. Diversification is good, but over-diversification is not.

Firstly, a large portfolio would mean that some funds in the portfolio will always be below-average, thus dragging down your total returns. Secondly, even with all the support of the computers and specialized websites, it is not possible to effectively manage a large portfolio. This again is going to impact the performance on the whole.

One should, therefore, have a limited but power-packed portfolio. The idea is to extract maximum punch with minimum cost and effort.

Chasing the Top Performers

There is too much focus on the performance and that too usually the recent one say over 3 months to 1 year. That�s why you always find this fascination among people for fund rankings.

Of course, performance matters! But making performance (and that too short-term) as the sole selection criteria can prove counter productive.

Historical evidence shows that no fund can always remain the top performer. It also shows that a fund, which has been consistently amongst the top quartile say over 3-5 years, will usually continue with its� good performance. Similarly, a consistently poor performing fund usually finds it difficult to make it to the top.

Besides this the markets, as we all know, are highly sentiment-based. Therefore, more often than not, you will find some theme or the other being market fancy. It could be infrastructure, mid-caps or technology and so-on. At any given time you will find that most of the top performers belong to the same category.

So if you chase top performers you will end with similar schemes in your portfolio. In the process, the portfolio becomes concentrated, defeating the very idea of using MFs to diversify one�s investment.

Your focus should not only be the past performance but also reputation & management of the AMC, fund�s investing style & focus, asset size, etc., besides of course, other key factors such as your investment horizon, risk appetite and other funds in your portfolio.

Mismatched and Unbalanced

It is but natural that the money you need in the short term should be in debt, while only the long term money should be in equity. Liquidity apart, your asset allocation between debt and equity should be in line with your risk appetite.

Some people of course do not do so. Some others start in planned manner. But, as equity and debt follow different paths, over time the portfolio will become mismatched and unbalanced.

As such you may either be over-exposed to equity thus increasing risk; or under-exposed thus losing out on the benefits of equity.

Or a liquidity mismatch may happen between the investment and your need. For example equity markets may be down when you need money, thus forcing you to sell at a loss.

Thus your portfolio needs timely review and correction in tune with your risk appetite & liquidity needs.

Infested with NFOs

Thousands of pages have been devoted to pointing out the myth of NAV. Yet the logic that NAV has absolutely no bearing on the future returns, simply does not register with a common investor.

Hence one can see thousands of crores flow into NFOs especially in a bull market, while the existing funds get practically nothing. In fact, it�s the opposite. People switch out of existing schemes to invest in NFOs under the false impression that Rs.10 NAV fund is cheaper.

As such a typical portfolio would be infested with NFOs. Higher costs in NFOs vis-�-vis existing funds will eat into the returns. Also as the so-called low NAV is why you invested in the NFO, it is quite likely that the fund�s style and focus does not fit with your needs. This also is going to hamper your returns.

Too Much Churning

Call it impatience or a false sense of being proactive or the instant-culture - we simply cannot wait and watch our portfolio grow. We always feel that we need to do something regularly.

Therefore, as soon as a fund shows good appreciation, we are quick to book profits. Or if a fund does not move for some time, we are equally prompt to dump it. This, for one, is adding to the costs in terms of capital gains taxes, entry loads, exit loads, STT, etc. But more importantly, we may be getting out too soon and thus missing out on future performance.

For example, I know investors who want to exit from some funds whose focus is on smaller or mid-sized companies. Now these are the funds, which usually will take time to show returns. It�s quite logical. A Bharti or a Suzlon or an Infosys did not become big in one day. Similarly, who knows how many such future stars are there in these funds? If we wait for 3-5 years, many such budding companies will blossom into beautiful flowers and give us super-normal returns. The question is � are we willing to wait for it?

Building and maintaining a well-diversified and balanced portfolio is no rocket science. All it needs is common sense and discipline to act prudently, promptly and purposefully.

Source : Moneycontrol.com