Sensex pares losses, banks recover

The key benchmark indices recovered in afternoon deals even as trading remained volatile. Banking stocks cut losses as bond prices rose.
Index heavyweight Reliance Industries was firm. Auto and cement stocks gained on decent- to-strong growth in sales/dispatches in the month just gone by. Realty stocks edged higher.
The market opened weak but soon jumped into the green before plunging into the red shortly tracking weak world markets. A strong rebound took place again in morning trade on higher US index futures. Sensex moved to green from red. It, however, soon slipped into the red shortly as heavy selling by foreign funds in the past few days weighed on the investor sentiment. The market cut losses again in early afternoon trade.
There has been heavy selling by foreign funds this year. FII outflow in February 2009 totaled Rs 2707 crore. FII outflow in calendar year 2009 totaled Rs 6940.90 crore (till 27 February 2009).
Expectations of a rate cut by the Reserve Bank of India (RBI) remain with the latest foreign trade data providing further proof that the Indian economy is slowing down. Exports fell 16% in January 2009, falling for the fourth month in a row, data released by the government during trading hours on Monday, 2 March 2009, showed.

Asian markets moved between positive and negative zone, cutting intraday losses as US index futures rose. Key benchmark indices in Japan, Singapore, China and Hong Kong were down by between 0.79% to 2.15%. Key benchmark indices in Taiwan and South Korea were up by between 0.21% to 0.66%.
Trading in US index futures showed the Dow could rise 62 points at the opening bell on Tuesday, 3 March 2009.
US markets ended at 12-year low on Monday, as another bailout of insurance giant AIG stirred fears about the stability of the financial system. It was the first time the Dow has closed below 7,000 since May 1997.
Closer home, the outcome of the forthcoming parliamentary elections will be a key drive of the domestic bourses going ahead. The market may recover if a coalition led either by Congress or BJP comes to power. But the recovery will be subject to BJP or Congress led coalition coming to power without a support from the Left front which is against key economic reforms. The market will then look for whether the new government which comes to power undertakes second generation reforms that could bring India back on a strong growth path witnessed in five years between 2003 and 2008.
It is highly unlikely that either Congress or BJP comes to power on its own i.e. without the support of other smaller/regional parties. The chief Election Commission on Monday announced a month long schedule of the parliamentary elections. The elections will he held between mid-April 2009 to mid-May 2009.
The BSE 30-share Sensex was down 20.71 points, or 0.25%, to 8,586.06.
The market breadth, indicating the overall health of the market was weak on BSE with 880 shares advancing as compared with 1,266 that declined. A total of 91 shares remained unchanged.
From the 30 share Sensex pack, 17 stocks rose while rest fell.
India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 1.29% to Rs 1,241, off the day's low of Rs 1,211.35, on bargain hunting. The stock had lost 3% in the previous trading session after the company set the swap ratio for merger of Reliance Petroluem which was slightly in favour of Reliance Petroleum.
Reliance Industries said on Monday 2 February 2009 its board approved the absorption of its unit Reliance Petroleum (RPL) and set a share swap ratio giving it direct control of the world's largest refinery complex. Reliance Industries said it would issue one share for every 16 held in RPL, which runs a refinery. Reliance Petroleum rose 1.06%.
PSU OMCs rose on sharp fall in crude oil prices. Hindustan Petroleum Corporation, Indian Oil Corporation and Bharat Petroleum Corporation rose by between 1.61% to 2.73%. The fall in crude oil prices will reduce the under-recoveries for the PSU OMCs on sale of fuel at controlled prices. PSU OMCs are currently making profit on sale of petrol and diesel. But they continue to make losses on the sale of kerosene and liquefied petroleum gas.
Capital goods stocks fell on worries a slowing economy will crimp orders. Crompton Greaves, Praj Industries, Bharat Heavy Electricals, Thermax fell by between 0.71% to 0.9%. But India's largest engineering and construction firm by sales Larsen & Toubro bucked the trend, gaining 0.15%.
Some healthcare stocks edged higher on defensive buying. Ranbaxy Laboratories, Dr Reddy's Laboratories, Cipla, Piramal HealthCare rose by between 0.01% to 0.78%.
Auto Stocks rose on improved sales in February 2009. India's largest motorcycle maker by sales Hero Honda Motors rose 1.56%. Hero Honda's sales rose 24% to 3,29,055 units in February 2009 over February 2008. But India's largest car maker by sales Maruti Suzuki India fell 0.38% to Rs 673 off the day's high of Rs 688.50. Maruti during trading hours on Monday reported 24.1% rise in sales to 79190 units in February 2009 over February 2008.
TVS Motor Company rose 5.54% after its two wheeler sales rose 13% to 1,07,301 units in February 2009 over February 2008.
India's largest tractor maker by sales Mahindra & Mahindra rose 0.69%. M&M recorded 10.8% growth in total volumes to 29,017 units in February 2009 over February 2008
India's largest commercial vehicle maker by sales Tata Motors rose 1% after the company reported improved sales. Tata Motors' total domestic sales for the month of February 2009 at 42,493 units, were the highest in the last 4 months. Domestic commercial vehicle sales at 23,454 units were the highest since September 2008 and domestic passenger vehicle sale at 19,039 units were was the highest since May 2008. The total domestic sales, however, declined 15% in February 2009 over February 2008.
Rate sensitive real estate shares rose on hopes lower rates will spur housing demand. DLF, Indiabulls Real Estate and Unitech rose by between 0.01% to 0.67%. Most of the realty deals including sale of commercial property and housing sales are driven by finance.
India's largest private sector bank by net profit ICICI Bank rose 0.71% to Rs 307 off the day's low of Rs 294.50. Its American Depository Receipts (ADR) slipped 11.72% on Monday, 2 February 2009. Recently, Life Insurance Corporation of India hiked its stake in ICICI Bank by 2.04% to 9.38%. India's second largest private sector bank by operating income HDFC Bank fell 1.44% as its ADR fell 7.1% overnight.
India's largest bank in terms of assets and branch network State Bank of India rose 0.41% to Rs 1000 off the day's low of Rs 985 after the bank reduced deposit rates by 40 to 50 basis points across maturities. The new rates would be effective from 9 March 2009.
PSU bank stocks, Union Bank of India, Bank of Baroda, Bank of India fell by between 0.07% to 1.57%.
Despite a steep cut in policy rates by Reserve Bank of India (RBI) since October 2008, there has not been a commensurate reduction in lending rates by banks as fears of rising bad loans have made them cautious in increasing advances/lending. One reason why banks have not fully passed on the central bank rate cuts to customers is because higher bond yields are pushing up their funding costs. Bond yields and bond prices are inversely related.
After a recent steep rise, the yields have started easing since late last week buoyed by hopes the central bank will purchase more bonds at the buyback auction. Recovery in bond prices could boost the valuations of banks' bond portfolio. The central bank is scheduled to buy back Rs 6000-crore of federal debt, with an option to buy an additional Rs 3000 crore on Thursday, 5 March 2009, ahead of a Rs 12000 crore government bond auction on Friday, 6 March 2009.