Inflation in India Falls, Stocks Advance

123jump.com Staff
18 Dec, 2008
New York City

Annualized inflation rate in India falls to 6.84% at the end of the first week in December. Indian government is seeking additional $9 billion for fiscal spending in year through March 2009. The benchmark Sensex index closes above 10,000.

[R]10:00AM New York, 7:30 PM Mumbai – Annualized inflation rate falls to 6.84% at the end of the first week in December. Indian government is seeking additional $9 billion for fiscal spending in year through March 2009.[/R]

Market Sentiment

Stocks in Mumbai closed above 10,000 after the country''s inflation plummeted more-than-expected to 6.84%. Government also unveiled measures to increase fiscal spending to $9 billion in the fiscal year ending March 2009.

Investor sentiment was strengthened as foreign funds purchased 1,681 crore rupees of equities in the month through December 17, 2008. Realty stocks and automakers rose.

In Mumbai, the BSE 30-share Sensex index rose 3.7% or 361.14 to 10,076.43, and the CNX Nifty soared 3.6% or 106.40 to 3,060.75.

Of the stocks traded on the BSE, 1,490 increased, 966 declined, and 91 were unchanged.

Trading Statistics

Daily turnover on the BSE increased to 5,078 crore rupees from 4,893.61 crore rupees yesterday.

Inflation Drops Below 7%, Government Increases Spending

The weekly measure of annualized wholesale inflation dropped to 6.8% in the twelve months ended December 6 from 8% in the previous week.

Government also said it is seeking $9 billion for the present fiscal year ending March 2009 as part of a stimulus package to boost economic growth. The government is likely to unveil new economic measures for the automobile, housing and steel sectors.

The government is likely to increase the limit for low interest rate housing loans from 20 lakh rupees to 30 lakh rupees, to increase tax rebates on home loans and reduce car and two-wheeler loan rates by 2% to 12%.

Increasing depreciation and facilitating faster disbursal of central value added tax credit for the steel sector is also considered.

In all, 12,500 crore rupees may be earmarked for fertilizer and food subsidies.

Gainers & Losers

Reliance Industries gained 0.7% to 1,360.20 rupees on hopes that the stimulus package will boost demand for petroleum products.

Tata Motors gained 7.1% despite reports the company is planning to close its commercial vehicle plant in Pune for three days from December 29, 2008.

Financial stocks gained on expectations that the Reserve Bank of India will slash interest rates. State Bank of India increased 7.9% after its advance tax payment gained 56% to 1,700 crore rupees, ICICI Bank advanced 9.2% and HDFC Bank soared 5.8%.

Canara Bank jumped 8.1%.

IT stocks increased as the U.S. President-elect Barack Obama''s plans for a stimulus plan that could reach $1 trillion over the next two years despite strengthening rupee to 47.05 from 47.67.

Satyam Computer Services rose 7.2% to 169.35 rupees, Wipro rose 2.7%, Tata Consultancy Services jumped 6.9% and Infosys gained 2.9%.

GMR Infrastructure gained 6.5% and Patel Engineering surged 9.7% after a consortium of the company received an order worth 3,859 crore rupees.

Bharat Electronics rose 2.2% after a block deal of one lakh shares was executed on NSE at 700 rupees per share.

National Aluminium Company soared 11.4% on hopes the government''s stimulus plans will help the domestic aluminium industry.

McNally Bharat Engineering Company climbed 11.6% after receiving two orders worth 244 crore rupees. Astra Microwave Products jumped 10.3% on short covering.

Sun TV Network gained 5.1%.

Thomas Cook India jumped 6.8% after the company priced a rights issue of equity shares at 35.50 rupees, 26.7% premium to the current market price.