Indian Stocks Up on G20 and Stimulus Hopes

123jump.com Staff
16 Mar, 2009
New York City

Stocks in India closed higher largely due to forecasts of the execution of an eagerly anticipated stimulus plan by the country

[R]10:00AM New York, 7:30 PM Mumbai- India foreign direct investment increases 58.7% to US$2.7 billion in January.[/R]

Indian market averages rose on positive global cues as investors cheered the announcement by the G20 finance ministers and central banks that expansionary policies will continue to be pursued to prop up the economy.

Investors were also upbeat after a report indicated that foreign direct investment leapt 58.8% in January from a year ago.

Market watchers forecast that the 6,000 crore rupees that will be pumped into the economy by political parties before the Lok Sabha elections will provide further stimulus for the economy.

Selling by foreign institutional investors also eased as they purchased shares worth 191.40 crore rupees on Friday last week.

Gains were, however, trimmed by news that the economy is headed into a deflation.

In Mumbai, the BSE 30-share Sensex index rose 2.1% or 186.93 to 8,943.54, and CNX Nifty gained 2.1% or 58 to 2,777.25.

Of the stocks traded on the BSE, 1622 rose, 879 declined, and 62 remained unchanged.

Trading Statistics

Daily turnover on the BSE increased to 3,490 crore rupees from 3,230.11 crore rupees on Friday last week.

India FDI Rises 58.8% to US$2.7 billion

India’s secretary in the Department of Industrial Policy and Promotion Ajay Shankar said the country’s foreign direct investment advanced 58.8% to US$2.7 billion in January from the same period a year ago.

FDI inflows in the April to January period soared to US$23.8 billion and will surpass last year’s target of US$25 billion.

However experts note that it is unlikely for the government to reach the targeted US$35 billion this fiscal due to the worsening economic conditions on the global financial markets.

“January numbers are very good...it is an indication of the confidence that the rest of the world has in India,"""""""" said Shankar.

India’s Economy Headed into Deflation

Global consultancy firm Goldman Sachs reported in a study today that India’s economy is headed towards deflation and the Reserve Bank of India might be forced to slash its cash reserve ratio by 150 basis points.

The projections are premised on the average weekly movements in the wholesale price index- a harbinger of the general price movements- which fell to 2.43% for the week ended February 28.

“We expect the year-on-year change in the WPI, the RBI''s preferred measure of inflation, to be negative starting April, and could remain so till end-2009, driven by the ongoing demand destruction as well as a high base from 2008. We expect the RBI to cut the cash reserve ratio of banks by 150 basis points and pursue quantitative easing to keep the system flush with liquidity,"""""""" said Goldman Sachs.

However, inflation is expected to pick up in 2010 due to a rebound in demand.

According to the report, credit growth is also forecasted to ease to 18.3% at the end of February from 19.3% from a month ago.

Gainers & Losers

Reliance Industries increased 3.5% to 1,326.60 rupees on reports the company might sell or lease out its 1,432 petrol pumps to Indian Oil Corporation .

Bharat Heavy Electricals advanced 2.2% on news the company is engaged in talks with French company Areva and Pune-based Bharat Forge for its venture in nuclear business.

Hindalco Industries gained 0.4% after the government on Friday last week imposed a safeguard duty of 22% for aluminium foils and 35% for aluminium sheets applicable for 200 days.

Tata Steel rallied 1.3% as its advance tax payment rose 92.4% to 406 crore rupees in the fourth quarter ended March 2009 from the same period a year ago.

Steel Authority of India increased 2.2% on reports the company''s sales may improve in the current quarter.

Automakers gained on falling oil prices. Crude oil prices dipped 1.7% to $46.3 per barrel after OPEC elected not to proceed with further production cuts. Tata Motors rose 3% and Hero Honda Motors soared 0.3%.

However, Maruti Suzuki India fell 1.9%.

Mahindra & Mahindra jumped 10.8% on reports the company cut its planned capital spending by 500 crore rupees.

ICICI Bank rose 4.5%, HDFC Bank gained 1.2% and State Bank of India climbed 3.7% after its advance tax payment increased 27.6% to 1810 crore rupees in the fourth quarter ended March 2009 from the same period a year earlier.

IT stocks increased despite the rupee rising to 51.32 against the dollar from 51.48/50 on Friday last week. TCS rose 2.6%, HCL Technologies climbed 5.6% after securing a contract worth $350 million.

Wipro increased 1.65%, but Infosys Technologies fell 0.6%.