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Sensex gains amid mixed econ data

March 12, 2009

The Sensex closed 2.25 percent higher on Thursday, as gains on Wall Street and positive inflation data boosted investor sentiments.

INDIAThe benchmark closed 183.35 points up at 8343.75, supported by index heavyweights Reliance Industries (up 4.1 percent), ICICI Bank (up 8.1 percent) and Infosys (up 2.5 percent).

The BSE Auto Index was the frontrunner, closing 3.7 percent higher on data released on Monday indicating a jump of almost 22 percent in car sales from a year ago.

Shares in Ashok Leyland, Mahindra & Mahindra, Hero Honda and Maruti Suzuki were up in the range of 3-5.8 percent.

Tata Motors raced 6.8 percent to 145.95 rupees after the British government announced a 27 million pound ($37 million) grant to its Jaguar Land Rover unit.

Inflation data released on Thursday showed wholesale price index had risen 2.43 percent in the 12 months to Feb. 28, below the previous week’s 3.03 percent. A dip in inflation creates room for the Reserve Bank of India to reduce policy rates further. The RBI has so far cut its key lending rate by 400 basis points, while the government has slashed factory gate duties and service tax to protect growth and jobs.

There was gloomy news on the industrial front. Data showed factory output fell 0.5 percent in January from a year earlier, only marginally better than the previous month’s upwardly revised contraction of 0.6 percent.

Manufacturing production fell 0.8 percent, while exports dropped an annual 16 percent in January.

Shares in Satyam Computer closed 3.1 percent down after the fraud-hit outsourcer closed registration for potential bidders. Some firms are likely to put in expressions of interest, attracted by Satyam’s strong client base and its large workforce.

Bharti Airtel was the top Sensex loser, falling 6.3 percent after the firm’s chief executive sold his holding in the company.

Going by the recent trend, it appears as though investors have become risk averse in their approach after the Satyam scandal. TRAI’s announcement of a cut in interconnection charges too did not help investor sentiments much.

FII data showed a positive net investment in equities of $3 million, while a net sell off was seen in debt of over $100 million.

The government’s efforts to shore up the sagging economy have started showing, but a lot still needs to be done to keep the boat steady. Economists say the full effect will be seen only later this year.

Although the Indian economy is fuelled by domestic demand, expensive credit is still a major concern. The RBI’s move to reduce its key interest rates has helped, but banks have still not been able to pass on the full benefit to consumers, and this makes credit more expensive.

The rupee is still trading in the range of 51-52 per dollar and this continues to be a concern for firms servicing external debt.

Do you think a further monetary easing will help in economic recovery and cheer the markets?


When Dow Jones leads,Sensex follows.DJIA had gained in past two sessions so when Sensex returned after a break,it had do some catching up with global cues.What is more,Sensex Futures are +22 points which points to another positive day tomorrow.
Sensex bravely ignored news about fall in industrial output in Jan.09(Y/Y).It may be a sign of optimism that industrial production may start to regrow in April-June 2009.
The government must support this optimism by acting quickly and decisively.Let repo rates be reduced further,and bankers pass the benefit to the borrowers.

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