BSE Sensex runs up ahead of Budget

The Bombay Stock Exchange popularly known as BSE is the oldest stock exchange in Asia. It has now been in existence for 133 years. The government gave the BSE permanent recognition under the ‘Securities Contracts (Regulation) Act 1956’. The sensitive index, known as BSE Sensex or BSE 30 stocks and sometimes even as BSE sensex 30, is BSE Index and the country’s first stock market index which is popular all around the world. This index comprises 30 stocks, which represent 12 sectors. The index is known as the ‘sensitive index’ because it reacts to movements in the market and its sentiments. This means that the Sensex responses to the investor sentiments, their confidence in a particular stock of a particular company and moves, high or low, accordingly.

Last week, that is, the week ended February 6, the BSE Sensex 30 had closed in red, 123.38 points or 1.31 percent lower at 9,300.86. During the whole of last week, the markets had drifted lower on worries about the US economy. But, the hope of tax sops and more fiscal measures coming in the interim budget helped the markets to cut losses in the later part of the week. The BSE Sensex jumped significantly during the first two sessions on February 9, the first day of a new week, on expectations from the interim budget that will be announced on February 16.

Markets remain Positive despite no Rate cuts

Last week’s stock market news was not good as the US stocks fell even as Obama took his oath as the President of United States. The stock market India drifted lower last week due to worries about US banking and weak global cues. However, the IIP data and lower inflation brought some good share market news. They saw to it that the Indian share markets did not fall steeply.

On Tuesday, the stock markets India extended gains in early trade and remained firm thereafter, displaying optimism drawn from positive global stock market new and share market news. There were a couple of happenings that the Indian share markets were looking forward to.

The stock market India had been eyeing a cut in the key policy rates—repo rate, reverse repo rate and cash reserve ratio (CRR)—by the Reserve Bank of India. But the Central bank made no changes in the rates in its third quarter monetary policy review. Apart from that, the RBI lowered the growth estimate for the fiscal year 2008-2009 from earlier 7.5 per cent to only 7 per cent. But for a knee-jerk reaction to this, the stock market India and Indian share markets remained steady and ended in green.

Banking Worries drown Obama cheer

The Sensex today failed to get a lift from Obama’s inauguration. Fresh banking worries weighed on Indian Sensex, after record losses at Citi, Deutsche Bank, RBS and other banks have dented the confidence of investors, who were hoping the worst of financial crisis have been over.

The BSE Sensex would continue to be guided by the marco events at the global stage. The banks’ results point to the enormous task ahead for Barack Obama, who has always reiterated that the crisis will not just pass away without extracting a big toll. Perhaps, he does not want his goodwill to be weighed down under the weight of the crisis.

RIL, ICICI Bank pulls Sensex down

After touching the October low of 7697, the benchmark index of the Indian stock market, Sensex, today appears to have gained some ground. Though it could not sustain the previous rally and failed to hold the significant 10,000 levels, India Sensex is still trading above 9000 points. If the central bank opts for another round of rate cuts and the government follows it up with a fresh stimulus package then the BSE Sensex would get another impetus. This might even play a crucial role in taking it past 10,000.

In the week ended 26 December, the Indian Sensex ended 771 points lower. RIL and ICICI Bank dragged the Sensex to lower levels. Heavyweight Reliance Industries lost 10 per cent in the week to close at Rs 1,349. The stock has been beaten down 58 per cent on YTD basis. Another heavyweight stock ICICI Bank slid over 11 per cent this week.

Stock Market seems to be in Positive Mode

During the third week of December, the Bombay Stock Exchange benchmark index Sensex has seen a sharp positive trend on back of positive global cues and strong buying in bluechip stocks. The overall mood at the Bombay Stock Exchange was positive in wake of the recent measures taken by the government to bolster economy in form of stimulus package and rate cut by the RBI followed by reduced interest rates on homes loans.

In a move that is sure to boost suppressing housing demand, PSU banks decided to cut interests rates on home loans. The mood among investors remained positive as the rally helped the bourses cross psychological levels. The BSE Sensex witnessed impressive buying in bank, realty, IT, oil and metal stocks. There was sustained buying interest seen in stocks in FMCG, consumer durables, auto and power sectors. Among the biggest gainers in the banking sector were the SBI, HDFC Bank and ICICI Bank Ltd. On Tuesday, the 30-share BSE index surged 147 points to end at 9,978 closer to the psychological 10,000 mark.

IT Stocks to outperform Indian Sensex?

After the meltdown dust has settled down on the Indian Sensex, some things are clear: Companies that are less leveraged, have control over their operating expenses and face less margin pressure are likely to outperform the Indian Sensex at least in the short term. Based on these parameters, Indian IT stocks fit the bill.

First, these IT companies are cash rich and don’t face the squeeze of higher interest outgoes. Next, as compared to manufacturing companies, they have very little fixed cost. And they have more control over their operating expenses. On top of that rupee is going to remain weak till the global deleveraging process is over. In addition to that cost squeeze is likely to push more and more companies to outsource their IT processes. But for the Sensex India to reach its earlier glory, the lead has to come from stocks in the other sectors.

Some respite from Bad News

Is the current BSE Sensex a buying level for the investors? At present, the BSE Sensex trades at a PE of 10, almost at its historical low. So this should be a signal for the investors to get in? But analysts do not agree on this. Some of them say that the crisis is yet to peak and corporate earnings will be further hit. Some analysts say that BSE Sensex at 6,000 could be the right buying levels. They argue that GDP could fall below 5 per cent, further impacting the corporate earnings and pushing the Sensex PE multiple to around 8.

Other say that already some overseas funds with long-term perspective have already started buying at current BSE Sensex levels. They also say that with hedge fund redemptions coming down in recent months, the BSE Sensex is likely to face less selling pressure.Despite the differences, one thing is for sure. We are in a bear market and it is difficult to predict in the short term. What is interesting to note that next year a lot of oil and gas projects are going to come Enterprises and Dutch financial major Aegon have decided to move in opposite ways with regard to their partnership for the 50:50 joint venture mutual fund venture Religare Aegon AMC.

The decision to part ways came after Religare decided to acquire 100 per cent stake in Lotus India AMC. Under the new arrangement, Aeogon will take control of Religare-Aegon Mutual Fund while the Indian partner will run its operations as Religare AMC. Despite this, the two groups may carry with their life insurance venture. With markets expecting a massive infrastructure package from the government, we can look to some infrastructure mutual funds. Closed-end infrastructure funds have a maturity period during which any withdrawal attracts stiff cost. However, close-ended infra funds become open-ended after completion of their maturity period.