May 2010 was a bad month for Indian stock market. Selling pressure continued almost all the trading days. But towards the end of the month some recovery also seen. Global uncertainties were the major reason behind this bear run! Doubts about the long term prospects of Euro zone countries are worrying the investors across the globe. As a result of this Indian investors also lost confidence and they engaged in bulk selling. After the global financial crisis  Euro zone crisis is the worst one and now also it is sustaining. FII sell off made a bad impact on Indian indices during May. They sold Indian equities worth Rs.9436.70 Cr. When the residues of the crisis settle down it is expected that they will come back to Indian market. However India’s growth story is still promising, Indian corporates are performing well.
Sensex closed at 16945 in May. It recorded a decrease of 3.5 percent against it’s April closing figure of 17559. Sensex traded in the range 15960-17537 during May. Nifty recorded a fall of 3.64 percent to close at 5086. Smallcap stocks can’t survive the selling pressure and they were down by 7.17 percent- the worst performance by this sector in 2010. Midcap stocks were down by 4.87 percent. All sectors except Health Care and Oil and gas were under selling pressure in May. Metal stocks plunged 14.25 percent. Whereas Reality stocks fell 11.3 percent against last month closing figure. Both banking and power sector stocks were down by 4.4 percent. Health care sector was up by 2.71 percent. Oil and gas sector recorded a growth of 2.6 percent during May.
Domestic mutual fund companies were net buyers. They bought equities worth Rs. 98.60 Cr. Indian market opened weak in June also. But traders are of the view that once the issues settle down there will be renewed buying interest. FIIs withdrew their money only to protect their capital. In the long term view, when Indian market is concerned, we have the growth potential.
Indian economy grew  8.6 per cent during the last quarter of 2009-10, mainly powered by Industry and service sectors. Now the country has an overall GDP growth of 7.4 per cent in 2009-10. Which is more than expected. Inflation eased to 9.59 percent in April. This is the second continuous month the inflation figures show a downward trend. According to reports monsoon will be on track. If this happens in line with expectation food inflation would also become lower. Which is a prime concern for Indian economy.
Indian Finance Minister Mr Pranab Mukherjee expects 8.5 percent GDP growth in 2010-11, which seems to be attainable according to present estimate. From the global financial meltdown we have learned that Indian market is capable of bounce back from any lows. Every crisis is an opportunity. Now is the time to buy good picks at moderate rate. Opportunity never knocks twice!

High rate of volatility seen in Indian indices during April. Market witnessed an upward trend during the first half of the month, whereas in the second half there was continuous selling pressure. Sensex touched a height of 18047 and a low of 17277 in April. Both sensex and nifty closed just a few points above last month’s closing figure.
Considering the global scenario, Greek crisis and Goldman Sachs issue were the major ones. U.S. Securities and Exchange Commission sued Goldman Sachs Inc. for fraud tied to collateralized debt obligations. The firm is facing inquiries in UK and Germany. A 110 billion euro ($147 billion) plan to bail out Greece reduces the risk of a debt default of that country. But according to experts it will not be a complete solution for the problem. The residue of these crisis remains now and investors across the globe are more cautious.
Considering Indian market, RBI credit policy announcement was the major event. The central bank hiked the key rates by 25 basis points. The rates which are now effective are Repo-5.25%, Reverse Repo-3.75% and CRR-6%. RBI is optimistic about bringing down inflation figures which is at 9.9 percent in March. The food inflation figure is even more dangerous which is at 17.65 percent according to the latest data.
The closing figure of sensex for April is at 17559. It gained 31 points (0.18%) against it’s March closing rate. Nifty recorded a gain of 0.55 percent to close at 5278. It touched a height of 5399.65 during April. Buying interest scaled down to Smallcap and Midcap stocks. Both were up by 8.4% and 5.6% respectively. Consumer durable stocks were the major gainers, the sector was up by above 10 percent. Reality (6.6%) and Banking stocks (4.7%) were also hot favorites among investors. Oil and gas stocks were under severe selling pressure. The sector was down by 2.3 percent. Metal and Engineering stocks were also in the negative terrain. FIIs continued their buying activity in stocks, in April they bought equities worth Rs. 9361 crore. Whereas domestic institutions sold Indian equities worth Rs.1715 crore. During the last week ahead of F&O expiry the turn over in Indian market was much higher.
According to RBI estimate the final real GDP growth for 2009-10 may settle between 7.2 and 7.5 per cent. Which itself is a decent one. The Euro zone crisis is not over yet. There are reports that apart from Greece, countries like Portugal, Spain and Ireland may face difficulties in the near future. Concern about these crisis is clouding above Indian market also. Recently China hiked it’s CRR rate also. These developments may prove bad for Indian equities as well. There will be range bound movement in Indian market in the near term. Little caution is the need of the hour. At the same time an eye for opportunity is not a bad idea.

Budget concerns prevailed in Indian stock market during February. Market was more or less volatile. During second half of February market showed a little bit of consolidation. Rail Budget was non- event in Indian Market but Union budget was not. On the budget day sensex gained 175 points, the highest single day gain in February. Except the fuel price hike proposal budget was pretty decent according to first reviews. Finance Minister later stated that the inflationary impact of budget would be 0.41 percent. The wholesale price index in India rose 8.56% in January, mainly because of higher food prices. Estimates show that the figure will go up in the coming months also. Finance Ministers’s announcement regarding disinvestment and foreign investment were the major factors influenced Indian market on Budget day.

The February closing of sensex was at 16430, up by 0.44 percent against last month closing rate of 16358. Comparing to January, February was a good month for Indian equities. Market expectations regarding the union budget was less but Finance Minister surprised the street. His announcements regarding fiscal consolidation and fiscal deficit made everyone happy. Particularily when he stated that double digit growth rate is achieveable. Positive impact of Budget continues in Indian stock market during the opening days of March also. Nifty was up by 40 points in February against it’s January closing. Midcap and Smallcap indices underperformed sensex and Nifty. Smallcap stocks were down by 2 percent whereas Midcap stocks recorded 1.72 percent decrease in February. Selling pressure in these stocks continued in the whole month.

FIIs were in favour of Indian equities, altogether they bought equities worth Rs. 1216.90 Cr. But indian Insurance and Mutual Fund companies continued selling for the second consecutive month. DIIs sold Rs.309.80 Cr worth equities during February. Mixed response seen in different sectors. Reality was the most beaten down sector, recorded a decrease of 7.51 percent. Oil companies and power sector companies were not in the radar of buyers. Both down by 3.54 percent and 3.27 percent respectively. Public sector companies, also felt the heat of selling pressure,were down by 2.74 percent. All other sectors barring these four were in the green territory. Consumer durable stocks were hot favourite among traders in February. BSE CD index was up by 5.34 percent. Buying interest also seen in IT, Health Care and Auto stocks. All these sectors were up by above 3 percent.

Debt worries in Eurozone countries were another major event during this period. But it failed to make a strong impact in Indian stocks. Positive trend in Asian Indices influenced Indian stocks too. Government set it’s disinvestment target at Rs.40,000 Cr in FY2011 and has plans to redraw the foreign investment structure. There are Budget proposals to give banking licence to more public players and NBFCs. All these developments served as positive inputs to Indian stock market. Going ahead economic consolidation would lead to sustainable growth which will be beneficial for India Inc. Selective investment will be an intelligent decision now.

The most awaited union budget has come. In a line Budget targets more growth without much risk. In order to sustain the momentum of growth finance minister took the way of income increase. There are positives as well as negatives in the budget. The remarkable negative point is that fuel price is going to increase. Which will increase inflation. Although minister said that steps will be taken to contain inflation this proposal is against his statement. Government primarily going to collect money from disinvestment and 3G auction. Tax rate becomes lower. MAT increase by 3% negative for the business. Indian market reacted well to the budget. Nifty up by 100 points and sensex by above 300 points post budget.
Inflation will go up further. Cost for household articles going to increase extra burden for aam admi. Government partially withdraw stimulus package. And set up a bright fiscal deficit target for FY13. These are positives. Apart from that there are proposals to increase the foreign investment inflow to indian market which will be beneficial for India Incorporated. RBI mulling to give banking licence for private players and NBFCs. Details of this proposals are not available. This is a move which will evoke long term consequences (even bad ones-if not implemented properly).

Government wants to decrease fiscal deficit in the coming financial years. FY10 fiscal deficit revised to 6.9 percent of GDP. According to the finance minister FY11 fiscal deficit target pegged at 5.5 percent of GDP. It will further come down in FY12 to 4.8 percent of GDP and will reach 4.1 percent by FY13. He intends to decrease the fiscal deficit to 4.1 percent of GDP with in 3 years. Finance minister also said 10 percent growth rate is attainable.

In a way budget is investor friendly. It intends to increase capital inflow to the economy. Rs. 15,000 Cr. more money will be collected through disinvestment in FY11. Service charge remains the same which is also a good move. Finance minister eased the tax burden so more money will flow into the economy.

Union Finance minister  praised UPA government. He termed Indian economy is now at a “better situation”. He was in favor of PSU disinvestment and disclosed that the target of Rs.25,ooo Cr from disinvestment. Double digit inflation is a major concern and will take steps to reduce it in 2 months. Manufacturing sector led the recovery, termed Finance Minister.

Tax proposals

Nil tax for income upto 1.6lakh
10 percent tax for income between 1.6-5lak
20 percent tax for income between 5-8lakh
30 percent tax for income above 8 lakh

Key Points

Rs. 50 per tonne cess on Indian coal

LED and CFL lights to cost less

More sops for tourism sector

Business with 60 lakh turnover have to audit A/cs

Partially withdraws stimulus package

Agriculture seeds exempt from service tax

Service tax retained at 10 percent

Tax for construction materials increased, red signal for construction industry

Refrigerator, Television,Mobile phones to cost more

3G auction to fetch Rs.36,000 Cr

Propose to extent interest subvention for export by one year

2 percent loan subsidy for farmers

Smart card alloted to NREGA

Defence allocation 1.47 lakh Cr

extended subsidy subvention for affordable housing

Surcharge for companies cut from 10 percent to 7.5 percent

Excise duty hiked from 8 percent to 10 percent
Central Excise Duty on petroleum products increased by Re 1 per litre
cigeratte to cost more
Partial rollback of excise duty on large cars

Foreign investment increased to a great extent. This was because of the loose FDI policy. More steps will be taken to increase foreign inflow

Challenges outlined during the last budget still remains

Food security and Health care system will be given more preference

10 percent growth rate is attainable

Will discuss kirit parikh report in due course (will lead to free pricing of Petroleum products)

GST and DTC (direct tax code) will implement in April 1, 2011

Will reduce fertilizer subsidy (red signal for agriculture, which is already recording a even more negative growth rate)

Banking licence for private banks and NBFCs

India market up following these announcements.

13 percent higher road allocation. Asked to fund infrastructure development more.Rs 1.73 lakh Cr. For infrastructure development.

Government to setup coal regulatory authority

Doubles allocation for power sector. Hiked fund allocation for renewable energy by 61 percent

Will extent farm loan payment by 6 months

Fund allocation for increased for school education to Rs.31036, and more grant for states.

Draft food security bill in public domain soon

More allotment for rural development, Bharat Nirman gets more money

Stock market indices not only in India but across the globe also witnessed an upward trend during calender year 2009. Stock markets and commodity markets rallied during the period. Calender year 2008 witnessed the worst financial crisis in modern times. Beginning of the year 2009 was the passing phase of the recession. Within no time indices all around the world staged a comeback and during the second half of year 2009 they all remained in the bullish phase.

Bombay sensitive index recorded a growth rate of 80 percent during 2009. Sensex started the year at 9721 as a result of global financial meltdown but it closed at 17465. During 2009 sensex was in the range 8047-17531. 2009 started with the Satyam scam. Which was a shock in Indian stock market. Another negative factor during the period was the raising commodity prices. But Indian investors were optimistic. FIIs also chose Indian market as favourite destination, in 2009 they bought equities worth 83424 crore. Which played a crucial role in the recovery of Indian indices. There are expectations that Indian bourses would break their past records during 2010.

So many policy changes including time change happened in Indian market. From 4^th January onwards the new time schedule came into effect. The bourses will open at 9.00AM and will close at 3.30PM. In the days to come there would be more policy changes. Leaving all odds behind one can surely says that Indian market is growing faster than any other market in the world. Equities were the worst performing asset during 2008 but it bounced back in style in 2009 and became the best performing asset.

Last week of December witnessed bullish rally in Indian stock market. In December Indian market was slightly volatile. Less than expected IIP figures were one negative factor behind the volatility soaring food and commodity prices added fuel. But when reached towards the end of 2009 investors started buying Indian stocks. Apart from stock market Mutual Fund and Insurance sector also witnessed drastic changes. SEBI abolished entry load in Mutual Funds which attracted severe protest from fund houses. SEBI also allowed exchanges to trade in Mutual Fund units. These were the major reforms in the Mutual Fund industry during 2009. In December Mutual Funds sold Indian equities woth 1515.60 crore.

IRDA also made some changes in Insurance sector. The major one is the implementation of a cap on the expenses of the ULIP plan. Another one is allowing life insurers to sell policies online. It is believed that these moves will protect policyholder’s interest.

Sensex closed the year at 17465.It’s November closing was 16926-an increase of above 3 percent. FII inflow continued in December also. They bought equities worth 10233.10 crore. Nifty also recorded a growth rate of 3.3 percent against it’s November closing to close at 5201. From index stocks now the buying interest came down to midcap and smallcap stocks. This is a good sign for Indian market. Smallcap stocks recorded a growth rate of 11 percent during December whereas midcap stock’s growth rate is at 4.7 percent against November 2009. Recovery in global markets also influenced Indian traders. US markets recorded biggest annual gain since 2003 in 2009. IT and Consumer Durables witnessed major buying interest during December. They recorded 9 percent and 8 percent growth respectively. Power, metal, auto and engineering stocks also witnessed renewed buying interest. Oil and gas sector was the least performing one during December.

2009 proved the strength of equities. It is believed that increased trading time would attract more participants to Indian market. Market volume would increase. Inflationary pressure is the major concern now. There are rumors that there will be some changes in key rates in order to tackle inflation. More and more traders will be attracted towards midcap and smallcap stocks. Invest in stock markets with long term plans is the need of the hour.