Sensex jumps 14.1% on week; best in 17 years

MUMBAI: The BSE Sensex rose 1.1 per cent on Friday and took gains for the week to 14.1 per cent, its most in 17 years, buoyed by hopes for pro-market reforms after the ruling coalition won general election last weekend.

Manmohan Singh was sworn in as the prime minister for a second term, along with his new cabinet and the outlook for the market would depend on how quickly they are able to push asset sales in state firms, ease rules for foreign investment and boost sagging growth.

Some analysts believe the market is overbought after it leapt more than 17 per cent at the start of the week following the unexpectedly easy election win. The BSE index has risen 73 per cent from a 2009 low in early March and has climbed for 11 weeks in a row in the longest winning streak in four years.

"Valuations have become high, but people are buying because they may be left out otherwise," D.D. Sharma, vice president at Anand Rathi Securities, said.

The BSE index ended up 150.61 points at 13,887.15, with gainers and losers evenly matched. Trading was choppy with the index falling 0.9 per cent at one stage.

Brokerages and investment houses polled by Reuters expected the benchmark to reach 15,750 by the end of December, gaining another 13 per cent.

"There are so many desperate buyers because nobody is betting on the market going down. You will see people buying at every dip from now," Sharma said.

Energy giant Reliance Industries, private-sector lender ICICI Bank and infrastructure firm Larsen & Toubro led the market higher after a lower start.

Reliance, which has the biggest weight in the main index, rose 3.1 per cent to 2,183.10 rupees, while private-sector lender ICICI gained 4.5 per cent to 702.80 rupees.

Larsen & Toubro climbed 4.7 per cent to 1,301.40 rupees

The market has largely been powered by foreign funds, which have pumped about $5 billion into the market in the past two months, including more than $1 billion in this week.

Outsourcers Tata Consultancy and Wipro, which get most of their revenue from overseas, fell about 2 per cent as the rupee climbed past 47 to a dollar to its highest since December.

Asian shares eased after a drop on Wall Street overnight on fears the United States, with its increasing budget deficit and weakened economy could lose its AAA rating.

Japan's Nikkei dropped 0.4 per cent, while MSCI's measure of other Asian markets edged down 0.02 per cent.

European shares were higher after falling more than 2 per cent in the previous session. The FTSEurofirst 300 index of top European shares was up 0.4 per cent at 1117 GMT.

Investors reap Rs 10,000 cr every second in today's trade

MUMBAI: Turning stock market into a money- making machine, the investors added well in excess of Rs 10,000 crore in every second of trade today--a frenzy they must have wished continued beyond just a minute.

However, the hopes are still not dashed completely as Dalal Street is pinning on another spectacular performance tomorrow with an eye on 15,000-points milestone for Sensex, even if it does not match today's historic gain of 2,111 points.

During 60 seconds of trade today -- first for 30 seconds at the opening and then another 30 seconds after trade resumed at 1155 hours -- investors' wealth measured in terms of total market capitalisation of all the listed companies grew by about Rs 6,50,000 crore. This is the biggest ever gain in the history of stock market, not only in India, but possibly in the entire world.

This sharp surge, the best ever post-polls performance of stock market in India, comes in sharp contrast to a huge loss suffered after the last general elections in 2004.

Election results had been announced during trading hours on May 13, 2004 and Sensex had ended up 0.8 per cent after highly volatile trade, but lost over 300 points the next day. In following trading session on May 17, 2004 Sensex plunged 11.1 per cent, its biggest drop in 12 years.

The Sensex had lost over 894 points in the two days after the election results were out in May 2004.

Meanwhile, today the total investors' wealth, measured in terms of combined market-cap of all the listed companies, has increased by over Rs 6,56,477 crore in a minute -- in the first 30 seconds and then after resumption trading in the afternoon -- to Rs 44,63,420.97 crore.

The 30-share Bombay Stock Exchange Sensex zoomed 1,305.97 points at 13,479.39, hitting the upper circuit with seconds of opening of trade, following which trading was halted for two hours. After trading was resumed the Sensex soared 806 points at 14,284.21 following which trading was halted for the day.

Further, the 30 Sensex companies, which account for over 47 per cent of the total market-cap of all the companies, saw their combined market valuation rise by over Rs 3.16 lakh crore today.

Sensex creates History; two upper circuits in one day

MUMBAI: Markets have stopped trading for the day as the benchmarks hit another upper circuit Monday as soon as the trade resumed after 2 hour
break. Investors are euphoric after the United Progressive Alliance emerged victorious in the 2009 general elections. ( Watch )

Bombay Stock Exchange’s Sensex was locked at 14272.62 up 2099.21 points or 17.24 per cent. National Stock Exchange’s Nifty was locked at 4308.05, up 636.40 points or 17.33 per cent. According to media reports turnover including cash and F&O was less than Rs 1000 crore.

Marketmen are upbeat given the fact that there will be no interference by the Left Parties and other regional parties in day-to-day functioning of the government and less number of allies will lead to a stable government which will run its course of five years.

BHEL (32.72%), Larsen & Toubro (29.53%), DLF (25.82%), ICICI Bank (25.30%) and HDFC (23.46%) were the top Sensex gainers.

Amongst the sectoral indices, BSE Realty Index was up 25.37 per cent, BSE Capital Goods Index gained 23.47 per cent, BSE Bankex moved 20.27 per cent higher and BSE Oil&gas Index advanced 19.57 per cent.

Market breadth was positinve on the BSE with 833 advances and 11 declines.

The new government which is likely to be sworn in by Friday is expected to come-out with full budget within 45 days of resuming office, according to media reports.
Reforms in the banking sector, divestment of public sector undertakings, infrastructure, retail sector and insurance sector is likely to top the priority list.

Sensex had opened 10.73 per cent or 1305.97 points higher at 13479.39 points to 12011.10. National Stock Exchange’s Nifty was locked at 4203.30, higher by 14.48 per cent or 531.65 points.

Toyota cuts annual production goal to 7-year low.

TOKYO: Toyota Motor Corp. said on Wednesday it will cut vehicle production 28 per cent this year to its lowest level in seven years.

The world's largest automaker, struggling as sales fall across the globe, says it aims to produce 6.68 million vehicles in 2009, down from 9.24 million in 2008. ``We expect the severe conditions to continue this year,'' said Toyota spokeswoman Ryoko Nishinohara. Toyota has already said it expects the current fiscal year through March 2010 to be its worst ever financially, forecasting a net loss of 550 billion yen ($5.7 billion). The carmaker has struggled to keep up with falling demand, especially in the U.S. and Europe. It has suspended production at factories, cut temporary workers in Japan and offered buyouts to American workers.

Toyota has not closed any factories and retains the capacity to make up to 10 million vehicles per year. But the annual production cut is the latest indicator of how quickly its fortunes have turned. Prior to the financial crisis and the global credit crunch, sales were soaring. The maker of popular cars such as the Camry and the Prius hybrid overtook GM last year as the world's largest automaker by annual sales.

In the fiscal year that ended in March 2008, it booked a record profit of 1.72 trillion yen. But sales suffered as the global economic slump set in, and a year later it had a net loss of 436.94 billion yen. Toyota has reacted by picking a member of the founding family, Akio Toyoda, to become its president and lead a turnaround. He will replace current president Katsuaki Watanabe in June. On Tuesday, Toyota said it would suspend several lines at an engine factory in Japan. The company said it will stop three of 11 production lines at Kamigo, its main engine factory in central Aichi prefecture, to adjust for its lower vehicle output. In late trade Wednesday, the company's shares were down 2.7 per cent at 3,640 yen in Tokyo, while the benchmark Nikkei 225 stock average was up 0.6 per cent.

Suzlon raises $47 mn from stake sale: Report

MUMBAI: The founders of Suzlon Energy Ltd raised $47 million by selling 30 million shares, or 2 percent stake, at Rs 77 each on Tuesday, two sources with knowledge of the deal said.

The deal was done within hours of opening on Tuesday evening, they said. Citigroup was the sole bookrunner for the deal. Shares in Suzlon, which the market values at around $2.5 billion, have risen 29.8 percent in 2009 compared to a 26 percent rise in the benchmark index. The stock had tumbled 83.9 percent in 2008, hit by quality woes, tight liquidity and a plunge in the broader market.

How much is Satyam's stock actually worth?

MUMBAI: In possibly the biggest single day fall for a stock, Satyam Computer Services lost 77 per cent to end at Rs 40.25 on NSE. The stock’s woes began in December after the company’s promoters made a $1.6-billion bid for Maytas Properties and Maytas Infrastructure promoted by Chairman B. Ramalinga Raju's son.

However, adverse market reaction, which saw the company’s ADR take a knock of 54.5% to $5.70, made the company call off the proposed acquisition. At the time, Chairman Raju evinced surprise saying he was “surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition.”

Raju, in fact, today (Jan 7, 2009) took the stock market and the business community by surprise, after he tendered his resignation and admitted in a letter to the board that Satyam’s balance sheet was cash and bank balances as on Sep 30, 2008 was inflated to the extent of Rs 5,040 crore (as against Rs 5,361 reflected in the books).

Further, Satyam’s balance sheet carries an accrued interest of Rs 376 crore which is non-existent, an understated liability of Rs 1,230 crore on account of funds arranged by Raju, and an over stated debtors position of Rs 490 crore (against Rs 2,651 crore in the books)

The letter goes on to state that Satyam reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24% of revenues) for the second quarter ended Sep 30, 2008, as against the actual revenues of Rs 2,112 crore and actual OPM of Rs 61 crore (3% of revenues). This resulted in artificial cash and bank balances going up by Rs 588 crore in the second quarter alone.

If one goes by the actual revenue and OPM figures, taking others as true, Satyam would have posted a loss instead of the reported profit after tax of Rs 537 crore for the September quarter. If one deducts the financial expenses and depreciation/amortization from the actual OPM of Rs 61 crore, it gives you a loss of Rs 5.87 crore, which translates to a negative EPS of Rs 0.08.

Investment bank CLSA has said that the value of Satyam stock in current conditions is about Rs 25-30. However, some analysts feel the stock is worthless as the scale of fraud is not yet known.

“The real value of the company can’t be determined at this point of time as what other figures are inflated should be known. Also, given the bleak economic conditions I don’t expect anybody will be interested acquiring the company. Hence, it is better one should exit or stay away,” said Ramesh Kumar, senior analyst at Global One.

In October of 2008, Satyam saw a high of Rs 325 and a low of Rs 220 and its market capitalization was Rs 20,534 crore. The MCap eroded significantly to Rs 11,465 crore by end December after Satyam announced the twin Maytas acquisition.

“It is one of the worst days for Indian investors. It has shaken investor confidence--both domestic and global. The biggest dent that this Satyam episode could create is the ‘trust’ of investors towards companies, auditors, and reported numbers by companies,” said Hitesh Agrawal- Head -Research -Angel Broking.

“We have discontinued coverage on the stock with immediate effect and would advise current investors to exit the stock and nonexistent investors to stay away,” he added.

Satyam Revelation Rocks Indian Markets

Company's chair resigns, confessing to having falsified the company's accounts for several years in order to forestall a takeover.

B. Ramalinga Raju, chairman of the scandal-plagued Indian outsourcing specialist Satyam Computer Services, has resigned, confessing that he had conspired to cook the firm’s books for several years.

In a letter to Satyam’s board, which was released Wednesday morning to the stock exchanges and market regulator, the Securities and Exchange Board of India, Raju owned up to inflating the firm’s cash and bank balances by $1 billion and fudging the firm’s revenues and operating margin in the quarter that ended in September 2008. The actual operating margin was 3% ($12.5 million), on revenues of $434 million, as against the incorrectly reported operating margin of 24% ($133 million), on $554 million in revenues. Debts were overstated by $100 million, and liabilities understated by $253 million.

Admitting that the gap in the firm’s balance sheet was caused by inflated profits over several years, Raju stated that he was afraid Satyam’s poor performance would result in a takeover, which would expose the gap. “It was like riding a tiger, not knowing how to get off without being eaten,” his letter read, adding that neither the board nor any of the firm’s executives were party to the wrongdoing. He characterized an aborted deal to buy two construction companies controlled by his relatives, which had riled investors in December, as a last-ditch attempt to substitute fictitious assets with real ones.

The confession sent the stock of Satyam Computer Services (nyse: SAY - news - people ) plunging by 138.70 rupees ($2.84), or 77.5%, to 40.25 rupees (82 cents), and pulled down the BSE Sensex 30 index by 749.05 points, or 7.25%, Wednesday. SEBI Chairman C. B. Bhave termed the development one of “horrifying magnitude,” reported the Press Trust of India. He went on to say that the regulator would take legal action after conferring with the government. The New York Stock Exchange-listed Satyam could face action from the U.S. Securities and Exchange Commission as well.

Revelation of the accounting fraud has produced shock waves across India’s corporate world. “This is beyond the realms of my imagination. It’s a real shocker,“ said Rakesh Jhunjhunwala, chairman of the Mumbai investment firm Rare Enterprises. (Jhunjhunwala has no exposure to Satyam.)

“I just can’t believe this. It’s very difficult to digest,” acknowledged Shailesh Haribhakti, executive chairman of audit and consulting firm BDO Haribhakti in Mumbai.

Ganesh Natarajan, chairman of the software industry association Nasscom, sought to allay fears that the Satyam fiasco would further damage India’s export-oriented software sector, which has already been dented by the financial meltdown and recession in the United States, its biggest market. “ This is a firm-level issue and won’t affect the entire IT sector,” he said. “ But it does mean that corporate governance standards overall need to be relooked at with a microscope.”

According to Haribhakti, the biggest challenge emerging from the sorry saga is protecting the interests of Satyam’s minority shareholders and its 53,000 employees: “The credibility of Indian business is at stake.”

Jhunjhunwala felt that putting the rest of corporate India in the same league as Satyam would be unfair. “Satyam should be merged with either Infosys or Wipro which are companies that can be trusted,” he remarked.