Sensex rallies to new 15-month high

Discarding mixed global cues, the benchmark Sensex Tuesday set a fresh 15-month high of 16,454 points by adding over 240 points on hectic buying by funds on reports of advance tax payments by some big corporate houses. After snapping its previous six-day winning streak on Monday, the BSE Sensex opened strong and improved further to settle the day at 16,454.45, higher by 240.26 points or 1.48 percent than its last close.

The last time the key index witnessed this level was on June 2 last year. Marketmen said funds were aggressive buyers across realty, metal, banking, auto and consumer goods counters as they sensed promising second quarter earnings by India Inc. They said second installment of advance tax payments by some big corporate was higher indicating revival in the economy."The advance tax payment by corporate is robust which boosted the market sentiment," said Sanjay Bhambri of Hi-Tech Securities.

The small-cap and mid-cap shares gained more than one percent each, reflecting good buying from retail investors. All-round buying saw all sectoral indices closing with gains but realty, metal, banking and auto led the rally.Realty major DLF was the biggest gainer among the Sensex stocks at 5.20 percent, while auto major Hero Honda at 3.47 percent was the next best. However, Asian indices ended narrowly mixed after opening firm.

European markets also displayed a mixed trend in their afternoon trade. The 50-issue Nifty of the National Stock Exchange also recouped by 83.50 points or 1.74 percent to 4,892.10 from its last close.Among sensex-based share, DLF shot up by 5.20 percent, Hero Honda by 3.47 percent, Sterlite Ind by 3.34 percent, Hindalco by 3.30 percent, Jaipra Ass by 2.92 percent, REL Com by 2.80 percent, SBI by 2.71 percent, REL Infra by 2.65 percent, Tata Steel by 2.54 percent, HDFC by 2.12 percent, ICICI Bank by 2.03 percent and RIL by 1.55 percent.

Total market breadth remained positive as 1,801 counters finished with gains against 994 that ended with losses on the BSE.The trading volume was relative up at Rs 5,494.39 crore from Rs 5,125.14 crore on Monday. Jindal Steel was the most active share with the highest turnover of Rs 187.85 crore.

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Sensex, Nifty remain in positive territory at 11:05 hrs

After a mild retreat that resulted in the market shedding some early gains, equities rallied higher on resumption of buying only to drift down again due to a round of profit taking in select blue chip stocks. The Sensex, which had rallied to 16,642.44 in early trade this morning, is up with a gain of 100.44 points or 0.61% at 16,554.89 at present. The Nifty is up 33.25 points or 0.68% at 4925.35. Metal stocks are in demand.

Mirroring sharp gains posted by key stocks in that space, the BSE Metal index has surged 2.5% now. Realty, bank and automobile stocks are also seen attracting strong buying enquiries. PSU stocks, which has turned a bit subdued in the previous session, are gaining in strength this morning on renewed support. Power, capital goods, FMCG and IT sectors witness stock specific action.

Several midcap and smallcap stocks have posted sharp gains this morning. The market breadth is quite strong at present. Out of 2370 stocks seen in action on BSE, 1481 stocks are trading in positive territory. 809 stocks have declined and 80 stocks trade flat. Tata Steel has rallied to Rs 515.80, gaining around 5%. Sterlite Industries is up 2.65% at Rs 763. Jindal Steel (3%), SAIL (3%), Ispat Industries (2.8%), JSW Steel (2.6%), Nalco (2.1%) and Jai Corp (1.2%) are the other prominent gainers in the metal space.

Realty stocks DLF, Unitech, Phoenix Mills, Mahindra Lifespace, Anant Raj Industries, Orbit Corporation, Sobha Developers and Omaxe are trading with notable gains. Mahindra & Mahindra, Reliance Communications, Jaiprakash Associates, State Bank of India, Bharti Airtel, ICICI Bank, Hero Honda, ACC, ITC, Tata Power, Maruti Suzuki, Larsen & Toubro, ONGC, NTPC, Tata Motors, HDFC Bank and Infosys Technologies are up with sharp to moderate gains.

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IT stocks slide in range-bound market

The key benchmark indices were flat in a range bound afternoon trade on Friday. The benchmark Sensex fell 57 points to 15,724 levels and the Nifty dropped 18 points to 4,669. While realty and capital goods counters gained, IT and pharma stocks were under pressure.

The realty index on the BSE rose 1.8 per cent and the capital goods index was up 0.2 per cent. The BSE IT index shed nearly 2 per cent and the BSE healthcare index dropped 0.6 per cent.Among the Sensex stocks, DLF led the gainers. The stock advanced 3.7 per cent.

Bharti Airtel, ACC and Hindalco were the other main gainers in the pack, up more than 1.4 per cent each. Tata Power, Infosys and ITC lost over 2 per cent each.Asian markets were trading mixed today. South Korea’s Kospi and Japan’s Nikkei rose over 0.5 per cent each. China’s Shanghai Composite slipped 2.9 per cent.
(With AP inputs)

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Sensex milestones

Here are the major milestones of BSE Sensex :

1. 1000, July 25, 1990 - On July 25, 1990, the Sensex touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results.
2. 2000, January 15, 1992 - On January 15, 1992, the Sensex crossed the 2,000-mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh.
3. 3000, February 29, 1992 - On February 29, 1992, the Sensex surged past the 3000 mark in the wake of the market-friendly Budget announced by Manmohan Singh.
4. 4000, March 30, 1992 - On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and Sensex witnessed unabated selling.
5. 5000, October 11, 1999 - On October 8, 1999, the Sensex crossed the 5,000-mark as the Bharatiya Janata Party-led coalition won the majority in the 13th Lok Sabha election.
6. 6000, February 11, 2000 - On February 11, 2000, the information technology boom helped the Sensex to cross the 6,000-mark and hit and all time high of 6,006.
7. 7000, June 21, 2005 - On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the Sensex crossed 7,000 points for the first time.
8. 8000, September 8, 2005 - On September 8, 2005, the Bombay Stock Exchange's benchmark 30-share index – the Sensex - crossed the 8000 level following brisk buying by foreign and domestic funds in early trading.
9. 9000, December 9, 2005 - The Sensex on November 28, 2005 crossed 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors.
10. 10,000, February 7, 2006 - The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10,000-mark on February 7, 2006.
11. 11,000, March 27, 2006 - The Sensex on March 21, 2006 crossed 11,000 and touched a peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time. However, it was on March 27, 2006 that the Sensex first closed at over 11,000 points.
12. 12,000, April 20, 2006 - The Sensex on April 20, 2006 crossed 12,000 and touched a peak of 12,004 points during mid-session at the Bombay Stock Exchange for the first time.
13. 13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000 for the first time. It touched a peak of 13,039.36 and finally closed at 13,024.26.
14. 14,000, December 5, 2006 - The Sensex on December 5, 2006 crossed 14,000.
15. 15,000, July 6, 2007 - The Sensex on July 6, 2007 crossed 15,000 mark.
16. 16,000, September 19, 2007 - The Sensex on September 19, 2007 crossed the 16,000 mark.
17. 17,000, September 26, 2007 - The Sensex on September 26, 2007 crossed the 17,000 mark for the first time.
18. 18,000, October 9, 2007 - The Sensex on October 09, 2007 crossed the 18,000 mark for the first time.
19. 19,000, October 15, 2007 - The Sensex on October 15, 2007 crossed the 19,000 mark for the first time.
20. 20,000, October 29, 2007 - The Sensex on October 29, 2007 crossed the 20,000 mark for the first time.
21. 21,000, Jan 08, 2008 - The Sensex on January 08, 2008 touched all time peak of 21078 before closing at 20873.

May 2006
On May 22, 2006, the Sensex plunged by 1100 points during intra-day trading, leading to the suspension of trading for the first time since May 17, 2004. The volatility of the Sensex had caused investors to lose Rs 6 lakh crore (US$131 billion) within seven trading sessions.

The Finance Minister of India, P. Chidambaram, made an unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after the reassurances of the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), the Sensex managed to move up 700 points, still 450 points in the red.

The Sensex eventually recovered from the volatility, and on October 16, 2006, the Sensex closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August 2006.

1. 13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000 and still riding high at the Bombay Stock Exchange for the first time. It took 135 days to reach 13,000 from 12,000. And 124 days to reach 13,000 from 12,500. On October 30, 2006 it touched a peak of 13,039.36 & closed at 13,024.26.
2. 14,000, December 5, 2006 - The Sensex on December 5, 2006 crossed 14,000 and touched a peak of 14028 at 9.58AM(IST) while opening for the day December 5, 2006.
3. 15,000, July 6, 2007- The Sensex on July 6, 2007 crossed another milestone and reached a magic figure of 15,000. it took almost 7 month and 1 day to touch such a historic milestone. Coincidentally Sachin Tendulkar achieved the same mark (15000 runs in international cricket) around the same time! (The usual refrain of the time was, "Sachin, make runs so Sensex rises!")

May 2009

On May 18, 2009, the sensex surged 2110.79 points from the previous closing of 12174.42 this leading to the suspension of trade for the whole day.This event created history in Dalal Street, by being the first ever time that trade had been suspended for an increase in value. This rally is primarily due to the victory of the UPA in the 15th General elections

Effects of the Subprime crisis in the U.S

On July 23, 2007, the Sensex touched a new high of 15,733 points. On July 27, 2007 the Sensex witnessed a huge correction because of selling by Foreign Institutional Investors and global cues to come back to 15,160 points by noon. Following global cues and heavy selling in the international markets, the BSE Sensex fell by 615 points in a single day on August 1, 2007.

1. 16,000, September 19, 2007- The Sensex on September 19, 2007 crossed the 16,000 mark and reached a historic peak of 16322 while closing. The bull hits because of the rate cut of 50 bit/s in the discount rate by the Fed chief Ben Bernanke in US.
2. 17,000, September 26, 2007- The Sensex on September 26, 2007 crossed the 17,000 mark for the first time, creating a record for the second fastest 1000 point gain in just 5 trading sessions. It failed however to sustain the momentum and closed below 17000. The Sensex closed above 17000 for the first time on the following day. Reliance group has been the main contributor in this bull run, contributing 256 points. This also helped Mukesh Ambani's net worth to grow to over $50 billion or Rs.2 trillion. It was also during this record bull run that the Sensex for the first time zoomed ahead of the Nikkei of Japan.
3. 18,000, October 9, 2007- The Sensex crossed the 18k mark for the first time on October 9, 2007. The journey from 17k to 18k took just 8 trading sessions which is the third fastest 1000 point rise in the history of the sensex. The sensex closed at 18,280 at the end of day. This 788 point gain on October 9 was the second biggest single day absolute gains.
4. 19,000, October 15, 2007- The Sensex crossed the 19k mark for the first time on October 15, 2007. It took just 4 days to reach from 18k to 19k. This is the fastest 1000 points rally ever and also the 640 point rally was the second highest single day rally in absolute terms. This made it a record 3000 point rally in 17 trading sessions overall.

Participatory notes issue

On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on participatory notes which accounted for roughly 50% of FII investment in 2007. SEBI was not happy with P-notes because it was not possible to know who owned the underlying securities, and hedge funds acting through P-notes might therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash when the markets opened on the following day (October 17, 2007). Within a minute of opening trade, the Sensex crashed by 1744 points or about 9% of its value - the biggest intra-day fall in Indian stock markets in absolute terms till then.

This led to automatic suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in the meantime, that the government was not against FIIs and was not immediately banning PNs. After the market opened at 10:55 AM, the index staged a comeback and ended the day at 18715.82, down 336.04 from the last day's close.

This was, however not the end of the volatility. The next day (October 18, 2007), the Sensex tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide continued the next day when the Sensex fell 438.41 points to settle at 17559.98 at the end of the week, after touching the lowest level of that week at 17226.18 during the day. After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules, the market made a 879-point gain on October 23, thus signalling the end of the PN crisis.

1. 20,000, October 29, 2007- The Sensex crossed the 20k mark for the first time with a massive 734.5 point gain but closed below the 20k mark. It took 11 days to reach from 19k to 20k. The journey of the last 10,000 points was covered in just 869 sessions as against 7,297 sessions taken to touch the 10,000 mark from 1,000 levels. In 2007 alone, there were six 1,000-point rallies for the Sensex.
2. 21,000, January 8, 2008 Business Standard.

January 2008

In the third week of January 2008, the Sensex experienced huge falls along with other markets around the world. On January 21, 2008, the Sensex saw its highest ever loss of 1,408 points at the end of the session. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of a recession in the US.

The next day, the BSE Sensex index went into a free fall. The index hit the lower circuit breaker in barely a minute after the markets opened at 10 AM. Trading was suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points.

However, after reassurance from the Finance Minister of India, the market bounced back to close at 16,730 with a loss of 875 points. Over the course of two days, the BSE Sensex in India dropped from 19,013 on Monday morning to 16,730 by Tuesday evening or a two day fall of 13.9%.

1. 9,975, October 17, 2008 - Sensex crashes below the psychological 5 figure mark of 10K, following extremely negative global financial indications in US and other countries. Exactly one year back in October 2007, Sensex had gone past the 20K mark.
2. 8701.07, October 24, 2008 lost 10.96% of its value on the intra day trade, the 3rd highest loss for a one day period in its history

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Stock Exchanges in India – BSE and NSE

There are two national stock exchanges in the country, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Most large brokers hold membership cards in both exchanges, offering investors a choice of placing their trades on either bourse.

Bombay Stock Exchange (BSE)

The BSE is the oldest stock exchange in the country, established in 1875. It was structured as a membership based firm, an Association of Persons. It is now a demutualised and corporatised entity, falling in line with Sebi's guidelines on demutualization of stock exchanges. The purpose is to separate ownership and management to prevent any conflicts of interest.

The BSE is managed by a Board of Directors, comprising professionals, trading member representatives and has a managing director too. The Board formulates larger policy issues and exercises overall control. The managing director takes care of daily operations. The exchange is present in 417 cities in India.
Types of Members Numbers

Individuals 180
Indian companies 719
Foreign Institutional Investors 22

Source : www.bseindia.com, as of Feb’07

Business Transacted on the BSE

There were 7639 scrips that are listed on the BSE. Not all are actively traded, with the number of scrips traded in Feb’07 at 2602. The average cash segment daily turnover on the BSE was Rs 4,675 crore in Feb’07 and the market capitalization of scrips listed on the BSE was Rs 34.9 lakh crore. The derivatives segment turnover in the month of Feb’07 was Rs 13,189 crore in Feb’07.

These statistics keep changing, to get an update on the latest statistics, go to http://www.bseindia.com/.

This link in particular may give you current information : http://www.bseindia.com/about/st_key/volumeofturnoverbusiness_tran.asp.

BSE Indices

The BSE maintains several stock indices that are popular among investors. The following are some of the closely watched indices.

• BSE Sensitive Index (BSE-30)
• BSE National Index (BSE-100) or BSE 100
• BSE-200 and the Dollex
• BSE-500

Apart from these, there are a host of other indices which focus on certain sections of stocks like small cap and mid-cap stocks. Then there are various other indices that are focused on sectors. These indices are updated on a real time basis in market hours. The most popular index is the BSE Sensitive Index, the Sensex.

BSE Sensitive Index (Sensex)

• Coverage :

Originally, it comprised 30 companies from both the "specified" i.e., ‘A’ group and the "non-specified" i.e., ‘B1 & B2’ groups. However, at present all the securities included in the Sensitive Index are specified group shares. These shares are selected on the basis of their liquidity, depth, and floating-stock-adjusted depth, as well as on the basis of industry representation.

• Method of compilation :

The compilation of the index values is based on the 'weighted aggregates' method. In this method, the number of equity shares outstanding for that stock weights the price of a component share in the index. This way, each security will influence the index in proportion to its relative importance in the market. When the price of a share is multiplied by the number of its equity shares outstanding, the result is the current market value for that particular security. The index on a day is calculated as the percentage of the aggregate market value of the equity shares of all the companies in the sample on that day to the average market value of the same companies during the base period for that index. This method of compilation has the advantage that it has the necessary flexibility to adjust for price changes caused by various corporate actions. The methodology is the same as that employed in many popular indices such as the Standard & Poor’s 500, Dow Jones Index, Hang Seng Index, NYSE Composite Index and FT-SE 100 Index.

• It is a wealth-measuring index where the prices are weighted by market capitalization. Initially, the index was computed on full market capitalization but since April 2003, it has moved to a free float market capitalization method. In such an index the base period values are adjusted for subsequent rights and new issue of equity. This adjustment prevents a distorted picture and gives an idea of wealth created for investors over a period.
• Base year :

The financial year 1978-79 was chosen as the base year. Considerations for the choice were the price stability during that year and proximity to the period of introduction of the index. One of the important aspects of maintaining continuity with the base year is to update the base year average. The base year value adjustment ensures that the rights issue and new capital of the index securities do not destroy the value of the index.

• On-line computation of the index :

During market hours, the BSE’s computers automatically use the prices of the index securities at which trades are executed to calculate the Sensex in a process of continuous updation.

• Reconstitution of the BSE Sensitive index :

Reconstitution is being carried out whenever required because some stocks might have lost their liquidity or investors may have found some new industry specific fancy. Base change calculation: The changes are in effect proportional adjustments in the base year average market value to offset price changes in market values upon which the index is based.

• National Stock Exchange of India Limited (NSE) :

The NSE was set up in 1992 by leading financial institutions (IDBI, LIC, UTI, ICICI, SBI and others) and was the first one to offer screen based trading all over India. Though the impetus for its establishment came from policy makers in the country, it has been set up as a public limited company. NSE is different from most other stock exchanges in India where membership on an exchange also meant ownership of the exchange. At the NSE, the ownership and management of the exchange are completely separate.

Governing body

• A board of directors manages the exchange.
• The board delegates decisions relating to market operations to an executive committee, which includes representatives from the exchange’s trading members, the public and the management.
• Besides, the exchange operates various committees to advise it on areas such as good market practices, settlement procedures, risk containment systems etc.
• Industry professionals, trading members and exchange staff man these committees.
• The day-to-day management of the exchange is delegated to the managing director who is supported by a team of professional staff.

Membership

• There are 789 members (as of Feb 28 ’07) who can trade on both the capital market and derivatives segments.
• There are 150 members who can trade only on the capital market segment.
• There are 47 members who can trade on the capital market, wholesale debt market (WDM) and derivatives’ segments.
• There are 9 members who can trade on WDM and capital market segments, and 7 who can trade only on WDM. In all, there are 1002 members.

Number of listed companies

• On the capital market segment, 1,462 companies are available for trading.
• On the wholesale debt market segment, 3,216 securities are available for trading. Capital market operations data.
• The turnover on the NSE has increased from Rs 1,805 crore in 1994-95 to Rs 15.69 lakh crore in 2005-06.
• The average daily traded volume has increased from Rs 17 crore during 1994-95 to Rs 6,253 crore during 2005-06.
• The total market capitalization has increased from Rs 363,350 crore as of end March 1995 to Rs 28.13 lakh crore as of end March 2006.
• Number of shares traded has increased from 0.007 billion in November 1994 to 8.57 billion in March'06.
• The average daily turnover in the derivatives segment was Rs 37,000 crore in Feb’07.

Classification of Listed Securities

On NSE, securities for account period settlement are classified as ‘EQ’ segment or ‘Normal’ segment. For book entry i.e. rolling settlement, the securities are traded in two separate segments known as ‘AE Segment’ and ‘BE Segment’. In case of AE segment, dematerialised securities are traded only in market lots, whereas in BE segment these can be traded in multiples of one share.

NSE Indices.

The popular indices of NSE are :

• S&P CNX NIFTY
• S&P CNX DEFTY
• S&P CNX 500
• S&P CNX NIFTY JUNIOR
• CNX MIDCAP
• CNX Industry Indices
• CNX Segment Indices

Method of Computation of Indices

• S&P CNX Nifty

S&P CNX Nifty comprises 50 stocks and is a market capitalization weighted index. Stocks are selected based on their market capitalization and liquidity. An important criteria of S&P CNX Nifty is that the impact cost (cost of executing the entire set of S&P CNX Nifty securities) is low, making it an optimal index for derivatives trading. The S&P CNX Nifty represents about 58% the total market capitalization of the stocks listed on the Indian bourses as of Dec 29, 2006. The Impact cost (explained in latter part of the article) of S&P for a portfolio of Rs 5 million is 0.08 per cent.

• S&P CNX Defty

Defty is a dollar denominated index based on the S&P CNX Nifty. Computations are done using the S&P CNX Nifty index calculated on the NEAT trading system of NSE and USD Rupee exchange rate that is based on the real time polled data feed.

• CNX Nifty Junior

CNX Nifty Junior comprises 50 stocks and is a market capitalization weighted Index. The next rung of liquid securities after the Nifty are included in the Junior Index. The Impact cost for CNX Junior Portfolio size of Rs 2.50 million is 0.14% per cent. The CNX Nifty Junior represents about 10% per cent of total market capitalization of all equity shares as on Sep 29’06.

• S&P CNX 500 Equity Index

The S&P CNX 500 Equity Index comprises 500 stocks and is market capitalization weighted. Stocks are selected based on their market capitalization, industry representation, trading interest and financial performance. However, the overriding need has been to ensure that the industry weightings in the index dynamically reflect the industry weightings in the market.

The S&P CNX~500 Equity Index currently contains 72 industry groups (S&P CNX Industry Indices) representing over 90 per cent of total market capitalization and about 86% per cent of total turnover making it an optimal market benchmark.

• S&P CNX Industry Indices

The S&P CNX industry indices serve as a standard for comparison of the stock market performance of individual companies vis-a-vis their respective peer groups and also enable fund managers to benchmark NAV performance vs. specific industries.

• CNX Mid Cap

CNX Midcap is computed using market capitalisation weighted method, wherein the level of the index reflects the total market value of all the stocks in the index relative to a particular base period. The method also takes into account constituent changes in the index and importantly corporate actions such as stock splits, rights, etc without affecting the index value. The constituents and the criteria for the selection judge the effectiveness of the index.

Selection of the index set is based on the following criteria :

1. All the stocks, which constitute more than 5% market capitalization of the universe (after sorting the securities in descending order of market capitalization), shall be excluded in order to reduce the skewness in the weightages of the stocks in the universe.
2. After step (a), the weightages of the remaining stocks in the universe is determined again.
3. After step (b), the cumulative weightage is calculated.
4. After step (c) companies which form part of the cumulative percentage in ascending order unto first 75 per cent (i.e. upto to 74.99 per cent) of the revised universe shall be ignored.
5. After, step (d), all the constituents of S&P CNX Nifty shall be ignored.
6. From the universe of companies remaining after step (e) i.e. 75th percent and above, first 100 companies in terms of highest market capitalization, shall constitute the CNX Midcap Index subject to fulfillment of the criteria mentioned below.

• CNX Segment Indices

The reform process in India has resulted in business restructuring and consolidation of the Indian corporate sector. With a view to providing investors with a better perspective of the stock market performance of the various segments of the Indian corporate sector, NSE has constructed various segment Indices such as the CNX MNC (Multinational Corporations) Index, CNX PSE (Public Sector Enterprises) Index and the CNX IBG (Indian Business Groups) Index. These indices aid investors in their asset allocation and segmental exposure decisions.

• CNX Customized Indices

Customized indices can be used for tracking the performance of the clients portfolio of stocks vis-a-vis objectively defined benchmarks or for benchmarking funds’ NAV performance to customized indices.

Method of Computation of Indices

The CNX Indices are computed using a market capitalization weighted method wherein the level of the Index reflects the total market value of all the stocks in the index relative to a particular base period. The method also takes into account constituent changes in the index and importantly corporate actions such as stock splits, rights, etc without affecting the index value.

• Index Maintenance

The Index Maintenance Sub-committee of NSE ensures that the guidelines for index maintenance are adhered to, for example: -

1. Monitoring and completing divisor adjustments in a timely manner on account of corporate actions like share changes, stock splits, mergers/amalgamations, etc
2. Monitoring and updating the indices database dynamically
3. Index Review according to laid down criteria

Adjustments for corporate actions are carried out in a timely manner to ensure that the value of the index is not affected by the corporate action, and remains comparable over a period of time. Each index has a replacement pool comprising companies that meet all criteria for candidacy to that index. All replacements of companies in the index take place from this pool. The replacement pool is monitored continuously and at all times includes only those companies that meet the selection criteria.

• S&P CNX Nifty

It is the most popular index, which represents about 58% of the total market capitalization of NSE. The salient features of the S&P CNX Nifty are :

1. Companies eligible for inclusion in Nifty must have a six monthly average market capitalisation of Rs.500 crore or more during the last six months.
2. Companies eligible for inclusion in S&P CNX Nifty should have at least 12% floating stock. For this purpose, floating stock shall mean stocks which are not held by the promoters and associated entities (where identifiable) of such companies.
3. Liquidity; all selected stocks should be below a certain impact cost, which is defined in the next paragraph. The security should have traded at an average impact cost of 0.75% or less during the last six months for 90% of the observations (instead of the earlier criteria of 1.5% or less during the last one year for 85% of the observations).

Impact Cost Definition –

The cost of executing a transaction in a security in proportion to the weight of its market capitalization against the index market capitalization at any point of time.

Impact Cost Calculation -

This is the percentage mark up suffered while buying or selling the desired quantity of a security compared to its ideal price (best buy + best sell) / 2, e.g. Bids and Offer at a particular time
Buy (Qty.) Buy (Price) Sell (Qty.) Sell (Price)
1000 98 1000 99
2000 97 1500 100
1000 96 1000 101

To Buy 1500 Shares IDEAL PRICE = (99 + 98)/2 = 98.5

ACTUAL BUY PRICE = (1000 X 99 + 500 X 100)/1500 = 99.33

(FOR 1500 SHARES) IMPACT COST = (99.33 - 98.5)/98.5 X 100 = 0.84%

Base Date and Value

The base period selected for S&P CNX Nifty index is the close of prices on November 3, 1995, which marks the completion of one year of operations of NSE’s Capital Market Segment. The base value of the index has been set at 1,000 and a base capital of Rs. 2.06 trillion.

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Sensex creates history; two upper circuits in one day

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.

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.

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.

Market experts views:

• “Markets had previously worried that gains by leftist and smaller regional parties would weigh on the reform agenda and lead to a further blow-out in the already large fiscal deficit.
• In previous elections, both BJP- and Congress-led alliances had been unable to push through reforms, held down by allies with their own agendas.
• The government's rural jobs program and strong private sector investment have highlighted the positive effects of economic reform and liberalisation, and voters' shunning of smaller parties imply a desire for greater action on the reform front,” said a Moody’s Economy.com report. The report added, “Despite the strong endorsement from voters, the government is likely to have a tough job pushing through some much-needed reforms.
• Political constraints mean a scrapping of fuel subsidies are unlikely, nor reforms to outdated labour laws that constrain hiring and create high firing costs.
• Returning to the path of fiscal consolidation will also be challenging if the global recession becomes protracted, while the financial crisis will mean any steps to liberalise capital flows and foreign investment will be cautious.” Madhabi Puri Buch, MD & CEO, ICICI Securities said, “The mood of the moment is clearly upbeat.
• The largest and most complex election process on the planet is complete.
• The impact of the results on the markets is clearly positive - both in the short term and long term.
• In the secondary markets and the primary markets.”
• “It is almost as though investors had pressed the pause button on major decisions on account of uncertainty.
• With the clear mandate to the new government and the strong expectation of stability for the next five years, the play button will be on. If global cues continue to be positive, the play could even become a fast forward,” Buch added.
• Dinesh Thakkar, CMD, Angel Broking said, “The election results have come as a positive surprise and are expected to go down well with the markets considering that markets like continuity of government policies, mindsets and ideologies.
• The UPA’s 250+ tally has managed to beat the most optimistic political analyst on the street and this ‘thumping’ victory has set the stage for the Congress led UPA to come back to power.
• Further, the possibility that the UPA could form the government without the Left will further soothe investors’ nerves.
• The markets are expected to rally as fresh money from FIIs and those waiting on the sidelines on account of the political uncertainty, makes its way into Indian stockmarkets.
• Investors must remain ‘long’ on India to take advantage of the long-term wealth creation opportunities that Indian stockmarkets have to offer.”

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Sensex cracks below the 9,000 on weak global cues

Key benchmark indices faltered in opening trade on weak cues from global markets. The barometer index BSE Sensex fell below the psychologically vital 9,000 level. The Sensex was down 186.30 points, or 2.06%, to 8,856.33.

Global cues were weak.Asian markets declined today, 20 February 2009, after Wall Street tumbled to six-year low on Thursday, 19 February 2009, as a gloomy US unemployment data reinforced fears the world`s largest economy is in a severe slump. Key benchmark indices in Hong Kong, Japan, Singapore, South Korea and Taiwan were down by between 1.47% and 4.07%. However, China`s Shanghai Composite rose 0.58%.

US markets tumbled on Thursday, 19 February 2009 on mounting concerns about the fate of major banks and signs that the recession is deepening, pushing the Dow to its lowest level in more than six years. The Dow Jones industrial average lost 89.68 points, or 1.19%, at 7,465.95.

The Standard & Poor`s 500 Index fell 9.48 points, or 1.2%, at 778.94. The Nasdaq Composite index shed 25.15 points, or 1.71%, at 1,442.82.US government data showed a record number of continuing unemployment claims, at nearly 5 million, and a surprisingly sharp drop in manufacturing in the mid-Atlantic states.

Closer home, Commerce minister Kamal Nath is likely to announce an export booster package later this month which would address some of the crucial concerns of the exporters. The sops under consideration include simplification of rules for service tax refund, extension of time given to exporters to meet export obligation and an increase in rates of input duty reimbursement schemes like drawback and DEPB for some sectors.

At 10:25 IST, the BSE 30-share Sensex was down 186.30 points, or 2.06%, to 8,856.33. The Sensex opened 98.85 points lower at 8,943.78, also its day`s high. At the day`s low of 8,829.57, the Sensex lost 213.06 points in early trade.

The S&P CNX Nifty slumped 55.85 points, or 2%, to 2,733.50The market breadth, indicating the overall health of the market, was weak on BSE with 600 shares declining as compared with 269 that advanced. A total of 29 shares remained unchanged.BSE clocked a turnover of Rs 389 crore by 10:25 IST.

All the members from the 30-share Sensex pack were trading lower. Mahindra & Mahindra (down 3.53%), HDFC (down 3.13%), and Reliance Infrastructure (down 2.65%), were among the major losers from the Sensex pack.Realty shares declined as margins of realty firms are under pressure due to falling property prices.

India`s largest realty developer by market capitalisation DLF fell 3.68% to Rs 150.70 and was the top loser from the Sensex pack. Foreign brokerage Goldman Sachs in its recent research report lowered DLF`s 12-month target price to Rs 124 post weak Q3 December 2008 results.Unitech (down 2.45%), Omaxe (down 1.60%), HDIL (down 2.72%), and Parsvnath Developers (down 1.33%), fell.

India`s largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 2.18% to Rs 1265.50 on fears the worsening global economy will hit demand for petrochemicals.Banking stocks fell as fears of rising defaults in a weakening economy and overnight fall in American Depository Receipts (ADRs), offset hopes of rate cuts from the Reserve Bank of India (RBI).

India`s second largest private sector bank by net profit HDFC Bank lost 3.09% to Rs 857.50 as its ADR fell 0.26% on Thursday, 19 February 2009. India`s largest private sector bank by net profit ICICI Bank slipped 4.14% to Rs 346.55 on a 1.36% fall in its ADR on Thursday, 19 February 2009.

India`s largest bank in terms of assets and branch network State Bank of India shed 1.75% to Rs 1039.65.Inflation rose at the lowest level in 13-months at 3.92% in the year through 7 February 2009, much lower than previous week`s annual rise of 4.39%, data released by the government on Thursday, 19 February 2009, showed.

Falling inflation provides room for the Reserve Bank of India (RBI) to cut interest rates further to shield the domestic economy from the global financial sector crisis and recession in key global economies.Only on Wednesday, 18 February 2009, the Reserve Bank of India Governor D Subbarao said that there is room to cut interest rates further.

The statement comes at a time when the market is expecting further action from the central bank.Market men see a bigger role for RBI to shield the domestic economy from the global financial sector crisis and recession in key global economies in the coming months as election code will be in force by the end of the month which means that there cannon be any policy action from the government.

IT pivotals fell as fears a weak global economy would cut the amount firms spent on technology offset a weak rupee. India`s third largest software services exporter, Wipro slipped 3.43% to Rs 212.80 despite a 1.12% rise in ADR on Thursday, 19 February 2009.

India`s second largest software services exporter Infosys Technologies lost 2.26% to Rs 1181.80 as its ADR fell 1.71% on Thursday, 19 February 2009. India`s largest software services exporter by sales TCS slipped 2.41% to Rs 477.95 and India`s fifth largest IT exporter by sales HCL Technologies declined 2.93% to Rs 105.95.

However Satyam Computer Service galloped 3.03% to Rs 47.50 at 10:18 IST after it won approval to bring on board a strategic investor needed to ensure the survival of the scam-tainted software outsourcer.

Indian rupee slipped today on concerns of capital outflows following decline in global markets. The partially convertible rupee was at 49.75 per dollar against previous close of 49.62. A weaker rupee boosts operating margins of IT firms which earn a lion`s share of revenue from exports.

India`s largest power equipment maker by sales Bharat Heavy Electrical (Bhel) fell 1.24% to Rs 1365. The company reportedly plans to pump in around Rs 1000 crore in developing locomotive manufacturing facility.

India`s second largest cellular services provider by sales Reliance Communications (RCom) lost 3.5% to Rs 157 on reports the government on Thursday, 19 February 2009 reportedly informed the Parliament that it will do a special audit on the books of RCom and its subsidiaries over allegations that the telecommunications company had diverted revenues earned from its mobile services to a subsidiary to bring down the total amountit had to pay to the government as licence fee and spectrum charge.

Back home, key benchmark indices ended slightly higher on Thursday, 19 February 2009, in what was a lackluster trading session, in sync with range-bound activity in global markets. The BSE 30-share Sensex rose 27.45 points, or 0.30%, to 9,042.63 and the S&P CNX Nifty rose 13.20 points or 0.48% to 2789.35.

According to provisional data on NSE, FIIs were net sellers worth Rs 363.48 crore while mutual funds bought shares worth Rs 108.44 crore on Thursday, 19 February 2009.

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Satyam to be replaced by Sun Pharma in Sensex