Bank shares surge on assurance that the government’s stimulus measures would continue into the next fiscal

The Indian stock market gained for the fourth consecutive session on Monday, on the back of strong global cues and prime minister Manmohan Singh’s assurance on Sunday that financial reforms would be accelerated and the government’s economic stimulus measures would continue into the next fiscal year. The Sensex closed at 16,499, gaining 340 points, while the Nifty rose 102 points to 4,898.
Banking stocks were among the top gainers on Monday as the prime minister asserted that growth in the next fiscal year, assuming a normal monsoon season, was expected to be more than 7.0% compared with a 6.5% forecast for the current year. State Bank of India (SBI) rose 5%. Bank of Baroda (BoB) and Punjab National Bank (PNB) were up 3% and 2%, respectively, on news that they have entered into an agreement with T Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company.

Sensex heavyweight Reliance Industries (RIL) was up 3% on reports that the firm is planning to acquire some of the assets of US petrochemical major LyondellBasell, which is undergoing reorganisation under the protection of a US court.

Telecom stocks fell on worries that the ongoing price war would result in a sharp fall in revenues and profits. Reliance Communications was down 2% while Bharti Airtel declined 4% after chairman Sunil Mittal told the media that the company was not actively seeking acquisitions, after talks for a tie-up with South Africa’s MTN collapsed recently.

On Sunday, the prime minister had stated that the government would push through legislative changes in the insurance sector to attract more foreign investment. He added that the government would push through stake sales in profitable state-run firms, implement measures to deepen the corporate bond market, strengthen the insurance and pensions sectors and improve the futures market for better price discovery and regulation.

By December 2009, the government plans to introduce bills proposing to raise the foreign stake limit in insurance companies to 49% from the present 26% and to open up the pension sector to private and foreign firms. It will also propose a law to cut its holding in top lender State Bank of India to 51%. 

The timing of the withdrawal of the economic stimulus measures would be decided when it becomes clear the economy is recovering, but there will be no fresh stimulus, finance minister Pranab Mukherjee said on Sunday.

Asian markets ended in the green on Monday on strong global cues. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.28%-2.25%. Praising China’s economic performance in the past year during the global financial crisis, Moody’s Investors Service raised the outlook on China’s A1 rating to positive from stable. The agency said the country’s strong credit fundamentals would resume its improving trend as the economy emerged from the effects of the global recession.
— Swapnil Suvarna [email protected]