Sensex off 775 points from the day's high

The key benchmark indices slipped into the red on profit taking
after a sharp surge at the onset of the trading session. The BSE
30-share Sensex was down 294.38 points or 2.06%, off close to 775
points from the day's high and up close to 150 points from the
day's low. Banking and IT stocks fell.

The wild swings in early trade followed a historic rally on Monday,
18 May 2009, when the key indices viz. the BSE Sensex and the S&P
CNX Nifty surged more than 17% each on hopes a new stable
government will be able to push reforms. Strong global cues may
further aid the rally.

A clear mandate for the Congress-led United Progressive Alliance
(UPA) has boosted hopes a strong coalition would be able to push
through economic reforms that would boost foreign investment.

Prime Minister Manmohan Singh's coalition defied predictions of a
tight election and was only about 11 seats short of an majority
from the 543 seats at stake. Congress' alliance took 261 seats,
sweeping aside its nearest rival, the bloc led by the
Hindu-nationalist Bharatiya Janata Party (BJP), which won only 159
combined. Congress, which alone won 205 seats, needs a handful of
partners to reach the 272 seats needed to take power, and is
expected to seek the support of more smaller parties or
independents.

Meanwhile, Dr Manmohan Singh met President Pratibha Patil on Monday
and submitted the resignations of his Council of Ministers.
Manmohan Singh formally stepped down as the Prime Minister.
President Pratibha Patil on Monday dissolved the 14th Lok Sabha
with immediate effect and asked the Prime Minister and his Council
of Ministers to continue in office till the new government is
formed. The President is expected to today, 19 May 2009, invite Dr.
Singh to form the next government.

Armed with a decisive mandate, Manmohan Singh will meet the
President to show the UPA alliance has the numbers, and formally
stake claim to form a new government at the Centre.

Financial sector reforms are likely to get a push in the coming
days, which were relegated to the back seat due to persistent
opposition from the Left parties, with the Congress-led UPA set to
form the next government.

A near term trigger for the market will be allocation of portfolios
in the new government. It remains to be seen who gets the key
ministries viz. power, transport and education sectors. Analysts
say growth in these three sectors are key for India to achieve
strong economic growth. If those seen as strong performers are
given charge of these three ministries, the market may extend
gains.

As per reports, Congress's strong showing in election means
reformers will almost certainly be named to key ministerial
portfolios, including finance, trade, defence and foreign affairs.
The ministers should be named this week. Fresh reformist faces may
also join the cabinet for the first time, including Rahul Gandhi,
heir to the powerful Gandhi dynasty and seen as pushing a new
generation of leaders into the Congress.

As per market talks, P Chidambaram could retain his home portfolio.
Among the contenders for the finance ministry are C Rangarajan, an
economic adviser to the prime minister, Montek Singh Ahluwalia,
deputy chairman of the Planning Commission, Trade Minister Kamal
Nath, and External Affairs Minister Pranab Mukherjee.

According to analysts the new government should give priority to
reforming the subsidy mechanism which is aimed at improving
delivery mechanism while at the same time reducing costs. Restoring
fiscal health is also required. In this regard, disinvestment is an
immediate channel for raising funds

Foreign funds have bought aggressively in Indian stocks in the
recent past. FII inflow in May 2009 totaled Rs 10,270.60 crore in
May 2009 (till 15 May 2009) while their inflow in calendar year
2009 totaled Rs 10,627.20 crore.

Asian stocks rose today as higher confidence among US homebuilders,
a surge in oil prices and a drop in bank borrowing costs stoked
optimism the global economy is recovering. Key benchmark indices in
China, Hong Kong, Japan, South Korea, Singapore and Taiwan, rose by
between 0.91% to 3.34%.

US markets on Monday, 18 May 2009 closed at the session's high
helped by banks and financial services stocks. The Dow gained
235.44 points, or 2.9%, to 8,504.08. The S&P 500 index gained 26.83
points, or 3%, to 909.71. The Nasdaq composite index added 52.22
points, or 3.1%, to 1,732.36. A reading showed home builder
sentiment rose for the second month in a row and at the highest
level since September 2008.

At 10:07 IST, The BSE 30-share Sensex was down 294.38 points or
2.06% to 13,989.83. The Sensex rose 473.61 points at the day's high
of 14.757.82 in early trade. At the day's low of 13,834.13, the
Sensex fell 450.08 points in early trade.

The S&P CNX Nifty was down 123.55 points or 2.86% to 4,199.60.

The market breadth, indicating the overall health of the market,
was positive. On BSE, 851 shares rose as compared with 654 that
fell. A total of 83 shares remained unchanged.

From the 30 share Sensex pack, 20 stocks fell while rest gained.

India's largest private sector firm by market capitalisation and
oil refiner Reliance Industries (RIL) fell 2.68% to Rs 2290 on
profit taking after a recent sharp surge. Analysts expect strong
growth in bottom line in coming quarters from sale of gas which it
started pumping last month from its deep-sea field off the east
coast.

Banking stocks fell on profit taking after a recent sharp surge.
India's largest private sector bank by net profit ICICI Bank fell
1.37% even as its American depository receipt (ADR) rose 25.22% on
Monday, 18 May 2009.

India's second largest private sector bank by operating income HDFC
Bank was down 3.91% even as its ADR rose 21.29% overnight.

But India's biggest bank in terms of branch network State Bank of
India was up 2.55%. State Bank of India has cut interest rates on
deposits by up to 50 basis points effective Monday, 18 May 2009.

India's biggest dedicated housing finance firm by operating income
HDFC was down 0.5%. As per recent reports, HDFC is likely to cut
deposit rates and follow it with a cut in lending rates

Outsourcing focussed IT stocks fell on a stronger rupee. India's
second largest software services exporter by sales Infosys fell
9.03% even after its American depository receipt (ADR) rose 8.99%
overnight.

India's largest software services exporter by sales TCS fell 4.89%.
TCS last week it has been selected for a five-year IT services
contract for auto maker Volkswagen group's operations in the United
Kingdom.

India's third largest software services exporter by sales Wipro
rose fell 7.45% even after its ADR rose 7.48% overnight.

The rupee rose to five-month high on Tuesday, extending a 3.2%
rally in the previous session, after a win for the ruling coalition
in elections boosted hopes for reforms and foreign investment. The
partially convertible rupee was at 47.36/37 against the dollar, 1.1
% above Monday's close of 47.88/90. A stronger rupee affects
operating margins of IT firms negatively as they derive maximum
revenue from US.