Sensex, it seems, is out of the woods

The market continued to recover for the second straight day due to heavy buying in index pivotals. The 30-shares BSE Sensex surged 305.82 points (2.32%), to end at 13,487.16. It had opened firm, at 13,256.81, as buying continued following a 186-point rally on Wednesday. The Sensex had surged to a fresh intra-day high of 13,524.77, its low for the day being 13,239.79. Its all-time high is more than half a thousand points away.

The S&P CNX Nifty advanced 87.30 points (2.32%), to settle at 3,852.50.

The BSE clocked a turnover of Rs 4,355 crore.

The market-breadth was rock solid as a host of small-cap and mid-cap counters rallied on high volumes. For 2,048 shares rising on BSE, just 487 declined. As many as 60 shares were unchanged. Gainers outpaced losers by a ratio of 4:1. The BSE Small-Cap index closed at 6,594.52, up 201 points (3.14%), while the BSE Mid-Cap index jumped 139.61 points (2.6%), to settle at 5,616.97.

Among the 30-Sensex pack, 28 advanced while Hero Honda (down 0.65% to Rs 714) and Tata Steel (down 0.09% to Rs 435.25) were the only losers.

ICICI Bank was the top gainer, up 5.62% to Rs 877, after it announced an increase of 0.5% in its Benchmark Advance Rate (I-BAR) and its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from 18 December 2006. The revised I-BAR will be 13.75% p.a. payable monthly as against 13.25% at present. The revised FRR will be 10.75% p.a. against 10.25% at present. The bank has also announced an increase in interest rates on deposits of value less than Rs 1 crore in the 0.25%-0.75% range across various tenors with effect from 18 December 2006. The hike in lending rates will help protect margins at a time, when deposit rates/cost of funds are also rising. On Wednesday, the ICICI Bank ADR surged 3.6% to $38.34, boosted by the news.

HLL (up 3.92% to Rs 228), NTPC (up 4.11% to Rs 145.65), Cipla (up 4.20% to Rs 248) and Satyam Computers (up 4.32% to Rs 467) were the other gainers.

Reliance Communications rose 3.69% to Rs 449.15, on reports that it is interested in Hutchison's India operations. As many as 9.9 lakh shares changed hands in the counter on BSE as market is abuzz with talk that the ADAG group telco is negotiating with three PE firms, who are together discussing this with the Hong Kong-based telecom major.

ONGC rose 2.14% to Rs 806, on reports that its joint venture with Mittal group, is close to signing an agreement for an oil block in Turkmenistan. Another report that ONGC’s overseas investment arm proposes to undertake joint exploration and production activities in Iraq with Reliance Industries (RIL), too, aided the recovery after a steep decline in the past four days. ONGC Mittal Energy (OMEL), the joint venture between ONGC and Mittal group, is eyeing opportunities in Kazakhstan, Azerbaijan and Indonesia, reports add.

Maruti Udyog gained 2.31% to Rs 906.24, amid reports that it will usher in the New Year by hiking prices of cars. It will raise prices from January 2007 by as much as Rs 12,000, to help offset higher freight and component costs, newspapers said on Thursday. The company has sent letters to dealers informing them of the increase effective January, papers quoted sources.

Index heavyweight Reliance Industries (RIL) advanced 2.10% to Rs 1,264, on a volume of 9.24 lakh shares. It had surged to an intra-day high of Rs 1,272.80.

Larsen & Toubro (L&T) rose 2.41% to Rs 1,455, after announcing that the company won two major contracts of an aggregate value of $ 86 million from a leading Chinese petrochemical company, Sinopec. The company has been contracted to design, manufacture and supply three ethylene oxide reactors, each weighing in excess of 1,000 tonnes. The reactors will form part of the Methyl Ethyl Glycol (MEG) unit in a petrochemical plant.

BF Utilities, a Kalyani group company into wind power generation, was surprisingly the top-traded counter on BSE and accounted for Rs 620.89 crore of the total turnover. The counter was locked at the 5% upper circuit filter at Rs 3,253.65, on a total volume of 19.10 lakh shares. A little over 5.05% of the company’s equity changed hands in the counter today. The counter saw an astronomical spurt in volume today on the multiple block deals. Its average yearly traded volume on BSE is just 36,030 shares, on a daily basis.

Tata Steel (Rs 117.68 crore) and Reliance Industries (Rs 116.04 crore) were the other counters traded in a big way.

Cement scrips dominated the indices on strong purchases anticipating firm cement prices. Analysts expect cement prices to remain firm over the medium term, as no big capacity addition is expected till FY 2008. Strong growth from housing and infrastructure has been driving up demand for cement.

Gujarat Ambuja Cement (up 3.62% to Rs 139), UltraTech Cement (up 7.20% to Rs 990), and ACC (up 2.64% to Rs 1,034) advanced.

Four Soft advanced 20% to Rs 69.70, after scheduling a board meet for 20 December 2006, to consider the allotment of equity shares / warrants preferentially. They will also consider raising capital by issuing ADRs/GDRs/ bonds/ debentures along with a proposed acquisition in Europe.

HCL Technologies surged 6.71% to Rs 626.65, after the software services firm announced a liberal 1-for-1 bonus issue. The stock had surged to a high of Rs 650.

Britannia Industries jumped 4.22% to Rs 1,141, after the company signed an agreement for buying stake in a bakery business owned by a West Asian group. The move to acquire stake in the West Asian bakeries, is in line with Britannia’s strategy of expanding overseas. The acquisition of shares is subject to the execution of definitive agreements.

Punj Lloyd (PLL) jumped 9.10% to Rs 1,018.55, after it set up a new company for carrying out back office engineering activities. Simon Carves India, the new company, is a wholly-owned subsidiary of PLL, catering to the the group's engineering requirements in the initial phase. Simon Carves India will integrate the engineering expertise of Punj Lloyd with its two recent acquisitions - Sembawang Engineers & Constructors and Simon Carves, UK.

Alok Industries rose 7% to Rs 71.20, after the company said foreign fund Caledonia Investment acquired 2.10% stake in the company through open market route on 12 December 2006. Post-acquisition, the shareholding of Caledonia Investment has risen to 14.33%.

All the Asia/Pacific and European indices were trading with gains except Mexico’s IPC and Stockholm General of Sweden index.

The Nikkei average rose 0.82% to its highest close in more than seven months on Thursday, as exporters, including Sony Corp, climbed on a weaker yen and strong US retail sales data.

The Nikkei rose 136.27 points, to 16,829.20, rising for the fourth straight session to hit the highest close since 11 May 2006. Hang Seng index was up 1.07%.

International rating agency Standard & Poor's (S&P) said on Thursday, India's credit rating can be upgraded to investment grade if it continued to improve public finances.

The outlook on the sovereign credit rating on India was revised to positive from stable in 2006, highlighting that if current credit improvements continue, especially on the fiscal front, India could achieve investment grade ratings," S&P said in its Asia Pacific Market Outlook for 2007.

The central bank is probably expected to refrain from raising interest rates at its policy board meeting to be held 18-19 December. Most of the nine voting policy board members want to examine more personal consumption and price data as well as US economic growth before raising borrowing costs, reports say.

Meanwhile, Federal Reserve kept interest rates unchanged on Tuesday for the fourth straight time, as worries about inflation continued to trump concerns about the slowing economy. At its final meeting of 2006, Fed left its target for the federal funds rate at 5.25%. The funds rate, the interest that banks charge each other, has been at that level since June, when the Fed raised rates for the 17th consecutive time in a two-year effort to combat rising inflation.

Although the Sensex is sharply off its record high of 14,000, equity valuations still remain steep. The Sensex’s current PE multiple is 21.72 based on trailing 12-month September 2006 earnings. The Indian market is most expensive compared to its regional and emerging market peers.

The Sensex staged a recovery on Wednesday (13 December) gaining 186 points. A lower-than-expected industrial output growth for October 2006 caused a 404-point fall in the Sensex on Tuesday (12 December), after the barometer index lost 400 points on Monday (11 December) following a surprise hike in the cash reserve ratio (CRR) by the RBI, which raised fears of a rise in interest rates. It had slipped 173 points on Friday (8 December) ahead of the surprising CRR hike.

After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so, given that strong earnings growth has been a key driver of the bull-run on the bourses.

US stocks closed little changed on Wednesday, as surprisingly strong retail sales data raised hopes for the holiday season, offsetting a rise in oil prices which hurt industrial shares. The Dow Jones industrial average advanced 1.92 points, or 0.02%, to end at 12,317.50. The Standard & Poor's 500 Index rose 1.65 points, or 0.12%, to finish at 1,413.21. The Nasdaq Composite Index eked out a gain of just 0.81 of a point, or 0.03%, to close at 2,432.41.

Oil prices edged up on Thursday after a larger-than-expected drop in U.S. crude stocks and as traders waited to see if OPEC ministers meeting in Nigeria would hold off from making further cuts to output. US light crude for January rose 29 cents to $61.66 a barrel. London Brent crude for January traded 23 cents higher at $61.56, ahead of its expiry on Thursday.

As per provisional figures, FIIs were net buyers to the tune of Rs 24.52 crore on 13 December, the day when the Sensex had risen 186 points. Their inflow was Rs 95 crore on 12 December, the day when the Sensex had plunged 404 points.

The last few days witnessed substantial FII sales in index-based futures. FIIs were net sellers to the tune of Rs 284 crore in index-based futures on 13 December. Their net sales in index-based futures in four trading sessions, between 8 December and 13 December, aggregate Rs 3,036 crore. The last two days also witnessed substantial FII purchases in individual stock futures, worth Rs 780 crore (between 12 December and 13 December).