Small-cap, mid-cap indices outperform Sensex

The market ended with small gains in a choppy trading session. The market came off lower level from an initial fall tracking recovery in stocks in China and Hong Kong and firm European markets.

Oil & gas stocks rose, boosted by record crude oil prices. Banking and consumer durables stocks declined. Metal stocks were mixed.

Oil prices continued their steady rise and surged to a record high near $130 a barrel on Tuesday, 20 May 2008, stoking fears of global inflation.

The 30-share BSE Sensex rose 12.98 points or 0.08% at 17,243.16. Sensex gained 63.16 points at day’s high of 17,293.34, hit in late trade. The market had dropped in early trade tracking weak global markets and record high oil prices. Sensex lost 188.55 points at day’s low of 17,041.63 touched in early trade.

The broader based S&P CNX Nifty was up 12.7 points or 0.25% at 5,117.65. Nifty May 2008 futures were at 5123.90, at a premium of 6.25 points as compared to spot closing of 5117.65.

The BSE clocked a turnover of Rs 7077 crore today as compared to a turnover of Rs 5940.08 on Tuesday 20 May 2008. The NSE's futures & options (F&O) segment turnover was Rs 39,481.17 crore which was higher than Rs 33,290.93 crore on Tuesday, 20 May 2008.

The market breadth was strong on BSE with 1,710 shares advancing as compared to 1,009 that declined. 76 remained unchanged.

Among the 30-member Sensex pack, 16 declined while the rest gained.

As per the provisional figures on NSE, foreign institutional investors (FII)'s sold shares worth Rs 776.63 crore and domestic funds bought shares worth Rs 452.66 crore today 21 MAy 2008.

The BSE Mid-Cap index rose 41.99 points or 0.59% to 7,148.05 and BSE Small-Cap index rose 130.37 points or 1.51% to 8,788.98. Both these indices outperformed Sensex.

BSE Power (down 0.06% to 3,302.92), BSE TecK index (down 0.06% to 3,532.39), BSE FMCG index (down 0.07% at 2,483.31), BSE IT index (down 0.31% to 4,453.35), BSE Consumer Durables index (down 0.53% to 4,681.20), BSE Health Care index (down 0.57% at 4,245.69), BSE Bankex (down 1.41% at 8,639.90) underperformed Sensex.

BSE Oil & Gas index (up 2.36% to 11,432.80), BSE Metal index (up 1.24% to 17,390.28), BSE PSU index (up 0.98% to 7,726.71), BSE Capital Goods index (up 0.79% at 13,670.08), BSE Auto index (up 0.4% at 4,782.90), BSE Realty index (up 0.14% at 7,904.88), outperformed Sensex.

Oil & gas stocks rose as crude rose to a record high near $130 a barrel on Tuesday, 20 May 2008. BPCL (up 1.99% to Rs 356.05), Indian Oil Corporation (up 0.63% to Rs 408.25), ONGC (up 0.26% to Rs 938.70) edged higher.

India’s largest private sectors firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 2.53% to Rs 2,667.90. Reportedly, the government has confiscated the company’s five blocks in the Kerala-Konkan (KK) basin after it failed to meet the minimum work programme.

Metal stocks were mixed. National Aluminium Company (up 4.62% to Rs 538), Tata Steel (up 3.09% to Rs 922.25), Sterlite Industries (up 0.55% to Rs 945.10) edged higher. Hindalco Industries (down 0.9% to Rs 197.25), Steel Authority of India (down 0.71% to Rs 182.55) edged lower.

Banking stocks declined. India’s largest private sector bank in terms of net profit ICICI Bank declined 1.77% to Rs 911.25.

HDFC Bank, India's second largest private sector bank in terms of net profit, declined 3.46% to Rs 1,413.90. The Reserve Bank of India has approved the Scheme of Amalgamation of Centurion Bank of Punjab with HDFC Bank. The Scheme of Amalgamation will come into effect from 23 May 2008.

India’s largest commercial bank State Bank of India (SBI) rose 0.37% to Rs 1,661.55. The bank today said it would resume tractor and farm equipment loans with immediate effect, having earlier suspended new loans because of rising defaults.

Consumer durables stocks declined. Blue Star (down 2.22% to Rs 449), Titan Industries (down 0.97% to Rs 1,200.60), Videocon Industries (down 0.07% to Rs 410.05) edged lower.

Mahindra & Mahindra (up 3.09% to Rs 670), Bharat Heavy Electricals (up 2.03% to Rs 1,771.70), Grasim Industries (up 1.57% to Rs 2,323.10), Tata Motors (up 1.55% to Rs 688.85), Tata Consultancy Services (up 1.18% to Rs 963.95), ITC (up 1.13% to Rs 228.45), ACC (up 1.05% to Rs 689.60) edged higher from the Sensex pack.

HDFC (down 3.13% to Rs 2,688.20), Hindustan Unilever (down 2.34% to Rs 236.10), NTPC (down 2.15% to Rs 182), Cipla (down 2.02% to Rs 204), Ambuja Cements (down 1.61% to Rs 107.10 edged lower from Sensex pack.

India’s largest telecom services provider by market share Bharti Airtel declined 0.74% to Rs 822.65. As per reports Bharti Airtel has forged an exclusive alliance with Indian Oil Corporation (IOC) that will enable the telco to access 18,000 retail outlets and 5,500 Indane cooking gas distributors of the oil giant. The deal also envisages that Airtel can use IOC outlets to sell its products, collect bills, set up PCO facilities and even open Bharti retail outlets on an exclusive basis.

IFCI clocked the highest volume of 2.15 crore shares on BSE. Reliance Natural Resources (1.49 crore shares), Ispat Industries (1.4 crore shares), Aishwarya Telecom (1.39 crore shares) and Chambal Fertilisers and Chemicals (1.24 crore shares) were the other volume toppers in that order.

Housing Development and Infrastructure clocked the highest turnover of Rs 400.61 crore shares on BSE. Cairn India (Rs 321.86 crore), Reliance Industries (Rs 266.57 crore), Reliance Petroleum (Rs 199.02 crore) and Mundra Port & Special Economic Zone (Rs 192.43 crore) were the other turnover toppers in that order.

European markets were mixed. Key benchmark indices in France, Germany were down by between 0.53% to 0.58%. While UK’s FTSE 100 rose 0.33% to 6,212.

Asian shares were mixed. Shares in China and Hong Kong rose after an initial slide. Key benchmark indices in Hong Kong and China rose between 1.16% to 2.93%. Key benchmark indices in Japan, South Korea, Singapore and Taiwan were down by between 0.26% to 1.65%.

Sensex shed 204.76 points or 1.17% at 17,230.18 on Tuesday, 20 May 2008, on concerns the Reserve Bank of India (RBI) may further tighten policy to fight high inflation after RBI governor Y V Reddy said inflation rate was totally unacceptable and the official data underestimates the actual rise. The wholesale price index rose 7.83% in 12 months to 3 May 2008, higher than previous week's annual rise of 7.61%, government data released on 16 May 2008, showed. It was the highest since an annual reading of 7.93% n 6 November 2004.

Further, a steep increase in upward revision in inflation rate for the week ended 8 March 2008, to 7.78% from the provisional 5.92%, came as a rude shock to marketmen. According to retail brokerage Sharekhan, the steep upward revision in inflation rate is a cause for concern, as prices of many commodities have not been updated for varied periods. Moreover, a sharp fall in the rupee against the dollar in the past few days has heightened concerns about inflation. This is because the fall in rupee will raise cost of imports which in turn will result in further rise in inflation.

In a bid to rein in inflation, the Reserve Bank of India, on Tuesday, 29 April 2008, raised cash reserve ratio (CRR) by 25 basis points to 8.25%, to suck out excess liquidity in the banking system, in its annual monetary policy review.

With parliamentary elections scheduled next year (May 2009), the government may leave no stone unturned in its attempt to tame inflation. This is bad news for commodity scrips such as cement and steel. Cement maker ACC said earlier this months that its margins will be hurt by a decision to hold its prices for 2 to 3 months that was taken after the government asked cement firms to help contain price pressures.

The government recently imposed export tax on basmati rice and some steel products, and cut import duties on key inputs like ferro alloys and metallurgical coke. The government had earlier banned export of cement and non-basmati rice. On 7 May 2008, the government ordered suspension in futures trading in channa, refined soyoil, potato and rubber for four months.

Earnings downgrade amid rising input and interest costs and drying up of global liquidity due to credit crisis, remain major concern for the Indian stock market.

Nonetheless, the structural growth drivers of the Indian economy remain intact – India’s economy is expected to witness a decent-to-strong growth for a long period of time due to favourable demographics. Acceleration in infrastructure creation will be another driver of strong growth in India’s economy. A CLSA report says India’s infrastructure development is set to accelerate, backed by greater private sector participation and improved finances of government and public sector enterprises. Rating agency Crisil in its outlook for Indian economy for the year through March 2009 has stated that the overall growth scenario is expected to remain strong with investment as the main driver.

Given the continued inflow to unit linked insurance plans (Ulips) and equity linked savings schemes (ELSS) of mutual funds, stock-specific buying will continue depending on fundamentals of individual stocks. Insurance firms are now a major player in the Indian stock market given the huge mop up in Ulips in recent years. It was buying support from domestic funds which had aided the recent recovery on the bourses.

Meanwhile, as per recent reports, ELSS which offer tax benefit are catching the fancy of small savers. ELSS funds saw their collective assets jump more than nine times to about Rs 16000 crore in three years ending March 2008. In 2005 the investment limit eligible for income tax breaks was raised ten times to Rs 1,00,000 rupees for ELSS funds. Systematic investment plan (SIP) are said to be driving inflows into ELSS funds.