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Friday, July 31, 2009

Market extends gains for a third week in a row


Better-than-expected earnings from India Inc, strong global cues and sustained buying by foreign funds helped the key benchmark indices extend gains for the third straight week. The BSE Mid-Cap and the BSE Small-Cap indices outperformed the Sensex.

The Securities and Exchange Board of India (Sebi) on 27 July 2009 introduced new norms for the comprehensive risk management system for the equity markets in the cash segment, in a move which would now reduce the margin burden on brokers. Sebi said that in case of a buy transaction in cash market, value at risk (VaR) margins, extreme loss margins and mark to market losses together will not exceed the purchase value of the transaction.

The BSE Sensex jumped 291.35 points or 1.89% to 15,670.31 in the week ended 31 July 2009. It was the Sensex's highest closing since 17 June 2008. The S&P CNX Nifty rose 67.90 points or 1.48% to 4636.45 in the week.

The BSE Mid-Cap index jumped 189.21 points or 3.52% to 5,571.02 and the BSE Small-Cap index rose 155.63 points or 2.57% to 6,205.83

The Sensex is up 6023 points or 62.43% in calendar year 2009 as on 310 July 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 7,509.91 points or 92.02% as on 31 July 2009.

A majority of the Q1 June 2009 results surpassed analysts' expectations with lower costs helping bottomline growth. The combined net profit of 1921 companies rose 20.50% to Rs 71437 crore on 5.1% fall in sales to Rs 673497 crore in Q1 June 2009 over Q1 June 2008.

Foreign institutional investor (FII) bought shares worth a net Rs 11066.30 crore in July 2009. FIIs had bought stocks worth a net Rs 3,224.90 crore in June 2009. Their inflow in calendar year 2009 totaled Rs 35369.90 crore

But a weak monsoon remains a cause of concern. The southwest monsoon rains, running between June to September, were 18% below normal in the week to 29 July 2009, having been above normal for the previous two weeks, the India Meteorological Department said on its website on Thursday, 30 July 2009. Total rainfall since the beginning of June was 19% below average, the weather bureau said.

In a major event, the Rererve Bank of India (RBI) kept the key rates unchanged and increased the inflation forecast to 5% by end March 2010 from earlier 4%, at its quarterly monetary policy review meet on Tuesday, 28 July 2009. The central bank raised its inflation forecast, saying an uncertain outlook for monsoon rains could "accentuate" inflation for already-high food prices.

The repo rate, at which the central bank lends cash to banks, stays at 4.75%, and the reverse repo rate, at which it absorbs surplus cash from the banking system, stays at 3.25%. Both these rates are at record low level. The statutory liquidity ratio (SLR) was also kept unchanged at 24%. The RBI also kept the cash reserve ratio (CRR), the amount of funds banks have to keep on deposit with it, unchanged at 5%.

The RBI said GDP is expected to grow at 6% in FY 2010, with an upward bias. At the time of the annual monetary policy announcement in April 2009, the central bank had forecast a 6% growth. So, the words 'upward bias' were the addition to that forecast.

Finance Minister Pranab Mukherjee after trading hours on 28 July 2009 announced tax breaks for industrial park schemes and developers of real estate and road projects to stimulate the economy and lift growth to 8-9 % by the end of 2010. He announced a 1% subsidy on home loans up to Rs 10 lakh, when the overall cost of the house does not exceed Rs 20 lakh.

In another measure that that could provide a boost to the realty sector the government has allowed developers of housing projects a tax holiday under section 80 IB(10) of the Income Tax Act on profits from projects approved between 1 April 2007 and 31 March 2008. The benefit is subject to a condition that the projects are completed on or before 31 March 2012.

The government has also extended tax holiday to developers of industrial parks by two years until March 2011. A tax holiday for firms engaged in food processing has also been extended. Producers of natural gas from coal-bed methane blocks would also be extended tax breaks.

Markets across the globe with the US equity indices surging to nine-month highs, with the Dow Jones above the psychological 9,000 mark on better-than-estimated results from frontline companies. Asian markets, too, struck 11-month high, as better-than-expected earnings of companies from Japan and US reinforced hopes of stronger global growth.

World equity funds garnered $9.5 billion in the week ending 29 July 2009, according to data the latest data from global fund tracker EPFR Global. The inflow was the highest since June 2008.

Emerging markets continued to be the darling of investors, with dedicated BRIC (Brazil, Russia, India and China) equity funds seeing net inflows for a 19th straight week. India equity funds took in a year-to-date high of $211 million in the most recent week, while China and Greater China stock funds saw $711 million in fresh money.

Closer home, trading for the week began on a muted note as key benchmark ended almost unchanged on Monday, 27 July 2009, after gyrating either sides throughout the day. The BSE 30-share Sensex slipped 3.92 points or 0.03% to 15,375.04 and the S&P CNX Nifty was up 3.75 points or 0.08% to 4,572.30.

Indices settled with modest losses on Tuesday, 28 July 2009 after swinging wildly either ways during the course of the day. The Reserve Bank of India raised inflation and GDP growth forecast while keeping key policy rates unchanged at their historical low level at a quarterly monetary policy review. The BSE 30-share Sensex was down 43.10 points or 0.28% to 15,331.94 and the S&P CNX Nifty was down 8.20 points or 0.18% to 4,564.10

A sell-off in Chinese stocks on Wednesday, 29 July 2009, amid speculation the central bank is poised to order lenders to set aside larger reserves, triggered a slide in stocks across emerging markets including India. The BSE 30-share Sensex lost 158.48 points or 1.03% to 15,173.46 and the S&P CNX Nifty fell 50.60 points or 1.11% to 4,513.50

Strong Q1 June 2009 earnings from State Bank of India (SBI) and Mahindra & Mahindra (M&M) and firm global stocks helped the key benchmark indices snap a three day losing streak on Thursday, 30 July 2009. The BSE 30-share Sensex rose 214.50 points or 1.41% to 15,387.96 and the S&P CNX Nifty was up 57.95 points or 1.28% to 4,571.45.

Strong global cues and better-than-expected Q1 June 2009 earnings of India Inc triggered surge in the key benchmark indices on Friday, 31 July 2009. The BSE 30-share Sensex gained 282.35 points or 1.83% to 15,670.31, its highest closing since 17 June 2008. The S&P CNX Nifty rose 65 points or 1.42% to 4,636.45.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 2.81% to Rs 1957.10 in the week. Reliance Natural Resources (RNRL) chairman Anil Ambani on 28 July 2009 accused the Petroleum Ministry of being biased in the legal dispute with brother Mukesh Ambani-led Reliance Industries (RIL) over the price of natural gas from the Krishna-Godavari basin. Addressing shareholders of the company, he also said the government would not lose a single rupee even if the gas from RIL's fields off the Andhra Pradesh coast were to be supplied to his company at the originally contracted price of $2.34 per unit.

Anil Ambani asked the Oil Ministry to cancel the Production Sharing Contract with RIL if it was really aggrieved and not challenge third party agreements. Giving details of the global gas scenario, he said the price of the industrial fuel had crashed 80% and the gas price of $4.2 per mmBtu (fixed by the Government) was "exorbitant" and against public interest.

Last month, the Bombay High Court had asked Reliance Industries to supply 28 million units of gas to Reliance Natural Resources for 17 years at $2.34 per unit, after assigning 12 million units to the state-run power utility NTPC. Reliance Industries challenged the verdict in the Supreme Court, which heard the case on 20 July 2009 and fixed 1 September 2009 as the next date of hearing. It also asked all the parties to file their replies on the government position on the matter by then.

India's largest FMCG company by sales Hindustan Unilever rose 3.23% to Rs 291.20, after striking a 52-week high of Rs 306 on 28 July 2009. The company's net profit declined 2.68% to Rs 543.19 crore on a 5.06% increase in total income to Rs 4536.17 crore in Q1 June 2009 over Q1 June 2008. The results were declared in late trade on 28 July 2009.

Auto stocks were in demand. India's largest truck market by sales Tata Motors gained 12.86% after net profit rose 57.54% to Rs 513.76 crore on a 7.17% decline in total income to Rs 6723.99 crore in Q1 June 2009 over Q1 June 2008. Analysts had expected a steep fall in net profit due to lower sales volume. The result was announced at the fag end of the trading session on 27 July 2009.

India's top small car maker by sales Maruti Suzuki India gained 2.57% to Rs 1413.25 after striking a record high of Rs 1428.65 on 31 July 2009. The company had announced strong Q1 June 2009 results during market hours on 23 July 2009.

India's largest tractor maker by sales Mahindra & Mahindra rose 3.12% to Rs 856.80 after hitting a 52-week high of Rs 892 on 31 July 2009. The company's net profit rose 151.63% to Rs 400.80 crore on 28.04 % rise in total income to Rs 426.61 crore in Q1 June 2009 over Q1 June 2008. The results for the current quarter include the figures of the erstwhile subsidiaries Mahindra Holdings and Finance and Punjab Tractors which were merged with the company. Hence, the figures of the current quarter are not comparable with those of the previous year's quarter. The results were announced after market hours on Thursday, 30 July 2009.

Metal stocks gained on firm metal prices in the London Metal Exchange. India's largest private sector steel maker by sales Tata Steel gained 5.18% even as net profit fell 47% to Rs 789.83 crore on a 8.16% decline in total income to Rs 5661.89 crore in Q1 June 2009 over Q1 June 2008. The result was announced during trading hours 29 July 2009.

Steel Authority of India (up 2.33%), and Hindalco (up 6.94%), National Aluminium Company (up 2.82%), gained.

India's largest copper market by sales Sterlite Industries slipped 1.23% after net profit fell 68.5% to Rs 112.70 crore in Q1 June 2009 over Q1 June 2008. The result was announced during trading hours on 29 July 2009.

IT stocks rose on the back of robust Q1 earnings from IT pivotals in the past few days. India's second largest IT firm by sales Infosys rose 3.02%. India's largest IT exporter by sales TCS jumped 9.25%. India's third largest IT exporter by sales Wipro spurted 6.80%.

India's largest cellular services provider by sales Bharti Airtel fell 1.19%. As per reports, Bharti Airtel and South Africa's MTN may extend by about four weeks their 31 July 2009 deadline for talks to agree on a merger.

India's largest power generation company by sales NTPC rose 2.25% after net profit jumped 27.1% to Rs 2193.62 crore on a 25.8% increase in sales to Rs 12002.68 crore in Q1 June 2009 over Q1 June 2008. The result was announced after market hours on 27 July 2009.

Other power generation firms gained as strong response to the Adani Power initial public offer lifted sentiment for the sector. The Adani Power issue was oversubscribed 21.51 times by 17:00 IST on the last day of the issue on 31 July 2009.

Reliance Infrastructure (up 2.91%), Tata Power (up 11.02%), and CESC (up 7.45%), advanced.

Bank stocks were mixed. India's largest private sector bank by net profit ICICI Bank slipped 1.02%. The bank's net profit rose 20.63% to Rs 878.22 crore on a 2.2% decline in operating income to Rs 9223.32 crore in Q1 June 2009 over Q1 June 2008. The bank reported its earnings on 25 July 2009. However, India's second largest private sector bank in terms of operating income HDFC Bank rose 3.30%.

India's biggest commercial bank in terms of branch network State Bank of India (SBI) rose 6.80% after net profit jumped 42.02% to Rs 2330.37 crore on 29.86% rise in total income to Rs 21041.51 crore in Q1 June 2009 over Q1 June 2008. The results hit the market during trading hours on 30 July 2009.

Realty stocks gained after the Reserve Bank of India (RBI) kept key policy rates unchanged at their historical low at its quarterly monetary policy review on 28 July 2009.

India's largest real estate developer by sales DLF rose 0.64%. The company's net profit surged 236.23% to Rs 100.40 crore on a 652.69% spurt in sales to Rs 417.97 crore in Q1 June 2009 over Q4 March 2009. The company announced the result after market hours on 30 July 2009.

Unitech (up 3.39%), Housing Development & Infrastructure (up 5.16%), Parsvnath Developers (up 8.04%), advanced.