Market vaults on robust industrial production data

The key benchmark indices surged led by index heavyweight Reliance Industries (RIL) on optimism for a patch-up between warring Ambani brothers and on better-than-expected industrial output data for August 2009. Firm European markets and higher US index futures aided rally. RIL rose nearly 3% on Anil Ambani's sought to resolve a dispute with his older brother brother Mukesh. The stock market remains closed on Tuesday, 13 October 2009, on account of assembly election in Maharashtra.

The BSE 30-share Sensex jumped 384.01 points or 2.31%. The Sensex closed above the psychological 17,000 mark and the 50-unit S&P CNX Nifty closed above the psychological 5,000 mark. The Sensex had last closed above 17,000 on 1 October 2009 while Nifty closed above 5,000 on 8 October 2009.

The market sentiment was upbeat after the latest data showed a surge in industrial output in August 2009. A strong response to initial public offer of Indiabulls Power which was fully bid within half an hour of opening of the issue today, 12 October 2009, also lifted sentiment.

Prime Minister's Manmohan Singh statement on Sunday, 11 October 2009, that the economic stimulus will continue, aided the rally. Oil exploration stocks rose. IT stocks gained on a weak rupee. Metal, realty, banking stocks and print media stocks also gained. The market breadth was strong.

Intraday volatility was high. The market surged in early trade after Anil Ambani on Sunday, 11 October 2009, called for a renewed effort to end a bitter feud related to the split of the family business empire that spans energy, telecommunications and financial services. The market soon pared gains. It bounced back again later with the Sensex hitting a fresh intraday high in morning trade. Amid a bout of volatility the market hit a fresh intraday high in early afternoon trade.

The market pared gains in afternoon trade. A solid rally took the Sensex to a fresh intraday high in mid-afternoon trade. The market pared gains after hitting fresh intraday high in late trade.

Industrial production (IIP) rose a robust 10.4% in August 2009, government data showed at 12:00 IST today. It is the fastest pace of growth in 22 months. Manufacturing output rose 10.2%. The government revised upwards industrial production growth for July 2009 to 7.2% from an earlier estimated 6.8%.

Planning Commission deputy chairman Montek Singh Ahluwalia said industrial growth is set to improve in the second half of the 2009/10 fiscal year. Finance Secretary Ashok Chawla said he expects trend in industrial production to continue and expects better numbers in September 2009. Abhijit Sen, a member of the government's Planning Commission said industrial output will not slow down in coming months. He, however, said farm output is expected to be lower by 2.5% in 2009/10 from the previous year.

Meanwhile, the IPO of Indiabulls Power was subscribed 5.95 times on the first day of the issue, data on NSE showed. Indiabulls Power, a unit of Mumbai-based developer Indiabulls Real Estate, is developing five thermal power plants in western and central India, with total capacity of 6,600 megawatts, and will use the issue proceeds to fund two projects. The issue closes on Thursday, 15 October 2009.

The company has allotted 6.11 crore shares to anchor investors at Rs 45 per shares, at the top end of the Rs 40 to Rs 45 price band for the IPO.

Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.

Cement firms too are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.

Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.

Banks are seen reporting a sedate growth in core lending. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.

Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.

Prime Minister Manmohan Singh said on Sunday that the worst is over for the Indian economy, and measures to control the sharp rise in food prices are taking effect. Singh, also said he was confident the harvest will be normal, despite the weakest monsoon since 1972 that has ravaged rice and sugarcane fields. Singh had said earlier the Indian economy is likely to grow at 6.3 to 6.5 % in the fiscal year to March 2010, or a seven-year low. He said economic stimulus measures will continue since the economy is not operating at full capacity.

Inflation based on the wholesale price index (WPI) rose 0.7% in the year through 26 September 2009, lower than a rise of 0.83% in the year through 19 September 2009, data released by the government on Thursday showed. Food article index in the WPI was up sharply at 15.45%. Meanwhile, the government revised upwards inflation for the year through 1 August 2009 to a decline of 0.83% from an estimated fall of 1.74%.

Last week, the Reserve Bank of India (RBI) Governer, D Subbarao said while there was broad agreement that the central bank needs to wind back some of its easy policy stance, there were risks if the move was mistimed. An early exit from the accommodative monetary stance on inflation concerns runs the risk of derailing the fragile growth, while a delayed exit may engender inflation expectations, he said. The central bank has pumped huge liquidity in the system and drastically cut policy rates in the aftermath of the global financial crisis last year.

European shares climbed after Dutch-based conglomerate Philips Electronics on Monday offered a better-than-forecast earnings report. Key benchmark indices in France, Germany and UK were up by between 1.33% to 1.54%.

But Asian stocks were mixed as investors remained cautious before a string of US earnings reports this week. Top US banks JPMorgan, Goldman Sachs, Citigroup and Bank of America report third quarter results over the nest five days.

Key benchmark indices in, Hong Kong, South Korea were down by between 0.42% to 0.93%. But key benchmark indices in Taiwan, and Singapore rose by between 0.37% to 1.05%. The Japanese stock markets were closed for a public holiday.

Chinese stocks reversed some of their hefty gains from Friday on concerns about a deluge of share supply. China's Shanghai Composite, which jumped 4.8% on Friday, slipped 0.6% to 2894.48.

China's economy is likely to grow by 8.3% and expansion could hit 9% next year, a leading state think-tank said, adding to signals the government is confident of hitting its growth target for 2009. In its latest quarterly report on the economy, the Chinese Academy of Social Sciences said that if the world financial crisis does not worsen next year and China avoids major natural disasters, the nation's GDP growth could reach 9 % in 2010, the China Securities Journal reported on Monday.

Meanwhile, the government of Singapore sharply upgraded its economic outlook for 2009 Monday, as the city-state's gross domestic product continued to expand at a rapid clip in the third quarter amid an improvement in manufacturing activity. It now expects the economy to contract by just 2.5% to 2% from the previous year - a sharp improvement over its previous forecast of a decline of 6% to 4% - but remained cautious about a full-scale recovery.

Trading in US index futures indicated the Dow could rise 64 points at the opening bell today, 12 September 2009.

US stocks climbed on Friday, with the Dow hitting a closing high for 2009, as investors anticipated positive news from the forthcoming key earnings reports and bullish broker comments boosted tech shares. The Dow Jones Industrial Average gained 78.07 points, or 0.8%, to 9,864.94. The S&P 500 Index added 6.01 points, or 0.6%, to 1,071.49, while the Nasdaq Composite index rose 15.35 points, or 0.7%, to 2,139.28.

In economic data, US trade balance unexpectedly dropped to $30.71 billion in August 2009.

St. Louis Federal Reserve President James Bullard on Sunday said there may not be as much slack in the U.S. economy as many forecasters believe.

Back home, a section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. As per reports, 30 companies have filed their draft red herring prospectuses in September 2009 with market regulator Securities & Exchange Board of India (Sebi) for raising funds through initial public offering.

The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.

As per one report, companies plan to raise over Rs 50,000 crore through initial public offers (IPOs), follow-up public offers, divestment of stake sale in the second half of the current financial year. Reliance Infratel also announced on 22 September 2009, its intention to raise Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest.

Divestment of state-run firms by the government may also increase the supply of paper in the market. As per recent reports, the government is planning to announce a blueprint for selling its stake in state-owned firms in the first week of October 2009. The policy is expected to suggest how the government will eventually bring down its stake in public sector companies to 75% over a period of time.

Some caution may prevail on the bourses ahead of assembly polls in three states viz. Maharashtra, Haryana and Arunachal Pradesh on 13 October 2009. The counting of votes will take place on 22 October 2009.

The BSE 30-share Sensex rose 384.01 points or 2.31% to 17,026.67. The Sensex rose 426.12 points at the day's high of 17,068.78 in late trade. The barometer index rose 44.66 points at the day's low of 16,687.32 in early trade.

The S&P CNX Nifty rose 109.05 points or 2.21% to 5,054.25. Nifty October 2009 futures were near spot price at 5,055, as compared to the spot closing of 5,054.25. Turnover in NSE's futures & options (F&O) segment surged to Rs 72,005.84 crore from Rs 63,622.53 crore on Friday, 9 October 2009.

BSE clocked a turnover of Rs 5258 crore, lower than Rs 6018.94 crore on Friday, 9 Ocotber 2009.

The market breadth, indicating the overall health of the market was strong. On BSE, 1621 shares advanced as compared with 1106 that declined. A total of 94 shares remained unchanged.

Among the 30-member Sensex pack, 27 rose while the rest fell.

The Sensex is up 7,379.36 points or 76.49% in calendar year 2009 as on 12 October 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8866.27 points or 108.64% as on 12 October 2009. FII inflow in the calendar year 2009 totaled Rs 61,964.10 crore (till 9 October 2009).

Coming back to today's trade, the BSE Mid-Cap index rose 1.22% and the BSE Small-Cap index rose 1.05%. Both the indices, however, underperformed the Sensex.

Sectoral indices on BSE displayed mixed trend. The BSE Consumer Durables index (up 3.72%), the BSE IT index (up 2.94%), the BSE Bankex (up 2.63%), the BSE Teck index (up 2.45%), the BSE Oil & Gas index (up 2.35%), outperformed the Sensex.

The BSE PSU index (up 0.95%), the BSE Capital Goods index (up 1.23%), the BSE Healthcare index (up 1.34%), BSE Power index (up 1.36%), the BSE Auto index (up 1.47%), the BSE Realty index (up 1.48%), the BSE Metal index (up 2.04%), the BSE FMCG index (up 2.25%), underperformed the Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) rose 3.19% to Rs 2,167.10 after Anil Dhirubali Ambaini group (ADAG) Chairman Anil Ambani called on Sunday, 11 October 2009, for a renewed effort to end a bitter feud with his brother Mukesh Ambani triggered by the carve-up of up a vast family business stretching from energy to telecommunications and financial services.

Anil Ambani said in a statement he believed "all disagreements can be sorted out in a constructive, cordial and conciliatory manner", and called for "a generous heart, a willing mind and accommodating spirit to resolve issues".

Their latest dispute is over a deal for Mukesh Ambani's Reliance Industries to sell gas to Anil Ambani's Reliance Natural Resources (RNRL) at below-market rates as agreed in a 2005 family settlement to divide the business following their father's death in 2002. The dispute has landed in the Supreme Court (SC). Anil Ambani said on Sunday the contentious gas dispute is a large national issue and can only be resolved through the SC.

Reliance Industries (RIL) said it welcomes Anil Ambani's call to make a renewed effort to "resolve, reconcile and reciprocate" and said it hopes that it is a positive change in the negative, calumnious and malafide campaign launched by ADAG against RIL.

RIL, last week, announced liberal 1:1 bonus issue. Both the bonus and the dividend are applicable to shareholders of the erstwhile Reliance Petroleum, which has been merged with RIL. Meanwhile, a sharp year on year fall in refining margins will weight on Q2 September 2009 results of RIL.

RNRL rose 5.3%. Among other ADAG group firms, Reliance Infrastructure rose 5% and Reliance Power gained 2.59%.

Oil exploration stocks rose after a government official said on Monday the government has received 76 bids for 36 blocks out of the 70 offered under the latest licensing round for exploration of oil and gas blocks. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) rose 2.02%. ONGC and its partners have provisionally bagged 7 deepwater blocks.

Cairn India rose 0.44%. Cairn India, a unit of Cairn Energy, has provisionally won a deepwater block in the Mumbai basin. But, India's second biggest state-run oil exploration firm by revenue Oil India fell 0.1%.

The country has also received 26 bids for 8 blocks out of the 10 offered under the fourth round of auction of coal bed methane blocks, said D.N. Narasimha Raju, joint secretary for exploration.

IT stocks rose on a weak rupee against the dollar. A weak rupee boosts revenues of IT firms in rupee terms as the sector derives a lion's shares of revenue from exports. IT bellwether Infosys Technologies rose 2.82% even as its ADR fell 3.52% on Friday.

Infosys raised its earnings and revenue guidance in both dollar and rupee terms for the year ending March 2010 (FY 2010) at the time of announcing Q2 September 2009 results before trading hour on Friday, 9 October 2009.

Infosys stocks had lost 1.49% on Friday reversing early surge after the company said strengthening rupee is a big concern for its earnings. The rupee dropped for a second straight session on Monday as the dollar's rise against major units depressed sentiment. The partially convertible rupee was at 46.45 per dollar, weaker than 46.40/42 at close on Friday.

The rupee has risen sharply in the past few days. It hit its highest level against the dollar in more than a year on Thursday, 8 October 2009. A stronger rupee negatively impacts operating margins of IT firms as the sector earns a lion's share of revenue from exports.

India's largest software services exporter TCS rose 3.36%. The company will pursue larger deals and leverage its full service offerings, its newly appointed chief executive and managing director N. Chandrasekaran said early last week. India's third largest software services exporter Wipro rose 3.79% even as its ADR fell 2.57% on Friday.

Banking stocks rose on market talks the central bank will hike the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM) category. Banks do not have to make any mark-to-market provisions on securities held this basket if prices of securities fall. Provisions have to be made out of profit and therefore, impact a bank's bottom line. Yields on ten-year government bonds have risen sharply this year. Bond prices and bond yields are inversely related.

India's largest private sector bank by net profit ICICI Bank rose 2.07% even as its ADR fell 0.76% on Friday. The bank last week reduced auto loan rates by 50 basis points.

India's second largest private sector bank by net profit HDFC Bank rose 1.6% even as its ADR fell 1.69% on Friday. The bank is seen reporting good Q2 results this week on the back of strong growth in fee income. A total of nine brokerages expect 16.3% to 31.5% growth in HDFC Bank Bank's net profit at between Rs 614.10 crore to Rs 694.10 crore in Q2 September 2009 over Q2 September 2008. HDFC Bank unveils Q2 results on Wednesday, 14 October 2009.

India's largest bank by net profit and branch network State Bank of India rose 5.16%. State Bank of India plans a series of investor presentations this week on the expected issue of a five-year dollar benchmark bond, an official at one of the banks managing the roadshow said on Monday. The bank's plans for a bond were first unveiled at the start of the month and would be the first from an Indian bank in the offshore G3 market since August 2007.

Among other PSU banks, Union Bank of India, Bank of India and Bank of Baroda, rose by between 1.1% to 3.76%.

Axis Bank rose 1.66% after net profit rose 31.95% to Rs 531.64 crore in Q2 September 2009 over Q2 September 2008. The results which hit the market at the fag end of the trading session, were more or less in line with market expectations.

India's largest dedicated housing finance firm HDFC rose 2.41% ahead of Q2 results. HDFC, after market hours, said net profit rose 24.27% to Rs 663.94 crore in Q2 September 2009 over Q2 September 2008. The results beat market expectations

Metal stocks rose on strong domestic demand. India's largest private sector steel maker by sales Tata Steel rose 2.51%. The company's domestic steel sales rose 19% in July-September 2009 quarter to 1.46 million tonnes from a year earlier. Domestic operations account for about a quarter of the group's total annual global capacity of 30 million tonnes, which includes unit Corus, Europe's second-largest steelmaker.

Among other metal stocks, Steel Authority of India, Hindustan Zinc, National Aluminum Company, Hindalco Inudstries, Sterlite Industries rose by between 0.24% to 2.04%.

FMCG stocks rose on revival in India's annual monsoon since mid-August. FMCG firms derive substantial revenue from the rural sector. United Spirits, Dabur India, Hindustan Unilever, ITC, Britannia Industries rose by between 0.68% to 5.45%.

Auto stocks rose on expectations of strong Q2 results. Higher volumes and increase in profit margins due to lower input costs are seen boosting the bottom line of auto firms in Q2 September 2009. India's largest tractor maker by sales Mahindra & Mahindra rose 2.83%. Total sales rose 10.94% to 28434 vehicles in September 2009 over September 2008. The company unveiled the sales figures during trading hours on 1 October 2009.

India's top small car maker by sales Maruti Suzuki India rose 2.8% on bargain hunting after a recent sharp fall in the counter. The company's total sales rose 17.3% to 83,306 vehicles in September 2009 over September 2008. The figures were released during trading hours on 1 October 2009.

Bajaj Auto rose 2.86%. Bajaj Auto is seen reporting a surge in net profit in Q2 September 2009 on higher vehicle and on a sharp surge in operating profit due to lower input costs. The company unveils Q2 results on Thursday, 15 October 2009.

India's largest truck maker by sales Tata Motors rose 0.36% on bargain hunting after the stock fell nearly 7% on Friday on equity dilution concerns. The company said during market hours on Friday it has raised $750 million through an issue of global depositary receipts (GDRs) and convertible bonds. The company said it will use the funds to repay debt taken for acquisition of Jaguar Land Rover (JLR).

Tata Motors said the GDRs were issued at $12.54 each -- a 1.5% discount to Thursday's closing price of Rs 589.25 on NSE. The convertible notes were issued at a 7.5% conversion premium over the GDR price with a yield to maturity of 5.5%.

Construction shares rose as higher government spending on infrastructure sector in the Union Budget 2009-2010 to provide a stimulus to the economy, may result in increase order flow for construction. Jaiprakash Associates, Nagarjuna Construction Company, Punj Lloyd, gammon India, Era Infra Engineering rose by between 0.99% to 7.03%.

The government has set a target of spending $20 billion a year on road construction.

Shares of diversified firm Grasim rose 0.79%. The company said on 3 October 2009 it will transfer its cement business to its unlisted unit Samruddhi Cement. The demerger will be completed by March 2010 after which Samruddhi Cement will be listed. Samruddhi will then make an offer to UltraTech Cement for consolidation of the group's cement business. For every share, shareholders of Grasim will get one share of Samruddhi.

Meanwhile, shares of UltraTech Cement fell 2.27%. The cement maker at its board meet held on 6 October 2009 gave in principle approval to a proposal to absorb group firm Samruddhi Cement. Aditya Birla group Grasim and UltraTech Cement currently operate a combined production capacity of 42 million tonnes a year or a fifth of India's cement capacity.

Among other cement stocks, ACC and Birla Corporation, rose by between 0.15% to 2.07%.

Telecom stocks were mixed after telecom regulator Telecom Regulatory Authority of India (TRAI) said on 8 October 2009 that operators would be free to offer various tariff plans to their subscribers, including the per-second billing scheme, and they would also be free to fix the tariff per second.

This would come as a relief to the telecom operators who would have taken a hit on their revenues, if the per-second-billing model was to become mandatory, as telcos are already facing low revenues per subscriber. Telecom stocks had tumbled in the recent past on concerns over declining tariffs and rising competition.

India's largest cellular services provider by sales Bharti Airtel rose 2.23%. Bharti Airtel added 2.51 million subscribers in September 2009, lower than the previous month's addition of 2.82 million users, data from an industry body showed on Monday.

Chief Executive Manoj Kohli last week that the company is considering a bid for Millicom's assets in Sri Lanka. Sweden's Millicom has put its mobile operations in Sri Lanka up for sale.

India's second largest cellular services provider by sales Reliance Communications (RCom) fell 0.62%.

RCom on 5 October 2009 reduced call charges across networks to a flat 50 paise per minute, heating up the tariff war in a market that is getting increasingly competitive. Its move came after an almost similar tariff cut by Bharti Airtel last month. A reduction in tariffs by Reliance Communications (RCom) also raised concerns of a fresh tariff war.

Realty stocks rose on recent reports that demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and a recovery in the job market. Realty market had slumped last year amid a global credit crunch and buyers fearing job losses. DLF, Unitech, Ansal Properties, Omaxe, Sobha Developers rose by between 0.77% to 2.57%.

Hotel stocks rose on hopes hotel occupancy rates may rise on a recovery in domestic economy. Indian Hotels, Hotel rose by between 3.53% to 5.63%.

Print media stocks rose as a recent steep slide in prices of newsprint, a key input, will boost profitability. Deccan Chronicle Holdings, HT Media, Sandesh and Jagran Prakashan rose by between 0.97% to 6.72%.

Newsprint prices have slumped over 50% during the last six months. The recent rally of the rupee against the dollar also bodes well for print media firms as it will bring down the import bill. Print media firms spend a large sum of money on import of newsprint.

Cals Refineries clocked highest volume of 5.55 crore shares on BSE. Reliance Natural Resources (1.16 crore shares), Ispat Industries (1.03 crore shares), Austral Coke (0.98 crore shares) and Unitech (0.75 crore shares) were the other volume toppers in that order.

Reliance Industries clocked highest turnover of Rs 345.55 crore on BSE. State Bank of India (Rs 236.94 crore), Reliance Capital (Rs 177.05 crore), Reliance Communications (Rs 119.79 crore) and ICICI Bank (Rs 119.43 crore) were the other turnover toppers in that order.