Auto stocks in top gear

Volatility was the order of the day as the key benchmark indices swung between positive and negative zone. Market snapped last two days' gains as a sharp slide in Chinese stocks and weak European markets weighed on investor sentiment. The BSE 30-share Sensex fell 49.10 points or 0.29%, off close to 100 points from the day's high and up close to 100 points from the day's low.

Index heavyweight Reliance Industries (RIL) fell. Metal and FMCG stocks also fell. But automobile and IT stocks gained. The market breadth was almost even compared to a strong breadth in early trade.

Investors resorted to profit taking after a recent strong rally which saw indices touch one-month highs. The BSE Sensex hit its highest level since 21 October 2009 at the onset of the trading session today, 24 November 2009. From a recent low of 16,785.65 on 19 November 2009, the Sensex had jumped 394.53 points or 2.35% to 17,180.18 on Monday, 23 November 2009.

Intraday volatility was high as traders roll over positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry of the near-month November 2009 contracts on Thursday, 26 November 2009

The market slipped into the red after opening with an upward gap as Asian stocks fell. The market cut losses in mid-morning trade. However, the intraday recovery proved short-lived. The market slumped in early afternoon trade. The market cut losses later. The market weakened again in late trade after moving between positive and negative zone in mid-afternoon trade.

Rollover in Nifty futures was about 35% at the end of Monday's (23 November 2009) trading. Rollover in Mini Nifty futures was about 30%.

Bank stocks led decline in world stocks on Tuesday, 24 November 2009, after global rating agency Standard & Poor's said it found most banks weakly capitalized, with Citigroup, UBS and Mizuho Financial Group more than two-thirds below the average. Many global stock investors have turned cautious heading into the year-end, wanting to lock in profits after a very good run in 2009.

A weak dollar has boosted world stocks recently as traders borrow against the low-yielding greenback to reinvest elsewhere in what's known as the carry trade. The dollar has tumbled this year on speculation the US Federal Reserve will keep interest rates low for a prolonged period of time to aid recovery in the US economy.

Speculation that the Federal Reserve will keep borrowing costs near record low levels grew after Charles Evans, president of the Fed Bank of Chicago, told the Financial Times that US interest rates may stay near zero until "late 2010, perhaps later."

An unwinding of the European Central Bank's extraordinary stimulus measures is still premature as the financial crisis has not completely subsided, European Central Bank (ECB) President Jean-Claude Trichet said on Monday. Trichet said not all liquidity measures would be needed to the same extent as in the past, and the ECB would phase out its extraordinary liquidity measures in a timely and gradual fashion - confirming comments made after the November 2009 rate meeting. Trichet also said the ECB did not feel constrained in its decision-making and had complete freedom to act as it saw appropriate.

France's business sentiment index was 89 in November, unchanged from the previous month, according to the monthly business survey by the French National Institute of Statistics and Economic Studies (Insee) released Tuesday. That was below market expectations for a rise to 91.

The Ifo German business climate index rose more than expected to 93.9 in November, from a reading of 91.9 the previous month, news reports said. Economists had forecast a rise to 92.6.

A raft of US data for investors to digest later in the global day includes November 2009 consumer confidence numbers, the September 2009 Case/Schiller home prices survey, and the FHFA home prices index. Attention will also be on the publication of minutes from the Nov 3-4 Federal Open Market Committee (FOMC) meeting.

Closer home, C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said in an interview to a news agency on Tuesday that India can absorb nearly $100 billion of dollars in capital inflows, nearly double for what is on track this year, before it needs to take strong restrictive measures. He said the total capital flows during the current year would be $57-$60 billion, which is manageable. Any initial curbs would be on speculative funds in sectors such as real estate and borrowing abroad to spend at home, he said.

Rangarajan's statement came after Brazil and Taiwan have taken steps to curb hot money inflows, and other governments are keeping a watchful eye on inflows, wary that they could fuel asset price bubbles.

Meanwhile, Russia's central bank on Tuesday said it would lower its refinancing rate to 9% from 9.5%, news reports said. The new rate will take effect Wednesday.

Closer home, BSE chief Madhu Kannan today said the bourse is preparing for a listing and hopes to cut over-reliance on revenues from cash equity trading in two years.

The Parliament was in uproar on Monday over a leaked government report blaming Bharatiya Janata Party (BJP) leaders for their role in the destruction of an ancient mosque that sparked widespread riots. Congress government has so far faced a concerted opposition in a parliament session that began last week and was supposed to debate issues such as rising food prices and policy moves on deregulating commodity prices.

The adjournments have further delayed government plans to debate reforms like increasing foreign investment in the insurance and pension sectors.

Prime Minister Manmohan Singh said on Monday completing a 2005 US-India nuclear cooperation deal would boost investment opportunities in India, a hopeful sign for US companies eyeing India's potential $150 billion market in power plants.

Singh, speaking to US business leaders on the eve of talks with US President Barack Obama, said India's ambitious infrastructure build-up would propel growth amid a global slowdown. Singh said he and Obama would sign a set of agreements on energy security, clean energy and climate change to deepen cooperation in an economic relationship that has grown rapidly since India began opening its economy 15 years ago.

Exit from the accomodative monetary policy stance has to be done carefully and strategically, Reserve Bank of India's newly appointed deputy governor Subir Gokarn said on Tuesday. The economic recovery is still sluggish and not broad-based but on course, Gokarn said.

Meanwhile, the Reserve Bank of India (RBI) could reportedly allow systemically strong Indian banks to increase their exposure to capital market above the current ceiling, allowing them to lend more to stock market-related activities and finance the overseas acquisition plans of Indian companies.

European shares fell on Tuesday after a strong rally in the previous session, with banking stocks retreating and commodity shares tracking weaker crude and metals prices. The key benchmark indices in France, Germany fell by between 0.11% to 0.22%. But UK's FTSE 100 rose 0.12%.

Germany's gross domestic product grew 0.7% in the third quarter from the previous quarter, the Federal Statistics Office confirmed on Tuesday in its second estimate.

Most of Asian stocks fell on Tuesday despite solid gains on Wall Street Monday, with concerns about the economic outlook taking shares down in Tokyo. The key benchmark indices in South Korea, Singapore, Indonesia, Hong Kong and Japan fell by between 0.38% to 1.53%. Taiwan's Taiwan Weighted rose 0.36%.

Japanese cabinet ministers increased pressure on the Bank of Japan on Tuesday to respond to deflation, with one saying that the central bank was asleep in deflation row.

The Bank of Japan raised its assessment of the nation's broad economy for the third consecutive month in November, saying the nation's economy "is picking up," although the economic upgrade doesn't signal a change in the bank's easy monetary stance.

China's Shanghai Composite fell 3.45% on concern the nation's banks will sell more shares to replenish capital depleted by record loan growth. As per reports, China's five largest banks have submitted preliminary plans for raising capital to the industry regulator after they extended unprecedented amounts of new loans this year.

Asian Development Bank President Haruhiko Kuroda said in an interview to a news agency on Monday that Asia's speedy economic recovery relative to the rest of the world is not yet strong enough to withstand tighter monetary policy. For India, Kuroda noted that while the country managed the crisis and its own fiscal situation relatively well, the nation's high deficit will probably result in it being among the first to start removing stimulus measures.

US index futures reversed early losses. Trading in US index futures indicated Dow could rise 11 points at the opening bell on Tuesday, 24 November 2009.

US stocks rose on Monday as stronger-than-expected home sales data fueled optimism about the economic recovery while a weaker dollar boosted commodity-linked stocks. The Dow gained 132.79 points, or 1.3%, to 10,450.95 - its highest level since October 2008. The S&P 500 index added 14.86 points, or 1.4%, to 1,106.24, while the Nasdaq Composite Index rose 29.97 points, or 1.4%, to 2,176.01.

A report showed existing home sales shot up 10.1% in October 2009 to the highest level in 2 and half years. This was well above the 2.3% rise economists had expected and came after a 9.2% jump in September 2009.

The BSE 30-share Sensex fell 49.10 points or 0.29% to 17131.08. The Sensex opened with an upward gap of 50.68 points at 17230.86, also its highest since 21 October 2009. The Sensex fell 152.66 points at the day's low of 17,027.52 in early afternoon trade.

The S&P CNX Nifty fell 13 points or 0.25% to 5,090.55. It hit a high of 5,112.85. Nifty November 2009 futures were at 5,073, at a discount of 17.55 points as compared to spot closing of 5,090.55. Turnover in NSE's futures & options (F&O) segment jumped to Rs 91101.55 crore from Rs 80777.38 crore on Monday, 23 November 2009.

BSE clocked a turnover of Rs 4636 crore, higher than Rs 4370.23 crore on Monday, 23 November 2009.

The market breadth, indicating the overall health of the market was even compared to a strong breadth in early trade. On BSE, 1370 shares advanced as compared with 1371 that declined. A total of 87 shares remained unchanged.

From the 30 share Sensex pack, 17 fell and rest rose.

A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex is up 7483.77 points or 77.57% in calendar year 2009, as on 24 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8970.68 points or 109.92% as on 24 November 2009.

Coming back to today's trade, the BSE Mid-Cap index rose 0.23% and the BSE Small-cap index rose 0.36%. Both the indices outperformed the Sensex.

The BSE Auto index (up 1.45%), the BSE Consumer Durables index (up 1.4%), the BSE Teck index (up 0.71%), the BSE IT index (up 0.5%), the BSE Healthcare index (up 0.25%), the BSE Capital Goods index (down 0.01%) outperformed the Sensex.

The BSE FMCG index (down 0.92%), the BSE Metal index (down 0.81%), the BSE Oil & Gas index (down 0.79%), the BSE Power index (down 0.69%), the BSE Realty index (down 0.6%), the BSE PSU index (down 0.52%), the BSE Bankex (down 0.44%), underperformed the Sensex..

Energy major Reliance Industries (RIL) fell 0.88% to Rs 2176.10 on reports the Securities and Exchange Board of India (Sebi) has asked Reliance Industries (RIL) why the company should not be barred from accessing the stock markets under rules governing fraudulent and unfair trade practices. The amendment (dated 8 October 2009) to the original show cause notice issued in April 2009 by the regulator's investigation department further asks why directions should not be issued to bar the company from buying, selling and dealing in any security, directly or indirectly. The notice was issued in the matter relating to alleged insider trading in the shares of the now-defunct Reliance Petroleum, which had since merged with RIL.

The RIL stock had jumped 3.31% on Monday after the company said it has put a bid to acquire bankrupt chemicals maker LyondellBasell Industries. RIL said that it had submitted a preliminary non-binding offer to acquire, for cash, a controlling interest in Rotterdam, Netherlands-based LyondellBasell.

RIL also said it is "reviewing a number of global opportunities for growth in its core business," including LyondellBasell. The conglomerate said its offer is "preliminary and subject to customary conditions, including conduct of due diligence, documentation and receipt of creditor support."

Meanwhile, RIL plans an aggressive exploration campaign, investments in petrochemicals and overseas acquisitions as India's top company by market capitalisation prepares itself for the next phase of growth. The company will work towards attaining global scale for its conventional energy platform petrochemicals, refining and oil and gas exploration and invest in its new businesses such as retailing and alternative energy, chairman Mukesh Ambani said at the company's annual meeting of shareholders on 17 November 2009.

RIL has set 27 November 2009 as the record date for a liberal 1:1 bonus share issue.

FMCG stocks fell on profit taking. ITC, Hindustan Unilever, Marico, Dabur India and Nestle India fell by between 0.21% to 2.04%.

Metal stocks fell on profit taking. Sterlite Industries and National Aluminum Company fell by between 0.19% to 1.88%.

But, India's largest aluminum maker by sales Hindalco Industries rose 1.08% after the company on Monday initiated the process of raising up to Rs 2900 crore by selling shares to institutional investors in order to part-finance three greenfield projects. The floor price of the share sale has been fixed at Rs 130.90 per share.

Hindustan Zinc rose 3.02%, extending Monday's sharp rally, after a foreign broker rated the stock as 'buy' with a 12-month price estimate of Rs 1,529.

Steel Authority of India (Sail) fell 0.15%. The government said on 19 November 2009 it is considering a 20% stake sale in steel major Sail, proceeds of which would partly fund the company's Rs 70000 crore expansion projects.

India's largest steel maker by sales Tata Steel fell 2.76%. The company recently said it issued $ 546.9 million in new convertible bonds in exchange for $ 493 million of securities as part of a plan to reduce costs and ease repayment obligations. The company had said earlier this month the new foreign currency convertible bonds will have a yield-to-maturity of 4.5% and will mature in November 2014.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.

IT stocks rose after positive economic data from the US on Monday. US is the biggest market for the Indian IT exporters. India's second largest software company by sales Infosys rose 0.75% as its ADR rose 1.19% on Monday. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, recently announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made on 12 November 2009.

India's largest software company by sales Tata Consultancy Services (TCS) rose 0.62%. Tata Consultancy Services, does not expect volume growth in the December quarter to match the September quarter as companies are still deciding on IT budgets, Chief Financial Officer S Mahalingam said on Monday. However pricing, which was a big concern towards the end of the previous fiscal year, was no longer such a major issue he said, The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

But, India's third largest software company by sales Wipro fell 0.48% even as its ADR rose 0.73% on Monday. Wipro subsidiary Infocrossing signed a five-year deal with the US-based Cliffs Natural Resources Inc, an international mining and natural resources firm, to provide IT infrastructure services, the global software major said Thursday 19 November 2009.

Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

Rate sensitive auto stocks rose as low interest rates and attractive benefits offered by companies pushed up auto sales in October 2009.

India's largest commercial vehicle maker by sales Tata Motors rose 0.59%. Tata Motors is reportedly looking at buying private equity firm Actis' stake in truck and bus maker Swaraj Mazda. UK-based Actis, which owns 7.74% in Swaraj and another 9.28% through its unit CDC, is considering exit options, report said.

Jaguar Land Rover received as much as 170 million pounds ($286 million) as a five-year working capital facility from General Electric Co.'s GE Capital division, the lender said on 16 November 2009. Tata Motors the owner of Jaguar Land Rover, is hopeful of turning around the unprofitable luxury unit as it cuts costs to battle a slump in sales during the global recession.

India's largest small car marker by sales Maruti Suzuki India rose 2.65% on reports the company will spend Rs 2000 crore to expand production capacity at its Manesar factory in Haryana. The company's total sales grew 32.4% to 85415 units in October 2009, compared with 64490 units posted in the same month a year ago.

India's largest bike marker by sales Hero Honda Motors rose 2.15%. The company reported a marginal increase in October sales at 354,156 units as against 352,449 units in the same month last year.

India's largest tractor maker by sales Mahindra & Mahindra rose 2.19%. The defence systems unit of India's top vehicle maker M&M will bid for domestic defence projects worth $ 3.5 billion over the next seven years, Khutub A. Hai, head of Mahindra Defence Systems said on Monday. M&M's overall sales climbed 32% in October this year to 18,410 units against 13,935 units in the same month last year. India's second largest bike marker by sales Bajaj Auto rose 1%. Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan Motor Co, said, recently that an agreement had been signed with Bajaj Auto for a low-cost car which would come to India in 2012.

Car sales in India rose an annual 34% to 132,615 units in October 2009, boosted by festival demand and easier availability of loans, an industry body said on Wednesday 11 November 2009. Sales of trucks and buses, a gauge of economic activity, rose 52% to 42,562 units in October 2009, the data showed.

Banking shares fell on profit taking. India's largest private sector bank by net profit ICICI Bank fell 1.26% even as its ADR rose 2.21% on Monday. The bank said on Saturday 20 November 2009 it raised $750 million (about Rs 3,500 crore) through an overseas bond issue, at an yield of 5.5%. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's largest bank by net profit State Bank of India (SBI) fell 0.69%. State Bank of India said on 9 November 2009 said it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced on 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

But, India's second largest private sector bank by net profit HDFC Bank rose 0.67% as its ADR rose 1.25% on Monday.

India's largest dedicated home loan lender Housing Development Finance Corporation (HDFC) fell 0.89%. The lender announced on 13 November 2009 it has agreed to acquire approximately 41% in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital.

Prime Minister Manmohan Singh said on 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

Meanwhile, the Reserve Bank of India Deputy Governor Usha Thorat said on Monday 16 November 2009 the central bank will soon issue guidelines on provisioning for bad loans by banks

Banks and co-operatives have reportedly disbursed farm loans to the tune of Rs 1.38 lakh crore in the first half of 2009-10, meeting over 42% of the target set by the government for the whole financial year.

India's largest thermal power generator by sales National Thermal Power Corporation (NTPC) rose 0.44%. The government has invited proposals from merchant bankers to manage the government's proposed 5% stake sale in leading utility NTPC, which could fetch about $1.9 billion at current market prices.

The proposals must be made by 3 December 2009, the government said in newspaper advertisement. The invitation is also for a 10% stake sale in unlisted state power producer Satluj Jal Vidyut Nigam.

Among other power stocks, Torrent Power, Reliance Power, Tata Power Company, CESC, Reliance Infrastructure fell by between 0.08% to 2.27%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.8%. The company on 17 November 2009 said Gilbarco Inc. has bought its petroleum dispensing pump business.

Indian power equipment maker Bharat Heavy Electricals fell 1.01% even after company said on Tuesday it had got an order worth Rs 5600 crore ($1.2 billion) to build a 1,980 megawatts thermal power plant in north India.

Among other capital goods stocks, ABB, Praj Industries, BEML fell by between 0.78% to 2.23%.

Telecom stocks rose on bargain hunting. Telecom stocks have tumbled in the past few weeks amid a price war. The price war intensified after Tata Teleservices extended its per-second billing scheme to roaming calls. The ongoing price war has hit profitability of mobile operators. India's largest mobile telecom services provider by sales Bharti Airtel rose 2.25%. The company reduced roaming rates by up to 60% on 20 November 2009. Bharti Airtel has slipped to third position in terms of monthly additions, data from an industry body showed. Bharti Airtel in October 2009 added about 27 lakh new users, lower than 29 lakh added by Vodafone Essar and over 38 lakh added by Tata Teleservices.

Bharti expects the current state of stiff competition to continue into 2010, as the government worked on new rules that may allow faster consolidation.

Among other telecom stocks, Reliance Communications and Spice Communications rose by between 0.01% to 0.81%.

UltraTech Cement, a unit of conglomerate Aditya Birla Group rose 0.1%. The company absorbed sister unit Samruddhi Cement, to form the country's biggest cement firm. The move, flagged in October 2009, was approved by the boards of both companies on Sunday. In October, the group said it will hive off the cement business of flagship firm Grasim Industries into unit Samruddhi in a cashless transaction and later merge it with group firm UltraTech. Samruddhi shareholders will receive four shares of UltraTech for every seven held in Samruddhi. UltraTech will also issue 14.95 crore new shares, boosting its capital to Rs 274 crore.

Rate sensitive realty shares fell after the RBI, late last month, raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% at a regular monetary policy review. Indiabulls Real Estate, Unitech, Sobha Developers fell by between 1.05% to 5.09%.

The latest RBI move will result in increase in borrowing costs for realty firms which depend heavily on borrowing. In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said in its quarterly policy review.

The government is reportedly considering a proposal to do away with the three-year lock-in stipulation for repatriation of foreign investments in real estate projects, in a move to ease foreign direct investment norms in the real estate sector.

Cals Refineries clocked highest volume of 2.84 crore shares on BSE. Dena Bank (1.24 crore shares), Unitech (0.81 crore shares), Suzlon Energy (0.79 crore shares) and Den Networks (0.77 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 152.56 crore on BSE. State Bank of India (Rs 144.99 crore), JSW Steel (Rs 136.79 crore), Tata Steel (Rs 135.88 crore) and Den Networks (Rs 126.08 crore) were the other turnover toppers in that order.