Banking, auto shares advance

The key benchmark indices edged higher on reports banks are unlikely to raise lending rates in the near term even if the central bank signals a tightening of the monetary policy by hiking the cash reserve ratio (CRR). Robust Q3 results from IT giant TCS and firm European market also underpinned sentiment. But the market was volatile. The BSE 30-share Sensex rose 86.78 points or 0.49%, off close to 75 points from the day's high and up close to 135 points from the day's low.

Index heavyweight Reliance Industries edged lower in volatile trade. Realty stocks fell. But banking, auto and IT stocks gained. GAIL India jumped on robust Q3 result. The market breadth was positive.

The market was volatile. Stocks recovered from lower level in early trade. The market surged in morning trade as US index futures rose. The market pared gains in mid-morning trade. The market surged to a fresh intraday high in early afternoon trade. The market pared gains in afternoon trade. It further trimmed gains in mid-afternoon trade.

Bankers, economists and bond markets expect a hike in the CRR by the central bank at a quarterly policy review on 29 January 2010. CRR is a slice of deposits that banks have to mandatorily park with the central bank. However, banks do not want to tweak rates in the near term now, given the surplus liquidity in the system and poor demand for loans. The surplus liquidity sloshing in the banking system daily is on an average in the range of Rs 50,000 crore-60,000 crore, which is reflected in the money parked by banks with RBI through its reverse repo window. A 50 basis points hike in CRR will drain out Rs 21,000 crore from the system. The CRR is now at 5%.

On 8 January 2010, State Bank of India chairman OP Bhatt had indicated to the media that interest rates will remain stable until June 2010 even if the CRR was raised by 50 basis points. "All banks are looking forward for more economic activity. Credit growth has not happened in a significant manner in the past 12 month or more. But because of the high liquidity overhang, my view is that regardless of what RBI does... rates will remain stable till June 2010," Bhatt had said.

The timing and sequence of exit from an easy policy is still a challenge, Reserve Bank of India Governor D Subbarao said on Monday, 18 January 2010. Subbarao, who was speaking at a conference in Goa, also said the challenge was to support growth without compromising price stability. The Reserve Bank of India will review monetary policy on 29 January 2010.

Wholesale sugar prices in India have dropped in the past two to three days, while retail rates are expected to fall in 10-15 days, Farm Minister Sharad Pawar told reporters on Monday.

Food prices are expected by some economists to drive headline wholesale inflation to 8% by the end of March and with economic growth at 7.9% in the September 2009 quarter, the RBI may begin its retreat from crisis policies. At the same time, the central bank is under heavy pressure from the government not to derail growth momentum. The headline inflation jumped to a one-year high in December 2009, reinforcing views the Reserve Bank of India (RBI) will start increasing reserve requirements later this month to contain price pressures as the economic recovery strengthens.

The wholesale price index rose 7.3% in December 2009 from a year earlier, its highest since November 2008 and accelerating from a 4.8% gain in November 2009. Data also showed last week that industrial output grew at faster-than-expected 11.7% in November 2009 from a year earlier

India is on course to return to pre-crisis growth rates of about 9% from 2011, if key reforms continue, having emerged from the global economic crisis less scathed than most other nations. That's according to a guest opinion article recently published by Standard & Poor's Ratings Services, titled "Why India Will Continue To Gain Stature In The Global Economy." The guest opinion article says that India's large, young, and growing population, the rising income of the middle class, and the country's high savings rate continue to support strong domestic demand, tempering the impact of weak export markets and other external stimuli.

The initial public offer (IPO) of fast-food chain Jubilant Foodworks was subscribed 0.14 times by 16:00 IST. The company has fixed IPO price band of Rs 135-Rs 145 per share. The issue opened for bidding today.

The company said during the weekend that it has received bids for 30.6 lakh shares at Rs 145 per share (the upper end of the price band) towards the anchor investor portion of the offer. The anchor investors to whom equity shares have been allocated pursuant to the offer include Arisaig Partners, Blackrock, Canara Robeco Mutual Fund, Fidelity, Franklin Templeton, HSBC, Reliance Mutual Fund, SBI Mutual Fund, T Rowe Price and Ward Ferry.

Meanwhile, the finance ministry is reportedly likely to keep the corporate tax rate unchanged at 30% in the coming budget, as it faces stiff resistance from companies to the draft direct tax code's proposal to cut the rate to 25% and remove all exemptions. The Central Board of Direct Taxes, the key government body that formulates and administers tax policy, is not willing to cut rates, as any reduction in statutory rate will further reduce the effective rate and dent the government's revenues. The government is already struggling with a 16-year high fiscal deficit, equivalent to 6.8% of the gross domestic product for the 2009-10 fiscal year.

The stock market regulator the Securities and Exchange Board of India (SEBI) reportedly wants the government to scrap tax benefits for corporates investing in mutual funds (MFs), a proposal, if accepted by the government, could deal a body blow to local asset management companies and other firms.

Some countries may suffer double-dip recessions if they exit strategies taken to battle the global financial crisis too early, head of International Monetary Fund, Dominique Strauss-Kahn, said on Monday.

The world will likely continue to live with ripple effects from the financial crisis for years, World Bank President Robert Zoellick said on Friday. Speaking at a news conference in Berlin, Zoellick said the World Bank estimated that a further 64 million people would fall into extreme poverty between 2009 and 2010 as a result of the crisis.

European shares rose on Monday, with banks recovering some of the losses they suffered on Friday following JP Morgan's results. The key benchmark indices in France, Germany and UK rose by between 0.44% to 0.68%.

The European Central Bank on Monday said it would stop conducting one-week Swiss franc liquidity swap operations after 31 January 2010, ending an emergency measure put in place to combat the financial crisis. The Frankfurt-based ECB said the move, decided in agreement with the Swiss National Bank, was made against the background of declining demand and improved conditions in the funding markets.

Asian markets were mixed. The key benchmark indices in Hong Kong, Indonesia, Japan, and Taiwan fell by between 0.17% to 1.16%. Key benchmark indices in China, South Korea and Singapore rose by between 0.12% to 0.59%.

Bank of Japan Governor Masaaki Shirakawa pledged on Monday to keep monetary policy easy to help pull the country out of deflation, reassuring the government the central bank will cooperate to support an economic recovery.

US stocks slid from 15-month highs on Friday after JPMorgan Chase & Co reported deep fourth-quarter loan losses that raised concerns about earnings for the banking industry. The Dow Jones industrial average plunged 100.90 points, or 0.94%, to 10,609.65. The Standard & Poor's 500 Index was down 12.43 points, or 1.08%, to 1,136.03. The Nasdaq Composite Index shed 28.75 points, or 1.24%, to 2,287.99.

Also weighing on stocks was consumers' caution about the economy as reflected in the Reuters/University of Michigan Surveys of Consumers. It showed preliminary sentiment was weaker than expected in early January due to worries over income and high unemployment.

Other data on Friday showed US consumer prices rose modestly while industrial output rose, suggesting the economy was growing but not generating enough inflation to trouble the Federal Reserve. Investors' appetite for riskier assets fell due to doubts about Greece's fiscal health. European Central Bank President Jean-Claude Trichet said Greece must work out its own economic problems

US markets remain closed on Monday, 18 January 2010 for Martin Luther King Jr. Day.

Trading in US index futures indicated that the Dow could gain 11 points at the opening bell on Tuesday, 19 January 2010

Closer home, the BSE 30-share Sensex rose 86.78 points or 0.49% at 17,641.08. The Sensex fell 48.80 points at the day's low of 17,505.50 in early trade. At the day's high of 17,712.60, the Sensex rose 158.30 points in early afternoon trade.

The S&P CNX Nifty rose 22.65 points, or 0.43% to 5274.85. Nifty January 2010 futures were at 5,269.70, at a discount of 5.15 points as compared to the spot closing of 5,274.85. Turnover in NSE's futures & options (F&O) segment surged to Rs 60,224.40 crore from Rs 48,879.73 crore on Friday, 15 January 2010.

Sectoral indices on BSE were mixed. BSE's banking sector index Bankex (up 2.41%), BSE Auto index (up 1.7%), BSE Consumer Durables index (up 1.37%), and BSE IT index (up 0.59%), outperformed the Sensex. BSE Capital Goods index (up 0.13%), BSE Realty index (down 0.09%), BSE FMCG index (down 0.11%), BSE Power index (down 0.22%), BSE Metal index (down 0.32%), BSE Oil & Gas index (down 0.36%) and BSE Healthcare index (down 0.48%), underperformed the Sensex.

The BSE Mid-Cap index rose 0.57% and the BSE Small-Cap index rose 0.63%. Both the indices outperformed the Sensex.

The market breadth, indicating the overall health of the market was positive. The breadth weakened from a strong breadth earlier in the day. On BSE, 1573 shares advanced compared with 1346 that declined. A total of 72 shares remained unchanged.

Among the 30-member Sensex pack, 19 rose while the rest fell.

BSE clocked a turnover of Rs 5980 crore, lower than Rs 6139.28 crore on Friday, 15 January 2010.

Index heavyweight Reliance Industries (RIL) fell 0.87% to Rs 1099.55. The stock was volatile. It hit a high of Rs 1115.70 and a low of Rs 1075.35. RIL last week raised $763 million through a block sale of 3.3 crore shares. Reliance, which is bidding for bankrupt LyondellBasell Industries, had previously sold treasury shares to state-owned insurer Life Insurance Corp of India raising $577 million. As per reports last week, Reliance had sweetened its offer to buy a controlling stake that valued LyondellBasell at $13.5 billion. RIL will announce its Q3 result on Friday, 22 January 2010.

GAIL India rose 3.1% after net profit jumped 239.41% to Rs 859.95 crore in Q3 December 2009 over Q3 December 2008. The company announced the result during market hours today.

Banking stocks gained on signs of improvement in credit growth. India's largest private sector bank by net profit ICICI Bank rose 2.64% even as its ADR fell 1.36% on Friday. The bank will announce its Q3 result on Thursday, 21 January 2010.

India's largest private sector bank by operating income HDFC Bank rose 4.53%, extending Friday's 0.33% rise after net profit jumped 31.6% to Rs 818.50 crore on 5.4% growth in net total income to Rs 3076.90 crore in Q3 December 2009 over Q3 December 2008. The result exceeded market expectations. Its ADR fell 0.94% on Friday. The bank announced the result during market hours on Friday, 15 January 2010.

India's largest bank by net profit and branch network State Bank of India rose 0.59%. Non-performing loans (NPAs) in the small and medium enterprise sector (SME) are on the rise, chairman O.P Bhatt said recently. The state-run bank paid advance tax of Rs 1795 crore versus Rs 1700 crore.

India's largest dedicated housing finance firm by revenue HDFC jumped 1.48%. The lender will announce its Q3 result on Wednesday, 20 January 2010.

After a significant moderation in systems loan growth during the period October-December 2009, the banking system credit growth has gradually started gaining momentum, as per the latest RBI data

IT stocks rose after stellar Q3 result by IT major Tata Consultancy Services after trading hours on Friday. India's largest IT exporter by sales Tata Consultancy Services rose 0.99% extending Friday's 1.23%. gains. Consolidated net profit as per US accounting standard rose 11% to Rs 1822.20 basis crore on 3% growth in sales to Rs 7650.30 crore in Q3 December 2009 over Q2 September 2009. The third quarter earnings surpassed market estimates as demand for outsourcing surged and prices stabilised, fuelling hopes of recovery in the showpiece sector.

India's third largest software services exporter Wipro rose 1.74% as its ADR rose 0.45% on Friday. The company will announce its Q3 result on Wednesday, 20 January 2010. The company is reportedly set to launch a $1 billion sponsored American Depository Receipts (ADR) offering that could possibly see the promoters and promoter group led by Azim Premji offloading some of their stake in the company.

IT bellwether Infosys rose 0.14%. Infosys' ADR fell 1.38% on Friday. Infosys, last week, raised its full-year revenue and profit outlook after strong Q3 results and on improving trend for outsourcing orders. The company's consolidated net profit as per Indian accounting standards rose 2.72% to Rs 1582 crore on 2.8% rise in consolidated revenue to Rs 5741 crore in Q3 December 2009 over Q2 September 2009. The company announced result on Tuesday 12 January 2010.

Infosys has raised earnings and revenue guidance for the year ending March 2010 (FY 2010) both in rupee and dollar terms. Infosys has forecast a 1.8% to 2% growth in consolidated dollar revenue for FY 2010 compared from a drop it had projected at the time of announcing Q2 September 2009 results. Infosys said FY 2010 consolidated revenue in dollar terms could rise to $4.75 billion to $4.76 billion, from $4.6 billion to $4.62 billion forecast earlier. The consolidated earnings per American depository share for the full year is seen rising 0.4% to $2.26, the company said in a statement.

Most auto stocks rose on expectations of good Q3 results. India's top truck maker by sales India's largest tractor marker by sales Mahindra & Mahindra (M&M) rose 1.97%. M&M marked its entry into the heavy commercial vehicle (HCV) segment with its unveiling of 25 and 31 tonne trucks with its US-based joint venture partner Navistar Inc.

Mahindra & Mahindra, reported 122% rise in its domestic sales to 22,754 units in December 2009 over December 2008. The company sold a total of 24,001 vehicles (domestic plus exports) in December 2009 as against 11,172 vehicles sold in December 2008.

India's largest motorcycle maker by sales Hero Honda Motors rose 4.41%, on bargain hunting after falling for the last three days. Hero Honda will comfortably exceed its fiscal 2009/10 sales target of 40 lakh units, its managing director Pawan Munjal said to media on 7 January 2010. Sales jumped 74% to 375,838 units in December 2009 over December 2008.

India's largest car maker by sales Maruti Suzuki rose 1.23% after the company said on Saturday 16 January 2010 it has raised the prices of some of its models to recover the rise in input costs. It said the price increases, effective immediately, varied from 0.12% to 1.9% with an average price rise of 0.6%. There was no increase in prices of its recently launched five-seater multipurpose vehicle Eeco, the petrol version of its Swift hatchback and its Gypsy utility vehicles, it said in its statemen. "For some models the increase in the costs are being absorbed by the company, in the light of market situation," it said. Maruti, in which Japan's Suzuki Corp has a 54.2 % stake, sells one of every two cars in India.

Maruti Suzuki India reported 50.6% increase in total vehicle sales to 84,804 units in December 2009 over December 2008. Domestic sales rose 36.5% to 71,000 units, while exports surged 223.7% to 13,804 units.

Bajaj Auto rose 0.62% extending Friday's 1.3% gains. Net profit surged 189.20% to Rs 507.29 crore on 57.9% spurt in net sales to Rs 3165.84 crore in Q3 December 2009 over Q3 December 2008. The company announced the result after market hours on Tuesday, 12 January 2010.

Tata Motors, India's largest commercial vehicle maker by sales, rose 1.46%. The company said on Friday it sold 74,707 vehicles globally in December 2009, a rise of 84 % from a year earlier. This included sales of Jaguar and Land Rover, which rose 33% from a year earlier to 21,134 vehicles, it said in a statement.

TVS Motors rose 0.19%. Sales rose 34% to 119,701 units in December 2009 over December 2008.

Rate sensitive realty stocks fell on profit taking. Among realty stocks, Ackruti City, Unitech and Phoenix Mills, Indiabulls Real Estate fell by between 0.44% to 1.19%.

But, India's largest realty player by market capitalization DLF rose 0.21%. DLF has reportedly decided to exit from its mutual fund venture, DLF Pramerica Mutual Fund, by selling its entire stake to the overseas partner in the venture, the US-based Prudential Financial, as the company seeks to focus on its core business. Prudential Financial (PFI) is expected to buy DLF's 39% stake in the asset management company that is yet to start operations.

Jaiprakash Associates fell 0.76% after net profit fell 38.9% to Rs 103.02 crore in Q3 December 2009 over Q3 December 2008. The company said the latest quarter profit was after a one-time expense of Rs 212 crore towards employee compensation. The company announced the result during market hours today.

NTPC, India's largest utility by sales, fell 0.45% snapping last two days' gains. The company said last week its follow-on public offer of 41.22 crore shares, or 5% in the company, will open on 3 February 2010 and close on 5 February 2010. The government holds an 89.5% stake in NTPC.

FMCG company and hotel chain operator ITC fell 0.65%. As per recent reports the firm expects to add 8-10 hotels in India over the next 3-5 years as a growing economy boosts demand for rooms. ITC's hotels division would add two properties in 2010/11 at Chennai in south India and Kolkata in the eastern region, but the details of investment were not disclosed.

Among other FMCG stocks, Britannia Industries, Tata Tea and Marico fell by between 0.65% to 1.38%.

Capital goods stocks rose on expectations of good Q3 result. ABB, Praj Industries, BEML rose by between 0.12% to 2.01%.

India's largest power equipment maker by sales Bharat Heavy Electricals (BHEL) rose 0.23%. The company will announce its Q3 result on Thursday, 21 January 2010Bhel on Thursday 14 January 2010 said it has bagged a Rs 200-crore order from PowerGrid Corporation of India for supplying insulators for setting up transmission lines.

India's largest engineering & construction firm by sales Larsen & Toubro rose 0.22% on bargain hunting after last two days' losses. The company will announce its Q3 result on Thursday, 21 January 2010. The company said recently it has received contracts worth Rs 2,325 crore for commercial and residential construction in Maharashtra, Gujarat, West Bengal and Chandigarh

Metal stocks fell after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 0.88% on Friday, 15 January 2010. Steel Authority of India, Hindustan Zinc, Jindal Steel & Power, JSW Steel and Sterlite Industries fell by between 0.76% to 1.89%.

Tata Steel, the world's eighth-largest steelmaker fell 1.19%. The company said on 5 January 2010 sales from its Indian operations rose 73% in December 2009 to 636,000 tonnes from a year earlier. The Indian 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

Three sugar pivotals fell after Farm Minister Sharad Pawar told media that wholesale sugar prices in India have dropped in the past two to three days, while retail rates are expected to fall in 10-15 days. Balrampur Chini, Shree Renuka Sugar and Bajaj Hindusthan Sugar fell by between 1.49% to 2.89%.

. The government last week announced a slew of measures such as duty-free sugar imports and enhanced allocation of rice and wheat for states to check the runway prices.

Cals Refineries clocked the highest volume of 3.49 crore shares on BSE. FCS Software (1.19 crore shares), Sanraa Media (0.69 crore shares), UCO Bank (0.64 crore shares) and Radhe Developers (0.56 crore shares were the other volume toppers in that order.

NMDC clocked the highest turnover of Rs 213.73 crore on BSE. Engineers India (Rs 197.73 crore), State Trading Corporation of India (Rs 192.65 crore), Hindustan Copper (Rs 171.06 crore) and Dredging Corporation of India (Rs 118.39 crore) were the other turnover toppers in that order.