Market ends volatile trading session higher

The key indices edged higher, gaining for the second straight day on firm Asian stocks. The BSE 30-share Sensex was provisionally up 69.12 points or 0.39%, off close to 45 points from the day's high and up close to 55 points from the day's low. A strong response to the initial public offer (IPO) of Infinite Computer Solutions which focuses on IT services for the telecom vertical, also underpinned sentiment. NTPC, India's largest utility by sales, rose after company said its follow-on public offer will open on 3 February 2010. Airline and capital goods stocks rose.

But FMCG stocks fell. Index heavyweight Reliance Industries (RIL) galloped. India's largest private sector bank by operating income HDFC Bank recovered from lower level ahead of Q3 result on Friday 15 January 2010. PSU OMCs rose on reports state-run oil marketing companies may get cash instead of oil bonds as compensation from the government for selling fuel at below market prices. The market breadth was strong.

The market pared gains after an initial surge triggered by firm Asian stocks. The market was further off the day's high in mid-morning trade. The market regained strength in early afternoon trade as the latest data on headline inflation came in line with market expectations. However, the intraday recovery proved short-lived. The market once again pared gains in afternoon trade. It cut losses later. The market surged in mid-afternoon trade. The market cut losses after hitting a fresh intraday high.

The initial public offer of Infinite Computer Solutions was subscribed 43.22 times. The issue ended on Wednesday, 13 January 2010. Foreign institutional investors put in bids for 11.63 crore shares as compared to 40.26 lakh shares reserved for the qualified institutional investors category as a whole. The strong response by foreign funds indicates that global liquidity remains ample.

The wholesale price index (WPI) rose 7.31% in December 2009 from a year earlier, sharply higher than previous month's annual rise of 4.78%, data released by the government today, 14 January 2010, showed. Food price index in WPI rose 19.17% in December 2009. Another data showed, the food price index was up 17.28% in the year to 2 January 2010. The fuel price index up 6.25% and the primary articles price index up 13.82% in the week to 2 January 2010

The government is taking a host of measures to tame inflation, Kaushik Basu, the chief economic adviser at the finance ministry said on Thursday.

In its October 2009 policy review, the Reserve Bank raised its WPI inflation projection for end-March 2010 to 6.5%, with an upside bias, from 5% earlier. The central bank is scheduled to review its policy on 29 January 2010, and signs of strengthening growth and a surge in headline inflation have the market factoring in tighter policy, including possible increases in interest rates.

Data early this week showed that industrial output grew at its fastest pace in two years in November 2009, rising 11.7%. The Indian economy is expected to grow by around 7.75% in the fiscal year to March 2010, but food price inflation is a major concern, Finance Minister Pranab Mukherjee said on Wednesday.

The head of the Asian Development Bank Haruhiko Kuroda warned it was too early for Asian countries to end stimulus policies started during the financial crisis and said he saw no big risk of price bubbles in China. Kuroda said on Thursday that policymakers still needed to restore demand and stabilise financial systems to support the economic recovery.

Closer home, the government may reportedly revert to pre-slowdown indirect tax rates in two phases beginning April 2010 as the government weighs likely harm to the ongoing economic recovery if a rollback is done at one go with the urgent need to move towards greater fiscal prudence. A suggestion to undertake a partial rollback figured in the first round of pre-Budget consultations between Prime Minister Manmohan Singh, finance minister Pranab Mukherjee and other policymakers recently. With the economy now on a firmer footing and industrial output growth strong, officials are looking to roll back the measures taken as part of the fiscal stimulus to shield the economy from the global recession. While those measures helped realise the primary goal, they pushed fiscal deficit to a 16-year high of 6.8% of the GDP.

The government has extended duty-free imports of white sugar by nine months to 31 December 2010 as it looks to cover a supply shortfall, but has adequate wheat and rice stocks, Farm Minister Sharad Pawar said on Wednesday.

Speaking after a cabinet panel reviewed food prices, Pawar said the federal government would allow millers outside Uttar Pradesh state to process raw sugar held up in ports after the Uttar Pradesh state government, under pressure from cane farmers, banned processing of the raws. The government is struggling to contain rising food prices, with food inflation hovering near 20% in December 2009. Duty-free imports of white sugar were earlier allowed up to 31 March 2010, while raw sugar shipments, without any import duty, are already allowed up to 31 December 2010. Pawar said states needed to take stern action against hoarding to help arrest rising food prices. He also said the country had more than adequate stocks of wheat and rice.

European shares advanced for a second straight session on Thursday, led higher by banks and miners, ahead of the European Central Bank's rate decision and more earnings results this week from US companies. The key benchmark indices in France, Germany and UK were up by between 0.4% to 0.56%.

Investors awaited a rate decision by the European Central Bank, which is set to start 2010 by flagging that interest rates will remain at a record low of 1% for some time, casting the bank's view on Greece's current debt troubles into the spotlight.

Asian stocks rose on Thursday, led by mining and finance companies, as a bigger-than-estimated increase in Australian jobs boosted confidence in the global economic recovery. The key benchmark indices in China, Indonesia, Japan, South Korea, Singapore and Taiwan rose by between 0.73% to 1.61%.But, Hong Kong's Hang Seng fell 0.15%.

Japanese wholesale prices fell 3.9% in the year to December, matching a median estimate from analysts, in a sign of persistent deflation due to weak domestic demand.

Trading in US index futures indicated a flat opening of US stocks on Thursday, 14 January 2010. Earlier in the day, US index futures were in green

US stocks closed higher on Wednesday. It was a fresh 15-month closing high for the Dow Jones Industrial Average which rose 53.51 points, or 0.50%, to 10,680.77. The Standard & Poor's 500 Index gained 9.46 points, or 0.83%, to 1,145.68. The Nasdaq Composite Index rose 25.59 points, or 1.12%, to 2,307.90.

In data released yesterday, the Federal Reserve said in its Beige Book regional business survey that the economy improved in 10 of the Fed's 12 districts last month, marking a broadening of the recovery. US economic activity remained at a low level as 2010 began but was improving modestly and beginning to broaden out to include wider swaths of the country, the Federal Reserve said on Wednesday. The US treasury department said the government racked up $ 91.85 billion budget deficit in December, a record for the month, marking a record 15th straight month of government red ink.

Two top Federal Reserve policy-makers said on Wednesday that the US central bank will need to be certain the economic recovery is firmly in place before tightening its monetary policy stance. New York Federal Reserve Bank President William Dudley and Chicago Federal Reserve Bank President Charles Evans said continued credit problems and a high rate of unemployment are constraints on the US economic recovery.

The Fed has slashed rates to near zero and pumped over $1 trillion into the financial system to prevent banking failures and pull the economy out of the worst recession in decades. It has pledged to keep rates ultra-low for a long time to nurture the recovery. Evans, who is not a voter on the Fed's policy-setting panel this year, also said policymakers would have to see convincing signs of healing in labor markets, where the jobless rate has been stuck at 10%, before tinkering with policy. Steps to withdraw the Fed's extraordinary support for the economy, including raising rates or withdrawing liquidity from the system, are unlikely "any time soon," Evans said.

The Fed's next policy meeting is on 26-27 January 2010, and it is not expected to make changes to rates or its promise to keep borrowing costs at rock-bottom levels for an extended period. The comments from Evans and Dudley, seen in the middle ground between the US central bank's anti-inflation hawks and pro-growth doves, suggest the central bank is in no rush to move toward raising interest rates.

Closer home, as per provisional figures, the BSE 30-share Sensex was up 69.12 points or 0.39% at 17,578.92. The barometer opened 15.91 points higher 17,525.71, which is also the day's low so far. At the day's high of 17,628.04, the Sensex rose 118.24 points in mid-afternoon trade.

The S&P CNX Nifty was up 25.45 points or 0.49% at 5259.40 as per provisional figures.

The BSE Mid-Cap index rose 0.89% and the BSE Small-Cap index rose 1.21%.

The market breadth, indicating the overall health of the market was strong. On BSE, 1884 shares advanced compared with 1014 that declined. A total of 62 shares remained unchanged.

Among the 30-member Sensex pack, 15 rose while rest fell.

BSE clocked a turnover of Rs 6184 crore, lower than Rs 6545.71 crore on Wednesday, 13 January 2010.

NTPC, India's largest utility by sales, rose 0.61% after company said on Thursday 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.

Index heavyweight Reliance Industries (RIL) rose 2.83%, extending last two days' gains. RIL early this week raised $763 million through a block sale of 3.3 crore shares. RIL raised $763 million through a block sale of 3.3 crore shares on Monday

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.

PSU OMCs rose on reports state-run oil marketing companies may get cash instead of oil bonds as compensation from the government for selling fuel at below market prices. HPCL and Indian Oil Corporation rose by between 0.57% to 1.47%. But BPCL fell 0.67%.

Capital goods stocks rose on expectation of better Q3 December results. Among capital goods stocks, Bharat Heavy Electricals, ABB, Thermax, SKF India and Crompton Greaves, rose by between 0.62% to 4.01%.

India's largest engineering & construction firm by sales Larsen & Toubro fell 0.33%. 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

India's largest private sector bank by operating income HDFC Bank fell 0.3% to Rs 1,685.50, ahead of Q3 result on Friday 15 January 2010. Nevertheless, the stock came off the day's low of Rs 1,670. Analysts expect 30% growth in HDFC Bank's net profit at a little over Rs 800 crore in Q3 December 2009 over Q3 December 2008. A strong growth in consumer loans, especially auto loans, is seen driving growth at the private sector bank. HDFC bank had reported net profit of Rs 621.74 crore in Q3 December 2008.

FMCG stocks fell on profit taking. Dabur India, Tata Tea and Hindustan Unilever fell by between 0.43% to 2.73%.

Airline stocks rose on reports air traffic saw a whopping 33% increase with 44.8 lakh people flying within India in December 2009 against 33.7 lakh in December 2008. SpiceJet (up 4.48%), Kingfisher Airlines (up 4.61%), Jet Airways (up 0.38%), soared.

Orient Paper & Industries dropped 3.56%, after the company's net profit plunged 53.11% to Rs 30.14 crore in Q3 December 2009 over Q3 December 2008.

Nitin Fire Protection Industries jumped 6.15% after the company said its board will meet on 20 January 2010 to consider foraying in the European market through a wholly owned subsidiary of the company.