Sensex, Nifty at highest level in 22 months

The key benchmark indices rose for the second straight trading day of 2010 tracking firm Asian stocks. Fears of an immediate hike in interest rates by the central bank receded following comments from government officials. The BSE 30-share Sensex rose 127.51 points or 0.73%, off close to 45 points from the day's high. The Sensex and the 50-unit S&P CNX Nifty attained their highest closing level in more than 22 months.

Metal stocks soared as base metal prices surged on the London Metal Exchange on Monday, 4 January 2010. Realty and banking stocks, also rose. But index heavyweight Reliance Industries edged lower. Shares of two auto majors Tata Motors and Maruti Suzuki India fell on concerns competition will intensify in the small car market. The market breadth was strong.

The market surged at the onset of the trading session on firm Asian stocks. The Sensex and the 50-unit S&P CNX Nifty struck their highest level in 20 months. The market remained range bound in morning trade. The market pared gains in early afternoon trade. The market firmed up again later. The market moved in a narrow range in afternoon trade. The market pared gains soon surging at about 13:30 IST. A bout of volatility was witnessed once again in late trade.

Emerging market equity funds posted a record $64.5 billion in inflows in calendar 2009, helped by record flows into BRIC -- Brazil, Russia, India and China funds, global fund tracker EPFR said on Tuesday. The Chinese economy's return to robust growth also boosted Asia ex-Japan equity funds, which posted record inflows of $19.1 billion. Emerging market bond funds attracted record inflows of $8.2 billion.

Direct tax receipts during April-December 2009 rose 8.51% from a year earlier to Rs 250000 crore, the finance ministry said in a statement on Tuesday. The corporate tax receipts were up by 13.47% at Rs 167000 crore, while income tax paid by individuals declined by 0.41% at Rs 83178 crore, it said.

The government does not need to tighten monetary policy now and risk stalling a nascent economic recovery as inflation pressure was mainly caused by high food prices, the chief economic adviser to the finance ministry Kaushik Basu said on Monday. Basu also said Asia's third-largest economy was likely to return to 9% growth in the fiscal year 2010/11, after topping 7.5% in the current year to end-March. "You don't want to have an effect across the board, which increases unemployment, which holds back the growth rate," he said, adding inflation would "peter out" over a few months. "Right now, it is a sector-specific intervention that is needed, which is in food sector and that is what the government is doing," he said.

Basu said the economic rebound seen in the first half of the current year would continue in the December quarter, despite a poor farm output. Basu said India's high savings and investment rates would help sustain the recovery and an annual economic growth rate of 10% is possible within "a couple of years".

While Basu said there was no need to tighten policy at this juncture, the prime minister's economic adviser, C. Rangarajan, told to TV media on Tuesday that liquidity tightening may be needed. Rangarajan, however, said an adjustment in policy interest rates is not warranted at the moment. The Reserve Bank of India is set to hold its quarterly monetary policy review on 29 January 2010 and is widely expected to tighten cash reserve ratio (CRR) requirements for banks, with economists divided on when the central bank will raise policy rates.

The food price inflation was at 19.83% in the 12 months to 19 December 2009 on supply shortages after the weakest monsoon in 37 years, followed by floods in parts of the country that hit crops.

The Reserve Bank of India (RBI) has said it was worried about a spillover of higher food prices to other sectors, raising expectations of monetary tightening by the central bank to dampen inflationary expectations.

RBI deputy governor Shyamal Gopinath said on Monday there have been no concerns on capital inflows.

Meanwhile, the latest data showed that the rate of growth in manufacturing rose for the first time in three months in December 2009, with activity reaching its highest since May 2009 on sharp rises in new work and output. The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian companies, rose to 55.6 in December from 53.0 in November. The reading was the strongest since May's 55.7, which was the strongest in 2009.

India's exports sector has bounced back with outward trade growing by 18% in November 2009, the commerce ministry said. The export figures turned positive after staying in the red for 13 months. The value of exports in November 2009 jumped to $13.19 billion compared to $11.16 billion.

Data last month showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

European shares turned positive extending recent gains led by banks after reports Barclays may raise earnings guidance. The key benchmark indices in France and UK rose by between 0.04% to 0.34%. But Germany's DAX fell 0.15%.

Most Asian stocks rose on Tuesday led by electronics and mining companies, after US manufacturing expanded at the fastest pace in more than three years and commodity prices advanced. The key benchmark indices in China, Taiwan, Hong Kong, Indonesia, Japan, and Singapore rose by between 0.04% to 2.09%. But, South Korea's Seoul Composite fell 0.33%.

China's yuan is facing a new round of appreciation pressure and expectations of a stronger currency will attract speculative capital inflows, complicating liquidity management, a senior official said in comments published on Tuesday. Zhang Xiaoqiang, a vice-chairman of the National Development and Reform Commission, the country's powerful central planner, said quantitative easing in rich countries, a weakening dollar and China's economic recovery were set to create additional pressure on the Yuan .

Trading in US index futures indicated a flat opening of US stocks on Tuesday, 5 January 2010.

US stocks rallied to their highest levels in over a year on the first trading day of 2010 on Monday after a report that showed growth in the manufacturing sector. All the three benchmark indices hit 15 month highs. The Dow Jones Industrial Average gained 155.91 points, or 1.5%, to 10,583.96. The Standard & Poor's 500 index added 17.89 points, or 1.6%, to 1,132.99, while the Nasdaq Composite Index rose 39.27 points, or 1.7%, to 2,308.42.

In key economic data, the ISM's gauge of manufacturing showed growth for a fifth straight month, rising to 55.9 in December 2009 from 53.6 in November. Participants shrugged off the two-month old construction spending data that showed a slightly steeper-than-expected 0.6% monthly decline for November.

Updated International Monetary Fund (IMF) economic forecasts this month are likely to show "somewhat more upbeat expectations" about the world economy, the IMF's First Deputy Managing Director, John Lipsky said on Monday. John Lipsky, wrote in an IMF blog that the improved prospects are evident in economic data and financial markets and will be reflected in the IMF's World Economic Outlook expected later this month. He warned, however, there were many reasons to be cautious about the economic recovery underway.

The US Federal Reserve sees a moderate economic recovery continuing in 2010, but needs to keep interest rates "exceptionally low" for an "extended period" to foster job growth, a Fed policymaker said on Monday. Fed Governor Elizabeth Duke told an economic forum that slack in the economy was likely to remain above historical norms for some time, helping to keep inflation subdued. The Fed cut interest rates to near zero in December 2008 and created a host of emergency lending facilities to fight the worst recession in more than 70 years. It has pledged low rates for an extended period.

Fed watchers have focused on any changes in that language for clues to the timing of a possible tightening of monetary policy as the economy recovers. The FOMC maintained the "extended period" stance in its last statement on 15 December 2009.

Closer home, the BSE 30-share Sensex rose 127.51 points or 0.73% to 17,686.24, its highest closing since 28 February 2008. The Sensex gained 171.05 points at the day's high of 17,729.78, in early trade. The Sensex fell 2.96 points at the day's low of 17555.77 in early trade.

The S&P CNX Nifty rose 45.70 points or 0.87% at 5277.90 its highest closing since 28 February 2008. It hit a high of 5,285.50. Nifty January 2010 futures were near spot price at 5,277, as compared to the spot closing of 5,277.90. Turnover in NSE's futures & options (F&O) segment surged to Rs 59,599.01 crore from Rs 42,559.47 crore on Monday, 4 January 2010

BSE clocked a turnover of Rs 6815 crore, higher than Rs 6591.78 crore on Monday, 4 January 2010.

The market breadth, indicating the overall health of the market was strong. On BSE, 1774 shares advanced as compared with 1108 that declined. A total of 79 shares remained unchanged.

The BSE Mid-Cap index rose 1.2% and the BSE Small-Cap index rose 0.85%. Both the indices outperformed the Sensex.

Among the 30-member Sensex pack, 23 rose while rest declined.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 0.54%. The stock had declined 1.29% on Monday after firm raised Rs 2,675 crore selling shares held by its treasury to build a war chest probably to buy the bankrupt petrochemical major LyondellBasell.

RIL sold 2.58 crore treasury shares, created eight years ago following the merger of Reliance Petroleum with RIL, to state-owned Life Insurance Corporation, which is the largest institutional shareholder in the company with a 6% stake.

Metal stocks spurted after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.75% on Monday, 4 January 2010. Steel makers rose as steel companies are reportedly eyeing higher prices in 2010 as stronger economic growth worldwide drives up demand for the critical building material. Tata Steel, Jindal Steel & Power, Bhushan Steel rose by between 2.3% to 2.39%.

Steel Authority of India (SAIL) rose 2.54% after gaining 3.14% on Monday after company reported a 32% growth in sales at 1.3 million tonne in December 2009 from a year ago

JSW Steel jumped 10.82% after the company's crude steel output soared 88% to 14.70 lakh tonnes in Q3 December 2009 over Q3 December 2008.

Recently, Tata Steel raised prices by Rs 2,000 a tonne, while state-owned Steel Authority of India (SAIL) withdrew the Rs 750-1,500 per tonne rebate it had started offering in November 2009, following the increase in raw material cost.

Among non ferrous stocks, Sterlite Industries, Hindustan Zinc, Hindalco Industries rose by between 2.63% to 7.39%.

National Aluminium Company rose 14.84%, on reports the state-run aluminium producer has hiked prices of rolled products by Rs 3,000 a tonne and other product prices by Rs 1,000 a tonne.

Rate sensitive realty stocks rose on reports realty sector holds promise in the year 2010 after a lackluster 2009. India's largest realty player by market capitalization DLF rose 1.36%. On 16 December 2009, the company's board approved merger of its commercial realty arm DLF Assets (DAL) with itself, a move aimed at repaying some of DAL's debt.

Among other realty stocks, Unitech, Housing Development & Infrastructure, Peninsula Land rose by between 1.45% to 5.04%.

Godrej Properties settled at at Rs 534.55, a premium of 9.09% over the initial public offer price of Rs 490. The stock opened at Rs 510, a premium of 4.10% over the initial public offer (IPO) price.

India's largest mobile services provider by sales Bharti Airtel rose 1.57% on reports the firm got an approval from Bangladesh's telecoms authority for its proposed $300 million investment in Abu Dhabi Group's Warid Telecom.

India's second largest mobile services provider by sales Reliance Communications rose 3.51%.

Banking stocks extended recent gains on reports credit offtake has picked up. According to the latest Reserve Bank of India (RBI) figures, total loans, including food credit loans to Food Corporation of India for foodgrain procurement and non-food credit (all other loans) amounted to Rs 29,41,293.07 crore as on 19 December 2009. This represents a sequential growth of Rs 34,028 crore since 27 November 2009 compared to a growth of Rs 7,698 crore in the whole of November 2009.

India's largest private sector bank by net profit ICICI Bank rose 0.98% as its ADR rose 2.78% on Monday. ICICI Bank has tied up with UK Trade and Investment to help Indian firms explore business opportunities in the British market. Through this tie-up, the bank will be able to provide value-added services such as training events and investment assistance to Indian firms looking at business opportunities in the UK. UK Trade and Investment is a government organisation that helps UK-based companies succeed in international markets.

India's largest bank by net profit and branch network State Bank of India was flat. The state-run bank paid advance tax of Rs 1795 crore versus Rs 1700 crore.

India's second largest private sector bank by net profit HDFC Bank rose 0.1% as its ADR rose 2.6% on Monday.

Drug maker Dr. Reddy's Laboratories rose 2.91% after the company said its Balaglitazone diabetes drug has met its primary target in the first of its phase 3 clinical trials. Balaglitazone reduced blood glucose levels over a period of time in the study conducted on 409 patients.

Among other health care stocks. Pfizer, Cadila Healthcare and Novartis India rose by between 0.63% to 2.62%.

Software pivotals rose on encouraging economic data from the United State. US is the biggest market for Indian IT companies. India's second largest software services exporter Infosys rose 0.22% as its ADR rose 2.7% on Monday. India's third largest software services exporter Wipro rose 1.61% as its ADR rose 1.57% on Monday. But, India's largest software services exporter TCS fell 0.11%.

The Indian rupee surged against the dollar on Tuesday boosted by gains in shares and higher Asian currencies. The partially convertible rupee was at 46.13/16 per dollar, above its close of 46.29/30 on Monday. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports.

India's largest engineering & construction firm by sales Larsen & Toubro rose 0.44%, gaining for the third straight day. The company said on Monday it won orders worth Rs 987 crore. The company said on Thursday 31 December 2009 it won two orders totaling Rs 580 crore.

Among other capital goods stocks, Bharat Heavy Electricals, BEML, Thermax and Praj Industries rose by between 0.35% to 1.76%.

India's largest thermal power generator by sales NTPC rose 0.5% on government's plan to divest stake in the firm.

Among other prominent power sector stocks, Tata Power Company, Reliance Power, Reliance Infrastructure, Torrent Power rose by between 0.51% to 1.17%.

Auto stocks were mixed. India's top truck maker by sales Tata Motors fell 1.99% on profit taking. Tata Motors registered 105% growth in sales to 51,627 units in December 2009 over December 2008.

India's top small car marker by sales Maruti Suzuki India fell 2.27% after managing director Shinzo Nakanishi said exports will be hit next year by removal of incentives in Europe. Nakanishi said there would be lower offtake from Nissan for exports as a result of the removal of incentives. Nakanishi said the company aims to keep operating margins at 10 percent in fiscal year 2009/10 but profitability will be impacted by a rise in raw material prices and a rise in the yen.

Maruti, posted a 51% rise in total sales in at 84,804 units in December 2009 over December 2008.

India's largest tractor marker by sales Mahindra & Mahindra (M&M) advanced 1.86%. M&M marked its entry on Monday 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 0.1%. Sales jumped 74% to 375,838 units in December 2009 over December 2008.

Bajaj Auto rose 0.24%. Bajaj Auto sold 2,20,429 two-wheelers in December 2009, registering an 85% growth in sales over the same month last year, when it sold 1,19,215 units.

TVS Motors fell 1.28% on profit taking after gaining 9.49% on Monday. Sales rose 34% to 119,701 units in December 2009 over December 2008.

Auto part makers rose after auto sales zoomed in December 2009 due to a recovering economy and burst of new launches. Bharat Seats, Lumax Industries, Sona Koyo Steering Systems, Steel Strips Wheels, Ahmednagar Forgings, Exide Industries, Munjal Showa, Subros, Bharat Forge, Amtek Auto and Automotive Axles rose by between 0.08% to 5%.

Consumer durables stocks gained on hopes of good earnings on the back of higher sales in Christmas. Rajesh Exports, Titan Industries, Asian Star Company rose by between 0.04% to 3.4%.

Sugar stocks soared as prices of the commodity rose sharply last week. Shree Renuka Sugars, Bajaj Hindusthan Sugar and Industries and Balrampur Chini rose by between 0.87% to 1.47%.

The Union government has allowed duty-free import of raw sugar to tide over the domestic production shortfall. In the 2008-09 season ending October 2009, domestic sugar output fell 42 per cent to 15 million tonne, causing retail sugar prices to more than double. Currently, sugar is selling at Rs 42-43 a kg in retail.

Kashyap Technologies clocked highest volume of 5.64 crore shares on BSE. JSW Energy (3.23 crore shares), Mahindra Satyam (2.18 crore shares), Cals Refineries (2.04 crore shares) and NHPC (1.66 crore shares) were the other volume toppers in that order.

JSW Energy clocked the highest turnover of Rs 364.81 crore on BSE. Godrej Properties (Rs 281.83 crore), Mahindra Satyam (Rs 232.10 crore), National Aluminum Company (Rs 158.38 crore) and Tata Steel (Rs 144.71 crore) were the other turnover toppers in that order.