Capital goods, banking stocks lead rally

The key benchmark indices reversed intraday losses and surged to fresh intraday highs in late trade tracking higher European stocks and gains in US index futures. Stocks rose for the second straight day. The BSE 30-share Sensex rose 107.83 points or 0.62%, up close to 175 points from the day's low and off close to 15 points from the day's high. Foreign funds today bought equities worth a net Rs 653.22 crore, provisional data released by the stock exchanges showed.

Index heavyweight Reliance Industries (RIL) reversed early losses. Banking, capital goods, FMCG and realty stocks rose. Some side counters surged even as the market breadth, indicting overall health of the market, was negative.

NSE's volatility index -- India VIX -- dropped, extending Tuesday's steep slide. The index lost 5.96% to 17.05. It had tumbled 9.17% on Tuesday. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days. The lower the index, which is based the S&P CNX Nifty option prices, the higher the market's desire to take risk.

The market recovered from lower level in early trade. However, the intraday recovery proved short-lived. The market weakened once again in morning trade. The Sensex hit fresh day's low in mid-morning trade. It recovered from lower level later. The market once again came off the day's high later. It trimmed losses in mid-afternoon trade. The market surged in late trade as traders rolled over positions in the derivatives segment from the March 2010 series to the April 2010 series ahead of the expiry of the near-month March 2010 derivatives contracts. The near-month March 2010 derivatives contracts expired today.

Rollover in Nifty futures was 52% at the end of Tuesday's (23 March 2010)'s trade. Rollover in Mini Nifty futures was 44% while the market wide Rollover was 55%. Rollover was low in REC, Union Bank of India, GAIL India, Hindalco and Welspun Gujarat Stahl Rohren, till Tuesday. The stock market was closed on Wednesday, 24 March 2010, for a public holiday.

In global news, credit rating agency Fitch on Wednesday lowered Portugal's sovereign credit rating, citing its growing budget deficit and debt load. Meanwhile, European Union (EU) leaders are meeting today in Brussels to resolve Greece's debt crisis. However, fears that EU members may fail to agree to an aid package for Greece pushed the euro to a fresh 10-month low against the dollar in Asia Thursday. The EU summit ends on Friday, 26 March 2010. People's Bank of China Vice Governor Zhu Min on Thursday said Greece's debt crisis is just the tip of the iceberg.

Meanwhile, the Dubai's government said Thursday it will commit $9.5 billion in new funding to help conglomerate Dubai World restructure its debt. Dubai World, which has interests in transport and logistics, ports, real estate and financial services, has been trying to restructure $23.5 billion in debt.

Closer home, the government today said that the food price index rose 16.22% in the year to 13 March 2010. The rise in the food price index was lower than an annual rise of 16.30% in the previous week. The fuel price index rose 12.68% and primary articles index jumped 13.88% in the year to 13 March 2010. The wholesale price inflation (WPI) jumped 9.89% in February 2010 and Finance Minister Pranab Mukherjee and other policymakers have said it could hit double digits in March 2010.

The demand-side pressure on the economy can build up further and it would be better to take some action now, Reserve Bank of India (RBI) governor D Subbarao said on Wednesday. The RBI, citing intensifying inflationary pressures and a steady economic recovery, caught investors off guard with a 25 basis point tightening in short term lending rates late on Friday 19 March 2010, after local markets had closed.

Prime Minister Manmohan Singh on Tuesday, 23 March 2010, said India could return to 9% growth trajectory by 2011-12, but cautioned that uncertain global environment could still play spoilsport. He said demand creation by expanding investment in infrastructure should act as a counterweight to any weakness in export sector.

The Planning Commission has suggested course correction in various policy measures related to social, agriculture and infrastructure sectors to put the economy back on high growth trajectory, while lowering the growth target for the five years to 2012.

The Planning Commission in its mid-term appraisal (MTA) of the Eleventh Five Year Plan (2007-12) has scaled down the GDP growth target for the period to 8.1% from earlier projection of 9%.The MTA, which was cleared by the full Planning Commission on Tuesday, said the path of fiscal correction is crucial for macro-economic credibility and larger private investment. The MTA document will now be placed before the Cabinet and thereafter before the National Development Council (NDC) for final approval.

India must raise prices of fuel, fertiliser and food sold under welfare schemes to keep its subsidy bill at targeted levels, the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, said on Tuesday. The government has said it would trim subsidies as part of measures to cut its large fiscal deficit.

The economy is expected to grow at 8.5% in this quarter, Kaushik Basu, chief economic adviser in the finance ministry said on Wednesday.

Coming back to stocks, encouraging Q4 March 2010 advance tax figures of top Indian firms, indicating good Q4 March 2010 results, boosted equities over the past few days. The market also witnessed a strong post-Budget rally driven by sustained buying by foreign funds since the presentation of the Union Budget 2010-2011 on 26 February 2010.

As per data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 12125.81 crore this month, till 25 March 2010. Finance secretary Ashok Chawla said on Tuesday, 23 March 2010, that foreign capital flows into India are currently not posing any concern.

The stock market gave a thumbs up to the Union Budget 2010-2011 due to its thrust on infrastructure development, government's pledge to reduce fiscal deficit over the next three years, a smaller-than-expected 2% hike in excise duties, and reduction in taxes for individuals which will boost disposable income. The Finance Minister has assumed a modest GDP growth of about 8% and inflation of about 4.5% for 2010-2011. Global credit rating agency Standard & Poor's, last week, revised the outlook on India to stable from negative due to improved government finances.

Going ahead, the key triggers for the stock market are structural reforms such as decontrol of petrol and diesel prices, targeting of food subsidies, and financial sector reforms such as increase in foreign direct investment in insurance sector.

European shares rose on Thursday, ahead of a European Union meeting to help heavily indebted Greece as investors focus on sovereign debt concerns. Oil majors gained as commodity prices eased off lows. The key benchmark indices in France, Germany and UK rose by between 0.45% to 0.8%.

Asian stock markets were mixed on Thursday, after US stocks slipped on Wednesday following large gains in recent days. The key benchmark indices in China and Hong Kong fell by between 1.15% to 1.23%. But, the key benchmark indices in Indonesia, Japan, Taiwan, Singapore and South Korea rose by between 0.07% to 0.46%.

Trading in US index futures indicated that the Dow could rise 32 points at opening on Thursday, 25 March 2010.

US stocks snapped a two-day winning streak on Wednesday, 24 March 2010 after Fitch cut its rating on Portugal by one notch and warned that another downgrade could be on the way. The Dow Jones fell 52.68 points or 0.48% to 10,836.15. The Nasdaq declined 16.48 points or 0.68% to 2,398.76 and the S&P 500 fell 6.45 points or 0.55% to 1,167.72.

In economic news, new-home sales fell around 2% to 308,000, the lowest on record, in February. Mortgage applications fell for a second straight week last week as interest rates crept higher. Orders for durable goods rose 0.5% in February as inventories increased by the most since December 2008.

With unemployment high and inflation low, the Federal Reserve is in no hurry to raise interest rates, two Federal Reserve officials suggested on Tuesday.

US Federal Reserve Vice Chairman Donald Kohn said on Wednesday that top policy makers had been "a little complacent" about complex financial instruments that contributed to the global financial crisis.

Close home, the BSE 30-share Sensex rose 107.83 points or 0.62% to 17568.85. The Sensex rose 124.21 points at the day's high of 17,575.23 in late trade. The barometer fell 67.81 points at the day's low of 17,383.21 in mid-morning trade.

The S&P CNX Nifty rose 35.10 points or 0.67% to 5260.40.

The BSE Mid-Cap index rose 0.12%. The BSE Small-Cap index fell 0.21%. Both these indices underperformed the Sensex.

The BSE Capital Goods index (up 1.09%), the BSE HealthCare index (up 0.94%), the BSE Bankex (up 0.9%), the BSE Teck index (up 0.84%), the BSE Realty index (up 0.8%), the BSE FMCG index (up 0.75%), the BSE IT index (up 0.74%), the BSE Metal index (up 0.66%), outperformed the Sensex.

The BSE PSU index (down 0.82%), the BSE Consumer Durables index (down 0.25%), the BSE Oil & Gas index (down 0.12%), the BSE Power index (up 0.22%), the BSE Auto index (up 0.46%), underperformed the Sensex.

The market breadth, indicating overall health of the market, turned negative compared to positive breadth earlier in the day. On BSE, 1311 shares advanced as compared with 1535 that declined. A total of 76 shares remained unchanged.

From the 30 Sensex shares, 18 stocks rose and the rest fell.

BSE clocked a turnover of Rs 4433 crore, higher than Rs 4208.84 crore on Tuesday, 23 March 2010.

Index heavyweight Reliance Industries (RIL) rose 0.22%, reversing early losses on expectations of good Q4 March 2010 results. As per the market buzz, RIL's Q4 advance tax surged to Rs 770 crore in Q4 March 2010 from Rs 365 crore a year ago. Meanwhile, Reliance Industries is reportedly seeking a joint venture with Atlas Energy to develop the US firm's Marcellus Shale gas operations.

Reliance Industries on 14 March 2010 announced a sports and entertainment joint venture with IMG Worldwide, a global leader in sports marketing and management. The equal venture, IMG Reliance, will set up modern infrastructure and coaching facilities for sports and create and operate sports and entertainment assets including celebrity management.

India's largest mobile services provider by sales Bharti Airtel rose 2.27% after Kuwait-based Zain Telecom's board on Wednesday cleared Bharti Airtel's proposal to buy its African assets for $10.7 billion (around Rs 48,600 crore), marking the Indian company's first successful attempt to acquire operations in Africa after two failures. Bharti had expressed its interest in Zain in the second week of February and the deadline for exclusive talks was to lapse today.

FMCG stocks rose on government's thrust on the rural sector and social schemes in the Budget. Hindustan Unilever rose 1.69%, extending recent gains. According to reports, the company plans to take legal action against striking workers at its Haldia factory, where work has stopped since 2 March 2010 due to a strike by the Hindustan Unilever Shramik Union.

Among other FMCG stocks, United Breweries, Nestle India, Dabur India, ITC, Marico, Godrej Consumer products rose by between 0.22% to 1.68%.

IT stocks rose for the second straight day as the passage of the US healthcare reforms Bill, which proposes to create Electronic Health Records (EHRs) for all Americans by 2014, is expected to open up a $20 billion market opportunity for Indian IT services firms.

India's largest software services exporter by sales Tata Consultancy Services (TCS) rose 0.11%, extending gains for the third straight day. The company said recently it signed a five year contract with Malaysia Airlines for providing end-to-end information technology infrastructure services. Meanwhile, TCS has paid Rs 178 crore in advance tax compared with Rs 53 crore a year earlier.

India's second largest software services exporter by sales Infosys rose 1.09%, extending gains for the second straight day. The stock hit a high of Rs Rs 2,821.40 in intraday trade which is a record high for the counter. Its ADR fell 1.44% on Wednesday. Infosys' fourth quarter advance tax payment doubled. India's third largest software services exporter by sales Wipro fell 0.08%. Its ADR fell 2.37% on Wednesday.

Rate sensitive realty shares rose on bargain hunting after recent losses triggered by a rate hike by the central bank late last week. HDIL, DLF, Omaxe, Unitech, Phoenix Mills, Anant Raj Industries rose by between 0.21% to 5.44%.

But, Indiabulls Real Estate dropped 0.45%, after the company said promoters have pledged more than 3.56 crore shares representing 8.87% of the equity capital of the company.

The Union budget last month proposed to impose service tax on the realty sector both on commercial rentals as well as on sale of under-construction housing units. The service tax would come to be about 3.5% of the cost of the apartment that includes the value of the land and also the cost of construction, realty body Credai said recently.

India's largest engineering & construction firm by sales Larsen & Toubro (L&T) rose 1.78% after the company said it has got orders worth Rs 1181 crore for power transmission and distribution projects. The company said on Tuesday, 23 March 2010 it got orders worth Rs 1500 crore. L&T's advance tax payment fell marginally to Rs 270 crore in Q4 March 2010 from Rs 275 crore a year earlier.

Among other capital goods stocks, Bharat Heavy Electricals, Praj Industries, Siemens rose by between 1.02% to 2.79%.

Rate sensitive banking stocks rose on bargain hunting after recent triggered by fears higher interest rates may hamper lending growth. India's largest private sector bank by net profit ICICI Bank rose 0.47%. Its ADR fell 1.38% on Wednesday. The bank's Q3 advance tax payment surged to Rs 350 crore versus Rs 250 crore a year ago.

India's largest private sector bank by net profit HDFC Bank rose 2.8% gaining for the straight third day. It hits all time high of Rs 1930 today. Its ADR fell 1.37% on Wednesday. India's largest bank by net profit and branch network State Bank of India (SBI) rose 0.16%.

Rate sensitive auto stocks were mixed. India's largest commercial vehicle maker by sales Tata Motors fell 1.87%, extending losses for the second straight day after company said it is offering an early conversion of notes into stock through an auction to help reduce the debt on its balance sheet. The company, whose products range from the premium Jaguar and Land Rover to the ultra-cheap Nano car, on Tuesday invited holders of its foreign currency convertible notes to submit applications to convert them into shares.

Bondholders will get an enhanced conversion ratio in the offer, which runs through 29 March 2010, the truckmaker said in a statement on Tuesday. The plan covers 11.8 billion yen ($131 million) of zero-coupon notes due March 2011 and $300 million of 1% bonds due in April 2011.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) rose 0.57% on bargain hunting after recent sharp losses. The company paid Rs 235 crore in advance tax in Q4 March 2010 versus nil payment a year earlier.

India's largest car maker by sales Maruti Suzuki India fell 1.47%, extending recent slide triggered by fears increase in competition may dent sales. Recently, Ford India entered the small car market with 'Figo'.

Bajaj Auto rose 1.59%. The company said today it is targeting sales of 40 lakh vehicles in the year ending March 2011. The company sold 25.78 lakh vehicles in the first eleven months of the current fiscal year ending March 2010.

India's largest bike maker by sales Hero Honda Motors rose 4.39% after the company said a meeting of company's board of directors will be held on 30 March 2010 to consider the declaration of special interim dividend. The stock hit a high of Rs 2,050 in intraday trade which is a record high for the counter.

Increase in raw material prices coupled with costs associated with new emission norms could force auto makers to increase prices further, which may hit volumes. The government raised excise duties on large cars and sport utility vehicles by 2%, which was immediately passed on by vehicles makers, including top carmaker Maruti Suzuki and utility vehicle makers Mahindra & Mahindra and Tata Motors. From 1 April 2010, all vehicles will have to comply with Euro IV emission norms across 13 major cities, adding to costs and setting the stage for another round of price hikes.

Some pharma stocks rose on hopes of a surge in US exports after the US Congress passed the heavily-contested healthcare bill on Sunday, 21 March 2010. Biocon, Dr Reddy's Laboratories, Ipca Laboratories, Cipla, Divi's Laboratories, Sun Pharmaceutical Industries, Pfizer rose by between 0.43% to 3.32%.

Following the passage of the landmark healthcare bill, multinational firms may now be willing to put more money to buy into India's formulations companies. The healthcare bill is the US government's attempt to reduce healthcare costs. The Obama administration would make a nearly $1-trillion commitment in taxpayer money over the next decade to help an estimated 32 million uninsured Americans get health coverage. The bill also promotes use of generic drugs that are often one-tenth the price of the original version, but has the same impact.

Analysts opine that this would translate into huge opportunities to Indian companies as India has the largest number of US Food and Drug Administration approved pharma plants outside the US. India was among the 14 countries named in the Congress discussion that can offer low-cost drugs to achieve lower healthcare costs

Infrastructure stocks fell on profit taking after recent gains. Prime minister Manmohan Singh said India needs to double its infrastructure spending to $1 trillion in the five years to 2016/17. The Finance Minister has provided Rs 1.73 lakh crore for infrastructure development in 2010-2011, which accounts for over 46% of the total plan expenditure for the year. IVRCL Infrastructure & Projects, Nagarjuna Construction Company, Hindustan Construction Company fell by between 1.37% to 2.54%.

Metal stocks rose on strong domestic demand. JSW Steel, Jai Corp, NMDC, Hindustan Zinc, Guj NRE Coke, Sesa Goa, Steel Authority of India, Hindalco Industries rose by between 0.03% to 5.68%.

India's largest copper maker by sales Sterlite Industries rose 0.46%. As per recent reports, a legal fight seems likely between Sterlite Industries and US copper miner Asarco LLC. The American company has filed a lawsuit against Sterlite for going back on a two-year old deal to acquire Asarco. This prompted Sterlite to also file a lawsuit against Asarco to claim recovery of about $50 million (about Rs 230 crore) that was deposited earlier.

India's largest steel maker by sales Tata Steel fell 0.23%. Its Q4 advance tax payment rose to Rs 513 crore from Rs 406 crore a year earlier.

National Aluminium Company fell 0.61%. The Union Minister for Mines has ruled out any possibility of disinvestment in the state-run aluminium firm.

Cals Refineries clocked the highest volume of 2.62 crore shares on BSE. Syncom Healthcare (1.07 crore shares), Birla Power Solutions (0.98 crore shares), Lloyd Steel Industries (0.67 crore shares) and Krishna Lifestyle (0.55 crore shares) were the other volume toppers in that order.

Syncom Healthcare clocked the highest turnover of Rs 156.61 crore on BSE. ARSS Infra (Rs 103.95 crore), Jubilant Food Organosys (Rs 87.62 crore), NMDC (Rs 81.85 crore) and Tata Motors (Rs 69.8 crore) were the other turnover toppers in that order.