Market scales two-year high on firm global stocks

The key benchmark indices closed at their highest level in more than two years supported by strong global markets. Stocks rose for the fourth day in a row. However, the market breadth, indicting the overall health of the market was weak. The BSE 30-share Sensex rose 66.59 points or 0.38%, up close to 70 points from the day's low and off close to 65 points from the day's high. Banking, metal, consumer durables and auto stocks rose. But, Index heavyweight Reliance Industries (RIL) reversed early gains. IT stocks fell on a firm rupee.

NSE's volatility index, India VIX, surged for the second day in a row. The index rose 4.7% to 18.73. The index had risen almost 5% on Friday, 26 March 2010. 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 trimmed gains in morning trade after hitting its highest level in more than 2-1/2 months in early trade. It regained strength later. The Nifty hit a two-year high in afternoon trade as European stocks rose in early trade. Soon the Sensex followed suit, hitting a 2-year high. The market pared gains amid a bout of volatility later.

Foreign funds have made heavy purchases of Indian stocks this month, helping stocks register strong gains. The Sensex has jumped 1,457.15 points or 8.96% from a low of 16,254.20 on 25 February 2010. As per data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 12716.71 crore this month, till 26 March 2010. Finance secretary Ashok Chawla said on Tuesday, 23 March 2010, that foreign capital flows into India are currently not posing any concern.

Encouraging Q4 March 2010 advance tax figures of top Indian firms, indicating good Q4 March 2010 results, boosted Indian 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. Global credit rating agency Standard & Poor's, last week, revised the outlook on India to stable from negative due to improved government finances.

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 GDP growth of about 8% and inflation of about 4.5% for 2010-2011.

The forecast for the southwest monsoon for 2010 is the next major trigger for the market. Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound.

Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. Agriculture secretary Prabeer Kumar Basu had also told media in Delhi last week that the monsoon rains for the year will be normal. The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data.

The government will sell Rs 2,87,000 crore ($64 billion) of bonds in the first half of 2010/11, 63% of its record full-year target, less than market expectations. On an average, Rs 11000-15000 crore of issuance would come to the market every week, Shyamala Gopinath, a deputy governor of the Reserve Bank of India (RBI), said after officials of the central bank and the finance ministry met to finalise the first-half borrowing schedule.

Gopinath said the Reserve Bank of India (RBI) would try to smoothly conduct the government's borrowing programme. The RBI will provide later in the day details on the size and the maturity of the bonds to be auctioned. The RBI has said managing the government's debt programme this year would be a challenge as last fiscal year's net debt supply was significantly lower than the net borrowing on account of a $13.6 billion buy-back of bonds by the central bank.

The headline inflation was near 10% in February, prompting the RBI to unexpectedly raise its key lending and borrowing rates by 25 basis points each on 19 March 2020. The Reserve Bank has said it is imperative to anchor inflationary expectations and analysts have forecast another rate hike during the policy review on 20 April 2010.

Meanwhile, the latest economic data showed infrastructure sector output grew 4.5% in February from a year earlier, lower than an upwardly revised annual growth of 9.5% in January. During April-February, the first 11 months of the 2009/10 fiscal year, output rose 5.3% from 2.9% a year ago. The infrastructure sector accounts for 26.7% of India's industrial output.

The headline inflation should peak in March with demand-side pressures likely having a short-term impact on prices, the central chief statistician Pronab Sen said on Friday.

Sen said that investments which had been deferred in the wake of the global financial crisis would pick up as Asia's third largest economy expands. He added that government data suggested investments have revived since December. On Thursday 25 March 2010, a document from the country's top policy panel said India should aim for an average 5% inflation and this was a target "quite within the realm of possibilities". The economy is expected to grow 7.2% in the current fiscal year and 8.5% in the next.

The stock market remains closed on Friday, 2 April 2010, on account of Good Friday.

European shares traded higher on Monday, with deal and dividend speculation boosting wireless-telecom firm Vodafone Group, and miners also advanced. The key benchmark indices in Germany, UK and France were up by 0.16% to 0.73%.

Euro-zone leaders unveiled a deal late Thursday 25 March 2010 in which Athens would receive coordinated bilateral loans from other euro-zone countries and the International Monetary Fund if it faced severe difficulties.

Asian stock markets were mostly higher Monday as stronger earnings from Chinese companies and a deal to provide Greece a financial safety net helped buoy sentiment. The key benchmark indices in Hong Kong, Singapore, and Taiwan rose by between 0.7% to 0.9%. But the key benchmark indices in South Korea, Indonesia and Japan fell by between 0.09% to 0.65%.

China's benchmark Shanghai Composite Index rose 2.09%, boosted by news Friday that the nation's top two exchanges will launch the trading of stock futures on 16 April 2010. The China Securities Regulatory Commission announced its approval for the long-awaited index futures on the Shanghai and Shenzhen bourses, according to news reports.

Japan's retail sales gained at the fastest pace in more than a decade in February as the economic recovery spread to households. Sales rose 4.2% from a year earlier, the Trade Ministry said in Tokyo, the biggest monthly jump since 1997.

Russia's central bank cut key rates by 25 basis points on Friday, and analysts forecast more easing to come as the economy remains sluggish and the currency still strong.

Trading in US index futures indicated that the Dow could gain 36 points at the opening bell on Monday, 29 March 2010.

The Dow and S&P ended flat on Friday 26 March 2010, giving back earlier gains. Weakness in tech shares kept the Nasdaq in slightly negative territory. Stocks initially rose after European Union leaders said they had agreed on a standby aid package for Greece, and after better-than-expected March consumer sentiment data. The Dow Jones Industrial Average rose 9.15 points, or 0.08%, to end at 10,850.36. The Standard & Poor's 500 Index inched up just 0.86 point, or 0.07%, to 1,166.59. But the Nasdaq Composite Index slipped 2.28 points, or 0.10%, to close at 2,395.13.

Earlier on Friday 26 March 2010, the Commerce Department said the gross domestic product expanded at an annual rate of 5.6% in the fourth quarter, instead of 5.9%, as it previously estimated and as analysts had been expecting.

Separately, the Thomson Reuters/University of Michigan's Surveys of Consumers consumer sentiment index came in at a final March reading of 73.6, above expectations, but unchanged from February.

The key economic data due this week is personal spending for February 2010. Economists expect a 0.3% increase, lower than a 0.5% rise in January 2010. On Thursday, 1 April 2010, the Institute of Supply Management will release its index on US manufacturing growth and the Labor Department's report on non-farm payroll employment is to follow Friday, 2 April 2010.

The Federal Reserve's unprecedented dose of stimulus to the economy during the recent financial crisis complicates the task of pulling back when the time is right, top central bank officials said on Friday.

World trade in merchandise goods is expected to rebound strongly this year as economic recovery takes hold, expanding by 9.5%, World Trade Organization Director-General Pascal Lamy said on Friday.

Close home, the BSE 30-share Sensex rose 66.59 points or 0.38% to 17,711.35, its highest closing since 28 February 2008. The Sensex rose 129.69 points at the day's high of 17,793.01 in afternoon trade. The barometer fell 5.58 points at the day's low of 17,639.18 in early trade.

The S&P CNX Nifty rose 20.85 points or 0.39% to 5302.85, its highest closing since 15 February 2008. It hit a high of 5,329.55 in afternoon trade. Nifty April 2010 futures were at 5,323, at a premium of 20.15 points over spot closing of 5,302.85. Turnover in NSE's futures & options (F&O) segment was Rs 57,047.03 crore, lower than Rs 57,814.27 crore on Friday, 26 March 2010.

The BSE Mid-Cap index rose 0.25%. The BSE Small-Cap index fell 0.44%. Both the indices underperformed the Sensex.

The BSE Consumer Durables index (up 1.97%), the BSE FMCG index (up 1.05%), the BSE Bankex (up 0.82%), the BSE Capital Goods index (up 0.68%), the BSE Realty index (up 0.61%), the BSE Auto index (up 0.56%), the BSE Metal index (up 0.39%), outperformed the Sensex.

The BSE IT index (down 1.74%), the BSE Teck index (down 1.33%), the BSE PSU index (down 0.01%), the BSE Oil & Gas index (up 0.06%), the BSE Power index (up 0.12%), the BSE HealthCare index (up 0.13%), underperformed the Sensex.

BSE clocked a turnover of Rs 4104 crore, lower compared to Rs 4653.52 crore on Friday, 26 March 2010.

The market breadth, indicating overall health of the market was weak. On BSE, 1031 shares advanced as compared with 1852 that declined. A total of 78 shares remained unchanged. The breadth was strong at the onset of the trading session.

From the 30 Sensex shares, 20 stocks rose and the rest fell.

Index heavyweight Reliance Industries (RIL) fell 0.47% on profit taking. 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.

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 FMCG maker by sales Hindustan Unilever rose 0.8% after the company sold remaining 49% in Capgemini Business Services (India) to Cap Gemini S.A.

Among other FMCG stocks, United Spirits, Tata Tea, ITC, Nestle India rose by between 0.08% to 4.91%.

India's largest drug maker by sales Ranbaxy Laboratories rose 1.11%, after the company signed a pact with Pfenex of US for developing a biosimilar therapeutic protein.

Among other healthcares tocks, Aurobido Pharma, Lupin, Sun Pharmaceutical Industries and Glenmark Pharmaceuticals rose by between 0.01% to 5.19%.

Consumer durables stocks rose on hopes increase in disposable incomes following changes in personal income tax slabs in the Budget could boost consumption. Blue Star, Rajesh Exports, Titan Industries and Gitanjali Gems rose by between 0.74% to 6.26%.

Rate sensitive banking stocks rose as the government will sell Rs 2,87,000 crore ($64 billion) of bonds in the first half of 2010/11, 63% of its record full-year target, less than market expectations. Lower supply of paper will prop up bond prices, which is beneficial to the bond portfolios of banks, as they rely on profits from appreciation of securities. India's largest private sector bank by net profit HDFC Bank rose 0.86%, gaining for the straight fifth day. It hit all-time high of Rs 1986 today. India's largest bank by net profit and branch network State Bank of India (SBI) rose 1.05%, extending Friday's gains.

India's largest private sector bank by net profit ICICI Bank rose 0.562% reversing early losses. The bank's Q3 advance tax payment surged to Rs 350 crore versus Rs 250 crore a year ago.

As per reports the annual growth in bank credit has for the first time exceeded the Reserve Bank of India's (RBI's) estimate of 16% for 2009-10. According to latest data from RBI, loan disbursement by scheduled commercial banks, including regional rural banks, recorded 16.04% growth at the end of 12 March 2010, on a year-on-year basis. This is above RBI's projection of 16% credit growth in this financial year.

Most Auto stocks rose on expectations of good Q4 results. India's largest tractor maker by sales Mahindra & Mahindra (M&M) was settled at Rs 553.35 after a 2-for-1 stock split was effected in the counter. M&M is reportedly likely to freeze investments in its troubled joint venture with Renault, ceding a majority stake and management control to the French company. Meanwhile, M&M paid Rs 236 crore in advance tax in Q4 March 2010 versus nil payment a year earlier.

India's largest car maker by sales Maruti Suzuki India rose 1.93%, extending Friday's 1.76% gains on bargain hunting after a recent slide triggered by fears increase in competition may dent sales. Recently, Ford India entered the small car market with 'Figo'.

Bajaj Auto rose 0.4%, gaining for the straight third day. The company said last week 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 was flat. The company said recently that a meeting of company's board of directors will be held on 30 March 2010 to consider the declaration of special interim dividend.

But, Tata Motors fell 1.33% on profit taking after Friday's 3.36% gains on reports the company is selling about 20% stake in its equipment and services unit, Telco Construction Equipment Company (Telcon), to Japan's Hitachi Construction Machinery Company for roughly $220 million. Telcon, in which Tata Motors holds 60% stake and Hitachi 40%, supplies a wide range of construction equipment such as excavators, mining shovels and dumpers to the construction and earth-moving sector.

Earlier, the stock had fallen 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.

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.

IT stocks fell as the rupee strengthened to its highest level in nearly 19 months on Monday as the dollar's broad drop against major currencies and gains in the domestic sharemarket boosted sentiment. India's largest software services exporter by sales Tata Consultancy Services (TCS) fell 1.7%, extending Friday's losses. The company said recently it signed a five year contract with Malaysia Airlines for providing end-to-end information technology infrastructure services.

India's second largest software services exporter by sales Infosys fell 2.23%, extending Friday's losses. Infosys' fourth quarter advance tax payment doubled. But, India's third largest software services exporter by sales Wipro fell 0.1%.

The partially convertible rupee was at 45.01/02 per dollar, above its close of 45.23/24 on Friday. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

Rate sensitive realty shares rose on bargain hunting after a recent fall triggered by worries higher interest rate on housing loans may crimp demand. HDIL, DLF, Omaxe, Sobha Developers, Omaxe, Unitech, rose by between 0.18% to 1.56%.

Meanwhile, the introduction of the contentious service tax on apartments that are still under construction in the Union Budget 2010-2011 may reportedly put pressure on property prices.

India's largest engineering and construction firm by sales, L&T, rose 1.43% after the company said today it has bagged an order worth Rs 1400 crore.

Among other capital goods stocks, Siemens, BEML, Bharat Heavy Electricals and Praj Industries rose by between 0.62% to 1.78%.

Bharti Airtel rose 0.24% on reports Bharti Airtel and Kuwait's Zain are likely to sign agreements for the Bharti's $9 billion buy of Zain's African assets on Tuesday 30 March 2010.

Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.01% on Friday, 26 March 2010., Sesa Goa, Sterlite Industries, National Aluminum Company, Hindalco Industries, Gujarat NRE Coke rose by between 0.18% to 3.23%.

But, India's largest steel maker by sales Tata Steel fell 0.19%. The company reportedly plans to tap the global depository receipt (GDR) market for raising at least $500 million (Rs 2,300 crore). The money is to be raised within the next two quarters, to capitalise the balance sheet, report said. Tata Steel's Q4 advance tax payment rose to Rs 513 crore from Rs 406 crore a year earlier.

India's largest mortgage lender, Housing Development Finance Corporation (HDFC) rose 2.04% on reports the company plans to rejig its investments in unlisted companies to capture their value. It will transfer shares of select securities to a special purpose vehicle (SPV) and bring in strategic investors in the SPV. HDFC has investments in companies such as Lafarge, Chalet Hotels, IL&FS , IL&FS Education, National Stock Exchange (NSE), L&T Urban Infrastructure and Maruti Countrywide, which it does not consider as strategic to its business.

Shares of animation and gaming firm DQ Entertainment (International) settled at Rs 108.55 on the BSE, at a premium of 35.70% over the initial public offer price of Rs 80. The stock debuted at Rs 135, a premium of 68.80% over the initial public offer (IPO) price.

DQ Entertainment clocked the highest volume of 3.99 crore shares on BSE. Cals Refineries (2 crore shares), Pipavav Shipyard (1.24 crore shares), Bellary Steels (1.12 crore shares) and Birla Power Solutions (0.92 crore shares) were the other volume toppers in that order.

DQ Entertainment clocked the highest turnover of Rs 433.60 crore on BSE. NMDC (Rs 119.10 crore), LIC Housing Finance (Rs 118.64 crore), Syncom Healthcare (Rs 105.16 crore) and Pipavav Shipyard (Rs 86.60 crore) were the other turnover toppers in that order.