Nifty scales two-year closing high

The 50-unit S&P CNX Nifty attained its highest closing level in more than two years supported by persistent buying by the foreign funds. The barometer index BSE Sensex achieved its highest closing level in more than two months as equities gained for the seven straight week. The Sensex jumped 85.91 points or 0.49%, off close to 40 points from the day's high.

The market breadth turned weak in the latter part of the day. That was in contrast to a strong breadth earlier in the day. Index heavyweight Reliance Industries (RIL) trimmed gains in late trade. Metal, consumer durables, auto and banking stocks rose. But, IT stocks fell. Most Asian stocks rose after European leaders on Thursday agreed on an aid plan for Greece, easing concern the nation's debt crisis will spread and derail the global recovery. However, European stocks edged lower.

Stocks were volatile. The market trimmed gains in morning trade after hitting its highest level in more than two months. The market jumped again to hit fresh two-month high in mid-morning trade. It once again trimmed gains in early afternoon trade. The market witnessed a bout of volatility in afternoon trade. The Sensex hit a fresh 2-month high in mid-afternoon trade. The market pared gains in late trade.

The market sentiment remains firm on heavy buying by foreign funds this month. 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.

Emerging-market equity funds combined took in a net $1.4 billion during the week ended 24 March 2010, a 10-week high, bringing year-to-date inflow totals past the $7 billion mark, according to the latest data from global fund tracker EPFR Global. But, China equity funds posted outflows in the week.

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 a modest 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.

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

Food prices eased for the third straight week in mid-March while fuel inflation remained steady. The Reserve Bank is seen raising rates the second time in as many months in April. The Reserve Bank of India (RBI) surprised markets with a 25 basis point hike in its key lending rate last week to tame headline inflation that is near 10% and warned of a build up in demand-side pressures in the economy.

Data on Thursday showed the fuel price index rose 12.68% in the year to 13 March 2010, flat on the week. The government had raised motor fuel prices in late February. The food price index rose an annual 16.22% in the year to 13 March 2010, lower than the previous week's reading of 16.30%. The primary articles index was up 13.88% for the latest period, compared with 14.16% in the previous week.

After the most recent rate hike, analysts are betting the RBI will raise rates to a slightly higher level this year than earlier expected. Most now see rates being raised by a total of 100 basis points by the end of 2010. The Reserve Bank of India (RBI) said on Thursday it was imperative to curb inflationary pressures fuelled by increased capacity utilisation and rising energy and commodity prices.

Earlier on Thursday, 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". A week after the RBI unexpectedly lifted its key rates, it said food prices were moderating but were still high and the pace of inflation in non-food manufactured goods was accelerating.

The RBI spoke of challenges in managing the central government's record $100.4 billion borrowing plan for the financial year that begins on 1 April 2010 and said the timing and maturity profile of fresh issuances were key. The huge borrowing sums could harden yields, making funds for banks and corporates more expensive, the RBI said. The RBI said the process of fiscal consolidation would help better monetary management.

The stock market will spurt if the government undertakes 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.

In global news, euro zone leaders agreed on Thursday to create a joint financial safety net with the IMF to help debt-ridden Greece and to try to restore confidence in their common currency after weeks of wrangling. Under the accord, Athens would receive coordinated bilateral loans from other countries that use the euro and money from the International Monetary Fund if it faced severe difficulties.

European shares edged lower on Friday, moving off annual highs, after Europe agreed a plan to support Greece if required. The key benchmark indices in France, Germany and UK were down by between 0.19% to 0.29%.

Asian stock markets were mostly up Friday, with Japanese exporters higher on the yen's recent weakness and banks in China were up after their earnings this week met expectations. The key benchmark indices in China, Hong Kong, Indonesia, Singapore, Taiwan, South Korea and Japan rose by between 0.49% to 1.55%.

Deflation continued in Japan as consumer prices data released Friday showed a decline for the 12th straight month in February. Core CPI, which excludes fresh food, dropped 1.2% from a year earlier.

South Korea left its fourth-quarter growth rate unrevised at 0.2%, compared to the previous three-month period, the Bank of Korea said in a statement Friday.

Trading in US index futures indicated that the Dow could gain 21 points at the opening bell on Friday, 26 March 2010.

US markets ended slightly lower on on Thursday on strength in dollar. The Dow Jones rose 5.06 points or 0.05% to 10,841.21. The Nasdaq declined 1.35 points or 0.06% to 2,397.41 and the S&P 500 fell 1.99 points or 0.17% to 1,165.73. In economic news, initial jobless claims for the week ended 20 March 2010 totaled 442,000, which was a bit less than the expected total of 450,000 and down 14,000 from the prior week. Continuing claims came in at 4.65 million down roughly 54,000.

A modest US economic recovery still warrants the Federal Reserve's ultra-low interest rate policy, but the central bank stands ready to remove stimulus once the expansion looks solid, Chairman Ben Bernanke said on Thursday.

Closer home, the BSE 30-share Sensex was up 85.91 points or 0.49% to 17,644.76, its highest closing since 6 January 2010. The Sensex rose 124.09 points at the day's high of 17,682.94 in mid-afternoon trade. The barometer opened at the previous day's close of 17,558.85 in early trade which was also the day's low.

The S&P CNX Nifty was up 21.60 points or 0.41% to 5282, its highest closing since 28 February 2008.

The BSE Mid-Cap index rose 0.71% and outperformed Sensex. The BSE Small-Cap index fell 0.03% and underperformed Sensex.

The BSE Auto index (up 1.75%), the BSE Bankex (up 1.59%), the BSE Consumer Durables index (up 1.37%), the BSE FMCG index (up 0.74%), the BSE Oil & Gas index (up 0.72%), the BSE Metal index (up 0.53%), outperformed the Sensex.

The BSE IT index (down 0.67%), the BSE Teck index (down 0.55%), the BSE Realty index (down 0.25%), the BSE HealthCare index (down 0.17%), the BSE Capital Goods index (down 0.06%), the BSE Power index (up 0.01%), the BSE PSU index (up 0.21%), underperformed the Sensex.

The market breadth, indicating overall health of the market was weak in contrast to a strong breadth earlier in the day. On BSE, 1192 shares advanced as compared with 1660 that declined. A total of 88 shares remained unchanged. The breadth was much stronger earlier in the day.

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

BSE clocked a turnover of Rs 4597 crore, higher than Rs 4557.30 crore on Thursday, 25 March 2010.

Index heavyweight Reliance Industries (RIL) rose 0.67%, to Rs 1099, extending recent gains on expectations of good Q4 March 2010 results. But the stock came off the day's high of Rs 1109.40. 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.

Bharti Airtel fell 1.15% on concerns that a debt-funded $9 billion deal to buy the African assets of Kuwaiti telecom Zain may stretch the Indian mobile operator's financials. Bharti said late on Thursday due diligence on the deal to buy Zain Africa BV, a company incorporated in the Netherlands, is complete and said it expected to sign definitive agreements with Zain soon, echoing what the Kuwaiti group said the previous day. The acquisition would give Bharti access to 15 countries in Africa.

Rate sensitive banking stocks rose on 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. India's largest private sector bank by net profit ICICI Bank rose 1.91%. 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 1.16% gaining for the straight fourth day. It hits all time high of Rs 1952.70 today. India's largest bank by net profit and branch network State Bank of India (SBI) rose 1.09%.

IT stocks fell on profit taking after recent strong gains. India's largest software services exporter by sales Tata Consultancy Services (TCS) fell 0.46%. 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 fell 1% after hitting a record high on Thursday. Its ADR rose 0.36% on Thursday. Infosys' fourth quarter advance tax payment doubled. India's third largest software services exporter by sales Wipro fell 0.31%. Its ADR fell 0.78% on Thursday.

Auto stocks rose on expectations of good Q4 results. Tata Motors rose 3.36% 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.

The stock had lost over the past two days 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 2.2% extending Thursday's gains. The company 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 1.76% 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 5.16% extending Thursday's gains. The company said on Thursday 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.

But India's largest bike maker by sales Hero Honda Motors fell 0.81% on profit taking after Thursday's 4.39% gains 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.

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.

Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 0.89% on Thursday, 25 March 2010. JSW Steel, Jai Corp, NMDC, Guj NRE Coke, Sesa Goa, Steel Authority of India, Hindalco Industries rose by between 0.26% to 3.66%.

India's largest steel maker by sales Tata Steel rose 1.2%. Its Q4 advance tax payment rose to Rs 513 crore from Rs 406 crore a year earlier.

But, India's largest copper maker by sales Sterlite Industries fell 0.18% reversing early gains. 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.

National Aluminium Company fell 0.14%. The Union Minister for Mines has ruled out any possibility of disinvestment in the state-run aluminium firm.

Consumer durables stocks rose on hopes increase in disposable incomes following changes in personal income tax slabs in the Budget could boost consumption. Videocon Industries, Titan Industries and Gitanjali Gems rose by between 0.07% to 3.76%.

FMCG stocks rose on government's thrust on the rural sector and social schemes in the Budget. Hindustan Unilever rose 2.61%, 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, ITC, United Spirits, Nestle India, Dabur India, Marico rose by between 0.17% to 3.34%.

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, Ipca Laboratories, Ranbaxy Laboratories, Sun Pharmaceutical Industries, Glenmark Pharmaceuticals rose by between 0.02% to 3.66%.

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

Some infrastructure stocks fell on profit taking after recent gains triggered by the government's major thrust on infrastructure sector. 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. Larsen & Toubro, Nagarjuna Construction Company, Hindustan Construction Company rose by between 0.27% to 0.95%.

Rate sensitive realty shares fell after a rate hike by the central bank late last week. HDIL, DLF, Omaxe, Ackruti City, Sobah Developers, Omaxe, Unitech, Phoenix Mills fell by between 0.23% to 2.91%.

Cals Refineries clocked the highest volume of 2.79 crore shares on BSE. Bellary Steels (2.58 crore shares), Syncom HealthCare (2.19 crore shares), Pipavav Shipyard (0.95 crore shares) and Birla Power Solutions (0.94 crore shares) were the other volume toppers in that order.

Syncom HealthCare clocked the highest turnover of Rs 295.78 crore on BSE. ARSS Infra (Rs 181.78 crore), Tata Motors (Rs 91.71 crore), Reliance Industries (Rs 84.97 crore) and State Bank of India (Rs 75.41 crore) were the other turnover toppers in that order.