Pharma stocks edge higher in volatile market

The key benchmark indices swayed between gains and losses ahead of the derivatives expiry later this week. Pharma stocks rose even as realty shares witnessed selling pressure. The BSE 30-share Sensex rose 40.45 points or 0.23%, up close to 94 points from the day's low and off close to 80 points from the day's high.

Investor sentiment appeared to positive with just four out of 13 sectoral indices on the BSE closing in the red. But, the market breadth, indicating the overall health of the market, was negative compared with a strong breadth in early trades today. World stocks rose.

The market was volatile as traders rolled over positions in derivatives segment from the March 2010 series to the April 2010 series ahead of the expiry of the near-month March 2010 derivatives contracts on Thursday, 25 March 2010. The market surged in early trade. The Sensex had lost nearly 1% on Monday, 22 March 2010, after a surprise hike in short term interest rates by the Reserve Bank of India (RBI) which it announced after trading hours on Friday, 19 March 2010.

The market pared gains soon after an initial rally. The market further trimmed gains in morning trade, after moving a in a narrow range in morning trade. The market once again moved in a narrow range in mid-morning trade. The key benchmark indices recovered from lower level after erasing almost the entire intraday gains. However, the intraday recovery proved short-lived. The market slipped into the red in afternoon trade. The key benchmark indices regained positive zone in mid-afternoon trade.

Rollover of Nifty futures from March 2010 series to April 2010 series was about 40% at the end of Monday's trade. Rollover in Mini Nifty futures was about 31% and the market wide rollover stood at about 36%. In individual stocks, GTL, National Aluminum Company, Reliance Power, GTL Infrastructure, and Bharti Airtel, have witnessed high rollover. But rollover was low in REC, Dish TV, Essar Oil, ITC and Welspun-Gujarat Stahl Rohren till Monday.

A day after a sharp surge, NSE's volatility index, India VIX, witnessed a steep slide. The index tumbled 9.17% to 18.13. 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. On Monday, 22 March 2010, the volatility index had surged 12.45% to 19.96 following a surprise hike in key policy rates by the Reserve Bank of India (RBI).

The stock market remains closed on Wednesday, 24 March 2010, on account of Ram Navmi.

The government will allow private-sector firms to issue infrastructure bonds to raise funds for projects, Finance Minister Pranab Mukherjee said on Tuesday. Prime minister Manmohan Singh today said there is a need to spend $1 trillion in infrastructure in the five years to 2016/17.

Mukherjee said the capacity of banks to fund infrastructure projects is stretched and new sources had to be tapped, including allowing private firms to issue infrastructure bonds. The availability of equity, both domestic and FDI (foreign direct investment) continue to remain an area of concern, he said. " We have still not completely succeeded in exploiting the full potential of insurance and pension funds for deployment in the infrastructure projects," Mukherjee said.

India plans to spend $514 billion in the five years to 2011/12, and Mukherjee said this goal was proceeding as per schedule.

The Reserve Bank of India (RBI) after trading hours on Friday 19 March 2010, unexpectedly raised interest rates from record-low levels, citing intensifying inflationary pressures and a steady economic recovery. The market had widely expected the RBI to raise rates soon, but the timing of its 25 basis-point hike for its key lending and borrowing rates, before the April 2010 policy review caught market men by surprise.

The RBI raised the repo rate, the rate at which it lends to banks to 5% from 4.75% and reverse repo rate, the rate which it absorbs funds from the system to 3.50% from 3.25% with immediate effect. India is the second major economy after Australia to start raising interest rates with signs of global recovery emerging and local price pressures picking up. China has raised its banks' reserve requirements but has left its rates unchanged.

The wholesale price index in Asia's third-largest economy accelerated to 9.89% in February, the highest since October 2008 and well above the central bank's end-March 2010 projection of 8.5% and the 8.56% reading for January 2010.

In the emergent scenario, low policy rates can complicate the inflation outlook and impair inflationary expectations, particularly given the recent escalation in the prices of non-food manufactured goods, the RBI said in a statement. While the recovery in growth has proceeded broadly along expected lines, the inflationary pressures have intensified beyond the central bank's baseline projection, the RBI said.

The government may have to sacrifice a little bit of short-term economic growth after the rate increase, which was aimed at consolidating long-term growth, the Reserve Bank of India (RBI) governor D Subbarao said on Monday.

The country's apex planning body has reportedly called for wide-ranging reforms in agriculture, while criticising the strategy employed by the government to increase farm output and tame soaring food prices.

The Planning Commission said the agriculture pricing system should be made more market-oriented by delinking support prices from procurement prices. It has also suggested measures such as abolition of levies and stocking limits, encouraging free movement of goods across the country and doing away with bans on exports and futures trading.

In its mid-term appraisal of the Eleventh Plan (2007-12) to be ratified by the full Planning Commission under Prime Minister Manmohan Singh on Tuesday, the panel pointed out that while the farm sector did well between 2005-06 and 2007-08 growing at 4%, the performance in the past two years showed that the government's strategy was not effective and more needed to be done on the supply side to maintain growth.

Meanwhile, poor performance in the power, road and port sectors has resulted in actual investment in infrastructure falling below the level envisaged in the Eleventh Plan period despite a robust growth in telecom sector.

Coming back to stocks, encouraging Q4 March 2010 advance tax figures of top Indian firms, indicating good Q4 March 2010 results, had boosted the bourses last week. 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 11112.83 crore this month, till 22 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.

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 stocks were moderately higher Tuesday, following a strong session in the US on Monday. The key benchmark indices in France, Germany and UK rose by between 0.53% to 0.82%.

European leaders recently tried to allay concerns that they were unprepared to aid Greece easing pressure on higher-yielding assets. The ECB president said the central bank is prepared to reassess its collateral rules if necessary, softening its stance as Greece struggles to cut the region's largest budget shortfall.

Most Asian shares rose on Tuesday, supported by investor expectations of an ongoing recovery in the world economy, and as tech stocks drew support from gains in their US peers. Sentiment was also lifted by the passage of the US healthcare legislation in the House of Representatives late Sunday. The key benchmark indices in Hong Kong, Indonesia, South Korea, Singapore rose by between 0.26% to 0.68%.

But the key benchmark indices in China, Taiwan and Japan fell by between 0.31% to 0.70%. Shares in China reversed earlier gains as financial stocks and property developers weakened on concerns about weaker dividends from the upcoming earnings reports.

Trading in US index futures indicated Dow could gain 9 points at the opening bell on Tuesday, 23 March 2010.

After a weak opening US stocks finally closed higher on Monday led by healthcare stocks as the passage of the health-care bill lifted uncertainty surrounding the legislation that was hanging over the market. The Dow Jones Industrial Average rose 43.91 points or 0.41% to 10784.89. The Nasdaq rose 20.99 points or 0.88% to 2395.40 and S&P 500 gained 5.91 points or 0.51% to 1,165.81.

The BSE 30-share Sensex rose 40.45 points or 0.23% to 17,451.02. The Sensex fell 53.93 points at the day's low of 17,356.64 in afternoon trade. The barometer rose 120.22 points at the day's high of 17,530.79 in early trade.

The S&P CNX Nifty was up 20.10 points or 0.39% at 5225.30.

The BSE Mid-Cap index rose 0.21% and the BSE Small-Cap index rose 0.30%.

The market breadth, indicating overall health of the market, was negative. That was in contrast to a strong breadth earlier in the day. On BSE, 1266 shares advanced as compared with 1504 that declined. A total of 109 shares remained unchanged.

BSE clocked a turnover of Rs 4175 crore, lower than Rs 4618.91 crore on Monday, 22 March 2010.

The BSE HealthCare index (up 1.54%), the BSE Oil & Gas index (up 1.13%), the BSE Power index (up 0.88%), the BSE Metal index (up 0.83%), the BSE Bankex (up 0.32%), the BSE IT index (up 0.31%), the BSE Capital Goods index (up 0.29%), outperformed the Sensex.

The BSE Consumer Durables index (up 0.15%), the BSE FMCG index (up 0.08%), the BSE Teck index (down 0.25%), the BSE PSU index (down 0.28%), the BSE Auto index (down 0.52%), and the BSE Realty index (down 0.71%), underperformed the Sensex.

From the 30 Sensex shares, 15 stocks fell, 14 stocks rose and one stock was unchanged.

Index heavyweight Reliance Industries (RIL) rose 1.43%, extending recent gains 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.

Cairn India rose 3.76% after parent Cairn Energy of UK lifted its estimates for reserves at its Indian operation and said the unit's Rajasthan fields could produce more oil than previously thought. Cairn raised its estimates of oil and gas in place in Rajasthan to 4 billion barrels of oil equivalent (boe) from 3.7 billion boe and said there could be another 2.5 billion boe yet to be discovered. The Edinburgh-based company said the fields had the potential to pump 240,000 boe per day. Previously the company said it hoped to exceed its target of 175,000 boe per day but did not specify by how much.

India's largest engineering & construction firm by sales Larsen & Toubro (L&T) fell 0.36% in a volatile trade. The company said today 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.

But, other capital goods stocks rose. Areva T&D, Alstom Projects, Siemens, Crompton Greaves, Thermax, Bharat Heavy Electricals and Punj Lloyd rose by between 0.42% to 10.33%.

India's largest mobile services provider by sales Bharti Airtel fell 3% and was the top loser form the Sensex pack. The company has tied up the entire financing requirement of $8.3 billion for its planned buy of Kuwaiti telecom Zain's African assets, in a sign of progress as the deadline for the firms' talks expire this week. Bharti and Zain are in exclusive talks until 25 March 2010, marking the third time Bharti has tried to get its hands on a meaningful African business after two failed bids for South Africa's MTN.

Rate sensitive auto stocks extended Monday's fall triggered by a rate hike by the central bank. India's largest commercial vehicle maker by sales Tata Motors fell 2.76%, extending Monday's 3.02% fall 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 today. 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) fell 0.02%, with the stock sliding for the fifth day. The company paid Rs 235 crore in advance tax in Q4 March 2010 versus nil payment a year earlier.

India's largest bike maker by sales Hero Honda Motors fell 0.45%. Hero Honda has short-listed Karnataka as one of the states for setting up its fourth manufacturing plant. Hero Honda Motors has reportedly proposed an investment of Rs 2,000 crore for the upcoming plant.

India's largest car maker by sales Maruti Suzuki India fell 0.34%, extending recent slide triggered by fears increase in competition may dent sales. Recently, Ford India entered the small car market with 'Figo'.

Bajaj Auto fell 0.05%. As per recent report a joint venture between Nissan Motor, Renault S.A. and Bajaj Auto is working to make a car that will match the price of Tata Motors' Nano.

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.

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, Dr Reddy's Laboratories, Ranbaxy Laboratories, Cipla, Divi's Laboratories, Lupin, Pfizer rose by between 0.09% to 3.34%.

Piramal Healthcare surged 3.38%, after the company signed a pact with Cipla for acquiring i-pill, an emergency contraceptive pill, for a consideration of Rs 95 crore.

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

Metal stocks rose on strong domestic demand. JSW Steel, Jai Corp, Guj NRE Coke, Sesa Goa, Hindalco Industries and Jindal Saw rose by between 0.34% to 3.02%.

India's largest steel maker by sales Tata Steel rose 1.20%. Its Q4 advance tax payment rose to Rs 513 crore from Rs 406 crore a year earlier.

India's largest copper maker by sales Sterlite Industries rose 0.47%. 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.

But, National Aluminium Company fell 1.51%. The Union Minister for Mines has ruled out any possibility of disinvestment in the state-run aluminium firm.

Jindal Steel & Power advanced 2.47% on reports the company will invest $10 billion to set up a coal-to-liquid plant and a 2,000 megawatt thermal power plant in Orissa.

Compact Disc India was locked at 20% upper limit at Rs 79.30, after the company secured a large animation contract worth $82 million.

Sonata Software galloped 6.89%, after the company partnered with an independent non-profit organization dedicated to improving testing processes and software quality on a global scale.

ARSS Infrastructure Projects reported a highest turnover of Rs 206.02 crore on the BSE. Man Infraconstruction (Rs 115.78 crore), Syncom Healthcare (Rs 109.04 crore), Tata Motors (Rs 78.95 crore) and State Bank of India (Rs 71.75 crore), were the other turnover toppers on the BSE.

Cals Refineries clocked a highest volume of 2.53 crore shares. Syncom Healthcare (83.58 lakh shares), Suven Life Sciences (71.76 lakh shares), Facor Alloys (61.74 lakh) and Krishna Lifestyle Technologies (55.66 lakh shares), were the other volume toppers on the BSE.