Telecom shares, RIL propel key indices to 2-month closing highs

The key benchmarks attained two month closing highs after moving in a tight range throughout the day. Index heavyweight Reliance Industries (RIL) surged in late rally. IT and realty stocks fell. But, PSU banks, auto and consumer durables stocks rose. Some side counters surged. The BSE 30-share Sensex rose 58.97 points or 0.34%, up close to 80 points from the day's low and off close to 20 points from the day's high.

The market was volatile. The market edged higher in early trade. It soon trimmed gains. The market surged again in morning trade, with the 50-unit S&P CNX Nifty hitting its highest level in two months. The market once gain trimmed gains. The market regained strength after hitting a fresh intraday low in morning trade. The market erased almost the entire intraday gains in mid-morning trade. It recovered later. The market slipped into the red in afternoon trade. Stocks regained positive zone after hitting fresh intraday lows in afternoon trade. The market pared gains after hitting a two-month high in late trade.

The market may remain volatile in the near term as traders rollover positions in derivatives segment from the March 2010 series to the April 2010 series ahead of the expiry of the expiry of the near-month March 2010 derivatives contracts on Thursday, 25 March 2010. The market remains closed on Wednesday, 24 March 2010, on account of Ram Navmi.

Encouraging Q4 March 2010 advance tax figures of top Indian firms, indicating good Q4 March 2010 results, has boosted the bourses this week. The market has 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 10525.80 crore this month, till 18 March 2010.

The stock market has applauded 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 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.

Global rating agency Standard & Poor's on Thursday revised India's rating outlook to stable from negative. S&P affirmed long-term and short-term sovereign credit ratings on India. The revision in outlook by S&P reflects its view that India's fiscal position could now begin to recover and that its economy will remain on a strong growth path. The government budget targets a general government (including central and state governments) deficit of 8.3% in the fiscal year ending 31 March 2011, from 9.8% in the previous fiscal year, S&P said.

S&P also estimated that India's gross domestic product will grow 8% in the year ending March 31, 2011, higher than its forecast earlier, adding India's external position was resilient. Even so, India's ratings continue to be constrained by the government's high debt burden and deficit, as well as India's weak fiscal profile, the rating agency said.

The food price inflation eased for the second straight week in early March but fuel inflation rose, maintaining the case for the Reserve Bank of India (RBI) to raise borrowing rates at its April policy review. Steepening inflation has seen markets pricing in a 25 to 50 basis point interest rate hike in April. The central bank is open to taking policy action before its April review, Deputy Governor K.C. Chakrabarty said on Thursday, contrary to earlier comments that it would refrain from taking inter-policy steps.

Data released on Thursday showed the food price index rose 16.30% in the year to 6 March 2010, lower than an annual rise of 17.81% in the previous week. It was the second straight weekly easing of food price inflation and analysts expected the trend to continue, echoing policymakers' comments that high inflation was due to supply shortages and would cool off as the new winter-sown harvest reached the market.

The fuel price index rose 12.68 % in the year to 6 March 2010, up from an annual rise of 11.38% in the previous week. The government had hiked state-set retail fuel prices at the end of February.

Key policymakers have said headline inflation would ease over the next two months, after the finance minister said it could top 10% in March following a reading of 9.89% in February. But in a sign the government was giving the green light to a rate hike, a top policy adviser said the Reserve Bank of India ought to carefully consider a return to a normal monetary policy.

Government officials have had until recently called for the Reserve Bank of India to ensure that any possible rate hike does not put the country's economic recovery at risk. The RBI has to balance managing the government's record $100 billion borrowing plan for the 2010/11 fiscal year with supporting growth and taming inflation.

Meanwhile, the Centre today approved 8% hike in dearness allowance (DA) for government employees and pensioners with effect from 1 January 2010. The hike in DA will result in annual outgo of Rs 6970 crore for the government. The dearness allowance is linked to the percentage rise in the 12-month average of the consumer price index and is revised twice a year.

Commerce and Industry Minister Anand Sharma urged US companies on Thursday to jump on board India's rapid growth and help it expand its manufacturing base.

Several companies have paid a higher tax this quarter according to the preliminary data, indicating better fourth quarter results. Reliance Industries has paid Rs 770 crore as advance tax for the March quarter compared with Rs 365 crore a year ago. Infosys' tax outgo has doubled to Rs 250 crore from Rs 125 crore. Tata Consultancy Services paid Rs 178 crore, compared from Rs 53 crore earlier. State-run Union Bank of India paid Rs 185 crore compared with Rs 253 crore a year ago. ICICI Bank's Q3 advance tax stood at Rs 350 crore versus Rs 250 crore a year ago. Asian Paints paid Rs 60 crore, versus Rs 43 crore year earlier.

State Bank of India has paid Rs 1857 crore verses Rs 1810. HDFC paid Rs 280 crore, unchanged from a year earlier. Tata Motors paid Rs 115 crore versus Nil a year ago. Bank of Baroda paid Rs 300 crore verses Rs 280. Zee Entertainment Enterprises paid Rs 97 crore versus Rs 109. Tata Steel paid Rs 513 crore versus Rs 406 crore. L&T paid Rs 270 crore versus Rs 275 crore. Bajaj Auto paid Rs 177 crore versus Rs 60 crore. M&M paid Rs 235 crore versus nil a year earlier.

Cement maker ACC paid Rs 330 crore compared to Rs 340 crore a year ago. Ambuja Cement paid Rs 120 crore, compared with Rs 125 crore a year ago. Aditya Birla Group firm Grasim Industries paid Rs 216 crore as advance tax in the period under review, as compared to Rs 65 crore a year ago. Life Insurance Corp of India (LIC) has paid Rs 864 crore as advance tax for the March quarter, compared with Rs 810 crore year ago.

Banks led European shares higher on Friday as Lloyds Banking Group surged after the lender said it would return to profitability in 2010. The key benchmark indices in France, Germnay and UK rose by between 0.28% to 0.72%.

Concerns over Greece's debt problems persisted on Friday. The country raised the stakes on Thursday in its quest for EU help to tackle its debt crisis, saying it cannot achieve promised deficit cuts if its borrowing costs remain so high and may have to call in the IMF.

Asian stocks rose after an early flip flop on Friday, led by Japanese car and electronics makers, after reports on fewer US jobless claims and higher manufacturing boosted confidence in the recovery of the world's biggest economy. The key benchmark indices in Japan, Indonesia, Hong Kong, South Korea, Singapore China and Taiwan rose by between 0.15% to 0.71%.

Trading in US index futures indicated that the Dow could gain 7 points at the opening bell on Friday, 19 March 2010.

US markets ended a choppy trading session higher with the Dow hitting a fresh 52-week high. Markets opened higher after jobless claims came in line with estimates and the CPI for February came in flat. But it lost steam midday as the dollar gained. The Dow Jones Industrial Average closed 45.50 points or 0.42% higher at 10,779.17. The Nasdaq Composite ended at 2,391.28, up 2.19 points or 0.09%. But, the S&P 500 was down 0.38 points or 0.03% at 1,165.83.

Closer home, the BSE 30-share Sensex rose 58.97 points or 0.34% to 17578.23, its highest closing level since 18 January 2010. The barometer index rose 81.61 points at the high of 17,600.87 in late trade. The Sensex fell 16.91 points at the day's low of 17,502.35 in afternoon trade.

The S&P CNX Nifty rose 16.90 points or 0.32% at 5262.80, its highest closing level since 18 January 2010. It hit a high of 5269.95 in late trade.

The BSE Mid-Cap index rose 0.07% and underperformed Sensex. The BSE Small-Cap index gained 0.37% and outperformed Sensex

The BSE Consumer Durables index (up 1.09%), the BSE Oil & Gas index (up 0.78%), the BSE HealthCare index (up 0.57%), the BSE Auto index (up 0.46%), the BSE PSU index (up 0.46%), the BSE Metal index (up 0.35%), outperformed the Sensex.

The BSE Realty index (down 0.95%), the BSE IT index (down 0.45%), the BSE Capital Goods index (up 0.16%), the BSE Bankex (up 0.21%), the BSE Power index (up 0.27%), the BSE Teck index (up 0.29%), the BSE FMCG index (up 0.31%), underperformed the Sensex.

The market breadth, indicating overall health of the market turned negative. The breadth was positive earlier in the day. On BSE, 1381 shares advanced as compared with 1459 that declined. A total of 111 shares remained unchanged.

Among the 30 Sensex stocks, 17 stocks rose and the rest fell.

BSE clocked a turnover of Rs 4853 crore, lower than Rs 5424.63 crore on Thursday, 18 March 2010.

Index heavyweight Reliance Industries (RIL) rose 1.37% to Rs 1089.80, extending recent rally triggered by 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 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 Sunday, 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.

Some PSU banks rose after R. Copeland, secretary, financial services, in the finance ministry said the government will pump Rs 9000 crore into state-run banks under the first phase of capital injection. State Bank of India, Bank of India, Punjab National Bank, Bank of Baroda, Union Bank of India rose by between 0.09% to 2.67%.

Among private banks, India's largest private sector bank by net profit HDFC Bank rose 0.84%. Its ADR fell 1.2% on Thursday. India's largest private sector bank by net profit ICICI Bank fell 0.58%, on profit taking after the recent gains. The bank's Q3 advance tax payment surged to Rs 350 crore versus Rs 250 crore a year ago. Its ADR fell 0.35% on Thursday.

IT stocks fell on profit taking after recent gains triggered by positive economic data in US. US is the biggest market for the Indian IT firms. India's largest software services exporter by sales Tata Consultancy Services (TCS) fell 0.82%. The company said on Monday 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 0.35% to Rs 2775.10 on profit taking after hitting an all-time high of Rs 2792.15 on Thursday. Its ADR rose 1.03% on Thursday. Infosys' fourth quarter advance tax payment doubled.

India's third largest software services exporter by sales Wipro fell 0.38%. Its ADR fell 1.07% on Thursday.

Realty shares fell after the Budget 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. Omaxe, DLF, HDIL, Indiabulls Real Estate fell by between 0.27% to 3.06 %.

Realty major DLF recently hinted that properties would turn dearer as developers would have to pass on the service tax burden to end-users.

Most auto stocks rose on strong advance tax payment in fourth installment, indicating good Q4 March 2010 results. India's largest bike maker by sales Hero Honda Motors rose 1.76%, extending Thursday's 0.58% gains. Hero Honda has shortlisted 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.

Bajaj Auto rose 1.39% on 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.

India's largest car maker by sales Maruti Suzuki India rose 0.5%, on bargain hunting after recent fall triggered by fears increase in competition may dent sales. Recently, Ford India entered the small car market with 'Figo'.

Maruti Suzuki India, recently said that Japanese auto giant Nissan has placed orders for 35,000 units of its small car A- Star for 2010-11 to sell it in the European market. Nissan sources the A-Star from Maruti's Manesar facility and sells it in the European market as 'Pixo'.

India's largest commercial vehicle maker by sales Tata Motors rose 0.46%, extending recent gains. Tata group's global sales rose 59% in February from a year earlier, the company said in a statement on Monday.

But, India's largest tractor maker by sales Mahindra & Mahindra (M&M) fell 1.27%, falling for the straight third day. The company paid Rs 235 crore in advance tax in Q4 March 2010 versus nil payment a year earlier.

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.

India's largest mobile services provider by sales Bharti Airtel gained 3.25%, after the company submitted its application for 3G spectrum for all 22 service areas. Bharti Airtel on Friday said it had agreed with Apple Inc to sell its iPhone 3GS in India in the coming months.

India's second largest mobile services provider by sales Reliance Communications rose 1.98%. Idea Cellular gained 2.08%.

According to media reports earlier this week, the country's three largest mobile service operators -- Bharti Airtel, Reliance Communications and Vodafone Essar -- have submitted applications for third-generation mobile services in all 22 service areas. Relatively smaller players such as Idea Cellular, Tata Teleservices, Aircel are also expected to bid for licenses in several regions. Today is the last date for applying for 3G mobile spectrum

Under the auction, the government is offering three 3G licenses each in 17 of the 22 telecom service areas in the country, and four slots each in the remaining five regions. But given that there are more than four private-sector operators in most of the regions, competition between those operators is expected to force them to bid strongly.

Infrastructure stocks rose on government's thrust on the infrastructure sector in the latest Budget. 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. Punj Lloyd, Nagarjuna Construction Company, Hindustan Construction Company rose by between 0.17% to 2.09%.

India's largest engineering & construction firm by sales Larsen & Toubro (L&T) rose 0.22% after the company said a unit got orders worth Rs 1400 crore. The company on Wednesday said it got orders worth Rs 1013 crore. The company on Monday said that it won orders worth Rs 2000 crore. L&T's advance tax payment fell marginally to Rs 270 crore in Q4 March 2010 from Rs 275 crore a year earlier.

FMCG stocks fell on profit taking. ITC, India's top cigarette maker by sales, was flat. As per recent reports, ITC has increased prices by up to 20% following a duty hike in the Budget. A sharp hike in prices has in the past impacted volumes of the cigarette major negatively.

ITC, which had increased the prices of its flagship brand Gold Flake Kings by 7% prior to the Budget, has raised prices again by 8% to 20% across all brands, reports suggest. Cigarette business generates more than half of ITC's revenue and was the biggest contributor to its profit during the December 2009 quarter.

Hindustan Unilever rose 0.58% extending Thursday's 0.71% 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, Dabur India, Godrej Consumer Products, Marico and Tata Tea fell by between 0.05% to 1.45%.

Metal stocks rose on strong domestic demand. Jindal Steel & Power, Jindal Saw, National Aluminum Compsny, Steel Authority of India, Sesa Goa, rose by between 0.15% to 3.5%.

India's largest steel maker by sales Tata Steel rose 0.79%, gaining for the straight fifth day. Its Q4 advance tax payment rose to Rs 513 crore from Rs 406 crore a year earlier.

Cals Refineries clocked the highest volume of 3.83 crore shares on BSE. S Kumars Nationwide (1.71 crore shares), Amtek Auto (1.67 crore shares), Texmo Pipes (1.09 crore shares) and Jubilant Food Organosys (0.91 crore shares) were the other volume toppers in that order.

Jubilant Food Organosys clocked the highest turnover of Rs 313.39 crore on BSE. Amtek Auto (Rs 290.63 crore), ARSS Infra (Rs 189.96 crore), MSK Projects (Rs 137.73 crore) and Sterlite Industries (Rs 131.87 crore) were the other turnover toppers in that order.