Most sectoral indices on BSE rise

The key indices settled marginally higher extending previous day's gains after the Reserve Bank of India (RBI) raised interest rates on Tuesday, 20 April 2010, by less than some economists had expected and forecast inflation will slow. Buying in mid and small-cap stocks kept the market breadth strong throughout the day. The barometer index BSE Sensex rose 11.98 points or 0.07%, off close to 93 points from the day's high and up close to 26 points from the day's low. Ten out of thirteen sectoral indices on BSE rose.

NSE's volatility index India VIX slumped for the second day in a row after the annual monetary policy was unveiled by the central bank during trading hours on Tuesday, 20 April 2010. Typically, volatility rises ahead of a key event and it falls after the event. India VIX lost 7.86% to 19.23. The current low level of the index also indicates that investors are willing to take risk.

The market pared gains after a firm start triggered by higher Asian stocks. The market regained strength, surging to a fresh intraday high in morning trade. The market moved in a range in mid-morning trade. Stocks once again pared gains in early afternoon trade. The market slipped into the red to hit a fresh intraday low in afternoon trade. The market moved between positive and negative terrain near the flat line in mid-afternoon trade.

European shares turned negative on Wednesday, with losses in banks overshadowing gains in technology shares which rose after strong results from Apple Inc. The key benchmark indices in UK, France and Germany fell 0.21% and 0.86%.

Asian stocks rose on Wednesday, as better-than-estimated results from Elpida Memory Inc. and Apple Inc. boosted confidence in the global economic recovery. The key benchmark indices in China, Indonesia, Japan, South Korea and Taiwan rose by between 0.75% to 1.8%. But key benchmark indices in Hong Kong and Singapore fell by between 0.46% to 0.52%.

Trading in US index index futures indicated that the Dow could shed 24 points at the opening bell on Wednesday, 21 April 2010.

US Stocks ended higher on Tuesday after some good earnings reports. The Dow Jones Industrial Average rose 25.01 points or 0.23% to 11,117.06. The S&P 500 gained 9.65 points or 0.81% to 1207.17. The Nasdaq Composite index rose 20.20 points or 0.81% to 2500.31.

Concern over public debt could prolong the credit crisis although Greece is a special case and should not be compared to other euro zone members, the International Monetary Fund said on Tuesday. The IMF said the health of the global financial system had improved alongside a fragile recovery in the world economy, but that investors' nerves over rising levels of public debt could undermine stability gains made so far.

Back home, investors heaved a sigh of relief after a small hike in short term interest rates and the cash reserve ratio (CRR) by the central bank at its annual policy review on Tuesday, 20 April 2010. The Reserve Bank of India (RBI) raised repo rate, reverse repo rate and CRR by 25 basis points each. Analysts were expecting a 25 to 50 basis points hike in short term rates and the CRR. The RBI said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

The hike in CRR is effective from 24 April 2010 while the hike in repo and reverse repo rates was with immediate effect. After the hike, the CRR will increase to 6%, the repo rate to 5.25% and the reverse repo to 3.75%. Repo is the rate at which the central bank lends to banks and reverse repo is the rate at which the central bank absorbs excess cash from the banking system. CRR is the portion of deposits banks must set aside with the RBI.

The RBI said there is need to move in a calibrated manner in the direction of normalising its policy instruments given that the economic recovery is firmly in place. The latest CRR hike will suck out excess liquidity of Rs 12500 crore from the banking system. According the central bank, non-food credit growth is expected at 20% in the year ending March 2011 (FY 2011).

The central bank said it has to do a fine balancing act and ensure that while absorbing excess liquidity, the government borrowing programme is not hampered. Notwithstanding lower budgeted government borrowings for FY 2011, fresh issuance of securities will be 36.3% higher than in the previous year, the central bank said.

The RBI said the economy is recovering rapidly from a slowdown but inflationary pressures, which were triggered by supply side factors, are now developing into a wider inflationary process. The central bank said there in uncertainty about the shape and pace of ongoing global economic recovery.

The central bank expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand. The quick rebound of the Indian economy in the year ended March 2010 (FY 2010) despite the failure of monsoon rainfall suggests that the Indian economy has become resilient, the RBI said. Growth in FY 2011 is expected to be more broad-based than in FY 2010. Prime Minister Manmohan Singh today pegged India's GDP growth at 8.25% for FY 2011.

The central bank has pegged headline inflation for end-March 2011 at 5.5%, lower than near double digits in the month of March 2010. According to RBI three major uncertainties cloud the outlook for inflation. First, the prospects of the monsoon in 2010-11 are not yet clear. Second, crude prices continue to be volatile. Third, there is evidence of demand side pressures building up.

The monsoon holds key. 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 June-September monsoon season is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. Agriculture secretary P K Basu said in a media interview on Monday, 5 April 2010, that early signs indicate normal monsoon rains this year. 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.

A weakening El Nino is a positive sign for the monsoon, Ajit Tyagi, director general at the India Meteorological Department, had said on 18 March 2010.

Coming back to stocks, the focus is on the fourth quarter corporate results and outlook provided by management for the current year. The combined net profit of a total of 99 companies rose 21.8% to Rs 7296 crore on 18.4% rise in sales to Rs 46492 crore in the quarter ended March 2010 over the quarter ended March 2009.

The BSE 30-share Sensex rose 11.98 points or 0.07% to 17,472.56. The index fell 14.07 points at the day's low of 17,446.51 in mid-afternoon trade. The Sensex rose 104.97 points at the day's high of 17,565.55 in morning trade.

The S&P CNX Nifty rose 14.80 points or 0.28% to 5244.90.

The BSE Mid-Cap index rose 0.96% and the BSE Small-Cap index rose 1.38%. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market was strong. On BSE, 1915 shares advanced as compared with 965 that declined. A total of 105 shares remained unchanged.

BSE clocked turnover of Rs 4646 crore, higher than Rs 4631.26 crore on Tuesday, 20 April 2010.

Most sectoral indices on BSE gained. The BSE Realty index (up 1.68%), Bankex (up 1.25%), Auto index (up 1.10%), Consumer Durables index (up 0.87%), Power index (up 0.72%), FMCG index (up 0.45%), Healthcare index (up 0.42%), PSU index (up 0.40%), Teck index (up 0.22%) and IT index (up 0.19%), outperformed the Sensex.

Metal index (down 0.04%), Oil & Gas index (down 0.41%) and Capital Goods index (down 0.57%), underperformed the Sensex.

From the 30 share Sensex pack, 16 stocks rose while the rest declined.

Index heavyweight Reliance Industries (RIL) fell 0.91% to Rs 1,054.20. The stock came off the day's high of Rs 1073.95. RIL is seen reporting strong Q4 March 2010 results on the back of higher gas output from the prolific Krishna-Godavari basin. RIL announces Q4 results on 23 April 2010.

RIL on 9 April 2010 said the company will pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the US with Atlas Energy, becoming the latest foreign company to invest in shale plays that are expected to be very lucrative. The firm will pick up a 40% stake in Atlas's operations in the booming Marcellus Shale, a gas project that spans parts of Pennsylvania, West Virginia and New York in the United States and which, according to some geologists, could hold enough natural gas to satisfy US demand for a decade.

India's second largest software exporter by sales, Infosys Technologies, fell 0.33%, reversing early gains, on a firm rupee. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

India's largest information technology services provider by sales, TCS fell 0.47%, reversing early gains. The stock had fallen 2.74% on Tuesday, 20 April 2010. The company posted 9.7% growth in consolidated net profit as per Indian accounting standards to Rs 2,001 crore on 1.17% rise in revenues to Rs 7738 crore in Q4 March 2010 over Q3 December 2009. The result was announced after the market hours on Monday 19 April 2010.

At the time of announcing the results, TCS chief executive officer and managing director N Chandrasekaran said the company's sales and execution machine is primed and the company has laid a solid platform for growth. There is a significant traction for TCS' strategy of full services which together with TCS' global engagement model positions the company well for accelerated growth, Chandrasekaran said.

The Indian rupee was stronger on Wednesday helped by the dollar's drop against some major currencies. The partially convertible rupee was at 44.43/44 per dollar, stronger than its close of 44.52/53 on Tuesday.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 0.95% on profit taking. The company, recently received an order worth Rs 1,060 crore from Gujarat State Petroleum Corporation (GSPC) to build an offshore oil platform.

India's largest power equipment maker by sales Bharat Heavy Electricals declined 1.40%.

Realty majors gained for the second straight day after the Reserve Bank of India kept risk weightage on loans to commercial real estate sector unchanged at its annual monetary policy review on Tuesday. Sobha Developers, Indiabulls Real Estate, Parsvnath Devlopers, Housing Development & Infrastructure, Peninsula Land and DLF, rose between 0.33% to 3.91%. A section of the market was expecting the Reserve Bank of India to raise the risk weightage on loans to commercial real estate to prevent asset bubbles.

Unitech rose 2.46% after the board of director of the company at a meeting held on 20 April 2010 approved demerger of non-core operations comprising of telecommunications, hotels, special economic zones, logistics, transmission towers and others into a separate entity called Unitech Infra. For every one share of Unitech, the shareholders will get one share of Unitech Infra, which will be listed at a later date.

The board also approved the amalgamation of two wholly owned subsidiaries, Aditya Properties and Unitech Holdings, with Unitech. The board also approved hiving off the shares and investments held in Unitech's telecommunications business to a wholly-owned subsidiary of Unitech Infra.

Banking majors rose for the second straight day after RBI raised interest rates on Tuesday by less than some economists had expected and forecast inflation will slow. India's largest bank by net profit and branch network State Bank of India rose 0.34%, reversing early losses. Punjab National Bank rose 1.80%. But, Bank of Baroda fell 1.56%.

India's largest private sector bank by net profit ICICI Bank rose 2.01%, extending Tuesday's 1.49% gains. But, India's second largest private sector bank by net profit HDFC Bank fell 0.2%.

Axis Bank jumped 4.44% extending Tuesday 2.51% gains triggered by strong Q4 results. Net profit jumped 31.54% to Rs 764.87 crore in Q4 March 2010 over Q4 March 2009. The result was announced during market hours on Tuesday, 20 April 2010.

India's largest mortgage finance firm by total income Housing Development Finance Corporation (HDFC) was almost flat. The company, last week, launched a Dual Rate Product-2 (DRHL-2) in which home loan interest rates will be fixed rate at 8.25% annually up to 31 March 2011, 9% for the period between 1 April 2011 and 31 March 2012, and the applicable floating rate for the balance term. The offer is for loan application made before 30 April 2010 and at least part-disbursement taken before 30 June 2010.

The Reserve Bank of India said recently banks would determine their lending rates with reference to the base rate, effective 1 July 2010. To stabilise the system of base rate calculation, banks are allowed to change the benchmark and methodology anytime

Hindustan Zinc rose 0.66% after net profit surged 124.67% to Rs 1238.99 crore in Q4 March 2010 over Q4 March 2009.

Concurrent (India) Infrastructure was locked at 5% upper limit at Rs 23.65, after net profit galloped 5837.5% to Rs 4.75 crore in Q4 March 2010 over Q3 December 2009.

Electrothem (India) surged 5.06%, after the company signed a pact to acquire 100% stake in Kolkata based Shree Ram Electro Cast for a consideration of up to Rs 85 crore.

ARSS Infrastructure Projects clocked a highest turnover of Rs 186.23 crore on BSE. Unitech (Rs 129.19 crore), Axis Bank (Rs 101.65 crore), State Bank of India (Rs 85.32 crore) and Jubilant FoodWorks (Rs 77.46 crore), were the other turnover toppers on BSE.

FCS Software Solutions reported a highest volume of 2.66 crore shares on BSE. Cals Refineries (1.59 crore shares), Unitech (1.50 crore shares), Birla Power Solutions (1.01 crore shares) and Century Extrusions (58.92 lakh shares), were the other volume toppers on BSE.