Bank, oil stocks lead rally

Bulls were back with a bang as the key benchmark indices surged for the second straight day on firm global stocks after China signalled support for the euro zone. The BSE 30-share Sensex jumped 278.56 points or 1.76%, up close to 335 points from day's low and off close to 25 points from the day's high. The 50-unit S&P CNX Nifty regained the psychological 5,000 mark. Bank and oil shares led the rally.

From a recent low of 16,022.48 on Tuesday, 25 May 2010, the Sensex has jumped 643.92 points or 4.01% in the past two trading sessions. The Sensex has lost 1302.62 points or 7.25% from a recent peak of 17,970.02 on 7 April 2010. The barometer index has lost 798.41 points or 4.57% in calendar 2010 after jumping 81% in 2009.

Coming back to today's trade, the market breadth was strong. Metal stocks gained as copper futures rose on Thursday. Auto shares advanced ahead of May 2010 sales figures due to be announced next week. Capital goods and IT pivotals gained on fresh buying.

Stocks were volatile as traders rolled over positions in the derivatives segment from May 2010 series to June 2010 series ahead of the expiry of the near-month May 2010 contracts today, 27 May 2010. The market recovered from lower level after an initial slide, mirroring a recovery in Asian stocks. The market extended gains in morning trade. Stocks came off the higher level in mid-morning trade.

Fresh buying pushed the key benchmark indices to the day's high in early afternoon trade. The market pared gains in afternoon trade after hitting a fresh intraday high. The market regained strength in mid-afternoon trade on firm European stocks. Stocks extended gains in late trade.

NSE's volatility index India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, tumbled 9.77% to 29.01, extending Wednesday's 6.87% slide. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

As per provisional data, foreign institutional investors (FIIs) today, 27 May 2010, sold stocks worth a net Rs 533.07 crore. Domestic funds bought equities worth a net Rs 410.44 crore. FIIs have dumped shares worth a net Rs 13,067.32 crore so far this month, till 27 May 2010, according to data from the stock exchanges. They had bought stocks worth a net Rs 2667.35 crore last month. Domestic funds have bought stocks worth a net Rs 6,092.31 crore so far this month, till 27 May 2010.

In an attempt to create a level-playing field with the retail investors, the market regulator Securities & Exchange Board of India (Sebi) reportedly proposes to change margin requirement norms for institutional investors so that these investors settle the margin requirement on the same day.

Meanwhile, the Reserve Bank of India (RBI) on Wednesday eased rules to boost liquidity at banks to avoid a cash crunch because of payments for corporate advance tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010. In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility.

Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.

European shares edged higher on Thursday, tracking gains in Asian stocks and after China denied a report it was looking to cut its holdings of euro zone sovereign debt. The key benchmark indices in France, Germany and UK were up by between 1.82% to 2.22%.

China State Administration of Foreign Exchange (Safe), the agency which manages the nation's reserves, said Thursday that media reports that it is considering selling some of it holdings of euro-bonds are "groundless". Safe also said it supports measures taken by the European Union and the International Monetary Fund to ensure financial stability within the euro zone and is confident markets will overcome the recent difficulties.

Safe also said it views the euro zone as one of the most important investment markets and a key component in its strategy to hold diversified investments for the long term. Worries about the health of the European economy have been at the core of recent turbulence in global financial markets.

Asian stocks jumped after staging an intra-day reversal in early trade. The key benchmark indices in Hong Kong, China, Indonesia, Japan, South Korea, Singapore and Taiwan were up by between 0.64% to 1.62%.

Japan's exports jumped 40.4% to 5.9 trillion yen in April 2010 from a year earlier, marking the fifth straight monthly year-on-year increase, boosted by global demand for Japanese cars and semiconductors.

US markets declined in volatile trading session on Wednesday on selling pressure in financial and technology stocks. The Dow Jones Industrial Average slipped 69.30 points, or 0.69%, at 9,974.45. The S&P 500 was down 6.08 points, or 0.57%, to 1067.95. The Nasdaq was down 15.07 points, or 0.68%, at 2195.88.

Data released on Wednesday showed new home sales rose 14.8% to a seasonally adjusted rate of 504,000 in April 2010, up from an upwardly revised 439,000 in March 2010.

Trading in US index futures indicated that the Dow could jump 199 points at the opening bell on Thursday, 27 May 2010.

China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on Wednesday, 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.

In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.

Prime Minister Manmohan Singh early this week said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. The Prime Minister said he expects inflation to moderate to 5-6% by December 2010. Singh expects 8.5% GDP growth in the year ending March 2011 (FY 2011).

The RBI 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 RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

The monsoon rains are likely to hit the country's southern coast in three to four days, the India Meteorological Department said in its latest forecast on Thursday. Conditions are becoming favourable for onset of southwest monsoon over Kerala during next 3-4 days, the weather office said.

The weather office had said late last week that rains were on track to hit the country's southern coast on 30 May 2010, and the Laila cyclone in the Bay of Bengal would not derail the vital June-September rainfall. The India Meteorological Department (IMD) in late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

The south west monsoon 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. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season also holds key.

The fourth quarter corporate results have been decent. The combined net profit of a total of 2,570 companies rose 18.5% to Rs 68967 crore on 23.8% rise in sales to Rs 675845 crore in the quarter ended March 2010 over the quarter ended March 2009.

The BSE 30-share Sensex rose 278.56 points or 1.76% to 16,666.40. The index fell 56.74 points at the day's low of 16,331.10 in early trade. The Sensex rose 306.71 points at the day's high of 16,694.55 in late trade.

The S&P CNX Nifty jumped 85.70 points or 1.74% to 5,003.10.

The BSE Mid-Cap index rose 0.93% and the BSE Small-Cap index rose 0.77%. Both the indices underperformed the Sensex.

All the sectoral indices on BSE rose. Banking sector index Bankex (up 2.55%), BSE Auto index (up 2.1%) and Oil & Gas index (up 2.09%), outperformed the Sensex. BSE Realty index rose 1.7% and matched Sensex's gains. BSE Consumer Durables index (up 0.63%), IT index (up 0.75%), Healthcare index (up 0.85%), Metal index (up 1.41%), Power index (up 1.43%), PSU index (up 1.51%) FMCG index (up 1.55%) and Capital Goods index (up 1.63%) and underperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong. The breadth strengthened as trading progressed. On BSE, 1669 shares advanced as compared with 1128 that declined. A total of 89 shares remained unchanged.

The total turnover on BSE amounted to Rs 3809 crore, higher than Rs 3234.39 crore on Wednesday, 26 May 2010.

From the 30 share Sensex pack, 26 stocks gained while only 4 of them slipped.

Auto shares advanced ahead of May 2010 sales figures due to be announced next week. India's top truck maker by sales Tata Motors surged 4.74%, extending Wednesday's 5.28% rally. It was the top gainer from the Sensex pack.

The company posted consolidated net profit of Rs 2571.06 crore for the year ended March 2010 (FY 2010) as compared with net loss of Rs 2505.25 crore in the year ended March 2009 (FY 2009). The result was announced after trading hours today.

India's largest tractor maker by sales Mahindra & Mahindra rose 1.78%, with the stock gaining for the second straight day after the company during market hours on Wednesday, 26 May 2010, said it has entered into high growth electric car segment by acquiring a majority 55.2% equity stake in Reva Electric Car Company. The company will announce its Q4 result on Saturday, 29 May 2010.

India's largest small car maker by sales Maruti Suzuki India rose 2.79%, with the stock rebounding from a three-day slide on bargain hunting.

Metal stocks gained as copper prices surged on better-than-expected US economic data. India's largest steel maker by sales Tata Steel rose 1.76% to Rs 493, staging a sharp rebound from day's low of Rs 473.40. Tata Steel reported consolidated net loss of Rs 2,009.22 crore in the year ended March 2010 (FY 2010) compared with a net profit of Rs 4950.09 crore in the year ended March 2009 (FY 2009). Total income decreased 29.82% to Rs 103578.97 crore in FY 2010 over FY 2009. The results were announced after market hours on Wednesday, 26 May 2010.

Sterlite Industries (up 4.26%), Hindalco Industries (up 0.44%), Hindustan Zinc (up 1.33%), Sesa Goa (up 3.83%), Steel Authority of India (up 0.53%), and JSW Steel (up 2.21%), edged higher.

Index heavyweight Reliance Industries (RIL) advanced 1.44% to Rs 1021.85, rebounding from day's low of Rs 1002.15. The company is reportedly evaluating acquiring or forming joint ventures for two shale gas assets in the US.

Oil exploration stocks gained after crude oil rose on Wednesday, 26 May 2010. India's largest oil & gas exploration firm by sales Oil & Natural Gas Corporation rose 4.64%. Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms. Crude oil for July delivery rose $2.36 or 3.4% to $71.11 per barrel on the New York Mercantile Exchange on Wednesday, 26 May 2010 after a US government report showed demand for fuels rose to the highest level since January 2009 and durable goods orders increased.

Cairn India rose 1.29%. Consolidated net profit jumped 53% to Rs 1051.10 crore on 45% increase in operating revenue to Rs 1623 crore in the year ended March 2010 over the year ended March 2009. The results were announced after trading hours today.

Oil India rose 1.63% after the company reported 509.17% rise in net profit to Rs 430.99 crore on 34.02% rise in net sales to Rs 1832.14 crore in Q4 March 2010 over the Q4 March 2009.

Shares of state-run oil marketing stocks on reports of a fuel price hike next month. A meeting of the empowered group of minister (eGoM) is scheduled on 7 June 2010 to discuss fuel pricing. HPCL (up 3.72%), and Indian Oil Corporation (up 4.87%), gained.

BPCL rose 3.25%. Net profit declined 80.61% to Rs 703.18 crore on 40.7% rise in total income to Rs 38158.70 crore in Q4 March 2010 over Q4 March 2009. The result was announced at the fag end of the trading session today, 27 May 2010.

Banking pivotals gained on fresh buying. India's largest private sector bank by net profit ICICI Bank rose 1.06% to Rs 856.60, recovering from day's low of Rs 833. India's second largest private sector bank by net profit HDFC Bank rose 3.78% to Rs 1894.95, recovering sharply from the day's low of Rs 1,811.45

India's largest commercial bank by net profit and branch network State Bank of India rose 2.01% to Rs 2251.70. Among other PSU banks, Bank of Baroda, Bank of India and Punjab National Bank rose by between 1.1% to 4.9%.

Capital goods pivotals gained on fresh buying. India's largest engineering and construction firm by sales Larsen & Toubro rose 1.69%, with the stock gaining for the second straight day. At the time of announcing Q4 March 2010 results on 17 May 2010, L&T's management gave a guidance of 20% growth in revenue and 25% growth in new orders in the current financial year.

India's largest equipment maker by sales Bharat Heavy Electricals rose 1.94%. Net profit jumped 41.71% to Rs 1909.58 crore in Q4 March 2010 over Q4 March 2009. The company announced the result during market hours on Wednesday, 26 May 2010.

IT pivotals rose on renewed buying. India's largest software services exporter by sales TCS rose 0.65%. India's second largest software services exporter by sales Infosys rose 0.95% and India's third largest software services exporter by sales Wipro was up 1.15%.

Some realty stocks rose for the second straight day on bargain hunting after a recent steep slide. Sobha Developers, DLF, Unitech, Omaxe, Orbit Corporation, Ackruti City, Parsvnath Developers rose by between 0.13% to 3.49%.

Lodha Developers on Tuesday, 25 May 2010, paid more than twice the asking price to win a 25,000-square meter plot of land in the central Mumbai suburb of Wadala for Rs 4050 crore.

Cals Refineries clocked the highest volume of 7.91 crore shares on BSE. Birla Power Solutions (1.64 crore shares), Reliance Natural Resources (90.38 lakh shares), Adani Enterprises (55.56 lakh shares) and Unitech (49.88 lakh shares) were the other volume toppers in that order.

Adani Enterprises clocked the highest turnover of Rs 301.78 crore on BSE. Tata Steel (Rs 209.06 crore), Sesa Goa (Rs 165.53 crore), State Bank of India (Rs 112.89 crore) and Tata Motors (Rs 109.76 crore) were the other turnover toppers in that order.