Gains in RIL, bank stocks help offset sell-off in telecom shares

The key benchmarks eked out small gains in volatile trade on higher European stocks and recovery in US index futures. Interest rate sensitive banking and realty stocks rose as lower-than-expected growth in industrial production in March 2010 helped ease rate-hike worries. Index heavyweight Reliance Industries (RIL) edged higher. The BSE 30-share Sensex rose 54.28 points or 0.32%, up close to 170 points from the day's low and off close to 55 points from the day's high. The market breadth was weak.

Telecom stocks extended losses for the second straight day after the telecom regulator suggested telecom firms to pay a one-time fee for holding radio-spectrum beyond 6.2 mega hertz (MHz) based on 3G prices. Bharti Airtel was down more than 8%. Two-wheeler major Bajaj Auto rose, reversing initial losses after robust Q4 results.

Volatility was immense. The market pared gains after a firm start. The market soon regained strength with the Sensex hitting a fresh intraday high in early trade. The market once again came off the higher level later. The Sensex slipped into the red in morning trade. The market hovered between the positive and negative terrain in mid-morning trade. The market hit a fresh intraday low in afternoon trade weighed by data showing lower-than-expected growth in industrial production in March 2010.

The market once again moved into positive zone in afternoon trade led by gains Reliance Industries. The market surged to a fresh intraday high in mid-afternoon trade as European stocks rose. The market pared gains in late trade as US index futures fell in volatile trade.

NSE's volatility index India VIX was almost unchanged at 25.82. The index, a measure of traders' perception of near-term risks in the market based on options prices, had risen 6.92% to 25.81 on Tuesday, 11 May 2010. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a gauge of the market's expectation of volatility over the next 30 calendar days.

The Reserve Bank of India governor D Subbarao on Tuesday, 11 May 2010, said India prefers long-term capital inflows to short-term flows and non-debt flows to debt flows. There is no proposal to impose a Tobin type tax to rein in excessive capital inflows, the RBI governor said in a speech delivered at a conference in Zurich on Tuesday. However, it needs reiterating that no policy instrument is clearly off the table and the choice of instruments will be determined by the context, Subbarao added.

Meanwhile, the latest economic data showed industrial output rose lower than expected 13.5% in March 2010. Manufacturing sector output rose 14.3% in March 2010. Industrial output rose 10.4% in the 2009/10 fiscal year, faster than the 2.6% growth clocked in the previous fiscal year.

European equities turned positive on Wednesday, with financials gaining after early losses on strong banking results and tough austerity measures announced by debt ridden Spain. The key benchmark indices in UK, France and Germany were up by 0.22% to 1.63%.

Gross domestic product in the 16-nation euro zone rose by 0.2% the first quarter of 2010 compared to the final three months of 2009. Compared to the first quarter of last year, GDP was up 0.5%.

Late on Tuesday night Conservative Party under Prime Minister David Cameron sealed a deal to form a new coalition government in UK with the Liberal Democrats.

Asian stocks were mixed after a firm start as investors remained concerned about the global economy's outlook despite a massive rescue package to combat the European debt crisis. The key benchmark indices in Japan, Taiwan and South Korea fell by between 0.08% to 0.43%. But, key benchmark indices in China, Indonesia, Hong Kong, Singapore rose by between 0.31% to 1.23%.

South Korea's central bank left its policy interest rate unchanged Wednesday at a record-low 2%, as expected, and said it foresees continued growth in the nation's economy but also warned of uncertainty due to sovereign-debt concerns in Europe.

US index futures edged higher in volatile trade. Trading in US index futures indicated that the Dow could rise 25 points at the opening bell on Wednesday, 12 May 2010.

US stocks declined in a volatile session on Tuesday as fears that a $1 trillion bailout for Europe won't solve the region's deep-seated problems blunted an improving US economic picture. The Dow Jones Industrial Average dropped 36.88 points, or 0.34% to 10,748.26. The Standard & Poor's 500 Index fell 3.94 points, or 0.34% to 1,155.79. But, the Nasdaq Composite Index gained 0.64 points, or 0.03% to 2,375.31.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 1543 companies rose 37.5% to Rs 46092 crore on 29.4% rise in sales to Rs 427460 crore in the quarter ended March 2010 over the quarter ended March 2009.

On the macro front, business at Indian service companies rebounded to a 21-month-high in April 2010 on new business and high input prices. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 62.1 in April, its highest since July 2008, and compared with 58.1 in March 2010.

On Friday, 14 May 2010, the government will unveil data on inflation based on the wholesale prices for the month of April 2010. The headline inflation was 9.9% in March 2010. The RBI has forecast the headline inflation to ease to 5.5% at end-March 2011 on expectations of a normal monsoon.

Inflation based on food prices rose 16.04% in the year through 24 April 2010, slower than previous week's annual rise of 16.61%. Fuel prices inflation remained at elevated level. The fuel price index rose 12.69% in the year through 24 April 2010, same as a week ago. The primary articles index rose 13.93% in the year through 24 April 2010.

The Indian Meteorological department (IMD) expects normal rainfall in the June-September monsoon season this year. Rainfall is likely to be 98% of the long-term average, the IMD said on 23 April 2010. 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 holds key.

The Reserve Bank of India 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.

In its half-yearly World Economic Outlook, the International Monetary Fund (IMF) has pegged India's GDP growth at 8.75% in calendar 2010 and 8.5% in calendar 2011. According to the IMF, domestic demand in India will strengthen as the labour market improves, and investment is expected to be boosted by strong corporate profitability, rising business confidence and favourable financing conditions.

The BSE 30-share Sensex rose 54.28 points or 0.32% to 17,195.81. The Sensex fell 113.45 points at the day's low of 17,028.08 in early afternoon trade. The index rose 110.99 points at the day's high of 17,252.52 in mid-afternoon trade.

The S&P CNX Nifty rose 20.50 points or 0.4% to 5156.65 as per provisional figures.

The BSE Mid-Cap index rose 0.07%. The BSE Small-Cap index fell 0.34%. Both the indices underperformed Sensex.

Sectoral indices on BSE were mixed. BSE Healthcare index (up 1.61%), FMCG index (up 1.45%), banking sector index Bankex (up 0.95%), Consumer Durables index (up 0.93%), Oil & Gas index (up 0.88%), IT index (up 0.69%), Realty index (up 0.6%), and PSU index (up 0.38%), outperformed the Sensex. Metal index (up 0.27%), Auto index (down 0.07%), and Power index (down 0.35%), underperformed the Sensex.

The market breadth, indicating the overall health of the market, was weak. The breadth was strong in early trade. On BSE, 1688 shares declined as compared to 1210 shares that advanced. A total of 81 shares remained unchanged.

Among the 30-share Sensex pack, 19 rose while the rest declined.

BSE clocked turnover of Rs 3814 crore, lower than Rs 4219.16 crore on Tuesday, 11 May 2010.

Index heavyweight Reliance Industries (RIL) rose 1.39% to Rs 1082. The stock jumped off the day's low of Rs 1063.10. The stock had surged recently after a favourable ruling in the Supreme Court late last week on gas dispute with Anil Ambani controlled Reliance Natural Resources (RNRL). The Supreme Court ordered the two firms to renegotiate a deal based on government policy on gas utilization.

Earlier, the Bombay High Court, in its order dated 15 June 2009 had directed that RNRL will get assured supply of 28 mmscmd of gas from RIL's Krishna-Godavari basin for 17 years at $2.34 per million British thermal units (mBtu). The gas price was 44.28% lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 mBtu.

Realty stocks rose as lower than expected growth in industrial production in March 2010 helped ease rate-hike worries. Sobha Developers, HDIL, DLF, Indiabulls Real Estate, Phoenix Mills and Unitech rose by between 0.57% to 2.92%.

Telecom stocks extended Tuesday's sharp fall after the telecom regulator suggested telecom firms to pay a one-time fee for holding radio-spectrum beyond 6.2 mega hertz (MHz) based on 3G prices. India's largest cellular services provider by sales Bharti Airtel fell 8.29%, extending Tuesday's 3.11% losses. The stock was the top loser from Sensex pack.

Bharti Airtel, on Wednesday said the telecoms regulator's proposals on allocation of second-generation (2G) spectrum are shocking, arbitrary and retrograde and are against all existing global norms for spectrum allocation. The company said it was confident that the Department of Telecommunications (DoT) and that the government will take a rational approach and summarily reject these arbitrary, impractical and perverse recommendations.

Idea Cellular declined 8.21%, extending Tuesday's 5.31% losses. India's second largest listed cellular services provider by sales Reliance Communications was flat.

The telecom regulator on Tuesday also recommended ending restrictions on telecoms firms selling out, a move which will help consolidation in the world's fastest growing telecoms market. The current rules restrict telecom firms from selling majority stakes within three years of getting license.

Interest rate sensitive banking shares rose as slower than expected growth in industrial production in March 2010 helped ease rate-hike worries. India's biggest commercial bank in terms of branch network State Bank of India rose 1.62%. India's second largest private sector bank by net profit HDFC Bank rose 1.1%, with the stock gaining for the second straight day.

But, India's largest private sector bank by net profit ICICI Bank fell 0.13% to Rs 914.80 in volatile trade. The stock hit a high of Rs 922.20 and a low of Rs 906.30.

India's largest mortgage lender by total income Housing Development Finance Corporation rose 0.19%. The company's board on 3 May 2010 approved a 5-for-1 stock-split.

FMCG shares rose on defensive buying. Marico, United Spirits, Hindustan Unilever and ITC rose by between 0.23% to 2.32%.

Cipla rose 0.51% on bargain hunting after a steep slide over the past two trading sessions triggered by disappointing Q4 March 2010 results. Net profit rose 8.93% to Rs 275.53 crore in Q4 March 2010 over Q4 March 2009. The result was announced after market hours on Friday, 7 May 2010.

Among other pharma stocks, Pfizer, Dr Reddy's Laboratories and Sun Pharmaceutical Industries rose by between 0.21% to 5.53%.

Ranbaxy Laboratories rose 0.21%, with the stock gaining for the second straight day on strong Q1 result. The company reported consolidated net profit of Rs 960.58 crore in Q1 March 2010 compared to a net loss of Rs 767.33 crore in Q1 March 2009. The company announced the result during market hours on Tuesday.

Metal stocks fell after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 1.55% on Tuesday, 11 May 2010. Hindustan Zinc, Jindal Steel & Power, Sterlite Industries, National Aluminum Company fell by between 0.1% to 0.75%.

But, some metal and mining stocks reversed early losses. Tata Steel, Jindal Saw, Hindalco Industries, Steel Authority of India, Sesa Goa, JSW Steel rose by between 0.18% to 2.58%.

Auto shares were mixed. India's largest small car maker by sales Maruti Suzuki India fell 0.21%. Maruti's total sales rose almost 30% to 93,058 units in April 2010 over April 2009. Domestic sales rose 23.4% to 80,034 units. The data was unveiled on 1 May 2010.

India's top truck maker by sales Tata Motors rose 0.41%, reversing initial losses. Total sales including exports of commercial and passenger vehicles jumped 52% to 57,202 vehicles in April 2010 over April 2009. Domestic sales rose 49% to 54,065 units. Exports rose 148.8% to 3,137 units.

India's largest tractor maker by sales Mahindra & Mahindra fell 2.6% on profit taking after a two-day rally.

Car sales in India rose an annual 39.5% to 143,976 cars in April 2010 over April 2009, data from the Society of Indian Automobile Manufacturers (SIAM) showed. Sales of trucks and buses, a barometer of economic activity, rose 64.5 % to 49,086 units in April 2010 over April 2009, SIAM said.

Bajaj Auto rose 1.02%, reversing initial losses. Net profit surged 306% to Rs 528.65 crore in Q4 March 2010 over Q4 March 2009.The company announced result during market hours today.

IT pivotals rose on bargain hunting after recent slide triggered by uncertainty over euro-zone countries' ability to reduce their deficits. Europe is the second largest market for Indian IT firms. India's third largest software services exporter Wipro rose 1.73%. India's second largest software services exporter Infosys rose 0.68%. India's largest software services exporter TCS rose 0.42%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.98% after company's water technology business unit won an order worth Rs 850 crore in Doha, Qatar for advanced waste water treatment and urban reuse.

Cals Refineries clocked the highest volume of 1.81 crore shares on BSE. Talwalkars Better Value Fitness (1.35 crore shares), Reliance Natural Resources (97.05 lakh shares), Glory Polifilms (91.84 lakh shares) and Birla Power Solutions (76.92 lakh shares) were the other volume toppers in that order.

Talwalkars Better Value Fitness clocked the highest turnover of Rs 247.87 crore on BSE. Tata Steel (Rs 117.37 crore), State Bank of India (105.26 crore), Bharti Airtel (Rs 99.70 crore) and Reliance Industries (Rs 84.54 crore) were the other turnover toppers in that order.