Market rebounds from 3-1/2 month trough

The key benchmark indices rebounded from 3-1/2 month lows hit early in the week, tracking recovery in global stocks. The S&P CNX Nifty regained the psychological 5,000 mark after falling below that mark in the preceding week. The market gained in 4 out of 5 trading sessions in the week ended Friday, 28 May 2010.

The BSE Sensex rose 417.45 points or 2.54% to 16,863.06. The S&P CNX Nifty gained 135.40 points or 2.74% to 5,066.55.

The BSE Mid-Cap index rose 1.01% and the BSE Small-Cap index gained rose 0.94%. Both the indices underperformed the Sensex.

The Sensex had slumped to 3-1/2 month lows on Tuesday, 25 May 2010, on sustained selling by foreign funds triggered by risk aversion amid euro zone debt worries. Foreign institutional investors (FIIs) have sold Indian 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 6092.31 crore so far this month, till 27 May 2010.

The Reserve Bank of India (RBI) on Wednesday, 26 May 2010, 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.

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 on Monday, 24 May 2010, 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, 27 May 2010. 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 are almost over. The combined net profit of a total of 2,668 companies rose 10.90% to Rs 77238 crore on 25.80% rise in sales to Rs 812809 crore in the quarter ended March 2010 over the quarter ended March 2009.

The key benchmark indices settled marginally higher on Monday, 24 May 2010, giving away strong intraday gains, as European stocks and US index futures fell. The BSE 30-share Sensex rose 23.94 points or 0.15% to 16,469.55 on Monday.

The key benchmark indices tumbled on Tuesday, 25 May 2010 to their lowest level in more than three months as world stocks slumped amid tensions in Korea as well as anxiety over global debt levels and sovereign default fears. The BSE 30-share Sensex fell 447.07 points or 2.71% to 16,022.48, its lowest closing level since 10 February 2010.

The key benchmark indices rebounded on Wednesday, 26 May 2010 from 3-1/2 month lows hit on Tuesday, 25 May 2010, tracking recovery in world stocks triggered by bargain hunting after a sharp slide. The BSE 30-share Sensex rose 365.36 points or 2.28% to 16,387.84.

Bulls were back with a bang as the key benchmark indices surged for the second straight day on Thursday, 27 May 2010, on firm global stocks after China signalled support for the euro zone. The BSE 30-share Sensex rose 278.56 points or 1.76% to 16,666.40 on that day.

Stocks extended gains for the third straight session on Friday, 28 May 2010, as world equities rose. The BSE 30-share Sensex was up 196.66 points or 1.18% to 16,863.06.

Index heavyweight Reliance Industries (RIL) rose 3.83% in the week after the feuding Ambani brothers Mukesh and Anil on Sunday, 23 May 2010, ended non-compete agreements in a move they hoped would lead to cooperation between the two groups. Both the groups said they aim to reach a conclusion soon for a gas supply agreement between Mukesh Ambani's RIL and younger brother Anil's Reliance Natural Resources (RNRL).

The scrapping of the non-compete agreement between the two groups means RIL can enter financial services, telecom and infrastructure sectors whereas the Anil Dhirubhai Ambani group (ADAG) can enter petroleum and petrochemical businesses.

The settlement comes two weeks after the Supreme Court ruled in Mukesh Ambani's favour in a bitter public dispute over gas pricing. The court on 7 May 2010 ordered the brothers to renegotiate within six weeks a private natural gas supply contract between Reliance Industries and Reliance Natural Resources. The new contract must abide by a government price of $4.2 per million metric British thermal unit (mmBtu), compared with $2.34 per mmBtu the brothers agreed on in 2005 for a 17-year period.

Meanwhile, RIL during market hours on Friday, 28 May 2010 said it made a fifth oil discovery in Cambay basin in Gujarat.

Shares of Anil Dhirubhai Ambani group spurted. Reliance Natural Resources (up 17.75%), Reliance Power (up 12.97%), Reliance Communications (up 10.53%), Reliance Infrastructure (up 6.26%), Reliance Capital (up 6.26%), jumped.

India's largest cigarette maker by sales ITC rose 3.9%. The scrip hit an all time high of Rs 283.10 on Friday, 28 May 2010. ITC said at the time of announcing Q4 March 2010 results on Friday, 21 May 2010, that a meeting of the board of directors will be held on 18 June 2010 to consider issue of bonus shares.

The cigarette major's profit rose 27% to Rs 1028.22 crore in Q4 March 2010 over Q4 March 2009. The company announced the result during market hours on Friday, 21 May 2010.

India's largest steel maker by sales Tata Steel slipped 2.6%. Tata Sons, the main investment firm of the Tata Group, is likely to inject around Rs 1,350 crore in Tata Steel through a preferential share-cum-warrant issue to part-finance the steel maker's future growth plans. The Tata Steel board on Thursday, 27 May 2010, decided to make the preferential allotment of 1.5 crore equity shares along with a 1.2 crore warrant issue to Tata Sons. The warrants can be converted into equity shares at a later stage at a pre-determined price.

India's top truck maker by sales Tata Motors jumped 5.31%. The company reported a consolidated net profit of Rs 2571.06 crore in the year ended March 2010 as against a net loss of Rs 2505.25 crore in the year ended March 2009. Net sales rose 30.7% to Rs 91893.45 crore in the year ended March 2010 over in the year ended March 2009. Surge in consolidated net profit was helped by rising sales and profitability at its Jaguar Land Rover (JLR) unit. The result was announced after market hours on 27 May 2010.

India's largest tractor maker by sales Mahindra & Mahindra rose 1.04%. The company 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 announces its Q4 result on Saturday, 29 May 2010.

India's largest small car maker by sales Maruti Suzuki India lost 1.53%.

Sterlite Industries (up 6.26%), Tata Consultancy Services (up 4.21%), DLF (up 4.05%), Larsen & Toubro (up 1.12%), rose.