Sensex at day's high as auto stocks rally

Key benchmark indices advanced to the day's high in morning trade mirroring recovery in Asian markets. US index futures rose. The BSE 30-share Sensex was up 78.93 points or 0.48% to 16,466.77, up 135.67 points of the day's low and off just 2.77 points from day's high.

The market breadth was positive. Index heavyweights Reliance Industries (RIL) and State Bank of India turned positive after suffering initial losses. Auto stocks gained on fresh buying. Metal stocks saw mixed trend.

Volatility may rise during the day as traders roll 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.

Meanwhile, stock brokers have advised clients not to sell shares today which they had bought in the cash segment on Wednesday, 26 May 2010, due to clubbing of settlements due to a bank holiday today, 27 May 2010. There will be no settlement of trades today due to bank holiday.

On the macro front, the government will unveil data on some wholesale price indices for the year through 15 May 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

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.

Asian stocks extended gains after staging an intra-day reversal. The key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.36% to 1.21%. However, key benchmark indices in China and Indonesia were down 0.02% and 0.05% respectively.

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 gain 81 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.

India's monsoon rains are 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, a weather office spokesman told a news agency last week. 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 2,523 companies rose 17.10% to Rs 68147 crore on 23.90% rise in sales to Rs 670843 crore in the quarter ended March 2010 over the quarter ended March 2009.

The BSE 30-share Sensex was up 78.93 points or 0.48% to 16,466.77 at 10:17 IST. The index fell 56.74 points at the day's low of 16,331.10 in early trade. The Sensex rose 81.70 points at the day's high of 16,469.54 in morning trade.

The S&P CNX Nifty was up 19.20 points or 0.39% to 4936.60

The market breadth, indicating the overall health of the market, was positive. On BSE, 1155 shares advanced as compared with 906 that declined. A total of 80 shares remained unchanged.

The total turnover on BSE amounted to Rs 940 crore by 10:25 IST as compared with Rs 472 crore by 09:25 IST.

From the 30 share Sensex pack, 22 stocks gained while the rest slipped. Bharti Airtel (down 0.95%), TCS (down 0.57%), and Jaiprakash Associates (down 0.46%), edged lower from the Sensex pack.

Oil & Natural Gas Corporation (up 2.16%), ITC (up 1.86%), and Larsen & Toubro (up 1.59%), edged higher from the Sensex pack.

India's largest tractor maker by sales Mahindra & Mahindra surged 2.42%. The company during market hours on Thursday, 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.

Other auto stocks also nudged higher on fresh buying. India's largest small car maker by sales Maruti Suzuki India rose 0.73%. India's largest truck maker by sales Tata Motors advanced 1.66% ahead of its year ended March 2010 (FY 2010) result today, 27 May 2010.

India's largest motorbike maker by sales Hero Honda Motors rose 0.57%. India's second largest motorbike maker by sales Bajaj Auto was up 0.08%.

Index heavyweight Reliance Industries (RIL) rose 0.18% to Rs 1009.20, 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.

Banking pivotals saw mixed trend. India's largest private sector bank by net profit ICICI Bank fell 0.95% after its ADR slipped 0.74% on Wednesday. India's second largest private sector bank by net profit HDFC Bank rose 0.38% to Rs 1832.95, recovering 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 0.29% to Rs 2178.50, staging a recovery from day's low of Rs 2,158.25.

India's largest steel maker by sales Tata Steel lost 0.21% after it reported a 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.

Other metal stocks saw mixed trend. India's largest private sector aluminium maker by sales Hindalco Industries declined 2.06% to Rs 144.80 and was the top loser from the Sensex pack.

India's largest non-ferrous metal producer by sales Sterlite Industries gained 2.79% to Rs 635.10 and was the top gainer from the Sensex pack.