Key indices regain crucial levels

Strong auto and cement sales in May 2010 and robust GDP growth data for Q4 March 2010 boosted the bourses, which extended gains for the second consecutive week. Recovery in world stocks aided recovery on the domestic bourses. The BSE Sensex regained 17,000 mark, while the NSE Nifty moved above the psychological 5,000 level .

As per government data released on Monday, 31 May 2010, India's economy grew at 8.6% in the March 2010 quarter driven by robust manufacturing sector on the back of government and consumer spending. The growth was significantly higher than the revised 6.5% expansion in Q3 December 2009 and a 5.8% growth in Q4 March 2009. The manufacturing sector grew 16.3%, farm output rose 0.7%, mining sector expanded 14% and services increased by 8.4% in January-March 2010 from a year earlier.

For the full year to March 2010, the economy expanded 7.4%, above a government forecast of 7.2%. Economic growth had slowed down to 6.7% in year ended March 2009.

On Monday, 31 May 2010, the India Meteorological Department (IMD) had informed that the monsoon arrived at the southern coast. The weather office 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.

However, with the tropical Cyclone Phet moving across the Arabian Sea towards the coast of Oman, reports suggested it could leave a short gap in the initial phase of monsoon. The IMD, however, has not changed its forecast. According to the IMD, the southwestern monsoon rainfall - through its course from June to September - will be normal.

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 BSE Sensex rose 254.63 points or 1.51% to 17,117.69 in the week ended 4 June 2010. The S&P CNX Nifty rose 68.95 points or 1.36% to 5135.50 in the week.

The BSE Mid-Cap index rose 1.99% and the BSE Small-Cap index 1.72%. Both the indices outperformed the Sensex.

Trading for the week began on positive note. Key benchmark indices clocked decent gains in a choppy trade on Monday, 31 May 2010 on the back of strong GDP outcome. The BSE 30-share Sensex rose 81.57 points or 0.48% to 16,944.63. The S&P CNX Nifty rose 19.75 points or 0.39% to 5086.30.

The key benchmark indices suffered a severe setback on Tuesday, 1 June 2010 as slowdown in Chinese manufacturing growth pulled world stocks sharply lower. The BSE 30-share Sensex fell 372.60 points or 2.2% to 16,572.03. The S&P CNX Nifty declined 116.10 points or 2.28% to 4,970.20.

Healthy auto and cement sales in May 2010 and buzz of strategic stake sale in Reliance Communications (RCom) helped domestic bourses shrug off weak global stocks on Wednesday, 2 June 2010. The BSE 30-share Sensex rose 169.81 points or 1.02% to 16,741.84. The S&P CNX Nifty gained 49.65 points or 1% to 5,019.85.

The key benchmark index surged on Thursday, 3 June 2010 as strong US housing data and positive services sector data in India for May 2010 boosted risk appetite. The barometer index BSE Sensex reclaimed the psychological 17,000 level. The BSE 30-share Sensex rose 280.40 points or 1.68% to 17,022.33. The S&P CNX Nifty gained 90.65 points or 1.81% to 5,110.50.

Key indices reversed earlier losses to end higher Friday, 4 June 2010, tracking intraday recovery in Asian markets. The 30-share BSE Sensex rose 95.36 points or 0.56% to 17,117.69. The 50-share NSE Nifty rose 25 points or 0.49% to 5,135.50.

The BSE Auto index index (up 4.45%), BSE FMCG index (up 3.64%), BSE PSU index (up 3.13%), BSE Healthcare index (up 2.12%), Bankex index (1.86%) and BSE IT index (up 1.84%), outperformed the Sensex.

The BSE Oil & Gas index (up 1.36%), BSE Capital Goods index (up 1.07%), Power index (up 0.54%), BSE Consumer Durables index (up 0.50%), Realty index (down 0.73%) and BSE Metal index (down 2.10%), underperformed the Sensex.

Twenty out of 30 shares on the Sensex ended the week in a positive territory.

Shares of India's second largest listed cellular services provider by sales Reliance Communications (RCom) was the biggest gainer last week. It rose 14.04% to Rs 168.15.

The RCom stock had risen on reports the company was considering a merger with South Africa's MTN group or roping in a strategic foreign investor to fund its foray into 3G services. Later, South Africa's MTN Group clarified it was not looking for a tie-up with RCom.

Meanwhile, reports had also suggested that United Arab Emirates-based Emirates Telecommunications Corporation (Etisalat) is in advanced talks to buy a 25% stake in Reliance Communications (RCom) for Rs 18,000 crore.

RCom later clarified that it has been receiving various proposals from time to time from reputed international telecom companies expressing interest in acquiring a strategic equity stake in RCom. The company evaluates such proposals in line with the company's policy to constantly endeavor to enhance overall shareholder value, RCom said. The company will comply with all its obligations including timely disclosures at the appropriate time, RCom added.

India's largest listed telecom company by sales Bharti Airtel rose 5.90% to Rs 276.30.

Auto stocks were in focus after auto makers posted robust sales growth in May 2010. TVS Motor Company (up 9.41%), Maruti Suzuki India (up 8.83%), Mahindra & Mahindra (up 7.37%), Hero Honda Motor (up 4.05%), Ashok Leyland (up 6.13%), Tata Motors (up 3.21%) and Bajaj Auto (up 0.85%), edged higher.

Auto sales rose despite recent price increases and a partial withdrawal of government stimulus measures in February 2010.

India's leading car maker by sales Maruti Suzuki India reported its highest-ever monthly sales in May 2010. The company's domestic sales rose 27.20% to 90,041 units in May 2010 over May 2009. This is highest ever monthly domestic sales. Its exports jumped 33.50% to 12,134 units in May 2010 over May 2009.

Tata Motors' total vehicle sales rose 41% to 56,779 units in May 2010 over May 2009. Domestic sales grew an annual 38% to 52,801 units, while exports surged 120% to 3,978 units in May 2010 over May 2009. The company sold 31,475 units of commercial vehicles in the domestic market last month, up 36.82% from 23,004 units sold in May last year.

Hero Honda's sales rose 14% to 4,35,933 units in May 2010 over May 2009. This is its highest ever monthly sales of Hero Honda.

Bajaj Auto's total vehicle sales increased 62% to 2.99 lakh units in May 2010 over May 2009. Motorcycle sales grew 63% to 2,69,488 units, while three wheeler sales rose 52% to 29,954 units in May 2010 over May 2009. Exports jumped 64% to 95,964 units.

TVS Motor Company's total two wheeler sales grew 30% to 1,54,667 units in May 2010 over May 2009.

Ashok Leyland's total vehicle sales surged 229% to 6,502 units in May 2010 over May 2009. Domestic sales surged 252% to 5,973 units, while exports jumped 89% to 529 units in May 2010 over May 2009.

Mahindra & Mahindra's sales surged 69% to 28,486 units in May 2010 over May 2009. Domestic sales soared 63% to 27,036 units and exports jumped 275% to 1,068 units in May 2010 over May 2009. Tractor sales rose 28% to 17,256 units.

State-run oil explorers ONGC (up 5.20%) and Oil India (up 3.06%) rose after these two state-run firms began charging higher gas prices from Tuesday, 1 June 2010.

The government on 19 May 2010, more than doubled the price of administered price mechanism gas to $4.2 per mbtu. Administered price mechanism (APM) gas is a term used for gas blocks awarded to state-run energy firms on nomination basis. The base price of APM gas supplied by state firms has risen to $4.2 per million British Thermal Units (mBtu), the same as the rate approved for Reliance Industries, bringing about near-uniformity in the cost of the fuel in India.

ONGC chairman R S Sharma had told media earlier that the company would annually gain about Rs 5500 crore in revenue and Rs 3500 crore in net profit due to revised gas prices.

India's largest cigarette maker by sales ITC rose 3.07% to Rs 290.75. The company will hold a board meeting on 18 June 2010 to consider issue of bonus shares. The company had last issued bonus shares in the ratio of 1:2 in 2005.

India's largest FMCG company by sales Hindustan Unilever jumped 6.82% to Rs 251.5. The company's board will consider share buyback on 11 June 2010.

Sterlite Industries (down 4.87%), Jindal Steel & Power (down 3.53%), Jaiprakash Associates (down 3.39%), Tata Power Company (down 2.55%), Tata Steel (down 2.29%), Hindalco Industries (down 1.89%), Wipro (down 1.30%), Housing Development Finance Corporation (HDFC) (down 1.08%) and HDFC Bank (down 0.03%), edged lower from the Sensex pack.

Index heavyweight Reliance Industries (RIL) fell 0.30%. RIL is reportedly likely to make its first big-ticket investment in coal-fired power plants after getting freed recently from its non-compete agreement with the Anil Dhirubhai Ambani Group (ADAG) that barred it from investing in high-growth sectors.