Market opens on a firm note

The key benchmark indices surged in early trade as Asian stocks and US index futures gained. The market breadth was strong. Oil & gas stocks extended Friday's (25 June 2010) gains after government freed petrol pricing and raised prices of other fuels. Reliance Communications, India's second biggest cellphone operator by sales, jumped more than 4% after company agreed to merge its telecom towers business with that of GTL Infrastructure. The BSE 30-share Sensex was up 88.80 points or 0.51%. Consumer durables stocks rose.



Most Asian stocks rose on Monday as commodities companies advanced. The key benchmark indices in China, Taiwan, South Korea, Indonesia, Hong Kong and Singapore rose by between 0.06% to 0.61%. But, the key benchmark indices in China and Japan fell by between 0.47% to 0.61%.

Trading in US index futures indicated that the Dow could gain 11 points at the opening bell on Monday, 28 June 2010.

In US market action on Friday, the Nasdaq and S&P 500 rose modestly on relief that the financial regulation bill wouldn't crimp Wall Street profits as badly as feared and as Oracle's strong results revived hopes about business spending. The Dow Jones industrial average was down 8.99 points, or 0.09% at 10,143.81. The Standard & Poor's 500 Index was up 3.07 points, or 0.29% at 1,076.76. The Nasdaq Composite Index was up 6.06 points, or 0.27% at 2,223.48.

In US economic news, a survey showed that consumer sentiment rose more than expected while a government report showed first-quarter gross domestic product was slower than previously estimated.

Meanwhile, world leaders agreed on Sunday, 27 June 2010, to take different paths for cutting budget deficits and making their banking systems safer. In a reversal from the unity of the past three crisis-era Group of 20 summits, the leaders left room to move at their own pace and adopt "differentiated and tailored" policies. The G20 rich and developing economies tried to balance their contrasting priorities by pledging to halve budget deficits by 2013 without stunting growth, and to clamp down on risky bank behavior without choking off lending.

Prime Minister Manmohan Singh on Sunday at the G20 meet warned of the risk of global double-dip recession if countries simultaneously cut government spending, recommending a nuanced approach for dealing with public debt. India, he said, would halve its fiscal deficit by 2013/14. Asia's third largest economy is projected to hit a deficit of 5.5% of GDP in the current fiscal year that ends in March 2011.

The market sentiment remains strong, with most Indian firms, including Reliance Industries, L&T, Tata Steel and Tata Motors, paying higher advance tax in Q1 June 2010 over Q1 June 2009. Higher advance tax payment normally indicates higher profits for the period under review. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year.

On the macro front, food inflation accelerated in mid-June 2010, maintaining pressure on the Reserve Bank of India to tighten monetary policy at a faster pace. The food price index rose 16.90% in the year to 12 June 2010, higher than the previous week's annual reading of 16.12%, data released by the government on Thursday 24 June 2010 showed. The fuel price index remained unchanged at 13.18% in the year to 12 June 2010.

The government's latest decision to raise fuel prices will stoke inflation, maintaining pressure on the Reserve Bank of India to tighten monetary policy. The government on Friday, 25 June 2010, raised petrol price by Rs 3.50 a litre, diesel price by Rs 2 litre, kerosene by Rs 3 litre and LPG by Rs 35 per cylinder.

The government has decided to decontrol petrol prices. The government will also eventually decontrol diesel prices, Oil Secretary S. Sundareshan said on 25 June 2010. The government will, however, continue to subsidize kerosene and LPG.

Investors will closely watch the progress of the monsoon rains. Annual monsoon rains were 11.1% below normal between June 1-23, the India Meteorological Department (IMD) said on Thursday, 24 June 2010.

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 south-west monsoon usually covers the entire country by mid-July. Monsoon rains are expected to be at 102% of the long-period average for the current monsoon season. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

Global rating agency Fitch recently raised India's growth forecast to 8.5% in the year to March 2011 from earlier forecast of 7% growth. The rating agency raised the local currency rating outlook to stable from negative as it forecast a decline in government debt to GDP ratio to 80% by March 2011 from 83% at the end of March 2010.

Meanwhile, in a major development, the government recently ended the row over unit linked insurance plans or Ulip by promulgating an ordinance on Friday, 18 June 2010, stating that unit linked insurance policies with investment component are insurance products which will come under the regulatory jurisdiction of the Insurance Regulatory & Development Authority (Irda) and not the Securities & Exchange Board of India (Sebi). It amended four Acts to make it clear that Ulips are not securities and they did not form part of collective investment schemes or mutual funds.

Foreign funds have made heavy purchases of Indian stocks over the past few days. The net inflow totaled Rs 6592.45 crore in June 2010 so far (till 25 June 2010) compared to a massive outflow of Rs 12071.13 crore in May 2010.

Domestic funds, which had absorbed some of the heavy selling from foreign funds last month, offloaded stocks worth a net Rs 4416.35 crore this month so far. Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.

At 9:20 IST, the BSE 30-share Sensex was up 88.80 points or 0.51% at 17,563.33. The Sensex rose 107.43 points at the day's high of 17,681.96 in early trade. The Sensex lost 2.68 points at the day's low of 17,571.85 in early trade.

The S&P CNX Nifty was up 29.05 points or 0.55% to 5298.10.

The BSE Mid-Cap index was up 0.6%. The BSE Small-Cap index was up 0.9%.

The market breadth, indicating the strength of the broader market was strong. On BSE, 544 shares advanced while 164 shares declined. A total of 14 shares remained unchanged.

From the 30-share Sensex, 22 stocks rose and rest fell.

Index heavyweight Reliance Industries (RIL) rose 0.34% on reports company plans to sell 2.5 acres of land in Central Mumbai to realty major Wadhwa Group. The land, located at Bandra-Kurla Complex (BKC), is expected to be sold for around Rs 1,000 crore. The 2.5-acre plot is part of a 18.5-acre piece of land that Reliance Industries had purchased for Rs 1,104 crore from the Mumbai Metropolitan Regional Development Authority (MMRDA) at an auction in 2006, reports suggested. The transaction is reportedly likely to be sealed in about a month's time.

RIL and Reliance Natural Resources (RNRL) on Friday, 25 June 2010, signed a revised gas supply master agreement which is in compliance with the gas utilization policy and EGoM decisions.

RNRL on Friday said it will now take appropriate steps requesting the government for expeditious allocation of natural gas. RNRL rose 0.91% extending Friday's 3.52% gains.

India's largest car maker sales Maruti Suzuki India fell 1% as hike in fuel prices could dent vehicle demand. The stock was the top loser from the Sensex pack.

PSU OMCs rose for the second straight day after the Empowered Group of Ministers on Friday, 25 June 2010 decided to decontrol petrol and diesel prices which will help reduce underrecoveries of PSU OMCs on fuel sales. BPCL, HPCL and Indian Oil Corporation rose by between 0.95% to 3.03%. Shares of these three PSU OMCs had risen by between 10.39% to 13.66% on Friday.

Among oil exploration stocks, ONGC and Oil India rose by between 0.87% to 2.77%.

Reliance Communications, India's second biggest cellphone operator by sales rose 4.42% after company agreed to merge its telecoms communication towers business with that of GTL Infrastructure to create what it said would be the world's largest telecoms infrastructure firm not controlled by an operator. Financial terms of the deal were not disclosed, but the combined operations would have an enterprise value of over $11 billion and would own more than 80,000 towers, with more than 125,000 tenancies from over 10 operators, Reliance Communications said on Sunday. GTL Infrastructure jumped 4.63%.

India's largest commercial vehicle maker by sales Tata Motors rose 0.77% ahead of a board meet today to consider fund raising.

Consumer durables stocks extended recent gains. Blue Star, Gitanjali Gems, Videocon Industries, Titan Industries and Rajesh Exports rose by between 0.05% to 2.54%.