Market retracts from 2-1/2 month high

Profit taking pulled the key benchmark indices off 2-½ month highs in what was an eventful week. An end to the row over regulation of Unit Linked Insurance Products (Ulips) and China's decision to allow its currency more freedom to move against the US dollar, boosted the market at the onset of the week. But, US Federal Reserve's more downbeat language on economic growth in the world's biggest economy weighed on the market towards the latter part of the week. The government's decision to raise fuel prices stoked inflation worries, pulling the market lower on last trading day of the week.



The BSE 30-share Sensex rose just 3.71 points or 0.02% to 17,574.53 in the week ended Friday, 25 June 2010. The 50-unit S&P CNX Nifty rose 6.45 points or 0.12% to 5,269.05.

Small-cap and mid-cap indices outperformed the Sensex. The BSE Mid-cap index jumped 106.88 points or 1.53% to 7,082.51 and the BSE Mid-cap index gained 142.93 points or 1.62% to 8,989.20.

In a major development, the government ended the row over Ulip by promulgating an ordinance on 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.

The BSE 30-share Sensex rose 305.73 points or 1.74% at 17,876.55 on Monday, 21 June 2010, its highest closing level since 9 April 2010. The S&P CNX Nifty jumped 90.70 points or 1.72% to 5,353.30, its highest closing since 9 April 2010.

Weakness in global stocks triggered profit taking on the domestic bourses on Tuesday, 22 June 2010, with metal and IT stocks leading the decline. The BSE 30-share Sensex fell 126.86 points or 0.71% at 17,749.69. The S&P CNX Nifty declined 36.75 points or 0.69% to 5,316.55.

Higher US index futures and recovery in European stocks helped the domestic bourses erase steep intraday losses to close flat on Wednesday 23 June 2010. The BSE 30-share Sensex was up 6.25 points or 0.04% at 17,755.94. The S&P CNX Nifty was up 6.60 points or 0.12% to 5,323.15.

Weakness in global stocks caused by US Federal Reserve's more downbeat language on economic growth in the world's biggest economy weighed on investor sentiment on Thursday, 24 June 2010. The BSE 30-share Sensex was down 25.70 points or 0.14% at 17,730.24. The S&P CNX Nifty was down 2.55 points or 0.05% to 5,320.60.

The key benchmark indices declined for the second straight day on Friday, 25 June 2010, on weak European stocks and as US index futures declined. But, oil & gas stocks surged after the government freed petrol prices. The BSE 30-share Sensex fell 155.71 points or 0.88% at 17,574.53. The S&P CNX Nifty shed 51.55 points or 0.97% to 5269.05.

PSU OMCs spurted. BPCL jumped 19.1% to Rs 621.35, HPCL jumped 18% to Rs 401.05 and Indian Oil Corporation rose 12.87% to Rs 377.30 in the week. Shares of oil exploration firm ONGC jumped 5.9% to Rs 1,264. The government on Friday, 25 June 2010, said it has decided to raise petrol price by Rs 3.50 a litre and diesel price by Rs 2 a litre, as part of a plan to move towards a market-determined fuel price regime. The decision follows a ministerial panel meeting on freeing up petrol prices and cutting subsidies on diesel, kerosene and cooking gas, to help rein in the fiscal deficit, which is projected at 5.5% of the gross domestic product in 2010/11 and free up revenues for other programmes.

Kerosene price has been raised by Rs 3 per litre and LPG by Rs 35 per cylinder. The government has decided to decontrol petrol prices. It has also decided to decontrol diesel prices, though not immediately. It will, however, continue to subsidise LPG and kerosene.

India's second largest mobile services provider by sales Reliance Communications jumped 4.3% to Rs 192.50. French media and telecom giant Vivendi on Wednesday, 23 June 2010, denied reports that it is negotiating with RCom to buy a 26% stake in the firm.

FMCG giant Hindustan Unilever rose 3.6% to Rs 266.55, car major Maruti Suzuki rose 3.3% to Rs 1,397.05, and Hero Honda rose 1.4% to Rs 2,049.95, on expectation that a normal monsoon this year will boost rural sales.

Cigarette major ITC rose 2.7% to Rs 302.15. The company's board on 18 June 2010 announced a liberal 1:1 bonus issue.

Tata Steel rose 3.3% to Rs 490.05 after the Chinese Ministry of Finance decided to scrap a tax rebate previously available on exports of a range of commodities, including various forms of steel. The move, which is reportedly a part of Beijing's efforts to cut carbon emissions in some polluting industries, is expected to be positive for Indian steel makers. There are substantial steel imports into India from China.

India's biggest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) rose 0.76% to Rs 1,063.25. RIL on 25 June 2010 said that pursuant to and in compliance with the directions and orders contained in the judgment of the Supreme Court of India delivered on 7 May 2010, RIL and Reliance Natural Resources (RNRL), have signed a gas supply master agreement which is in compliance with the gas utilization policy and EGoM decisions.

RIL on 24 June 2010 said it has entered into a joint venture with US based Pioneer Natural Resources Company under which RIL will acquire 45% interest in Pioneer's core Eagle Ford shale acreage position in two separate transactions. RIL will pay $1.31 billion for its implied share of 1,18,000 net acres. The transaction will include combined upfront cash payment of $263 million and deferred payments of $1.05 billion associated with a carry arrangement for 75% of Pioneer's and Newpek's capital costs over four years.

Bank stocks fell on rate hike worries. India's largest private sector bank by market capitalisation ICICI Bank fell 1.1% to Rs 857.50. India's second largest private sector bank by operating income HDFC Bank fell 2.2% to Rs 1,947.80. India's biggest commercial bank in terms of branch network State Bank of India fell 3% to Rs 2,300.80

IT stocks fell after the Federal Reserve downgraded its assessment of the economic recovery in the US, the biggest market for Indian IT firms. India's largest IT exporter by sales Tata Consultancy Services fell 2.5% to Rs 761.55, India's second largest IT exporter by sales Infosys fell 0.14% to Rs 2,777.75 and India's third largest IT exporter by sales Wipro fell 4.7% to Rs 390.55.