Media shares in limelight as Trai recommends 74% FDI in broadcast carriage services

The key benchmark indices jumped amid high volatility as European banks sought a smaller amount of central bank loans at a three-month tender auction on Wednesday than markets had anticipated. The news helped ease liquidity-related fears about the health of euro zone financial sector. Index heavyweight Reliance Industries (RIL) gained. Media shares jumped after the Telecom Regulatory Authority of India (Trai) recommended increasing foreign investment (FDI) limit to 74% in broadcast carriage services viz. DTH, IPTV, Mobile TV, HITS (Headend in the Sky), Teleport and multi-system operators (MSOs).



FMCG stocks, PSU OMCs, oil exploration stocks, auto and capital goods stocks rose. Banking and realty stocks reversed initial losses. The BSE 30-share Sensex was up 166.81 points or 0.95%, up close to 325 points from the day's low up and off close to 25 points from the day's high. The market breadth was strong in contrast to negative breadth earlier in the day.

Intraday volatility was high. The market recovered after initial losses caused by weak Asian stocks. The market once again slipped into the red after turning positive to hit fresh intraday high in morning trade. The market moved in a narrow range in mid-morning trade. The market surged to a fresh intraday high in early afternoon trade. The market extended gains in mid-afternoon trade. The market pared gains later before jumping to hit fresh intraday high in late trade.

NSE's volatility index India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, declined 2.76% to 20.07. The index had jumped 5.58% to 20.64 on Tuesday, 29 June 2010. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

Meanwhile, stock brokers have advised clients that shares bought in the cash segment today, 30 June 2010, should not be sold on Thursday, 1 July 2010, due to clubbing of settlements owing to annual closure of accounts of the Reserve Bank of India (RBI) on 1 July 2010. All offices of the RBI in Mumbai and Navi Mumbai will remain close on 1 July 2010 for annual closure of accounts of the central bank.

Bank shares led rally in European stocks on Wednesday as European banks sought a smaller amount of central bank loans at a three-month tender auction on Wednesday than markets had anticipated. The news helped ease liquidity-related fears about the health of the financial sector. High demand at the auction would have underlined worries about the interbank funding market. The key benchmark indices in France, Germany and UK rose by between 0.57% to 0.67%.

Meanwhile, official data showed that the unemployment rate in Germany, Europe's biggest economy, declined to 7.5% in June from 7.7% in May.

Asian stocks slid for the second day in a row on Wednesday as investors unwound risky positions amid concerns about the global economy. The key benchmark indices in Taiwan, South Korea, Japan and fell by between 0.55% to 1.96%. But, key benchmark indices in Singapore and Indonesia rose by between 0.18% to 0.7%.

China's Shanghai Composite was down 1.18% after slumping 4.3% in the previous session, amid worries about a second-half economic slowdown. Hong Kong's Hang Seng was down 0.59%

Japanese manufacturing activity declined in June for the first time in five months, The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) also showed that new export orders, a leading indicator of Japanese exports, declined for the second straight month in June.

Manufacturing PMI indexes for the United States and Europe due on Thursday are also expected to show factory output growth in both economies is slowing slightly.

Trading in US index futures indicated that the Dow could gain 50 points at the opening bell on Wednesday, 30 June 2010.

US stock markets slumped on Tuesday and the S&P 500 tumbled to its lowest level in eight months in a sell-off triggered by a wave of increasing alarm over the global economic outlook The Dow Jones Industrial Average lost 268.22 points, or 2.65% to 9,870.30. The Standard & Poor's 500 Index fell 33.33 points, or 3.10% to 1,041.24. The Nasdaq Composite Index dropped 85.47 points, or 3.85% to 2,135.18.

US consumer confidence dropped in June 2010 after rising for three months, adding to the view the economic recovery is slowing, while single-family home prices unexpectedly climbed in April 2010.

Back home, Prime Minister Manmohan Singh said on Tuesday, 29 June 2010, said capital inflows have not become a problem for the Indian economy as of now and the country does not face a situation that requires imposition of capital controls.

In macro economic news, infrastructure sector output grew 5% in May from a year earlier, lower than an upwardly revised annual growth of 5.4% in April, government data showed on Monday. The infrastructure sector accounts for 26.7% of the industrial output.

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.

The consumer price index (CPI) rose 13.91% in May from a year earlier, marginally higher than April's annual rise of 13.33% government data showed on Wednesday.

Investors will closely watch the progress of the monsoon rains. Annual monsoon rains were 12% below normal between June 1-27, the India Meteorological Department (IMD) said in its update on Monday, 28 June 2010. The vital monsoon rains, running late in the main sugar- and rice-producing regions, are not likely to revive in the next few days, the weather office said in its latest update, raising concerns about rising inflation.

So far, the monsoon has covered southern India and parts of eastern and central India but has not moved to other areas in the past 11 days as unfavourable weather conditions have inhibited monsoon winds, the weather office said. However, the monsoon is likely to advance after four days and cover the entire country on schedule by the middle of July, it said.

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. Last week, the weather office said the rains were expected to be better than previously forecast. 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.

On the corporate front, most Indian firms, including Reliance Industries, L&T, Tata Steel and Tata Motors, have paid 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.

The BSE 30-share Sensex was up 166.81 points or 0.95% at 17,700.90. The Sensex rose 190.95 points at the day's high of 17,725.04 at the fag end of the trading session. The Sensex lost 160.31 points at the day's low of 17,373.78 in early trade.

The S&P CNX Nifty was up 56.35 points or 1.07% to 5,312.50.

The BSE Mid-Cap index was up 0.46%. The BSE Small-Cap index was up 0.44%. Both the indices underperformed the Sensex.

Barring the BSE IT index, all other sectoral indices on BSE rose. BSE FMCG index (up 1.9%), Oil & Gas index (up 1.62%), and Auto index (up 1.07%), outperformed the Sensex. The BSE Realty index (up 0.93%), Power index (up 0.78%), banking sector index Bankex (up 0.76%), BSE PSU index (up 0.6%), Capital Goods index (up 0.56%), Metal index (up 0.47%), Consumer Durables index (up 0.42%), Healthcare index (up 0.28%), and BSE IT index (down 0.07%), underperformed the Sensex.

The market breadth, indicating the strength of the broader market, was strong. The breadth was negative earlier in the day. On BSE, 1609 shares advanced while 1283 shares declined. A total of 89 shares remained unchanged.

From the 30 share Sensex pack, 25 stocks rose and rest fell.

BSE clocked turnover of Rs 4901 crore, higher than Rs 4523.16 crore on Tuesday, 29 June 2010.

Index heavyweight Reliance Industries (RIL) rose 1.84%, on reports the Mukesh Ambani group is close to signing an equal joint venture agreement with global private equity and hedge fund company, DE Shaw, to enter the financial services sector.

Meanwhile, Mexico's energy ministry denied a media report that it was planning to construct a new oil refinery in partnership with Reliance Industries (RIL). Media reports had on Monday suggested that RIL and Mexican state-run oil giant Pemex may soon join hands to develop a green field refinery in Mexico.

RIL announced during market hours on Monday that it made seventh oil discovery in Cambay basin in Gujarat.

RIL and Reliance Natural Resources (RNRL) on Friday, 25 June 2010, entered into a new gas supply agreement, as directed by the Supreme Court. The Supreme Court had ordered the two companies to renegotiate the Gas Supply Master Agreement, which was signed between the Ambani brothers as part of the business demerger in 2005.

PSU OMCs extended recent strong gains triggered by the government's decision on Friday, 25 June 2010, to decontrol petrol and diesel prices which will help reduce underrecoveries of PSU OMCs on fuel sales. BPCL, HPCL and Indian Oil Corporation (IOC) rose by between 2.34% to 7.94%.

Oil firms and the government will jointly take a decision on how often petrol prices should be revised, Oil Secretary S. Sundareshan told reporters on Wednesday.

Oil exploration stocks also extended recent strong gains as last week's fuel price hike will reduce their subsidy sharing burden. ONGC and Oil India rose by between 1.11% to 1.31%.

Media shares jumped after the Telecom Regulatory Authority of India (Trai) recommended increasing foreign investment (FDI) limit to 74% in DTH, IPTV, Mobile TV, HITS, Teleport and multi-system operators (MSOs). In its recommendations sent to the Information and Broadcasting Ministry today, Trai has also suggested that FDI limit for local cable operators (LCOs) should be at 26%. On the FM radio front, Trai is in favour of a 26% FDI cap, up from the existing limit of 20%. There is no change in the 26% FDI cap for News & Current Affairs TV Channels. There will be no restriction on foreign investment for uplinking and downlinking of TV channels other than News & Current Affairs TV channels.

Among broadcasters, Zee Entertainment Enterprises jumped 4.8% to Rs 305.10 and Sun TV rose 3.4% to Rs 436.30. DTH operator Dish TV jumped 6.6% to Rs 48. FM radio operator Entertainment Network (India) surged 5.9% to Rs 250.15.

FMCG stocks rose on expectations normal monsoon rains this year will boost rural sales. ITC, Tata Tea, United Spirits, Dabur India, Hindustan Unilever, Nestle India, Marico rose by between 0.35% to 3.53%.

Index heavyweight Larsen & Toubro rose 0.59%, reversing initial losses after company announced during market hours today that it has bagged orders worth Rs 1383 crore.

Among other capital goods stocks, Bharat Heavy Electricals, ABB, SKF India and Thermax rose by between 0.08% to 5.25%.

Auto stocks rose ahead of the release of the monthly vehicle sales figures for June 2010 starting Thursday, 1 July 2010. Maruti Suzuki India, Ashok Leyland, Mahindra & Mahindra, Hero Honda Motors rose by between 0.03% to 2.49%.

India's largest commercial vehicle maker by sales Tata Motors rose 1.28%, on bargain hunting. The stock had lost ground recently on equity dilution concerns after the company announced after market hours on Monday that it plans to raise about Rs 4700 crore ($1.02 billion) through a combination of shares, bonds, debentures and other equity-linked instruments to cut debt and grow its business. Its ADR tumbled 4.52% on Tuesday, 29 June 2010.

According to a monthly report released by auto industry body the Society of Indian Automobile Manufacturers (Siam) on 9 June 2010, car sales in India rose 30.4% to 1.48 lakh units in May 2010 over May 2009. Auto sales rose despite recent price increases and a partial withdrawal of government stimulus measures in February 2010. The auto industry expects consumer demand to sustain following the overall economic expansion.

High beta realty stocks reversed initial losses. Ackruti City, HDIL, DLF, Unitech, Phoenix Mills and Indiabulls Real Estate rose by between 0.29% to 4.03%.

Bank stocks reversed initial losses. Bank credit grew an annual 19.1% in early June 2010, according to the RBI data, in tune with a rise in business and consumer confidence. India's second largest private sector bank by operating income HDFC Bank rose 0.57%. India's largest private sector bank by market capitalisation ICICI Bank rose 1.55%. ICICI Bank will announce the base rate today.

India's biggest commercial bank in terms of branch network, State Bank of India, rose 0.31%. SBI announced during market hours on Tuesday it has fixed the base rate at 7.5% per annum with effect from 1 July 2010.

Among the other PSU banks, Punjab National Bank and Bank of India rose by between 0.19% to 0.94%. But, Bank of Baroda fell 0.74%.

India's largest dedicated housing finance firm by revenue HDFC rose 1.36%, reversing initial losses.

Reliance Communications, India's second biggest cellphone operator by sales, rose 2.35% on reports company is likely to acquire privately-held cable television company, Digicable, in a cashless deal. The stock had risen 4.65% on Monday 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.

Among other telecom stocks, Bharti Airtel fell 1.02%. But, Idea Cellular rose 3.5%.

IT stocks fell, extending recent losses triggered by weak economic data in the US, which is the largest market for Indian IT firms. India's largest IT exporter by sales Tata Consultancy Services fell 0.41%, with the stock falling for the second straight day. India's third largest IT exporter by sales Wipro fell 1.23%, with the stock falling for the second straight day. Its ADR tumbled 4.52% on Tuesday, 29 June 2010.

India's second largest IT exporter by sales Infosys fell 0.07% to Rs 2788.55. The stock came off the day's low of Rs 2733. Its ADR tumbled 3.53% on Tuesday, 29 June 2010.

Cals Refineries clocked the highest volume of 5.3 crore shares on BSE. FCS Software (1.92 crore shares), IFCI (1.81 crore shares), Sanraa Media (1.69 crore shares) and Shree Ashtavinayak Cine Vision (89.10 lakh shares) were the other volume toppers in that order.

HPCL clocked the highest turnover of Rs 328.10 crore on BSE. IOC (Rs 137.41 crore), BPCL (Rs 135.48 crore), Aban Offshore (Rs 129.64 crore) and Reliance Industries (Rs 112.71 crore) were the other turnover toppers in that order.