Oil, realty stocks lead rally; market snaps two-day slide

The key benchmark indices snapped last two days' losses on firm global stocks. The market breadth was strong. Oil & gas stocks extended Friday's (25 June 2010) sharp gains after the government freed petrol pricing and raised prices of other fuels. Metal, auto, sugar and realty stocks also gained. Except the BSE FMCG index, all the other sectoral indices on BSE were in green.



Index heavyweight Reliance Industries (RIL) extended initial gains after the company announced during market hours today that it made seventh oil discovery in a block in Cambay basin, near Ahmedabad in Gujarat. The BSE 30-share Sensex rose 199.73 points or 1.14%. The barometer index had lost 181.41 points or 1.02% in the preceding two trading sessions to settle at 17574.53 on Friday, 25 June 2010 from the recent high of 17755.94 on 23 June 2010.

Coming back to today's trade, intraday volatility was high. The market opened on a firm note, as a partial decontrol of fuel prices on Friday, 25 June 2010, and expectations of good monsoon rains this year, boosted sentiments. Stocks extended gains in morning trade. The market pared gains in mid-morning trade. The market regained strength in early afternoon trade.

The market pared gains soon after hitting fresh intraday high in afternoon trade. The market once again regained strength to hit fresh intraday high in mid-afternoon trade as European stocks rose. The market extended gains 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 2.25% to 19.55. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure ofthe market's expectation of volatility over the next 30 calendar days.

Emerging-market equity funds posted hefty net inflows in the week ended 23 June 2010. The group absorbed $1.98 billion of fresh cash on the week, according to fund tracker EPFR Global. Diversified global emerging-market funds had the biggest gains, taking in $1.15 billion.

Funds investing in the BRICs--Brazil, Russia, India and China--had their best week since early March 2010, bringing year-to-date inflows to $772 million. China equity funds saw modest inflows of $52 million. Taiwan funds had their best week in more than a year with $205 million inflows.

European shares extended gains on Monday, led higher by the banking sector as the G20 adopted a more flexible timeline for banks to build up higher levels of capital and liquidity. The key benchmark indices in France, Germany and UK, were up by between 0.23% to 0.93%.

Most Asian stocks rose on Monday after fears eased Washington would draft a harsh bill for regulating the banking sector and an unremarkable conclusion to a Group of 20 summit where leaders agreed to take their own paths to ensuring economic growth. The key benchmark indices in China, Taiwan, South Korea, Indonesia, Hong Kong and Singapore rose by between 0.13% to 0.64%. But, the key benchmark indices in China and Japan fell by between 0.45% to 0.69%.

Japan's retail sales expanded for the fifth straight month in May, though growth in spending lost momentum as government stimulus measures fade. Retail sales rose 2.8% from the same month a year earlier, the government said Monday.

Trading in US index futures indicated that the Dow could gain 19 points at the opening bell on Monday, 28 June 2010. US index futures moved between gains and losses.

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 12% below normal between June 1-27, the India Meteorological Department (IMD) said in its update on Monday, 28 June 2010. The seasonal rains were above normal in rice, corn and cane growing areas of south India, but lower-than-normal in the rest of the country, including soybean-growing areas of central India.

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.

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.

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.

The BSE 30-share Sensex rose 199.73 points or 1.14% at 17,774.26. The Sensex jumped 220.27 points at the day's high of 17,794.80 in late trade. The Sensex lost 2.68 points at the day's low of 17,571.85 in early trade.

The S&P CNX Nifty rose 64.45 points or 1.22% to 5,333.50.

The BSE Mid-Cap index was up 1.14% and matched the Sensex's rise. The BSE Small-Cap index was up 1.1% and underperformed the Sensex.

Barring the BSE FMCG index, all the other sectoral indices on BSE rose. BSE Consumer Durables index (up 2.83%), BSE Oil & Gas index (up 2.29%), Realty index (up 2.15%), BSE Power index (up 1.94%), BSE PSU index (up 1.78%), BSE Capital Goods index (up 1.45%), and Auto index (up 1.19%), outperformed the Sensex. BSE Metal index (up 1.1%), banking sector index Bankex (up 0.84%), IT index (up 0.75%), Healthcare index (up 0.33%), and FMCG index (down 0.66%), underperformed the Sensex.

The market breadth, indicating the strength of the broader market was strong. On BSE, 1,789 shares advanced while 1,088 shares declined. A total of 113 shares remained unchanged.

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

BSE clocked turnover of Rs 4201 crore, lower than Rs 4491.90 crore on Friday, 25 June 2010.

Index heavyweight Reliance Industries (RIL) rose 2.33%, after company announced during market hours today that it made seventh oil discovery in Block CB-ONN-2003/1 in Cambay basin.

Meanwhile, as per media reports, RIL and Mexican state-run oil giant Pemex may soon join hands to develop a greenfield refinery in Mexico.

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.

RNRL on Friday said it will now take appropriate steps requesting the government for expeditious allocation of natural gas. RNRL rose 1.29%, extending Friday's 3.52% gains.

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 3.39% to 7.98%. 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 2.34% to 3.19%, as the latest hike in fuel prices will reduce the subsidy burden of these two upstream oil firms.

Tata Power Company, India's No. 1 private-sector power producer, rose 2.28% after company said on Monday it is in the process of acquiring 20.95 megawatts (MW) operating wind assets in Maharashtra from Niskalp Energy. The company will also shortly place an order for 150 MW wind capacity to be set up in Maharashtra and Tamil Nadu, to be commissioned during the course of this year and next year.

Reliance Infrastructure rose 4.04% on reports the company has signed a concession arrangement with Maharashtra State Road Development Corporation (MSRDC) to develop the phase 2 of Mumbai Sea Link. The phase 2 is likely to get commissioned by June 2014.

Reliance Communications, India's second biggest cellphone operator by sales, rose 4.65% 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 4.08%.

Auto stocks rose on expectations of good Q1 results as most companies paid higher advance tax in Q1 June 2010 over Q1 June 2009. Bajaj Auto, Ashok Leyland and Mahindra & Mahindra rose by between 0.11% to 2.32%.

India's largest commercial vehicle maker by sales Tata Motors rose 2.79%, ahead of a board meet today to consider fund raising. The stock had fallen in last three days on equity dilution concerns after the company said during market hours on Wednesday that a meeting of the board of directors of the company will be held on Monday, 28 June 2010 to consider various options for raising long term capital funds.

But, Maruti Suzuki India and Hero Honda Motors fell by between 0.08% to 0.18%.

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 rose on bargain hunting. Ackruti City, HDIL, DLF, Unitech and Indiabulls Real Estate rose by between 1.69% to 3.46%.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange rose 1.12% on Friday, 25 June 2010. Steel Authority of India, Sterlite Industries, Sesa Goa, Tata Steel, Hindustan Zinc, JSW Steel and National Aluminum Company rose by between 0.87% to 2.68%.

India's largest cigarette maker by sales ITC fell 1.52%, with the stock falling for the second straight day. The stock hit a record high of Rs 307.80 on Friday, 25 June 2010. The company's board of directors recently recommended liberal 1:1 bonus issue.

Some FMCG stocks fell on profit taking. Britannia Industries, United Breweries and Hindustan Unilever fell by between 0.08% to 2.51%.

Bank stocks rose on expectations of a pick up in credit offtake in a fast rebounding economy. India's second largest private sector bank by operating income HDFC Bank rose 0.2%, reversing initial losses. India's largest private sector bank by market capitalisation ICICI Bank rose 1.29%, with the stock recovering after a two-day slide. PSU banking major State Bank of India rose 0.05%. Among the other PSU bank stocks, Punjab National Bank, Bank of India and Bank of Baroda rose by between 0.22% to 2.65%.

IT stocks rose on bargain hunting after 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 rose 0.28%, recovering from last two days' losses. India's third largest IT exporter by sales Wipro rose 1.04%, recovering from a four-day slide. India's second largest IT exporter by sales Infosys rose 0.96%.

Sugar stocks rose after world raw sugar for July 2010 delivery closed at 10-week high on Friday, 25 June 2010, supported by speculative fund buying and a rally in crude prices. Balrampur Chini Mills, Triveni Engineering and Industries, Bajaj Hindusthan, Shree Renuka Sugars rose by between 5.73% to 9.19%.

Cals Refineries clocked the highest volume of 3.92 crore shares on BSE. GTL Infrastructure (1.69 crore shares), NHPC (1.25 crore shares), FCS Software (75.88 lakh shares) and Reliance Natural Resources (73.76 lakh shares) were the other volume toppers in that order.

HPCL clocked the highest turnover of Rs 251.80 crore on BSE. BPCL (Rs 187.65 crore), Indian Oil Corporation (Rs 171.06 crore), Oil India (Rs 148.50 crore) and Reliance Communications (Rs 137.56 crore) were the other turnover toppers in that order.