Telecom, auto shares lead 1% Sensex surge

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. But, intraday volatility was immense. The BSE 30-share Sensex rose 169.81 points or 1.02%, up close to 170 points from the day's low and off close to 30 points from the day's high. The 50-unit S&P CNX Nifty regained the psychological 5,000 level after alternatively moving above and below that level in intraday trade. All the sectoral indices on BSE logged gains.

From a recent low of 16,022.48 on 25 May 2010, the BSE Sensex has gained 719.36 points or 4.48% in six trading sessions. From a recent peak of 17,970.02 on 7 April 2010, the Sensex is down 1,228.18 points or 6.83%. The Sensex has declined 722.97 points or 4.13% in the calendar year 2010 so far after jumping 81% in calendar 2009.

Volatility was high today. The market edged higher in early trade, tracking gains in some Asian stocks. It soon came off the higher level. The market shortly regained strength. It once again came off the higher level later. The Sensex briefly moved into negative zone in morning trade. The market shortly regained strength. The market moved in a narrow range in early afternoon trade.

The market regained strength in afternoon trade, soon after sharply cutting gains from the day's high in early afternoon trade. The market once again pared gains in choppy in mid-afternoon trade. Buying frenzy in index pivotals propelled key benchmark indices to the day's highs at the fag end of the trading session as US index futures climbed.

NSE's volatility index India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, declined 4.54% to 27.76. The index had declined 9.16% to 29.08 on Tuesday, 1 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.

The market breadth was strong. Telecom shares saw an across the board rally on hopes of merger and acquisition activity. Shares of state-run gas firms gained on reports the Centre has notified Cabinet decision to more than double the price of natural gas. Auto stocks were in limelight after robust sales figures for May 2010. Cement stocks rose after logging healthy monthly sales growth in May 2010.

Metal shares staged a comeback in late trade on bargain hunting after suffering losses in early trade. Banking and IT stocks saw mixed trend. Index heavyweight Reliance Industries was marginally lower, paring early gains.

European shares lost ground on Wednesday, pulled down by broad losses among commodity-sector companies and a further slide for oil major BP. The key benchmark indices in France, Germany and UK fell by between 0.75% to 1.29%.

Asian stock markets were mixed. The key benchmark indices in Taiwan, Japan and Hong Kong were down by between 0.13% to 1.28%. The key indices in China, Indonesia and Singapore rose by between 0.12% to 0.45%. South Korea's market was closed for local elections.

Japanese stocks fell in a roller coaster session after Prime Minister Yukio Hatoyama said he will step down. The Nikkei 225 average was down 1.12%.

US markets edged lower on Tuesday, 1 June 2010, in choppy trading prompted by fears of new banking problems in Europe and of a slowdown in Chinese growth. The Dow Jones industrial average fell 112.61 points, or 1.11%, at 10,024.02. The Standard & Poor's 500 Index dropped 18.70 points, or 1.72%, at 1,070.71 and the Nasdaq Composite index lost 34.71 points, or 1.54%, at 2,222.33.

In economic data, the ISM reported its manufacturing index dropped to 59.7 in May 2010 from 60.4 in April 2010, but remained in growth mode for a 10th straight month and beat expectations. A separate report showed construction activity rose the most in nearly a decade.

Global ratings firm Fitch Ratings on 28 May 2010 cut Spain's credit rating by one level to AA+ from AAA, saying the country's debt burden is likely to weigh on growth. Fitch cited an inflexible labor market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment. Spain is struggling to lower debt amid a fiscal crisis that prompted the European Union to forge an almost $1 trillion loan package for its weakest economies.

Spain's downgrade follows similar cuts in ratings of Greece and Portugal recently as those nations attempt to grapple with debt problems by implementing austerity measures.

US index futures climbed in choppy trade. Trading in US index futures indicated that the Dow could rise 44 points at the opening bell on Wednesday, 2 June 2010.

Back home, Prime Minister Manmohan Singh highlighted 12 major areas of his intended priority on Tuesday, 1 June 2010, while releasing the first anniversary report of the UPA-II government at a function in New Delhi. These include relations with neighbours, economic resurgence, internal security, education, health, child rights, food security, empowerment of women, weaker sections and minorities and rural renewal. He added that the economy is expected to grow at 8.5% in the current financial year ending March 2011.

The Prime Minister identified price rise as one of the major problems faced by his government but assured to monitor the situation and take necessary corrective measures to rein in inflation. Singh said India must withdraw fiscal stimulus to boost economic growth and reduce deficit in a calibrated manner.

The Reserve Bank of India on Tuesday said inflation remained higher than its comfort level, signalling that the bank could raise interest rates further.

India's exports rose 36% to $16.9 billion in April 2010 over April 2009, the latest government data released on 1 June 2010 showed. Exports rose for the sixth consecutive month in May 2010 after registering a slide in 13 straight months. Imports rose 43% to $27.3 billion in April 2010 over April 2009. HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian firms, surged to a 27-month high of 59 in May 2010 from 57.2 in April 2010, bolstered by steady growth in output, new orders and employment. The rate of growth had slowed in March 2010 and April 2010.

Meanwhile, a revenue bounty for the government from the sale of telecom spectrum would help bring down fiscal deficit in the current financial year.

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, data released by the government on Monday, 31 May 2010, showed. 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 quarter 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.

The advance of the south west monsoon rains has been temporarily halted by a cyclonic depression in the Arabian Sea. Monsoon has covered Kerala and Tamil Nadu, but not moved beyond due to a cyclonic depression, according to agency reports. The weather office expects monsoon rains to advance to Karnataka later this weekend, by when the cyclone would weaken. The June-September monsoon rains hit Kerala on 31 May 2010, a day ahead of schedule. The south-west monsoon usually covers the entire country by mid-July.

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.

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 Reserve Bank of India (RBI) on 26 May 2010, eased rules to boost liquidity at banks to avoid a cash crunch because of payments for corporate advance tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010. In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility.

Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.

The RBI expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand. The RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.

In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.

On the corporate front, the combined net profit of a total of 3,436 companies rose 14.20% to Rs 87,243 crore on 24.70% rise in sales to Rs 9,25,978 crore in the quarter ended March 2010 over the quarter ended March 2009.

The BSE 30-share Sensex rose 169.81 points or 1.02% to 16,741.84. The index rose 202.12 points at the day's high of 16,774.15 at the fag end of the trading session. The Sensex fell 0.58 points at the day's low of 16,571.45 in morning trade.

The S&P CNX Nifty gained 49.65 points or 1% to 5,019.85. Nifty hit a high of 5,031.20 at the fag end of the trading session.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,669 shares advanced as compared with 1,110 that declined. A total of 112 shares remained unchanged.

Among the 30-share Sensex pack, 23 advanced while only 7 of them declined.

The total turnover on BSE amounted to Rs 3708 crore, lower than Rs 4252.65 crore on Tuesday, 1 June 2010.

The BSE Mid-Cap index rose 0.85% and the BSE Small-Cap index rose 0.79%. Both the indices underperformed the Sensex.

All the sectoral indices on the BSE rose. The BSE Teck index (up 1.95%), Auto index (up 1.74%), Realty index (up 1.33%), and Capital Goods index (up 1.14%) outperformed the Sensex.

BSE Healthcare index (up 0.23%), Metal index (up 0.46%), FMCG index (up 0.47%), Power index (up 0.49%), Oil & Gas index (up 0.7%), Banking sector index Bankex (up 0.81%), Consumer Durables index (up 0.86%), PSU index (up 0.95%), IT index (up 0.97%), underperformed the Sensex.

Telecom shares saw an across the board rally on hopes of merger and acquisition activity. Shares of India's second largest listed cellular services provider by sales RCom jumped 11.02% to Rs 154.60 on reports 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. It was the top gainer from the Sensex pack.

The stock rose on heavy volume of 1.08 crore shares on BSE. The average daily volume in the stock in the past one quarter to 28 May 2010 stood at 9.8 lakh shares

RCom 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 cellular services provider by sales Bharti Airtel rose 5.16% and India's third largest listed cellular services provider by sales Idea Cellular Services gained 8.97%.

India's largest power utility firm Reliance Infrastructure surged 4.03% on reports the company has bagged a project worth Rs 2,960 crore for six-laning the Delhi-Agra highway from the National Highways Authority of India.

Shares of state-run gas firms rose on reports the Centre has notified Cabinet decision to more than double the price of natural gas produced by state-run firms from fields given to them without auctioning. The revised price of $4.20 per million British thermal units is effective from 1 June 2010.

India's largest oil exploration firm by sales Oil & Natural Gas Corporation shot up 3.32%. Oil India rose 0.92%.

Index heavyweight Reliance Industries (RIL) was flat at Rs 1011.90, after swinging in a band of Rs 1003.60 and Rs 1028 during the day. The Bombay Stock Exchange (BSE) said it was investigating trading in the stock after it plunged 20% in a few seconds before recovering most of its losses in intra-day trade on 1 June 2010.

Meanwhile, 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.

Auto stocks advanced after unveiling robust sales figures for May 2010. India's largest tractor maker by sales Mahindra & Mahindra (M&M) gained 1.83%, extending five-day gains, as auto sales rose 69% to 28,486 units in May 2010 over May 2009.

India's largest small car maker by sales Maruti Suzuki India rose 1.47% after total sales rose 27.90% to 1,02,175 units in May 2010 over May 2009. The company's domestic sales rose 27.2% to 90,041 units in May 2010 over May 2009. This is highest ever monthly domestic sales. Exports increased 33.5% to 12,134 units in May 2010 over May 2009. The company announced the sales figures during trading hours on 1 June 2010.

India's top truck maker by sales Tata Motors advanced 2.6% after reporting 41% growth in vehicle sales in May 2010 over May 2009. The company sold 56,779 units in May 2010 as against 40,196 units sold in May 2009. The company unveiled the monthly sales data after trading hours on Tuesday, 1 June 2010.

India's largest bike maker by sales Hero Honda Motors spurted 3.28% on reports the company has raised prices of its products by up to Rs 1,000 with immediate effect due to rising input costs.

Banking stocks saw mixed trend. India's largest bank in terms of branch network State Bank of India rose 2.21%. India's largest private sector bank by sales ICICI Bank rose 0.57%

However, India's second largest private sector bank by sales HDFC Bank slipped 0.14% after its ADR declined 1.62% on Tuesday, 1 June 2010.

IT stocks saw mixed trend. India's second largest software services exporter by sales Infosys rose 0.72%. India's largest software services exporter by sales TCS rose 2.05%. But, India's third largest software services exporter by sales Wipro slipped 1.22% to Rs 650.05 after its ADR lost 2.32% on 1 June 2010.

Cement stocks rose after logging healthy monthly sales growth in May 2010. Jaiprakash Associates surged 2.09% after logging 63% jump in sales to 1.3 million tonnes in May 2010 over May 2009.

ACC rose 0.91%. The company recently said it is setting up a mega cement project of 3 million tonnes per annum at Ghughus in the Chandrapur district of Maharashtra at a cost of about Rs 1500 crore.

UltraTech Cement rose 3.52%. Aditya Birla Group's cement shipments rose 5.5% to 3.3 million tonnes in May 2010 over May 2009. Production rose 5.6% to 3.4 million tonnes. The group has decided to combine its cement operations under UltraTech Cement. The process is expected to be completed by July 2010.

Ambuja Cements advanced 2.99% after shipments rose 13.7% to 1.86 million tonnes in May 2010 over May 2009. Cement production rose 16.4% to 1.90 million tonnes.

Metal shares staged a comeback in late trade on bargain hunting after suffering losses in early trade triggered by a setback in metal prices on the London Metal Exchange on Tuesday. Sterlite Industries (up 0.81%), JSW Steel (up 0.21%), Tata Steel (up 0.85%), National Aluminium Company (up 1.24%), and Sesa Goa (up 2.64%), gained.

Infrastructure stocks gained on fresh buying. Larsen & Toubro (up 2.27%), Nagarjuna Construction Company (up 2.62%), Hindustan Construction Company(up 0.74%) and IVRCL Infrastructure (up 5.3%), edged higher.

Realty stocks also gained on fresh buying. Unitech, Ackruti City, DLF, HDIL, Ackruti City, Indiabulls Real Estate rose by between 0.03% to 3.86%.

Consumer durables stocks rose on bargain hunting. Blue Star, Videocon Industries, Gitanjali Gems and Rajesh Exports rose by between 0.82% to 3.68%.

Cals Refineries clocked the highest volume of 2.51 crore shares on BSE. FCS Software (1.13 crore shares), Reliance Communications (1.08 crore shares), Development Credit Bank (84.30 lakh shares) and Reliance Natural Resources (71.72 lakh shares) were the other volume toppers in that order.

Torrent Pharma clocked the highest turnover of Rs 235.97 crore on BSE. Reliance Communications (Rs 167.30 crore), Tata Steel (Rs 157.64 crore), Sesa Goa (Rs 120.72 crore) and Tata Motors (Rs 98.36 crore) were the other turnover toppers in that order.