Bank stocks rise in volatile market; L&T scales 52-week high

The key benchmark indices registered their third decline in four days as most Asian stocks fell. The BSE 30-share Sensex lost 27.40 points or 0.15%, up close to 75 points from the day's low and off about equal points from the day's high. The Sensex fell below the psychological 18,000 mark after crossing that mark in mid-morning trade. Realty, FMCG, healthcare and consumer durables stocks fell. But, capital goods stocks rose. Index heavyweight Reliance Industries (RIL) edged lower.



Private sector banking major HDFC Bank rose after reporting strong Q1 result. Shares of a number of state-run banks rose as Canara Bank's strong Q1 results announced on Saturday, 17 July 2010, fuelled expectations of good results from other state-run banks.

The market moved between positive and negative zone throughout the day. The market recovered from an early slide as Chinese stocks and US index futures rose. The intraday recovery gathered strength in morning trade - the market moved into positive zone. The market slipped into the red again in early afternoon trade. Weakness continued in afternoon trade after European stocks opened lower. The market moved in a range in mid-afternoon 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, jumped 5.12% to 20.71. The index had lost 2.38% to 19.70 on Friday, 16 July 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.

Foreign funds today, 19 July 2010, bought Indian stocks worth a net Rs 153.79 crore, as per provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 261.30 crore.

Foreign funds have made substantial purchases of Indian stocks this month. Foreign funds have bought Indian equities worth a net Rs 5218.84 crore this month so far, till 19 July 2010, as per data from the stock exchanges. Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010.

Domestic funds have sold shares worth a net Rs 2620.18 crore this month so far, till 19 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.

India's June exports rose an annual 30% to $17.75 billion, Trade Secretary Rahul Khullar said on Monday. Imports for the month rose 23% to $28.3 billion, he said.

Meanwhile, a committee set up by the stock market regulator Securities & Exchange Board of India (Sebi) has recommended major changes in the existing law governing substantial acquisition of shares and takeovers. The committee headed by C. Achuthan has recommended an increase in the acquisition threshold for the initial trigger of an open offer from the current level of 15% to 25% of the voting capital of a listed company. While no change has been recommended in the annual creeping acquisition limit of 5%, the committee has recommended that creeping acquisition be permitted only to acquirers who already hold more than 25% of the voting capital, subject to the aggregate post-acquisition shareholding not exceeding the maximum permissible non-public shareholding.

The committee has recommended that an open offer should be made for all the shares of the target company to ensure equality of opportunity and fair treatment of all shareholders, big and small. The exception to this rule is the size of an open offer where the same is voluntary in nature. The current regulations mandate a minimum offer size of only 20%.

European shares turned positive on Monday as energy shares cut early losses and miners advanced, tracking stronger metals prices. The key benchmark indices in France, UK and Germany were up by 0.51% to 0.71%.

Negotiators for the International Monetary Fund and European Union walked away from talks with Hungary over the weekend over differences on government budget cuts.

Moody's Investors Service on Monday cut Ireland's sovereign debt rating by one notch to Aa2 from Aa1, citing the government's gradual but significant loss of financial strength. However, the agency also lifted the outlook on Irish government debt to stable from negative, saying the risks are now evenly balanced

Asian stock markets fell on Monday after US consumer confidence weakened and corporate results fell short of expectations. The key benchmark indices in Hong Kong, Taiwan, Indonesia and South Korea were down by 0.19% to 0.79%. But, China's Shanghai Composite rose 2.11%, as banking, property and consumer stocks rose on hopes that Beijing may not introduce more restrictive policies after several indicators showed last week the economy was cooling. Japanese markets were shut for Marine Day.

Trading in US index futures indicated that the Dow could gain 48 points at the opening bell on Monday, 19 July 2010.

Dismal economic data and lower than expected revenues from GE and two big banks slammed US stocks on Friday, 16 July 2010, driving down major indexes more than 2%. General Electric Co, Bank of America Corp and Citigroup Inc joined the list of major companies that beat Wall Street's expectations, but investors unloaded some shares of all three after the companies reported a drop in quarterly revenues. The Dow Jones Industrial Average dropped 261.41 points, or 2.52% to 10,097.90. The Standard & Poor's 500 Index slid 31.60 points, or 2.88% to 1,064.88. The Nasdaq Composite Index lost 70.03 points, or 3.11% to 2,179.05.

The Thomson Reuters/University of Michigan survey of consumers showed US consumer sentiment fell far more than expected to 66.5 in a preliminary July reading, down sharply from 76, June's final number. Earlier, the US Labor Department reported the US Consumer Price Index dipped 0.1% in June, which was weaker than the forecast for no change.

With the market anxious to know whether the world's biggest economy is stalling, semiannual testimony by U.S. central bank chief Ben Bernanke on Wednesday will be closely watched by investors.

Back home, a sharp cut in corporate tax rate proposed in the direct taxes code is reportedly likely to be done in stages to ensure that tax collections do no plummet, derailing the government's attempts to bring the fiscal situation under control. The direct taxes code, or DTC, has proposed a cut in corporate tax rate to 25% from the current 30%, but will withdraw most tax exemptions available to companies. The government is likely to lower the tax rate to 27.5%, or a reduction of 2.5 percentage points, when the code comes into effect, likely from April 2011, reports suggest.

The stock market regulator Securities & Exchange Board of India (Sebi) on Thursday, 15 July 2010, allowed physical settlement of both stock options and stock futures. At present only cash settlement of derivatives is allowed. Sebi said stock exchanges will also have flexibility to offer a combination of cash settlement for stock options and physical settlement for stock or physical settlement for stock options and cash settlement for stock futures.

A stock exchange may introduce physical settlement in a phased manner, it said in a circular. On introduction, however, physical settlement for all stock options and/or all stock futures, as the case may be, must be completed within six months, Sebi said. The settlement mechanism shall be decided by the stock exchanges in consultation with the depositories,the stock market regulator said.

Meanwhile, the lower exposure margin requirement for stock derivatives has become effective from late last week.

On the macro front, the latest data showed that the fuel price index rose 14.27% in the year to 3 July 2010 and the food price index climbed 12.81%. Fuel price inflation eased from the previous week's annual rise of 18.02% while the pace of food price inflation edged up marginally from last week's 12.63%. Food inflation edged up because of higher rice and wheat prices. The primary articles index was up 16.25% compared with the previous week's reading of 16.08%.

The headline inflation rose lower-than-expected 10.55% in June 2010. The rate of increase was higher than May's rise of 10.16%. Inflation for April 2010 was revised upwards to 11.23% from 9.59%.

Weak monsoon rains in the past week will not significantly hurt crop output in the country and the weather outlook is encouraging, Farm Minister Sharad Pawar said on Friday, 16 July 2010. Monsoon rains were 24% below normal in the week ended 14 July 2010. Out of 36 meteorological sub-divisions, rainfall was excess in 8, normal in 4, deficient in 19 and scanty in 5 sub-divisions during the week. Bihar, east Madhya Pradesh, Chhattisgarh, Vidarbha, Andhra Pradesh, Tamil Nadu and Sub- Himalayan West Bengal & Sikkim received good rainfall during the week.

The India Meteorological Department (IMD) said the cumulative seasonal rainfall for the country as a whole during this year's monsoon upto 15 July has so far been 14% below the long period average (LPA). Out of 36 meteorological subdivisions, the rainfall has been excess over 6, normal over 16 and deficient in 14 sub-divisions.

The monsoon activity revived on Monday, 19 July 2010, with many parts of the country receiving good rains, raising the prospects of a strong harvest. The southwest monsoon was vigorous over Sub-Himalayan West Bengal & Sikkim and active over Saurashtra & Kutch and Arunachal Prades during past 24 hours, the IMD said in its daily update on Sunday, 18 July 2010. The IMD expects widespread rainfall over Uttar Pradesh, Uttrakhand, Bihar, Sub-Himalayan West Bengal & Sikkim, Konkan & Goa, Coastal Karnataka, Kerala, Lakshadweep and northeastern States, in the near term. It said fairly widespread rainfall would occur over Himachal Pradesh, Punjab, Haryana, Chandigarh & Delhi, East Rajasthan, Gangetic West Bengal, Vidarbha, Madhya Pradesh, Chhattisgarh, Jharkhand and Andaman & Nicobar Islands.

The IMD expects scattered rainfall over Madhya Maharashtra, Marathwada, Interior Karnataka, north Andhra Pradesh and Orissa during next 48 hours and increase thereafter. It expects isolated to scattered rainfall over rest of the country in the near term. For the current week, the IMD expects widespread rainfall over west coast, along foothills of Himalaya and northeastern states. It also expects fairly widespread rainfall over central and east India this week.

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 weather office expects this year's monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

The BSE 30-share Sensex fell 27.40 points or 0.15% to 17928.42. The Sensex rose 49.25 points at the day's high of 18,005.07 in mid-morning trade. The index lost 99.42 points at the day's low 17,856.40 in early trade.

The S&P CNX Nifty fell 7.45 points or 0.14% to 5386.45.

The BSE Mid-Cap index rose 0.2%. The BSE Small-Cap index rose 0.14%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE declined. The BSE FMCG index (down 1.4%), Realty index (down 0.94%), Consumer Durables index (down 0.68%), Oil & Gas index (down 0.34%), Healthcare index (down 0.33%), IT index (down 0.31%), Auto index (down 0.24%), and Power index (down 0.24%), underperformed the Sensex.

BSE PSU index (up 0.75%), banking sector index Bankex (up 0.25%), Capital Goods index (up 0.22%) and Metal index (up 0.12%), outperformed the Sensex.

The market breadth, indicating the strength of the broader market, was positive. On BSE, 1,514 shares advance while 1,426 shares declined. A total of 84 shares remained unchanged. The breadth was much stronger earlier in the day.

From the 30 share Sensex pack, 19 stocks fell and the rest rose.

BSE clocked turnover of Rs 3705 crore, lower than Rs 4307.85 crore on Friday, 16 July 2010.

India's largest thermal power producer by sales NTPC rose 2.22% and was the top gainer from the Sensex pack. NTPC said during the weekend that it will start commercial operations of its second coal-based 490 MW power plant at Dadri in Uttar Pradesh to provide electricity for the Commonwealth Games. The new plant, along with another unit of similar capacity which came on stream early this year, will provide 90% of its power output for the Games in October this year, the company said in a statement. The remaining 10% will be given to Uttar Pradesh.

Index heavyweight Reliance Industries (RIL) was down 0.63% at Rs 1056.25. The stock hit a low of Rs 1054 and a high of Rs 1065.75. RIL may reportedly be able to establish more commercially-viable oil and gas finds in the country's largest gas field KG-D6 with the Cabinet allowing the company extra time for drilling wells.

The extension will help RIL complete evaluation works in at least three wells in the KG-D6 block where drilling was not authorised by the concerned regulator Directorate General of Hydrocarbon (DGH) after the company missed the deadline, reports suggest.

RIL and Reliance Natural Resources (RNRL) on 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. RIL also recently announced its seventh oil discovery in Cambay basin in Gujarat.

FMCG stocks fell on profit taking. ITC, Dabur India, Nestle India and Hindustan Unilever fell by between 0.71% to 2.51%.

Sun Pharmaceutical Industries fell 1.07%. The company has announced that the US District Court for the District of New Jersey denied its motion for judgment as a matter of law, seeking to reverse the earlier jury verdict in the patent litigation over generic Protonix.

The detailed opinion of the Court supporting this order has not yet been issued. Sun Pharma continues to believe that the patent is invalid and unenforceable and will pursue all available legal remedies including appeals. Other claims of Sun Pharma, including patent misuse and unclean hands, that also concern the validity and enforceability of the patents remain pending, the company said.

Among other healthcare stocks, Cipla, Lupin and Dr Reddy's Laboratories fell by between 0.23% to 0.48%.

Some consumer durables stocks fell on profit taking. Gitanjali Gems, Blue Star, Rajesh Exports and Titan Industries fell by between 0.8% to 4.2%.

Interest rate sensitive realty stocks fell on rate hike worries. Omaxe, DLF, Phoenix Mills, Unitech, Indiabulls Real Estate, HDIL, Ansal Properties, Sobha Developers fell by between 0.16% to 1.74%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 1.14% after company said during market hours today L&T General Insurance Company, the general insurance arm of the firm would commence its operations soon. The scrip today hit a 52 week high of Rs 1,898. The company has received the necessary license from the regulatory authority for commencing general insurance business.

Among other capital goods stocks, Siemens, SKF India, Praj Industries and BEML rose by between 0.59% to 1.55%.

But, India's largest power equipment maker by sales Bharat Heavy Electricals fell 1.14%. The company has got an order worth Rs 2665 crore from Dainik Bhaskar Power for setting up a 1,200 megawatts thermal power plant in Chhattisgarh. The company will announce its Q1 result on Friday, 23 July 2010.

Reliance Communications (RCom) rose 2.22% on reports Emirates Telecommunications is close to buying a 26% stake in the firm. It was the top gainer form the Sensex pack. The deal is estimated to be worth $3 billion, and the two groups are considering merging RCom with Swan Telecom, the Indian company in which Etisalat holds a 45%, reports suggest.

Metal stocks were mixed. Steel Authority of India, Jindal Steel & Power, Hindalco Industries rose by between 0.34% to 0.6%. But, Sterlite Industries, Hindustan Zinc and National Aluminum Company fell by between 0.04% to 1.38%. LMEX, a gauge of six metals traded on the London Metal Exchange fell 2.35% in London on Friday, 16 July 2010.

India's largest steel maker by sales Tata Steel rose 0.51%, reversing initial losses. Tata Steel's subsidiary Natsteel Holding has sold off its entire 27.03% stake in Southern Steel Berhad, Malaysia for $72 million (around Rs 337 crore).

Private sector banking major HDFC Bank rose 0.99% after the bank announced during market hours today that its net profit rose 33.92% to Rs 811.72 crore in Q1 June 2010 over Q1 June 2009.

India's biggest commercial bank in terms of branch network, State Bank of India (SBI) rose 0.61%. The government on Thursday, 15 July 2010, approved the merger of State Bank of Indore with State Bank of India (SBI).

SBI recently said it has signed a joint venture agreement with State General Reserve Fund (SGRF), Sultanate of Oman to set up a general purpose Private Equity Fund for investing in various assets in India. This is a part of sovereign level collaboration between the Government of India and the Government of Sultanate of Oman. The fund will have initial target corpus of $100 million and is proposed to be expanded in future up to a level of $1.5 billion.

Shares of a number of state-run banks rose as Canara Bank's strong Q1 results announced on Saturday, 17 July 2010, fuelled expectations of good results from other state-run banks. Andhra Bank jumped 6.1% to Rs 147.05. Indian Overseas Bank flared up 5.15% to Rs 115.40. UCO Bank rose 4.22% to Rs 87.75. UCO Bank will declare Q1 June 2010 results on 23 July 2010.

Canara Bank jumped nearly 4% to Rs 497.70 as net profit soared 82.5% to Rs 1013.37 crore on 17.1% rise in total income to Rs 5894.85 crore in Q1 June 2010 over Q1 June 2009. The stock today, 19 July 2010, hit a record high of Rs 514.60

Among other PSU stocks, Bank of Baroda rose 0.62%. Bank of India and Punjab National Bank fell by between 0.17% to 0.48 %.

India's largest private sector bank by market capitalisation ICICI Bank fell 0.23%. The bank recently announced the pricing of an international bond offering of $500 million. The bank recently set its base rate for loans at 7.5%, effective 1 July 2010 as part of a new rule to set minimum lending rates.

India's largest dedicated housing finance firm by revenue, HDFC rose 0.99%, with the stock snapping last two days' slide. Net profit rose 22.95% to Rs 694.59 crore in Q1 June 2010 over Q1 June 2009. Income from operations rose 0.15% to Rs 2797.13 crore in Q1 June 2010 over Q1 June 2009. The results were announced on 14 July 2010.

Auto stocks fell on worries hike in fuel price late last month and higher interest rates will crimp demand. Bajaj Auto fell 0.32%, with the stock falling for the third straight day. Bajaj Auto will announce Q1 results on Thursday, 22 July 2010. The board of Bajaj Auto will also consider issue of bonus shares along with the first quarter results.

The country's largest two-wheeler maker Hero Honda Motors fell 1.05%. The company reported a 16.6% jump in its sales at 4,26,454 in June 2010 over June 2009.

India's largest truck maker by sales, Tata Motors fell 0.74%, with the stock snapping last two days' gains triggered strong sales. Tata Motors' global vehicles sales rose 46% to 91,608 units in June 2010 over June 2009. The figure includes its British luxury unit Jaguar Land Rover, whose sales rose 47% in the month to 20,189 units.

India's largest car maker by sales Maruti Suzuki India fell 1.12%. The company will announce Q1 results on Saturday, 24 July 2010.

But, India's largest tractor maker by sales Mahindra & Mahindra (M&M) rose 0.55%. The company, last week, said its board of directors at its meeting held on 15 July 2010, was briefed about the company's potential bid for Ssangyong Motors Company, South Korea. A decision on the bid would be taken at the company's next board meeting to be held on 28 July 2010.

Cals Refineries clocked the highest volume of 2.48 crore shares on BSE. FCS Software (1.62 crore shares), Sanraa Media (1.54 crore shares), IFCI (1 crore shares) and Karuturi Global Solutions (68.09 lakh shares) were the other volume toppers in that order.

BF Utilities clocked the highest turnover of Rs 176.42 crore on BSE. Everonn Education Systems (Rs 110.90 crore), Technofab Engineering (Rs 67.42 crore), Tata Steel (Rs 60.04 crore) and IFCI (Rs 59.86 crore) were the other turnover toppers in that order.