Market snaps two-day slide; TCS soars as Q1 result beats street

The key benchmark indices eked out small gains on the final trading session of the week, snapping losses in the preceding two trading sessions, as European stocks rose. Sustained buying by foreign funds and stock market regulator Sebi's decision to allow physical settlement of stock derivatives, underpinned sentiment. Stock-specific buying continued based on expectations regarding Q1 results of individual firms. Banking and financial services shares were in demand.



The BSE 30-share Sensex rose 46.36 points or 0.26%, up close to 75 points from the day's low and off close to 15 points from the day's high. IT major TCS jumped as its Q1 result beat market expectations. Other IT stocks also rose. Realty and FMCG stocks also gained. But, index heavyweight Reliance Industries edged lower.

NSE's volatility index India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, lost 2.38% to 19.70. 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 slipped into the red after moving between positive and negative terrain near the flat line in early trade. The market edged higher in morning trade. It pared gains in mid-morning trade. The market regained strength in early afternoon trade as some Asian stocks rose. The market extended gains in afternoon trade as European stocks rose at the onset of the trading session. The key benchmark indices regained strength in mid-afternoon trade, having earlier pared gains from the day's highs. The market scaled a fresh intraday high at the fag end of the trading session.

Foreign funds continue to mop up Indian stocks. Foreign funds have bought Indian equities worth a net Rs 4388.62 crore this month so far, till 15 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 2076.98 crore this month so far, till 15 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.

European stocks rose on Friday drawing some optimism from Wall Street's late-session comeback on Thursday 15 July 2010. The key benchmark indices in UK, France and Germany were up by 0.77% to 1.13%.

Most Asian stocks fell on weak US economic data. The key benchmark indices in Hong Kong, Japan, Taiwan, and South Korea were down by 0.03% to 2.86%. China's Shanghai Composite ended unchanged for the day. The key benchmark Indonesia and Singapore were up by between 0.34% to 0.4%.

Trading in US index futures indicated that the Dow could rise 8 points at the opening bell on Friday, 16 July 2010. US index futures reversed initial losses.

US Stocks ended little changed on Thursday, 15 July 2010, recouping intraday losses late in the day, led by a sudden turnaround in shares of Goldman Sachs and BP. The Dow Jones Industrial Average dipped 7.41 points, or 0.07% to end at 10,359.31. The Standard & Poor's 500 Index added 1.31 points, or 0.12% to 1,096.48. The Nasdaq Composite Index was off 0.76 of a point, or 0.03% to 2,249.08.

An unexpected fall in regional factory activity and a third straight month of decline in producer prices raised concerns about deflation, cooling enthusiasm for the strong start to the earnings season that had lifted stocks off recent lows.

Meanwhile, the US Congress approved a broad overhaul of financial regulation, sending it to President Barack Obama to sign it into a law.

Back home, in a major development, 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.

On expiry/exercise of physically settled stock derivatives, the risk management framework (i.e. margins and default) of the cash segment shall be applicable, it said.Settlement of cash and equity derivative segments will continue to remain separate, the Sebi circular said.

The stock exchanges interested in introducing physical settlement are advised to submit to Sebi for approval, a detailed framework for implementation of physical settlement of stock derivatives. After opting for a particular mode of settlement for stock derivatives, a stock exchange may change to another mode of settlement after seeking prior approval of Sebi, it said.

Meanwhile, the lower exposure margin requirement for stock derivatives has become effective from Thursday, 15 July 2010.

The Securities and Exchange Board of India (Sebi) is reviving the practice of pre-opening session for share trades, and has asked stock exchanges to put systems in place for it. To begin with, the pre-open session will be introduced on a pilot basis, and will be applicable only for shares in the BSE Sensex and the S&P CNX Nifty.

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%.

The industrial output in May 2010 rose at a slower-than-expected 11.5% from a year earlier, data showed on Monday, 12 July 2010. Manufacturing output rose an annual 12.3%, the statistics office said. Mining output was up 8.7% and power generation rose 6.4%. Production of capital goods rose 34.3% year-on-year after an annual rise of 72.8% in April 2010, while consumer durables output grew 23.7%, down from a 37% rise in the previous month April's industrial production growth was revised downwards to 16.5% from 17.6%.

The International Monetary Fund (IMF) on 8 July 2010 raised its world output forecast for 2010, citing solid growth in the first half, especially in Asia, but warned of significant downside risks flowing from Europe. The IMF revised its 2010 world gross domestic product forecast to 4.6%, up from a previous forecast in April of 4.2%. The 2011 GDP forecast was unchanged at 4.3%.

The IMF raised India's growth forecast for 2010 to 9.5%, stating that favourable financing conditions and robust corporate profits will accelerate economic expansion. The IMF expects India's economy to grow 8.5% in 2011.

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 IMD expects rainfall activity to enhance over many parts of the country from Monday, 19 July 2010.

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 rose 46.36 points or 0.26% at 17,955.82. The Sensex rose 70.81 points at the day's high of 17,980.27 at the fag end of the trading session. The index fell 17.30 points at the day's low 17,892.16 in early trade.

The S&P CNX Nifty rose 15.15 points or 0.28% to 5,393.90.

The BSE Mid-Cap index rose 0.44%. The BSE Small-Cap index rose 0.66%. Both these indices outperformed the Sensex.

The market breadth, indicating the strength of the broader market, was positive. On BSE, 1,617 shares advanced while 1,322 shares declined. A total of 103 shares remained unchanged. The breadth was much stronger earlier in the day.

From the 30 share Sensex pack, 17 stocks rose and rest fell.

BSE clocked turnover of Rs 3998 crore, lower than Rs 4320.79 crore on Thursday, 15 July 2010.

IT major TCS jumped 6.16% as its Q1 results beat market expectations. TCS' consolidated net profit as per US accounting standards declined 5.31% to Rs 1844.30 crore on 6.21% growth in revenue to Rs 8217.30 crore in Q1 June 2010 over Q4 March 2010. The company raised its hiring target by 10,000 to 40,000 for 2010-11, reflecting strong demand.

TCS chief executive officer and managing director N Chandrasekaran said Q1 June 2010 was a quarter of complete outperformance at TCS. He said TCS' balance growth in Q1 June 2010 was driven by disciplined execution and strong demand across markets and industry sectors. He said while the management is alert about changing macro dynamics in many markets, TCS' customer-centric business model is very relevant and helps TCS participate in the ongoing recovery.

TCS' chief financial officer and executive director S Mahalingam said TCS' investments in building an extensive front office presence in new markets is helping support and sustain higher growth.

IT bellwether Infosys rose 0.7%, with the stock gaining for the second straight day and recovering from a slide early this week triggered by disappointing Q1 result. At the time of announcing the results early this week, Infosys warned that the global economic environment continues to be uncertain, even though the company raised its full-year revenue and profit forecasts.

Infosys' consolidated net profit as per International Financial Reporting Standards (IRFS) declined 7% to Rs 1488 crore on 4.3% increase in revenue to Rs 6198 crore in Q1 June 2010 over Q4 March 2010. Operating profit declined 1.9% to Rs 1755 crore in Q1 June 2010 over Q4 March 2010. The operating profit margin (OPM) declined to 28.31% in Q1 June 2010 from 30.09% in Q4 March 2010. During the quarter, the company and its subsidiaries hired as many as 8,859 employees in total, but the net addition to its headcount was just 1,026.

India's third largest IT exporter by sales Wipro rose 0.06%, with the stock gaining for the second straight day.

Index heavyweight Reliance Industries (RIL) fell 0.93%. RIL reportedly has approached the Competition Commission of India (CCI) alleging that state-run oil companies have formed a cartel to supply aviation turbine fuel to national carrier Air India.

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.

Interest rate sensitive realty stocks rose on buzz of hike in foreign direct investment to the sector. Omaxe, DLF, Unitech, Indiabulls Real Estate, HDIL, Ansal Properties rose by between 0.35% to 1.95%.

Shares of banking and financial services firms hogged limelight. India's largest private sector bank by market capitalisation ICICI Bank rose 2.32%. The bank, last week, 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.

Axis Bank rose 1.05%, extending Thursday's 2.34% gains triggered by strong Q1 results. The scrip hit a record high of Rs 1367 today. Net profit rose 31.99% to Rs 741.88 crore in Q1 June 2010 over Q1 June 2009. The private sector bank announced the results during trading hours on Thursday

But, India's second largest private sector bank by operating income HDFC Bank fell 1.24%, with the stock falling for the second straight day. The stock had hit the record high of Rs 2,110.40 on Wednesday, 14 July 2010. HDFC Bank, last week, said it has issued on a private placement basis unsecured, redeemable, non-convertible, subordinated bonds in the nature of debentures towards Tier-II Capital for an amount aggregating Rs 1105 crore. HDFC Bank recently set its base rate at 7.25%

India's biggest commercial bank in terms of branch network, State Bank of India (SBI) rose 0.07%. 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.

Among other PSU stocks, Bank of India, Bank of Baroda and Punjab National Bank rose by between 0.65% to 1.49%.

India's largest dedicated housing finance firm by revenue, HDFC fell 0.86%, with the stock falling for the second straight day. 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 hit the market in late trade on Wednesday, 14 July 2010.

FMCG stocks rose on renewed buying. Nestle India, Dabur India, Hindustan Unilever, Marico, United Spirits rose by between 0.35% to 1.75%.

Larsen & Toubro, India's largest engineering fell 0.17%, on equity dilution concerns. The company plans to raise $600 million (about Rs 2,700 crore) from institutional investors to fund future programmes that include building a large metro rail network and setting up power plants. The funds will be raised by offering shares to institutional investors through the qualified institutional placement route and will be completed within a year of the annual general meeting, L&T said in a notice to shareholders. The meeting is scheduled for 26 August 2010.

Among other capital goods stocks, Siemens, SKF India, Punj Lloyd, Thermax, BEML fell by between 0.09% to 1.38%.

Some healthcare stocks fell on profit taking. Sun Pharmaceutical Industries, Ranbaxy Laboratories, Biocon fell by between 0.13% to 0.46%.

Auto stocks were mixed. India's India's largest tractor maker by sales Mahindra & Mahindra (M&M) fell 2.06%, reversing initial gains. The stock was the top loser from the Sensex pack. The company 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.

Bajaj Auto fell 0.38%. The company recently said that a meeting of the board of directors of the company will be held on 22 July 2010 to consider issue of bonus shares.

The country's largest two-wheeler maker Hero Honda Motors rose 0.07%. 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 rose 2.65% with the stock gaining for the second straight day after its 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 was flat. The company's total vehicle sales rose 17.3% to 88,091 vehicles in June 2010 over June 2009.

Metal stocks declined as LMEX, a gauge of six metals traded on the London Metal Exchange fell 0.34% in London on Thursday, 15 July 2009. Steel Authority of India, Jindal Steel & Power, Hindalco Industries, Sterlite Industries fell by between 0.03% to 1%.

Tata Steel fell 0.41% after gaining 1.08% on Thursday. The company announced after market hours on Wednesday that it will raise Rs 1600 crore via share, warrants issue to promoter Tata Sons.

Cals Refineries clocked a highest volume of 2.31 crore shares on BSE. IFCI (1.18 crore shares), FCS Software (1.11 crore shares), Technofab Engineering (94.96 lakh shares) and Development Credit Bank (83.23 lakh shares), were other volume toppers on BSE.

Shares of Technofab Engineering (TEL) settled at Rs 295.65 on BSE, a premium of 23.19% over the initial public offer price of Rs 240 per share. The stock debuted at Rs 265, a 10.42% premium over the initial public offer (IPO) price.

Technofab Engineering reported highest turnover of Rs 280.76 crore on BSE. Everonn Education (Rs 178.49 crore), TCS (Rs 130.19 crore), BF Utilities (Rs 115.54 crore) and IFCI (Rs 72.33 crore), were the other turnover toppers on BSE.