Sensex, Nifty scale 29-month closing highs

Rally in European stocks and US index futures triggered a strong rally on the domestic bourses during the later part of the trading session. The BSE Sensex and the 50-unit S&P CNX Nifty both attained their highest closing level in nearly 2-1/2 years. The market surged for the second straight day today, 22 July 2010, with recovery of monsoon rains, decent Q1 June 2010 corporate earning so far and sustained foreign fund buying, boosting investor sentiment. The barometer index BSE Sensex crossed the psychological 18,000 mark, with auto, metal and banking stocks leading the rally.



Cigarette major ITC edged higher after reporting strong Q1 June 2010 results. The BSE 30-share Sensex jumped 135.92 points or 0.76%, up close to 235 points from the day's low and off close to 15 points from the day's high. The market breadth was positive. Except the BSE IT index, all the other sectoral indices on BSE rose. European shares surged as German and French purchasing manager' index readings for July 2010 beat forecasts. US index futures jumped.

Foreign funds today, 22 July 2010, bought equities worth a net Rs 174.68 crore, as per provisional data from the stock exchanges. Domestic funds dumped shares worth a net Rs 512.19 crore.

Foreign funds have made substantial purchases of Indian stocks this month. Foreign funds have bought Indian equities worth a net Rs 6053.03 crore this month so far, till 22 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 3539.31 crore this month so far, till 22 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.

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 for the third day in a row. The index lost 5.5% to 18.90. 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.

Stocks drifted lower at the onset of the trading session on weak global cues. The market came off the lower level later. The market moved into positive zone in mid-afternoon trade as European stocks and US index futures surged. The market extended gains in late trade to strike fresh intraday highs.

Volatility may rise over the next few days as traders rollover positions in the derivatives segment from July 2010 series to August 2010 series ahead of the expiry of the near-month July 2010 contracts next Thursday, 29 July 2010.

On the macro front, the latest data showed the fuel price index rose 14.27% in the year to 10 July 2010, unchanged when compared to previous week's rise of 14.27%. The food food price index climbed 12.47%, lower than previous week's annual rise of 12.81%. The primary articles index was up 16.48%, compared with the previous week's reading of 16.25%.

The key near term event to watch out for is the central bank's quarterly policy review on Tuesday, 27 July 2010. Analysts expect another 25 basis points rate hike aimed at anchoring inflation expectations. The Reserve Bank of India (RBI) on 2 July 2010, hiked the repo rate by 25 basis points to 5.5% from 5.25%, with immediate effect. It also hiked the reverse repo rate, at which it absorbs excess cash from the banking system, by an equal 25 basis points to 4% from 3.75%. The central bank said the latest rate hike was a part of the calibrated exit from the expansionary monetary policy.

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%.

Meanwhile, C. Rangarajan, the Chairman of the Prime Minister's Economic Advisory Council is scheduled to meet Prime Minister Manmohan Singh on Friday, 23 July 2010 to brief him about the GDP projections and the challenges before the economy. Rangarajan would also submit the economic outlook for 2010-11 to the Prime Minister.

On the corporate front, the combined net profit of a total of 262 companies rose 31% to Rs 18012 crore on 18.8% rise in sales to Rs 111573 crore in Q1 June 2010 over Q1 June 2009.

Meanwhile, the goods and services tax (GST), which is to replace the existing value added tax (VAT), service tax, excise duties and central sales tax among others, will be in place from 1 April 2011. Reports indicated that the Centre and states on Wednesday, 21 July 2010 arrived at a broad consensus on rolling out independent India's biggest tax reforms that will simplify the manner in which corporates, small enterprises and traders will be levied taxes on goods and services. The new indirect tax reform is to streamline the movement of goods and services across India with a single tax structure.

European shares surged as German and French purchasing managers' index readings for July 2010 beat forecasts. The key benchmark indices in UK, Germany and France were up by between 1.03% to 1.71%. The preliminary estimate of Germany's composite PMI rose to 59.3 in July 2010 from 56.7 in June 2010, according to Markit Economics. France's rose to 59.9 in July 2010 from June's 59.6.

Investors are keenly awaiting the results of the stress tests on 91 European banks due after the close of business Friday, 23 July 2010. The European stress test exercise comes in the wake of an earlier US effort to instill new confidence in its own battered banking sector. European regulators had asked the region's biggest banks to publish a list of each lender's gross and net exposure to central and local governments in 30 countries in the region, including Greece, Spain, Ireland, Italy and Portugal to determine if they can survive potential losses from both a recession and a decline in the value of their government- bond holdings.

Most Asian stocks fell after the US Federal Reserve Chairman Ben Bernanke said the US economic outlook remains unusually uncertain. The key benchmark indices in South Korea, Indonesia, Japan and Taiwan were down by 0.12% to 0.76%. But, Key benchmark indices in Hong Kong, Singapore and China rose 0.50% to 1.07%.

US markets edged lower on Wednesday, 21 July 2010 after Federal Reserve Chairman Ben Bernanke confirmed investors' fears that the economy has weakened. Bernanke told a congressional committee that the economy is "unusually uncertain." The Dow Jones industrial average fell 109.43, or 1.1%, to 10,120.53. The Standard & Poor's 500 index fell 13.89, or 1.3%, to 1,069.59 and the Nasdaq composite index fell 35.16, or 1.6%, to 2,187.33.

In economic data, US mortgage applications jumped last week and demand for home refinancing loans hit the highest level in 14 months, according to the mortgage bankers association.

Trading in US index futures indicated that the Dow could jump 106 points at the opening bell on Thursday, 22 July 2010. US index futures reversed initial losses.

Back home, in a sharp variation from International Monetary Fund's upbeat assessment of growth prospects for India in 2010, the Asian Development Bank (ADB), early this week, retained its growth estimate for India at 8.2%. The ADB also stuck to its China's forecast at 9.6% but marginally revised that for the Asian region to 7.9%. International Monetary Fund (IMF) has upgraded India's growth projection to as high as 9.5% from 8.8% estimated earlier.

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%.

Investors are closely monitoring the progress of the monsoon rains. The annual monsoon rains were 17% below normal in the week to 21 July 2010, improving after a 24% deficit in the previous week, the India Meteorological Department said on Thursday, 22 July 2010. The seasonal monsoon rains during 1 June to 21 July 2010 were 14% below normal, the weather office added.

Weekly rainfall in the key crop-planting period was above normal in north India's cane and rice growing regions, but deficient in 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 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 surged 135.92 points or 0.76% to 18,113.15 its highest closing since 15 February 2008. The Sensex rose 150.67 points at the day's high of 18,127.90 in late trade. The index lost 97.35 points at the day's low of 17,879.88 in morning trade.

The S&P CNX Nifty rose 42.60 points or 0.79% to 5,441.95, its highest closing since 5 February 2008.

The market breadth, indicating the health of the market was positive. On BSE, 1556 shares advanced while 1373 shares declined. A total of 85 shares remained unchanged.

The total turnover on BSE amounted to Rs 4316 crore, lower than Rs 4600 crore on Wednesday, 21 July 2010.

From the 30-share Sensex pack, 25 stocks advanced while only 5 of them declined.

The BSE Mid-Cap index rose 0.41% and the BSE Small-Cap index rose 0.27%. Both these indices underperformed the Sensex.

Barring the BSE IT index, all the other sectoral indices on BSE rose. BSE Consumer Durables index (up 1.41%), BSE Metal index (up 1.28%), Auto index (up 1.24%), FMCG index (up 0.93%), Realty index (up 0.82%), outperformed the Sensex.

BSE IT index (down 0.13%), Healthcare index (up 0.22%), Oil & Gas index (up 0.5%), BSE Power index (up 0.54%), banking sector index Bankex (up 0.71%), Capital Goods index (up 0.72%), and PSU index (up 0.72%) underperformed the Sensex.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) advanced 2.5% and was the top gainer from the Sensex pack. 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.

Bajaj Auto rose 3.15% after the company's board during market hours today announced a liberal 1:1 bonus issue. The company's net profit jumped 101.08% to Rs 590.15 crore on 68.18% increase in total income to Rs 3971.73 crore in Q1 June 2010 over Q1 June 2009.

Among other auto stocks, Tata Motors, Ashok Leyland and Hero Honda Motors rose by between 0.24% to 1.78%,

Telecom stocks rose on fresh buying. India's largest listed telecom services provider by sales Bharti Airtel gained 2.39% on reports the company plans to launch iPhone 4, the latest product from Apple Computer's stable, by October this year.

India's second largest listed telecom services provider by sales Reliance Communications (RCom) rose 0.98%. As per recent reports, RCom stake sale to the Dubai-based Etisalat will be completed soon.

Index heavyweight Reliance Industries (RIL) was unchanged at Rs 1057. The stock came off day's low of Rs 1049.05. As per reports, RIL has rejected the oil ministry's directive to sell gas from its Krishna Godavari basin field to new customers by reducing supply to existing ones. As many as 16 companies are waiting to sign gas sale and purchase agreements with RIL.

Banking stocks made a comeback in late trade on expectations of strong lending growth in a fast rebounding economy. India's largest private sector bank by market capitalisation ICICI Bank gained 0.68% to Rs 908.95. The stock came off the day's low of Rs 886.

India's second largest private sector bank by market capitalisation HDFC Bank rose 1.1%, halting a two-day fall.

India's biggest commercial bank in terms of branch network, State Bank of India (SBI) gained 1.65%, halting a two-day fall. The bank is reportedly hitting the overseas debt markets to raise funds for overseas lending requirement of the bank. The size of the medium term notes, having a tenure of five years, to be raised by the bank may be somewhere between $500 million and $1.5 billion.

India's largest cigarette maker by sales ITC jumped 1.64% as net profit jumped 21.81% to Rs 1070.31 crore on 15.41% increase in total income to Rs 4945.82 crore in Q1 June 2010 over Q1 June 2009. The result was announced during trading hours today, 22 July 2010.

Among other FMCG stocks, Hindustan Unilever, Dabur India and Britannia Industries rose by between 0.19% to 2.76%.

Realty stocks rose on expectations of good Q1 result on the back of rise in property prices. HDIL, Ackruti City, Unitech and Omaxe rose by between 0.79% to 3.07%.

India's largest realty firm by sales DLF advanced 1.11%. The company's board may consider on 28 July 2010, issuing shares by a unit, DLF Brands, to a group company of its founders or any other strategic investor. DLF Brands is the retail arm of the company. The company did not give details. DLF will also report its quarterly results on 28 July 2010.

India's largest engineering & construction firm by sales Larsen & Toubro rose 0.63% to Rs 1927.20 after striking a 52-week high of Rs 1932 in intra-day trade today. As per recent reports, the company has bagged the Rs 12,132 crore Hyderabad Metro Rail project.

Among other capital goods stocks, Bharat Heavy Electricals, SKF India, Thermax and Praj Industries rose by between 0.07% to 2.15%.

Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange rose 2.60% in London on Wednesday, 21 July 2010. Steel Authority of India, Hindalco Industries, JSW Steel, Sterlite Industries, Sesa Goa and a Steel rose by between 0.25% to 2.26%.

IT stocks were mixed and underperformed the Sensex on worries about the US economy. US is the biggest market for Indian software exporters. India's third largest software services exporter Wipro rose 0.11% ahead of its Q1 June 2010 earnings on Friday, 23 July 2010.

India's largest software services exporter TCS rose 0.29%. But, India's second largest software services exporter Infosys Technologies slipped 0.28%.

ACC lost 1.06% after net profit fell 26% to Rs 358.93 crore on 2.67% decline in total income to Rs 2080.41 crore in Q2 June 2010 over Q2 June 2009. The result was announced during trading hours today, 22 July 2010.

Among other cement stocks, Ultratech Cement and India Cements fell 1.6% and 0.64% respectively.

FCS Software clocked the highest volume of 2.03 crore shares on BSE. Cals Refineries (1.79 crore shares), IFCI (1.18 crore shares), Shree Ashtavinayak Cine Vision (1.03 crore shares) and Haldyn Glass Gujarat (74.41 lakh shares) were the other volume toppers in that order.

Tata Steel clocked the highest turnover of Rs 149.97 crore on BSE. Bajaj Auto (Rs 125.91 crore), State Bank of India (Rs 97.08 crore), JSW Steel (Rs 89.74 crore) and IFCI (Rs 73.53 crore) were the other turnover toppers in that order.