Bank stocks edge higher in range bound market

The key benchmark indices ended almost unchanged in range bound trade, with worries over global economic recovery capping gains. Nevertheless, investors' stock-specific approach ensured a decent-to-strong rally in a number of individual scrips. European stocks and US index futures edged higher. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. FMCG stocks rose. But, IT stocks fell. The market breadth was negative in contrast to a strong breadth earlier in the day. The BSE 30-share Sensex was down 1.93 points or 0.01%, up close to 25 points from the day's low and off close to 85 points from the day's high.



The market edged higher in early trade as US index futures rose. Stocks trimmed gains in morning trade. The market came further off highs in mid-morning trade as index heavyweight Reliance Industries (RIL) turned negative. The market regained positive terrain, soon after slipping into the red to hit fresh intraday low in early afternoon trade. The market held positive zone in afternoon trade as European stocks opened on a firm note. The market remained firm in range bound mid-afternoon trade. The Sensex regained positive zone after slipping into the red for a brief period in late trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was down 2.65% at 17.63. The index had jumped 8.18% to 18.11 on Monday, 16 August 2010, a day after it had lost 7% on Friday, 13 August 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 have made heavy purchases of Indian stocks over the past 2-1/2 months. Foreign funds today, 17 August 2010, bought shares worth a net Rs 404.09 crore, as per the provisional figures released by the stock exchanges. Domestic funds dumped shares worth Rs 400.12 crore

Foreign funds have bought equities worth a net Rs 4870.26 crore so far this month, till 17 August 2010, absorbing selling of Rs 3149.01 crore from domestic funds, as per data from the stock exchanges.

Foreign funds had bought shares worth a net Rs 8320.50 crore in July 2010, absorbing selling by domestic institutional investors. Domestic funds sold shares worth a net Rs 6323.13 crore in July 2010.

Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010, absorbing selling by domestic funds in that month. Domestic funds had dumped shares worth a net Rs 4777.05 crore in June 2010.

India's exports in July grew an annual 13.2% to $16.24 billion, Trade Secretary Rahul Khullar said on Tuesday, 17 August 2010, the ninth straight month of expansion. The Imports for the month rose 34.3% to $29.17 billion, he said.

The proceedings of the parliament were disrupted on Tuesday, 17 August 2010, over the killing of farmers protesting against land being acquired for a highway. At least three farmers were killed in Uttar Pradesh (UP) late last week when police fired at protesters demanding more compensation for land taken to build a $2 billion six-lane highway to connect the Taj Mahal city of Agra with New Delhi. The UP state government has already acquired 1,500 hectares of a total of 43,000 hectares of land needed for the project.

The incident was the latest in a string of violence surrounding government efforts to acquire farmland for industry in India, where two-thirds of the 1.2 billion populations is dependent on agriculture.

The Indian manufacturing sector is optimistic to maintain buoyant levels of growth in the next two quarters -- July-September and October-December 2010 -- though there may be a slight drop in growth rates in the second quarter, according to CII's latest ASCON survey. The CII ASCON survey is based on interactions with more than 350 respondents from various manufacturing industry associations representing about 4,000 manufacturing companies. The survey covers a wide spectrum of sectors including basic goods, intermediate goods, capital goods, consumer durables and non durables.

Sectors that are expected to grow at strong pace include automotive, electronics and consumer durables, ball and roller bearing and forging. Other sectors such as tractors, electric fans, machine tools are also expected to perform fairly well in the next two quarters, as per the survey.

Amongst the major demands of Indian manufacturing sector is the early implementation of the nationwide Goods and Services Tax (GST), which will help improve competitiveness, retaining the present levels of Cenvat and excise rates, corrections in inverted duty structures and simplification of taxation procedures and laws.

European shares edged higher on Tuesday, 17 August 2010, with miners among the gainers as metals prices rose, with the dollar weaker. The key benchmark indices in France, Germany and UK were up by between 0.8% to 1.14%.

German investor confidence dropped to a 16-month low in August, suggesting economic growth will slow from the record-breaking pace set in the second quarter. The Mannheim-based ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months ahead, fell to 14 from 21.2 in July, its fourth straight decline.

Asian stocks were mixed on Tuesday, 17 August 2010, amid growing worries about the cooling global economy. The key benchmark indices in Singapore and Taiwan were down by between 0.13% to 0.35%. But, South Korea's Seoul Composite index rose 0.67% and China's Shanghai Composite rose 0.38%. Hong Kong's Hang Seng rose 0.12%.

China saw foreign direct investment of $6.92 billion in July, a rise of 29.2% from a year earlier, though the figure was a sharp drop from the $12.5 billion it attracted in June. The monthly figure brings total FDI investment flows for the first seven months of they year to $58.3 billion, a rise of 39.6% from a year earlier. In a separate announcement, the Ministry of Commerce said it expects export growth to cool in the coming few months.

Japan's Nikkei Average fell 0.38%, with exporters on the decline, pressured by continued strength in the yen and recent data showing a slowdown in the nation's economic recovery.

Trading in US index futures indicated that the Dow could rise 51 points at the opening bell on Tuesday, 17 August 2010.

US stocks ended barely changed on Monday, 16 August 2010, suggesting that even several days of losses have not convinced institutions that share prices are attractive. The Dow Jones Industrial Average was down 1.14 points, or 0.01% at 10,302.01. The Standard & Poor's 500 Index was up 0.13 point, or 0.01% at 1,079.38. The Nasdaq Composite Index was up 8.39 points, or 0.39% at 2,181.87.

US homebuilder sentiment unexpectedly fell for a third straight month in August to its lowest level since March 2009, according to an industry survey. A gauge of manufacturing in New York state was up in August, the New York Fed said, but a new orders component index fell below zero for the first time since June 2009, an early sign of a slowdown.

Closer home in India, the latest data showed the wholesale price index (WPI) rose an annual 9.97% in July 2010, slower than expectations. The annual food inflation rate fell to 10.29% in July 2010 from 14.6% rise in June 2010, with prices of vegetables and sugar falling on the month. Manufacturing inflation, which the RBI uses as a proxy for assessing demand, cooled to 6.15% from 6.66% in June 2010. On the flip side, the headline inflation for May 2010 was revised upwards to 11.14% from 10.16%.

Analysts expect the Reserve Bank of India to raise interest rates by 25 basis points at a mid-quarter monetary policy review on 16 September 2010, to rein in inflation and inflation expectations.

The Reserve Bank of India (RBI) at its Q1 monetary policy on 27 July 2010 raised a key lending rate by 25 basis points to curb surging inflation. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations, the RBI said at that time. The RBI also signaled its strong preference for tight liquidity, saying it would ensure that excess liquidity in the system doesn't dilute the effectiveness of policy-rate actions.

The yield on benchmark 10-year 2020 bond was hovering at 7.88%, higher than Monday's (16 August 2010) close of 7.82%. The yield on the second most traded, 8.13% 2022 bond was hovering at 7.97%, higher than Monday's close of 7.92%.

The industrial output rose 7.1% in June 2010 compared with revised 11.3% rise in May 2010, the latest data showed. Manufacturing grew 7.3%, mining sector grew 9.5%, consumer goods sector rose 8.3%, capital goods sector expanded 9.7% and electricity generation rose 3.5%.

The industrial production growth rate for May 2010 was revised marginally down to 11.3% from 11.5% reported earlier. The growth rate for March 2010 was revised upward to 14.5% from 13.9% reported earlier.

The first quarter June 2010 earnings seasons is almost over. The Q1 results were a mixed bag. The combined net profit of a total of 3,486 Indian companies fell 9.6% to Rs 68,783 crore on 19.7% rise in sales to Rs 8,63,601 crore in Q1 June 2010 over Q1 June 2009.

The vital monsoon rains were 26% below normal in the week to 12 August 2010 the first weekly fall in three weeks, the weather office said on 12 August 2010. The rains were 16% above normal in the week to 4 August 2010 and 38% above average in the week to 28 July 2010.

The southwest monsoon was active over West Madhya Pradesh, Vidarbha, interior Karnataka and Kerala during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Monday, 16 August 2010. The weather office expects widespread rainfall activity over Punjab, Haryana, Uttar Pradesh, Bihar, Sub-Himalayan West Bengal & Sikkim and northeastern states over the next few days.

Meanwhile, the improvement in rainfall early this month in the country as a whole, has resulted in a spectacular improvement in the water stock in reservoirs, reports suggest. The total water storage in the 81 major reservoirs stood at 52.09 billion cubic metres (BCM) as on 5 August 2010, against 28.65 BCM a fortnight ago. The present storage is a mere 6% short of normal, against 35% a fortnight ago, reports suggest.

The cumulative rainfall during the period from 1 June 2010 to 16 August 2010 was 4% below normal. Rainfall over the country as a whole for the second half (August to September) of the 2010 southwest monsoon season is likely to be normal, according to the India Meteorological Department (IMD). Quantitatively, rainfall for the country as a whole during the period August-September 2010 is likely to be 107% of long period average (LPA) with a model error of plus/minus 7%, according to the weather office.

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. If the southwest monsoon for the June-September monsoon season turns out good and if it is well distributed, it will help raise farm output, boost rural incomes and lower food inflation.

The BSE 30-share Sensex was down 1.93 points or 0.01% to 18,048.85. At the day's high of 18,140.15 hit in early trade the index rose 89.37 points. The index fell 24.78 points at the day's low of 18026 in early afternoon trade.

The S&P CNX Nifty was down 4.15 points or 0.08% to 5,414.15.

The BSE Mid-Cap index was up 0.6%. The Small-Cap index up 0.34%. Both these indices outperformed the Sensex.

Sectoral indices on BSE were mixed. Banking sector index Bankex (up 0.95%), Realty index (up 0.23%), PSU index (up 0.22%), Consumer Durables index (up 0.2%), Healthcare index (up 0.15%), FMCG index (up 0.07%), and Auto index (up 0.01%), outperformed the Sensex. The BSE Oil & Gas index (down 0.15%), Metal index (down 0.21%), Power index (down 0.26%), Capital Goods index (down 0.29%), and IT index (down 0.33%), underperformed the Sensex.

The market breadth, indicating the health of the market turned negative in contrast to a strong breadth earlier in the day. On BSE, 1,534 shares declined while 1,453 shares advanced. A total of 99 shares remained unchanged.

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

BSE clocked turnover of Rs 4975 crore, lower than Rs 5619.16 crore on Monday, 16 August 2010.

Index heavyweight Reliance Industries (RIL) fell 0.52% to Rs 971.10. The stock hit a high of Rs 989.90 and a low of Rs 970.10. Reliance Industries recently denied a media report that the company may sell treasury stocks worth more than $1 billion. The company has no such plans, Reliance spokesman Manoj Warrier clarified to the media on Wednesday, 11 August 2010.

A unit of RIL recently signed definitive agreements to enter into a Marcellus Shale gas joint venture with United States-based Carrizo Oil & Gas Inc. RIL will pay a total $392 million, comprising $340 million of cash and $52 million of drilling carry obligations. Under the deal, Reliance will acquire a 60% interest in Marcellus Shale acreage in Central and Northeast Pennsylvania that is currently held in an equal joint venture between Carrizo and an affiliate of Avista Capital Partners. Reliance will acquire all of Avista's stake and 20% of Carrizo's stake in the existing joint venture.

Shares of three state-run oil marketing companies rose as crude-oil futures settled at a five-week low on Monday, 16 August 2010, on lingering concerns about the global economy. BPCL, HPCL and Indian Oil Corporation rose by between 1.4% to 3.22%. For Indian state-run oil refining and marketing firms -- BPCL, HPCL and IOC, the fall in crude oil prices augurs well as it will reduce under-recoveries on domestic sale of diesel, LPG and kerosene at government controlled prices. The government recently decontrolled petrol prices.

Realty stocks rose in volatile trade. Anant Raj Industries, Peninsula Land, Omaxe, Indiabulls Real Estate, Sobha Developers, Orbit Corporation, Housing Development & Infrastructure rose by between 0.46% to 4.35%.

Bank stocks rose on prospects of strong lending growth in a fast growing Indian economy. India's second-biggest lender ICICI Bank rose 0.32%, as the bank will raise its prime lending rate (PLR) by 50 basis points from 18 August 2010, it said in a statement. The The bank will increase its prime lending rate to 16.25%, the statement said.

India's second largest private sector bank by market capitalisation HDFC Bank rose 1.86%. The stock had scaled a record high of Rs 2,140.90 on 2 August 2010. HDFC Bank raised deposit rates for various maturities by 0.25% to 0.75%, with effect from 30 July 2010.

For deposits with maturity between 91 days and 6 months, the rate would be raised by 75 basis points to 5.25% from the existing 4.5%. For fixed deposit between 9 months and one year, the new rates would be higher by 50 basis points at 6.25% while for 1 year 16 days category it will be 7%, 25 basis points more than the existing rate of 6.75%.

Bank of India, Bank of Baroda and Punjab National Bank rose by between 1.54% to 6.2%.

India's largest commercial bank State Bank of India (SBI) fell 0.07%. SBI on Monday said it has raised the benchmark prime lending rate by 50 basis points to 12.25% per annum effective from 17 August 2010. SBI on Monday also announced introduction of floating rate term deposit products linked to base rate with effective from 6 September 2010.

The parliament approved a bill on Thursday, 12 August 2010, enabling the government to reduce its holding in State Bank of India (SBI) to 51% and help it raise capital. The SBI stock hit record high of Rs 2879.95 on Friday, 13 August 2010.

The SBI stock had surged close to 7% on Thursday, 12 August 2010 boosted by strong Q1 result. On a consolidated basis, SBI's net profit rose 22% to Rs 3365.26 crore on 0.98% decline in total income to Rs 32808.06 crore in Q1 June 2010 over Q1 June 2009. The results were announced during trading hours on Thursday.

India's largest dedicated housing finance firm by revenue, HDFC, rose 1.26%. HDFC has fixed 20 August 2010 record date for a 5-for-1 stock split.

Shares of Larsen & Toubro fell 0.68% as the stock turned ex-dividend today, 17 August 2010, for dividend of Rs 12.50 per share in the year ended March 2010.

But, other capital goods stocks rose. Bharat Heavy Electricals, BEML, Praj Industries, Thermax, rose by between 0.1% to 1.57%.

FMCG stocks rose on good monsoon rains. Rural markets contribute substantial amount to sales of FMCG firms. ITC, Nestle India, Dabur India, Marico, United Breweries rose by between 0.85% to 10.12%.

But, India's largest FMCG firm by sales, Hindustan Unilever, fell 1.59%.

IT stocks fell as tepid US consumer data reignited fears about slower US growth. US is the biggest market for Indian IT firms. India's largest software services exporter TCS fell 0.43%, with the stock falling for the second straight day. The stock had on 5 August 2010 hit a record high of Rs 882. India's second largest software services exporter Infosys Technologies fell 0.26%, with the stock falling for the second straight day. India's third largest software services exporter Wipro fell 0.46%.

Consumer durables stocks rose. Rajesh Exports, Blue Star and Videocon Industries rose by between 0.45% to 3.44%.

Metal stocks fell on worries over global economic recovery. JSW Steel, Jindal Steel & Power, Steel Authority of India, Tata Steel, National Aluminum Company, Hindustan Zinc, declined 0.06% to 0.91%. LMEX a gauge of six metals traded on the London Metal Exchange rose 1.1% on Monday, 16 August 2010.

Sterlite Industries fell 0.97%, after a government panel said on Monday UK-based mining group Vedanta should not be given permission for bauxite mining in Orissa. The panel said such a move may have serious consequences for the security and the well being of the entire country. Sterlite belongs to the Vedanta group.

Vedanta Resources on Monday said it will buy 51% to 60% in Cairn India for $8.5-9.6 billion in cash. Vedanta will make an open offer to shareholders of Cairn India for up to 20% of issued shares at a minimum price of Rs 355 per share. As on 30 June 2010, Cairn Energy PLC held 62.36% in Cairn India. The Cairn India acquisition gives the Vedanta Group a presence in the energy sector. Sterlite is not a part of the Vedanta deal for Cairn India.

Sesa Goa fell 0.88%, extending a steep 8.9% slide on Monday, 16 August 2010. The stock had tumbled on Monday after the company's board approved the acquisition of a 20% strategic stake in Cairn India for a total cash consideration of approximately $3 billion. Sesa Goa is a part of the Vedanta group.

Shares of Cairn India rose 1.74% on bargain hunting after the stock slumped 6.36% on Monday after the Vedanta group announced the deal to a controlling stake in the firm.

Auto stocks were mixed. India's biggest truck maker by sales Tata Motors rose 0.39%. The company said on Monday, 16 August 2010, its global vehicle sales in July rose 36% from a year earlier to 90,646 units. Jaguar and Land Rover sales in the month rose 30% to 19,386 units

India's largest tractor maker by sales Mahindra & Mahindra fell 0.21%. The company has been picked as the preferred bidder to buy South Korea's Ssangyong Motor in a deal estimated at $500 million.

Maruti Suzuki, India's top car maker fell 0.05%. Managing Director Shinzo Nakanishi said recently that the company is looking to advance its capacity expansion plans. Its second unit in Haryana is scheduled to come up by April 2012. Nakanishi said the company is working on ways to advance that to an earlier date.

Maruti, launched a new version of its best selling car Alto. The new version, Alto-K10 is powered by 998cc K10B engine and is priced between Rs 3.03 - Rs 3.16 lakh (ex-showroom Delhi).

Maruti's total vehicle sales rose 29.2% to 1,00,857 units in July 2010 over July 2009. The company announced the sales figures during market hours on 2 August 2010. Maruti Suzuki India recently raised prices across models by 1% to 1.5% due to a sharp increase in input costs. The price rise was between Rs 2,000 to Rs 7,500. The company decided to keep prices of its best selling model Alto unchanged.

India's largest motorbike maker by sales Hero Honda Motors rose 0.7%, with the stock gaining for the fourth straight day. The company reported a jump of 16.60% in sales at 4,27,686 units in July 2010 over July 2009. The company has recorded dispatches of more than four lakh units in a single month for the third consecutive time.

India's second largest bike maker by sales Bajaj Auto fell 0.38%. The stock had hit a record high of Rs 2767.35 on Thursday, 5 August 2010. Bajaj Auto's total vehicle sales jumped 65% at 3.18 lakh units in July 2010 over July 2009.

FCS Software clocked the highest volume of 5.2 crore shares on BSE. Cals Refineries (4.57 crore shares), Shree Ashtavinayak Cine Vision (1.29 crore shares), Hindustan Motors (1.04 crore shares) and IFCI (82 lakh shares) were the other volume toppers in that order.

SKS Microfinance clocked turnover of Rs 360.36 crore on BSE. Midfield Industries (Rs 143.76 crore), Sesa Goa (Rs 107.61 crore), LIC Housing Finance (Rs 97.61 crore) and Raymond (Rs 96.29 crore) were the other turnover toppers in that order.