BSE Mid-Cap, Small-Cap indices outshine Sensex

Key benchmark indices eked out marginal gains in the week ended Friday, 13 August 2010 as select pivotals surged after reporting upbeat earnings. Sustained buying by foreign funds supported the market, as the barometer index BSE Sensex logged gains in three out of the five trading days of the week.



The monsoon rains, vital for the economy, 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 cumulative rainfall during the period from 1 June 2010 to 12 August 2010 was 5% 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 government has relaxed the requirement of a minimum 25% public shareholding for listed state-run firms. It may be recalled that the government in early June 2010 had announced changes in the Securities Contracts (Regulation) Rules 1957, so as to ensure that all listed companies maintain a minimum public float of 25%. Existing listed companies having less than 25% public holding have to reach the stipulated level by an annual addition of not less than 5% to public holding, the government had said at that time. The new rule had raised concerns there will be a deluge of share sales from government-owned firms to meet the minimum 25% public shareholding requirement.

As per the relaxed norms, listed state-owned companies that have less than 10% public stake will have to reach that threshold over a period of three years. The modified rules also give a breather to the private sector companies. While they will have to comply with the minimum 25% public float within three years, they now have flexibility in how the limit is reached i.e. the requirement of a minimum annual 5% increase has been scrapped.

Foreign funds have been net equity buyers over the past two months. They bought equities worth a net Rs 4066.17 crore in the first few trading days this month, till 13 August 2010, absorbing selling of Rs 2314.97 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.

The first quarter results were a mixed bag. The combined net profit of a total of 2965 companies fell 8.4% to Rs 68,344 crore on 19.8% rise in sales to Rs 8,29,064 crore in Q1 June 2010 over Q1 June 2009.

On the macro front, the latest data showed the food price index rose 11.40% in the year to 31 July 2010, while the fuel price index climbed 12.66%. Food inflation accelerated from the previous week's annual rise of 9.53% while fuel inflation eased from the week-ago reading of 14.26%. The primary articles index rose 15.66% compared with the previous week's reading of 14.36%.

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%.

Industrial production growth for May 2010 was revised slightly downwards to 11.3% from 11.5%. Planning Commission deputy chairman Montek Singh Ahluwalia on 12 August 2010, said industrial production growth is expected to remain in high single digits in the current fiscal year.

In global economic data, Euro zone gross domestic product grew at its fastest pace in more than three years in the second quarter, boosted by a strong performance by Germany and France, but concerns remain that the rebound could falter. European Union statistics agency Eurostat said GDP in the 16-nation currency zone expanded by 1% in the second quarter from the first, and by 1.7% versus the second quarter of 2009.

The latest data showed the German economy, Europe's biggest, grew by 2.2% in the second quarter compared with the previous three-month period.

The Fed's Open Market Committee said in a post-meeting statement on 10 August 2010 that it would begin funneling proceeds from maturing mortgage bonds into longer-term government debt to keep borrowing costs low. The hope is that this will send long-term rates on debt and mortgages lower, stimulating lending to consumers and businesses. The US central bank also issued an assessment of the economy that was darker than a month earlier, saying the pace of the economic recovery will likely be more gradual than previously thought.

The Fed also left benchmark overnight interest rates steady in a zero to 0.25% range, and renewed its pledge to keep them low for an extended period.

The Bank of Japan on 10 August 2010, voted unanimously to leave its policy interest rate unchanged, as widely expected. The Japanese central bank also kept its economic outlook unchanged. It also did not announce any new major monetary easing move.

The BSE Sensex rose 23.04 points or 0.13% to 18,167.03, in the week ended 13 August 2010. The 50-unit S&P CNX Nifty rose 12.85 points or 0.23% to settle at 5,452.10.

The BSE Mid-Cap index gained 1.43% to 7,642.04 and the BSE Small-Cap index advanced 1.32% to 9,710.28. Both these indices outperformed the Sensex.

Trading for the week began on buoyant note. Key benchmark indices surged to 2-1/2-year highs on Monday, 9 August 2010. The BSE 30-share Sensex rose 143.51 points or 0.79% to 18,287.50, its highest closing level since 5 February 2008. The S&P CNX Nifty gained 46.90 points or 0.86% to 5486.15, its highest closing level since 18 January 2008.

Weak global stocks triggered profit taking on the domestic bourses on Tuesday, 10 August 2010. The BSE 30-share Sensex fell 67.51 points or 0.37% to 18,219.99 and the S&P CNX Nifty declined 25.45 points or 0.46% to 5,460.70.

Stocks declined for the second day in a row on Wednesday, 11 August 2010, mirroring weak European equities and a sharp decline in US index futures amid concerns about the pace and sustainability of the global economic recovery. The BSE 30-share Sensex fell 149.80 points or 0.82% to 18,070.19 and the S&P CNX Nifty declined 40.10 points or 0.73% to 5,420.60.

Key benchmark indices swung between gains and losses in a highly volatile trading session on Thursday, 12 August 2010, amid choppy European shares. The BSE 30-share Sensex was up 3.71 points or 0.02% to 18,073.90. The S&P CNX Nifty was down 4.15 points or 0.08% to 5416.45.

The market shut shop on a winning streak on Friday, 13 August 2010, buoyed by better-than-expected earnings from banking giant State Bank of India. The BSE 30-share Sensex was up 93.13 points or 0.52% to 18,167.03 and the S&P CNX Nifty was up 35.65 points or 0.66% to 5452.10.

India's largest truck maker by sales Tata Motors jumped 13.71% to Rs 1017 in the week ended Friday, 13 August 2010. The company reported turnaround Q1 June 2010 results during trading hours on 10 August 2010. The scrip hit a record high of Rs 1031.80 on 12 August 2010.

The company reported consolidated net profit of Rs 1988.73 crore in Q1 June 2010 compared to a net loss of Rs 328.78 crore in Q1 June 2009. Net revenue jumped 64.2% to Rs 27055.57 crore in Q1 June 2010 over Q1 June 2009.

India's largest commercial bank State Bank of India (SBI) rose 8.76% to Rs 2849.40 boosted by strong Q1 results. It was the second biggest gainer from the Sensex pack. The stock hit record high of Rs 2,879.95 on 13 August 2010. On a consolidated basis, 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 12 August 2010.

India's largest realty firm by sales DLF gained 4.83% to Rs 322.45 and was the third biggest gainer from the Sensex pack.

Hindustan Unilever (up 4.13%), ONGC (up 3.66%), and ICICI Bank (up 2.47%), were the other gainers from the Sensex pack.

Index heavyweight Reliance Industries (RIL) declined 2.12% to Rs 979.05. RIL has denied a media report that the company may sell treasury stocks worth more than $1 billion.

India's largest non-ferrous metal firm by sales Sterlite Industries lost 8.93% to Rs 160.70 and was the top loser from the Sensex pack. The stock declined on reports that its parent Vedanta Resources is looking to buy a 51% stake in Cairn India for $8-8.5 billion.

India's third largest software services exporter Wipro declined 4.36% to Rs 414.80 and was the second biggest loser from the Sensex pack. The stock declined on downbeat economic data from US, its key market.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) shed 3.34% to Rs 627.65 and was the top third biggest loser from the Sensex pack. M&M was picked as the preferred bidder to buy South Korea's Ssangyong Motor in a deal estimated at $500 million.

Other loses from Sensex pack were Infosys Technologies (down 2.93%), Reliance Communications (down 2.75%), and HDFC (down 2.35%).