BSE Mid-Cap, Small-Cap indices outshine Sensex

The key benchmark indiices surged to 2-1/2-year highs in the week ended Friday, 20 August 2010, on sustained buying by foreign funds. But, a recent string of weak economic data in the US, which reignited worries over global economic recovery, capped gains at the fag end of the week. The BSE Sensex fell in 3 out of the 5 trading sessions of the week.



The BSE Sensex rose 234.79 points or 1.29% to 18,401.82 in the week ended Friday, 20 August 2010. The S&P CNX Nifty gained 78.55 points or 1.44% to 5,530.65.

The BSE Mid-Cap index rose 2.34% and the BSE Small-Cap index rose 1.7%. Both the indices outperformed the Sensex.

Foreign funds have made heavy purchases of Indian stocks over the past 2-1/2 months. Foreign funds have bought equities worth a net Rs 6365.98 crore so far this month, till 19 August 2010, absorbing selling of Rs 3047.42 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.

Data on 19 August 2010 showed the primary articles index rose 14.85% in the year to 7 August 2010, lower than previous week's annual rise of 15.66%. The food price index rose 10.35%, lower than previous week's annual rise of 11.4%, as prices of vegetables, potatoes and onions fell. The fuel price index rose 12.57%, lower than previous week's annual rise of 12.66%.

Chief Statistician T.C.A. Anant on 19 August 2010 said the headline inflation is expected to ease further in coming months. Data early this week showed that the headline inflation eased in July 2010, fuelling expectations that the central bank may lessen the scale and pace of increase in interest rates.

Saumitra Chaudhuri, a Planning Commission member in charge of economic development, told a news agency, early this week, that inflation has peaked and would start easing at a faster rate from September 2010. The Reserve Bank of India will undertake a mid-quarter monetary policy review on 16 September 2010, as per the schedule. Finance Minister Pranab Mukherjee said this month rising prices were a cost of rapid economic growth.

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.

Meanwhile, the introduction of a good and services tax (GST) could miss the deadline of April 2011 after the Centre and states failed to break the deadlock over their differences on the tax architecture. The Bharatiya Janata Party (BJP), the principal opposition party, refused to budge from its stand even after the Centre relented on its position and thereby ruled out attempts to forge a consensus.

Finance Minister Pranab Mukherjee on Wednesday, 18 August 2010, offered concessions on most major demands by states on the constitutional amendments needed to allow the ambitious tax reform to take effect from next April. After states objected to a clause in the draft GST bill giving the union finance minister veto power over state tax matters, the finance minister dropped this clause altogether. In a major concession to dissenting states, Mukherjee said decisions taken by a proposed GST council will be taken by consensus. Mukherjee also promised states another revised draft of the GST bill to reflect these concessions.

However, some states, especially those ruled by the opposition Bhartiya Janta Party, wanted one month to consider the draft GST bill which also needs approval from state legislatures before the new tax system can be introduced. Some media reports suggested that even if the GST bill is introduced in the next session of parliament starting towards the end of the year, the deadline for the rollout of GST from 1 April 2011, could be met.

India needs to channelise more pension and insurance funds into the infrastructure sector, Finance Minister Pranab Mukherjee said in a government statement released on Wednesday, 18 August 2010. India plans to spend $1.5 trillion between 2007 and 2017 to upgrade its infrastructure to support double-digit economic growth rates.

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. Imports for the month rose 34.3% to $29.17 billion, he said.

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.

Improved rainfall this year has helped farmers plant various crops over a larger area than last year. The kharif sowing has been 10% more than the drought-hit 2009, leading to optimistic outlook for harvests. The cumulative rainfall during the period from 1 June 2010 to 19 August 2010 was 4% below normal.

The India Meteorological Department (IMD) expects widespread rainfall activity over Sub-Himalayan West Bengal & Sikkim, Bihar, Uttar Pradesh, Haryana, East Rajasthan, Uttarakhand, Himachal Pradesh, northeastern states, Coastal Karnataka and Kerala, over the next few days. 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.

Trading for the week began on a weak note. The key benchmark indices edged lower on Monday, 16 August 2010, on doubts over global economic recovery. The BSE 30-share Sensex lost 116.25 points or 0.64% to 18,050.78.

The key benchmark indices ended almost unchanged in range bound trade on Tuesday, 17 August 2010, with worries over global economic recovery capping gains. The BSE 30-share Sensex lost 1.93 points or 0.01% to 18,048.85.

The key benchmark indices surged on Wednesday, 18 August 2010, with data showing sustained buying by foreign funds boosting sentiment. The BSE 30-share Sensex rose 208.27 points or 1.15% to 18,257.12.

Bulls were in command as the key benchmark indices achieved highest closing level in more than 2-1/2-years on Thursday, 19 August 2010. The BSE 30-share Sensex jumped 197.82 points or 1.08% to 18,454.94, its highest level since 5 February 2008.

The key benchmark indices edged lower on Friday, 20 August 2010 snapping two-day gains, as select pivotals fell on profit booking. Weak global stocks weighed on investor sentiment ahead of the weekend. The BSE Sensex fell 53.12 points or 0.29% to 18,401.82.

ITC (up 4.36%), ACC (up 3.1%), Larsen & Toubro (up 3.32%), were among the top gainers from the Sensex pack during the week ended Friday, 20 August 2010. State Bank of India (down 2.31%), Bharti Airtel (down 2.22%), ONGC (down 1.46%) edged lower during the week.

Index heavyweight Reliance Industries (RIL) rose 0.93%. Reportedly the stock market regulator Securities & Exchange Board of India has rejected a second attempt by RIL to settle charges of insider trading out of court. Sebi will continue its investigation into trades carried out by entities allegedly linked to RIL, in November 2007.

India's top truck maker by sales Tata Motors lost 0.2% on equity dilution worries. As per reports, the company plans to raise $700-750 million through issue of shares with differential voting rights to retire debt.

Copper maker Sterlite Industries fell 0.53%, after a government panel said 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 Industries is a part of 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.

India's second mobile services by sales Reliance Communications fell 3.12% on weak Q1 June 2010 results. Consolidated net profit fell 84.7% to Rs 250.89 crore in Q1 June 2010 over Q1 June 2009. The company announced the results after trading hours on Friday, 13 August 2010.

India's largest private sector bank by net profit ICICI Bank rose 1.96%. The stock scaled a 52-week high of Rs 1015 on Thursday, 19 August 2010. The bank announced a hike of 0.5% to 16.25% in its prime lending rate effective 18 August 2010.

India's second largest private sector bank by net profit HDFC Bank was up 6.95%. The stock hit a record high of Rs 2240.50 on Friday, 20 August 2010.