ICICI Bank, RIL advance in range bound market

The key benchmark indices eked out small gains, rising for the second straight day, as banking stocks and index heavyweight Reliance Industries (RIL) rose. Strong sales reported by auto firms for July 2010, data showing sustained buying by foreign funds over the past two months and revival of monsoon rains in the crucial sowing month of July, supported the domestic bourses. The BSE 30-share Sensex was up 33.62 points or 0.19%, off close to 55 points from the day's high and up close to 40 points from the day's low.



Index heavyweight Larsen & Toubro fell. IT stocks also fell on a firm rupee. FMCG stocks, too, edged lower. But, Hindalco Industries rose after posting higher Q1 bottom line.

The market pared gains after a firm start triggered by higher Asian stocks. The Sensex moved in a narrow range in morning trade. The movement confined to a narrow range in mid-morning trade. The market continued to move in a narrow range in early afternoon trade. The market slipped into the red in afternoon trade as European stocks declined in early trade. The market regained positive zone later. The Sensex was a tad higher in mid-afternoon trade. The market moved in a narrow range in late trade.

Foreign funds continue to mop up Indian stocks. As per provisional figures provided by the stock exchanges, foreign funds today, 3 August 2010, bought shares a net Rs 607.42 crore. Domestic funds sold shares worth a net Rs 152.52 crore.

Foreign funds have bought equities worth a net Rs 1335.55 crore in the first two trading days this month, absorbing selling of Rs 325.31 crore from domestic funds, as per data from the stock exchanges.

. Foreign funds 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, as per data from the stock exchanges.

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.

Asia ex-Japan equity funds absorbed more than $1 billion in the week ended 28 July 2010, their biggest inflow in 14 weeks, according to data from global fund tracking firm EPFR Global. Indian equity funds posted an eighth consecutive week of inflows and China stock funds recorded the biggest weekly intake since mid-April 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, was down 2.45% at 17.55. The index had lost 5.02% at 17.99 on Monday, 2 August 2010. The index had risen 1.25% at 18.56 on Friday, 30 July 2010, a day after plunging 6.1% to 18.33 on Thursday, 29 July 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.

On the corporate front, the combined net profit of a total of 1,723 companies fell 9.8% to Rs 55,989 crore on 20.9% rise in sales to Rs 6,90,351 crore in Q1 June 2010 over Q1 June 2009.

The government on Tuesday sought parliamentary approval to spend a gross additional $14.78 billion in the fiscal year to end-March 2011 (FY 2011), on top of the budget target of around $240 billion. Finance Minister Pranab Mukherjee sought approval to spend a net additional $11.8 billion. The government said the proposed extra spending would not derail the government's plans to keep fiscal deficit capped at 5.5% of GDP in the current financial year, due to excess receipts under non-tax revenue.

These additional funds would be mainly used to pay oil retailers Rs 14000 crore, as compensation for selling fuel below market rates, and Rs 579 crore as fertiliser subsidies. The government also plans to spend Rs 8467 crore to raise its vote share in the International Monetary Fund.

European shares drifted lower on Tuesday, 3 August 2010, as weaker metals prices put pressure on mining stocks, but losses were limited as more strong company results boosted optimism for earnings. The key benchmark indices in UK and France were down by 0.28% to 0.42%. But, Germany's DAX rose 0.19%.

Most Asian stocks rose on Tuesday, 3 August 2010, after Wall Street opened August with a strong rally on positive indicators from around the globe. The key benchmark indices in Hong Kong, Japan, Taiwan and South Korea were up by between 0.21% to 1.29%. But, the key benchmark indices in Singapore, China and Indonesia fell by between 0.34% to 2.79%.

US index futures cut initial losses. Trading in US index futures indicated that the Dow could fall 2 points at the opening bell on Tuesday, 3 August 2010.

US stocks closed at their highest level in 10 weeks on Monday, 2 August 2010, as a weaker US dollar lifted the energy and raw materials sectors. The Dow Jones Industrial Average gained 208.44 points, or 1.99% to 10,674.38. The Standard & Poor's 500 Index advanced 24.26 points, or 2.20% to 1,125.86. The Nasdaq Composite Index rose 40.66 points, or 1.80% to 2,295.36.

Further boosting stocks, the Institute for Supply Management said the US manufacturing sector grew at a faster rate than expected in July. The government reported construction spending unexpectedly rose in June.

Back home, the Indian government moved a step closer to creating a permanent mechanism to resolve disputes among regulators as the Lok Sabha on Monday passed the bill moved to replace the ordinance issued to end the spat between Insurance Regulatory and Development Authority (Irda) and Sebi over regulation of unit linked plans, or Ulips. Members from the BJP and the Left parties accused the government of trying to create a 'super regulator' through the legislation.

The bill was passed with a voice vote after finance minister Pranab Mukherjee assured the House that the government will not dilute the autonomy of the regulators and won't be a 'super regulator'. Pointing that the RBI has two functions --monetary and regulatory -- the minister said, it no way, the government is interfering with the monetary authority. The RBI is the supreme (as far as monetary matters are concerned). Justifying the bill, he said the government has to interfere if there is contradiction between the regulators and the overall interests of the economy suffers.

The Securities and Insurance Laws (Amendment and Validation) Bill, 2010, replaces an ordinance issued last month to end the turf war between market regulator Sebi and insurance watchdog Insurance Regulatory and Development Authority (Irda) over the jurisdiction of Ulips.

On the macro front, India's exports rose for the eighth straight month in June, growing an annual 30% to $17.75 billion, government data on Monday showed.

The manufacturing expansion picked up pace in July 2010, driven by new orders, stronger factory output and rising prices even as hiring stagnated, a survey showed on Monday, 2 August 2010. The HSBC Markit Purchasing Managers' Index, based on a survey of 500 companies, edged up to 57.6 in July 2010 from 57.3 in June 2010 when it slipped from a multi-year high.

The factory output index jumped to a four-month high of 62.3 in July from 60.5 in the prior month, pointing to a rate of expansion in production that was above the trend since the end of the financial crisis, according to survey compilers Markit. But, Indian manufacturers shed jobs for the first time in four months in July.

The revival of monsoon rains in the crucial sowing month of July 2010 augurs well for the Indian economy which is driven by strong domestic demand. The annual monsoon rains were 38% above normal in the week to 28 July 2010, bouncing back from a 17-percent deficit in the previous week, the weather office said on 29 July 2010. The cumulative rainfall during the period from 1 June 2010 to 2 August 2010 was 3% below normal.

Over 64.7 million hectares had been brought under the crop cover by 22 July 2010. This is about 5.4 million hectares more compared with 59.3 million hectares planted last year till this date. An overall 1% above-normal rainfall in whole July has facilitated extensive crop sowing even in the traditionally arid tracks of Rajasthan, Gujarat and Maharashtra. This has facilitated higher area coverage under rain-dependent, but high priced crops like cotton, pulses and coarse cereals. Kharif sowing is expected to be largely over by the middle of this month in most parts of the country.

The southwest monsoon was vigorous over West Rajasthan and Saurashtra & Kutch and active over Gujarat region and Madhya Pradesh during past 24 hours, India Meteorological Department (IMD) said in its daily update on Monday, 2 August 2010. The IMD expects fairly widespread rainfall over plains of northwest India and north Peninsula and adjoining central India 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, the IMD said late last week. 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%, it said.

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.

Water level in main reservoirs was at 27% of capacity in the week to 29 July 2010, up from 19% in the previous week. Reservoirs are important for hydropower, which accounts for a quarter of the nation's generation capacity. They also provide water to irrigate winter crops such as wheat and rapeseed.

The Reserve Bank of India (RBI) at its Q1 monetary policy on Tuesday, 27 July 2010, raised its key short term interest rates for the fourth time this year to curb surging inflation. The central bank also raised its economic growth and inflation forecasts.

The RBI raised GDP forecast to 8.5% for the year ending March 2011 (FY 2011), from 8% with an upside bias earlier. The central bank said the upward revision in growth forecast is primarily based on better industrial production and its favourable impact on the services sector and also giving due consideration to the global scenario.

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 RBI also raised the baseline projection for inflation based on wholesale price index for March 2011 to 6% from 5.5% indicated in the April 2010 policy statement, taking into account the emerging domestic and external scenario. The RBI said its outlook on inflation will partly be shaped by the distribution of monsoon rains and their impact, as the agricultural harvest will be crucial to easing currently high food prices in the country.

The Reserve Bank of India said the economy could face a significant risk in the form of a slowdown in capital flows, at a time when the current account deficit is widening. In its first quarterly review of monetary policy, the Reserve Bank of India said that a potential slowdown in capital inflows could impact the current and trade deficit. The current deficit is already widening as imports continue to rise with the rebound in economic growth.

RBI has said that the risk of capital flows runs both ways. Given the present state of the global economy, central banks in advanced economies are likely to maintain accommodative monetary policies for an extended period. With the strong growth potential of emerging market economies, including India, this is likely to trigger large capital inflows. Large capital inflows above the absorptive capacity of the economy will pose a challenge for monetary and exchange rate management. This also has implications for asset prices. In this scenario, a widening current account deficit will help absorb a larger proportion of the inflows.

The BSE 30-share Sensex was up 33.62 points or 0.19% to 18,114.83. The Sensex rose 86.24 points at the day's high of 18,167.45 in early trade. The index fell 8.83 points at the day's low of 18,072.38 in early afternoon trade.

The S&P CNX Nifty was up 7.90 points or 0.15% to 5,439.55.

The BSE Mid-Cap index rose 0.31%. The Small-Cap index rose 0.33%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE rose. BSE's banking sector index Bankex (up 0.95%), Oil & Gas index (up 0.67%), Healthcare index (up 0.37%), and PSU index (up 0.31%), outperformed the Sensex. The BSE Metal index (up 0.14%), the BSE TECk index (up 0.12%), Consumer Durables index (up 0.08%), Power index (up 0.06%), Realty index (up 0.03%), Auto index (down 0.09%), IT index (down 0.48%), Capital Goods index (down 0.73%) and FMCG index (down 0.73%), underperformed the Sensex.

The market breadth, indicating the health of the market, was positive. On BSE, 1522 shares advanced while 1448 shares declined. A total of 86 shares remained unchanged. The breadth was much stronger earlier in the day.

From 30 share Sensex pack, 16 fell and the rest moved up.

BSE clocked turnover of Rs 4416 crore, higher than Rs 3974.28 crore on Monday 2 August 2010.

Index heavyweight Reliance Industries (RIL) rose 1.15%, with the stock gaining for the second straight day. The stock had dropped during the last three days of the week ended Friday, 30 July 2010, on worries about stagnant gas production. Gas production is likely to stagnate at 60 million standard cubic metres of gas a day for a while. Reliance Industries will be able to pump natural gas at full capacity from its deep-sea field during the year to March 2013, Oil Secretary S. Sundareshan said last week.

RIL's net profit jumped 32.3% to Rs 4851 crore on 86.7% increase in net turnover to Rs 58,228 crore in Q1 June 2010 over Q1 June 2009. The results were announced after trading hours on 27 July 2010.

India's largest FMCG maker by sales Hindustan Unilever (HUL) was flat. HUL's net profit fell 1.84% to Rs 533.21 crore on 8.42% increase in total income to Rs 4918.34 crore in Q1 June 2010 over Q1 June 2009. The result was announced on 27 July 2010.

Cigarette maker ITC fell 1.46% to Rs 154.10. The stock turned ex-bonus from today, 3 August 2010, for a liberal 1:1 bonus.

Copper and aluminum maker Hindalco Industries rose 0.64% after company announced during market hours today its net profit rose 11.2% to Rs 534.40 crore in Q1 June 2010 over Q1 June 2009.

India's largest engineering and construction firm by sales Larsen & Toubro fell 1.47%. The stock was the third biggest loser from the Sensex pack. The company announced during market hours on Monday that it won a Rs 6500 crore mega power plant order from a Jaiprakash Group firm.

Among other capital goods stocks, BEML, ABB, Punj Lloyd fell by between 0.27% to 3.36%.

India's second largest mobile services provider by sales Reliance Communications fell 2.3% and was the top loser from the Sensex pack. The company said on Tuesday it would announce on 4 August 2010 a strategic agreement with Universal Music Group as a preparation for the launch of its 3G services.

India's largest mobile services provider by sales Bharti Airtel jumped 3.35% and was the top gainer from the Sensex pack.

Banking stocks rose on expectations of a strong growth in lending in a fast rebounding economy. Bank lending to companies and individuals grew more than 21% in the year through 2 July 2010, the fastest pace since January 2008.

India's largest private sector bank by market capitalisation ICICI Bank rose 2.38%, extending Monday's 3.9% rally triggered by better-than-expected Q1 results. Net profit rose 17% to Rs 1026 crore in Q1 June 2010 over Q1 June 2009. Net interest income rose 0.3% to Rs 1991 crore. Non-interest income declined 19.6% to Rs 1,680 crore. Within non-interest income category, fee income rose 7.12% to Rs 1413 crore. The treasury income declined sharply to Rs 104 crore from Rs 714 crore in Q1 June 2009. Lease and other income surged to Rs 163 crore from Rs 57 crore in Q1 June 2009.

The ratio of low-cost current & savings accounts (CASA) deposits to total deposits surged to 42.1% at end June 2010 from 30.4% at end June 2009. The ratio of net non-performing assets declined to 1.62% at end June 2010 from 2.19% at end June 2010. The bank announced the result on Saturday, 31 July 2010.

India's biggest commercial bank in terms of branch network, State Bank of India (SBI) rose 0.85%, with the stock gaining for the sixth straight day. The stock today, 3 August 2010, scaled a record high of Rs 2,616.40. The Lok Sabha on Monday approved a bill that will allow the State Bank of India (SBI) to reduce government holding in the bank to 51% from 55% and raise funds from the capital markets.

Punjab National Bank and Bank of India fell by between 0.22% to 0.6%. But, Bank of Baroda rose 1.53%.

India's second largest private sector bank by market capitalisation HDFC Bank fell 0.57%. The stock hit record high of Rs 2,140.90 on Monday, 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%.

India's largest dedicated housing finance firm by revenue HDFC rose 0.93%, reversing initial losses. HDFC has fixed 20 August 2010 record date for a 5-for-1 stock split.

IT pivotals fell on a firm rupee. India's second largest software services exporter Infosys Technologies fell 0.54%. India's third largest software services exporter Wipro fell 0.34%. India's largest software services exporter TCS fell 0.65%, with the stock falling for the fourth straight day.

The rupee rose to a fresh over-one-month peak on Tuesday morning boosted by stronger regional peers. The partially convertible rupee was at 46.15/16 per dollar, after rising to 46.10, its highest since 28 June 2010 and above its previous close of 46.24/25. A firm rupee adversely impacts operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

Consumer durables stocks rose on renewed buying. Videocon Industries, Gitanjali Gems, Rajesh Exports rose by between 0.66% to 2.4%.

Auto stocks were mixed. India's largest motorbike maker by sales Hero Honda Motors rose 1.79%, as 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 largest car maker by sales Maruti Suzuki rose 0.36%, with the stock gaining for the third straight day, on strong sales in the month just gone by. Total 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 Monday. Maruti Suzuki India has raised prices across models by 1% to 1.5% due to a sharp increase in input costs. The price rise would range between Rs 2,000 to Rs 7,500.

India's second largest bike maker by sales Bajaj Auto fell 0.61%. Total vehicle sales jumped 65% at 3.18 lakh units in July 2010 over July 2009.

India's biggest commercial vehicles maker in terms of market share, Tata Motors fell 0.67%. The company's total vehicle sales jumped 41% at 67,799 units in July 2010 over July 2009.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.14%.

Cals Refineries clocked the highest volume of 2.65 crore shares on BSE. FCS Software (1.01 crore shares), Aster Silicates (73.96 lakh shares), Karuturi Global Solutions (56.10 lakh shares) and IFCI (53.12 lakh shares) were the other volume toppers in that order.

Jubilant Foodworks clocked the highest turnover of Rs 195.22 crore on BSE. State Bank of India (Rs 129.20 crore), ICICI Bank (Rs 97.26 crore), Aster Silicates (Rs 90.19 crore) and Reliance Industries (Rs 77.95 crore) were the other turnover toppers in that order.