Nifty scales 31-month closing high

The key benchmark eked out tiny gains, with some stocks witnessing a sharp rally. Volatility was high as traders rolled over positions in derivatives segment from the August 2010 series to the September 2010 series ahead of the expiry of the near-month August 2010 contracts this Thursday, 26 August 2010. European stocks and US index futures rose while Asian stocks ended lower.



The 50-unit S&P CNX Nifty achieved its highest closing level in 31 months. The barometer index BSE 30-share Sensex was up 7.53 points or 0.04% off close to 45 points from the day's high and up about 40 points from the day's low. The market breadth was strong. Select banking and auto shares gained on fresh buying.

The market was volatile. The market lost ground soon after a positive start. The Sensex regained positive zone in early trade. The market once again slipped into the red later. The Sensex regained positive zone in morning trade. The market moved in a narrow range in mid-morning trade. Fresh buying in select pivotals pushed the market to day's high in early afternoon trade. The market once again slipped into the red in early afternoon trade. The Sensex regained positive zone later. The Sensex once again slipped into the red at the fag end of the trading session.

Volatility may remain high this week ahead of the expiry of the near-month August 2010 derivatives contracts.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, rose 2.63% at 17.14. The index had risen 1.03% at 16.70 on Friday, 20 August 2010. The index had risen 0.79% to 16.53 on Thursday, 19 August 2010. The index had slumped 6.98% at 16.40 on Wednesday, 18 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.

In an attempt to boost exports, the government has announced a bagful of stimulus measures in the latest review of the Foreign Trade Policy. To spur exports, Commerce and Industry Minister Anand Sharma announced today a six-month extension of the Duty Entitlement Pass Book scheme (DEPB). The DEPB, which neutralises the incidence of duties, was supposed to expire on 31 December 2010. It will now expire on 30 June 2011. The additional export incentives will cost the government over Rs 1000 crore, Sharma said.

Coming back to stocks, 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 7028.83 crore so far this month, till 20 August 2010, absorbing selling of Rs 3149.57 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.

Amid growing hopes of a bumper kharif harvest thanks to further improvement in monsoon rainfall, worries persist over the unabated poor crop sowing in some parts rain-starved eastern region. Overall, nearly 90% of the total normal kharif acreage has already been seeded till 20 August 2010 and the standing crops are reportedly in good shape. Water status of most reservoirs is also getting better rapidly and is now just three per cent short of normal, reports suggest.

A ray of hope for the drought-hit eastern region has emerged from the India Meteorological Department (IMD) which has predicted widespread showers in eastern Uttar Pradesh, Bihar, sub-Himalayan West Bengal, Sikkim, Assam and Meghalaya in the rest of this month. That will help farmers in this region grow coarse cereals, pulses and fodder.

The cumulative rainfall during the period from 1 June 2010 to 22 August 2010 was 3% below normal. The Southwest monsoon was vigorous over interior Karnataka and Rayalaseema and active over Assam & Meghalaya, Arunachal Pradesh, Sub-Himalayan West Bengal & Sikkim, Himachal Pradesh, Uttarakhand, Haryana, Chandigarh & Delhi, West Uttar Pradesh, East Rajasthan, Madhya Maharashtra and Coastal Karnataka, during the past 24 hours, the India Meteorological Department (IMD) said in its daily update on Sunday, 22 August 2010.

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 goods and services tax (GST) may reportedly make a debut on 1 June 2011 (GST) as the government is no mood to delay the ambitious indirect tax reform by another year. Its planned rollout from April next year now looks uncertain due to opposition from BJP-ruled states, which fear an erosion of their fiscal autonomy.

As per reports, the government is going ahead with the preparations so that GST can be rolled out quickly after a political consensus is reached on the architecture of this reform. The constitution amendment bill for the rollout of GST has to be passed by both the houses of Parliament and at least 15 state assemblies. Finance Minister Pranab Mukhejee said last week that he will not introduce the constitutional amendments required for the indirect tax reform in Parliament until there is wide consensus on the matter.

GST is expected to bring down the incidence of total indirect taxes on goods and services as it prevents levy of tax on tax, or what is called cascading, and would provide for set-off of tax paid on a wider set of inputs including services.

The government is likely to place the bill on the Direct Taxes Code (DTC) in the ongoing Monsoon session of Parliament. The Direct Tax Code (DTC) is being proposed as a replacement for the Income Tax Act, 1961, and is likely to come into effect from 1 April 2011.

European shares rose on Monday, 23 August 2010, with miners up on hopes that the election results in Australia would end plans for a new mining tax, while Old Mutual gained after HSBC said it will buy a stake in Nedbank. The key benchmark indices in France, UK and Germany rose by between 0.41% to 0.89%.

Meanwhile, ratings agency Moody's Investors Service in its semi-annual European Sovereign Outlook released today said that economic growth in Europe is likely to be lower than the rest of the world due to the need to cut budget deficits and pay down debt. The agency added that the prospect of slower growth was clearly a downside risk for sovereign ratings. Moody's said that those countries that are facing persistently strong deleveraging could experience renewed negative pressure on their ratings in the future, depending on how long the process lasts. Moody's said it will closely monitor whether deficit-reduction measures have the potential to enhance growth.

Private-sector output in the 16-nation euro zone grew at a slower pace in August 2010, with the preliminary Markit purchasing managers index for the region slipping to a two-month low of 56.10 from a reading of 56.70 in July 2010. A reading of more than 50 indicates growth in activity, while a PMI of less than 50 signals contraction. Economists had forecast a fall in PMI to 56.3. The index for the services sector slipped to 55.60 from 55.80 in July 2010, while the manufacturing PMI declined to 55 from 56.70.

Asian stocks dropped on Monday, 23 August 2010, on concerns over the strength of the global economic recovery amid recent poor economic data in the US. The key benchmark indices in Japan, China, South Korea and Hong Kong, were down by between 0.11% to 0.44%. But, key benchmark indices in Taiwan and Jakarta were up 0.61% and 0.35% respectively.

US markets ended on a mixed note on Friday, 20 August 2010, as traders remained concerned over the pace of recovery of the economy after weak data. The Dow Jones Industrial Average shed 57.59 points or 0.56% at 10,213.62. The S&P 500 index lost 3.94 points or 0.37% to 1,071.69. But, the Nasdaq composite index, gaining 0.81 points or 0.04% to 2,179.76.

Trading in US index futures indicated that the Dow could rise 36 points at the opening bell on Monday, 23 August 2010. US index futures swung between gains and losses.

Closer home, the Union Cabinet on Friday, 20 August 2010, cleared a revised version of a Bill to govern civil liability in the event of nuclear damage to push forward the process of increasing the share of atomic power in electricity generation. However, the Nuclear Liability Bill faced fresh roadblocks on Sunday, 22 August 2010, with the Bhartiya Janata Part and the Left parties asserting that they would oppose any dilution of the suppliers' liability.

On the macro front, multilateral lender Asian Development Bank may raise inflation forecast for India at its next Economic Outlook slated for 28 September 2010, depending on progress of the monsoon rains. ADB has forecast a 8.2% GDP growth for 2010 and average inflation of 5% for the year.

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%.

The liquidity situation in the financial markets has improved, a senior Reserve Bank of India (RBI) official said on Friday, 20 August 2010. The Reserve Bank of India (RBI) is also keeping a close watch on the liquidity situation, said Janak Raj, an adviser at the RBI's monetary policy division.

Chief Statistician T.C.A. Anant on 19 August 2010 said the headline inflation is expected to ease further in coming months. 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 recently said 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.

Bond yields edged higher on Monday, 23 August 2010. The yield on benchmark 10-year 2020 bond was hovering at 8%, higher than Friday's (20 August 2010) close of 7.98%. The yield on the second most traded, 8.13% 2022 bond was hovering at 8.04%, higher from Friday's (20 August 2010) close of 8.02%.

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.

India needs to channelise more pension and insurance funds into the infrastructure sector, Finance Minister Pranab Mukherjee said in a government statement released on 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.

The BSE 30-share Sensex was up 7.53 points or 0.04% to 18,409.35. The Sensex rose 52.56 points at the day's high of 18,454.38 in early afternoon trade. The index fell 30.80 points at the day's low of 18,371.02 in early trade.

The S&P CNX Nifty was up 12.85 points or 0.23% to 5,543.50, its highest closing since 18 January 2008. Nifty struck an intra-day high of 5,549.80 in mid-afternoon trade.

The market breadth, indicating the health of the market was strong. On BSE, 1740 shares advanced while 1244 shares declined. A total of 72 shares remained unchanged.

The total turnover on BSE amounted to Rs 5650 crore, higher than Rs 5230.65 crore on Friday, 20 August 2010.

The BSE Mid-Cap index rose 0.84% and the BSE Small-Cap index rose 0.94%. Both these indices outperformed the Sensex.

From the 30-share Sensex pack, 18 stocks gained while the rest of them slipped.

Except the BSE FMCG index, all the other sectoral indices on BSE rose. The BSE Consumer Durables index (up 4.37%), PSU index (up 1.1%), Healthcare index (up 0.65%), Power index (up 0.6%), banking sector index Bankex (up 0.56%), IT index (up 0.56%), Capital Goods index (up 0.52%), Auto index (up 0.46%), Metal index (up 0.36%), Oil & Gas index (up 0.21%), and Realty index (up 0.16%), outperformed the Sensex. The BSE FMCG index (down 1.04%), underperformed the Sensex.

Shares of state-run oil marketing companies (OMCs) jumped, boosted by declining crude oil prices. Lower crude oil prices will reduce underrecoveries on domestic sale of diesel, LPG and kerosene at government mandated prices. HPCL (up 5.38%), BPCL (up 11%), and Indian Oil Corporation (up 3.08%), edged higher.

As per reports, the government has paid Rs 14000 crore as subsidy to the three state-run oil marketing firms for Q1 June 2010.

Crude oil declined 97 cents to $73.46 a barrel on the New York Mercantile Exchange Friday, 20 August 2010, amid worries that weakening growth in the United States could curtail energy demand.

Index heavyweight Reliance Industries (RIL) slipped 1.19% to Rs 976.40, off day's high of Rs 994.95. The stock hit a low of Rs 975.15 during the day. 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 largest oil exploration firm by net profit Oil & Natural Gas Corporation (ONGC) spurted 1.97% on reports the company may seek management control of Rajasthan oilfields in lieu of allowing Cairn Energy to sell majority stake in Cairn India to Vedanta Resources.

ONGC holds 30% interest and pre emption or right of first refusal in case Cairn India was to exit Rajasthan assets, reports suggest. Cairn India fell 0.17%

Jindal Steel and Power spurted 2.85% to Rs 708.35 after the company's subsidiary Jindal Steel Bolivia got 3,000 acres of additional land to start its a $2.1-billion steel plant in Santa Cruz area of Bolivia. The announcement was made on Saturday, 21 August 2010. It was the top gainer from the Sensex pack.

India's largest private sector steel maker by sales Tata Steel rose 0.23% at Rs 521.40. As per reports, the company will invest Rs 1000 crore to set up a plant that would produce 50,000 tonnes of ferro chrome a year and a second plant that would produce 400,000 tonnes of rebar steel a year.

India's largest pharma company by sales Cipla gained 2.22% after the company said its board will meet on 25 August 2010 to consider payment of a special interim dividend for the year ending March 2011, to commemorate 75th anniversary of the company. The company announced the board meet during trading hours today, 23 August 2010.

India's largest bank by net profit and branch network State Bank of India (SBI) rose 1.4% to Rs 2822.60 after oscillating in a band of Rs 2839.90 and Rs 2770.10 during the day. SBI said on Saturday, 21 August 2010 it will issue a total of 1,14,606 shares to shareholders of State Bank of Indore, which will be merged with SBI. The minority shareholders of State Bank of Indore will get 34 SBI shares for every 100 State Bank of Indore shares held.

India's second largest cellular services provider by sales Reliance Communications (RCom) gained 0.71%. RCom during market hours on Friday, 20 August 2010 said it has entered into a pact with Nokia India, in a first-of-its-kind multi-faceted business partnership.

India's largest cellular services provider by sales Bharti Airtel rose 2.16%. The company has won the rights to sponsor all cricket series played in India until 2013 and will pay $700,000 per match.

Shares of software exporters gave away initial gains in late trade. India's second largest software services exporter by sales Infosys rose 0.84% to Rs 2792.35, off day's high of Rs 2806.80. India's largest software services exporter by sales TCS rose 0.02% to Rs 867.30, off the day's high of Rs 875.45. India's third largest software services exporter by sales Wipro rose 0.13% at Rs 412.20, off day's high of Rs 415.25

Reliance Infrastructure fell 2.36%. It was the top loser from the Sensex pack

Consumer durables stocks rose on renewed buying. Rajesh Exports, Gitanjali Gems, Blue Star, Videocon Industries and Titan Industries rose by between 1.12% to 8.51%.

India's top tractor maker by sales Mahindra & Mahindra jumped 1.02% after the company signed a memorandum of understanding to buy a majority stake in troubled South Korean automaker Ssangyong. The announcement was made before trading hours today, 23 August 2010.

Anand Mahindra, vice chairman and managing director of the Mahindra group, in a statement today said that Korea is one of the world's leading centers of automotive excellence, and Ssangyong brings with it a rich legacy of research and development and innovation. He added that India is a rapidly growing sports utility vehicles market and will create new growth avenues for Ssangyong.

Other auto stocks also logged gains on fresh buying. India's top car maker by sales Maruti Suzuki India gained 0.34%. India's largest bike maker by sales Hero Honda Motors rose 0.28%.

India's top truck maker by sales Tata Motors was flat. As per recent reports, the company plans to raise $700-750 million through issue of shares with differential voting rights to retire debt.

India's largest engineering & construction company by sales Larsen & Toubro rose 0.21% after the company during market hours today said it has won two orders aggregating Rs 1195 crore from Oil & Natural Gas Corporation to set up additional processing units at its gas processing complexes in Hazira and Uran.

Among other capital good stocks, Bharat Heavy Electricals, BEML, ABB rose by between 0..07% to 1.3%.

Tyre stocks surged after an official of J K Tyre was quoted as saying that the company may increase tyre prices by 4% to 5% by the first week of September 2010 to offset rising rubber prices. Natural rubber is a key raw material in tyre manufacturing. Ceat, Apollo Tyres, J K Tyre and MRF rose by between 1.72% to 7.96%.

The comments from the J K Tyre official raised expectations that other tyre makers will raise prices.

Cals Refineries clocked the highest volume of 2.98 crore shares on BSE. SpiceJet (1.15 crore shares), FCS Software (1.03 crore shares), Ispat Industries (98.61 lakh shares) and Shree Ashtavinayak Cine Vision (97.96 lakh shares) were the other volume toppers in that order.

Midfield Industries clocked the highest turnover of Rs 207.27 crore on BSE. Asian Hotels (East) (Rs 202.46 crore), Asian Hotels (North) (Rs 171.36 crore), BPCL (Rs 157.80 crore) and Asian Hotels (West) were the other turnover toppers in that order.