Sensex regains 18,000 mark as SBI vaults after strong Q1 numbers

Volatility was the order of the day as key benchmark indices swung between gains and losses amid choppy European shares. Shares of India's biggest commercial bank in terms of branch network, State Bank of India (SBI), surged nearly 7% after it reported strong Q1 results during trading hours. Auto and realty stocks also rose. Tata Motors hit a record high, extending recent strong rally triggered by robust Q1 result.



The BSE Sensex closed above the psychological 18,000 mark, after alternatively moving above and below that level throughout the day. FMCG and IT stocks fell. Tata Power fell after the company reported a fall in first quarter net profit. The BSE 30-share Sensex was up 3.71 points or 0.02%, off close to 40 points from the day's high and up close to 160 points from the day's low. The market breadth was negative.

Intraday volatility was immense. The BSE Sensex fell below the psychological 18,000 mark at the onset of the trading session on weak Asian stocks and as US index futures fell. The market came off the lower level in morning trade as Asian stocks and US index futures recovered from initial sharp losses. A bout of volatility was witnessed in mid-morning trade after the government released industrial production data for June 2010 at about 11:00 IST.

The market weakened once again after hitting a fresh intraday high in mid-morning trade. A strong rebound was witnessed in afternoon trade as State Bank of India (SBI) surged in afternoon trade after reporting upbeat Q1 results. The barometer index hit a fresh intraday high, as it regained the psychological 18,000 mark. But, the intraday rebound proved short-lived -- the market once again slipped into the red in mid-afternoon trade as European stocks fell. The market came off the lower level later.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was down 0.61% at 18. The index had risen 4.5% to 18.11 on Wednesday, 11 August 2010. The index had risen 1.94% at 17.33 on Tuesday, 10 August 2010. The index had lost 2.13% to 17 on Monday 9 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.

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 today, 12 August 2010, said industrial production growth is expected to remain in high single digits in the current fiscal year.

The yield on the most traded 8.13% 2022 bond moved higher to 7.97% from Wednesday's (11 August 2010) close of 7.94%.

Reserve Bank of India deputy governor Subir Gokarn said the monetary policy action taken by the Reserve Bank of India should start to show its impact on inflation over the next 6 to 12 months. It is well-known that monetary policy acts with a lag, Gokarn said in an article which was published on the RBI's website today, 12 August 2010. The article was written about a month back.

The management of current inflation requires both supply-side and demand-side approaches, Gokarn said. Monetary policy has addressed the latter with a gradual, calibrated set of actions on both interest rates and liquidity management. The pace and sequencing of the actions has been influenced by both persistent global uncertainties and the need to support the domestic recovery, Gokarn said. This has required a balancing act between reining in inflationary expectations and adequate liquidity in the domestic financial system, Gokarn said in the article. While the current rate of inflation is a legitimate concern, the results of this policy stance should become visible over the next few months, Gokarn said.

One thing that we learnt from the events of 2008-09 was that India is not immune to global turbulence, Gokarn said. Be it through trade, capital flows or a general sense of confidence about economic prospects, a global problem quickly becomes a domestic one. Given these linkages, the risks from the global economy need to be taken into consideration while formulating domestic policy, the RBI deputy governor wrote.

The kind of rapid and massive reductions that were made to policy instruments during the crisis simply cannot be replicated in the reverse direction, Gokarn said. Growth is picking up and confidence gradually returning to businesses and consumers, but given the vividness of the crisis, the process is still likely to be vulnerable to both external shocks and domestic ones. Rapid transitions in the policy regime might constitute one such shock. In essence, on this consideration, while rapid and drastic actions are entirely warranted when dealing with a crisis, managing a return to normalcy requires a more gradualist and calibrated approach, Gokarn said.

European shares swung between gains and losses, with bank stocks sliding on concerns over the global economic recovery. The key benchmark indices in France and Germany were down by 0.03% to 0.16%. But, UK's FTSE 100 rose 0.52%.

Euro zone industrial production declined in June, with output in France and Germany falling sharply. Output fell 0.1% month-on-month, figures released by Eurostat on Thursday showed, and rose 8.2% year-on-year, although the drop followed sharp increases in April and May.

Asian stocks dropped on Thursday, 12 August 2010, on growing doubts about global economic growth. The key benchmark indices in Singapore, China, Hong Kong, Taiwan, Indonesia, Japan and South Korea were down by between 0.32% to 2.07%.

South Korea's central bank left its key interest rate unchanged Thursday amid slowing economic growth and worries about inflation, a month after raising rates from a record low. The Bank of Korea announced that it kept the benchmark seven-day repurchase rate at 2.25% at a monthly monetary policy meeting.

US index futures swung between gains and losses. Trading in US index futures indicated that the Dow could slide 13 points at the opening bell on Thursday, 12 August 2010.

US stocks erased the year's gains in the broadest sell-off in a month-and-a-half on Wednesday, 11 August 2010, as fears of sustained global economic stagnation caused investors to flee to safer assets. The sell-off caused following the Federal Reserve's bleaker assessment of the US economy on Tuesday, 10 August 2010, when the US central bank also said at a regular policy meeting on interest rates that it would take steps to hold down borrowing costs. The Dow Jones Industrial Average was down 265.42 points, or 2.49% at 10,378.83. The Standard & Poor's 500 Index was down 31.59 points, or 2.82% at 1,089.47. The Nasdaq Composite Index was down 68.54 points, or 3.01% at 2,208.63.

The latest data showed the US trade deficit had widened in June to its highest level in 20 months as exports fell.

Back home, the Indian government early this week 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.

On the corporate front, the combined net profit of a total of 2,695 Indian companies fell 7.9% to Rs 66,020 crore on 20.4% rise in sales to Rs 7,98,097 crore in Q1 June 2010 over Q1 June 2009.

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 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 today, 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.

There are concerns about scanty rains in Bihar. According to reports drought has hit the state's rice bowl severely. Sowing of pulses and oilseeds in the state has also been way behind the target, reports suggest. Projections this time are that cultivation would be far short of the below normal figures of 2009 in the state.

On the flip side, 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 11 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 southwest monsoon activity was subdued over the country during the past 24 hours, the IMD said in its daily update on Wednesday 11, August 2010. The weather office expects fairly widespread rainfall with isolated heavy fall over western Himalayan region, west coast and Lakshadweep over the next few days. The IMD expects fairly widespread rainfall to continue over central and east India in the near term.

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 is good and well distributed it will help raise farm output, boost rural incomes and lower food inflation.

Coming back to stocks, foreign funds have made heavy purchases of Indian stocks over the past two months. Foreign funds today, 12 August 2010, bought shares worth a net Rs 218.19 crore as per the provisional figures released by the stock exchanges. Domestic funds dumped shares worth Rs 656.05 crore.

Foreign funds have bought equities worth a net Rs 4016.02 crore in the first few trading days this month, till 12 August 2010, absorbing selling of Rs 2348.35 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 BSE 30-share Sensex was up 3.71 points or 0.02% to 18,073.90. The index lost 155.41 points at the day's low of 17,914.78 in early trade. The Sensex rose 43.43 points at the day's high of 18,113.62 in afternoon trade.

The S&P CNX Nifty was down 4.15 points or 0.08% to 5416.45.

The BSE Mid-Cap index was up 0.3%. The Small-Cap index rose 0.03%. Both the indices outperformed the Sensex.

Sectoral indices on BSE were mixed. Banking sector index Bankex (up 1.68%), Auto index (up 1.17%), Consumer Durables index (up 1.03%), Realty index (up 1.03%), PSU index (up 0.98%), Healthcare index (up 0.19%) and Oil & Gas index (up 0.17%), outperformed the Sensex. The BSE Power index (down 0.01%), Capital Goods index (down 0.18%), FMCG index (down 0.49%), Metal index (down 0.77%), and IT index (down 0.9%), underperformed the Sensex.

The market breadth, indicating the health of the market, was weak. On BSE, 1,648 shares declined while 1,298 shares advanced. A total of 99 shares remained unchanged.

From 30 share Sensex pack, 18 fell and the rest rose.

BSE clocked turnover of Rs 5470 crore, lower than Rs 5627.09 crore on Wednesday, 11 August 2010.

India's largest commercial bank State Bank of India (SBI) rose 6.93% to Rs 2784 after strong Q1 results. The stock hit record high of Rs 2797.80 today. 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 today.

Shares of two leading private sector banks fell. India's largest private sector bank by market capitalisation ICICI Bank fell 0.74%. 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 31 July 2010.

India's second largest private sector bank by market capitalisation HDFC Bank fell 0.39%, with the stock falling for the second straight day. The stock had scaled a 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 fell 0.3%, with the stock falling for the second straight day. HDFC has fixed 20 August 2010 record date for a 5-for-1 stock split.

Index heavyweight Reliance Industries (RIL) fell 1.05%, with the stock falling for the sixth straight day. Reliance Industries has 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, last week, 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.

Commercial vehicle maker Tata Motors rose 1.72% extending last two days' surge triggered by turnaround Q1 June 2010 results which the company announced during trading hours on Tuesday, 10 August 2010. The stock today, 12 August 2010, hit a record high of Rs 1,031.80.

The company reported consolidated net profit of Rs 1988.73 crore for 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.

Tata Motors said the Jaguar Land Rover business continued to show strong profitability, with increase in volumes coupled with significantly favorable currency movement in Q1 June 2010, reporting profit before tax of Great British Pounds (GBP) 233.82 million (Rs 1590.25 crore).

India's largest tractor maker by sales Mahindra & Mahindra rose 0.8%, reversing initial losses. 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 rose 0.95%, with the stock snapping last tow days' losses. Managing Director Shinzo Nakanishi said last week 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, last week, 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 Monday, 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 0.09%. 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 rose 2.87%, with the stock snapping last five days' losses. 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.

Ranbaxy Laboratories fell 0.47%. Consolidated operational net profit soared 4818% to Rs 457.40 crore on 22% growth in sales to Rs 2102.90 crore in Q2 June 2010 over Q2 June 2009.

Ranbaxy Laboratories today said its chief executive officer (CEO) and managing director (MD) Atul Sobti will step down from the positions effective from 19 August 2010. The company did not mention the reason for his departure. Arun Sawhney, who is currently president of Ranbaxy's global pharmaceutical business, will take over as managing director from 20 August 2010.

Tata Power Company fell 0.42% after company announced during market hours today its consolidated net profit after statutory appropriations, fell 45.57% to Rs 311.67 crore on 3.53% rise in total income to Rs 5095.43 crore in Q1 June 2010 over Q1 June 2009.

Metal stocks fell as LMEX a gauge of six metals traded on the London Metal Exchange declined 1.7% on Wednesday, 11 August 2010. JSW Steel, Jindal Saw, Sterlite Industries, Hindustan Zinc, Steel Authority of India fell by between 0.19% to 2.56%.

India's largest steel maker by sales Tata Steel fell 0.12% ahead of its Q1 result today.

Copper and aluminum maker Hindalco Industries rose 1.64% after the company's Canadian subsidiary Novelis Inc recently reported strong operational results for Q1 June 2010. Novelis' net adjusted EBITDA (earnings before interest, taxation, depreciation and amortization) jumped 112.1% $263 million in Q1 June 2010 over Q1 June 2009. Top line grew 29.2% $2.53 billion as shipments of rolled products increased 14.8%. Net income declined 65% to $50 million.

FMCG stocks fell on profit taking. Dabur India, Nestle India, ITC, Britannia Industries, United Spirits fell by between 0.12% to 1.89%.

But, India's largest FMCG maker by sales Hindustan Unilever (HUL) rose 2.19%.

IT stocks fell on recent weak economic data in the US, the biggest market for Indian IT firms. India's largest software services exporter TCS fell 0.44%, with the stock falling for the fifth straight day. The stock on Thursday, 5 August 2010, hit a record high of Rs 882. India's second largest software services exporter Infosys Technologies fell 1.15%, with the stock falling for the fifth straight day. India's third largest software services exporter Wipro fell 1.2%, with the stock falling for the fourth straight day.

Realty stocks rose as most realty companies posted good Q1 results. Ansal Properties, Phoenix Mills, Indiabulls Rela Estate, Orbit Corporation, Unitech, Parsvnath Developers, Peninsula Land, Unitech, DLF, Housing Development & Infrastructure rose by between 0.06% to 5.4%.

PSU OMCs rose as crude futures fell as economic reports renewed worries about the ability of the global recovery to support oil demand. BPCL, HPCL and Indian Oil Corporation (IOC) rose by between 0.98% to 4.85%.

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.

Cals Refineries clocked the highest volume of 2.66 crore shares on BSE. FCS Software (2.35 crore shares), Asahi Infrastructure (1.57 crore shares), Birla Cotsyn (95.84 lakh shares) and Birla Power Solutions (82.14 lakh shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 650.86 crore on BSE. Tata Steel (Rs 186.17 crore), Tata Motors (Rs 174.14 crore), Reliance Industries (Rs 141.79 crore) and Engineers India (Rs 120.96 crore) were the other turnover toppers in that order.