Market scales 32-month high as companies pay higher advance tax

The key benchmark indices gained for the seventh straight day on reports that prominent Indian firms such as Reliance Industries, HDFC, State Bank of India, Hindalco Industries and ICICI Bank, have paid higher advance tax in Q2 September 2010. Data showing heavy buying by foreign funds recently and good monsoon rains in the current monsoon season, underpinned sentiments. The barometer index BSE Sensex and the 50-unit S&P CNX Nifty scaled 32-month highs. Index heavyweight Reliance Industries (RIL) edged higher. But, another index heavyweight ICICI Bank fell.



The market breadth was weak, having reversed from a strong breadth earlier in the day. The BSE 30-share Sensex jumped 155.05 points or 0.8%, off close to 55 points from the day's high and up close to 160 points from the day's low. IT, FMCG and metal stocks rose. Except the BSE auto index, all the other sectoral indices on BSE were in green.

The key benchmark indices hit their highest level in 32 months at the onset of the trading session on data showing heavy buying by foreign funds recently. The market pared gains in morning trade. The market surged to a fresh 32-month high in mid-morning trade. The market once again pared gains in early afternoon trade. The market came off the lower level in afternoon trade. The market once again pared gains in mid-afternoon trade as index heavyweight ICICI Bank fell. The market moved in a narrow range in late trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 4.46% at 19.43, gaining for the third day in a row. The index had risen 2.54% to 18.60 on Tuesday, 14 September 2010. The index had jumped 13.94% to 18.14 on Monday, 13 September 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.

Foreign institutional investors (FIIs) are in a buying spree in India. Foreign institutional investors (FIIs) bought shares worth a net Rs 1723.30 crore on Tuesday, 14 September 2010, on the top of a massive inflow of Rs 2636.30 crore in a single trading session on Monday, 13 September 2010.

FII inflow in September 2010 totaled Rs 8939.10 crore (till 14 September 2010). FIIs had bought equities worth Rs 11687.50 crore in August 2010. FII inflow in the calendar year 2010 totaled Rs 68320.80 crore (till 14 September 2010).

India's trade deficit widened to $13.06 billion in August 2010, trade secretary Rahul Khullar said on Wednesday, 15 September 2010. Khullar said the trade deficit could touch $135 billion for the year ending March 2011, higher than his August forecast for $120 billion.

The widening deficit puts further pressure on the current account and on the need for India to attract capital inflows to finance the gap and avoid pressure on its currency. Exports grew an annual 22.5% to $16.64 billion in August 2010. Imports jumped 32.2% to $29.7 billion.

European shares edged lower on Wednesday, 15 September 2010, pausing for breath after an almost uninterrupted rally since early this month. The key benchmark indices in UK, France and Germany were down by 0.26% to 0.38%.

The number of British workers claiming jobless benefits rose by a seasonally-adjusted 2,300 to 1.4663 million in August for the first monthly rise since January, the Office for National Statistics reported Wednesday. Economists had forecast a decline of 5,000. Persons claiming benefits equaled 4.5% of the workforce, unchanged from July and in line with forecasts.

Asian stocks rose in volatile trade on Wednesday, 15 September 2010. In Japan, the Nikkei 225 average jumped 2.34% after the country intervened to weaken its currency for the first time since 2004.

The Japanese yen plunged after Japan's monetary authorities publicly intervened in the market for the first time since 2004. Japan's Finance Minister Yoshihiko Noda confirmed that his ministry intervened in the foreign-exchange markets but didn't specify the amount of intervention, according to reports. Noda also said the intervention was aimed at curbing excessive foreign-exchange fluctuations and that Japan had acted alone, the reports said.

In other Asian markets, the key benchmark indices in Indonesia, Hong Kong Singapore, South Korea and Taiwan were up by between 0.14% to 3.9%.

But, Chinese stocks fell as investors speculated the government will issue new measures to curb property prices. The Shanghai Composite index lost 1.34%

Trading in US index futures indicated that the Dow could fall 30 points at opening on Wednesday, 15 September 2010.

Closer home, India's industry began the second quarter on a strong footing, clocking 13.8% growth in July 2010, data late last week showed. The growth rate, the highest in two months, exceeded market expectations. The growth was driven by a strong showing by the manufacturing sector, particularly the capital goods segment.

Meanwhile, the government revised downwards the industrial production growth for June 2010 to 5.76% from earlier 7.1%

The wholesale price index (WPI) rose an annual 8.5% in August 2010, lower than 9.8% rise in July 2010. The figures are the first using a new series of data with a different base year of 2004-05, new components and weightings. Under the old series, inflation was at 9.5% in August 2010, lower than a 9.97% rise in July 2010.

The food price index rose 14.64% in August 2010 year on year, while the fuel price index was up 12.55%. Finance Minister Pranab Mukherjee said on Tuesday that inflationary pressures remain in India and the Reserve Bank of India (RBI) will take appropriate steps at the appropriate time.

The Reserve Bank of India (RBI) is seen raising short-term interest rates by 25 basis points at a mid-term policy review on Thursday, 16 September 2010, as inflation remains above RBI's comfort level.

The yield on the benchmark 10-year 2020 bond was almost unchanged at Tuesday's (14 September 2010) close of 7.95%. The yield on the second most traded, 8.13% 2022 bond was almost unchanged at Tuesday's close of 8.08%.

Going ahead, good monsoon rains this season will raise farm output, boost rural incomes and lower food inflation. As a result of the intensification of monsoon since the last week of August 2010, the drought-hit areas of the east and the north-east have received adequate moisture to facilitate planting of alternative, short-duration crops, especially of pulses and fodders, in the fields that had remain unsown so far. This is likely to mitigate the losses due to persistent paucity of rains in this region.

Countrywide, the crop coverage this season has been far better compared to not only the rain-starved 2009 but also to the good rainfall year of 2008. The total area sown under kharif crops till the end of August was 8.3 million hectares higher than in 2009 and 1.15 million hectares more than in 2008 when the country had reaped a record kharif foodgrain harvest of 118.14 million tonnes.

There has been a considerable expansion in acreage under those commodities that have witnessed a perceptible spurt in prices, such as pulses, coarse cereals like bajra and maize, and commercial crops like cotton and sugarcane. On other hand, the area planted with rice and oilseed, the commodities whose prices have remained more or less stable, has come down this year by nearly two million hectares and 700,000 hectares, respectively, compared to that in 2008.

The total water stock in the country's 81 major reservoirs has risen by 9 September 2010 to 103.156 billion cubic metres, some 32% higher than last year's corresponding level and 11% above normal for this time of the season. Many dams have their flood gates opened due to unabated water inflows.

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 BSE 30-share Sensex jumped 155.05 points or 0.8% to 19,502.11, its highest closing level since 17 January 2008. The index rose 207.54 at the day's high of 19,554.50 in mid-morning trade. The index fell 5.97 points at the day's low of 19,340.99 in early trade.

The S&P CNX Nifty jumped 65.40 points or 1.13% at 5,860.95, its highest closing level since 17 January 2008. The index hit high of 5,869 in mid-morning trade.

The BSE Mid-Cap index rose 0.08%. The BSE Small-Cap index fell 0.09%. Both these indices underperformed the Sensex.

Except the BSE Auto index, all the other sectoral indices on BSE rose. The BSE IT index (up 2.49%), BSE Oil & Gas index (up 1.85%), and Metal index (up 0.95%), outperformed the Sensex. The BSE FMCG index (up 0.48%), Consumer Durables index (up 0.4%), Realty index (up 0.37%), banking sector index Bankex (up 0.34%), PSU index (up 0.32%), Power index (up 0.24%), Healthcare index (up 0.24%), Capital Goods index (up 0.05%), and Auto index (down 0.24%), underperformed the Sensex.

The market breadth was weak, having reversed from a strong breadth earlier in the day. On BSE, 1718 shares declined while 1269 shares rose. A total of 103 shares remained unchanged.

From the 30 share Sensex pack, 17 rose and the rest fell.

The BSE clocked turnover of Rs 5230 crore, lower than Rs 5452.82 on Tuesday, 14 September 2010.

India's largest oil & gas exploration firm by sales ONGC rose 1.14% to Rs 1,411.25, on buzz the company may consider a bonus issue or a stock-split ahead of the government's plan to divest 5% of its equity in the company through a follow-on public offer. But, the stock came sharply off the day's high of Rs 1,451.90, which is a record high for the counter.

The petroleum ministry has announced its decision to divest 5% of government equity in ONGC.

Index heavyweight Reliance Industries (RIL) rose 2.3% to Rs 1010.45, on reports the company has got up to 25% higher price offers for natural gas it produces from the eastern offshore Krishna-Godavari basin. But, the stock came off the day's high of Rs 1016.

Reliance Industries has reportedly paid 13% higher advance tax at Rs 1308 crore in Q2 September 2010, compared with Rs 1157 crore in Q2 September 2009.

Carrizo Oil & Gas recently announced that it has closed its previously announced joint venture transaction in Marcellus Shale with a subsidiary of RIL. RIL has acquired a 20% interest in about 52,200 net Carrizo acres in Pennsylvania, which is considered as a highly prospective area for Marcellus Shale natural gas, for $ 65 million.

Closer home, RIL, early this month, said it bought additional 26.7 lakh shares or about 0.68% stake in EIH, raising its stake in the hotel chain to 14.8%. RIL had earlier bought a 14.12% stake in EIH from EIH promoters in an off-market deal valued at Rs 1,021 crore, or an average price of Rs 184 a share

India's second largest private sector bank by net profit HDFC Bank rose 1.76%, on reports its advance tax payment jumped 41% to Rs 600 crore in Q2 September 2010, from Rs 425 crore in Q2 September 2009. The stock hit a record high Rs 2,382 today.

India's largest private sector bank by net profit ICICI Bank fell 0.13%, reversing initial gains. The stock had hit a 52-week high of Rs 1,116.45 on Tuesday, 14 September 2010. The bank has reportedly paid advance tax of Rs 600 crore in Q2 September 2010, compared with Rs 500 crore in Q2 September 2009.

State Bank of India fell 1.7%. The state-run bank has reportedly paid advance tax of Rs 1924 crore in Q2 September 2010, compared with Rs 1832 crore in Q2 September 2009.

Home finance major HDFC rose 1.34% on buzz its advance tax payment rose 25% to Rs 400 crore in Q2 September 2010, from Rs 320 crore in Q2 September 2009.

Capital goods stocks reversed initial gains. Larsen & Toubro, BEML, Bharat Heavy Electricals, Thermax, Praj Industries, Bharat Bijlee fell by between 0.03% to 1.03%.

High beta metal and mining stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange, rose 0.85% on Tuesday, 14 September 2010. Hindustan Zinc, Sterlite Industires, Sesa Goa, JSW Steel and National Aluminum Company rose by between 0.44% to 1.7%.

Steel Authority of India gained 2.08% after the company entered into a 50:50 joint venture with Indian Railways arm RITES to build a wagon-making unit at Kulti near Asansol in West Bengal.

Hindalco Industries rose 1.61% as its Q2 September 2010 advance tax payment doubled Rs 140 crore from Rs 70 crore in Q2 September 2009.

India's largest steel maker by sales Tata Steel rose 1.11% after company announced before market hours today that it has exercised an option to buy 80% of the Direct Shipping Ore project of New Millennium Capital Corp., Canada.

IT stocks rose on positive economic data in the US, the key market for Indian IT firms. India's largest IT exporter by sales TCS rose 2.18%, with the stock gaining for the third straight day. The stock hit record high of Rs 917 today. TCS announced before market hours today that it has entered into a significant multi-year agreement with SUPERVALU Inc, one of the largest grocery retailers in North America, for full services engagement.

India's second largest software services exporter by sales Infosys rose 2.49%, with the stock gaining for the eighth straight day. The stock hit record high of Rs 3,059 today.

India's third largest software services exporter Wipro rose 2.25%, with the stock gaining for the second straight day. Wipro has appointed billionaire founder-chairman Azim Premji's oldest son Rishad Premji as chief strategy officer.

Some FMCG stocks rose as good rains will lift rural income, which in turn will boost demand for consumer goods. Rural market contributes substantially to the sales of FMCG firms. Marico, ITC, United Spirits rose by between 0.52% to 1.27%.

Some high beta realty stocks rose on renewed buying. Indiabulls Real Estate, Phoenix Mills, HDIL, Unitech and Parsvnath Developers rose by between 0.06% to 1.24%.

Auto stocks were mixed. India's top small car maker by sales Maruti Suzuki India rose 1.75%, with the stock gaining for the fourth straight day. The company on 7 September 2010, said it will invest Rs 1925 crore for setting up its second plant at Manesar, Haryana, to take annual production capacity to 1.75 million units from the present 1.2 million units. The expansion will be funded by internal accruals.

Maruti's total sales grew 23.6% to 1.04 lakh vehicles in August 2010 over August 2009. This is the highest ever monthly sales recorded by the company.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 0.95%, with the stock gaining for the fifth straight day. M&M's auto sales jumped 29% to 28,903 units in August 2010 over August 2009.

But, India's largest truck maker by sales Tata Motors fell 2.86%. The stock hit a record high of Rs 1,077.20 today. Tata Motors' total sales rose 32% at 65,938 units in August 2010 over August 2009. However, on a month-month basis, the sales were down 2.7%.

Car sales in India rose an annual 33.2% in August, an industry body said late last week, as a rapidly expanding economy continues to pull buyers to showrooms. Car firms sold 1,60,794 cars in the month, data from the Society of Indian Automobile Manufacturers (SIAM) showed. Sales of trucks and buses, a barometer of economic activity, rose 28.1% to 52,030 units in August, SIAM said.

Bajaj Auto fell 0.31%. Total sales rose 55% to 329,364 units in August 2010 over August 2009. India's largest bike maker by sales Hero Honda Motors rose 0.97%. The company reported 2.16% rise in total vehicle sales to 4.24 lakh units in August 2010 over August 2009.

Cals Refineries clocked the highest volume of 11.73 crore shares on BSE. FCS Software (3.24 crore shares), Karuturi Global Solutions (2.42 crore shares), Jupiter Bioscience (87.49 lakh shares) and Shree Ashtavinayak Cine Vision (83.88 lakh shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 160.97 crore on BSE. Reliance Industries (Rs 159.05 crore), Midfield Industries (Rs 152.25 crore), Atlanta (Rs 123.47 crore) and Tata Steel (Rs 109.07 crore) were the other turnover toppers in that order.