Sensex gains 1.86% in broad-based rally

The key indices scaled 31-month highs on signs the global economic recovery is on track. Stocks rose across the globe as better-than-expected US payrolls data late last week eased market anxiety over chances of a double-dip recession in the world's biggest economy. Besides strong global cues, a good monsoon this season and sustained buying by foreign funds, boosted domestic investor sentiment. The BSE Sensex crossed 18,500 mark and Nifty crossed 5,550 level.



Buying was broad-based as all the sectoral indices ended in green, with metal and banking shares leading the rally. Large-caps outperformed the mid and small-cap stocks. The BSE 30-share Sensex jumped 338.62 points or 1.86%, up close to 436 points from the day's low and off close to 40 points from the day's high.

The market surged in early trade, soon after swinging wildly between positive and negative terrain in opening trade. The Sensex hit a fresh intraday high in morning trade. The market extended gains in mid-morning trade. The Sensex and the 50-unit Nifty scaled their highest level in 31 months in early afternoon trade. The market extended gains in afternoon trade as European stocks opened on a firm note. The rally gathered further steam in mid-afternoon trade. The market came off the higher level 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 down 4.04% at 15.22. The index had lost 1.8% to 15.86 on Friday, 3 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 funds today, 6 September 2010, bought shares worth a net Rs 946.53 crore, as per the provisional data released by the stock exchanges. Domestic funds bought shares worth a net Rs 392.13 crore.

Foreign funds have bought shares worth a net Rs 1671.67 crore in the first four trading sessions this month, as per data from the stock exchanges. Their inflow in calendar 2010 has reached Rs 21166.76 crore.

Emerging market equity and bond funds saw a 14th straight week of inflows, although investors were cautious about further increasing their equity holdings in emerging economies. As per the latest data from global fund tracker EPFR Global, net inflows into emerging market equity funds totaled $250 million in the week ended 1 September 2010. BRIC equity funds, which refer to emerging powerhouses Brazil, Russia, India and China, saw outflows for the first time in 13 weeks. Chinese equity funds posted outflows of $5 million, EPFR said, but Brazil equity funds received net inflows of $107 million, extending its winning streak to nine consecutive weeks.

Better-than-expected employment data in the US, boosted European stocks on Monday, 6 September 2010. The key benchmarks indices in UK, France and Germany were up by 0.32% to 0.38%.

Asian stocks surged on Monday, 6 September 2010, on the back of strong US jobs data late last week. The key benchmark indices in Singapore, Hong Kong, China, Indonesia, South Korea, Taiwan and Japan were up by between 0.70% to 2.05%.

Wall Street also put in a solid performance on Friday, 3 September 2010, after a government report on employment beat expectations and encouraged investors. US payrolls fell for a third straight month in August, the Labor Department said, but the loss of 54,000 non-farm jobs was far less than the 100,000 expected.

US market remains closed today, 6 September 2010, for the Labor Day holiday.

Closer home, food inflation inched higher in the third week of August as did inflation for the Fuel group and the Primary Articles group, data released by the Government on Friday, 3 September 2010, showed. Inflation for the Food Articles group stood at 10.86% for the year to 21 August 2010, as against 10.05% in the previous week, the Commerce & Industry Ministry data showed. Higher prices of fruits and vegetables led to food inflation accelerating in the latest data.

Inflation for the Primary Articles group also rose to 15.19% from 14.75% in the year through 14 August 2010, the data showed. Inflation for the Fuel & Power group increased to 12.71% from 12.57% in the preceding week, according to the Commerce Ministry data.

Growth in India's service sector slowed for a second month in August 2010 after hitting a two-year peak in June 2010, but businesses were more optimistic about the outlook, a survey showed on Friday, 3 September 2010. The HSBC Markit Business Activity Index, based on a survey of 400 Indian firms, eased to 59.3 in August from 61.7 the previous month, but stayed well above the 50 mark that divides growth from contraction.

The data continued to reflect sharp growth in the Indian service sector, with the strongest expansions in postage & telecommunications as well as services such as sports clubs, the survey showed. The survey showed business expectations spiked to 72.3 in August from 67.8 in July, with almost half of the panelists saying they expect activity levels to rise over the coming year on the back of an improving global economy.

Meanwhile, good rains in August 2010 and continuation of the wet spell in the first week of September 2010 has strengthened the optimism about a record kharif harvest this season. Further, the weather office's prediction that the monsoon will not start withdrawing before mid-September 2010 has boosted the outlook for the next rabi as well.

The kharif sowing is more or less over in most of the country, barring some pockets in the east where soil moisture remained inadequate for seeding till the second half of August 2010. Paddy growers in such tracts of Jharkhand, West Bengal and Bihar are now sowing alternative crops like urad, moong, nigerseed and fodder on the advice of agriculture experts and officials of the state agriculture departments, as per media reports.

With 16% above-normal rainfall in the last week of August, the overall deficiency in the season's cumulative monsoon rainfall till 4 September 2010 has shrunk to just 1%, from 5% at July-end and 16% at June-end. The forecast issued by the India Meteorological Department (IMD) projects 15% excess rainfall in September 2010, the last month of the four-month monsoon season (June to September). The rain-starved tract in the north-east is also projected to receive good rainfall till at least 10 September 2010. The cumulative seasonal rainfall in the eastern region as a whole, however, may remain in the deficient domain, according to IMD.

While the traditional high rainfall region in the east and north-east has remained rain deficient in this monsoon this, the usually arid tracts, such as western Rajasthan, Leh and Ladakh in Jammu and Kashmir, Vidarbha, Marathwada, Saurashtra and Kutch, have got excess rainfall in the current monsoon season. This has facilitated extensive sowing of coarse cereals, pulses and cotton in these tracts, as per media reports. High ruling prices of these commodities has also encouraged the farmers to go for these crops.

The good and sustained waterfall since the last week of July, moreover, has refilled most of the reservoirs which were depleted substantially due to last year's drought. According to the Central Water Commission, total water stock in the 81 major reservoirs was 90.777 million cubic metres (BCM) on 1 September 2010. This level is nearly 34% above the last year's corresponding level and 2% above the long period average.

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 yield on the benchmark 10-year 2020 bond was hovering at 7.99%, slightly higher than Friday's (3 September 2010) close of 7.98%. The yield on the second most traded, 8.13% 2022 bond was almost unchanged at Friday's close of 8.05%.

The BSE 30-share Sensex rose 338.62 points or 1.86% to 18,560.05, its highest closing since 5 February 2008. The index gained 378.87 points at the day's high of 18,600.30 in late trade. The index fell 97.14 points at the day's low of 18,124.29 in early trade.

The S&P CNX Nifty rose 97.55 points or 1.78% at 5,576.95, its highest closing since 18 January 2008. It hit a high of 5,589.40 in late trade.

The BSE Mid-Cap index rose 1.31% and the BSE Small-Cap index gained 1.83%. Both these indices underperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 2072 shares rose while 881 shares declined. A total of 123 shares remained unchanged.

BSE clocked turnover of Rs 5412 crore, higher than Rs 4778.27 crore on Friday, 3 September 2010.

All the 13 sectoral indices on BSE rose. The BSE Metal index (up 3.47%), banking sector index Bankex (up 2.06%), Realty index (up 1.98%), Oil & Gas index (up 1.97%) and IT index (up 1.88%), outperformed the Sensex.

The BSE Auto index (up 1.71%), Power index (up 1.34%), PSU index (up 1.12%), Consumer Durables index (up 1.03%), Healthcare index (up 0.97%), Capital Goods index (up 0.79%) and FMCG index (up 0.58%), underperformed the Sensex.

From the 30-share Sensex pack, 26 stocks rose while the rest of them fell.

Index heavyweight Reliance Industries rose 2.98% to Rs 953.20. RIL said on 1 September 2010, it bought additional 26.7 lakh shares or about 0.68% stake in EIH, raising its stake in the hotel chain to 14.8%. It may be recalled that RIL had early this week 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.

Reliance Power rose 1.44% and Reliance Natural Resources gained 1.54%, after shareholders of both the firms separately approved a composite scheme of arrangement, involving the merger of the latter with the former.

Cigarette maker ITC rose 0.85% to Rs 165.65. The stock hit a record high of Rs 167 today.

Banking stocks rose on expectations of a strong lending growth in a growing Indian economy. India's largest private sector bank by net profit ICICI Bank rose 3.81% to Rs 1035.65. The stock hit a 52 week high of Rs 1045.85 today. India's second largest private sector bank by net profit HDFC Bank rose 0.55%, with the stock gaining for the fifth straight day.

India's largest bank by net profit and branch network State Bank of India rose 3.07%, with the stock gaining for the second straight day. Punjab National Bank and Bank of Baroda rose by between 1.52% and 0.90%. But, Bank of India was almost flat at Rs 463.65.

High beta realty stocks rose on renewed buying. Ansal Properties & Infrastructure, Peninsula Land, HDIL, Sobha Developers, Unitech, Indiabulls Real Estate, DLF, Orbit Corporation, Mahindra Lifespace Developers, Anant Raj Industries, Ackruti City and Omaxe rose by between 0.12% to 4.43%.

High beta metal and mining stocks rose on strong domestic demand and as worries over the global economic recovery eased following positive economic data in the US. Tata Steel, Hindalco Industries, Sterlite Industries, JSW Steel, Jindal Saw, Steel Authority of India, NMDC, Jindal Steel & Power, National Aluminium Company, Hindustan Zinc and Sesa Goa rose by between 0.94% to 6.60%.

Steel shares were also boosted by expectations China will continue to cut capacity in the steel sector. China's state-run Economic Information Daily reported that 18 small-sized steelmakers in Wuan city in the Hebei province have been ordered to suspend steel production for between 20 days to a month in a bid to meet China's target to cut energy consumption. The move is expected to bolster steel prices.

Shares of software exporters rose on positive economic data in the US, the biggest market for Indian IT firms. India's second largest software services exporter by sales Infosys rose 2.16%, with the stock gaining for the second straight day. India's largest software services exporter by sales TCS rose 1.89%.

India's third largest software services exporter Wipro rose 0.82% after the company's American depository receipt, or ADR jumped 3.44% to $13.54 on the New York Stock Exchange on Friday, 3 September 2010. Wipro has appointed billionaire founder-chairman Azim Premji's oldest son Rishad Premji as chief strategy officer.

Piramal Healthcare reported a highest turnover of Rs 372.23 crore on BSE. Tata Steel (Rs 196.08 crore), Midfield Industries (Rs 159.75 crore), Prakash Steelage (Rs 142.56 crore) and Reliance Industries (Rs 131.03 crore), were the other turnover toppers on BSE.

Cals Refineries clocked a highest volume of 5.46 crore shares on BSE. FCS Software (2.41 crore shares), Karuturi Global (1.29 crore shares), Prakash Steelage (86.08 lakh shares) and Ispat Industries (85.88 lakh shares), were the other volume toppers on BSE.