Sensex, Nifty attain 31-month closing highs

The key benchmark indices managed to end in positive terrain, gaining for the third day in a row, as good monsoon rains this year will raise farm output, boost rural incomes and lower food inflation. The two key benchmark indices -- the barometer index BSE Sensex and the 50-unit S&P CNX Nifty attained their highest closing levels in more than 31 months. The Sensex rose 21.65 points or 0.12%, up close to 126 points from the day's low and off close to 56 points from the day's high.



The market breadth was positive as Mid and Small-Cap indices on BSE outperformed the Sensex. Seven out of 13 sectoral indices on BSE rose. Software and technology shares rose whereas capital goods and FMCG shares declined. Shares of India's biggest commercial bank in terms of branch network, State Bank of India (SBI), hit a record high above Rs 2,900.

The market edged lower at the onset of the trading session on weak Asian stocks. The market moved in a narrow band in morning trade. The market came off the lower level in mid-morning trade. The intraday recovery gathered steam as the key benchmark indices moved into positive zone in early afternoon trade. A bout of volatility was witnessed in afternoon trade as the Sensex pared gains, soon after hitting a 31-month high. The market slipped into the red later as European stocks fell. The market cut losses in mid-afternoon trade. The Sensex regained positive zone later.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 0.88% at 15.97. The index had surged 4.01% to 15.83 on Tuesday, 7 September 2010, a day after sliding 4.04% to 15.22 on Monday, 6 September 2010. 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 institutional investors (FIIs) are in a buying spree in India. FIIs bought share worth a net Rs 281.96 crore today, 8 September 2010, as per provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 98.21 crore.

Foreign funds have shares worth a net Rs 1932.75 crore in the first few days this month, as per data from the stock exchanges. The inflow has reached Rs 21427.85 crore in calendar 2010.

On the macro front, good rains in August 2010 and 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.

European stock markets erased early losses and traded mostly higher Wednesday amid relief over a successful Portuguese debt auction, although bank stocks remained weak. The key benchmark indices in France and Germany were up by 0.16% to 0.25%. UK's FTSE 100 was flat.

Banks stocks were again weak in Europe, following sharp losses in the previous session, as worries over exposure to sovereign debt in peripheral European markets have come back into focus. Portugal successfully completed a bond auction Wednesday, helping to alleviate some of those worries, but other European markets remained a concern. Additional worries about Ireland have in part been sparked by the rising cost of bailing out Anglo Irish Bank. Those fears have pushed Irish government bond yields to record levels.

Greece was also in focus after the National Bank of Greece said late Tuesday that it will raise 2.8 billion euros of fresh capital.

Germany's industrial production edged up 0.1% in July from the previous month, the economics ministry in Berlin reported on Wednesday. The result was below market expectations for a monthly rise of 1%. On Tuesday, the ministry reported a 2.2% decline in German manufacturing orders for July.

Asian stocks fell on Wednesday, with Japan's big exporters among the heaviest losers as a rise in the yen to a new 15-year high threatens to erode their overseas earnings. Japan's Nikkei Average fell 2.18%.

The Japanese yen today, 8 September 2010, touched a fresh 15-year high against the US dollar. The yen rallied despite Finance Minister Yoshihiko Noda's comments that the government will take decisive steps against the rising yen, if necessary, and that those measures included foreign-exchange market intervention. It was the first time Noda has mentioned that currency-market intervention was a policy option.

Bank of Japan (BoJ) governor Masaaki Shirakawa, meanwhile, defended the central bank's recent steps to further ease monetary policy. He said the central bank stands ready to implement further easing if the country's economic conditions deteriorate. Last week, the BoJ extended its low-interest loan program designed to spur the economy, while reducing the yen's attractiveness for foreign investors.

In other Asian markets, the key benchmark indices in Hong Kong, South Korea, Taiwan, China and Singapore were down by between 0.11% to 1.46%.

US index futures swung between gains and losses. Trading in US index futures indicated that the Dow could rise 34 points at the opening bell on Wednesday, 8 September 2010. US stocks fell in light volume on Tuesday, 7 September 2010, as investors seized on renewed concerns about European banks as a reason to sell shares after strong gains last week.

Bond yields were slightly lower. The yield on the benchmark 10-year 2020 bond was hovering at 7.94%, slightly lower than Tuesday's (7 September 2010) close of 7.95%. The yield on the second most traded, 8.13% 2022 bond was hovering at 8.023%, lower than Tuesday's close of 8.035%.

The BSE 30-share Sensex rose 21.65 points or 0.12% to 18,666.71, its highest closing since 18 January 2008. The index rose 76.15 points at the day's high of 18,721.21 in afternoon trade. The index fell 104.41 points at the day's low of 18,540.65 in early trade.

The S&P CNX Nifty rose 3.85 points or 0.07% at 5,607.85, its highest closing since 18 January 2008. Nifty hit a high of 5,625.30 in early afternoon trade.

The BSE Mid-Cap index rose 0.34% and the BSE Small-Cap index rose 0.59%. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1600 shares rose while 1348 shares declined. A total of 118 shares remained unchanged. The breadth was much stronger earlier in the day.

BSE clocked turnover of Rs 6124 crore, higher than Rs 5643.59 crore on Tuesday, 7 September 2010.

The BSE IT index (up 0.57%), Realty index (up 0.46%), Healthcare index (up 0.38%), Metal index (up 0.37%), PSU index (up 0.25%), the banking index -- Bankex (up 0.14%), outperformed the Sensex.

The Consumer Durables index (down 0.14%), Auto index (down 0.19%), Oil & Gas index (down 0.20%), Power index (down 0.27%), FMCG index (down 0.43%) and Capital Goods index (down 0.45%), underperformed the Sensex.

From the 30-share Sensex pack, 18 stocks rose while the rest of them fell.

Index heavyweight Reliance Industries fell 0.19% to Rs 960.05. The stock was volatile. The stock hit a high of Rs 965.25 and a low of Rs 953. 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%. RIL had early last 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.

India's largest mobile services provider by sales Bharti Airtel rose 2.59% to Rs 352.15. The stock came off the day's low of Rs 337.70.

IT stocks reversed initial losses. India's largest software services exporter by sales TCS rose 0.87%. India's second largest software services exporter by sales Infosys rose 0.58%. India's third largest software services exporter Wipro rose 0.58%. Wipro has appointed billionaire founder-chairman Azim Premji's oldest son Rishad Premji as chief strategy officer.

India's largest bank by net profit and branch network State Bank of India (SBI) rose 2.07% to Rs 2894.20. The stock hit record high of Rs 2910 today. State Bank of India said during market hours on Tuesday that the executive committee of the central board of the bank has accorded approval for raising tier II capital by way of public issue of lower tier-II bonds for an amount of Rs 500 crore, with an option to retain 100% oversubscription (green shoe option).

State Bank of India Chairman O.P. Bhatt said on Tuesday that loan quality in the banking sector had deteriorated in the last two years.

Some FMCG stocks fell on profit taking. Godrej Consumer Products, ITC, Ruchi Soya Industries, United Spirits, Dabur India, United Breweries and Tata Global fell by 0.12% to 1.36%. But, India's largest FMCG maker by sales Hindustan Unilever rose 1.74%.

Larsen & Toubro (L&T) fell 0.63%. The company's subsidiary, L&T Infrastructure Finance, is reportedly targeting a disbursement of Rs 5,000-5,500-crore in the current fiscal ending March 2011.

Among other capital goods stocks, Crompton Greaves, SKF India, BEML, Bharat Electronics, Siemens, Alstom Projects, Bharat Bijlee, Jyoti Structures and Areva T&D fell by between 0.26% to 1.99%.

Most auto stocks fell on rate hike worries. India's top small car maker by sales Maruti Suzuki India fell 0.67%, reversing initial gains. The company on Tuesday, 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 truck maker by sales Tata Motors fell 0.60%, with the stock snapping last two days' gains. 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%.

Bajaj Auto fell 1.13%. Total sales rose 55% to 329,364 units in August 2010 over August 2009. India's largest bike maker by sales Hero Honda Motors fell 0.10%. The company reported 2.16% rise in total vehicle sales to 4.24 lakh units in August 2010 over August 2009.

But, India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 0.91%. M&M's auto sales jumped 29% to 28,903 units in August 2010 over August 2009.

Steel stocks rose as steel companies have increased product prices early this month. Steel Authority of India (SAIL), Ispat Industries, Jindal Steel & Power, Tata Steel rose by between 0.49% to 0.62%.

Tata Steel has raised its flat product prices by about Rs 1,000/tonne with effect from 3 September 2010 on account of a pick-up in demand. Earlier this month, major steel producers such as SAIL, JSW Steel, Essar Steel and Ispat hiked prices by 3-4%. JSW Steel increased flat product prices by nearly Rs 1000/tonne. SAIL increased its product prices by cutting back on discounts. However, the companies have kept the long product prices unchanged.

With steel imports expected to fall and demand expected to rise during the second half of the year ending March 2011 (FY 2011), the steel ministry has raised its FY 2011 forecast for steel consumption to 10% from the earlier target of 9%. Steel consumption rose 9.7% in the first five months of FY 2011. For the past 2-3 months, steel prices had remained weak on account of cheaper imports from China and lower demand due to the monsoon season.

High beta realty stocks rose in volatile trade. Anant Raj Industries, HDIL, Parsvnath Devlopers, Indiabulls Real Estate, DLF, Sobha Developrs, Peninsula Land and Unitech rose by between 0.12% to 3.82%.

Bartronics India galloped 16.41% amid high volumes on bargain hunting after a recent steep slide.

Tata Motors clocked a highest turnover of Rs 525.33 crore on BSE. Piramal Healthcare (Rs 440.53 crore), Midfield Industries (Rs 239.55 crore), Tata Power (Rs 218.33 crore) and State Bank of India (Rs 190.85 crore), were the other turnover toppers on BSE in that order.

Cals Refineries reported a highest volume of 4.74 crore shares on BSE. KRBL (1.46 crore shares), FCS Software (1.23 crore shares), Birla Power (90.34 lakh shares) and Shree Ashtavinayak Cine Vision (87.02 lakh shares), were the other volume toppers on BSE in that order.