Sensex, Nifty scale 32-month highs as FIIs step up buying

The key benchmark indices rose for the sixth straight day on data showing heavy buying by foreign funds during the past two trading sessions on Thursday, 9 September 2010 and Monday, 13 September 2010. Data showing easing of inflation also helped equities score further gains. The BSE Sensex and the 50-unit S&P CNX Nifty scaled 32-month highs. The focus today, 14 September 2010, was on large-cap stocks as many mid and small-cap stocks declined on profit booking after recent strong gains. The market breadth was weak.



The BSE 30-share Sensex jumped 138.63 points or 0.72%, up about 130 points from the day's low and off close to 140 points from the day's high. Mahindra & Mahindra, Tata Motors, HDFC Bank, Infosys and TCS hit record highs. ICICI Bank scaled 52-week high. European stocks reversed initial gains. US index futures were in the red. Asians stocks were mixed.

The market opened on a firm note on data showing heavy buying by foreign funds on Monday, 13 September 2010, when the Sensex had risen 2.17%. The market surged in morning trade, extending initial gains. The sharp rally was followed by the Sensex instantly paring gains. The market came off the lower level in mid-morning trade as the rate of rise in inflation eased in August 2010. Stocks moved in a narrow range in early afternoon trade. The market strengthened in afternoon trade. The market came off the higher level in mid-afternoon trade.

Foreign institutional investors (FIIs) are in a buying spree in India. Foreign institutional investors (FIIs) bought shares worth a net Rs 2636.30 crore on Monday, 13 September 2010, on the top of an inflow of Rs 1176.60 crore on Thursday, 9 September 2010. The stock market was closed on Friday, 10 September 2010, for a public holiday.

FII inflow in September 2010 totaled Rs 7215.80 crore (till 13 September 2010). FIIs had bought equities worth Rs 11,687.50 crore in August 2010. FII inflow in the calendar year 2010 totaled Rs 66,597.40 crore (till 13 September 2010).

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 2.54% at 18.60. 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.

Investors will closely watch advance tax payment by individual firms this week. The second installment of advance tax payment which falls due on Wednesday, 15 September 2010, will give a hint about Q2 September 2010 corporate results.

On the macro front, 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.

Bond yields declined after the inflation data which hit the market at about 11:30 IST. The yield on the benchmark 10-year 2020 bond was hovering at 7.95%, lower than Monday's (13 September 2010) close of 7.98%. The yield on the second most traded, 8.13% 2022 bond was hovering at 8.08%, lower than Monday's close of 8.10%.

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.

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.

European shares fell on Tuesday, 14 September 2010, after German investor confidence fell more than expected. The key benchmark indices in UK, France and Germany were down by 0.16% and 0.23%.

A survey showed that German investor confidence is down for the fifth consecutive month, falling more than expected in September amid worries the economy may again be slowing. The ZEW institute's confidence index, which measures professional investors' outlook for the next half year, fell 18.3 points in September to minus 4.3 points, compared to 14 points in August.

Gross domestic product in the 16-nation euro region may increase 1.7% this year instead of the 0.9% projected at the depth of Europe's fiscal crisis in May, the Brussels-based commission said in a report published yesterday.

Asian markets were mixed on Tuesday, 14 September 2010, as stock prices consolidated after Monday's rally. Japanese shares fell as a stronger yen dented prospects for export earnings. The Nikkei 225 average fell 0.24%. The Japanese yen rose sharply after Prime Minister Naoto Kan survived a challenge to his leadership of the ruling party and the government.

In other Asian markets, the key benchmark indices in Singapore and South Korea fell by between 0.20% to 0.59%. But, the key benchmark indices in China, Hong Kong and Taiwan rose by between 0.01% to 0.51%. The Indonesian stock market was closed for a trading holiday.

Chinese Premier Wen Jiabao said his nation is committed to treating foreign businesses justly, seeking to counter criticism of unfairness brought forward by leaders of multinationals. China is committed to creating an open and fair environment for foreign-invested enterprises, The Wall Street Journal quoted Wen as saying on Monday, 13 September 2010, at the World Economic Forum in the northern Chinese port city of Tianjin. Wen pledged the government would give equal treatment to foreign-invested and wholly Chinese firms in its procurement decisions.

Asian markets had registered solid gains on Monday, 13 September 2010, on the back of strong economic data from China and US.

Trading in US index futures indicated that the Dow could slide 26 points at the opening bell on Tuesday, 14 September 2010. US index futures moved between gains and losses.

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 BSE 30-share Sensex was up 138.63 points or 0.72% to 19,346.96, its highest closing level since 17 January 2008. The index rose 278.69 points at the day's high of 19,487.02 in morning trade. The index rose 9.80 points at the day's low of 19218.13 in early trade.

The S&P CNX Nifty was up 35.55 points or 0.62% at 5,795.55, its highest closing level since 17 January 2008. The index hit high of 5,838.45, in morning trade.

The BSE Mid-Cap index fell 0.63%. The BSE Small-Cap index fell 0.75%. Both the indices underperformed the Sensex.

Most sectoral indices on BSE rose. The BSE Consumer Durables index (up 1.56%), IT index (up 1.45%) and Auto index (up 1.37%), outperformed the Sensex. The BSE Capital Goods index (up 0.56%), banking sector index Bankex (up 0.52%), PSU index (up 0.37%), FMCG index (up 0.37%), Oil & Gas index (up 0.24%), Power index (down 0.11%), Realty index (down 0.39%) and Metal index (down 0.53%), underperformed the Sensex. The BSE Healthcare index was unchanged for the day, underperforming the Sensex which rose 0.72%.

The market breadth, indicating the overall health of the market, was weak. On BSE, 2033 shares declined while 984 shares rose. A total of 81 shares remained unchanged. The breadth was strong in early trade.

From the 30 share Sensex pack, 20 rose and the rest fell.

BSE clocked turnover of Rs 5429 crore, higher than Rs 4974.18 crore on Monday, 13 September 2010.

Index heavyweight Reliance Industries (RIL) fell 0.45% to Rs 987.75, in volatile trade. The stock hit a high of Rs 1003 and a low of Rs 984.20. The stock had surged 3.58% on Monday. 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.

Consumer durables stocks reversed initial losses. Rajesh Exports, Titan Industries and Videocon Industries rose by between 0.26% to 4.14%.

High beta metal and mining stocks fell on worries about economic recovery in the developed world. Sesa Goa, JSW Steel, National Aluminum Company, Hindustan Zinc, Tata Steel, Jindal Steel & Power, Hindalco Industries and Steel authority of India fell by between 0.07% to 1.97%.

LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.79% on Monday, 13 September 2010.

Auto stocks rose on robust vehicle sales in the month of July 2010. India's top small car maker by sales Maruti Suzuki India rose 1.5%, with the stock gaining for the third straight day. 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 tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 1.44%, with the stock gaining for the fourth straight day. The stock hit record high of Rs 677.80 today. M&M's auto sales jumped 29% to 28,903 units in August 2010 over August 2009.

India's largest truck maker by sales Tata Motors rose 2.73%. The stock hit a record high of Rs 1,067.50 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 was flat. 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 0.34%. The company reported 2.16% rise in total vehicle sales to 4.24 lakh units in August 2010 over August 2009.

IT stocks rose on renewed buying. India's largest software services exporter by sales TCS rose 1.65%, with the stock gaining for the second straight day. The stock hit record high of Rs 898.40 today. The company announced during market hours today that it is setting up a new learning and development campus in southern city of Thiruvananthpuram in Kerala. India's second largest software services exporter by sales Infosys rose 1.38%, with the stock gaining for the seventh straight day. The stock hit record high of Rs 3000 today.

India's third largest software services exporter Wipro rose 3.66%. Wipro has appointed billionaire founder-chairman Azim Premji's oldest son Rishad Premji as chief strategy officer.

Banking stocks extended Monday's sharp surge after global regulators announced new capital rules that weren't as harsh as some had expected. Sentiment toward lenders also improved as the rules, which won't be introduced for years, took away a key element of uncertainty by easing any immediate pressure on banks to sell new shares to raise capital.

India's second largest private sector bank by net profit HDFC Bank rose 2.33%. The stock hit a record high Rs 2,350 today. The bank early this month raised its benchmark prime lending rate (BPLR) by 50 basis points to 16.25%.

India's largest private sector bank by net profit ICICI Bank rose 0.27% after surging 4.43% on Monday. The stock hit a 52-week high of Rs 1,116.45 today.

But, India's largest bank by net profit and branch network State Bank of India (SBI) fell 1.07%, after surging 5.52% on Monday. The stock hit record high of Rs 3,175 on Monday, 13 September 2010. State Bank of India recently said 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).

Bank of Baroda and Punjab National Bank rose 0.36% and 0.77% respectively. But, Bank of India fell 0.5%.

India's largest dedicated housing finance firm by revenue HDFC rose 1.27% after surging 5.32% on Monday. The stock hit a record high of Rs 681.40 today.

On Sunday, 12 September 2010, global regulators agreed to new capital rules for the banking and financial services sector. The new regulations will require a total common equity ratio of 7% for banks. The minimum common equity level requirement was lifted to 4.5%, from 2%, and banks will also now be required to hold a capital conservation buffer of 2.5% to withstand future periods of stress, the group of governors and supervisory heads in the Basel Committee on Banking Supervision announced.

The new rules requiring higher capital levels for lenders are designed to provide a cushion to absorb losses and thus help prevent the kind of problems seen in the recent global financial crisis. Banks will be required to have a tier 1 capital ratio of 6%, up from the current 4% level. The key element of tier 1 capital is common shareholder funds and disclosed reserves or retained earnings, according to the Basel Committee.

Although the sector's capital requirements have increased, the rise wasn't as bad as some had expected and banks will have time to introduce the new rules, with higher capital levels required to be in place by the start of 2019.

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, United Breweries, ITC, Nestle India and Hindustan Unilever rose by between 0.04% to 1.23%.

High beta realty stocks fell on rate hike worries. Indiabulls Real Estate, Phoenix Mills, Ackruti City, Omaxe and HDIL fell by between 0.33% to 4.52%.

Capital goods stocks rose for the second straight day after the latest data showed robust growth in the capital goods sector in July 2010. Larsen & Toubro, Thermax, ABB, Siemens and Bharat Heavy Electricals rose by between 0.35% to 1.46%.

NHPC clocked the highest volume of 1.71 crore shares on BSE. Cals Refineries (1.65 crore shares), Birla Power Solutions (1.64 crore shares), Karuturi Global Solutions (1.44 crore shares) and Jupiter Bioscience (1.3 crore shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 227.02 crroe on BSE. Jupiter Bioscience (Rs 163.74 crore), Tata Motors (Rs 132.38 crore), Tata Steel (Rs 118.81 crore) and Reliance Industries (Rs 107.53 crore) were the other turnover toppers in that order.