BSE Mid-Cap, Small-Cap indices outshine Sensex

Trading for the week began positive as the key benchmark indices snapped losses in the preceding two trading sessions as world stocks rose on expectation the US Federal Reserve and other central banks will step in to boost the economy. The market breadth was strong. Mid and small-cap indices on BSE outperformed the Sensex. Index heavyweight Reliance Industries (RIL) extended initial gains. The BSE 30-share Sensex was up 89.63 points or 0.44%, off close to 120 points from the day's high. Buying was conspicuous in realty, consumer durables, auto and metal stocks.



The market surged in early trade, tracking higher Asian stocks. The Sensex pared gains in morning trade. The market further trimmed gains in mid-morning trade. The market moved in a narrow range in early afternoon trade. The market once again came off highs in afternoon trade as European stocks came off initial highs. The market regained strength in mid-afternoon trade as European stocks came off lows. The market extended gains 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 0.93% at 21.20. The index had lost 4.68% at 21.40 on Friday, 8 October 2010, a day after rising 3.31% to 22.45 on Thursday, 7 October 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.

European shares edged higher on Monday, 11 October 2010, as Friday's (8 October 2010) weaker-than-expected US jobs data fuelled expectations that the US Federal Reserve will embark on a second round of quantitative easing to support the US economy. The key benchmark indices in UK, France and Germany were up by 0.18% to 0.21%.

Most Asian shares rose on Monday, 11 October 2010, on hopes that the Federal Reserve would inject fresh money to revive the US economy. The key benchmark indices in China, Indonesia, Hong Kong and Singapore rose by between 0.05% to 2.49%. But, the key benchmark indices in South Korea and Taiwan fell by between 0.32% to 0.82%. Japanese markets were shut for a holiday.

China lifted the proportion of funds that banks must set aside as reserves by half a percentage point on Monday, the first such move since May 2010, in an effort to drain cash from the economy, according to report from a news agency which cited four unidentified sources. The report said the increase will apply to the nation's six largest commercial lenders, boosting their reserve ratios to 17.5%. The policy tightening is temporary and will be in place for two months, the report said.

Trading in US index futures indicated that the Dow could gain 17 points at the opening bell on Monday, 11 October 2010. The Dow Jones Industrial Average closed above the 11,000 mark for the first time in five months on Friday, 8 October 2010, as a surprisingly weak jobs report strengthened the case for more stimulus from the Federal Reserve.

Earnings season in the US kicks off this week, with chip maker Intel Corp reporting on Tuesday, 12 October 2010, to be followed by J.P. Morgan Chase & Co on Wednesday, 13 October 2010, Google Inc. on Thursday, 14 October 2010 and General Electric Co on Friday, 15 October 2010.

The International Monetary Fund concluded two days of talks in Washington on Saturday 9 October 2010 without reaching a solution to address rising tensions about currency exchange rates. Meanwhile, the World Bank said it does not believe these issues will overshadow talk of development at next month's G-20 meeting. A communique issued Saturday at the conclusion of the International Monetary Fund meetings says the IMF pledges to "deepen its work" in areas including global imbalances and exchange rate movements. Talk of currency disputes and the need for structural rebalance dominated the talks in Washington, as did a push to implement reforms. The IMF said that further action is needed to enhance regulation and supervision.

Back home, Reserve Bank of India's (RBI) governor D Subbarao said India would intervene in the foreign exchange markets if needed, to maintain stability. He was talking at a panel discussion at the International Monetary Fund in Washington on Saturday, 9 October 2010. "If the inflows are lumpy and volatile or if they disrupt the macroeconomic situation, we will do so," Subbarao said of intervention. "Our intervention will be to keep liquidity conditions consistent with activity in the real economy and to maintain financial stability and not to stand against developments driven by changing economic fundamentals," Subbarao said.

He said India has not intervened because its absorption of inflows has increased as the current account deficit widens on a surge in imports on an upbeat outlook for growth and investment. "Economies that have current account surpluses or only small deficits have intervened. That does not mean we won't intervene," Subbarao said.

Reserve Bank of India deputy governor Subir Gokarn on Tuesday, 5 October 2010, said the central bank is considering measures to deal with an influx of foreign fund flows. The rupee hit a two-year high against the dollar on Thursday, 7 October 2010. A rising rupee is a bad news for exporters, particularly the labour-intensive segments such as textiles and leather. The government has recently extended sops to some of the labour intensive export sectors.

On Monday, 4 October 2010, Finance Minister Pranab Mukherjee said there was no need to intervene in the foreign exchange market or cap foreign portfolio inflows. "As long as the capital flows are in excess of the current account deficit the pressure to appreciate will continue and it could potentially disrupt," RBI's Gokarn said early last week.

India requires sustained foreign investment to plug its widening current account deficit, which has been worsened by a yawning trade deficit.

Mukherjee said on Thursday, 7 October 2010, that huge surpluses in some countries and large deficits in others are "unsustainable" and should be addressed in multilateral discussions. He also called for an early conclusion to the stalled Doha Round of world trade talks.

Foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $21.60 billion, above last year's $17.45 billion, as per data from the Securities & Exchange Board of India (Sebi). The Sebi data includes FII inflow through primary and secondary market route.

A sizable chuck of FII inflow this year is from India-focused exchange traded funds as well as long-only funds.

But, a section of the market is concerned that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 36000 crore from share sales over the next three to six months. This includes a large initial public offer (IPO) from Coal India this month. The government plans to raise about Rs 15000 crore to Rs 16000 crore from divestment of 10% stake in Coal India. The Coal India IPO is billed as the country's largest issue ever. The IPO of Coal India opens for bidding on 18 October 2010.

The next major trigger for the stock market is Q2 September 2010 results. Brokerage earnings estimates will now roll over to FY 2012 (year ending March 2012).

Tier-I IT firms viz. Infosys, TCS, Wipro, and HCL Tech are seen reporting strong earnings growth in Q2 September 2010 as high volumes will boost operating margins. However, the IT sector faces headwind of a firm rupee in Q3 December 2010. The rupee hit a 2-year high against the dollar on Thursday, 7 October 2010. Higher volumes and price hike will aid earnings growth of most auto firms in Q2 September 2010 though analysts will closely eye operating profit margins and outlook on margins in the face of rising metal prices

Banks are seen reporting decent-to-strong earnings growth on the back of pick-up in credit offtake. Manufacturers of base metals are also seen reporting strong Q2 results on the back of higher metal prices. Increase in product prices will offset higher input costs for consumer staples firms in Q2 September 2010. But, cement firms will report dismal results due to a sharp fall in cement prices during the monsoon season.

Meanwhile, the finance ministry is reportedly considering a proposal to relax investment norms and allow foreign individuals to directly buy shares of Indian companies. Current guidelines permit only foreign mutual funds to directly invest in the domestic bourses.

The BSE 30-share Sensex was up 89.63 points or 0.44% to 20,339.89. The index rose 211.01 points at the day's high of 20,461.27 in early trade. The Sensex opened flat at 20,250.26, which was also the day's low.

The S&P CNX Nifty was up 32.40 points or 0.53% to 6,135.85.

The BSE Mid-Cap index rose 0.79% and the BSE Small-Cap index rose 1.36%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE rose. The BSE Auto index (up 1.93%), Metal index (up 1.57%), Oil & Gas index (up 1.29%), Consumer Durables index (up 0.65%), PSU index (up 0.52%), and Realty index (up 0.46%), outperformed the Sensex. The BSE Healthcare index (up 0.29%), banking sector index Bankex (up 0.24%), Power index (up 0.1%), Capital Goods index (up 0.04%), FMCG index (down 0.01%) and IT index (down 0.12%), underperformed the Sensex.

The market breadth was strong. On BSE, 1901 shares advanced while 1091 shares declined. A total of 89 shares remained unchanged.

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

The BSE clocked turnover of Rs 4366 crore, lower than Rs 5352.68 crore on Friday, 8 October 2010.

Index heavyweight Reliance Industries (RIL) rose 1.97%. RIL may reportedly be sitting on yet another gold mine -- its D4 block. RIL is the operator of the block with 85% stake. RIL's partner Niko Resources, which owns 15% in the block located on the east coast of India, has raised initial estimates of gas reserves in the D4 block.

Edward S Sampson, chairman and chief executive officer of Canada-based Niko Resources, told investors in a conference recently that he feels that reserves at the D4 block are twice the size of the D6 block and have prospectivity of up to an exceeding potential for 100TCF gas. RIL said that the appraisal process is presently being undertaken and, therefore, will not comment at this juncture.

Some FMCG stocks rose on expectations of higher sales this year due to good monsoon rains. Britannia Industries, ITC and United Breweries rose by between 0.17% to 1.99%. But, FMGC major Hindustan Unilever fell 0.83%. FMCG firms derive substantial sales from rural India.

Consumer durables stocks rose on expectations of pick-up in sales in the upcoming festive season that starts with Dasara on 17 October 2010. Blue Star, Lloyd Electric, Rajesh Exports and Titan Industries rose by between 0.54% to 3.38%.

High beta realty stocks rose on expectations of pick-up in sales of residential apartments in the upcoming festive season that starts with Dasara on 17 October 2010. Omaxe, Unitech, Ackruti City, Parsvnath Developers and Lok Housing rose by between 0.65% to 3.48%.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange rose 2.81% on Friday, 8 October 2010. Hindustan Zinc, Sterlite Industries, Sesa Goa, National Aluminum Company, Jindal Steel & Power, and JSW Steel rose by between 0.12% to 3.13%.

Tata Steel, the world's seventh-largest steelmaker, rose 2.06%, recovering from a two-day steep slide. The company, last week, said sales from its Indian operations rose 14% to 1.66 million tonnes in Q2 September 2010 over Q2 September 2009. The growth was driven by the highest-ever quarterly sales of long products, primarily used in construction, the company said in a statement.

The Indian operations account for about a quarter of the group's total annual global capacity of about 30 million tonnes, which includes unit Corus, Europe's second-largest steelmaker. Tata Steel's crude steel production in India rose 5% to 1.73 million in Q2 September 2010 over Q2 September 2009.

Steel Authority of India (Sail), India's largest domestic producer of the alloy, rose 1.87%. The company's sales rose 2.9% to 3.17 million tonnes in Q2 September 2010 over Q2 September 2009. The growth came on the back of higher sales of long products such as wire rods, rounds and bars, and structurals, the state-run firm said in a statement. These products are mainly used in the construction sector. Sales of special steels and value-added products rose 10% in the quarter from a year ago.

Hindalco Industries rose 0.26% As per recent reports the company's US unit -- Novelis Inc is in talks to buy BP Plc's 60% stake in its US joint venture, Logan Aluminium, for $600 million in an all-cash deal. The stock hit a 52-week high of Rs 218.90 today, 11 October 2010.

Auto stocks rose on expectations of pick-up in sales in the upcoming festive season that begins with Dasara on 17 October 2010. Commercial vehicles major Tata Motors rose 4.05%. The stock had hit a record high of Rs 1155.75 on Friday, 1 October 2010. The company, recently said it has acquired 80% stake in Italian design and engineering firm Trilix SRL, for 1.85 million euros. The acquisition will help enhance the company's styling and design capabilities to global standards, Tata Motors said in a statement.

Tata Motors, last week, said it has increased the total size of ordinary and 'A' ordinary shares placement to $750 million from a base amount of $525 million following strong investor response. The company said the size of the 'A' ordinary shares issue has been raised to $550 million from $400 million.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 0.12%, with the stock snapping last three days' losses. The stock had hit all-time high of Rs 758.70 on Wednesday, 6 October 2010. The company said on Friday, 8 October 2010 that it has decided to issue a notice of early redemption on the outstanding foreign currency convertible bonds (FCCBs) aggregating $141.2 million. The bondholders will have the right to convert the FCCBs on or before 29 October 2010 and the balance outstanding FCCBs after the conversions, if any during this period, will be redeemed on 8 November 2010, M&M said in a statement.

The bondholders have in the last three months opted for conversion of FCCBs aggregating $48.30 million into equity shares/GDRs, M&M said. Each GDR represents one underlying equity share of the company.

M&M on Friday, 1 October 2010, said it sold 35,177 vehicles in September 2010, nearly 24% more from a year earlier.

India's leading bike maker by sales Hero Honda Motors rose 2.02%. Sales rose 8.1% to 4.33 lakh units in September 2010 over September 2009.

India's top car maker, Maruti Suzuki rose 1.63%, with the stock gaining for the second straight day. Total vehicle sales rose 29.6% to 1,08,006 units in September 2010 over September 2009. This is a record monthly sale from the car major.

Bajaj Auto rose 0.13%. The stock had hit all-time high of Rs 1,611.45 on Wednesday, 6 October 2010. The company's total sales rose 26% to 3,52,769 units in September 2010 over September 2009.

Car sales rose an annual 30.4% to 169,082 cars in September 2010, an industry body said on Friday, 8 October 2010. The Society of Indian Automobile Manufacturers (SIAM) said sales of trucks and buses, a barometer of economic activity, rose 29.6% to 59,455 units in September 2010.

Healthcare stocks also rose. Biocon, Ranbaxy Laboratories, Sun Pharmaceutical Industries, Dr Reddy's Laboratories, Wockhardt and Cipla rose by between 0.26% to 2.33%.

Cement stocks rose on expectations of pick up in demand as the monsoon season ends. ACC, UltraTech Cements, Ambuja Cements and India Cements rose by between 0.1% to 1.47%.

Banking stocks rose on expectations of good Q2 September 2010 results. India's largest private sector bank by net profit ICICI Bank rose 0.34%. ICICI Bank, recently, hiked base rate by 25 basis points to 7.75%. ICICI Bank has also increased interest rates on its special home loan scheme by 25 basis points. The scheme now offers loans at the rate of 8.5% for the first year and 9.5% for the second year. From the third year onwards, home loans will be priced at 175 basis over the base rate.

All banks had to review their base rate in the first week of October 2010 as RBI has mandated that the base rate has to be reviewed every quarter. The new benchmark rate came into effect from 1 July 2010, replacing the prime lending rate and banks have to price all new loans in reference with base rate.

India's largest commercial bank by net profit and branch network State Bank of India (SBI) rose 0.44%, with the stock gaining for the second straight day. The stock hit a record high of Rs 3299 on Monday, 4 October 2010.

Bank of Baroda, Bank of India and Punjab National Bank rose by between 0.34% to 2.36%.

But, India's second largest private sector bank by net profit HDFC Bank fell 0.73%, with the stock falling for the third straight day. HDFC Bank raised its key lending rate or the base rate by 25 basis points to 7.50% effective Tuesday, 5 October 2010. HDFC Bank had raised its rates on some deposits by up to 50 basis points effective 24 September 2010.

India's largest engineering and construction firm by sale Larsen & Toubro (L&T) fell 0.19%. The company said during market on Friday, 8 October 2010, it has bagged new orders worth Rs 1585 crore in buildings & factories segments.

Sugar stocks edged higher on a recovery in world sugar prices. Baja Hindustan, Balrampur Chini and Shree Renuka Sugars rose by between 0.19% to 1.86%.

Fertiliser stocks gained on reports ample monsoon rains and higher prices of farm goods are likely to lift Indian fertiliser demand in 2010/11 by 13%. GSFC, GNFC, Mangalore Chemicals & Fertilisers, National Fertilizers, Chambal Fertilisers & Chemicals, National Fertiliser & Chemicals rose by between 1.97% to 10.19%.

IT stocks fell on weak economic data in US, the prime market for Indian IT firms. India's largest IT exporter by sales TCS fell 0.1%. India's second largest IT exporter by sales Infosys fell 0.2%. The company will announce its Q2 result on Friday, 15 October 2010. But, India's third largest IT exporter by sales Wipro rose 0.14%.

A recent rally in the rupee against the dollar also weighed on IT stocks. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

Gallantt Ispat settled at Rs 81.60 on BSE, a 63.20% premium over the initial public offer price of Rs 50. The stock debuted at Rs 48.90, a 2.20% discount to the initial public offer (IPO) price.

Gallantt Ispat clocked the highest volume of 5.14 crore shares on BSE. Cals Refineries (3.1 crore shares), Birla Power Solutions (1.33 crore shares), FCS Software (1.3 crore shares) and Electrosteel Steels (95.74 lakh shares) were the other volume toppers in that order.

Gallantt Ispat clocked the highest turnover of Rs 419.58 crore on BSE. Jindal Poly Films (Rs 189.88 crore), Reliance Industries (Rs 125.72 crore), Career Point Infosystems (Rs 96.32 lakh shares) and VIP Industries (Rs 68.71 crore) were the other turnover toppers in that order.