IT stocks help bulls emerge victorious in choppy trade; turnover drops

Volatility ruled the roost as the market snapped a two-day steep slide on bargain hunting. L&T and HDFC, both, bounced back after reporting strong Q2 results during trading hours. European stocks and US index futures came off days' lows, which aided the smart intraday rebound on the domestic bourses.



The initial public offer of state-run Coal India was subscribed 27% by 16:00 IST on the first day of the issue today, 18 October 2010, data on NSE website showed. Market men are worried that the Coal India IPO, billed as the country's largest issue ever, will soak liquidity from the secondary market. The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India.

The BSE Sensex and the S&P CNX Nifty regained their psychological 20,000 and 6,000 levels, respectively after falling below those levels in intraday trade. The Sensex settled 43.84 points or 0.22% higher at 20,168.89, up 298.38 points from the day's low and off 60.50 points from the day's high. The turnover on BSE was lower as compared with that on Friday, 15 October 2010. Shares of debutante Commercial Engineers & Body Builders Company settled at discount over the initial public offer price with high volumes.

The market breadth was weak, compared with a positive breadth in the opening trade. Banking stocks and select IT pivotals staged a strong intraday rebound. Oil & gas stocks were in demand on news-based developments. Index heavyweights Reliance Industries (RIL) jumped over 2% and ONGC gained over 1.5%. Most metal stocks edged lower, weighed by fall in metal prices on the London Metal Exchange, on Friday, 15 October 2010. Bank stocks bounced back on expectations of strong Q2 results. Telecom pivotals saw divergent trend. Fertiliser shares declined on profit booking after recent solid surge.

Weird quotes were seen during the 15-minute pre-open session that began on BSE and NSE today, 18 October 2010, with a wide difference in the Sensex and Nifty values. In the pre-open session that began on the bourses today, 18 October 2010, the first eight minutes are reserved for order entry, modification and cancellation. The next four minutes were set aside for order matching and trade confirmation. The remaining three minutes will facilitate the transition from call auction to normal open session.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, declined 1.32% to 22.35. The index had jumped 9.95% to 22.65 on Friday, 15 October 2010. The index had risen 2.9% at 20.60 on Thursday, 14 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.

The near term focus of the market is on Q2 September 2010 quarter earnings as brokerage update their earnings estimates to FY 2012 (year ending March 2012) taking into consideration the latest quarterly earning.

Tier-1 IT firms viz. TCS, Wipro, and HCL Technologies 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. 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.

European stocks moved off initial lows on Monday, 18 October 2010. The key benchmark indices in Germany and UK were up 0.26% and 0.07% respectively. France's CAC was down 0.09%.

France's interior minister, citing Saudi intelligence, said the country is under threat of a terror attack by al-Qaeda, media reports say. Minister Brice Hortefeux said Saudi officials spoke of a threat in Europe, particularly in France, media reports say. The group Al-Qaeda in the Arabian Peninsula was active or planning to be active, Hortefeux said in an interview broadcast Sunday.

Asian stocks fell on Monday, 18 October 2010, as investors took some profits ahead of a widely expected easing in US monetary policy. The key benchmark indices in China, Japan, South Korea, Singapore, Taiwan, Indonesia and Hong Kong were down by between 0.02% to 1.76%.

Chinese stocks reversed sharp early gains to end lower, snapping a seven-session winning run as some airline and commodity producers came under selling pressure in afternoon trade. The Shanghai Composite index, which topped the psychologically-important 3,000-point level during the session, ended 0.5% lower at 2,955.23. Data on China's third-quarter gross domestic product and consumer-level price inflation is due on Thursday, 21 October 2010.

US markets ended on a mixed note on Friday, 15 October 2010, with the Dow Jones Industrial Average edging lower, weighed by financials stocks. The Dow declined 31.79 points or 0.3% to 11,062.78. But, the S&P 500 index rose 2.38 points or 0.2% to 1176.19. The Nasdaq Composite index climbed 33.39 points or 1.37% to 2,468.77, with the index lifted by strong Google Inc. quarterly results.

US economic news was mixed on Friday. Investors liked the fact that Ben Bernanke, chairman of the US Federal Reserve, addressed the issue of additional economic stimulus, raising the possibility that the central bank will attempt to put the economic recovery back on track. There are hopes that the Fed will embark on another round of quantitative easing, which involves pumping more money into the US economy by purchasing government bonds and taking other measures to encourage lending.

US retail sales rose 0.6% in September 2010, topping expectations. However, consumer sentiment as measured by the University of Michigan declined.

Trading in US index futures indicated that the Dow could fall 42 points at the opening bell on Monday, 18 October 2010. US index futures were off initial lows.

Back home, the initial public offer (IPO) of state-run Coal India was subscribed 27% by 16:00 IST on day one of the issue today, 18 October 2010. The issue, which is billed as India's largest ever, closes on Thursday, 21 October 2010. The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India.

The government has set Rs 225-245 per share price band for the Coal India IPO. Retail investors and company employees will get shares at 5% discount on the final issue price to be discovered through the book-building route. The Indian government is selling 63.16 crore Coal India shares, or 10% of the company.

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 80000 crore from share sales over the next three to six months. This includes the large initial public offer (IPO) from Coal India, which is current open for bidding.

Meanwhile, as per an industry body survey, the business confidence of India Inc. for the October-December 2010 quarter declined on concerns such as inflation and high interest rates. The Confederation of Indian Industry (CII) 74th Business Outlook Survey showed the industry lobby's business confidence index for October-December 2010 fell by 1.4 points to 66.2 as compared to an increase of 1.5 points during April-September 2010. The index reflects the expectation of Indian industry about the performance of companies, sectors and the economy. The survey found inflationary conditions, slackening consumer demand, cost and availability of labour and high interest rates as the top concerns.

Coming back to stocks, foreign funds have made heavy purchases of Indian equities this year. Net equity inflow in 2010 now stands at a record $23.36 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.

Foreign funds sold shares worth a net Rs 112.75 crore on Friday, 15 October 2010, as per the provisional data from the stock exchanges. Domestic funds dumped shares worth a net Rs 1053.45 crore on that day.

Bond yields rose as higher inflation in September 2010 has raised the chances of a rate hike at the central bank's next policy review on 2 November 2010. The yield on the most traded 8.13% 2,022 bond was hovering at 8.12%, compared with Friday's (15 October 2010) close of 8.09%. The yield on the benchmark 10-year bond was hovering at 8.09%, compared with Friday's (15 October 2010) close of 8.07%.

The wholesale-price index rose 8.62% in September 2010 from a year earlier, higher than the annual rise of 8.5% in August 2010, government data showed on Friday, 15 October 2010. The annual reading for July 2010 was upwardly revised to 10.31%. The Reserve Bank of India (RBI) next reviews monetary policy on 2 November 2010.

A separate data showed the food inflation rose marginally to 16.37% for the week ended 2 October 2010, on the back of higher prices of cereals, fruits, select vegetables and milk. Food inflation was at 16.24% for the week ended 25 September 2010.

Customs, Central Excise and Service Tax revenue collections at all India level rose 44.4% to Rs 150686 crore during April-September 2010 as compared to corresponding period in previous year, data released on 13 October 2010 showed.

Industrial production rose at a much slower-than-expected 5.6% in August 2010 from a year earlier, sharply lower than the previous month's revised 15.2% growth, data showed on Tuesday, 12 October 2010. Manufacturing output rose an annual 5.9% in August 2010, lower than a 10.6% rise in August 2009. Industrial production growth for July 2010 was revised upwards to 15.2% from 13.8% earlier.

The Reserve Bank of India (RBI) governor D Subbarao on Friday, 15 October 2010, said the RBI was watching the exchange rate situation and will intervene in the forex market if inflows are lumpy and volatile. India must manage capital inflows so that it can fund its current account deficit while at the same time not harming exports, Deputy Governor Subir Gokarn had said on Thursday 14 October 2010. The rupee hit a 25-1/2-month high above 44 per dollar on Friday, 15 October 2010.

"The Coal India IPO may add pressure on liquidity at least temporarily, so it is something that we will look at and if the circumstances warrant, we will think about responding," Gokarn said late last week.

The BSE 30-share Sensex was up 43.84 points or 0.22% to 20,168.89. The Sensex lost 254.54 points at the day's low of 19,870.51 in morning trade. The index rose 104.34 points at the day's high of 20,229.39 in late trade.

The S&P CNX Nifty was up 13.30 points or 0.22% to 6,075.95.

The market breadth, indicating the health of the market, was weak. The breadth was positive in opening session. On BSE, 1754 shares declined while 1286 shares advanced. A total of 79 shares remained unchanged.

The total turnover on BSE amounted to Rs 4401 crore, lower than Friday's turnover of Rs 5292.57 crore.

The BSE Mid-Cap index fell 0.47% to 8,272.22 and the BSE Small-Cap index declined 0.15% to 10,613.85. Both these indices underperformed the Sensex.

Sectoral indices on BSE displayed mixed trend. The BSE Consumer Durables index (down 1.02%), the BSE FMCG (down 0.18%), and the BSE Power index (down 0.17%), underperformed the Sensex.

The BSE IT (up 1.28%), the BSE Oil & Gas index (up 0.84%), and the BSE Realty index (up 0.72%), outperformed the Sensex.

Among the 30-share Sensex pack, 16 declined while the rest advanced.

ACC (down 2.96%), Tata Power (down 1.92%), Jaiprakash Associates (down 1.76%), edged lower from the Sensex pack. NTPC (up 1.33%), Reliance Infrastructure (up 1.03%), and DLF (up 0.83%), edged higher from the Sensex pack.

IT stocks rebounded sharply from the days' lows as the rupee declined against the dollar after a steep rally over the past one month or so. The partially convertible rupee was trading at 44.28/29 a dollar, weaker than Friday's (15 October 2010) close of 44.10/11, a 25-month closing high. A firm rupee negatively impacts operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

India's largest IT exporter by sales TCS surged 3.20% to Rs 981.40, off day's low of Rs 931 and was the top gainer from the Sensex pack. The company announces its Q2 September 2010 results on 21 October 2010.

India's second largest IT exporter by sales Infosys rose 0.84% to Rs 3102, after sliding to day's low of Rs 3043. Infosys before market hours on Friday, 15 October 2010, reported a 16.7% rise in consolidated net profit as per International Financial Reporting Standards (IFRS) to Rs 1737 crore on 12.1% growth in revenue to Rs 6947 crore in Q2 September 2010 over Q1 June 2010. The core operating profit margin (OPM) surged to 30.2% in Q2 September 2010 from 28.31% in Q1 June 2010.

Infosys also raised its earnings as well revenue forecast for the year ending March 2011 in both dollar and rupee terms. But, it cautioned about the global economic environment.

India's third largest software services exporter by sales Wipro slipped 1.16% to Rs 468. Nevertheless, the stock rebounded from day's low of Rs 461. The company announces its Q2 September 2010 results on 22 October 2010.

HCL Technologies rose 3.5% ahead of its Q1 September 2010 results on 20 October 2010.

Oil & gas stocks were in demand on news-based developments. Index heavyweight Reliance Industries (RIL) jumped 2.18% to Rs 1063.60, with bulk of the gains materializing at the fag end of the trading session. The stock's came of sharply from day's low of Rs 1034.25. Reportedly, RIL has set aside Rs 5000 crore to build malls and form ventures with global brands in the next two years.

India's largest oil exploration firm by sales Oil and Natural Gas Corporation (ONGC) advanced 1.83%. The company on Saturday, 16 October 2010 said it has made two new discoveries of oil and gas reserves -- gas at the Krishna-Godavari basin block and oil in the Cauvery basin.

State-run oil marketing firm BPCL rose 0.71% after company on Friday, 15 October 2010, hiked petrol prices by 70 paise per litre effective midnight Friday.

Among other oil marketing firms, HPCL advanced 0.48% and Indian Oil Corporation gained 0.31%.

Petronet LNG jumped 8.3% ahead of its Q2 September 2010 results on 25 October 2010.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) rose 1.03% to Rs 2010, recovering sharply from day's low of Rs 1928.80. Profit after tax from ordinary activities rose 19.59% to Rs 694.14 crore on 17.72% rise in net sales to Rs 9260.77 crore in Q2 September 2010 over Q2 September 2009. The company announced the result during market hours today.

The L&T management maintained its revenue growth forecast at 20% for the year ending March 2011 (FY 2011). A senior executive of the company said the order book is seen rising 25% in FY 2011, maintaining the earlier guidance.

India's largest mortgage lender by total income HDFC rose 0.16% to Rs 728, off day's low of Rs 705.55, on strong Q2 results. Net profit rose 21.62% to Rs 807.54 crore on 4.2% rise in total income to Rs 2970.22 crore in Q2 September 2010 over Q2 September 2009. The company announced the results during trading hours.

Bank stocks bounced back on expectations of strong Q2 results. India's second largest private sector bank by total income HDFC Bank rose 1.03% to Rs 2411, after sliding to day's low of Rs 2352.55 in intra-day trade.

India's largest private sector bank by total income ICICI Bank lost 0.76%. The stock came off the day's low of Rs 1,094.30.

India's largest truck maker by sales Tata Motors rose 1.34% to Rs 1172, off the day's low of Rs 1131.35. The company's global vehicle sales rose 19% to 86,996 units in September 2010 over September 2009.

India's largest bike maker Hero Honda Motors fell 0.07% to Rs 1801.05 in volatile trade after moving in a band of Rs 1790-1814.50. As per reports, US private equity firms Carlyle, Kohlberg Kravis Roberts & Co and Warburg Pincus are in talks to acquire an effective 15-18% stake in the company.

Telecom pivotals saw divergent trend. India's largest cellular services provider by sales Bharti Airtel dropped 2.02%. The company added 2.04 million mobile users in September 2010 versus 2.03 million in August 2010.

India's largest cellular services provider by sales Reliance Communications (RCom) rose 0.17% after the company it said signed up 2 million mobile users in September 2010. RCom had 115.3 million users as of end-August 2010.

Most metal stocks edged lower after LMEX, a gauge of six metals traded on the London Metal Exchange, declined 0.42% on Friday, 15 October 2010.

Steel Authority of India (down 0.14%), Sesa Goa (down 0.91%), National Aluminium Company (down 1.27%), Hindalco Industries (down 0.78%), JSW Steel (down 0.24%), declined.

However, Tata Steel (up 1.86%), Hindustan Zinc (up 0.53%), and Jindal Saw (up 3.47 %), rose.

India's largest non-ferrous metal firm by sales Sterlite Industries India was down 0.92%. The Supreme Court on Monday, 18 October 2010, extended a stay on a lower court order asking Sterlite Industries to close its copper smelter in south India. The stay will continue till the second week of December 2010, allowing the unit to continue its operations.

On 1 October 2010, the Supreme Court had stayed till 18 October 2010 an order from the Madras High Court asking Sterlite to shut its smelter in Tuticorin on environmental grounds.

Fertiliser shares declined on profit booking after a recent surge triggered by optimism good rains this year will boost sales. Coromandel International (down 3.22%), Zuari Industries (down 3.23%), Rashtriya Chemicals & Fertilisers (down 5.02%), Deepak Fertilisers (down 0.31%), Chambal Fertiliser & Chemicals (down 7.80%), GSFC (down 5.77%), Nagarjuna Fertilisers & Chemicals (down 3.91%) and National Fertilisers (down 2.28%), declined.

Jay Bharat Maruti was locked at 20% upper limit, extending gains for the second day, after net profit jumped 133% to Rs 10.30 crore in Q2 September 2010 over Q2 September 2009. The company declared its results during trading hours on Friday, 15 October 2010, when the stock had gained 5.07% to Rs 81.80.

Dr Reddy's Laboratories gained 1.01% after the company received approval from the US Food & Drug Administration to market Lansoprazole delayed release capsules in United States. The company made this announcement on Saturday, 16 October 2010.

Shiva Cement was locked at 20% upper limit after the company said its cement dispatches grew 12.6% in September 2010 over September 2009. The company made this announcement during trading hours today, 18 October 2010.

Kiri Dyes & Chemicals rose 4.70% after the company's board decided to open bidding for a proposal qualified institutional placement of shares on Thursday, 21 October 2010.

Surana Telecom and Power jumped 10.27% after company said that it has been allocated a solar power project of 5 megawatt capacity from the state government of Gujarat. The company announced this during market hours today, 18 October 2010.

Indiabulls Real Estate jumped 5.39%. The company will announce its Q2 September 2010 results on 20 October 2010.

Piramal Healthcare rose 3.58%. The company will announce its Q2 results on 22 October 2010.

Shares of Commercial Engineers & Body Builders Company (CEBBCO) settled at Rs 112.25 on BSE, an 11.61% discount to the initial public offer price of Rs 127. The stock debuted at Rs 122.80, a discount of 3.3% to the issue price of Rs 127. It hit a high of Rs 144.80 and a low of Rs 106.30 during the day.

Bedmutha Industries was the top traded counter on the BSE with turnover of Rs 378.52 crore followed by Commercial Engineers & Body Builders Company (Rs 138.20 crore), Larsen & Toubro (Rs 137.72 crore), State Bank of India (Rs 88.10 crore), and Reliance Industries (Rs 86.95 crore), in that order.

Cals Refineries was the top traded counter on the BSE with volume of 1.98 crore shares followed by Bedmutha Industries (1.83 crore shares), Commercial Engineers & Body Builders Company (1.14 crore shares), Pipavav Shipyard (97.36 lakh shares), and Alok Industries (86.89 lakh shares), in that order.