IT stocks lead 2.4% Sensex surge

The key benchmark indices surged to hit 33-month closing highs as world stocks rose on growing expectations that the US Federal Reserve will take further measures to boost the slowing economic recovery. The market breadth was strong. All the sectoral indices on BSE rose. The BSE 30-share Sensex jumped 484.54 points or 2.4%, off close to 15 points from the day's high and up close to 475 points from the day's low. IT, banking, realty and FMCG stocks led the rally. State Bank of India and Tata Motors scaled record highs. Wipro hit a 52-week high.



The market edged higher in early trade tracking firm Asian stocks. After a bout of volatility, the market surged in morning trade. Stocks extended gains in mid-morning trade. The market continued its upward march to hit fresh intraday high in early afternoon trade. The key benchmark indices hit fresh intraday highs in afternoon trade as European stocks edged higher in opening trade. Buying further intensified as market hit fresh intraday high in mid-afternoon trade. Stocks further 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, lost 2.39% to 20.02. The index had declined 3.25% to 20.51 on Tuesday, 12 October 2010. The index had lost 0.93% to 21.20 on Monday, 11 October 2010. 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 stocks surged on Wednesday, 13 October 2010, with investors encouraged by signs the US Federal Reserve may take further action to bolster the US economy. The key benchmark indices in UK, France and Germany were up by 1.22% to 1.51%.

The minutes from the Fed's meeting on 21 September 2010 suggested that the US central bank is almost certain to take steps to shore up a recovery in the world's No. 1 economy at its next policy meeting in early November 2010. The minutes showed the Fed was concerned that the economy was growing slower than it had expected. Fed officials said in the minutes that they were prepared to provide additional relief "before long."

Industrial production in the 16-nation euro zone rose 1% in August and was up 7.9% compared to the same month last year, the European Union statistics agency Eurostat reported Wednesday. Economists had forecast a 0.7% monthly rise and a 7.5% year-on-year increase. Output rose 0.1% in July for a 7.2% year-on-year increase.

Asian stocks rose Wednesday, 13 October 2010, as the minutes from the Federal Reserve's latest meeting signaled that the US central bank will soon act to boost growth. The key benchmark indices in Japan, Indonesia, South Korea, Hong Kong, Taiwan and Singapore rose by between 0.16% to 1.82%.

Chinese stocks recovered in volatile trade after data showed the nation's trade surplus narrowed to $16.88 billion in September 2010 from a $20.03 billion surplus in August 2010. The Shanghai Composite index rose 0.7%. The trade surplus for September 2010 was below economists' expectations for a $18.5 billion surplus. Although export growth slowed from a year earlier, they were still up 4.1% on-month, while imports rose 7.4% to reach a historic high, suggesting the economy continued to grow at a reasonable pace.

US stocks hit fresh 5-month highs on Tuesday, 12 October 2010, as details from the Fed's latest meeting showed the US central bank may once again flood markets with cheap cash "before long" to further boost growth.

Intel Corp on Tuesday reported stronger-than-expected third-quarter results and forecast better sales in the fourth quarter.

Trading in US index futures indicated that the Dow could jump 66 points at the opening bell on Wednesday, 13 October 2010.

Back home, 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.

Output in the mining sector rose 7% verses 11% rise in August 2009 and electricity generation rose just 1% from a 10.6% growth in August 2009. Intermediate goods production rose 10% verses a 10.4% rise in August 2009 and basis goods production rose 3.7% verses a 7.7% rise in August 2009. Capital goods production contracted 2.6% in August 2010 verses a 9.2% growth in August 2009.

Production of consumer goods rose 6.9%, lower than a 10.9% growth in August 2009. Within the consumer goods segment, the consumer durables sector put up a strong showing. Production of consumer durables jumped 26.5% verses a 24.7% growth in August 2009. But, production of consumer non-durables contracted 1.2% verses a 6.1% growth in August 2009.

The government will unveil data on wholesale price index for September 2010 on Friday, 15 October 2010, which will provide clues on the central bank's policy stance at its next policy review scheduled on 2 November 2010. The wholesale price index, the most widely watched gauge of prices in India, rose 8.5% in August 2010.

Foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $22.01 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 36,000 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 15,000 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 and closes on 21 October 2010.

The government on Tuesday, 12 October 2010, set Rs 225-245 per share price band for the Coal India IPO. Retail investors will get shares at 5% discount on the final issue price to be discovered through the book-building route. The Indian government is selling roughly 63.16 crore Coal India shares, or 10% of the company.

The Reserve Bank of India governor D Subbarao said over the weekend in Washington that the central bank would intervene in the foreign exchange market if inflows are "lumpy" and "volatile". The rupee had dropped to a one-week low on Tuesday, 12 October 2010, after hitting a 25-month high of 44.125 on Thursday, 7 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-1 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.

The BSE 30-share Sensex jumped 484.54 points or 2.4% to 20,687.88, its highest closing since 14 January 2008. The index rose 500.63 points at the day's high of 20,703.97 in late trade. The Sensex rose 8.32 points at the day's low of 20,211.66 in early trade.

The S&P CNX Nifty was up 143 points or 2.35% to 6,233.90, its highest closing since 9 January 2008. Nifty hit high of 6,240.25 in late trade.

All the sectoral indices on BSE rose. The BSE IT index (up 3.15%), Capital Goods index (up 2.68%), and Realty index (up 2.51%), outperformed the Sensex. The BSE FMCG index (up 2.29%), banking sector index Bankex (up 2.21%), Oil & Gas index (up 1.56%), Metal index (up 1.41%), Auto index (up 1.39%), PSU index (up 1.19%), Consumer Durables index (up 1.09), Healthcare index (up 1.03%), and Power index (up 0.91%), underperformed the Sensex.

The BSE Mid-Cap index rose 0.99%. The BSE Small-Cap index rose 1.06%. Both these indices underperformed the Sensex.

The market breadth was strong. On BSE, 1,953 shares advanced while 1082 shares declined. A total of 72 shares remained unchanged.

From 30 share Sensex pack, 29 rose and one fell.

BSE clocked turnover of Rs 5632 crore, higher than Rs 5329.30 crore on Tuesday, 12 October 2010.

Index heavyweight Reliance Industries (RIL) rose 1.73%. 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.

HDFC jumped 4.6% and was the top gainer from the Sensex pack.

India's largest engineering and construction firm by sale Larsen & Toubro (L&T) rose 4.04%, with the stock snapping last two days' losses. The company said during market on Friday, 8 October 2010, it has bagged new orders worth Rs 1585 crore in buildings & factories segments.

Among other capital goods stocks, BEML, Siemens, Thermax, ABB, BHEL and Praj Industries rose by between 0.07% to 2.67%.

Interest rate sensitive realty stocks rose as a slower than expected rise in industrial output in August 2010 could ease pressure on the central bank to again raise rates at a policy review early next month. Omaxe, Unitech, DLF, Indiabulls Real Estate, Phoenix Mills and Lok Housing rose by between 1.52% to 4.24%.

IT stocks rose after Intel Corp on Tuesday reported stronger-than-expected third-quarter results and forecast better sales in the fourth quarter. India's largest IT exporter by sales TCS rose 4.56%, with the stock gaining for the second straight day. India's second largest IT exporter by sales Infosys rose 2.48%, with the stock gaining for the second straight day. Infosys announces its Q2 result on Friday, 15 October 2010. India's third largest IT exporter by sales Wipro rose 4.48%. The stock hit 52 week high of Rs 488 today.

FMCG stocks rose as good monsoon rains this year could boost rural sales. ITC, Nestle India, Hindustan Unilever, Marico, United Breweries and United Spirits rose by between 0.05% to 3.86%. FMCG firms derive substantial revenue from rural sales.

Consumer durables stocks rose on renewed buying. Blue Star, Lloyd Electric, Gitanjali Gems, Videocon Industries and Titan Industries rose by between 0.53% to 4.49%.

Cement stocks rose on expectations of pick up in demand following the end of the monsoon season. ACC, UltraTech Cements and Ambuja Cements rose by between 2.37% to 3.31%.

Banking stocks rose on a pick-up in credit offtake in a fast rebounding Indian economy. India's largest commercial bank by net profit and branch network State Bank of India (SBI) rose 2.26%. The stock hit a record high of Rs 3315.60 today. Bank of India and Punjab National Bank rose by between 1.34% to 3.19%. But, Bank of Baroda fell 0.05%.

India's second largest private sector bank by net profit HDFC Bank rose 2.45%, with the stock snapping last four days' losses. HDFC Bank raised its key lending rate or the base rate by 25 basis points to 7.50% effective 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 private sector bank by net profit ICICI Bank rose 1.92%, with the stock gaining for the second straight day. 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.

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 maker Tata Motors rose 1.69%, with the stock gaining for the second straight day. The stock hit record high of Rs 1180.50 today. Tata Motors on Tuesday, 12 October 2010, announced successful completion of its issue of shares aggregating $750 million, comprising 'A' ordinary shares aggregating $550 million and ordinary shares aggregating $200 million. The company said it received strong response to the issue from investors across India and internationally with a book size aggregating $1.85 billion.

Tata Motors on Monday, 11 October 2010, launched the first Indian crossover four-wheeler called the Tata Aria. The crossover combines the features of a sports utility vehicle, a sedan and a multi utility vehicle in one package. Tata Aria is likely to compete with the Toyota Innova and Mahindra Xylo and is priced in the range of Rs 13-16 lakh. Analysts reckon that the Aria will help Tata Motors sustain its sales momentum going forward.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 2.77%, with the stock gaining for the third straight day. 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 top car maker, Maruti Suzuki rose 2.28%. 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 1.32%. 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.

India's leading bike maker by sales Hero Honda Motors rose 0.22%. Sales rose 8.1% to 4.33 lakh units in September 2010 over September 2009.

Total car sales in India 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.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.85% on Tuesday, 12 October 2010. Sterlite Industries, Hindustan Zinc, Tata Steel, Steel Authority of India, Sesa Goa and Hindalco Industries rose by between 0.23% to 2.68%.

Shares of VA Tech Wabag settled at Rs 1709.40 on BSE, a 30.49% premium over the initial public offering price of Rs 1310. The stock debuted at Rs 1655, a 26.34% premium over the initial public offering (IPO) price.

Karuturi Global clocked the highest volume of 5.39 crore shares on BSE. FCS Software (3.07 crore shares), Cals Refineries (1.97 crore shares), Arvind (1.37 crore shares) and Birla Power Solutions (1.28 crore shares) were the other volume toppers in that order.

Va Tech Wabag clocked highest turnover of Rs 892.20 crore on BSE. Strides Arcolab (Rs 443.26 crore), Karuturi Global (Rs 172.94 crore), State Bank of India (Rs 147.08 crore) and Uflex (Rs 116.86 crore) were the other turnover toppers in that order.