Market drifts higher on firm global stocks

Initial batch of strong Q2 September 2010 results and firm global markets helped Indian stocks score decent gains in a choppy trading session. Stocks were volatile as traders rolled over positions in the derivatives segment from the near-month October 2010 series to November 2010 series ahead of the expiry of the October 2010 contracts on Thursday, 28 October 2010. Shares of IT bellwether Infosys fell and index heavyweight Reliance Industries came off the day's high. Most Asian markets climbed on expectations that further monetary easing by the US Federal Reserve would boost liquidity in the region.



The market breadth was strong. The BSE 30-share Sensex jumped 137.25 points or 0.68%, off about 150 points from the day's high and up close to 105 points from the day's low. High beta metal and realty stocks rose. Consumer durables, cement and auto stocks also rose. FMCG major Hindustan Unilever edged higher as Q2 net profit surged.

The market edged higher in early trade on firm Asian equities. Stocks extended gains in morning trade. After moving in a narrow range for a while, the key indices hit fresh intraday highs in mid-morning trade. The market once again trimmed gains in early afternoon trade. The market was further off the day's high in afternoon trade. The market regained strength in mid-afternoon trade. The market once again came off highs in late trade.

Meanwhile, the board of Securities and Exchange board of India (Sebi) today, 25 October 2010, raised the investment limit for retail investor in public offers to Rs 2 lakh from current Rs 1 lakh. Sebi also tightened norms on preferential issue of warrants to promoters. The board also discussed the changes in the takeover code proposed by the Achutan Committee. It was felt that more time is required to discuss the proposals and no final decision was taken in this regard in today's board meet.

On the macro front, the trade deficit narrowed to $9.12 billion in September 2010 from a 23-month high of $13.06 billion in August 2010. Exports in September 2010 rose an annual 23.2% to $18.02 billion, while imports for the month grew 26.1% on the year to $27.14 billion. Trade Secretary Rahul Khullar had said last month that said the trade deficit could touch $135 billion for the year ending March 2011 (FY 2011), higher than his earlier forecast for $120 billion.

Trade Minister Anand Sharma told reporters at a separate event that the country is on track to meet FY 2011 export growth target of close to 15%. The rupee cannot yet be called volatile, Sharma said.

European stocks rose on Monday, 25 October 2010, following a largely upbeat Asian session, as investors welcomed the pledge from the Group of 20 industrial and emerging nations not to engage in competitive currency devaluations. The key benchmark indices in UK, France and Germany were up by 0.4% to 0.65%.

Asian stocks edged higher on Monday, 25 October 2010, after global finance leaders vowed at a weekend meeting to avoid potentially debilitating currency devaluations. The key benchmark indices in China, Hong Kong, Indonesia, Singapore, South Korea and Taiwan rose by between 0.27% to 2.57%.

Sentiment held firm in Asia after Group of 20 finance ministers and central bank governors agreed on Saturday, 23 October 2010, to boost cooperation on rebalancing the world economy to help defuse tensions that had sparked fears of trade conflicts. They also vowed to avoid competitive currency devaluations and reduce trade and current account imbalances.

But, Japan's Nikkei Average fell 0.27%, led by decline in exporters as the yen hit a 15-year high against the dollar. Japan's exports grew at their slowest pace this year in September 2010, hit by cooling foreign demand and a strong yen. Exports climbed 14.4% from a year earlier to 5.8 trillion yen ($72 billion), the Ministry of Finance said Monday. Imports rose 9.9% to 5.04 trillion yen.

China's consumer price index will likely accelerate in October from September's 23-year high of 3.6%, according to a report by mainland Chinese media, citing an official with the National Bureau of Statistics. Yao Jinyuan, chief economist at the Statistics Bureau, said the CPI would likely edge higher before possibly softening in December, though he cautioned housing and food remain risks to the inflation outlook.

Trading in US index futures indicated that the Dow could gain 59 points at the opening bell on Monday, 25 October 2010.

Back home, the focus is on second quarter September 2010 results. The results announced so far have been encouraging. The combined net profit of a total of 450 firms surged 89.5% to Rs 37,786 crore on 19.6% growth in sales to Rs 1,90,798 crore in Q2 September 2010 over Q2 September 2009.

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.

While global liquidity remains ample, a section of the market is worried 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 equity and debt issue over the next three to six months. State-run Power Grid Corp, Steel Authority of India and Indian Oil Corp are some of the companies that are planning large share sales in coming months.

Inflows into secondary equity markets could be hit in the immediate short term due to diversion of funds to the mega Rs 15000-crore Coal India initial public offer (IPO), which was concluded on Thursday, 21 October 2010. A large sum of money is blocked in the IPO, which was subscribed more than 15 times. Pressure on fund outflows will ease in late October 2010 or early November 2010 as Coal India begins to refund excess subscriptions received towards its initial public offering.

Foreign funds have made heavy purchases of Indian equities this year. Net equity inflow in 2010 now stands at a record $24.17 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.

Global emerging-market equity funds drew record inflows in the third week of October 2010 as investors sought growth in developing nations and the dollar weakened, according to global fund tracker EPFR Global. The funds took in $3.8 billion in the week ending 20 October 2010. Year-to-date inflows to global emerging-market equity funds exceed the record $44.2 billion for the whole of 2009.

Asia ex-Japan, Latin America and EMEA equity funds posted inflows ranging from $327 million to $981 million in the week ending 20 October 2010. Dedicated BRIC (Brazil, Russia, India and China) equity funds had their best week since February 2010, but were again eclipsed by Frontier equity funds, which pulled in $150 million, a 145-week high. Turkey equity funds saw inflows for the eighth week.

The BSE 30-share Sensex advanced 137.25 points or 0.68% to 20,303.12. The Sensex rose 286.44 points at the day's high of 20,452.30 in mid-morning trade. The index rose 33.87 points at the day's low of 20,199.73 in early trade.

The S&P CNX Nifty was up 39.75 points or 0.66% to 6,105.80.

The BSE Mid-cap index was up 0.77% and the BSE Small-cap index was up 0.95%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE rose. The BSE Consumer Durables index (up 2.37%), Auto index (up 1.23%), Metal index (up 1.09%), Healthcare index (up 1%), and Realty index (up 0.92%), outperformed the Sensex. The BSE Oil & Gas index (up 0.63%), banking sector index Bankex (up 0.44%), PSU index (up 0.34%), Capital Goods index (up 0.26%), Power index (up 0.02%), FMCG index (down 0.2%) and IT index (down 0.37%), underperformed the Sensex.

The market breadth, indicating the health of the market was positive. On BSE, 1,743 shares advanced while 1,263 shares declined. A total of 88 shares remained unchanged.

Among the 30-share Sensex pack, 23 rose while the rest declined.

BSE clocked turnover of Rs 4765 crore, lower than Rs 5866.16 crore on Friday, 22 October 2010.

Index heavyweight Reliance Industries (RIL) rose 0.82% to Rs 1090.35, with the stock gaining for the fourth straight day. But, the stock came off the day's high of Rs 1101. As per reports, RIL may actively bid for oil and gas exploration blocks, including nine new areas, being auctioned by the Government. Out of 34 blocks being offered under NELP-IX, 19 blocks are new areas -- seven are in deep sea, two in shallow waters and ten onland blocks. The rest 15 (one in deep water, five in shallow water and nine onland blocks) are recycled blocks.

India's third largest IT exporter by sales Wipro fell 4.04%, extending Friday's (22 October 2010) 4.54% decline, as Q2 results fell short of market expectations. The stock was the top loser from the Sensex pack. Consolidated net profit as per International Financial Reporting Standards rose 9.75% to Rs 1284.90 crore on 11.7% growth in revenue to Rs 7730.50 crore in Q2 September 2010 over Q2 September 2009. The results hit the market before trading hours on Friday, 22 October 2010.

India's largest IT exporter by sales Infosys fell 1.11%.

India's largest IT exporter by sales Tata Consultancy Services (TCS) jumped 2.26% to Rs 1061.65 after surging 5.72% on Friday. The stock struck a record high of Rs 1069.60 today, after reporting forecast-beating Q2 results late last week.

TCS after trading hours on Thursday, 21 October 2010, reported a 14.22% rise in consolidated net profit as per US accounting standards to Rs 2106.50 crore on 13.01% growth in total revenue to Rs 9286.40 crore in Q2 September 2010 over Q1 June 2010.

Cement stocks rose on expectations of a revival of demand with the South West monsoon over. ACC, Ambuja Cements and India Cements rose by between 2.79% to 4.04%.

FMCG major Hindustan Unilever (HUL) rose 1.36% after net profit rose 32.1% to Rs 566.12 crore on 12.16% rise in total income to Rs 4841.49 crore in Q2 September 2010 over Q2 September 2009. The company announced result during market hours today.

Despite a significant rise in input cost, increase in cost of goods sold (COGS) was contained at 20 basis points (bps) through buying efficiencies and cost savings programmes, Hindustan Unilever (HUL) said in a statement. Competitive levels of advertising along with investment to drive emerging categories, led to 90 bps increase in advertising spends. Advertisement & promotion (A&P) increased by 30 bps to 13.8% of sales in Q2 September 2010 over Q2 September 2009. Increase in COGS, higher investment in A&P and higher cost of packaging moulds to support the step up in innovation activity, led to a 170 bps year-on-year decline in operating margin, HUL said.

Profit after tax before exceptional items grew by 6.8%. There were exceptional gains of Rs 40 crore in Q2 September 2010, compared with an exceptional costs of Rs 135 crore in Q2 September 2009.

HUL said net sales grew 10.7% during the quarter, driven by strong underlying volume growth of 14% in domestic consumer business. Growth was broad based across Home and Personal Care (HPC) and Foods -- ahead of the market in aggregate, HUL said.

Commenting on the results, HUL Chairman Harish Manwani, said, "Our domestic consumer business has delivered double digit underlying volume growth for the third quarter in a row. This has been led by bigger and better innovations supported by strong execution in the market. We continue to strengthen our core business while at the same time leading market development in emerging categories."

HUL's board of directors declared an interim dividend of Rs 3 per share for the year ending March 2011.

Cigarette maker ITC fell 1.11%.

Metal stocks rose as the LMEX, a gauge of six metals traded on the London Metal Exchange, rose 0.36% on Friday, 22 October 2010. Tata Steel, Steel Authority of India, Hindalco Industries, Hindustan Zinc and Jindal Steel & Power rose by between 0.16% to 4.12%.

Copper maker Sterlite Industries rose 2.47% ahead of its Q2 result on Tuesday, 26 October 2010.

High beta realty rose on renewed buying. Anant Raj Industries, Indiabulls Real Estate, DLF, Unitech and HDIL rose by between 0.31% to 1.95%.

Auto stocks rose on expectations of strong Q2 results. Ashok Leyland, Hero Honda Motors, M&M and Maruti Suzuki India rose by between 0.38% to 2.08%.

Commercial vehicle maker Tata Motors rose 2.8% on reports the company's Jaguar Land Rover unit is in talks with a Chinese auto maker to establish a manufacturing and sales joint venture in China.

Bajaj Auto rose 0.43%. Bajaj Auto will replace cement producer ACC as a component of the BSE's 30-share Sensex from 6 December 2010, the Bombay Stock Exchange (BSE) said on Friday, 22 October 2010.

Some consumer durables stocks rose on expectations of healthy sales in ongoing festive season that lasts till Diwali early next month. Titan Industries, Blue Star, Gitanjali Gems and Rajesh Exports rose by between 2.41% to 11.39%.

Bharti Airtel rose 1.14% after the company said it will launch 3G wireless data services before the end of 2010. Bharti, which won rights in an auction this year to offer 3G services in 13 of India's 22 telecoms zones, said in a statement it was in advanced discussions with other 'quality' operators to offer 3G services to its customers across the country.

Capital goods stocks, too, rose. Siemens, Larsen & Toubro, ABB and Bharat Bijlee rose by between 0.17% to 2.1%.

Bank stocks rose on good Q2 results/expectations of strong Q2 results where results are yet to be announced. India's largest private sector bank by net profit ICICI Bank rose 0.91%, with the stock gaining for the third straight day.

India's largest bank by net profit and branch network State Bank of India rose 1.22%, with the stock gaining for the third straight day. The bank has revised the Benchmark Prime Lending Rate upwards by 25 basis points (bsp) from 12.25% per annum (p.a.) to 12.50% p.a. effective from 21 October 2010. The bank has also raised base rate by 10 bps from 7.50% p.a. to 7.60% p.a. effective from October 21, 2010.

But, India's second largest private sector bank by net profit HDFC Bank fell 0.45%. The bank's net profit rose 32.68% to Rs 912.14 crore on 14.37% rise in total income to Rs 5770.70 crore in Q2 September 2010 over Q2 September 2009. The private sector bank announced the results after trading hours on 19 October 2010.

Bank of Baroda and Punjab National Bank rose by between 0.03% to 1.42%. But, Bank of India fell 3.13%.

Cals Refineries clocked the highest volume of 1.36 crore shares on BSE. Alok Industries (1.26 crore shares), Tulsi Extrusions (79.73 lakh shares), Ballarpur Industries (76.48 lakh shares) and Pipavav Shipyard (68.59 lakh shares) were the other volume toppers in that order.

SKS Microfinance clocked the highest turnover of Rs 201.41 crore on BSE. Reliance Industries (Rs 89.69 crore), Gitanjali Gems (Rs 82.10 crore), Orchid Chemicals (Rs 77.52 crore) and Uflex (Rs 77.51 crore) were the other turnover toppers in that order.