Bank stocks lead rebound

The key benchmark indices closed higher, recovering from last week's fall, with banks leading the gains. The market reversed early losses and spurted in late trade as investors cheered improved trade data and easing of inflation in October 2010. Europeans stocks coming off lows and as US index futures edging higher also helped triggered bargain hunting after Friday's (12 November 2010)'s 2.1% drop in the Sensex.



The market breadth was negative, in contrast with a positive breadth earlier in the day. Nine out of 13 sectoral indices on BSE rose. The BSE 30-share Sensex jumped 152.80 points or 0.76%, off close to 26 points from the day's high and up close to 263 points from the day's low.

Intraday volatility was high. The market edged lower after a firm start as most Asian stocks fell. The key benchmark indices once again slipped into the red after reversing initial losses to hit fresh intraday highs in morning trade. The market slipped into the red after recovering sharply from the day's low to turn positive for a brief period in mid-morning trade. The market regained positive zone in early afternoon trade. The market hit a fresh intraday high in afternoon trade.

The market once again slipped into the red in afternoon trade as European stocks fell in early trade and as US index futures reversed initial gains. The market surged to fresh intraday high in late trade as Europeans stocks came off lows and as US index futures edged higher.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, declined after Friday's (12 November 2010) sharp surge. The index was down 6.38% at 20.25. 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 stock market remains closed on Wednesday, 17 November 2010, on account of Bakri-Id.

India's exports in October rose an annual 21.3% to $18 billion, while imports for the month grew 6.8% on the year to $27.7 billion, Trade Secretary Rahul Khullar said on Monday, 15 November 2010. Khullar said exports could touch $200 billion in the fiscal year that ends in March 2011 (FY 2011). He also said that the trade deficit will not top $135 billion. The trade deficit had widened to a 23-month high of $13.06 billion in August 2010 and Khullar had said the deficit could touch $135 billion for FY 2011, higher than his earlier forecast of $120 billion. The government is targeting close to 15% export growth in the current fiscal.

The wholesale price index rose 8.58% in October 2010, a touch slower than 8.62% increase in September 2010, data released by the government today, 15 November 2010, showed. The annual reading for August 2010 was upwardly revised to 8.82% from 8.5%.

Finance Minister Pranab Mukherjee today, 15 November 2010, said inflationary pressures are coming from the supply side and that the full impact of the Reserve Bank of India's rate hikes on inflation had yet to be seen. Mukherjee also said that he would not prejudge whether a further rate hike from the central bank is needed. Mukherjee said he expects headline inflation to ease to 6% by March 2011.

The government today, 15 November 2010, sought parliamentary approval to spend a net additional Rs 19812 crore ($4.39 billion) in the 2010-11 fiscal year. Finance Minister Pranab Mukherjee told parliament the gross additional spending nod sought was for Rs 44946 crore. The government has a budget target of spending Rs 11.09 lakh crore in the current fiscal year.

The finance minister also sought parliamentary approval for spending Rs 5000 crore towards compensation to fertiliser firms and Rs 278 crore as cash compensation to state-run oil marketing firms for selling products below cost. The finance minister told parliament that the additional spending will not increase 2010-11 fiscal deficit, which the government aims to limit to 5.5% of gross domestic product.

The government seeks legislative approval for spending amounts beyond what it estimates during the budget for the year. Generally, these additional sums are for increases in major expenditure heads such as interest payments and subsidies. Mukherjee, while setting the 2010-11 fiscal deficit target in February, had said the the gap would be partially funded through market borrowings of Rs 4.57 lakh crore.

European shares though weak came off the day's lows on Monday. The key benchmark index in France, UK and Germany were down 0.07% to 0.36%

European Union (EU) officials are due to discuss the possibility of a bailout for Ireland at a series of meetings in Brussels soon amid growing concern that investors' loss of confidence in Irish government bonds could spread to Portugal and Spain. European leaders over the weekend urged Ireland to accept a bailout from the European Union's EUR500 billion emergency-loan facility, to help restore confidence in financial markets and avert a spread of worries to other euro-zone members, even as Ireland denied it needed assistance. Ireland said on Sunday that it neither needed nor was discussing EU financial aid and denied reports that the European Union was pressing it to accept emergency funding.

Meanwhile, Greece revised upwards its 2009 fiscal deficit to 15.4% of gross domestic product from a previous estimate of 13.6%.

Asian stocks were mixed on Monday, with data showing stronger-than-expected economic growth boosting Japanese shares. The key benchmark indices in Indonesia, Hong Kong, Taiwan and Singapore fell by between 0.47% to 0.91%.

China's Shanghai composite rose 0.97%, reversing initial losses. South Korea's Seoul Composite rose 0.04%.

Japan's Nikkei Average rose 1.06% on improved economic data. Japan's economy was stronger than expected in the July-September 2010 period, as consumer spending offset weakening exports and a strong yen. Real gross domestic product expanded at an annualized rate of 3.9% over the three-month period, the Cabinet Office said Monday.

US markets fell on Friday, 12 November 2010, on worries that China might try to put the brakes on its surging economy. Any slowdown in the Chinese economy will likely reduce global demand for oil, metals and grains, which sent prices of those commodities lower.

US index futures edged higher in volatile trade. Trading in US index futures indicated that the Dow could gain 15 points at the opening bell on Monday, 15 November 2010.

In the face of a currency war between US and China, global leaders including India's prime minister Manmohan Singh on Friday, 12 November 2010 agreed to refrain from "competitive devaluation" and bring in exchange rate flexibility to ensure that no country gets undue advantage. The G-20 communique acknowledged that emerging economies could use macro-prudential tools to control capital inflows, pointing to capital controls to keep currency appreciation in check.

Back home, industrial output in September 2010 rose at a much slower-than-expected 4.4% in September 2010 from 8.2% a year ago, government data released on Friday, 12 November 2010, showed. The September IIP data is the lowest in 15 months. Meanwhile, the index of industrial production for August was revised upwards from 5.6% to 6.9%.

RBI's Gokarn, last week, said the industrial production data "may reflect the beginning of a slowing in the growth momentum, but until we see every indicator pointing in the same direction, it's difficult" to get a clear picture.

The $1.7 billion follow-on public offer of state-run Power Grid Corporation received strong response. The issue was subscribed 14.88 times.

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. Steel Authority of India and Indian Oil Corp are some of the other state-run firms that are planning large share sales in coming months.

Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said.

Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflow in 2010 stands at a record $28.68 billion, above last year's $17.45 billion.

Chairman of the prime minister's Economic Advisory Council C. Rangarajan said earlier last week that the Indian economy has the capacity to absorb capital inflows of up to $70 billion annually without government intervention. "The quantitative easing by the US Federal Reserve may have implications in terms of capital inflows, but as I had indicated earlier, India's current-account deficit will be around 3% of gross domestic product" this fiscal year, C. Rangarajan said.

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 3007 firms surged 45.7% to Rs 103741 crore on 19.8% growth in sales to Rs 915734 crore in Q2 September 2010 over Q2 September 2009.

The Reserve Bank of India (RBI) at its second quarterly monetary policy review on 2 November 2010 hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said. The Reserve Bank of India (RBI) next reviews monetary policy on 16 December 2010.

The BSE 30-share Sensex rose 152.80 points or 0.76%, to 20,309.69. The Sensex rose 178.62 points at the day's high of 20,335.51 in late trade. The Sensex lost 110.29 points at the day's low of 20,046.60 in morning trade.

The S&P CNX Nifty jumped 49.95 points or 0.82% to 6,121.60.

The BSE Mid-Cap index rose 0.19%. The BSE Small-Cap index declined 0.30%. Both these indices underperformed the Sensex.

The market breadth, indicating the health of the market was negative. On BSE, 1685 shares declined while 1276 shares rose. A total of 144 shares remained unchanged. The breadth was positive earlier in the day.

BSE clocked turnover of Rs 4605 crore, lower than Rs 5304.61 crore on Friday, 12 November 2010.

The BSE banking sector index Bankex (up 2.43%), Healthcare index (up 1.07%), IT index (up 0.86%) and Auto index (up 0.83%), outperformed the Sensex.

PSU index (up 0.62%), FMCG index (up 0.56%), Metal index (up 0.56%), Capital Goods index (up 0.01%), Oil & Gas index (down 0.15%), Power index (down 0.20%), Consumer Durables index (down 1.13%) and Realty index (down 1.43%), underperformed the Sensex.

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

Index heavyweight Reliance Industries (RIL) fell 0.74% to Rs 1054. However, the stock came off the day's low of Rs 1039.35.

FMCG stocks reversed initial losses. Nestle India, Colgate-Palmolive (India), Marico, United Breweries, Dabur India, ITC and Hindustan Unilever rose by 0.40% to 1.58%

India's largest steel maker by sales Tata Steel rose 1.79% after turnaround Q2 results. The company posted a consolidated net profit of Rs 1,978.81 crore in Q2 September 2010 against a net loss of Rs 2,707.25 crore in the same period last year buoyed by robust performance of its European unit Corus. Net sales for the quarter were Rs 28,090.91 crore (Rs 25,276.14 crore), a growth of 11%. The company announced the result after market hours on Friday.

Some metal stocks reversed initial losses. Sesa Goa, Steel Authority of India, JSW Steel, Sterlite Industries and Hindalco Industries rose by between 0.31% to 2.37%.

But, Jindal Steel & Power fell 1.01%. Naveen Jindal, chairman of Jindal Power, a unit of Jindal Steel and Power, said Jindal Power plans to file for an initial public offering worth Rs 7000 crroe within six months.

Bank stocks jumped as wholesale price inflation for October 2010 came in more or less in line with market expectations. India's largest bank by branch network and net profit State Bank of India (SBI) jumped 4.41% on reports the state-run bank is eyeing acquisition of a bank in Indonesia in an all cash deal not exceeding $100 million to expand its operations in Southeast Asia. Meanwhile, bank will start a road show next week for its planned euro bond issue, Chairman O.P. Bhatt said on Monday, 15 November 2010. Bhatt had said last week SBI was planning to launch a benchmark-size 5-year euro bond issue.

The SBI stock in the past few days underwent sharp correction on reporting lower than expected Q2 result. On a consolidated basis, SBI's net profit fell 22.52% to Rs 2363.95 crore on 14.57% increase in total income to Rs 37925.44 crore in Q2 September 2010 over Q2 September 2009. As State Bank of Indore was merged with SBI with effect from 26 August 2010, the Q2 September 2010 are not comparable with the corresponding period of the previous year. The bank announced Q2 result after market hours on 8 November 2010.

India's largest private sector bank by net profit ICICI Bank rose 1.73%, with stock rebounding from last three days' losses.

India's second largest private sector bank by net profit HDFC Bank rose 2.84%. Among other lenders, Federal Bank, IDBI Bank, IndusInd Bank, Canara Bank, Yes Bank, Axis Bank, Oriental Bank of Commerce, IndianOverseas Bank, Allahabad Bank, Kotak Mahindra Bank, Karnataka Bank, Bank of India, Bank of Baroda and Punjab National Bank rose by 0.33% to 5.32%.

India's largest IT exporter by sales Tata Consultancy Services (TCS) rose 0.58% as the uncertainty around the Rs 4300-crore deal awarded to TCS to administer Britain's National Employee Savings Trust (NEST) has come to an end, after the government gave a go ahead. Britain's Personal Accounts Delivery Authority (PADA), which had awarded TCS the deal to administer NEST for 10 years, has confirmed the long-term contract and has provided an option to extend the deal for up to five years beyond.

India's second largest software services exporter by sales Infosys rose 0.83%. Infosys is eyeing acquisitions in Japan as India's second-largest outsourcer looks for growth outside its main markets in the United States and Europe its chief executive S Gopalkrishnan said. India's third largest software services exporter by sales Wipro rose 1.87%.

India's largest realty player by sales DLF fell 1.68%, extending last two days' sharp losses on weak Q2 results.

Among other realty stocks, Ackruti City, HDIL, Ansal Properties, Parsvnath Developers, Peninsula Land, Unitech, Anant Raj Industries, Mahindra Lifespace Developers, Sobha Developers and Orbit Corporation fell by 0.69% to 4.54%.

Most auto stocks on expectations of strong sales. Tata Motors, India's largest auto maker by sales rose 0.54%. The company posted a 100-fold jump in consolidated net profit due to a buoyant local market and a surge in sales at UK subsidiary Jaguar Land Rover (JLR). Net profit rose to Rs 2,222.99 crore for the Q2 September 2010 compared with Rs 21.78 crore in the corresponding quarter a year ago.

India's largest bike maker by sales Hero Honda Motors rose 1.07%, with the stock gaining for the third straight day. The company reported its highest ever monthly sales at 5,05,553 units in October 2010, registering a jump of 42.75% over the same month last year.

India's top small car maker by sales Maruti Suzuki India fell 1.19%, with the stock falling for the third straight day. The company's total sales rose 39.2% to 1.18 lakh vehicles in October 2010 over October 2009.

Bajaj Auto rose 0.72%, with the stock gaining for the second straight day. The company reported 32% surge in total sales to a 3.7 lakh units in October 2010 over October 2009. The company clocked record motorcycle and commercial vehicle sales in October 2010.

India's largest tractor maker by sales Mahindra & Mahindra rose 3.3%. The stock hit record high of Rs 826.40 on Thursday, 11 November 2010. The company's auto sales rose 34% to 34,495 units in October 2010 as against 25,670 units during October 2009.

Car sales in India rose an annual 37.9% in October, an industry body said last week. Firms sold 1,82,992 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 18.17% to 50,835 units in October, SIAM said.

State Bank of India clocked a highest turnover of Rs 325.90 crore on BSE. Tata Steel (Rs 129.79 crore), Wockhardt (Rs 123.88 crore), Delta Corp (Rs 112.65 crore) and Coal India (Rs 82.97 crore), were the other turnover toppers on BSE in that order.

Himachal Futuristic Communication reported the highest volume of 2.22 crore shares on BSE. IKF Technologies (1.95 crore shares), Cals Refineries (1.69 crore shares), Birla Power Solutions (1.40 crore shares) and Alok Industries (1.12 crore shares), were the other volume toppers on BSE in that order.