Higher advance tax outgo helps market score modest gains

The barometer index BSE Sensex and the 50-unit S&P CNX Nifty regained their psychological 20,000 and 6,000 mark respectively as higher advance tax payment by top Indian firms and a major acquisition in the steel sector, boosted sentiment. The Sensex advanced in three out of five trading sessions during the week.



The BSE Sensex rose 208.81 points or 1.05% to 20,073.66 in the week ended Friday, 24 December 2010. The S&P CNX Nifty rose 62.85 points or 1.05% to 6,011.60. The BSE Mid-Cap index rose 0.78% and the BSE Small-Cap index rose 1.86%.

The combined advance tax payment by top 100 corporate taxpayers rose 18.7% to Rs 27,531 crore in Q3 December 2010 over Q3 December 2009, indicating better corporate performance in the third quarter this year. Advance tax is paid in four installments in June, September, December and March and is based on taxpayers' projected earnings, thus giving an indication of industry's performance in the months to come.

But, macroeconomic worries arising from a surge in global crude oil to above $91 a barrel level, capped sharp upside on the domestic bourses bourses. Finance secretary Ashok Chawla on Wednesday, 22 December 2010, said the government is willing to bear a third of the losses incurred by fuel retailers due to selling auto and cooking fuel below cost. If global crude prices rise further, oil subsidies will increase, he said.

A ministerial panel may meet by end-December on diesel prices, Oil Secretary S. Sundareshan said on Tuesday, 21 December 2010. "The agenda of the meeting will be finalised a day before the meeting," Sundareshan told reporters. If the price of diesel is hiked, it will offset an expected decline in wholesale price inflation arising from a favourable base effect. Diesel is a key transportation fuel and any hike in diesel prices directly adds to inflationary pressure.

The food price index rose 12.13% while the fuel price index climbed 10.74% in the year to 11 December 2010, the latest government data showed. In the prior week, annual food and fuel inflation stood at 9.46% and 10.67% respectively. The primary articles price index was up 15.35% in the latest week compared with an annual rise of 13.25% a week earlier.

Meanwhile, the finance ministry has reportedly shot off a fresh missive to the labour ministry asking it to invest a part of the Rs 5 lakh crore corpus of the employees' provident fund savings in stock markets. The finance ministry had earlier proposed that the EPF organisation could set aside 15% of funds for investments in the stock market and need not seek a nod from the Central Board of Trustees, or CBT, the policy making body of the employees'provident fund organisation, or EPFO.

Foreign institutional investors (FII) have resorted to profit taking this month, having sold shares worth Rs 1259.50 crore (till 22 December 2010). FIIs had bought equities worth Rs 18,293.10 crore in November 2010. FIIs have made record purchases of Indian stocks this year.

Trading for the week began on a dull note. The key benchmark indices gave up almost all the intraday gains on Monday, 20 December 2010, after striking two-week highs. The barometer index BSE Sensex closed with small gains while S&P CNX Nifty closed a tad lower.

The key benchmark indices clocked modest gains on Tuesday, 21 December 2010, with the Sensex achieving a five-week closing high, as reports of higher advance tax payment by top Indian firms and firm global stocks boosted sentiment. The BSE 30-share Sensex jumped 171.44 points or 0.86% to 20,060.32. The S&P CNX Nifty was up 53.60 points or 0.9% to 6,000.65.

The key benchmark indices edged lower in a choppy trade on Wednesday, 22 December 2010. The BSE 30-share Sensex was down 44.52 points or 0.22% to 20,015.80. The S&P CNX Nifty was down 16.25 points or 0.27% to 5,984.40.

The key benchmark ended a choppy trading session lower on Thursday, 23 December 2010, as macroeconomic worries arising from a high global crude oil prices weighed on investor sentiment. The BSE 30-share Sensex shed 32.92 points or 0.16% to 19,982.88. The S&P CNX Nifty fell 4.40 points or 0.07% to 5,980.

The key benchmark indices clocked decent gains on Friday, 24 December 2010, snapping two-day losing streak, as metal producers rose on upbeat outlook for base metals. The BSE 30-share Sensex rose 90.78 points or 0.45% to 20,073.66. The S&P CNX Nifty rose 31.60 points or 0.53% to 6,011.60.

Among the 30 Sensex shares, 22 gained while the rest declined.

India's largest motorcycle maker by sales Hero Honda Motors was the leading Sensex gainer last week. It spurted 14.91% to Rs 1929.45 on reports that royalty payment to Japan's Honda Motor is unlikely rise from the current level after the split of the joint venture. Currently, Hero Honda pays 2.6% of sales as royalty charges to Honda. Earlier unconfirmed reports had speculated that royalty payments could shoot up to 8% of sales after the split of the joint venture.

Hero Honda Motors' Indian promoters, the Hero Group announced that it will buyout the entire 26% stake of its Japanese partner Honda Motor Company Group in Hero Honda Motors, thus breaking its 26-year-old partnership with the Japanese auto major. The announcement was made after market hours on 16 December 2010. Without disclosing the size of the deal, Hero Honda Motors stated that the decision to restructure the equity has been reached in a cordial and amicable manner.

India's second largest listed telecom operator by sales Reliance Communications spurted 10.09% to Rs 141.90. It was the second biggest gainer from the Sensex pack. The stock rose on momentum buying, playing a catch-up with rest of the market, after underperforming over the past year. Shares of Reliance Communications underperformed the market over the past one month till 23 December 2010, falling 12.08% as compared to the Sensex's 1.48% rise. It also underperformed the market in past one quarter, sliding 23.46% as against 0.61% rise in the Sensex.

India's largest copper maker by sales Sterlite Industries jumped 7.32% to Rs 184.80, on rally in global copper prices. It was the third largest Sensex gainer. Copper rallied in the global commodity markets on upbeat US data and ongoing supply concerns.

Hopes of consolidation sparked by a major acquisition deal in the steel sector also aided the rally in metal stocks. JSW Steel, on 21 December 2010, entered into a pact with the promoters of Ispat Industries to acquire 41.29% stake in Ispat Industries.

Hindalco Industries (up 6.92%), Jindal Steel & Power (up 4.08%), Mahindra & Mahindra (up 3.84%), Wipro (up 2.59%) and Infosys Technologies (up 2.31%), were the other Sensex gainers.

Index heavyweight Reliance Industries (RIL) rose 0.36% to Rs 1059.55. RIL and Russian petrochemical company SIBUR entered into a joint venture for the production of butyl rubber in India. The estimated investment in the project will be $450 million with RIL holding a majority stake in the venture.

Meanwhile, RIL's advance tax payment reportedly surged 42.8% to Rs 1191 crore in Q3 December 2010 over Q3 December 2009.

India's largest truck maker by sales Tata Motors was the biggest loser from the Sensex pack last week. The stock declined 3.10% to Rs 1306.10 on profit booking after outperforming the market over the past one month till 23 December 2010, rising 11.14% as compared to the Sensex's 1.48% rise. It had also outperformed the market in past one quarter, gaining 25.80% as against 0.61% rise in the Sensex.

State-run oil explorer by market capitalisation ONGC fell 2.60% to Rs 1,294.60. It was the second biggest Sensex loser. The stock turned ex-dividend on 20 December 2010, for a special interim dividend of Rs 32 for the year ending March 2011. The special dividend was announced ahead of divestment of 5% stake by the government in the state-run oil exploration giant. The ONGC board also cleared a 1:1 bonus and a 2-for-1 stock split last week, which was earlier approved by the Centre. The government currently holds 74.14% stake in ONGC (as on 30 September 2010).

Anil Dhirubhai Ambani-controlled Reliance Infrastructure fell 1.65% to Rs 814.80. It was the third biggest Sensex loser. Larsen & Toubro (down 1.33%), Jaiprakash Associates (down 1.30%), Bharat Heavy Electricals (down 0.87%), Bajaj Auto (down 0.72%) and State Bank of India (down 0.25%), were the other Sensex losers.