Index heavyweights lead recovery; breadth strong

The key benchmark indices surged on the last day of the week as investors sought bargains after recent steep slide. Data showing strong-than-expected industrial production growth for October 2010 aided the recovery. The BSE 30-share Sensex was up 266.53 points or 1.3%, up close to 435 points from the day's low and off close to 30 points from the day's high. Gains in European stocks and higher US index futures also aided sentiment. Asian stocks were mostly lower.



Closer home, banking, realty, FMCG, metal and consumer durables stocks led the gains. The market breadth was strong in contrast with a weak breadth in early trade as many small and mid-cap stocks recovered after suffering steep fall in the past few sessions. ACC spurted after three block deals on BSE. Index heavyweight Reliance Industries gained 4%. Another index heavyweight ICICI Bank surged close to 6% and was the top gainer from the Sensex pack. All the sectoral indices on BSE rose.

Stocks were volatile. The key benchmark indices slipped into the red, soon after recovering from an initial slide. The market surged to a fresh intraday high in morning trade. The market extended gains in mid-morning trade after strong industrial production data. The market trimmed gains in early afternoon trade. The market came off lows in afternoon trade. The market moved in a range in mid-afternoon trade. The Sensex surged to fresh intraday high 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, was down 4.29% at 21.63. The index had jumped 10.62% to 22.60 on Thursday, 9 December 2010. The index had jumped 6.19% to 20.43 on Wednesday, 8 December 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 market witnessed a steep slide this week, with small-cap and mid-cap stocks taking a beating on concerns over a regulatory crackdown on companies and an ongoing investigation into a telecom corruption scandal. Foreign funds extended their selling spree for the second day in a row on Thursday, 9 December 2010, the latest data released by the Securities & Exchange Board of India (Sebi) showed. Foreign institutional investors (FIIs) sold shares worth net Rs 1197.10 crore on Thursday, 9 December 2010, on the top of an outflow of Rs 1297.80 crore on Wednesday, 8 December 2010.

The current account deficit is expected to be 3% of GDP, Finance Minister Pranab Mukherjee said on Friday. The current account deficit had widened sharply to $13.7 billion in the June 2010 quarter, which was around 3.7% of GDP.

Data announced today, 10 December 2010, showed industrial output in October rose a faster-than-expected 10.8% from a year earlier, higher than the previous month's annual growth of 4.4%. Manufacturing output rose an annual 11.3% in October.

Industrial output growth for the current fiscal that ends in March 2011 could be close to 10%, Montek Singh Ahluwalia, Deputy Chairman of Planning Commission, said on Friday. He also said that headline inflation remains a matter of concern.

European stock markets were cautiously higher on Friday, with the drug and food sectors leading the gains. The key benchmark indices in France and Germany rose by between 0.06% to 0.55%. But, UK's FTSE 100 fell 0.09%.

Concerns about euro-zone debt crisis remain. Fitch Ratings on Thursday downgraded Ireland's credit rating by three notches, citing the costs of restructuring the country's banking system and loss of affordable access to market funding.

Asian shares fell on Friday, 10 December 2010, as many investors took to the sidelines after robust China trade data heightened concerns of an imminent rate hike from Beijing. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.14% to 1.01%. But, China's Shanghai Composite rose 1.07%

The Chinese central bank today, 10 December 2010, announced a hike of 50 basis points in the reserve requirement for banks. The announcement was made after many Asian markets had closed for trading for the day.

China's trade surplus sharply narrowed in November from the previous month as imports outpaced exports, according to official data released Friday. The monthly trade surplus stood at $22.9 billion, shrinking from $27.1 billion in October. The nation's exports jumped 34.9% from the year-ago period, accelerating rapidly from October 22.9%. But imports grew at a faster pace of 37.7%, way ahead of October's 25.3% increase and of expectations for a 24.5% expansion.

In New York on Thursday, 9 December 2010, stocks closed mixed as traders waited to see whether a tax compromise brokered by the White House and Republicans will pass the Democratic-controlled House. A latest data from the Labor Department showed first-time claims for unemployment benefits dropped last week to the second-lowest level this year.

Trading in US index futures indicated that the Dow could gain 17 points at the opening bell on Friday, 10 December 2010.

Back home, the next major trigger for the equity market is the advance tax payment of corporates for the third installment, which falls due on 15 December 2010. The advance tax figures will provide a cue on Q3 December 2010 corporate earnings.

The food price index rose 8.69%, while the fuel price index climbed 9.99% in the year to 27 November 2010, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 8.60% and 9.99% respectively. The primary articles price index was up 12.66% in the latest week compared with an annual rise of 12.72% a week earlier.

The large capital flows into India are not a matter of concern, according to a mid-year review of the Indian economy tabled by Finance Minister Pranab Mukherjee in parliament on Tuesday. Even after this month's sell-off, the inflow of foreign funds in Indian stocks remains at record level this year.

According to mid-year review, the economy may grow by 9% during the year ending March 2011 (FY 2011). Average headline inflation is seen at 8.98% for the year, it said. The report indicated that the country's fiscal deficit will not be more than 5.5% of its gross domestic product in FY 2011.

The Indian economy grew a robust 8.9% year-on-year in Q2 September 2010, maintaining the same pace of expansion as the previous quarter, boosted by farm output and manufacturing, government data released Tuesday, 30 November 2010 showed. The manufacturing sector grew an annual 9.8% and farm output grew an annual 4.4% in Q2 September 2010. The government revised upwards the Q1 June 2010 GDP growth to 8.9% from 8.8% earlier.

The recent macro economic data has been strong. Business activity in India's services sector surged to a four-month high in November 2010, driven by robust growth in new orders, a survey showed on Friday, 3 December 2010. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 60.1 in November from 56.2 in October. It was the best showing for the index since July, and the 19th straight month it has remained above the 50 mark that divides growth from contraction.

The manufacturing activity strengthened further in November 2010 and the strong growth momentum is showing up in rising inflation pressures, according to an HSBC survey released on Wednesday, 1 December 2010. The HSBC Manufacturing Purchasing Managers' Index rose to 58.4 in November from 57.2 in October, the survey said.

Exports rose an annual 26.8% to $18.9 billion in November 2010, while imports for the month grew 11.2% on the year to $27.8 billion, as the provisional data released by Trade Secretary Rahul Khullar showed on Wednesday.

The BSE 30-share Sensex was up 266.53 points or 1.3% to 19,508.89. The Sensex rose 295.04 points at the day's high of 19,537.40 in late trade. The index lost 167.79 points at the day's low of 19,074.57 in early trade.

The S&P CNX Nifty was up 90.85 points or 1.58% to 5,857.35.

The BSE Mid-Cap index rose 2.02% and the BSE Small-Cap index gained 2.36%. Both the indices outperformed the Sensex.

All the sectoral indices on BSE rose. Consumer Durables index (down 3.2%), Banking sector index Bankex (up 2.83%), Oil & Gas index (up 2.51%), Metal index (up 1.59%) and PSU index (up 1.42%) outperformed the Sensex.

Teck index (up 0.17%), Auto index (up 0.27%), IT index (up 0.44%), Capital Goods index (up 0.62%), Healthcare index (up 0.81%), Power index (up 1.25%), FMCG index (up 1.35%) and Realty index (up 1.37%), underperformed the Sensex.

The market breadth, indicating the overall health of the market was strong. On BSE, 1902 shares rose while 1,053 shares fell. A total of 75 shares remained unchanged. The breadth was weak in early trade.

Among the 30-member Sensex pack, 22 rose while the rest fell.

BSE clocked turnover of Rs 4315 crore lower than Rs 4569.05 crore on Thursday, 9 December 2010.

Index heavyweight Reliance Industries (RIL) gained 4%. The stock today snapped last two days' falling trend. Billionaire private equity investor Ted Forstmann's sports and entertainment company IMG Worldwide and RIL have reportedly teamed up again to commercially develop another popular global sport in India. IMG and RIL have signed a 15-year deal with Indian soccer's governing body for the commercial rights to the sport, including the potential relaunch of the pro league there.

Cement maker ACC jumped 8.76% on high volume of 24.6 lakh shares after 1.06% equity changed hands in three bulk deals on BSE today, 10 December 2010. In other cement stocks, UltraTech Cement, Ambuja Cements and Jaiprakash Associates rose by between 2.03% to 6.3%.

Metal stocks rose after strong China trade data for November 2010. China is the world's largest consumer of copper and aluminum. Steel Authority of India, Jindal Steel & Power, Hindalco Industries, Sterlite Industries rose by between 1.44% to 2.39%.

India's largest steel maker by sales Tata Steel rose 2.28%. As per recent reports the company could team up with an Indian metals company or a miner to make a counter bid for Riversdale Mining, in response to Rio's $3.5 billion (about Rs 15,750 crore) bid for coal-rich Australian miner Riversdale. Tata Steel is gearing up for a battle to control the Australian-listed miner that owns large coal mines in Mozambique and has become a target for global mining majors such as Anglo-American and Rio Tinto. Tata Steel which owns 24% in Riversdale, is one of the larger shareholders in the Australian company, and may have to spend upward of $1 billion to raise its shareholding to a controlling 51%, reports said

Consumer durables stocks rose on bargain hunting after recent sharp losses. Titan Industries, Whirlpool, Lloyd Electric, Videocon Industries and Gitanjali Gems rose by between 1.71% to 6.63%.

Many banking stocks rose on bargain hunting, snapping last four days' losses triggered by worries higher cost of funds will hit net interest margins. India's largest bank by net profit and branch network State Bank of India (SBI) rose 1.87%, with the stock snapping last six days' losses. SBI during trading hours on Monday, 6 December 2010, said it has raised deposit rates by 50 to 150 basis points across various maturities with effect from Tuesday, 7 December 2010.

Among all slabs, the sharpest hike is in the 46 to 90-day slab, where the bank would offer 5.50% as against 4% earlier. In case of deposits with a maturity of 181 days to less than one year, the bank will now offer 7.25% as against 6% earlier. The bank will offer 8.5% for 555-day and 1,000-day deposits.

India's largest private sector bank in terms of operating income ICICI Bank rose 5.71%, with the stock snapping last five days' losses. The bank has hiked its benchmark prime-lending rate and Floating Reference Rate (FRR) for consumer loans (including home loans) by 50 basis points with effect from 6 December 2010. It has also announced an increase in interest rates for various tenors of retail fixed deposits by 25-50 basis points with effect from 6 December 2010.

But, India's second largest private sector bank by net profit HDFC Bank fell 0.82%, with the stock falling for the fifth straight day.

India's top mortgage lender by total income, Housing Development Finance Corporation (HDFC), fell 0.55%, with the stock falling for the fourth straight day. On Friday, 3 December 2010 HDFC, hiked its benchmark lending rate by a steep 75 basis points, making home loan dearer for both existing and new borrowers. With this revision, the retail prime lending rate (RPLR) goes up from 14.25% to 15%.

Realty stocks rose on bargain hunting after recent losses triggered by worries higher interest rates may affect demand for residential and commercial properties. Unitech, Ackruti City, Indiabulls Real Estate, and Phoenix Mills rose by between 0.89% to 4.39%.

FMCG stocks rose on bargain hunting. United Spirits, Hindustan Unilever, Nestle India and ITC rose by between 0.32% to 2.6%.

Telecom pivotals saw divergent trend. India's largest listed cellular services provider by sales Bharti Airtel 2.27%. The stock extended two-day 2.93% slide.

India's second largest listed cellular services provider by sales Reliance Communications (RCom) advanced 2.98%, on bargain hunting, after a 13.61% slide in the preceding five trading days. The stock recovered from a record low of Rs 119.75 in intra-day trade today, 10 December 2010.

Software stocks nudged higher on strong economic data in the US, the biggest market for Indian IT firms. India's third largest IT exporter by sales Wipro rose 3%, with the stock gaining for the second straight day. The company recently signed a contract with Vodafone Essar to build and manage its fixed line telecom service business. Wipro will provide a wide range of services, including network design, network build, integration with existing IT OSS/BSS applications and managed services of the setup over three years. In addition, Wipro will build an enterprise network operating centre (NOC) to manage the operations of Vodafone Essar's enterprise customers.

India's largest software company by sales TCS rose 0.26%. The company announced during market hours on Friday, 3 December 2010 that the Uttar Pradesh state government has selected the company for its State Data Center project.

India's second largest software company by sales Infosys fell 0.33%. Infosys Technologies is reportedly looking for an acquisition in the legal process outsourcing business and will consider domestic firms with a strong client base or US firms with technologies in the business.

Auto stocks were mixed. Tata Motor fell 1.9%, with the stock falling for the second straight day. India's top small car maker by sales Maruti Suzuki India rose 1.21%, with the stock snapping last two days losses.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 2.26%, with the stock snapping last two days' losses. The company, last week, announced strong sales in November 2010.

Bajaj Auto fell 2.65%, with the stock falling for the third straight day. The company's total sales rose 8% to 2,99,231 units in November 2010 over November 2009. The figures were announced on Thursday, 2 December 2010.

Bike maker Hero Honda Motors rose 1.88%, with the stock snapping last two days' losses. As per reports the company has hiked the prices of its models by 1.5% to 2.5% to offset the rising input costs. The price increase amounts to Rs 500 for entry segment models, while the company's high-end models Karizma and ZMR have the highest hike of Rs 1,500.

Sugar stocks rose on reports the government may slap tax on sugar imports from January 2011 after reviewing output estimates for the new sugar season that began in October 2010. Shree Renuka Sugars, Balrampur Chini Mills, Bajaj Hindusthan rose by between rose by between rose by between 3.16% to 7.4%.

K S Oils clocked highest volume of 1.23 crore shares on BSE. Cals Refineries (99.55 lakh shares), Resurgence Mines (88 lakh shares), Alok Industries (66.87 lakh shares) and India Infoline (57.91 lakh shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 302.57 crore on BSE. ACC (Rs 264.51 crore), LIC Housing Finance (Rs 156.44 crore), Reliance Industries (Rs 96.62 crore) and Tata Motors (Rs 86.90 crore) were the other turnover toppers in that order.