Market snaps three-week losing streak on strong economic data

A slew of positive global and domestic economic data and bargain hunting after recent steep losses, helped the market snap a three-week losing streak. The key benchmark indices posted smart gains in the week ended Friday, 3 December 2010, logging gains in four out of five trading sessions. Mid-cap and small-cap indices on BSE underperformed the Sensex.



The BSE Sesnex advanced 830.32 points or 4.34% to 19,966.93 in the week ended Friday, 3 December 2010. The S&P CNX Nifty rose 240.85 points or 4.18% to 5,992.80. The BSE Mid-Cap index rose 3.55% and the BSE Small-Cap index gained 3.61%. Both these indices underperformed the Sensex.

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 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.

India's merchandise exports rose 21.3% to $18 billion in October 2010 over October 2009, boosting hopes that the country may be able to reach the $200 billion target fixed for the current fiscal. Imports during the period grew by 6.8% to $ 27.68 billion, leaving a trade deficit of $9.72 billion, data released on 1 December 2010 showed.

India's 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 1 December 2010. The HSBC Manufacturing Purchasing Managers' Index rose to 58.4 in November from 57.2 in October, the survey said.

November marked the 20th straight month that the PMI stayed above the 50-point level, which separates expansion from contraction in the level of activity at local factories. "A spike in the backlog of works confirms that capacity is tight, which together with rising input and output prices strengthens the case for continued tightening by the Reserve Bank of India," HSBC said, adding that rate hikes are expected to resume in early 2011.

The government on 1 December 2010, approved additional capital infusion of Rs 6000 crore in 10 public sector banks with an objective to raise its holding to a minimum 58% in all state-run banks.

The Lok Sabha on 1 December 2010 approved a $9.8-billion additional spending bill to cover various payments including outstanding government debt, food and fertiliser subsidies, and government pensions. The bill was passed by a voice vote in parliament, a type of vote allowing the government to bypass a three-week deadlock between the ruling Congress party-led coalition and opposition parties caused by rows over a series of corruption scandals.

The 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 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 food price index rose 8.60% while the fuel price index climbed 9.99% in the year to 20 November 2010, government data on 2 December 2010 showed. In the prior week, annual food and fuel inflation stood at 10.15% and 10.57% respectively. The primary articles price index was up 12.72% in the latest week compared with an annual rise of 13.38% a week earlier.

Finance Minister Pranab Mukherjee said GDP growth would be between 8.5% to 8.75% in the current fiscal that ends in March 2011 (FY 2011). Chairman of the Prime Minister's Economic Advisory Council C. Rangarajan said the economy is expected to grow 9% in the year to March 2012 (FY 2012). Rangarajan also said the government may reassess FY 2011 growth expectations and that it was "not impossible" to reach 9% growth in the financial year.

The Reserve Bank of India on 29 November 2010, decided to extend its liquidity support facility to banks to further ease the funds crunch. The second LAF, which will be conducted daily at 16:15 IST, will be available till 28 January 2011, against 16 December 2010 announced earlier. The RBI has also further eased Statutory Liquidity Ratio (SLR) requirements as a temporary measure. Banks can now maintain a lower SLR that is two percentage points less than the current requirement. Earlier, they were allowed a one percentage point relief.

The initial public offer (IPO) of state-run MOIL, the largest manganese ore producer in India, was subscribed a massive 56.43 times. The issue closed on 1 December 2010.

The output of key infrastructure industries surged by a robust 7% in October 2010, against a 3.9% growth recorded in the same month last year, helped by a strong showing by the electricity, crude oil and the finished steel sectors. The latest data for the six core sector showed a sharp rebound from the output in September 2010, when growth in these sectors had slipped to 2.7%.

A bribe-for-loan scandal spooked the banking sector and the stock market late last month. Chiefs of some of the top rung public sector banks and financial institutions were arrested by the Central Bureau of Investigation (CBI) on 24 November 2010, for allegedly sanctioning loans in return for bribes. The CBI has reportedly sent notices to 21 medium-to-large sized Indian companies regarding the ongoing probe into a financial bribery scandal.

Finance Minister Pranab Mukherjee, last week, asked all banks, financial institutions and insurance firms to look into their exposures to firms named by the Central Bureau of Investigation in a loans bribery scandal. A ministry statement quoted Pranab Mukherjee as calling on regulatory and other institutions to further improve safeguards.

Bargain hunting helped the key benchmark indices register modest gains at the onset of the week. The BSE 30-share Sensex jumped 268.49 points or 1.4% to 19,405.10 on Monday, 29 November 2010. The S&P CNX Nifty was up 78.05 points or 1.36% at 5,830.

The key benchmark indices reversed initial losses on Tuesday, 30 November 2010, on robust Q2 September 2010 GDP growth data. The BSE 30-share Sensex jumped 116.15 points or 0.6% to 19,521.25 and the S&P CNX Nifty was up 32.70 points or 0.56% at 5,862.70.

Firm global cues helped the market head higher on the first trading session of the month on Wednesday, 1 December 2010. The BSE 30-share Sensex jumped 328.75 points or 1.68% to 19,850 and the S&P CNX Nifty was up 98.20 points or 1.67% at 5,960.90

The key benchmark indices edged higher for forth running day on Thursday, 2 December 2010, on slew of recent strong economic data, lower inflation and higher global stocks. The BSE 30-share Sensex was up 142.70 points or 0.72% to 19,992.70 and the S&P CNX Nifty was up 50.80 points or 0.85% at 6011.70

Market took a breather on Friday, 3 December 2010, as investors resorted to profit booking after a four-day rally. The BSE 30-share Sensex fell 25.77 points or 0.13% to 19,966.93. The S&P CNX Nifty was down 18.90 points or 0.31% at 5,992.80.

From the 30 share Sensex pack, 26 stocks advanced while only 4 of them declined during the week ended Friday, 3 December 2010.

Index heavyweight Reliance Industries (RIL) advanced 4.56% to Rs 1006.40 in the week. Shares in NTPC rose 4.7%. RIL and NTPC may reportedly settle their five-year-old legal battle over a contract to supply natural gas from RIL's field in the Krishna-Godavari basin to the state-owned power utility.

The RIL-NTPC dispute dates back to 2005 when NTPC dragged RIL to the Bombay High Court, complaining that RIL was not honouring a contract to sell 12 million standard cubic metres a day (mmscmd) of gas to its Kawas and Gandhar expansion projects in Gujarat for 17 years at $2.34 per unit.

India's largest truck maker by sales Tata Motors jumped 12.72% to Rs 1314.85 and was the top gainer from the Sensex pack. The company's total vehicle sales rose 1% to 54,622 units in November 2010 over November 2009.

Reliance Communications (up 7.06%), Cipla (up 8.92%), and Mahindra & Mahindra (up 5.42%), edged higher from the Sensex pack.

India's top bike maker by sales Hero Honda Motors lost 5.37% to Rs 1832.45 and was the top loser from the Sensex pack. The stock fell on reports the Hero Group has agreed to increase royalty payments made to Japanese automaker Honda Motor Co. to 8% of overall annual sales in return for a technology makeover and a stake sale triggered the slide.

ACC (down 2%), Reliance Infrastructure (down 1.59%), and Tata Power Company (down 0.07%), edged lower from the Sensex pack.

Metal and mining shares saw an across the board surge after strong investor response to the MOIL IPO. Jindal Steel & Power (up 10.72%), Hindalco (up 7.97%), Tata Steel (up 2.67%), and Sterlite Industries (up 2.89%), gained from the metal pack.

India's largest realty stock by sales DLF advanced 6.53%. The stock gained on bargain hunting after a recent steep slide triggered by the back the outbreak of a bank loans bribery scandal on 24 November 2010, mainly involving realty and infrastructure firms.