Market starts 2011 on positive note; Sensex scales 7-week high

The key benchmark indices posted small gains to scale seven week closing highs on the first trading session of calendar year 2011 on strong manufacturing sector data, on higher auto sales in the month just gone by and on firm world markets. The market gained for the fourth straight day today, 3 January 2011. Index heavyweight Reliance Industries (RIL) reversed initial gains. Two-wheeler major Bajaj Auto skidded more than 4% on sequential decline in sales in December 2010. Banking, metal and consumer durables stocks climbed. The market breadth was strong. The BSE Mid-Cap and Small-Cap indices outperformed the Sensex. The BSE 30-share Sensex was up 51.96 points or 0.25%, up close to 30 points from the day's low and off close to 105 points from the day's high.



The market surged at the onset of the first trading session of 2011, scaling seven-week high as strong auto sales for December 2010 and higher Asian stocks bolstered sentiments. The market trimmed gains in morning trade. The key benchmark indices recovered in mid-morning trade soon after hitting fresh intraday lows as the latest data showed continuation of the strong momentum in the manufacturing sector in December 2010.

A bout of volatility was witnessed in early afternoon trade as the key benchmark indices recovered from lower level after hitting fresh intraday lows. The market moved in a range in afternoon trade. The market held positive zone in mid-afternoon trade. The market pared gains to hit fresh intraday low 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, edged higher to 16.99% from Friday's (31 December 2010) 16.56%. 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.

Exports in November 2010 rose an annual 26.5% to $18.9 billion, while imports for the month grew 11.2% on the year to $27.8 billion, government data released on Monday showed. India's trade deficit in November narrowed to $8.9 billion compared with $9.7 billion in October.

India's manufacturing activity continued to expand in December 2010, although the momentum from the prior month eased because of capacity constraints and a slowdown in new orders, a survey by HSBC showed Monday. The monthly purchasing managers' index eased to 56.7 from November's reading of 58.4, though it stayed well ahead of the threshold of 50, which separates expansion from contraction. "The PMI numbers show that the economy remains in high gear, but that this is becoming increasingly difficult to reconcile with a comfortable level of inflation," HSBC economists wrote in a statement. India's central bank, they wrote, may raise interest rates sooner rather than later to curb price increases

Foreign institutional investors (FIIs) bought shares worth a net Rs 616.70 crore on Friday, 31 December 2010, compared to an inflow of Rs 2352.70 crore on Thursday, 30 December 2010. FIIs bought equities worth Rs 2049.60 crore in December 2010. FIIs had bought equities worth Rs 18293.10 crore in November 2010.

FII inflow in the calendar year 2010 totaled Rs 133266 crore. In dollar terms the net equity inflow in 2010 totaled $29.36 billion, above last year's $17.45 billion. The annual inflow in 2010 was at record level.

Emerging-market equity funds drew more inflows in the week ended 29 December 2010, attracting a record level of money in 2010, according to fund tracker EPFR Global. Emerging-market equity funds tracked by EPFR Global took in a net $1.11 billion for the week ended 29 December 2010. A record-setting $92 billion was put in emerging market equity funds in 2010.

European shares climbed strongly in the first trading session of 2011, helped by an outstanding performance for Italian stocks. The gains came following a strong gain in Italy's purchasing managers' index, which showed manufacturing activity in December 2010 was unexpectedly robust. The key benchmark indices in France and Germany rose 2.2% and 1.53%, respectively. London markets were closed for a bank holiday.

Asian stock markets kicked off the year with a healthy start, rising across the board on hopes the global economic recovery will continue in 2011. The key benchmark indices in Hong Kong, Indonesia, Singapore, South Korea and Taiwan rose by between 0.59% to 1.74%. Markets in Australia, Japan, New Zealand, Thailand and Vietnam were shut, as were the mainland Chinese bourses.

Singapore's economy returned to growth in the fourth-quarter as strength in manufacturing helped offset weakness in the construction sector, though the expansion was slightly weaker than expectations. The southeast Asian country's gross domestic product expanded at a seasonally-adjusted, annualized rate of 6.9% in the October-December 2010 period from the preceding quarter, data showed on Monday.

US stocks closed out a year of double-digit gains and the S&P's best December since 1991 with a quiet and little changed session on Friday, 31 December 2010, as investors found no reason to make big bets ahead of the new year.

Trading in US index futures indicated that the Dow could gain 77 points at the opening bell on Monday, 3 January 2011.

Back home, the Reserve Bank of India, last week, warned that a sudden reversal of overseas portfolio investments that have been flooding in this year could create problems for the economy. "A potentially worrying feature of capital flows to India has been the dominance of portfolio flows which are prone to sudden stops and reversals," the RBI said in a report on assessment of the health of financial sector.

The second financial stability report by the central bank also warned that "at present, stressed liquidity conditions warrant caution and a watchful management in the coming months". With both financial and real sectors still under stress in advanced economies, the report said, "India will have to guard against vulnerabilities arising from risks to global growth and financial stability."

The report said that the other soft spots in the financial sector include widening current account deficit, deteriorating external sector ratios and tight liquidity position, in addition to inflationary pressures. The report also said that recent concerns regarding microfinance institutions (MFIs) warrant closer examination.

Inflation in the food articles group climbed to 14.44% in the week ended 18 December 2010 from 12.13% in the previous week, the latest government data showed. This was the fourth instance of an increase in food inflation after easing for seven consecutive weeks. Inflation in the Primary Articles group jumped to 17.24% in the week under review from 15.35% in the week ended 11 December 2010, the latest data showed. Inflation in the Fuel & Power group inched higher to 11.63% in the week ended 18 December from 10.74% in the week ended 11 December.

Prime Minister Manmohan Singh on Friday said the government would try to effectively fight inflation and improve governance in thenew year.

The output of six key infrastructure sectors grew 2.3% in November 2010 from a year ago, the slowest pace in the last 21 months, raising the prospects of a drop in industrial growth for the month. The six core industries -- crude oil, petroleum refining, coal, electricity, cement and finished steel, have a combined weight of 26.7% in the index of industrial production and are considered an advance indicator of industrial activity. These sectors had grown an upwardly revised 8.6% in October 2010.

The current account deficit in the September quarter widened to a record high of $15.8 billion as booming domestic consumer demand sucked in imports and service sector exports suffered from weak global demand.

The BSE 30-share Sensex was up 51.96 points or 0.25% to 20,561.05, its highest closing level since 11 November 2010. The Sensex rose 155.71 points at the day's high of 20,664.80 in early trade. The index gained 21.91 points at the day's low of 20,531 in late trade.

The S&P CNX Nifty was up 23.10 points or 0.38% to 6,157.60, its highest closing since 11 November 2010. The Nifty hit high of 6,178.55 in early trade.

The BSE Mid-Cap index rose 0.9% and the BSE Small-Cap index advanced 1.81%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE rose. The BSE Metal index (up 2.07%), Consumer Durables index (up 1.54%), PSU index (up 0.59%), banking sector index Bankex (up 0.56%), Power index (up 0.54%), Realty index (up 0.5%), Capital Goods index (up 0.44%), and Healthcare index (up 0.43%), outperformed the Sensex. The BSE FMCG index (up 0.24%), Oil & Gas index (down 0.02%), IT index (down 0.11%) and Auto index (down 0.17%), underperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 2,099 shares rose while 884 shares declined. A total of 89 shares remained unchanged.

Form the 30-share Sensex pack, 19 rose and the rest fell.

BSE clocked turnover of Rs 3426 crore, marginally higher than Rs 3402.66 crore on Friday, 31 December 2010.

Index heavyweight Reliance Industries (RIL) fell 0.39% to Rs 1054.15. The stock came off the day's high of Rs 1066.40. RIL's advance tax payment reportedly surged 42.8% to Rs 1191 crore in Q3 December 2010 over Q3 December 2009.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.03% after the company's railway business unit secured a slew of orders aggregating Rs 1103 crore from various power plant developers for construction of dedicated railway lines to link power plant sites to the main line rail network.

Among other capital goods stocks, Bhel, Thermax and ABB gained by between 0.83% to 2.31%.

Jaiprakash Associates rose 2.31% after company's cement shipments in December rose 28% to 1.35 million tonnes. The engineering and construction firm, which also has interests in hospitality and power, has a capacity to produce 21.3 million tonnes of cement a year.

Shares of Anil Dhirubhai Ambani Group (ADAG) edged higher for the second straight day on reports the group has decided on re-branding all its businesses as 'Reliance' rather than maintaining individual identities for each service. As a result, the group will lose the small ADAG tagline in several of its current logos. Reliance Capital, Reliance Infrastructure, Reliance MediaWorks, Reliance Communications and Reliance Power rose by between 0.47% to 2.86%.

Metal and mining stocks rose across the board as LMEX, a gauge of six metals traded on the London Metal Exchange gained 1.17% on Friday, 31 December 2010. Hindustan Zinc, Sesa Goa, NMDC and National Aluminum Company rose by between 0.01% to 3.3%.

Copper and aluminum maker Hindalco Industries was unchanged at close. The stock hit record high of Rs 249.40 in intraday trade today.

Steel Authority of India gained 2.99% after the company raised prices of its products by an average Rs 1,000 a tonne, or about 3%. The price increases are with immediate effect.

JSW Steel gained 1.32% after company raised prices by Rs 1,400-1,700 a tonne, or 4-5%, across various grades. The price increases are with immediate effect.

Among other steel stocks, Tata Steel, Bhushan Steel, and Jindal Steel & Power gained by between 0.79% to 3.6%.

Consumer durables stocks, too, edged higher. Rajesh Exports, Gitanjali Gems, Titan Industries and Videocon Industries rose by between 0.52% to 2.25%.

India's largest commercial bank in terms of branch network State Bank of India gained 0.35%, after the bank raised its base rate by 40 basis points (bsp) to 8% effective 1 January 2011, from 7.6% earlier. The bank has also raised the benchmark prime lending rate upwards by 25 bps from 12.50% to 12.75%.

India's largest private sector bank by market capitalization HDFC Bank gained 1.88%.

Kotak Mahindra Bank rose 0.73% after bank raised its base rate to 8.25% per annum from 8%. The bank has also increased its benchmark prime lending rate by 25 basis points.

India's largest private sector bank by market capitalisation ICICI Bank fell 0.09% in volatile trade after the bank raised its base rate by 50 basis points to 8.25% effective 3 January 2011. ICICI Bank has also announced an increase of 0.25% in its benchmark prime-lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from 3 January 2011.

IT stocks fell on profit taking. India's third largest IT exporter by sales Wipro shed 1.5%. The company said on 10 December 2010, that it won a 5-year outsourcing contract from Vasan Eye Care. Financial details of the contract were not disclosed.

India's largest software company by sales TCS declined 0.47%. The stock had hit record high of Rs 1179 on Friday, 31 December 2010. The company said on 22 December 2010 that Hilton Worldwide, a leading global hospitality company, has signed a multi-year agreement with TCS.

But, India's second largest IT services provider by sales Infosys rose 0.23%. The stock hit a record high of Rs 3,458.85 today. Infosys will unveil Q3 December 2010 results on 13 January 2011.

PSU OMCs rose after hiking jet fuel prices by almost 2%, the sixth straight increase in rates since October 2010 when international crude oil prices started climbing. BPCL, HPCL and Indian Oil Corporation rose by between 0.28% to 2.96%.

Prices of aviation turbine fuel, or ATF, in Delhi have been increased by Rs 935 a kilolitre, or 1.99% to Rs 47,816 per kl with effect from Friday, 31 December 2010, midnight.

Tata Power Company advanced 0.32% after company said on Monday it had terminated an agreement to raise $300 million by issuing shares with differential rights in two of its special purpose vehicles to private-equity firm Olympus Capital Holdings Asia. Tata Power said in a statement to the stock exchange that certain conditions stated in the investment agreement were not fulfilled, without elaborating. The company had said in June last year it was raising the money to fund acquisitions and cut debt.

High beta realty stocks edged higher for the third day in a row. Ackruti City, DLF, HDIL and Unitech rose by between 0.14% to 1.2%.

Auto stocks were mixed after reporting strong vehicle sales in December 2010. Mahindra & Mahindra gained 1.22% after company's auto sales rose 42% to 34,062 units in December 2010 over December 2009. Domestic auto sales rose 43% to 32,546 units while exports increased 22% to 1,516 units.

Hero Honda Motors was flat after company reported a 33% growth in sales at 5.01 lakh units for December 2010 over the same month in 2009. The company recorded a sales growth of 16.4% during the calendar year 2010 with cumulative sales of over 5 million units. During the October-December quarter of 2010, the company sold 14,28,030 units, registering a 29% growth over the same period in 2009.

Tata Motors was flat after total sales jumped 31% to 67,441 in December 2010 over December 2009. The company's domestic sales for December 2010 were 61,632 units, 28% growth over 48,173 units sold in December 2009.

Eicher Motors jumped 1.67% after VE Commercial Vehicles, the joint venture between Eicher Motors and Sweden's Volvo sold 4,030 Eicher-branded trucks and buses in December 2010, up 51% from a year ago. Domestic sales for the month rose 44% to 3,426 units, while exports surged to 604 units from 287 units.

India's second largest motorcycle maker by sales Bajaj Auto tumbled 4.21%. The stock was the top loser from the Sensex pack. Bajaj Auto's total vehicle sales rose 10% to 2.76 lakh units in December 2010 over December 2009. Motorcycle sales rose 11% to 2.43 lakh units in December 2010 over December 2009. But, the performance was disappointing on sequential basis. Total vehicle sales declined 7.69% and motorcycle sales declined 8.3% in December 2010 over November 2010.

India's largest car maker by sales Maruti Suzuki India rose 0.5%.

Cals Refineries clocked the highest volume of 5.08 crore shares on BSE. Comfort Intech (1.84 crore shares), Ravikumar Distilleries (1.21 crore shares), Ispat Industries (74.77 lakh shares) and K Sera Sera (73.47 lakh shares) were the other volume toppers in that order.

Tata Steel clocked highest turnover of Rs 162.80 crore on BSE. State Bank of India (Rs 89.08 crore), Ravikumar Distilleries (Rs 78.20 crore), Everonn Education (Rs 74.01 crore) and Hexaware Technologies (Rs 54.51 crore) were the other turnover toppers in that order.