Market surges in choppy trade as world stocks rally

The key benchmark indices surged, snapping six-day slide, on firm world stocks. Bargain hunting emerged after a recent steep slide. The market shrugged off disappointing industrial production data for November 2010. Index heavyweight Reliance Industries (RIL) jumped. IT pivotals gained, with sector bellwether Infosys trading firm on the eve of Q3 December 2010 results on Thursday, 13 January 2011.



The BSE 30-share Sensex was up 337.76 points or 1.76%, up close to 475 points from the day's low and off close to 40 points from the day's high. Banking, consumer durables, realty and metal stocks led the rally. The market breadth was strong, having alternately swung between positive and negative zone earlier in the day. Except the BSE Capital Goods index, all the other sectoral indices on BSE were in the green.

Intraday volatility was high. The market edged higher amid initial volatility, tracking gains in Asian stocks. The market pared gains in morning trade. The market reserved direction in mid-morning trade after disappointing industrial production data, which was announced at 11:00 IST. The market lost ground again in early afternoon trade after erasing almost all the intraday losses. The market once again staged a rebound from lower level in afternoon trade. The market hit a fresh intraday high in mid-afternoon trade as European stocks rose in early trade. The market came off high after hitting a 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, declined for the second day in a row. The index eased to 21.41% from Tuesday's (11 January 2011) close of 22.33%. 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.

Government data released today, 12 January 2011, showed industrial output rose at 2.7% in November 2010 as against a revised 11.30% growth in October 2010, as growth in the manufacturing output slowed sharply.

Finance Minister Pranab Mukherjee today, 12 January 2011, said the government is looking to take corrective measures to improve industrial output. Mukherjee also said he expects the industrial output numbers to improve in the next four months. Industrial output growth for the current fiscal year ending in March 2011 could be around 10 %, Montek Singh Ahluwalia, deputy chairman of the Planning Commission said on Wednesday.

Foreign funds continued their recent selling spree. Foreign institutional investors (FIIs) sold shares worth a net Rs 1123.60 crore on Tuesday, 11 January 2011, higher than an outflow of Rs 1088.20 crore on Monday, 10 January 2011.

FII outflow in January 2011 totaled Rs 1659.10 crore (till 11 January 2011). FIIs had bought equities worth Rs 2049.60 crore in December 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, compared to an inflow of $17.45 billion in 2009. The annual inflow in 2010 was at record level.

Emerging-market equity funds saw a big jump in inflows for the week ended 5 January 2011, according to fund tracker EPFR Global. For that week, flows to emerging-market equity funds totaled $3.38 billion. Flows into Asia ex-Japan equity funds hit 7-week highs. Korea equity funds had their best week in 8 months despite tension with North Korea.

The Securities and Exchange Board of India (Sebi) on Tuesday, 11 January 2011, decided to permit stock exchanges to introduce derivative contracts (futures and options) on foreign stock indices in the equity derivatives segment.

The government will announce inflation data for the month of December 2010 on Friday, 14 January 2011. The benchmark wholesale-price inflation cooled to near a one-year low of 7.48% in November 2010. A surge in food inflation in late December 2010 has rekindled fears of interest rate hike by the Reserve Bank of India (RBI) at a quarterly policy review on 25 January 2011. Food inflation accelerated to the highest level in more than a year in late December 2010.

Corporate earnings for Q3 December 2010, which will start trickling this week, will set the direction for the stock market in the near term. Analysts see corporate profit margins to be under pressure in the coming months due to higher commodity prices, rising cost of debt, surging wages and increased competitive intensity across sectors. IT bellwether Infosys kickstarts the earnings reporting season on 13 January 2011.

European stock markets gained on Wednesday, boosted by a report that the European Union is discussing plans to expand the euro 440 billion bailout fund for indebted euro-zone countries to contain the debt crisis. The key benchmark indices in France, Germany and UK rose by between 0.32% to 1.33%.

The Portuguese government on Wednesday sold 1.25 billion euros ($1.62 billion) of government bonds, news reports said, in a key test of credit markets amid speculation the country could eventually be forced to seek a fiscal bailout. Portugal's debt agency sold 650 million euros of bonds maturing in 2014 and 599 million euros of bonds maturing in 2020

Spain is auctioning 2016 bonds Thursday, 13 January 2011, and Italy is due to auction 2026 government bonds on the same day.

European Commissioner for Economic and Monetary Affairs Olli Rehn said in an article in the Financial Times that the lending capacity of the European Financial Stability Facility should be "reinforced" and the scope of its activity widened.

Official data showed that the German economy grew by a powerful 3.6% in 2010 -- the strongest performance since reunification two decades ago.

Asian stocks rose on Wednesday, 12 January 2011, as higher oil and metal prices buoyed commodity shares and a weaker yen boosted the outlook for Japanese export earnings. The key benchmark indices in Hong Kong, Taiwan, South Korea, Indonesia, Japan, Singapore and China rose between 0.11% to 2.88%.

Trading in US index futures indicated that the Dow could rise 56 points at the opening bell on Wednesday, 12 January 2011.

Back home, in his first pre-Budget interaction with industrialists on Tuesday, 11 January 2011, Mukherjee hinted that indirect taxes won't be increased, considering high prices of commodities.

Meanwhile, bankers on Tuesday, 11 January 2011, asked the RBI to further ease the liquidity situation in the banking system with a cut in the cash reserve ratio (CRR) and/or the statutory liquidity ratio (SLR). Banks highlighted a mismatch between slower deposit growth and faster credit growth as becoming a serious issue for them.

A meeting convened by Prime Minister Manmohan Singh on Tuesday, 11 January 2011, to discuss inflation and ways to tackle it, particularly the surging prices of vegetables, fruits, eggs and milk, reportedly remained inconclusive. The ministers concerned will meet the prime minister again in a day or two to come up with measures to tackle food inflation.

The trade deficit in December 2010 narrowed to $2.6 billion from $8.9 billion in November 2010, the lowest in the last three years, trade secretary Rahul Khullar said on Saturday, 8 January 2011.

Meanwhile as per recent reports, the proposed Goods and Service Tax (GST) will not be rolled out before April 2012, two years after its slated implementation date, due to continued parliamentary disruption. The implementation of GST has already been postponed twice due to resistance from opposition party-ruled states and fears over state governments losing financial autonomy.

Prime Minister Manmohan Singh, last week, said the Indian economy is likely to grow between 9 and 10% from the next financial year that starts from 1 April 2011, after growing 8.5% in the current financial year.

The BSE 30-share Sensex was up 337.76 points or 1.76% to 19,534.10. The Sensex jumped 378.29 points at the day's high of 19,574.63 in late trade. The index lost 147.78 points at the day's low of 19,048.56 in early afternoon trade.

The S&P CNX Nifty was up 109.15 points or 1.9% at 5,863.25.

The market breadth, indicating the health of the market was strong. On BSE, 1,861 shares advanced while 1,067 shares declined. A total of 90 shares remained unchanged. The breadth had had alternately swung between gains and losses earlier in the day.

Among the 30-member Sensex pack, 22 advanced while the rest declined.

BSE clocked turnover of Rs 3448 crore, higher than Rs 3416.25 crore on Tuesday, 11 January 2011.

The BSE Mid-Cap index rose 1.68% and BSE Small-Cap index gained 1.42%. Both these indices underperformed the Sensex.

Except BSE Capital Goods index, all the rest sectoral indices on BSE were in the green. The BSE Consumer Durables index (up 4.64%), Realty index (up 3.27%), Metal index (up 2.8%), banking sector index Bankex (up 2.66%) and Auto index (up 2.02%) outperformed the Sensex.

The BSE Capital Goods index (down 0.18%), PSU index (up 0.5%), Power index (up 0.74%), HealthCare index (up 0.77%), FMCG index (up 1.11%), Oil & Gas index (up 1.19%), IT index (up 1.67%) and Teck index (up 1.74%) underperformed the Sensex.

Index heavyweight Reliance Industries (RIL) rose 1.61%. As per recent report, gas production from RIL's D6 block in Krishna-Godavari basin has dropped to 52-53 million metric standard cubic metres a day (mmscmd) from 60 mmscmd last October. RIL owns 90% in the D6 block, off the east coast, while Canada's Niko Resources holds the remainder.

Consumer durables stocks jumped. Rajesh Exports, Gianjali gems, Blue Star, Videocon Industries and Titan Industries rose by between 0.19% to 7.96%.

Some auto stocks reversed initial losses. India's largest truck maker by sales Tata Motors jumped 4.83%. India's leading tractor maker by sales Mahindra & Mahindra rose 2.11%. India's top bike maker by sales Hero Honda Motors gained 1.92%.

India's second largest motorcycle maker by sales Bajaj Auto fell 1.52%. India's largest car maker by sales Maruti Suzuki India lost 0.39%.

Realty stocks recovered on bargain hunting after recent sharp losses. DLF, Indiabulls Real Estate, Unitech and HDIL gained by between 2.33% to 6.31%.

India's largest software services exporter by sales Infosys rose 1.37% ahead of its Q3 December 2010 results on Thursday, 13 January 2011. Analysts expect sequential growth in revenue and net profit of the IT bellwether in Q3 December 2010, primarily driven by volume growth and operational efficiencies.

For the IT sector, the negative impact of a surge in the rupee against the dollar could be offset by a favourable cross-currency movement during the quarter. On average basis during the quarter, the rupee appreciated 3.3% verses the dollar. On the flip side, there could be seasonal weakness in terms of fewer working days on account of Diwali, Thanksgiving and Christmas holidays during the quarter.

India's largest software company by sales TCS jumped 3.28%. The company unveils its Q3 December 2010 results on 17 January 2011

India's third largest IT exporter by sales Wipro fell 0.18% in volatile trade. The company announces its Q3 December 2010 results on 21 January 2011.

Metal stocks rose across the board. Sterlite Industries, JSW Steel, Hindalco Industries, Hindustan Zinc, Steel Authority of India and National Aluminum Company rose by between 0.77% to 6.49%.

India's largest private sector steel maker by sales Tata Steel rose 0.26%, reversing initial losses. The company's board after market hours on Tuesday, 11 January 2011 approved a follow-on public offer of 5.7 crore shares to reduce debt and expand Jamshedpur facility. The FPO will result in equity dilution of 6.31%.

Banking stocks recovered after recent steep slide triggered by concerns higher deposits rates may impact banks' net interest margins, thereby hurting profitability. India's largest private sector bank by market capitalisation ICICI Bank jumped 4.47%, with the stock gaining fro the second straight day. India's second largest private sector bank by net profit HDFC Bank rose 2.77%, recovering from three-day 7.75% decline.

India's largest bank by net profit and branch network State Bank of India (SBI) rose 2.03%, with the stock gaining for the second straight day. Chairman O.P. Bhatt said on Wednesday a television channel report about the Central Bureau of Investigation (CBI) conducting searches at its offices had come as a surprise to him. A television channel had said the CBI was conducting searches in some offices of SBI and other banks as part of the 2G mobile licence allocation probe.

Cairn India gained 3.67%, after crude oil prices advanced over 2% on the New York Mercantile Exchange on Tuesday, 11 January 2011. Light, sweet crude oil gained $1.86 or 2.1%, to settle at $91.11 a barrel on Tuesday, 11 January 2011, due to steady dollar and concerns on supply disruptions due to a leakage discovered at Trans-Alaska pipeline. The rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms.

India's top engineering and construction firm by sales Larsen & Toubro shed 1.43%. The company is likely to come out with an initial public offer of its finance arm this quarter depending on market conditions.

Shekhawati Poly Yarn clocked highest volume of 10.51 crore shares on BSE. Cals Refineries (3.27 crore shares), Suzlon Energy (1.29 crore shares), Resurgence Mines (74.92 lakh shares) and Unitech (64.68 lakh shares) were the other volume toppers in that order.

Shekhawati Poly Yarn clocked highest turnover of Rs 499.29 crore on BSE. State Bank of India (Rs 292.12 crore), Tata Steel (Rs 169.79 crore), ICICI Bank (Rs 121.14 crore) and Tata Motors (Rs 112.15 crore) were the other turnover toppers in that order.