BSE Mid-Cap, Small-Cap indices extend recent strong gains

The key benchmark indices edged lower in choppy trade, extending last two days' losses, as oil prices hovering near 2-1/2-year highs sparked inflation and interest rates worries. The BSE 30-share Sensex was down 21.02 points or 0.11%, off close to 75 points from the day's high and up close to 55 points from the day's low. Nevertheless, the board market depicted strength. The market breadth was strong. The BSE Mid-Cap and Small-Cap indices rose, extending recent strong gains.



IT stocks fell on a firm rupee. Index heavyweight Reliance Industries (RIL) edged lower. Airline stocks fell on higher crude oil prices even as PSU OMCs shrugged off firm crude oil prices. Realty stocks extended recent strong gains on value buying. Capital goods stocks rose on renewed buying. Fertiliser shares rallied on expectations normal monsoon this year could boost demand.

The market edged lower in early trade as crude hovered near 2-1/2-year highs. A bout of volatility was witnessed as the key benchmark indices dropped once again after recovering from the day's low in morning trade. The market trimmed losses in mid-morning trade. The key benchmark indices were off lows in early afternoon trade as index heavyweights ICICI Bank and L&T recovered. The intraday recovery gathered steam as Sensex moved into positive zone for a brief period in afternoon trade. The market pared gains after surging to hit fresh intraday high in mid-afternoon trade. The market slipped into the red in volatile late trade.

The BSE 30-share Sensex was down 21.02 points or 0.11% to 19,591.18. The Sensex rose 52.89 points at the day's high of 19,665.09 in mid-afternoon trade. The index fell 75.18 points at the day's low of 19,537.02 in mid-morning trade.

The S&P CNX Nifty was down 6.05 points or 0.1% to 5,885.70.

The BSE Mid-Cap index rose 0.98% at 7,264.29 and the BSE Small-Cap index gained 1.25% at 8,897.19. Both these indices outperformed the Sensex. The BSE Mid-Cap index has jumped 771.99 points or 11.89% in 13 trading sessions from a recent low of 6,492.30 on 21 March 2011. The BSE Small-Cap index has jumped 1,121.83 points or 14.4% from a recent low of 7,775.36 on 21 March 2011.

The market breadth, indicating the health of the market, was strong. On BSE, 1926 shares advanced while 1025 shares declined. A total of 93 shares remained unchanged.

Among the 30-member Sensex pack, 17 declined and the rest advanced.

Index heavyweight Reliance Industries (RIL) fell 0.35%. RIL, last week, bagged two blocks in the ninth round of oil and gas block auctions held by the government

Meanwhile, RIL reportedly doubled fuel exports from its world's biggest refining complex last month as it boosted gasoline shipments to the US ahead of the driving season. The company, controlled by billionaire Mukesh Ambani, increased sales from its Jamnagar facility to at least 2 million metric tonnes from 8.5 lakh tonnes in February 2011.

PSU OMCs shrugged off firm crude oil prices. BPCL, HPCL and Indian Oil Corporation rose by between 1.57% to 3.72%. Higher oil prices will increase under-recoveries at the state-run oil firms on domestic sale of diesel, LPG and kerosene at a controlled price. The government has already deregulated pricing of petrol.

Cairn India fell 2.02% in choppy trade as the Cabinet Committee on Economic Affairs (CCEA) on Wednesday, 6 April 2011, delayed approval to Vedanta Resources' $9.6 billion deal to buy Cairn India by referring the matter to a panel for further review. ONGC is Cairn India's minority partner in the huge Rajasthan oil block but pays the entire royalty to the government, a key reason why the government has delayed its clearance to Vedanta Resources' deal to acquire a controlling stake in Cairn India.

Cairn Energy PLC today, 7 April 2011, said it has extended by more than a month the deadline for the sale of a stake in its Indian unit to Vedanta Resources. Edinburgh-based Cairn also said some elements of the deal--namely put and call options exercisable by Cairn and Vedanta, and pre-emption right exercisable by Vedanta--have been removed from the terms of the sale agreement after objections from market regulator the Securities and Exchange Board of India. Vedanta in August 2010 proposed to acquire up to 60% of Cairn India for about $9.6 billion in cash.

Vedanta group firm Sesa Goa fell 3.07%. The company announced during market hours today that it has posted letter of offer to acquire 20.01% equity shares of Cairn India. The open offer will open on 11 April 2011 and close on 30 April 2011.

Most capital goods stocks rose on renewed buying. Punj Lloyd, Bhel, Thermax, BEML and Siemens rose by between 0.01% to 1.8%.

Larsen & Toubro rose 0.71%. The company announced on 5 April 2011 that it had achieved financial closure for Hyderabad Metro rail project.

Some realty stocks extended recent gains on continued value buying. Anant Raj Industries, Ackruti City, Indiabulls Real Estate and Unitech rose by between 0.75% to 5.08%.

IT pivotals dropped as a firm rupee could dent guidance on software exports in future quarters. The rupee to a near six-month high Wednesday, boosted by capital inflows via corporate borrowings and a return in foreign funds' risk appetite for emerging markets. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

India's largest software services exporter TCS shed 2%, extending Wednesday's 1.25% losses.

India's second largest software services exporter Infosys Technologies fell 0.71%, extending Wednesday's 0.27% decline. The market has been abuzz with talks Infosys, an IT sector bellwether, will give encouraging guidance for the year ending March 2012 (FY 2012) given underlying strong demand for offshore outsourcing. Infosys unveils Q4 and year ended March 2011 results on 15 April 2011 when it will also give annual guidance for FY 2012.

India's third largest software services exporter Wipro rose 1.21% to Rs 471.75, off the day's low of Rs 460.

Most metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange gained 2.05% on Wednesday, 6 April 2011. Tata Steel, JSW Steel, Sail, Nalco, Jindal Saw, Hindalco Industries and Hindustan Zinc rose by between 0.15% to 1.79%.

Bank shares recovered from initial losses on expectations of good Q4 results. Strong lending growth is seen boosting bottom line of banks in Q4 March 2011. India's largest private sector bank by net profit ICICI Bank rose 0.16% to Rs 1102.30, off the day's low of Rs 1093.50. India's second largest private sector bank by net profit HDFC Bank was down 0.96% to Rs 2354.90, off the day's low of Rs 2340.15. India's largest state run bank by net profit and branch network State Bank of India (SBI) gained 0.41% to Rs 2808.35, off the day's low of Rs 2775.60.

Healthcare stocks rose on renewed buying. Biocon, Cipla, Lupin, Ranbaxy Laboratories rose by between 0.12% to 4.11%.

Auto stocks were mixed. India's top small care maker by sales Maruti Suzuki declined 1.2%, extending Wednesday's 1.4% fall. The company announced after market hours on Wednesday that it would recall 13,157 diesel engine cars. The company said it would inspect the 'connecting rod bolt' for units of its Swift and Ritz model diesel cars with engines manufactured between 13 November 2010 and 4 December 2010.

Maruti Suzuki increased the prices of its products by 0.2% to 2.4% from 4 April 2011, depending on the models to offset rising costs of key inputs viz. steel, aluminum, copper and natural rubber.

India's second largest bike maker by sales Bajaj Auto fell 0.73%. The company's total vehicle sales increased 12% to 3.07 lakh units in March 2011 over March 2010. The company announced its March 2011 sales figures on Monday, 4 April 2011.

India's largest truck maker by sales Tata Motors declined 0.27%. The company had hiked prices of some car models by Rs 7,000 to Rs 36,000 from 1 April 2011.

India's top tractor and utility vehicles maker by sales Mahindra & Mahindra rose 0.89%, reversing initial losses. The company had said on 1 April 2011 it will raise prices of its products within a week to offset higher commodity prices.

India's largest bike maker by sales Hero Honda Motors rose 0.77%, with the stock gaining for the thirteenth straight day. Hero Honda's total sales rose 24.4% to 5.15 lakh units in March 2011 over March 2010. The monthly sales in March 2011 were record monthly sales.

Hotel shares rose on renewed buying. Hotel shares rose on renewed buying. EIH and Hotel Leela Ventures gained by between 3.38% to 4.56%.

Indian Hotels jumped 6.98% on reports the company plans to introduce a new hotel brand in the mid-scale segment and consolidate its foreign brands under one holding company.

Fertiliser shares rallied on expectations normal monsoon season this year could boost fertiliser demand. GSFC, Tata Chemicals, GNFC, and Chambal Fertilisers & Chemicals rose by between 2.27% to 8.88%.

Airline stocks fell as higher crude oil prices raised concerns about higher operating costs. Jet fuel prices are linked to crude oil prices. Jet fuel constitutes 40% of the operating cost for airliners. Kingfisher Airlines, SpiceJet and Jet Airways declined by between 0.75% to 2.71%.

Unitech clocked highest volume of 1.03 crore shares on BSE. HFCL (1.03 crore shares), Cals Refineries (70.57 lakh shares), Suzlon Energy (68.46 lakh shares) and Alok Industries (54.17 lakh shares) were the other volume toppers in that order.

TTK Prestige clocked highest turnover of Rs 100.05 crore on BSE. State Bank of India (Rs 93.30 crore), Lovable Lingerie (Rs 89.81 crore), BF Utilities (Rs 73.28 crore) and Unitech (Rs 49.21 crore) were the other turnover toppers in that order.

Indian stocks witnessed a sharp rally recently on the back of heavy inflow from foreign funds. Foreign institutional investors (FIIs) bought shares worth a net Rs 716.30 crore on Wednesday, 6 April 2011, data released by Securities & Exchange Board of India showed. FII inflow in April 2011 totaled Rs 6366.30 crore (till 6 April 2011). FIIs had bought equities worth Rs 6897.80 crore in March 2011. FII inflow in the calendar year 2011 totaled Rs 3865.40 crore (till 6 April 2011).

The near term major trigger for the market is Q4 March 2011 results which will start trickling in from about mid-April 2011. Investors will scrutinize post-result management commentary to gauge outlook on earnings at a time when rising salaries, raw materials prices and interest rates are pressurizing profit margins of India Inc.

India imports majority of its crude oil requirements and a surge in crude oil prices over the past few months has sparked inflation and interest rates worries. The Reserve Bank of India (RBI) is seen raising key short term policy rates by 25 basis points at its annual 2011-2012 monetary policy review on 3 May 2011.

High oil prices have also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were flat at $108.83 a barrel. The price had climbed 49 cents to $108.83 a barrel in New York on Wednesday, 6 April 2011, the highest settlement since 22 September 2008.

Good monsoon this year could help ease food inflation and boost rural income. Recent reports indicate that India will receive good rains during the July-September monsoon season this year. The India Meteorological Department (IMD) is expected to come out with its long term forecast of the summer monsoon rainfall season by the end of this month.

The food price index rose 9.18% and the fuel price index climbed 13.13% in the year to March 26, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 9.50% and 13.13%. The primary articles price index was up 12.97% compared with an annual rise of 12.98% a week earlier.

A combination of inflationary pressures, slower external demand, and tighter fiscal and monetary policies is expected to curb India's growth this year, the Asian Development Bank said in a report. India's gross domestic product is now expected to expand by 8.2% in 2011, down from an estimated rate of 8.6% in 2010, ADB said. Agricultural output, strong private consumption and exports all supported growth in 2010, it said.

But inflationary pressures have led the Reserve Bank of India to hike interest rates eight times in about a year, while the government has adopted tighter fiscal targets. This year, these policies will "also remain less accommodating than in the past," while "high oil prices remain a threat," ADB said. However, it expects growth to bounce back to 8.8% in 2012 "as investment and overall economic activity pick up and as planned reforms move forward."

Standard & Poor's Ratings Services on Wednesday affirmed the 'BBB-' long-term and 'A-3' short-term unsolicited sovereign credit ratings on India. The outlook on the long-term rating is stable, it said. The ratings on India reflect the country's good economic growth prospects and its fairly strong external position. Positive investment trends further underpin the ratings, with foreign direct investment and portfolio investments covering a large share of the current account deficit. Nevertheless, the country's weak fiscal profile and structural problems temper its strengths. Structural problems not only constrain efficiency but also preclude a large share of the population from benefiting from the country's rising prosperity, it added.

A survey showed on Tuesday that growth in India's service sector slowed in March from February's blistering seven-month high as new business growth moderated slightly, while price pressures, particularly wages, continued to rise. The seasonally adjusted HSBC Markit Business Activity index, based on a survey of over 450 companies, slipped to 58.8 in March 2011 from 60.2 in February 2011, but remained above the 50 mark that denotes expansion for the 23rd consecutive month.

On the political front, the first phase of assembly polls took place in Assam on Monday, 4 April 2011 in 62 of the 126 assembly constituencies. The second and concluding phase of elections will be held on 11 April 2011 in the remaining 64 constituencies. Assam elections will be followed by elections in Tamil Nadu, Puducherry, West Bengal and Kerala in two months between April and May. While Assam will have two-phased poll, Tamil Nadu, Kerala and Puducherry in one phase and West Bengal in six phases ending on 10 May 2011. The vote count is scheduled for 13 May 2011 for elections held in all the five states.

European stocks held in a tight range Thursday after the Bank of England left interest rates on hold, as expected, and European Central Bank hiked key lending rate to 1.25% from 1%. The key benchmark indices in UK and Germany fell 0.18% and 0.12% respectively. France's CAC 40 rose 0.06%.

The Bank of England has held its base lending rate at an all-time low of 0.5%, despite mounting concerns about high inflation. The Bank's Monetary Policy Committee on Thursday also announced no new funding for its economic stimulus program of asset purchases, known as quantitative easing.

Portugal's caretaker government gave in to market pressures on Wednesday and joined Greece and Ireland in seeking an emergency bailout. The decision came after the government was forced to pay much higher rates to sell more debt.

Asian stocks were mixed on Thursday after Portugal became the latest European country to plead for a bailout. The key benchmark indices in China, Indonesia, Singapore and Taiwan rose by between 0.04% to 0.56%. The key benchmark indices in Hong Kong and South Korea fell by between 0.01% to 0.21%.

Japanese stocks rose 0.07% off day's high after the Bank of Japan further eased its monetary policy, while leaving policy rates unchanged at the end of its two-day meeting. The Bank of Japan said Thursday that its policy board unanimously voted to keep its overnight call rate range from zero to 0.1%, and it also established a special lending facility for financial institutions in areas hit by the 11 March 2021 earthquake and tsunami.

US markets inched forward in relatively light volume on Wednesday, with investors adding selectively and avoiding large bets ahead of earnings.

US index future moved between the gains and losses throughout the day today. Trading in US index futures indicated that the Dow could gain 4 points at the opening bell on Thursday, 7 April 2011.