Sensex, Nifty rebound from 3-week lows as IMD forecasts normal rains

Hopes that the India Meteorological Department (IMD) will predict normal rains this year helped the key benchmark indices end in positive territory today, 19 April 2011. As expected, the IMD after trading hours forecast normal rains this year. The BSE 30-share Sensex advanced 30.66 points or 0.16%, up close to 146 points from the day's low and off close to 80 points from the day's high. A slide in crude oil prices and gains in European stocks aided intraday recovery on the domestic bourses after the key benchmark indices -- the barometer BSE Sensex and the 50-unit S&P CNX Nifty hit 3-week low earlier in the day. Trading was volatile throughout the session.




The barometer index settled above the psychological 19,000 mark after falling below that level in morning trade. The market breadth was negative.

Index heavyweight Reliance Industries (RIL) edged higher in volatile trade. Two other index heavyweights Larsen & Toubro and ICICI Bank also ended higher. Most IT stocks gained on bargain hunting. Most auto stocks fell on concerns higher interest rates could crimp auto sales. Some interest rate sensitive realty reversed initial losses. PSU OMCs jumped as crude oil prices eased. HDFC Bank gained on strong Q4 result. FMCG stocks fell on profit taking. Fertilizer shares moved higher on hopes of good rainfall.

Volatility was the order of the day right from the onset of the trading session. The key benchmark indices moved between positive and negative terrain in early trade. The market weakened to hit 3-week lows in morning trade weighed by weak Asian stocks. Volatility ruled the roost as the key benchmark indices pared gains after reversing initial losses to hit fresh intraday highs in mid-morning trade. The market held positive zone in early afternoon trade.

The key benchmark indices regained strength soon after erasing most of the intraday gains in afternoon trade as European stocks rose in early trade. The market once again slipped into the red in mid-afternoon trade. The market regained positive zone in late trade.

The BSE 30-share Sensex was up 30.66 points or 0.16% to 19,121.83. The index gained 110.75 points at the day's high of 19,201.92 in mid-morning trade. The Sensex shed 114.98 points at the day's low of 18,976.19 in morning trade, its lowest level since 29 March 2011.

The S&P CNX Nifty was up 11.65 points or 0.20% to 5,740.75. The Nifty hit low of 5,693.25 in morning trade, its lowest level since 29 March 2011.

The BSE Mid-Cap index rose 0.36%. The BSE Small-Cap index gained 0.29%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was negative. On BSE, 1476 shares declined while 1389 shares advanced. A total of 116 shares remained unchanged.

Large bulk deals in Cairn India counter lifted turnover on BSE to Rs 12881 crore from Rs 3391.27 crore on Monday, 18 April 2011.

Among the 30-member Sensex pack, 18 advanced while the rest declined.

Index heavyweight Reliance Industries (RIL) rose 0.12% to Rs 1011.35. The stock was volatile. It hit a high of Rs 1017.90 and low of Rs 999. The company will announce its Q4 result on Thursday, 21 April 2011. The market has been abuzz with talks that the company's plans for the financial sector will be high on the agenda and final details of the deal with DE Shaw would be discussed at RIL's board meet on Thursday, 21 April 2011, when RIL announces Q4 result. RIL, last month formed a joint venture with DE Shaw group, to offer an array of financial services. But, it did not share the investment plans or equity structure or even the leadership of the new venture.

RIL, last week, said it has started work on large polyester projects in India to consolidate its position as the world's largest integrated polyester producer. RIL said it has planned its capacity expansion in phases over the next few years including a 2.30 million metric tonne at Dahej, Gujarat, with an ability to increase the capacity by another 1.15 million tonne at a later stage. The expansion also includes a 3.95 lakh tonne of polyester filament yarn and 1.4 lakh tonne polyester texturized yarn at Silvassa.

Cairn India rose 2.29% to Rs 344.25 after Vedanta Resources reportedly bought 11% stake in Cairn India from Petronas in block deals executed on BSE in early trade today.

State-run oil marketing companies (PSU OMCs) rose as crude prices fell sharply on Monday after ratings agency S&P revised lower its US credit outlook to negative and OPEC ministers said high crude prices could place a major strain on consumer countries' economies. HPCL (up 3.56%), BPCL (up 2.69%) and Indian Oil Corporation (up 2.68%), rose.

Lower crude oil prices could decrease under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

IT pivotals rose on bargain hunting after last two days' fall triggered by disappointing guidance from IT bellwether Infosys unveiled on Friday, 15 April 2011.

India's largest software services exporter TCS rose 1.32%, recovering from last two days' 4.9% slide. The company will announce Q4 result on Thursday, 21 April 2011. India's third largest software services exporter Wipro rose 1.16%, snapping last two days' losses. The company declares its Q4 result on 27 April 2011. HCL Technologies gained 2.53% ahead of Q3 result tomorrow, 20 April 2011.

A weak rupee also supported IT stocks. The rupee fell to a 2-1/2-week before staging a strong intraday rebound. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

But, India's second largest software services exporter and index heavyweight Infosys fell 0.64% to Rs 2,886.70, extending last two days' 12.12% slide triggered by the company's disappointing earnings growth forecast for the year ending March 2012 (FY 2012).

Infosys has projected 8% to 10% growth in earnings per American Depositary Share (ADS) as per International Financial Reporting Standards at $2.83 to $2.88 for the year ending March 2012 (FY 2012) over the year ended March 2011 (FY 2011). The projected growth in earnings is much lower than the projected revenue growth for the current year -- Infosys has projected 18% to 20% growth in revenue at $7.13 billion to $7.25 billion for the year ending March 2012 (FY 2012) over the year ended March 2011 (FY 2011).

Anil Ambani-controlled Reliance Infrastructure rose 0.39%. The company, after market hours today, 19 April 2011, said it bought-back 1 lakh equity shares today under its buyback programme. The company commenced its up to Rs 1000-crore share buyback offer on 11 April 2011.

Reliance Infrastructure has said that the buyback is mainly aimed at reducing short-term volatility in the firm's share price as well as discourage speculative activity in its stock. The buy-back worth up to Rs 1000 crore would be funded from investments made by the company in liquid and marketable securities.

Index heavyweight Larsen & Toubro rose 1.62%. The board of directors of the company early this month approved seeking shareholders' approval for transfer of the electrical and automation (E&A) business of the company to a subsidiary or associate company or to any other entity as a going concern. L&T said this restructuring of the business is required so that it is able to realize its full growth potential and participate comprehensively in the growth of the industry.

The electrical and automation business of L&T offers products and solutions in the electrical distribution and industry automation space. This division is a leader in low voltage switchgear market in India. Over the years, the division has extended the portfolio to become an integrated solutions provider for its customers.

Telecom stocks rose on renewed buying. India's second largest mobile services provider by sales Reliance Communications gained 2.08%. Idea Cellular rose 1.87%.

India's largest mobile services provider by sales Bharti Airtel rose 2.18%. The company is reportedly revamping the top deck of its various mobile businesses across South Asia and Africa to consolidate similar management functions in different entities under a single leadership, its biggest rejig in more than a year.

India's second largest private sector bank by net profit HDFC Bank rose 1.40% on strong Q4 results and on announcement of 5-for-1 stock split. Net profit rose 33.23% to Rs 1114.71 crore on 34.38% rise in total income to Rs 6724.31 crore in Q4 March 2010 over Q4 March 2010. The board of directors of the bank also approved a 5-for-1 stock-split while approving the results. The result and stock-split announcements were made after trading hours on Monday, 18 April 2011.

India's largest private sector bank by net profit ICICI Bank rose 0.74% to Rs 1090.20 off the day's low of Rs 1073.20. The bank will announce Q4 result on 28 April 2011.

India's largest state run bank by net profit and branch network State Bank of India (SBI) declined 0.52% to Rs 2738.55. The bank said after market hours today, 19 April 2011, that it will revise its benchmark prime lending rate and base rate upwards by 25 basis points (bps) each to 13.25% per annum and 8.50% per annum respectively, effective from 25 April 2011.

Some interest rate sensitive realty stocks reversed initial losses. Sunteck Realty, Sobha Developers, DLF, Anant Raj Industries, Orbit Corporation, Peninsula Land and Parsvnath Developers rose by 0.22% to 4.38%. Unitech was flat recovering from initial losses.

Most auto stocks fell on concerns higher interest rates could crimp auto sales. Purchases of automobiles, including that of cars, two-wheelers, utility vehicles and commercial vehicles are substantially driven by financing.

India's largest bike maker by sales Hero Honda Motors fell 4.64% on profit taking. The stock had jumped 13.7% during the past three trading sessions, boosted by the announcement of a liberal interim dividend of Rs 70 per share for the year ended March 2011. 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.

India's largest truck maker by sales Tata Motors declined 0.38%, with the stock falling for the third straight day. The company late last week said its global vehicle sales rose 9% to 1.10 lakh units in March 2011 over March 2010. Global sales of commercial vehicles grew 19% to 56,814 in March, while sales of passenger vehicles were at 53,971 units, the company said in a statement. Jaguar and Land Rover (JLR) sales rose 2% to 24,101 units, driven by an 8% rise in Land Rover sales. Tata Motors bought the British luxury brand unit JLR from Ford Motor Co for $2.3 billion in 2008.

Meanwhile, Tata Motors has reportedly cut its passenger car production to trim stocks.

India's top small car maker by sales Maruti Suzuki India declined 0.82%. The company will announce its Q4 result on 25 April 2011. The company had recently announced that it will 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 rose 1.06%, reversing initial losses. 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 4 April 2011.

India's leading farm equipment maker by sales Mahindra & Mahindra (M&M) rose 0.66%, reversing initial decline on reports company is in talks with Japanese major Mitsubishi for a global strategic alliance to source farm equipment products including tractors as it looks to expand presence in major markets across the globe.

FMCG stocks fell on profit taking. Hindustan Unilever, Godrej Consumer Products, ITC, Dabur India, United Breweries, Britannia Industries, United Spirits, Marico, Colgate-Palmolive (India) and Nestle India fell by 0.08% to 1.20%.

Fertiliser stocks rose across the board on expectation of normal monsoon season this year. Nagarjuna Fertilizers, Chambal Fertlisers and Chemicals, Coromandel International, Rashtriya Chemicals and Fertilizers, National Fertilizers and Tata Chemicals rose by 0.69% to 3.75%.

Cairn India clocked the highest turnover of Rs 9919.22 crore on BSE. Infosys Technologies (Rs 160.71 crore), Pipavav Shipyard (Rs 84.98 crore), State Bank of India (Rs 77.25 crore) and C Mahendra Exports (Rs 63.34 crore), were the other turnover toppers on BSE in that order.

Cairn India reported a highest volume of 29.91 crore shares on BSE. Himachal Futuristic Communication (1.59 crore shares), Cals Refineries (1.24 crore shares), Pipavav Shipyard (97.32 lakh shares) and Development Credit Bank (78.49 lakh shares), were the other volume toppers on BSE in that order.

The near term major trigger for the market is Q4 March 2011 results of India Inc. 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. High global commodity prices will add to pressure on profit margins of Indian firms.

The combined net profit of a total of 65 companies rose 27.3% to Rs 4839 crore on 26.6% rise in sales to Rs 42218 crore in Q4 March 2011 over Q4 March 2010.

Meanwhile, India Meteorological Department (IMD) has predicted the southwest monsoon 2011 to be 98% (normal) of the long period average (LPA) with a model error of plus/minus 5%. IMD has indicated that there is very low probability for the season rainfall to be deficient (below 90% of LPA) or excess (above 110% of LPA).

The IMD released its initial forecast for the June to September monsoon after market hours today, 19 April 2011. The forecast is made in two stages in April and in June. The forecast for the season as a whole (June-September) is issued in the first stage.

Normal monsoon could help ease food inflation and boost rural income. The quantity and geographical spread of rainfall during the monsoon season is crucial for India's agriculture sector as the country lacks irrigation facilities on more than half of its farm land.

The South Asia Climate Outlook Forum last week predicted that South Asia is likely to receive normal monsoon rains in 2011. It said the La Nina weather phenomenon, which aids monsoon in the region, would continue until June.

With inflation remaining above its comfort level, 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.

Investors today, 19 April 2011, took solace in cooling off crude oil prices. A sharp surge in global crude oil prices over the past few months had raised macroeconomic worries. India imports majority of its crude oil requirements and high oil prices had raised concerns about widening current account deficit. High oil prices had 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 down 92 cents or 0.86% at 106.20 a barrel.

European shares gained on Tuesday, 19 April 2011, after strong earnings news lifted investor sentiment, with both SKF and Burberry beating consensus forecasts. However, investors were cautious ahead of results in the United States from banking heavyweight Goldman Sachs and technology groups IBM and Intel Corp. The key benchmark indices in UK, France and Germany were up by 0.53% to 0.76%.

Asian stocks fell after rating agency Standard & Poor's on Monday, 18 April 2011, downgraded outlook on its US sovereign rating to negative from stable. The key benchmark indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan fell by between 0.6% to 1.87%. Indonesia's Jakarta Composite rose 0.15%.

US index futures reversed initial losses. Trading in US index futures indicated that the Dow could gain 17 points at the opening bell on Tuesday, 19 April 2011.

US markets fell more than 1% on Monday as sovereign debt fears on both sides of the Atlantic and China's monetary tightening hurt the outlook for global economic growth. US states' credit ratings are not expected to change as a result of the negative outlook on the United States, Standard & Poor's said on Monday. The credit rating company on Monday for the first time downgraded its outlook on US debt to negative, citing the large budget deficit and a lack of clarity in the government's ability to improve its fiscal situation.

Fresh fears that Greece will have to restructure its mountain of debt, possibly as early as this summer, sent the euro and some euro zone bond prices tumbling on Monday as the bloc's debt crisis escalated.