Market scales 4-week high as FIIs step up buying

The key benchmark indices gained for the second straight day to attain their highest closing level in more than 4 weeks as data showing heavy buying by foreign funds on Tuesday, 31 May 2011, boosted sentiment. The BSE Sensex was up 105.53 points or 0.57%, up close to 95 points from the day's low and off close to 25 points from the day's high. The market breadth was strong.

Capital goods stocks gained. M&M edged higher on strong auto sales in May 2011. Tata Motors declined on reporting weak passenger car sales for May 2011. ACC gained on strong cement dispatches in the month just gone by. Index heavyweight Reliance Industries (RIL) dropped. Telecom stocks were in demand. IT pivotals, too, rose on renewed buying. Realty stocks edged lower. Power generation and distribution firms were in demand. Shares of Reliance Anil Dhirubhai Ambani (ADA) group rose across the board. Sugar stocks recovered from recent losses.



The market pared gains after a firm start. The market soon regained strength. The market surged to fresh intraday high in morning trade. A bout of volatility was witnessed in mid-morning trade as the key benchmark indices regained strength after hitting fresh intraday lows in mid-morning trade soon after a private survey showed growth in manufacturing sector eased in May 2011. Stocks moved in a narrow range in early afternoon trade. A bout of volatility was witnessed as the key benchmark indices regained strength soon after paring gains in early afternoon trade. The market retained positive zone in mid-afternoon trade. The market surged in late trade.

Foreign institutional investors (FIIs) bought shares worth a net Rs 1323.90 crore from the secondary equity markets on Tuesday, 31 May 2011, much higher than Monday's (30 May 2011) inflow of Rs 342.90 crore.

The BSE Sensex was up 105.53 points or 0.57% to 18,608.81, its highest closing level since 2 May 2011. The Sensex jumped 132.84 points at the day's high of 18,636.12 in morning trade. The index rose 11.38 points at the day's low of 18,514.66 in mid-morning trade.

The S&P CNX Nifty was up 31.85 points or 0.57% to 5,592, its highest closing level since 2 May 2011. The Nifty hit high of 5,597.35 in late trade.

The BSE Mid-Cap index rose 0.82% and the BSE Small-Cap index rose 0.87%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was strong. On BSE, 1789 shares advanced while 1030 shares declined. A total of 134 shares remained unchanged.

Among the 30-member Sensex pack, 22 stocks rose while the rest of them fell.

BSE clocked turnover of Rs 2699 crore, lower than Rs 3031.45 crore on Tuesday, 31 May 2011.

Index heavyweight Reliance Industries (RIL) fell 0.53% to Rs 946.75, after hovering between the day's low of Rs 943.80 and the day's high of Rs 958. RIL is reportedly buying regasified liquified natural gas (R-LNG) from Royal Dutch Shell and Petronet LNG at double the price. The move comes in the wake of shortage of natural gas from its D6 fields in the Krishna-Godavari (KG) basin.

Power generation and distribution firms were in demand. Tata Power Company rose 1.11% after company said during market hours today that it has launched an offering of perpetual debentures of Rs 1500 crore. The unique feature of the debentures is that they are perpetual in nature with no maturity or redemption and are callable only at the option of the company. The coupon (which may be deferred at the company's option) on the debentures is set at 11.4% per annum with a step up provision if the debentures aren't called after 10 years. These debentures rank senior only to share capital of the company. This provides equity characteristics to these 'hybrid' debentures.

Tata Power had said after market hours on Tuesday that rating agency CRISIL has assigned 'AA/Positive' rating to the company's issue of Rs 1500 crore unsecured, listed, subordinated perpetual debentures. CRISIL has accorded 50% equity content to this instrument. It implies that CRISIL, in its analysis of Tata Power's capital structure and financial ratios, will treat 50% of the principal amount as equity and the other half as debt, the company said.

State-run power generation major NTPC rose 3.43% and Reliance ADA group power generation firm Reliance Infrastructure gained 1.81%

Cement maker ACC rose 1.63% after company said during market hours today that cement dispatches rose 13.71% to 1.99 million tonnes in May 2011 over May 2010.

Among other cement stocks, UltraTech Cement, India Cements and Ambuja Cement rose by between 0.66% to 3.1%.

Reliance ADA group firm Reliance Communications (RCom) jumped 4.81%, extending Tuesday's 2.17% gain triggered by the company's announcement that it will initiate due diligence for selling stake in its tower unit -- Reliance Infratel. Reliance Infratel during trading hours on Tuesday said that the board of RCom was informed of the receipt of formal indicative offers from several interested parties for the acquisition of RCom's controlling interest in Reliance Infratel. The board noted that based on the indicative offers, completion of such a transaction would facilitate RCom's stated objectives of achieving a substantial reduction of its overall debt position, and staying well within its target long term leverage ratios. Accordingly, the board has approved taking the process to the next stage of detailed due diligence etc., with a view to completing such a potential transaction at the earliest.

India's largest listed cellular services provider by sales Bharti Airtel advanced 1.95% while Idea Cellular rose 2.19%

Reliance ADA Group stocks rose almost across the board. Reliance Capital, Reliance MediaWorks and Reliance Power gained by between 1.65% to 4.72%

Mahindra & Mahindra (M&M) rose 0.52% after company announced a 20% rise in its auto sales to 34,323 units in May 2011 over May 2010. The figures were announced during trading hours today. Speaking on the May 2011 sales numbers, Rajesh Jejurikar, CEO, Automotive Division, M&M said, "We are happy with the 20% growth that we have clocked in May 2011. All our brands have been doing well, with the recently launched Verito having sold 1,290 vehicles, almost three times last May".

India's top truck maker by sales Tata Motors slipped 1.19% as the firm's domestic passenger car sales declined 8.25% to 21,549 unit in May 2011 over May 2010. The passenger car sales include Tata and Fiat vehicles. Sales of commercial vehicles in the domestic market rose 19% to 37,361 units in May 2011 over May 2010. Tata Motors' total sales including exports of commercial and passenger vehicles rose 9.7% to 62,296 vehicles in May 2011 over May 2010.

India's largest car maker by sales Maruti Suzuki India rose 1.74% after company said during market hours today that total sales rose 1.9% to 1.04 lakh units in May 2011 over May 2010. Domestic sales rose 3.9% to 93,519 units. Exports fell 13% to 10,554 units.

India's top bike maker by sales Hero Honda Motors gained 0.44%, with the stock gaining for the second straight day.

India's second largest bike maker by sales Bajaj Auto fell 0.43%, with the stock snapping three days' gains. Net profit surged 164.89% to Rs 1400.39 crore on 23.54% rise in total income to Rs 4199.97 crore in Q4 March 2011 over Q4 March 2010. Huge extraordinary (EO) income boosted Bajaj Auto's net profit in Q4 March 2011. The result was announced on 18 May 2011.

TVS Motor Company jumped 2.68% after total sales rose 18.4% to 1.85 lakh units in May 2011 over May 2010. Total two wheeler sales grew 18% to 1.81 lakh units. Domestic two wheeler sales rose 16% to 1.58 lakh units. Scooter sales rose 20% at 38,168 units. Motorcycles were up 11% at 75,619. Exports rose 42% to 26,168.

Capital goods stocks rose on renewed buying. Larsen & Toubro, Bhel, Siemens, Praj Industries and Thermax rose by between 0.24% to 2.33%.

IT stocks extended recent gains. India's second largest software services exporter Infosys rose 0.72% with the stock gaining for the second straight day. The IT firm last week said it had received a subpoena from a grand jury in a US district court that requires the company to provide certain documents and records related the company's sponsorships for and uses of B1 business visas. Infosys said it intends to comply with the subpoena and to cooperate with the investigation.

India's largest software services exporter TCS gained 1.42%, with the stock gaining for the fifth straight day. The company announced during market hours today said Ahli Brokerage QSC has selected company's TCS BaNCS product to extend its brokerage footprint in the Middle East.

India's third largest software exporter Wipro rose 0.32%, with the stock gaining for the fourth straight day. The company announced after market hours today that the Jammu and Kashmir state government has selected the company for automating its state power distribution department.

Realty major DLF fell 0.9% on profit taking after a recent rally. DLF, last week, said it is focusing on high margin residential projects. In the commercial leasing segment, the company's strategy is to increase average rentals and focus on leasing of semi-finished and ready-to-occupy properties. DLF also said it intends to strengthen operational cash flows and enhance momentum on non-core divestments. The company said it will moderate investments in land aggregation and capex. DLF said it has raised its overall target for asset divestments to Rs 10000 crore from Rs 4500 crore (ex wind power) previously.

DLF said the genuine actual user consumer/corporate demand both in both the residential and commercial leasing segments continues to be healthy. However, speculative demand has petered out and investment demand has slowed down considerably as the financing cost equation has changed for the worse, the realty major said. DLF said product pricing by developers will be done keeping the current/future inflationary trends in mind in an attempt to retain product profitability/margins.

Banking stocks were mixed. India's largest private sector bank by net profit ICICI Bank fell 0.09%. The bank announced on 20 May 2011 that it has successfully priced issue of 5.5 year $1 billion international bond offering. The bonds carry a coupon rate of 4.75%.

India's second largest private sector bank by net profit HDFC Bank gained 0.04%, with the stock gaining for the fifth straight day. The bank raised its base rate by 55 basis points (bps) to 9.25% per annum and prime lending rate (PLR) by 50 bps to 17.75% effective 12 May 2011.

India's largest commercial bank by branch network State Bank of India (SBI) rose 1.39%, with the stock gaining for the fifth straight day, on bargain hunting after a steep slide triggered by weak Q4 results. Net profit slumped 98.88% to Rs 20.88 crore on 18.07% rise in total income to Rs 26536.84 crore in Q4 March 2011 over Q4 March 2010. The result was announced on 17 May 2011.

Cigarette maker ITC rose 0.28% to Rs 193.90. The stock hit record high of Rs 195 today, 1 June 2011.

Most other FMCG stocks rose after data on Tuesday showed that farm output rose a strong 7.5% in Q4 March 2011. Hindustan Unilever, Britannia Industries and Nestle India rose by between 0.52% to 1.67%.

India's largest steel maker by sales Tata Steel fell 1.17%, reversing initial gains. The company said after market hours on Tuesday that it has completed the transaction and received the relevant consideration for the transfer of 51% equity shares of Tata Refractories out of its total stake of 77.46% to Krosaki Harima Corporation of Japan at an equity valuation of Rs 1130 crore.

Most metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange, gained 0.74% on Tuesday, 31 May 2011. Sesa Goa, Nalco, NMDC, Hindalco Industries, Sail, Sterlite Industries, Sail and Jindal Steel & Power rose by between 0.1% to 2.73%.

Aviation stocks rose on reports state-run oil marketing companies have cut jet fuel prices by about 4%, effective today, 1 June 2011. Jet fuel accounts for about 40% of the operating cost for airline companies. Kingfisher Airlines, Jet Airways and SpiceJet rose by between 0.94% to 1.53%.

Sugar stocks recovered from recent losses triggered by weak global sugar prices. Bajaj Hindusthan, Balrampur Chini Mills and Shree Renuka Sugars rose by between 2.66% to 4.02%.

KS Oils clocked highest volume of 90.62 lakh shares on BSE. Sanghvi Forging (89.98 crore shares), Cals Refineries (86.04 lakh shares), Mahindra Satyam (65.35 lakh shares) and Paramount Printpackaging (62.16 lakh shares) were the other volume toppers in that order.

Aanjaneya Lifecare clocked highest turnover of Rs 116.18 crore on BSE. State Bank of India (Rs 112.06 crore), Sanghvi Forging (Rs 72.16 crore), Coal India (Rs 60.38 crore) and Tata Steel (Rs 59.98 crore) were the other turnover toppers in that order.

On the macro front, India's infrastructure sector output grew 5.2% in April from a year earlier, slower than an annual growth of 7.4% in March, government data showed on Wednesday. The infrastructure sector accounts for 26.7% of India's industrial output.

India's merchandise exports rose 34% to $23.8 billion in April 2011 over April 2010, while imports for the month rose 14% to $32.8 billion over April 2010, government data released on Wednesday showed. Oil imports rose 7.7% to $10.2 billion. The trade deficit in April 2011 was at $9 billion.

Growth in India's manufacturing sector eased slightly in May as the pace of new orders slowed, but factories' input and output prices continued to rise sharply. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 companies, edged down to 57.5 in May from 58.0 in April, weighed down by a slower expansion rate for new orders and a labour shortage.

The Indian economy grew by a slower-than-expected 7.8% in Q4 March 2011 and also slower than a revised 8.3% growth in Q3 December 2010, data showed on Tuesday. The manufacturing sector output rose 5.5% and farm output rose 7.5% in Q4 March 2011. The GDP grew 8.5% in the fiscal year ended March 2011, higher than 8% growth in the previous fiscal year.

The annual monsoon rains have hit Kerala two days earlier than expected this year, boosting prospects for a harvest that could spur Asia's third-largest economy. The 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).

Good rains would help ease food inflation and boost rural income. Rainfall that comes within 96% to 104% of the long-term average is considered a normal monsoon season, but this alone doesn't guarantee a good crop. The timing and spread of the rains are equally important. The quantity and geographical spread of rainfall during the monsoon season is crucial for India's agriculture sector, which lacks irrigation facilities on more than half its farm land. Monsoon rains usually enter India's mainland through the southern state of Kerala in the first week of June, gradually progressing to cover most of central and northern India by July, before retreating in September.

European stocks fell as an index benchmarking euro-zone manufacturing firms fell to a seven-month low in May 2011. The key benchmark indices in France, Germany and UK shed by between 0.06% to 0.18%.

The final euro-zone manufacturing-purchasing-managers index, compiled by the London data provider Markit, fell to 54.6 in May 2011 from 58 in April 2011. The decline in the index was the sharpest since November 2008, Markit said, "as manufacturers reported slower rates of increase in output, new orders, employment and inventory accumulation." The report said that in all the countries covered, the purchasing-managers indexes "signaled a broad-based slowdown in the pace of recovery, with headline indexes retreating from their April levels."

Most Asian stocks rose on Wednesday tracking overnight gains in US stocks. The key benchmark indices in Indonesia, Singapore, China, Japan and Taiwan rose by between 0.02% to 0.82%. The key benchmark indices in South Korea and Hong Kong fell 0.05% and 0.24% respectively.

A privately compiled version of the China Purchasing Managers' Index slipped to a 10-month low of 51.6 in May 2011 from 51.8 in April 2011. HSBC said its PMI survey, compiled by Markit and released Wednesday, "pointed to only modest growth of China's manufacturing sector, as both output and new orders rose at marginally slower rates." It also said input-cost inflation slowed to a nine-month low for the month, "but remained strong nonetheless." An official Chinese version of the PMI, released earlier Wednesday, printed at 52, slowing from 52.9 in April

Trading in US index futures indicates that the Dow could fall 13 points at the opening bell on Wednesday, 1 June 2011. Investors will eye the outcome of a survey on the performance of the manufacturing sector in US due later in the global day.

The Federal Reserve's second round of quantitative easing or QE2, a temporary policy designed to increase the money supply, keep interest rates low and stimulate the economy, ends on 30 June 2011.