Sensex, Nifty attain 2-1/2-week closing highs

Indian stocks shrugged off weak global cues and gained for the second straight day, led by telecom stocks, which rose on hopes other carriers would follow Bharti Airtel by raising call rates. A reform initiative from the government to open up multi-brand retail boosted sentiment. However, shares of most organized retailers fell on profit taking after recent strong gains. The barometer index BSE Sensex and the 50-unit S&P CNX Nifty attained 2-1/2-week closing highs. The Sensex rose 148.99 points or 0.8%, up close to 200 points from the day's low and off close to 61 points from the day's high.



The market breadth was positive. Index heavyweight Reliance Industries (RIL) edged higher after the government after trading hours on Friday, 22 July 2011, cleared RIL's proposed $7.2 billion asset sale to BP PLC. State-run power giant NTPC gained after the company reported 12.7% growth in first quarter bottom line. Sterlite Industries gained on strong Q1 result. Capital goods stocks rose.

Bharti Airtel hit 52-week high on reports that the company has hiked prepaid call rates in six telecom circles. Other telecom stocks also gained on hopes that other telecom players will follow suit after Bharti's hike in call rates, with Idea Cellular hitting 52-week high. Reliance Communications surged 14%. Realty stocks reversed initial losses. Auto stocks rose on expectations that sales will pick up in the second half of the year.

The market edged lower in early trade on US debt worries. The market trimmed gains after reversing initial losses to hit fresh intraday high in morning trade. Intraday volatility continued as the key benchmark indices trimmed losses after slipping once again into the red in mid-morning trade. Volatility continued as the Sensex alternately moved between positive and negative terrain in early afternoon trade. The market came off lows in afternoon trade. The market surged to fresh intraday high in mid-afternoon trade. The market pared gains in late trade.

The BSE Sensex rose 148.99 points or 0.80% to 18,871.29, its highest closing level since 7 July 2011. The Sensex jumped 209.97 points at the day's high of 18,932.27 in mid-afternoon trade. The index fell 51.46 points at the day's low of 18,670.84 in early trade.

The S&P CNX Nifty rose 46.35 points or 0.82% to 5,680.30, its highest closing level since 7 July 2011. The Nifty hit high of 5,700.55 in intraday trade.

The BSE Mid-Cap index was up 0.49% and the BSE Small-Cap index was up 0.50%. Both these indices underperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,609 shares advanced and 1,274 shares declined. A total of 121 shares remained unchanged.

BSE clocked turnover of Rs 2957 crore, lower than Rs 3187.31 crore on Friday, 22 July 2011.

From the 30-share Sensex pack, 24 stocks rose and the rest fell.

Index heavyweight Reliance Industries (RIL) rose 0.98% to Rs 882.15 after the government on Friday approved RIL's proposed $7.2 billion asset sale to BP PLC. The stock hit a high of Rs 892.95 and a low of Rs 880. RIL and BP have been waiting for approval from the government since February 2011 when RIL agreed to sell a 30% stake to BP in 23 oil and gas blocks for $7.2 billion plus another $1.8 billion linked to exploration success. The deal includes the D6 block in the Krishna-Godavari basin, India's richest gas find so far, and RIL has already received $2 billion from BP.

Oil Minister Jaipal Reddy said his ministry recommended the Cabinet Committee on Economic Affairs to approve the deal for 21 blocks as there were some technical issues over two non-producing blocks. The ministry may in future grant or refuse consent on the two blocks, he added.

RIL is expected to gain from BP's deep-water drilling expertise to increase gas production. Several technical and geological issues have resulted in gas output from RIL's KG-D6 block falling below 50 million metric standard cubic meters per day from 60 million metric standard cubic meters per day last year. As per the agreement, BP and RIL will also establish an equally owned joint venture for the sourcing and marketing of natural gas in India. That venture doesn't require government approval.

RIL's net profit rose 16.69% to Rs 5661 crore on 39.1% increase in net sales to Rs 81018 crore in Q1 June 2011 over Q1 June 2010. The growth in both net profit and net sales topped market expectations. RIL was seen reporting 15.44% growth in net profit to Rs 5600.35 crore on 28.7% growth in net sales to Rs 74951.47 crore in Q1 June 2011 over Q1 June 2010, as per average estimate of 10 brokerages. The result hit the market after trading hours today, 25 July 2011.

India's largest engineering and construction company Larsen & Toubro (L&T) rose 1.47% to Rs 1852.40, extending Friday's 1.98% gain. L&T Finance Holdings, a unit of L&T, has set a price band of Rs 51-59 a share for its Rs 1245 crore initial public offering (IPO). L&T Finance Holdings' IPO opens for bidding on 27 July 2011. Subscriptions will close on 29 July 2011.

Bharat Heavy Electricals (Bhel) rose 1% to Rs 1,993 on expectations of good Q1 results tomorrow, 26 July 2011. A strong execution of the large order book will help power equipment major Bhel report decent Q1 results tomorrow, 26 July 2011.

Among other capital good stocks, Reliance Industrial Infrastructure, Thermax, Punj Lloyd, Siemens, ABB, Lakshmi Machine Works, BEML, BGR Energy and Havells India rose 0.28% to 1.82%.

Suzlon Energy rose 3.02% to Rs 54.50 after the company's subsidiary signed an irrevocable undertaking to accept an offer from ZF Friedrichshafen AG and to sell its 26.06% equity interest in Hansen Transmissions International NV, Belgium for about $187 million.

Bank stocks rose ahead of Reserve Bank of India's monetary policy review tomorrow, 26 July 2011. Punjab National Bank, Bank of Baroda, Yes Bank, IndusInd Bank, IDBI Bank, Kotak Mahindra Bank, Canara Bank and Federal Bank rose 0.03% to 2.60%.

India's largest private sector bank by net profit ICICI Bank gained 0.55%, reversing initial losses triggered by reports that the bank has raised deposit rates by 25-75 basis points in select term deposits. The rate increase is effective from 22 July 2011. According to reports, for deposits below Rs. 15 lakh, the bank would offer 6.25% for maturity of 46-60 days, 6.5% for maturity of 61-90 days, and 9.25% for maturity of 390 days.

ICICI Bank had increased its benchmark prime lending rate (BPLR) and base rate by 25 basis points each this month. The base rate is now 9.50%, while the BPLR is 18.25%.

India's second largest private sector bank by net profit HDFC Bank rose 0.74%, reversing initial losses. The bank's net profit jumped 33.67% rise in net profit to Rs 1084.98 crore on 31.2% growth in total income to Rs 7098 crore in Q1 June 2011 over Q1 June 2010. The result was announced on 19 July 2011.

India's largest commercial bank by branch network State Bank of India (SBI) rose 0.79%, extending Friday's 1.7% gain.

Axis Bank rose 3.10%, extending Friday's 4.64% gain triggered by good Q1 results. Net profit rose 27.02% to Rs 942.35 crore on 16.69% growth in total income to Rs 1167.87 crore in Q1 June 2011 over Q1 June 2010. The bank announced the Q1 result during trading hours on Friday, 22 July 2011.

Metal stocks extended recent gains triggered by Hindustan Zinc's strong Q1 results announced last week. Hindalco Industries, Steel Authority of India, NMDC, Tata Steel, Jindal Steel & Power, Jindal Saw, Bhushan Steel and JSW Steel rose by 0.01% to 2.32%.

Sterlite Industries gained 2.25% to Rs 172.45 after company announced during market hours today that consolidated net profit rose 62.6% to Rs 1639.73 crore on 65.57% rise in total income to Rs 9860.70 crore in Q1 June 2011 over Q1 June 2010. The result hit at the market at the fag end of the trading session today, 25 July 2011.

Hindustan Zinc rose 0.84% to Rs 143.50, extending gains for sixth session triggered by strong Q1 results announced during market hours on Thursday, 21 July 2011. Net profit rose 67.8% to Rs 1494.91 crore on 44.6% rise in net sales to Rs 2821.35 crore in Q1 June 2011 over Q1 June 2010.

Coal India inched up 0.07% to Rs 369.15. The company's chairman N C Jha was quoted by the media as saying that the company is seeking approval from the Indian government to buy a 30% stake in a coal asset in Indonesia.

India's largest mobile services provider by sales Bharti Airtel jumped 5.37% to Rs 433, extending Friday's 4% rally triggered by reports that the company has hiked prepaid call rates by 20% in six telecom circles. The stock hit a 52-week high of Rs 438.50 today. This is the first hike in call rates by Bharti in nearly three years.

Other telecom stocks also gained on hopes that other telecom players will follow suit after Bharti's hike in call rates. The hike in call rates could ease pressure on profit margins of telecom firms. Reliance Communications (up 14%), MTNL (up 9.31%), Idea Cellular (up 7.21%) and Tata Teleservices (Maharashtra) (up 4.37%), edged higher.

Realty stocks reversed initial losses. Peninsula Land, Sobha Developers, DLF, Unitech, Indiabulls Real Estate, Ackruti City, HDIL, Parsvnath Developers, DB Realty and Sunteck Realty rose by between 0.20% to 3.25%.

Shares of most organized retailers fell on profit taking after recent strong gains. Trent and Shoppers Stop shed 2.28% and 0.02%, respectively. However, Pantaloon Retail India rose 1.61%.

A Committee of Secretaries on Friday, 22 July 2011, approved a proposal to allow foreign direct investment (FDI) in multi-brand retail operations in India. As per reports, the CoS has suggested that FDI in retail should be allowed only in cities with population of at least one million people and that foreign investors will have to invest at least $100 million to set up multi-brand retail operations.

The policy change means international retailers may start selling to Indian shoppers through partnerships with Indian retailers and will be allowed to own up to a 51% stake in such local joint ventures. This is the first major reform by the ruling United Progressive Alliance, which is facing a barrage of graft charges and severe criticism for its reluctance to push through big-ticket reforms despite being returned to power with a majority mandate in May 2009. The proposal of allowing FDI in multibrand retail will now go to the Union Cabinet for approval.

Auto stocks rose on expectations that sales will pick up in the second half of the year. India's largest truck maker by sales Tata Motors rose 0.71%, with the stock gaining for the third straight day.

Utility vehicles and tractors major Mahindra & Mahindra (M&M) rose 3.49%, extending Friday's near 3% rise triggered by expectations that good monsoon rains will boost rural demand.

During market hours on Friday, 22 July 2011, Ssangyong Motor Company, the South Korean subsidiary of M&M, reported 43% growth in revenue to KRW 1349.2 billion in the first half of the calendar 2011 over the previous corresponding period. Ssangyong Motor's sales rose 53% to 55,873 vehicles in the first half of the calendar 2011 over in the first half of the calendar 2010. This is the highest level of sales volume achieved by the company in a half year period since 2007.

India's largest car maker by sales Maruti Suzuki India rose 1.69%, extending Friday's 0.61% gain. Maruti Suzuki is seen reporting weak Q1 results tomorrow, 26 July 2011, on account of lower sales volumes due to a strike at Manesar, Gurgaon unit and due to annual maintenance shutdown at that unit, pressure on profit margins on account of un-favourable currency movement and higher advertising spend.

India's largest bike maker by sales Hero Honda Motors gained 0.39% extending recent gains triggered by strong Q1 result. The company, last week, reported 13.46% growth in net profit to Rs 557.89 crore on 32.2% growth total turnover to Rs 5683.33 crore in Q1 June 2011 over Q1 June 2010. The growth in net profit surpassed market expectations even as revenue growth slightly lagged expectations. Hero Honda Motors was seen reporting 10.85% growth in net profit to Rs 545.06 crore on 32.92% growth in operating income to Rs 5711.34 crore in Q1 June 2011 over Q1 June 2010, as per average estimate of 11 brokerages.

Hero Honda's Managing Director and CEO Pawan Munjal said that the immediate focus of the management is to maintain operational excellence in the light of volatile costs of commodities such as steel, aluminium and rubber. Munjal said that Hero Honda will also carry on strengthening its product portfolio through new launches, network expansion and other customer outreach initiatives.

India's second largest motorcycle maker by sales Bajaj Auto fell 0.35%.

Jaiprakash Associates rose 1.46% to Rs 76.40 after the company announced during market hours today that the company has been awarded two contracts aggregating Rs 2079 crore by Punatsangchhu-II Hydroelectric Project Authority, Bhutan.

NTPC rose 0.33% to Rs 183.95 after the company announced during market hours today that net profit rose 12.69% to Rs 2075.78 crore on 12.21% rise in total income to Rs 15167.89 crore in Q1 June 2011 over Q1 June 2010.

Ranbaxy Laboratories rose 0.11% to Rs 543.45 after the company announced during market hours today that it has launched Letrozole tablets of 2.5 milligram strength on day one in UK, Romania and France.

Shree Renuka Sugars gained 0.34% to Rs 74.10 after the company announced during market hours today that it has commissioned its new sugar refinery on the West coast of India near the port of Kandla on 25 July 2011, having a rated capacity of 3,000 tons per day (1 million tonnes per year) of raw sugar refining and 45 megawatts (MW) of co-generation capacity.

HSIL jumped 15.12% to Rs 221.60 after net profit galloped 110.79% to Rs 28.52 crore on 41.18% surge in net sales to Rs 304.78 crore in Q1 June 2011 over Q1 June 2010.

Rushil Decor clocked a highest turnover of Rs 182.07 crore on BSE. Amrutanjan Health Care (Rs 164.89 crore), Bharti Airtel (Rs 142.07 crore), Reliance Communications (Rs 107.47 crore) and Reliance Industries (Rs 88.04 crore), were the other turnover toppers on BSE in that order.

Future Ventures India reported a highest volume of 1.27 crore shares on BSE. Rushil Decor (1.04 crore shares), Reliance Communications (1.03 crore shares), Lanco Infratech (93.44 lakh shares) and Suzlon Energy (86.56 lakh shares), were the other volume toppers on BSE in that order.

The market had surged on Friday, 22 July 2011, as pick-up in monsoon rains and a second bailout deal for Greece boosted sentiment with the key benchmark indices attaining two-week closing highs. The BSE Sensex had jumped 286.11 points or 1.55% to settle at 18,722.30, its highest closing level since 8 July 2011.

The market remain volatile in the near term as traders roll over positions in the derivatives segment from the near-month July 2011 series to August 2011 series ahead of the expiry of July 2011 derivatives contracts on Thursday, 28 July 2011.

As the crucial corporate earnings season gathers steam, investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs. A hike in transportation costs will add to cost pressure of India Inc. As per reports, freight rates have gone up by 8% to 9% on all routes across India following the recent hike in diesel prices.

Car major Maruti Suzuki, steel major JSW Steel, power equipment major Bhel, decorative paints major Asian Paints and Shriram Transport Finance Company are set to unveil Q1 results tomorrow, 26 July 2011. UltraTech Cement, HCL Technologies, GAIL (India), Bank of Baroda, Infrastructure Development Finance Company (IDFC), Oil India and Lupin unveil results on 27 July 2011.

State-run oil exploration giant ONGC, FMCG giant Hindustan Unilever, Cigarette major ITC, Sun Pharma, cement majors--ACC and Ambuja Cements, Jindal Steel & Power, state-run Punjab National Bank, and GSFC unveil results on 28 July 2011. ICICI Bank, Power Finance Corporation, Bhushan Steel, Idea Cellular and TVS Motor unveil Q1 results on 29 July 2011. Sun TV announces Q1 results on 1 August 2011. Power Grid Corporation unveils Q1 results on 2 August 2011.

Bharti Airtel unveils Q1 results on 3 August 2011. Adani Power, Mundra Port And Special Economic Zone and Indian Hotels announce Q1 results on 4 August 2011. IL&FS Transportation Networks announces Q1 results on 5 August 2011. M&M announces Q1 results on 8 August 2011. ABB and GMR Infrastructure announce quarterly results on 9 August 2011. Tata Power unveils Q1 results on 10 August 2011. Tata Motors unveils Q1 results on 11 August 2011. Hindalco and Coal India unveil Q1 results on 12 August 2011.

The RBI is seen raising its key lending rate by 25 basis points at its first quarter review of the monetary policy 2011-12 on Tuesday, 26 July 2011, to tame inflation, which remains much above the central bank's perceived comfort level of 5% to 6%.

The Reserve Bank of India (RBI) today, 25 July 2011, said taming inflation warrants continuation of the anti-inflationary monetary stance. In its report titled 'Macroeconomic and Monetary Developments First Quarter Review 2011-12', the central bank said that inflation risk stays, while growth showed signs of moderation in Q1 June 2011. On current reckoning, growth is likely to stay around trend growth of around 8%, RBI said. However, downside risks have increased. Overall, some moderation in growth is expected in 2011-12.

The RBI said near-term upside risks to inflation remain significant. Price pressures are expected to persist through Q2 September 2011 as well and then moderate towards the later part of 2011-12. Breaking inertial dynamics of wage and food price rise is important for arresting inflation. Risks to baseline growth and inflation projections may arise from a significant departure of monsoon from normal, a collapse or re-build of global commodity price bubble, and euro-zone debt crisis assuming full-blown proportions. Notwithstanding the slowdown in growth, high inflation requires continued anti-inflationary bias with a close watch and responsiveness to new information, the central bank said.

The RBI said global recovery appears to be stalling. Global inflation is rising rapidly prompting debate over how much longer advanced economies can defer an exit from an excessively accommodative monetary policy. Meanwhile, commodity prices exhibited some decline in Q1 June 2011 with global growth weakening, but it is unclear if this is transitory, RBI added.

RBI said there has been timely arrival and advancement of monsoon. However, after a good rainfall in June 2011, the monsoon appears to be weakening a bit. Sowing till 22 July 2011 has been marginally less than that in corresponding period last year. On balance, agricultural growth is expected to stay broadly on track, RBI said. The growth in industrial production, though having moderated, has turned more broad-based. Services sector has sustained its momentum. Going forward, there is a possibility of some softening in industrial growth as a result of implied input costs, RBI said.

The central bank said that inflation remained high in Q1 June 2011, in line with the projections made in the May 2011 policy statement. There has been generalisation of inflation since December 2010 with dominant contribution from non-food manufacturing products. Inflation is being driven by both cost-push and demand-side factors. RBI added that food inflation has declined. The RBI said near-normal monsoon may not ease pressure on food inflation further due to increases in wage costs and support prices. These trends necessitate structural reforms to enhance supply response, while the anti-inflationary bias of monetary policy anchors inflation expectations, the central bank added.

The pick up in the annual monsoon rains has improved crop prospects. Rainfall between July 14 and July 20 was 7% above the long-term average, according to the India Meteorological Department, following two successive weeks of below-average rains that raised concerns about crops. July is the crucial month for sowing rice, sugarcane, pulses and cotton. The seasonal rainfall deficit had widened to 3% below the long-term average last week, but now stands at 1% below normal. So far, 12% of the country has had below-average rainfall, while 88% had normal or excess showers. The June-September monsoon season brings about 70% of India's annual rainfall and is crucial for crops as about 60% of the country's farmland is rain-fed.

Gujarat, the country's largest producer of groundnut and cotton, had 80% below-average rains until the end of June, but now the gap has narrowed to 34%. However, poor rains in Andhra Pradesh are causing worries for rice plantings. As per reports, just about 9% of the state's rice area has been sown so far.

European stocks fell today, 25 July 2011, weighed by the looming deadline to raise the US debt ceiling and a further downgrade of Greece's rating prevented markets from extending a four-session winning streak. The key benchmark indices in UK and France fell by 0.15% and 0.14%, respectively. Germany's DAX was up 0.04%.

Moody's Investors Service cut Greece's credit ratings by three notches Monday, describing default as almost certain and warning that the new bailout plan for the country sets a negative precedent for creditors of other debt-strapped euro-zone nations. Moody's lowered Greece's local- and foreign-currency bond ratings from Caa1 to Ca, one level above default, and assigned them a developing outlook. European leaders last week approved a rescue plan that combines 109 billion euros ($156.5 billion) in fresh financing with an expected €37 billion debt relief from the private sector through a debt swap.

Asian shares fell today after US leaders failed over the weekend to agree to raise the nation's debt ceiling ahead of a looming deadline on August 2, raising worries about a possible sovereign default. The key benchmark indices in China, Hong Kong, Japan, Indonesia, Singapore, South Korea and Taiwan fell by between 0.36% to 2.96%.

Mainland Chinese shares tumbled on concerns about a slowdown in the country's manufacturing, with railway stocks hit especially hard after an accident over the weekend of two high-speed railway trains. At least 36 people were killed in the pile-up of two trains, according to reports. Chinese stocks had dropped last week after a preliminary reading of HSBC's Purchasing Managers' Index survey showed a contraction in July manufacturing activity.

Trading in US index futures indicated that the Dow could slump 86 points at the opening bell on Monday, 25 July 2011.