Market recovers as crude oil eases

Gains in European shares triggered by a fall in crude oil prices aided a recovery in battered Indian shares today, 22 August 2011. The BSE Sensex jumped 200.03 points or 1.24%, up close to 295 points from the day's low and off about 30 from the day's high. The market breadth was strong. Index heavyweight Reliance Industries (RIL) surged. State Bank of India and Tata Motors recovered from 52-week lows. Infrastructure stocks rose on bargain hunting after recent slide.



Bank stocks were mixed. Software stocks extended recent steep losses triggered by concerns that a likely economic slowdown in the US and Europe will hit technology spending by overseas clients, with IT major Infosys hitting 52-week low.

European shares and US index futures rose on hopes for lower oil prices ahead as rebels moved into Libya's capital. Libyan rebels have reportedly entered the capital city of Tripoli after months of fighting, raising the possibility of oil production in the country resuming. The front-month October Brent crude contract on London's ICE futures exchange fell $1.22 to $107.40 a barrel. Nymex crude futures rose 90 cents in electronic trade to $83.16 a barrel.

For India, the recent slide in global crude oil prices will help ease concerns of higher oil subsidy burden for the government provided the fall in oil price sustains.

The market slipped into the red soon after a positive start. The market extended losses in early trade as Asian stocks fell. The market bounced back in morning trade. The market soon came off highs as Asian stocks fell. Key benchmark indices once again slipped into the red after regaining positive zone for a short while in mid-morning trade. The market hit a fresh intraday low in early afternoon trade. The market bounced back in afternoon trade as European shares moved into positive zone after opening lower. The market hit a fresh intraday high in mid-afternoon trade. The market extended gains in late trade to strike fresh intraday high.

The market may remain volatile this week as traders rollover positions in the derivatives segment from the near-month August 2011 series to September 2011 series. The August 2011 derivatives contracts expire on Thursday, 25 August 2011.

The BSE Sensex jumped 200.03 points or 1.24% to 16,341.70, its highest closing level since 18 August 2011. The Sensex lost 95.19 points at the day's low of 16,046.48 in early afternoon trade. The index jumped 228.79 points at the day's high of 16,370.46 in late trade.

The S&P CNX Nifty was up 53.15 points or 1.1% to 4,898.80, its highest closing level since 18 August 2011. The Nifty hit a high of 4,910.05.

The BSE Mid-Cap index rose 1.25% and the BSE Small-Cap index gained 1.54%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2005 crore, slightly lower than Rs 2014.36 crore on Friday, 19 August 2011.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,811 shares rose and 1,021 shares declined. A total of 97 shares remained unchanged. The breadth had turned negative for a brief period in afternoon trade.

Among the 30-share Sensex pack, 24 gained while only six of them declined.

Index heavyweight Reliance Industries (RIL) surged 3.43% to Rs 756.25, off the day's low of Rs 725.60. The stock had hit 52-week low of Rs 721.60 in intraday trade on Friday, 19 August 2011. RIL has received the government's formal approval to sell a 30% stake in 21 oil and gas production sharing contracts to BP PLC. "Following the approval, Reliance and BP will work together to conclude the deal expeditiously," RIL said in a statement recently.

The initial proposal was for RIL to sell the stake in 23 blocks to BP for $7.2 billion plus another $1.8 billion linked to exploration success. However, the government cleared only 21 blocks and RIL had said it would continue to seek approval for the remaining two blocks.

India's largest oil exploration firm by market capitalization ONGC shot up 3.99% to Rs 286.75 as the company's subsidy burden will reduce after the recent slide in crude oil prices.

Software stocks extended recent steep losses triggered by concerns that a likely economic slowdown in the US and Europe will hit technology spending by overseas clients. The US and Europe are the two biggest markets for Indian IT firms. India's largest software services exporter TCS fell 1.24%.

India's second largest software services exporter Infosys shed 1.41% to Rs 2194.05 in volatile trade after sliding to 52-week low of Rs 2,171.85 in intraday trade today, 22 August 2011. Infosys Chief Executive S.D. Shibulal on Sunday, 21 August 2011, said clients may eventually end up having to cut their information technology budgets for 2011 if they continue to delay making spending decisions because of the economic troubles in the US and Europe. Shibulal, who took over as chief executive Sunday, said clients may also delay finalizing their technology budgets for 2012 to the first part of that year compared with the usual practice of doing it at the end of the previous year.

Infosys has been cautious on the outlook for IT outsourcing in the recent past, but it says it hasn't yet seen the need to cut its revenue outlook of $7.13 billion for the fiscal year through March 2012, a growth of 18%-20% from the previous year. "There is definitely a delay in decision-making. But we're not seeing any immediate effect," Shibulal, a co-founder of Infosys, said.

India's third largest software services exporter Wipro rose 3.74% to Rs 332.50, reversing initial losses in volatile trade. The stock had hit 52-week low of Rs 310.20 in intraday trade on Friday, 19 August 2011.

HCL Technologies was down 1.21% to Rs 387. The stock hit a 52-week low of Rs 365.75 in intraday trade on Friday, 19 August 2011. The company, last week, said that Canada's largest credit union has selected HCL Technologies to automate enterprise-wide loan origination & processing.

MphasiS jumped 10.3% at Rs 388.30 after the company clarified that media reports of the Central Bureau of Investigation raiding the company's premises are false. The clarification from MphasiS came during trading hours today, 22 August 2011. Earlier in the day, the MphasiS stock had slumped 12.49% to a 52-week low of Rs 308.05.

MphasiS said that there have been no CBI searches on the company's premises. The company added that it has highest governance and ethics standards adhering to all statutory and legal requirements as applicable.

Mahindra Satyam rose 1.65% after the company said it doesn't foresee any impact on its business from the recent US credit downgrade and debt concerns in Europe. Mahindra Satyam's president of business development and customer relationships Atul Kunwar said in a recent media interview that while decisions on awarding large deals are taking longer, the company doesn't foresee any impact on its own business from the recent US credit downgrade, which led to widespread fears of a slowdown in the economy there, and debt concerns in Europe. The time taken by clients to decide on awarding large deals is increasing by three months from the current average of six to 24 months, Kunwar said. He said, Mahindra Satyam is in the middle of a strong July-September quarter, winning the highest number of deals worth at least $50 million since an accounting fraud at the company broke out in January 2009.

The company after market hours today, 22 August 2011, announced the inauguration of its near-shore delivery center in Eindhoven, Netherlands.

High beta infrastructure stocks rose on bargain hunting after recent slide. India's largest dam builder Jaiprakash Associates jumped 5.38% and was the top gainer from the Sensex pack.

Larsen & Toubro, IRB Infrastructure Developers, Nagarjuna Construction Company, Hindustan Construction Company and Unity Infrastructure & Projects rose by between 1.24% to 9.38%.

Bank stocks were mixed. India's largest bank by net profit and branch network State Bank of India (SBI) rose 1.06% to Rs 2,061.50, in volatile trade after sliding to a 52-week low of Rs 2,007.50 in intraday trade today. The bank's consolidated net profit fell 25.34% to Rs 2512.47 crore on 20.3% rise in total income to Rs 39454.89 crore in Q1 June 2011 over Q1 June 2010. The bank announced Q1 results on 13 August 2011.

India's second largest private sector bank by net profit HDFC Bank lost 2%. The bank recently hiked its lending rates by half a percentage point, in line with the rate hikes by other top lenders after the central bank raised its policy rate by the same margin in late July 2011. HDFC Bank also raised interest rates on some deposits by between 25 basis points and 75 basis points.

India's largest private sector bank by net profit ICICI Bank rose 2.13% to Rs 850.90. The stock had registered a 52-week low of Rs 825 in intraday trade on Friday, 19 August 2011. The bank recently raised its base rate upwards by 50 basis points to 10%. The bank had also announced an increase of 0.5% in its benchmark prime lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans).

ICICI Bank, last week, said it will launch two new home loan products with interest rates fixed for one and two years--a reminder of the teaser loan schemes which became a banking sector trend in 2009-2010.

Reliance Communications jumped 6.42% on reports the company has hired UBS to sell its 95% stake in tower unit Reliance Infratel. UBS has reportedly reached out to US companies, American Tower and Crown Castle International as well as India's Viom Networks and UAE's Etisalat, asking for $5 billion for the stake, reports suggest. Reliance Communications (RCom) had said in May 2011 it had several offers for its tower arm. The company needs to sell its stake to help pay some of its $7.5 billion debt.

Most metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 0.51% on Friday, 19 August 2011. Tata Steel, Sterlite Industries (India), Sail, Hindustan Zinc and Hindalco Industries rose by between 1.6% to 6.14%.

India's largest sponge iron steel maker Jindal Steel & Power (JSPL) advanced 3.07% on reports the company has raised $475 million through the takeout financing route to part finance expansion plans overseas. JSPL reportedly has raised the loan at 225 basis points over the Libor, for a tenor of five years, with 10 large banks participating in the transaction.

National Aluminium Company jumped 8.85% to Rs 65.20 on reports the state-run company has received government's approval to mine a coal block in Orissa with estimated reserves of 70 million tonnes.

Interest rate sensitive realty stocks rose on bargain hunting after recent losses triggered by worries that higher interest rates will dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance. HDIL, Indiabulls Real Estate and Unitech gained by between 0.56% to 5.21%.

India's largest real estate developer by market capitalisation DLF lost 2.25%. Recently, a hefty Rs 630-crore fine imposed on the realty major by the competition regulator for abusing dominant market position. The Competition Commission of India's (CCI) verdict on 12 August 2011, came after an owners' association said DLF had imposed arbitrary, unfair and unreasonable conditions on them. DLF on 17 August 2011, that it is perusing the order and will examine all options in consultation with company's legal experts including but not limited to appealing against the order at the Competition Appellate Tribunal. The company said it believes that it has a strong case.

FMCG stocks edged higher as good monsoon rains may boost rural incomes which in turn may boosts sales consumer goods. ITC, United Spirits, Dabur India, Marico and United Breweries gained by between 1.36% to 3.78%.

Auto stocks rose on bargain hunting after recent losses. India's largest commercial vehicle maker by sales Tata Motors gained 3.27% to Rs 736.70. The stock bounced back from 52-week low of Rs 700 in intraday today, 22 August 2011. The company's global sales declined 6% to 85,392 units in July 2011 over July 2010. While sales of luxury sedans of Jaguar brand were down 23% to 4,372 units, Land Rover sales were up by 8% at 14,747 units in July 2011 over July 2010. Total passenger vehicles sales fell 24% to 38,154 units in July 2011 over July 2010. Commercial vehicles sales were up by 16% to 47,238 units.

The company, last week, informed the stock exchanges that a committee of directors vide its Circular Resolution dated 12 August 2011 approved 13 September 2011 as the record date for the purpose of sub-division of the Ordinary Shares and 'A' Ordinary Shares (collectively the shares) both having face value of Rs 10 into 5 shares having face value of Rs 2 each.

India's largest bike maker by sales Hero MotoCorp rose 0.62%. Hero MotoCorp recently unveiled a new brand after the two-wheeler major ended its long standing partnership with Japan's Honda Motor. Hero MotoCorp aims to increase annual revenue to $10 billion and two-wheeler sales to 10 million units a year in the next five to six years, as it expands in overseas markets and hopefully benefits from strong local demand. The company expects exports to contribute a tenth of its vehicle sales and revenue over the same period.

Hero MotoCorp said during market hours on Thursday, 18 August 2011, that its board of directors by way of passing a resolution by circulation on 17 August 2011, appointed Sunil Kant Munjal as the joint managing director of the company for a term of five years from 17 August 2011.

India's second largest bike maker by sales Bajaj Auto jumped 3.56%.

India's largest small car maker by sales Maruti Suzuki India rose 0.52%. Maruti, last week, unveiled its much awaited sportier and stylish car, new Swift. The new Swift is priced in the range 4.22 lakh to 5.53 lakh for petrol variant and 5.17 lakh to 6.38 lakh in diesel variant.

Speaking at the launch of the new Swift, Shinzo Nakanishi, Managing Director and CEO, Maruti Suzuki said, "We have launched the new Swift at a time when there was significant demand for the ongoing model. In keeping with the Swift's iconic status, we had to ensure that the brand continues to offer the latest and the best in terms of features, design, performance and aspiration. I am confident that the new Swift will create new benchmarks with its improved fuel efficiency, stylish and sportier looks and high performance."

Maruti Chairman R.C. Bhargava on Friday, 19 August 2011, said that the company's management is in discussions with the local unit of Fiat SpA to source diesel engines for its cars.

India's largest tractor and utility vehicles maker by sales Mahindra & Mahindra (M&M) declined 0.66%. The company's consolidated net profit rose 6.7% to Rs 662.30 crore on 66.2% rise in gross revenue and other income to Rs 14256 crore in Q1 June 2011 over Q1 June 2010. The result was announced last week.

Commenting on the results, Mahindra Group Executive Director and Chief Financial Officer Bharat Doshi said, "We are delighted to announce the consolidated financials of the Mahindra Group which in addition to the auto and farm businesses are a reflection of the robust growth of the various group companies in the IT, finance, real estate, hospitality and Systech sectors. Mahindra Satyam's significant growth in margins and profit and SsangYong Motor Company's improved sales volume is heartening to note; it is with great satisfaction that we see the integration of both these companies in the group."

Sugar shares rose on reports the government has notified export of additional five lakh tonnes of sugar. Shree Renuka Sugars, Bajaj Hindusthan and Balrampur Chini Mills rose by between 4.96% to 10.01%.

The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, had on 12 August 2011, decided to allow exports of an additional five lakh tonnes of sugar in view of production higher than domestic demand.

Cals Refineries clocked highest volume of 6.41 crore shares on BSE. Sanraa Media (73.81 lakh shares), SpiceJet (70.02 lakh shares), K S Oils (69.88 lakh shares) and Suzlon Energy (36.43 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 114.83 crore on BSE. Lovable Lingerie (Rs 90.35 crore), Infosys (Rs 55.49 crore), RIL (Rs 55.15 crore) and JSW Steel (Rs 52.74 crore) were the other turnover toppers in that order.

The ongoing credit crisis in the Euro-zone is a cause for concern for India Inc. Foreign portfolio inflow acts as a catalyst to private corporate capital expenditure in India. Foreign institutional investors (FIIs) sold shares worth a net Rs 1281.10 crore during two trading from Thursday 18 August and Friday 19 August 2011, the latest data released by Securities & Exchange Board of India (Sebi) shows. FII outflow in August 2011 totaled Rs 8132.80 crore (till 19 August 2011). FIIs had bought shares worth a net Rs 8030.10 crore in July 2011. FII inflow in calendar 2011 totaled Rs 2567.70 crore (till 19 August 2011).

The Reserve Bank of India (RBI) said at first quarter 2011-2012 policy review late last month that that the uncertain global macro-economic environment poses a challenge for the Indian economy from the perspective of financing the current account deficit. In this context, the composition of capital flows remains a concern. In recent months, some shift in composition of capital flows towards foreign direct investment (FDI) has been observed, RBI said. This trend needs to be reinforced through policy actions to improve the quality of financing of the current account deficit, RBI said.

Indian firms relying on European and US markets are worried about a likely economic slowdown in the US and Europe. Bilateral trade between India and the US stood at $36.5 billion in 2010.

Commerce Minister Anand Sharma, last week, said India's discussions with the European Union (EU) and Canada to form free-trade agreements are in advance stages. India aims to boost bilateral trade with Canada to C$15 billion (US$15.3 billion) a year by 2015 from about C$4.2 billion in 2010.

With the 27-member EU, India had initiated discussions on the free-trade pact in 2007. The two sides originally hoped to conclude a wide-ranging deal by 2010 to boost trade to $237 billion annually by 2015. Their bilateral trade is currently worth about $92 billion.

Prime Minister Manmohan Singh on Saturday, 20 August 2011, said the government is aiming for 9% annual growth over a five-year period beginning 1 April 2012. "It will be prudent to have a growth target, which would ensure achievement of the objective of sustained inclusive growth at a level which will also take into account the capabilities of the economy to achieve higher growth," Mr. Singh said, after a meeting of the planning commission to finalize details of the 12th five-year plan. If the global economic situation improves, India's growth "can be 9.2% during the period," he added.

India sets five-year macroeconomic targets, and the planning commission's view is a part of planning for the next five-year period. The commission is chaired by the prime minister.

Reserve Bank of India (RBI) deputy governor Subir Gokarn, last week, said that the primary objective of monetary policy must be to keep inflation low and stable. The RBI is scheduled to undertake a mid-quarter policy review on 16 September 2011.

Food Minister K.V. Thomas, last week, said that the government plans to introduce a food security bill, which promises to give cheap food grains to 70% of the country's population, in the winter session of parliament. Thomas told reporters that the bill won't be introduced in the ongoing session of parliament, as earlier planned, because the "consultation process with state governments and different ministries is still on. "A ministerial panel had cleared the draft law last month.

Indian Meteorological Department (IMD) said on Thursday, 18 August 2011, that monsoon rains were 26% above normal in week to 17 August 2011, strengthening from a 14% above normal reading in the previous week. The June to September Southwest monsoon rains are crucial to crop production in 60% of the country that does not have adequate irrigation.

Total rainfall since the beginning of the season was 1% below normal until 17 August 2011, down from a deficit of 4% until last week. Good rains will help India achieve its target of increasing its food grains output to a record 245 million metric tonnes this crop year that started 1 July 2011. Good rains could help boost rural income and may help bring down food inflation. The rainfall has been normal in 65% of the country, while it has exceeded the normal in 23% and deficient in 12% until 17 August 2011.

The rainfall was excess to normal in oilseeds-growing western region, in the rice-growing eastern region as well as parts of the grain-bowl northern region and the north-western Rajasthan state. Plantings of key summer crops have been on the rise until 5 August, aided by favourable weather, including the main summer-sown rice crop. Rice acreage rose to 26.03 million hectares as against 24.47 million hectares during the same period last year. A news agency quoted IMD spokesman B.P. Yadav as saying on Thursday, 18 August 2011, that there could probably be a weakening of the monsoon rains again next week, especially in the northern region but showers may increase in central India and southern peninsula.

With Prime Minister Manmohan Singh maintaining that the government is open to dialogue, anti-corruption activist Anna Hazare today, 22 August 2011, suggested that he should send his representatives for discussion on Jan Lokpal Bill. The suggestion came within hours of the prime minister saying that the government is open to a "reasoned debate" on the Lokpal Bill and that the Parliamentary panel examining it can propose changes. Hazare's hunger strike inched close to 150 hours as hundreds of supporters poured into Ramlila Maidan to express solidarity with the 73-year-old Gandhian who began his indefinite fast in police custody on 16 August.

European stocks rose on Monday, 22 August 2011, as investors stepped in to buy shares in banks and oil producers. The key benchmark indices in France, UK and Germany rose by between 0.91% to 2.57%.

German Chancellor Angela Merkel on Sunday, 21 August 2011, ruled out euro-zone bonds as a solution to the region's ongoing debt crisis, telling Germany's ZDF television that politicians "can and won't simply run after the markets." Investors have increasingly clamored for joint issuance of euro-zone bonds as a solution to the euro-zone debt problems. Merkel said the implementation of euro bonds would require changes to the European Union treaty and other legal hurdles. Merkel said it was important for each country to take steps to reduce debt.

Most Asian stocks fell on Monday, 22 August 2011, as worries over the European debt crisis dragged on investor sentiment. The key benchmark indices in China, Taiwan, Japan, Indonesia, South Korea and Singapore were down by between 0.07% to 1.96%. Hong Kong's Hang Seng was up 0.45%

Hong Kong's consumer price index surged to 7.9% in July 2011 from the same month a year ago, accelerating from the rate of 5.6% in June 2011 but falling short of expectations. The jump in July CPI was "mainly due to the low base of comparison from the Government's payment of public housing rentals in July last year," the Census and Statistics Department reported Monday.

Major Asian stock markets lost at least 1% last week as investors fretted about global growth prospects and awaited developments in the euro-zone debt crisis.

Trading in US index futures indicated that the Dow could gain 112 points at the opening bell on Monday, 22 August 2011.

US stocks closed lower on Friday, 19 August 2011 and notched their fourth straight losing week, as investors continued worrying about a potential global recession and the health of the European banking system. The Dow Jones Industrial Average lost 172.93 points, or 1.57%, to 10817.65. The Standard & Poor's 500-stock index dropped 17.12 points, or 1.5%, to 1123.53 and the Nasdaq Composite slid 38.59 points, or 1.62%, to 2341.84.

Investors are looking forward to Federal Reserve Chairman Ben Bernanke's speech at Jackson Hole on Friday, 26 August 2011, amid a debate and speculation over further monetary easing, and specifically, about any reference to the Fed's third round of quantitative easing, or QE3