RIL reclaims title of India's most valued firm

Positive global cues helped Indian shares register gains for the second day in a row. The BSE Sensex jumped 156.77 points or 0.96%, off 50.74 points from the day's high and up 285.29 points from the day's low. World stocks rose, with sentiment boosted by Chinese data and expectations Federal Reserve Chairman Ben Bernanke will signal readiness later this week to support struggling US economy. The Sensex has jumped 356.80 points or 2.21% in two sessions from a 14-1/2-month low of 16,141.67 on 19 August 2011.



Coming back to today's trade, the market breadth was strong. Index heavyweight Reliance Industries (RIL) edged higher to reclaim its title of India's biggest company in terms of market capitalisation. Coal India, though down, cut intraday losses triggered by reports of labour unions demanding a 100% jump in employee salaries.

Software pivotals gained after the National Association of Software and Services Companies, or Nasscom today, 23 August 2011, reiterated its estimate of the industry recording 16%-18% growth in export revenue this fiscal year, despite fears of economic troubles in the main outsourcing markets viz. the US and Europe. Bank stocks recovered on bargain hunting after recent steep decline. Fertiliser stocks advanced on a likely decontrol of urea prices.

The market lost ground soon after a firm start. A bout of volatility was witnessed as the key benchmark indices dropped to fresh intraday lows in morning trade. The market came off lows in mid-morning trade as most Asian shares rose. The market moved into positive zone in early afternoon trade as US index futures surged. The market extended gains in afternoon trade as European shares opened on a firm note. The market extended gains in mid-afternoon trade to strike fresh intraday high. A sudden fall pulled the market off the day's high later. The market soon regained strength.

The BSE Sensex jumped 156.77 points or 0.96% to settle at 16,498.47, its highest closing level since 17 August 2011. The index rose 207.51 points at the day's high of 16,549.21 in mid-afternoon trade. The Sensex lost 128.52 points at the day's low of 16,213.18 in mid-morning trade.

The S&P CNX Nifty rose 50.10 points or 1.02% to settle at 4,948.90, its highest closing level since 17 August 2011. The Nifty hit a high of 4,965.80 and a low of 4,863.80 in intraday trade.

The BSE Mid-Cap index underperformed the Sensex, gaining 0.95%. The BSE Small-Cap index outperformed the Sensex, rising 1.16%.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,824 shares rose and 988 shares declined. A total of 106 shares remained unchanged.

BSE clocked turnover of Rs 2239 crore, higher than Rs 2014.36 crore on Monday, 22 August 2011.

Among the 30-share Sensex pack, 19 gained while the rest fell.

Bajaj Auto (up 4.27%), Bhel (up 2.65%), Bharti Airtel (up 1.99%), Larsen & Toubro (up 1.82%) and Hindustan Unilever (up 1.34%), edged higher from the Sensex pack.

Index heavyweight Reliance Industries (RIL) rose 1.23% to Rs 765.55 after gyrating between Rs 747.85 and Rs 771.75. 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.

RIL today, 23 August 2011, reclaimed its title as India's most valued firm. Last week Coal India, the world's largest coal miner by output, overtook RIL, claiming for a brief period the title of India's biggest company. Recovery in RIL shares early this week has helped RIL reclaim the title. At the end of Tuesday's (23 August 2011) trade, RIL commanded a market capitalisation of Rs 250661.74 crore while Coal India (CIL) had a market capitalisation of Rs 247538.15 crore.

Shares of Coal India lost 0.86% to Rs 391.90, off day's low of Rs 381.50. Labour unions of Coal India have reportedly demanded a 100% jump in employee salaries--a demand that would put the state-run entity under a severe strain. Coal India's annual employee cost stood at Rs 18201.45 crore for the year ended 31 March 2011 as per the company's consolidated financial statements. The major cost within the employee cost was salaries, wages and bonus at Rs 11706.42 crore. This amounted to 24.73% of the company's total expenditure of Rs 47332.08 crore.

Cairn India fell 0.92% to Rs 265.25, off day's low of Rs 261. The company's UK-based parent Cairn Energy PLC after market hours today said it agreed to accept India government conditions on royalty and cess on the Rajasthan oilfields so as to facilitate its stake sale in Cairn India (CIL) to Vedanta Resources. These two conditions are now with Cairn India shareholders for approval, with voting results due on 14 September 2011, Cairn Energy said.

Cairn Energy in the statement, said, "Sale of 40% shareholding in Cairn India to Vedanta will be completed in two stages. The first tranche of 10%, which realised about $1.4 billion (was) completed (in) July 2011. The second tranche of 30%, approved by the government of India (GoI) in June, subject to certain conditions, will realise about $4 billion," it said.

Cairn Energy said the Mangala field in the Rajasthan block currently produces 125,000 barrels of oil per day. Development of Bhagyam oilfield is on track and is scheduled to commence production in the fourth quarter of 2011.

"Cairn (Energy) is encouraged that the Vedanta transaction is moving toward completion. Following approval from the government of India, all parties are now working to satisfy the consents and conditions to complete the sale to Vedanta as soon as possible," Cairn Energy's CEO Simon Thomson said.

"The sale of Cairn Energy's 40% stake will allow a return of substantial funds to shareholders and will also provide the group with the balance sheet strength and financial flexibility to explore new opportunities in line with its consistent strategy of seeking transformational growth," Thomson added.

State-run oil exploration giant ONGC declined 2.65% and state-run power generation major NTPC fell 2.03%.

Software pivotals rose after the National Association of Software and Services Companies, or Nasscom reiterated its estimate of the industry recording 16%-18% growth in export revenue this fiscal year, despite fears of economic troubles in the main outsourcing markets viz. the US and Europe. India's largest software services exporter TCS shot up 6.66% to Rs 979.50 and was the top gainer from the Sensex pack. The stock rose on bargain hunting after sliding 8.58% in the preceding three trading sessions.

"We don't see any reasons to do it [revise outlook]," Som Mittal, Nasscom president told reporters on the sidelines of an industry event today, 23 August 2011. "We had factored in a little bit of uncertainty when we gave the 16%-18% growth outlook," he added. Nasscom, had in February forecast the industry's export revenue at $68 billion-$70 billion for the fiscal year ending March 2012.

India's second largest software services exporter Infosys rose 3.64% to Rs 2,274. The stock had slipped to a 52-week low of Rs 2,171.85 in intraday trade on Monday, 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 0.20% to Rs 333.15, off day's low of Rs 320.80. The stock had hit 52-week low of Rs 310.20 in intraday trade on Friday, 19 August 2011.

iGate Patni (up 4.22%), Tech Mahindra (up 3.67%), Rolta India (up 3.10%), HCL Technologies (up 2.51%), Oracle Financial Services Software (up 1.92%) and MphasiS (up 0.05%), were the other software sector shares that rose.

However, Mahindra Satyam fell 2.73% to Rs 65.85 after the Income Tax department slapped a tax demand of Rs 2113 crore on the firm after disallowing exemptions claimed by the company. The company announced this after market hours on Monday, 22 August 2011.

Bank stocks recovered on bargain hunting after a recent steep decline. India's second largest private sector bank by net profit HDFC Bank rose 0.93% to Rs 456.90. 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 bank by net profit and branch network State Bank of India (SBI) rose 0.17% to Rs 2064.95, recovering from intraday low of Rs 2038. SBI Chairman Pratip Chaudhuri today, 23 August 2011, said the bank is likely to raise funds via a rights issue by end of the current fiscal year. 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 largest private sector bank by net profit ICICI Bank rose 0.13% to Rs 852, recovering from day's low of Rs 832.05. 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.

Yes Bank (up 5.05%), Bank of India (up 4.15%), Axis Bank (up 3.03%), IndusInd Bank (up 2.18%), Canara Bank (up 1.95%), Punjab National Bank (up 1.56%), IDBI Bank (up 1.20%), Bank of Baroda (up 0.84%) and Kotak Mahindra Bank (up 0.03%), were the other banking shares that edged higher.

India's largest private sector steel maker by sales Tata Steel rose 1.30% to Rs 475.75 on reports Tata Steel Thailand is scouting for iron ore mines in Indonesia and Thailand in order to turn around its mothballed mini blast furnace unit in Thailand.

India's largest private sector aluminium maker by sales Hindalco Industries rose 1.04% to Rs 145.75 on reports that the company is planning to raise around Rs 8000 crore of debt. The Rs 8000 crore debt will be used to part fund its Aditya Alumunium refinery project and a captive power plant in Orissa. With the volatility in the global markets and increasing borrowing costs locally, the company is evaluating various options to raise debt in the Indian and global markets, report said.

NMDC (up 3.10%), Nalco (up 1.69%), JSW Steel (up 1.34%), Welspun Corp (up 1.26%), Sesa Goa (up 1.14%), Jindal Saw (up 1.08%) and Jindal Steel & Power (up 0.77%), were the other metal and mining sector shares that edged higher.

Pharma major Cipla lost 2.59% to Rs 282.55. Recent reports indicated the country's drug regulator has sent show-cause notices to the company for selling drugs banned by the government.

Ipca Laboratories (down 2.18%), Ranbaxy Laboratories (down 1.60%), Dr Reddy's Laboratories (down 0.71%), Orchid Chemicals & Pharmaceuticals (down 0.63%), Lupin (down 0.40%) and Dishman Pharmaceuticals and Chemicals (down 0.15%), were the other pharmaceutical sector shares that edged lower.

Fertiliser stocks advanced on a likely decontrol of urea prices. Rashtriya Chemicals & Fertilisers (up 7.81%), Nagarjuna Fertilisers & Chemicals (up 5.08%), National Fertilizer (up 4.12%), GSFC (up 3.76%), Chambal Fertiliser & Chemicals (up 3.43%) and Zuari Industries (up 1.30%), surged.

A Group of Ministers on fertilizers recently approved a policy for decontrol of urea prices. Under the policy, manufacturers will be allowed to hike the rates for the key farm nutrient by up to 10% in the first year. The decision of the Group of Ministers, headed Finance Minister Pranab Mukherjee, on urea decontrol will now go to the Cabinet Committee on Economic Affairs for final approval. The government has already freed potassic and phosphoric fertilisers with the introduction of NBS with effect from April 2010.

Cals Refineries reported a highest volume of 8.18 crore shares on BSE. KS Oils (1.25 crore shares), Inventure Growth & Securities (62.68 lakh shares), Sujana Towers (41.08 lakh shares) and Shree Ashtavinayak Cine Vision (40.62 lakh shares), were the other shares that reported high volumes on BSE in that order.

Lovable Lingerie reported a highest turnover of Rs 100.82 crore on BSE. Inventure Growth & Securities (Rs 97.52 crore), State Bank of India (Rs 88.59 crore), Tata Motors (Rs 52.68 crore) and Reliance Industries (Rs 52.63 crore), were the other shares that reported high turnover on BSE in that order.

The market may remain volatile in the near term 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.

Foreign institutional investors (FIIs) have pressed heavy sales this month amid the ongoing credit crisis in the euro zone. The sustained selling by foreign funds is a cause for concern for India Inc. Foreign portfolio inflow acts as a catalyst to private corporate capital expenditure in India. FII outflow in August 2011 totaled Rs 8898.90 crore (till 22 August 2011). FIIs had bought shares worth a net Rs 8030.10 crore in July 2011. FII inflow in calendar 2011 totaled Rs 1801.60 crore (till 22 August 2011).

As per a recent survey by a prominent investment bank, Corporate India will raise capital spending by tepid 10% in the year to March 2012 (FY 2012). Capital expenditure (capex) in FY 2012 will be concentrated on improving productivity rather than adding greenfield capacity, the investment bank said.

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, last week, 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.

As anti-corruption activist Anna Hazare's fast entered eighth day, a worried Government called an all-party meeting for Wednesday, 23 August 2011, to discuss details of setting up an anti-corruption watchdog. Hazare, the 73-year-old Gandhian began his indefinite fast in police custody on 16 August 2011 demanding a strong Lokpal bill.

European stock markets were trading firm on Tuesday, 23 August 2011 after monthly data on Chinese factory output showed a slight improvement. The key benchmark indices in UK, France and Germany were up by between 1.28% to 1.83%.

The latest PMI readings for the euro zone signaled that manufacturing activity in the 17-nation region contracted slightly in August, while overall activity continued to grow at a slow pace. An unchanged composite PMI reading of 51.1 for August topped forecasts for a slide to 50.3.

The German manufacturing PMI also provided some relief for investors. A flash reading of the index for August was unchanged from July at 52 and beat the 50.8 consensus forecast. The reading for the services sector, however, fell to 50.4 from 52.9.

Asian stocks rose on Tuesday, 23 August 2011, with resource stocks and auto-makers among the best performers, as investors were encouraged by signs of relative improvement in the Chinese economy. The key benchmark indices in China, Taiwan, Japan, Indonesia, Hong Kong, South Korea and Singapore were up by between 1.06% to 3.86%.

HSBC's China "flash" Purchasing Managers' Index strengthened to a two-month high of 49.8 in August, edging up from 49.3 in July, but remaining marginally below the threshold that indicates expansion from contraction. The preliminary version of the PMI output index also showed improvement, rising to a two-month high of 49.4 in August from 48 in July. HSBC economists noted the headline PMI data was consistent with industrial production growth of about a 13% year on year and that the new export order index rose to a three-month high, which should alleviate concerns of an overly-rapid cooling in the Chinese economy.

Tuesday's gains for Asia came after sentiment recovered somewhat in the US on Monday, 22 August 2011, as US stocks snapped a three-day losing streak to notch mild gains. The Dow Jones Industrial Average finished up 37 points, or 0.34%, at 10854.65. The Standard & Poor's 500-stock index edged up 0.29 point, or 0.03%, to 1123.82. The Nasdaq Composite gained 3.54 points, or 0.15%, to 2345.38.

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.

On Thursday, 25 August 2011, investors will scrutinize weekly US jobless claims data for signs of stabilization in the nation's labor market

Trading in US index futures indicated that the Dow could jump 133 points at the opening bell on Tuesday, 23 August 2011.