Market scales 3-1/2 week closing high

The key benchmark indices edged higher amidst high volatility to scale 3-1/2 week closing highs aided by firm European stocks. The BSE Sensex was up 149.48 points or 0.89%, up close to 375 points from the day's low. The market breadth was positive. Index heavyweight Reliance Industries jumped more than 4%. Other index heavyweights, Larsen & Toubro, Infosys and ICICI Bank too gained.

The S&P CNX Nifty settled above the psychological 5,000 mark after sliding below that level at the onset of the day's trading session. Auto stocks were in demand on reporting good sales figures for August 2011. Bike makers Hero MotoCorp and Bajaj Auto retreated after scaling record peaks. Software stocks rose on bargain hunting reversing an intraday fall triggered by concerns that a likely economic slowdown in the US and Europe will hit technology spending by overseas clients. Banking pivotals were mixed and were off day's low.



The BSE Sensex was up 149.48 points or 0.89% to 16,862.81, its highest closing level since 11 August 2011. The index gained 181.40 points at the day's high of 16,894.73 in late trade. The index lost 225.03 points at the day's low of 16,488.30 in mid-morning trade.

The S&P CNX Nifty was up 47.10 points or 0.94% to 5,064.30, its highest closing level since 12 August 2011. The index gyrated between 5,072.90 and 4,942.90 during the day.

The BSE Mid-Cap index rose 0.59% and BSE Small-Cap index gained 0.71%. Both these indices underperformed Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1634 shares gained and 1178 shares declined. A total of 114 shares remained unchanged.

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

The total turnover on BSE amounted to Rs 3071 crore higher than Rs 2549.87 crore on Monday, 5 September 2011.

Index heavyweight Reliance Industries (RIL) jumped 4.05% to Rs 820.85. The stock came off the day's low of Rs 777.25. It was the top gainer from the Sensex pack. RIL, last week, announced the completion of BP's acquisition of a 30% stake in 21 oil and gas production sharing contracts that RIL operates in India, including the producing KG D6 block.

BP will pay RIL an aggregate consideration of $7.2 billion subject to completion adjustments for the interests to be acquired in the 21 production sharing contracts, the two companies said in a joint statement. Further performance payments of up to $1.8 billion could be paid based on exploration success that results in development of commercial discoveries, the two companies said.

India's largest oil exploration firm by net sales ONGC rose 1.6% after reports indicated the state-run firm's follow-on public offer is likely to open on 20 September 2011 and will close on 23 September 2011. The public offer is one of the most important share sale by the government to meet its Rs 40,000 crore disinvestment target. At present, the government holds 74.14% in the maharatna.

Auto stocks extended recent gains on reporting good sales figures for August 2011 while shares of bike makers retreated on profit booking. India's largest tractor maker by sales Mahindra and Mahindra (M&M) advanced 3.31%. M&M reportedly raised prices by up to 2% for its entire range of products last month to offset the impact of high raw material costs. Separately another report showed M&M plans to make acquisitions in Britain and in Europe to bolster its software and outsourcing business. The company's sales rose 30.38% to 37,684 units in August 2011 over August 2010. The maker of the Xylo, Scorpio and Bolero models exported 1,928 autos, up 18% on year.

India's largest small car maker by sales Maruti Suzuki India advanced 1.71%. Maruti's sales declined 13% to 91,442 vehicles in August 2011 over August 2010 hurt by disruption in production at Manesar plant caused by the labour unrest in end-August.

India's largest truck maker by sales Tata Motors rose 1.59%. Tata Motors sold 64,078 vehicles in August 2011, 3% down on last year. Car sales fell 33% to 16,829 vehicles but sales of trucks and buses grew 21% to 43,045 units. Tata Motors sold 1,202 units of its Nano minicar in August 2011, down 85% on year, as its Gujarat factory remained shut for two weeks for routine maintenance. Exports also fell 18% to 4,204 vehicles.

Ashok Leyland fell 0.39% after the company reported a 3.50% decline in its total commercial vehicle sales to 7,218 units in August 2011 over August 2010. Ashok Leyland's domestic sales fell 8.01% to 6,168 units. Exports, however, increased by 35.48% to 1,050 units in August 2011 over August 2010.

Two wheeler stocks declined on profit taking after the recent surge. India's largest two wheeler maker by sales Hero MotoCorp shed 0.32% to Rs 2167.50 after striking a record high of Rs 2206 in intraday trade today. The company's sales rose 19% to 5.03 lakh units in August 2011 over August 2010.

India's second largest two wheeler maker by sales Bajaj Auto slipped 1.49% to Rs 1648.25 after scaling a record peak of Rs 1694.90 today. The company's total sales rose 16% to a record 3.82 lakh units in August 2011 over August 2010. Motorcycle sales jumped 17% to a record 3.38 lakh units in August 2011 over August 2010.

TVS Motor Company fell 0.92%. The company's total vehicle sales rose 14% to 1.94 lakh units in August 2011 over August 2010.

Software stocks rose on bargain hunting after the recent fall 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 third largest software services exporter Wipro rose 0.42%.

India's second largest software services exporter Infosys rose 1.75%. The chief executive of Infosys said last month that the economic worries in the US and Europe were delaying decisions and clients may not spend all of their information-technology budgets for this year.

India's largest software services exporter TCS gained 0.31%. The company has reportedly put in a $500-million bid to buy a controlling stake in the information technology unit of German flagship airline Lufthansa.

TCS after market hours on Monday announced that Westpac has selected TCS' BaNCS Insurance to assist the financial institution to upgrade and transform the life insurance software platform to drive growth in New Zealand.

Banking pivotals were mixed. India's largest private sector bank by net profit ICICI Bank rose 0.92%. India's second largest private sector bank by net profit HDFC Bank rose 0.65%.

India's largest bank by branch network and net profit State Bank of India (SBI) lost 1%.

India's largest mortgage lender by total income Housing Development Finance Corporation (HDFC) rose 0.71%. Reportedly HDFC on Monday launched dual-rate home loans named ‘Fixed First' where interest rates are fixed for the first three or five years and then shifted to floating rates.

Interest rate sensitive realty stock edged lower on 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. India's largest realty firm by sales DLF slumped 4.43% and was the top loser from the Sensex pack.

Everonn Education hit lower circuit of 10%, extending recent fall triggered by the arrest of the company's founder and Managing Director P. Kishore for allegedly bribing a tax official.

NTPC fell 1% to Rs 162.60. The stock hit 52 week low of Rs 161.80 today.

Idea Cellular shed 2.23% to Rs 98.70. The stock skidded after hitting 52 week high of Rs 103.65.

India's largest power equipment maker by sales Bharat Heavy Electricals (Bhel) gained 2.11%. A cabinet panel has approved the sale of a 5% government stake in Bhel through a follow-on public offer. The sale will reduce the government's stake in Bhel to 62.72% from 67.72%. The offering is one of the many big-ticket stake sales in state-run companies that the government has planned this fiscal year as it looks to shore up its resources to fund its ambitious social spending plans and to keep its gaping fiscal deficit in check.

In the current financial year through March 2012, the government plans to raise Rs 40000 crore through share sales in state-run firms. It has managed to raise only Rs 1145 crore so far.

India's largest engineering & construction firm by sales Larsen & Toubro rose 1.24%.

Metal stocks were mixed after LMEX, a gauge of six metals traded on the London Metal Exchange dropped 1.55% on Monday, 5 September 2011. Sterlite Industries, Welspun Corp, Bhushan Steel, Sail, Hindalco Industries, Hindustan Zinc rose by between 0.24% to 4.92%. Tata Steel, JSW Steel, and Nalco shed by between 0.08% to 0.87%.

Cairn India fell 0.56% after crude oil prices slumped in Asian trading on Tuesday, 6 September 2011. Lower crude oil prices will result in lower realizations from crude sales for oil exploration firms.

Shares of oil marketing companies gained after crude oil prices fell in Asian trading on Tuesday, 6 September 2011. Hindustan Petroleum Corporation (HPCL) (up 1.45%), and Bharat Petroleum Corporation (BPCL) (up 0.17%) edged higher. Indian Oil Corporation (IOC) was flat. Lower crude oil prices could reduce 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.

Crude for October 2011 delivery fell 1.97% or $1.67 at $84.78 a barrel in Asian trading on Tuesday, 6 September 2011.

India Securities clocked highest volume of 4.81 crore shares on BSE. Shree Ashtavinayak Cine Vision (1.93 crore shares), Unitech (92.82 lakh shares), Birla Power Solutions (90.36 lakh shares) and Birla Cotsyn (61.07 lakh shares) were the other volume toppers in that order.

India Securities clocked highest turnover of Rs 285.61 crore on BSE. SBI (Rs 130.21 crore), Tata Coffee (Rs 130.21 crore), RIL (Rs 90.83 crore) and Jubilant Foodworks (Rs 81.78 crore) were the other turnover toppers in that order.

Foreign institutional investors (FIIs) bought shares worth Rs 133.22 crore on Monday, 5 September 2011, as per provisional data from the stock exchanges. Domestic institutional investors (DIIs) bought shares worth Rs 147.23 crore on that day. FIIs bought shares worth Rs 1291.60 crore in the first two trading sessions of September 2011.

The much awaited Land Acquisition Bill, which seeks to lay down norms for increased compensation to land owners, was approved by the Union Cabinet on Monday, 5 September 2011. It is to be introduced in the Parliament on Wednesday, 7 September 2011. The bill integrates land acquisition and rehabilitation and resettlement, defines public purpose clearly, has clause for retrospective effect and draws timelines for compensation.

Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released on Monday, 5 September 2011. The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.

The report was upbeat about India's ability to weather a global economic downturn. "While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors," the report said. It noted that India's foreign currency reserves equal four times its foreign debt obligations.

A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, "Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio," the report said.

India's services sector grew at its slowest pace in more than two years in August 2011, throttled by feeble expansion in new business as a faltering global economy and tight domestic monetary conditions weighed, a survey showed on Monday, 5 September 2011. The HSBC Markit Business Activity Index, based on a survey of around 400 companies, slumped to 53.8 in August from 58.2 in July, the index's biggest one-month decline since January 2009. It was also the weakest growth since June 2009, but the index has stayed above the 50 mark that separates growth from contraction for 28 consecutive months.

The new business sub-index fell to its lowest level in three months in August, at 54.9 from July's 59.3, as dampening global economic conditions knocked orders. Expectations for new business were also scaled back in August. The survey also showed a reduction in service sector employment levels for the second consecutive month as new business growth slowed while input costs and output prices continued to march ahead.

India's manufacturing activity in August 2011 slowed to a 29-month low as exports took a beating amid the lingering uncertainty in the global economic environment, a survey showed Friday, 2 September 2011. The seasonally adjusted HSBC Purchasing Managers' Index, prepared by Markit, fell to 52.6 in August from 53.6 in July. The pace of new order flows in August decelerated to the slowest in 29 months as export orders contracted at the sharpest rate since the series was started, HSBC said.

Production backlogs fell for the first time since March 2010 as pressure on operating capacity subsided. Also, inflationary pressures intensified as both input and output prices rose.

Food inflation firmed up to 10.05% in the week ended 20 August 2011, the highest in nearly six months and up from 9.8% rise in the previous week. The data highlights a prolonged battle against inflation that could prompt the Reserve Bank of India to raise its policy interest rate for the 12th time since March 2010 when it next meets to review monetary policy on 16 September 2011.

Exports surged 81.79% to $29.3 billion while imports jumped 51.5% to $40.4 billion in July 2011 over July 2010, leaving a trade deficit of $11 billion, data showed last week.

European stock markets edged higher Tuesday on bargain hunting after the sharp losses on the previous day. The key benchmark indices in Germany, France and UK rose by between 0.18% to 1.07%.

The European Central Bank (ECB) is expected to keep its key interest rate unchanged at 1.5% at its monthly policy meeting on interest rates on Thursday, 8 September 2011. On the same day, the Bank of England's (BOE) Monetary Policy Committee is also expected to maintain its key benchmark rate at 0.5%, the thirty-first consecutive month at such a rate.

Select Asian markets declined on Tuesday amid fears that Europe's sovereign debt troubles are worsening and could trigger a second full-blown banking crisis. The key benchmark indices in Taiwan, Japan, South Korea and China were down by between 0.33% to 2.44%. The key benchmark indices in Hong Kong, Singapore and Indonesia rose by between 0.04% to 0.62%.

Trading in US index futures indicated that the Dow could slide 193 points at the opening bell on Tuesday, 6 September 2011. The US market had remained closed on Monday, 5 September 2011, for the Labour Day holiday. European stocks had tumbled on Monday on worries that Rome is not doing enough to bring Italy's debt under control.

US President Barack Obama is scheduled to give a speech on Thursday, 8 September 2011, to propose steps to stimulate hiring in the backdrop of US unemployment crisis.