Sensex surges more than 500 points on Europe deal, US data

European Union leaders' efforts to contain the euro zone debt crisis and data showing the US economy grew in the third quarter at its fastest pace in a year stoked appetite for riskier assets with Indian bourses being no exception. Key benchmark indices surged to hit 11-1/2 week closing highs. The market gained for the fourth straight day. The BSE Sensex was up 515.97 points or 2.98%, off close to 100 points from the day's high and up about 130 points from the day's low. The market breadth was strong. Buying was witnessed across the board with all the 13 sectoral indices on BSE clocking gains.



The Sensex has risen 1351.04 points or 8.21% in this month so far. The index has slumped 2,704.29 points or 13.18% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 3,303.84 points or 15.65%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 2,059.37 points or 13.07%.

Coming back to today's trade, metal stocks led the rally on surge in global metal prices. Hindalco Industries jumped more than 10%. Interest rate sensitive realty and banking stocks rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting. Among index heavyweights Reliance Industries jumped nearly 3%, L&T surged close to 5% and ICICI Bank galloped 7%. ITC, Bajaj Auto and M&M hit record highs.

The market surged in early trade to hit highest levels in 11-1/2 week on firm Asian stocks. It trimmed gains in morning trade. It continued to trade firm in later.

The market remained closed on Thursday, 27 October 2011, on account of Diwali, the biggest festival in India.

The BSE Sensex was up 515.97 points or 2.98% to 17,804.80, its highest closing level since 3 August 2011. The index jumped 619.30 points at the day's high of 17,908.13 in early trade. The index rose 383.03 points at the day's low of 17,671.86 in early trade.

The S&P CNX Nifty was up 158.90 points or 3.05% to 5360.70, its highest closing level since 3 August 2011. The Nifty hit a high of 5,399.70 in intraday trade. Nifty hit a low of 5,322.80 in intraday trade.

BSE clocked turnover of Rs 2502 crore today.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1738 shares rose and 1,142 fell. A total of 88 shares were unchanged. Breadth was much stronger earlier in the day.

From the 30 share Sensex pack 27 rose and only three of them declined.

Index heavyweight Reliance Industries (RIL) advanced 2.82%, extending recent gains. RIL's net profit rose 15.84% to Rs 5703 crore on 34.73% rise in turnover to Rs 80790 crore in Q2 September 2011 over Q2 September 2010. Operating profit rose just 5% to Rs 9844 crore in Q2 September 2011 over Q2 September 2010. The core operating profit margin (OPM) declined sharply to 12.5% in Q2 September 2011 from 16.3% in Q2 September 2010. The result was announced on 15 October 2011.

RIL said its Infotel Broadband Services unit is in the process of setting up a 4G broadband wireless network and finalizing arrangements with global players.

RIL recently concluded a $7.2 billion deal with BP PLC under which it sold a 30% stake in 21 oil-and-gas exploration blocks to the British explorer. RIL said it has received all the payments that were due from BP, with the final installment of Rs 14690 crore received on 3 October 2011. It said all the production-sharing contracts under the deal with BP have been revised and submitted to the government for approval. "The integration process is currently under way, and the joint teams are evolving strategies to operate across the gas value chain in India from exploration, development, distribution and marketing," RIL said.

Meanwhile, RIL has neither confirmed nor denied media reports of a likely suspension of oil and gas drilling operations. RIL said on 17 October 2011 that RIL has always communicated any material event to the stock exchanges first before disseminating to the media. Media reports had suggested recently that RIL may suspend oil and gas drilling operations for an unspecified time until an internal valuation of its exploration and production strategy.

India's largest cigarette maker by sales ITC rose 1.49% to Rs 215.15, extending recent gains on good Q2 results. The stock hit a record high of Rs 216.10 today. Net profit rose 21.46% to Rs 1514.31 crore on 18.22% rise in total income to Rs 6266.02 crore in Q2 September 2011 over Q2 September 2010. The company announced the results during trading hours on Monday.

India's largest engineering & construction firm by order book, L&T, jumped 4.63%, with the stock gaining for the third straight day on bargain hunting after a recent slide triggered by the company cutting its order growth guidance for the current fiscal year to 5%, from 15% earlier at the time of announcing second quarter results on Friday, 21 October 2011. Order flow is being hampered by investment slowdown, project deferrals and higher competition, Chief Financial Officer R Shankar Raman said at the time of announced the second quarter results last week.

Among other capital goods stocks, ABB, Siemens, Bhel, Praj Industries, BEML and Punj Lloyd rose by between 1.11% to 5.89%.

Bharti Airtel fell 0.65% after Reuben Muoka, a spokesman for the Nigerian Communications Commission said Nigerian regulators have threatened to fine and stop three telecommunications companies from signing up new cellular phone subscribers over complaints about poor service in a nation reliant on mobile calls. Bharti Airtel, local firm Globacom. and South Africa-based MTN Group all face a deadline at the end of November to improve their service. Otherwise, they will be liable for fines and halted from expanding their customer base, Mr. Muoka said.

Metal and mining shares jumped after LMEX, a gauge of six metals traded on the London Metal Exchange, vaulted 4.76% on Thursday, 27 October 2011.

India's largest private sector aluminium maker by capacity Hindalco Industries galloped 10.88% and was the top gainer from the Sensex pack.

Jindal Steel & Power, NMDC, Sterlite Industries, JSW Steel, Nalco, Sail, Hindustan Zinc and Tata Steel rose by between 1.92% to 9.94%.

Interest rate sensitive realty stocks rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting. Purchases of both residential and commercial property are largely driven by finance. HDIL, Unitech, DLF, D B Realty and Indiabulls Real Estate rose by between 1.8% to 7.95%.

Interest rate sensitive banking stocks too rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting. India's largest bank by branch network State Bank of India (SBI) rose 2.15%. State Bank of India is not in a hurry to raise interest rates now, its Chairman Pratip Chaudhuri had said on Tuesday. "We don't see pressure now. Banks are comfortable with the liquidity now. Banks will not be desperate to raise rates," Chaudhuri said at a post policy bankers' meeting with media.

The SBI stock had surged recently on hopes of capital infusion from the Government of India, its majority shareholder. The finance ministry has ruled out a rights issue for SBI in this financial year. However, it assured the lender that its capital requirements would be met by March 31, 2012.

Among other PSU stocks, Punjab National Bank, Bank of India and Bank of Baroda gained by between 2.13% to 2.34%.

The finance ministry will have to opt for supplementary demand for grants to meet the capital needs of five-six public sector banks, including SBI, in the current financial year. This capital is pegged at Rs 10000 crore to Rs 20000 crore in this financial year, against Rs 6000 crore provided in the Union Budget 2011-2012.

India's second largest private sector bank by net profit HDFC Bank rose 2.25%. The bank's net profit rose 31.48% to Rs 1199.35 on 37.4% rise in total income to Rs 7929.38 crore in Q2 September 2011 over Q2 September 2010. The result was announced during market hours on 19 October 2011.

HDFC Bank's portfolio quality as of 30 September 2011 remained healthy, with gross non-performing assets (NPA) at 1% of gross advances and net non-performing assets at 0.2% of net advances (as against 1.2% gross NPAs and 0.3% net NPA ratios as on 30 September 2010). The bank's provisioning policies for specific loan loss provisions remained higher than the minimum regulatory requirements. The NPA provision coverage ratio (excluding write-offs, technical or otherwise) was at 81.3% as of 30 September 2011. Total restructured assets were 0.4% of the bank's gross advances as of 31 September 2011. Of these, restructured advances categorized as standard assets were 0.1% of the bank's gross advances.

HDFC Bank's CASA ratio stood at 47.3% as of 30 September 2011. The CASA (current and savings account) ratio is the ratio of deposits in the current and savings accounts of a bank to its total deposits. A high CASA ratio indicates that a higher portion of the banks' deposits come from current and savings accounts. This means that the bank is getting money at low cost, since no interest is paid on the current accounts and the interest paid on savings account is usually low.

The bank's total capital adequacy ratio (CAR) as at 30 September 2011 as per Basel II guidelines was at 16.5%, as against regulatory minimum of 9%. Tier I CAR was at 11.4% as at 30 September 2011.

India's largest private sector bank by net profit ICICI Bank jumped 7.01%.

Oil exploration stocks rose along with crude oil prices. Cairn India, Oil India and ONGC rose by between 0.42% to 3.04%. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.

Shares of offshore oil services providers gained as oil prices rose. Aban Offshore, Jindal Drilling, SEAMEC, Great Offshore and Deep Industries gained by between 0.2% to 7.93%.

Shares state-run oil-marketing companies (PSU OMCs) fell as crude oil prices rose. Indian Oil Corporation (IOC), HPCL and BPCL shed by between 0.5% to 2.88%. Higher crude oil prices will increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices.

Crude oil futures rallied more than 4% on Thursday, primed by a deal on Greek debt that man market men said bodes well for resolving the euro zone crisis.

IT stocks advanced on strong economic data in the US, which is the largest outsourcing market for the Indian IT firms. India's largest software services exporter by sales Tata Consultancy Services (TCS) gained 2.2%. During market hours on Monday the company said that Scotwest and Capital Credit Unions chose the company's BaNCS Core Banking as their IT platform to transform their infrastructure to address emerging opportunities in Community Banking in the United Kingdom.

After market hours on 17 October 2011, TCS reported a 4.7% fall in consolidated net profit to Rs 2301 crore on 7.7% growth in revenue to Rs 11633 crore in Q2 September 2011 over Q1 June 2011. The company's operating profit rose 11.4% to Rs 3143 crore in Q2 September 2011 over Q1 June 2011.

Commenting on the results TCS Chief Executive Officer and Managing Director N Chandrasekaran said, "Our domain-rich solutions and disciplined execution helped us capture business across major markets and deliver stellar growth in international revenues. We see strong momentum for our full services strategy from customers who are looking for agility and growth. We have created a nimble organization on the ground to stay close and stay relevant to our customers as there are ambiguities in the external environment in the short term".

India's second largest software services exporter Infosys gained 0.74%. The company's consolidated net profit as per International Financial Reporting Standards (IFRS) rose 10.68% to Rs 1906 crore on 8.2% growth in revenue to Rs 8099 crore in Q2 September 2011 over Q1 June 2011. The company announced the results on 12 October 2011.

Infosys has forecast 9.72% to 11.11% growth in non-annualized earnings per American Depositary Share at $0.79 to $0.80 in Q3 December 2011 over Q2 September 2011. It has forecast 3.2% to 5.3% growth in revenue at $1.802 to $1.84 billion in Q3 December 2011 over Q2 September 2011.

The company has for the second quarter in a row revised upwards its dollar earnings guidance for the year ending March 2012 (FY 2012). The company expects 15.3% to 16.8% growth in earnings per American Depositary Share at $3.02 to $3.06 in FY 2012 over the year ending March 2011 (FY 2011). However, the company has revised downwards dollar revenue growth guidance for FY 2012. The company expects 17.1% to 19.1% growth in revenue at $7.08 billion to $7.20 billion in FY 2012 over FY 2011.

India's third largest software services exporter Wipro rose 1.13% ahead of its Q2 results on Monday, 31 October 2011.

Interest rate sensitive auto stocks rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Another trigger for the rally in auto stocks was the government's announcement of increase in minimum support prices for Rabi crops.

The Cabinet Committee on Economic Affairs on Tuesday approved increase in MSP of wheat, barley, gram, masur, rapeseed, and mustard by 15-39% for Rabi crop of 2011-12 season to be marketed in 2012-13.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 2.24% to Rs 868.50. The stock hit record high of Rs 874.75 today.

India's largest truck maker by sales Tata Motors jumped 7.34%, with the stock gaining for the fourth straight day. Recently, the company reported 24% rise in global sales to 1,07,258 units in Q2 September 2011 over Q2 September 2010. Global sales of Jaguar Land Rover were up 42% to 27,639 vehicles in September 2011 over September 2010. The total passenger vehicles sales stood at 55,539 units in September 2011, up 21% from the corresponding period last year. Commercial vehicles sales were up by 28% to 51,719 units in Q2 September 2011 over Q2 September 2010. The company unveils its Q2 results on 14 November 2011.

India's largest bike maker by sales Hero MotoCorp gained 2.46%, with the stock gaining for the fifth straight day. After market hours on 18 October 2011, the company reported 19.38% rise in net profit to Rs 603.62 crore on 28.06% growth in total net operating income to Rs 5829.32 crore in Q2 September 2011 over Q2 September 2010. The company's core operating profit margin or OPM surged to 15.76% in Q2 September 2011 from 13.35% in Q2 September 2010.

The company said the total net operating income of Rs 5829.32 crore in Q2 September 2011 was a record quarterly figure. Hero MotoCorp said that with the company registering record sales of over 3 million units for six months period April-September 2011, it is comfortably placed to surpass the initial guidance of 6 million units for the year ending March 2012 (FY 2012).

India's second largest bike maker by sales Bajaj Auto fell 0.11% to Rs 1754.45. The stock scaled a record high of Rs 1822.15 today, 28 October 2011. The company's net profit increased 6.41% to Rs 725.80 crore on 20.70% increase in net sales to Rs 5046.48 crore in Q2 September 2011 over Q2 September 2010. The company incurred a mark-to-market (MTM) loss of Rs 95.41 crore on forward derivative contracts in the foreign exchange market. The company said this is a notional loss, which would reverse over the contract period. The company announced Q2 results during market hours on 20 October 2011.

India's largest small car maker by sales Maruti Suzuki India fell 1.99% to Rs 1128 ahead of its Q2 results on Saturday, 29 October 2011. The Maruti Suzuki India stock was on a roll recently advancing 9.34% in six trading sessions to Rs 1150.90 on 26 October 2011 from Rs 1150.90 on 18 October 2011. The stock gained recently triggered by end of labour strike at the company's Manesar plant last week.

Stock-specific activity may dominate trade in the near-term as earnings flow in. Investors will closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook.

Maruti Suzuki and LIC Housing Finance report Q2 results on Saturday, 29 October 2011. ICICI Bank, Wipro, Hindustan Unilever, Dabur India, Colgate Palmolive (India), Bank of Baroda, NMDC and BPCL unveil Q2 results on 31 October 2011

Cement majors ACC and Ambuja Cements, Punjab National Bank, HPCL and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. Sun TV Network, Ashok Leyland and TVS Motor report Q2 results on 3 November 2011. ONGC, Bharti Airtel and GlaxoSmithKline Pharmaceuticals unveil quarterly results on 4 November 2011.

Infrastructure Development Finance Company and ABB unveil results on 8 November 2011. Ranbaxy Laboratories, Indian Oil Corporation, GMR Infrastructure and Power Finance Corporation unveil quarterly results on 9 November 2011. Tata Steel, Hindalco and Mahindra Satyam unveil Q2 results on 10 November 2011. Jet Airways (India) and Tata Chemicals unveil Q2 results on 11 November 2011. Coal India and Shipping Corporation of India report Q2 results on 12 November 2011. Tata Motors, Mahindra & Mahindra and India Cements unveil Q2 results on 14 November 2011. Tata Power unveils Q2 results on 15 November 2011.

RBI announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on Tuesday, 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably. RBI said that economic growth is moderating on account of the cumulative impact of past monetary policy actions as well as some other factors.

The central bank said that the likelihood of a rate action in the December mid-quarter review is relatively low. Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted, the central bank said in a statement. However, as always, actions will depend on evolving macroeconomic conditions, it added.

While the impact of past monetary actions is still unfolding, it is necessary to persist with the anti-inflationary stance, RBI said. The stance of the monetary policy is intended to maintain an interest rate environment to contain inflation and anchor inflation expectations. The stance of the monetary policy is also intended to stimulate investment activity to support raising the trend growth. The stance of the monetary policy is also intended manage liquidity to ensure that it remains in moderate deficit, consistent with effective monetary transmission.

RBI said that several factors--structural imbalances in agriculture, infrastructure capacity bottlenecks and distorted administered prices of several key commodities and the pace of fiscal consolidation--have combined to keep medium-term inflation risks in the economy high. These risks can only be mitigated by concerted policy actions on several fronts, RBI said. In the absence of progress on these, over the medium term, RBI's monetary policy stance will have to take into account the risks of inflation surging in response to even a moderate growth recovery.

Food inflation has accelerated to a six-month high, propelled by soaring vegetable prices and highlighting limitations of the Reserve Bank of India's monetary intervention after it raised rates for the 13th time in 19 months recently. Data released by the government on Thursday showed food inflation rose to 11.43% year on year for the week to October 15, compared with 10.6% in the preceding week, driven by a 25% jump in vegetable prices even as prices of food articles increased 0.25%.

Finance Minister Pranab Mukherjee on 19 October 2011 said that the government is concerned about the volatility of FII flows. Mukherjee said loose monetary policies adopted by central banks in advanced economies have added to global liquidity, driving investments into better off emerging economies and fueling inflation in these countries.

The falling rupee could bloat India's already mammoth import bill and further strain government finances as the fuel subsidy burden swells, Finance Secretary R.S. Gujral said Friday, 21 October 2011. The rupee hit a near 30-month low below 50 against the dollar on 21 October 2011. Elevated crude oil prices are likely to push the government to spend an additional Rs 40000 crore on fuel subsidies in the current year.

Meanwhile, the new takeover code regulations notified by the market regulator Sebi last month became effective from Saturday, 22 October 2011. With these rules coming into force, both promoter and public shareholders of a listed company would now get the same price for their shares being purchased by an acquirer. At the same time, an acquirer would have to make an open offer for purchase of a minimum 26% stake from public shareholders, as against 20% earlier.

The new rules would also help the listed companies to get more investment from private equity players and other investors who are not interested in a takeover, as the trigger point for an open offer has been raised to 25%, from 15% earlier. Now, an entity needs to make an open offer only if its holding reaches threshold limit of 25%, as against 15% earlier. The new regulations replace the takeover rules that were in force since 1997

Given the lackluster initial FII response to the government's sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on 12 September 2011, further relaxed the norms on FII investment in such bonds. Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.

The government has raised its borrowing target for the current fiscal year by Rs 52800 crore, fueling worries that it may even overshoot the new estimate because of muted revenue growth amid a slowing economy and swelling subsidies. The government will borrow Rs 2.2 lakh crore during October 2011-March 2012 period, or the second half of the fiscal year, compared with the target of Rs 1.67 lakh crore announced in budget in February 2011. C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council on 29 September 2011 said it is going to be difficult to achieve fiscal deficit target of 4.6% of GDP for the year ending March 2012.

The government's new borrowing programme may crowd out private borrowers who come into the market in the second half of the year. Credit growth normally picks up after October every year when the busy season starts.

The Union Cabinet on Tuesday, 25 October 2011 approved a national manufacturing policy, the first of its kind in the country, to increase manufacturing's share of national output as it aims to create millions of jobs and add capacity to sustain brisk economic growth through the next decade. The policy targets raising the share of manufacturing to 25% of gross domestic product by 2022 from the current 16% -- a level that has remained stagnant since 1980.

The new policy proposes developing National Investment and Manufacturing Zones, or mega-industrial parks, that will reduce the compliance burden on industry, the government said in a statement. The policy also aims to create 100 million additional jobs over the next decade, Commerce and Industry Minister Anand Sharma said. The government has identified seven locations across India to set up such industry parks, the government statement said.

Under the policy, a special company will be established that will be a one-stop shop for all clearances for businesses interested in setting up operations in the industry parks, the statement said. Small- and medium-sized companies will be offered tax breaks to entice them to the parks.

European markets reversed initial gains on Friday. Key benchmark indices in UK, and France were down by between 0.17% to 0.38%. Germany's DAX rose 0.08%.

Asian stocks advanced on Friday as a long-awaited plan to resolve the European debt crisis encouraged investors to put money back in markets driving up prices of risky assets such as the euro and commodities. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.39% to 2.04%.

Japan's industrial production contracted for the first time in six months, as domestic manufacturers struggled against a worldwide economic slowdown, figures released on Friday showed. Industrial output in the world's third-largest economy fell at a seasonally adjusted rate of 4% in September from the previous month, the Ministry of Economy, Trade and Industry said today.

The deal in Europe calls for private banks and insurers to take 50 percent losses on their Greek debt as well as agreements on recapitalisation of hard-hit European banks and a leveraging of the bloc's rescue fund.

Trading in US index futures indicated that the Dow could fall 64 points at the opening bell on Friday, 28 October 2011.

U.S. stocks surged 3% on Thursday as an agreement by European leaders to help contain the region's two-year debt crisis lifted a cloud hovering over markets. In a positive sign for the U.S. economy, the government's estimate of third-quarter growth expanded at the fastest pace in a year. The Commerce Department reported on Thursday that third-quarter GDP grew at an annual rate of 2.5% in the July to September period.