Market scales 2 week closing high on central banks' liquidity move

Key benchmark indices gained for the second straight day to hit highest level in two weeks as world's six major central banks move to come together to tame a liquidity crunch for European banks by providing cheaper dollar funding boosted sentiment. The BSE Sensex was up 359.99 points or 2.23%, off close to 235 points from the day's high and up about 50 points from the day's low. The market breadth was positive.

Interest rate sensitive banking, realty and auto stocks gained triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Metal stocks jumped after LMEX, a gauge of six metals traded on the London Metal Exchange surged 5% on Wednesday, 30 November 2011. Maruti Suzuki India fell on poor November sales. Index heavyweight Reliance Industries (RIL) trimmed initial gains.



The market galloped in early trade to hit highest level in two weeks. It trimmed gains in morning trade. It further pared gains to hit fresh intraday low in mid-morning trade. It was hovering near the intraday lows in early afternoon trade. Market extended gains in afternoon trade. It trimmed gains to hit fresh intraday low in mid-afternoon trade after a weak start of European stocks. It further pared gains in late trade.

The BSE Sensex was up 359.99 points or 2.23% to 16,483.45, its highest closing level since 16 November 2011. The index surged 594.65 points at the day's high of 16,718.11 in early trade. The index rose 307.15 points at the day's low of 16,430.61 in late trade.

The S&P CNX Nifty was up 104.80 points or 2.17% to 4,936.85, its highest closing level since 16 November 2011. The Nifty hit a high of 5,011.90 and a low of 4,916.70 in intraday trade.

The BSE Mid-Cap index rose 0.97% and the BSE Small-Cap index gained 0.43%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 1953 crore slightly higher than Rs 1942.16 crore on Wednesday, 30 November 2011.

The market breadth, indicating the overall health of the market, was positive compared with strong breadth earlier in the day. On BSE, 1691 shares gained and 1124 shares fell. A total of 112 shares were unchanged.

From the 30-share Sensex pack, 25 rose and only 5 fell. Bharti Airtel, Bhel, ONGC, Sun Pharmaceutical Industries and Hindustan Unilever shed by between 0.38% to 2.46%.

Index heavyweight Reliance Industries (RIL) advanced 2.53% to Rs 798.50, off the day's high of Rs 810. The company after market hours on Monday said it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company's entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks.

RIL said all the investments in the exploration, development and production of hydrocarbons from KG-D6 were made by RIL and its foreign partners at their own risk, and not by the Government of India (GoI). RIL and its partners are entitled under the production sharing contract (PSC) with the GoI to recover their full costs from the revenues generated by production from the block, RIL said in a statement.

The investment made in KG-D6 production facilities has been only partly recovered and the return on the investment so far is less than the cost of the capital, RIL said. The PSC contains no provision which entitles the GoI to restrict the costs recovered by the company by reference to factors such as the level of production or the extent to which field facilities are utilised, RIL said. RIL said it has initiated arbitration proceedings against the GoI in a bid to finally resolve the cost recovery issue so as not to hinder future investments in this block.

Interest rate sensitive realty stocks rose triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Purchases of both residential and commercial property are largely driven by finance. HDIL, DLF, Indiabulls Real Estate and Unitech rose by between 3.47% to 5.34%.

Metal stocks jumped after LMEX, a gauge of six metals traded on the London Metal Exchange surged 5% on Wednesday, 30 November 2011. Tata Steel, Jindal Saw, Sail, Hindustan Zinc, Nalco, Jindal Steel & Power, Hindalco Industries, Sterlite Industries and JSW Steel rose by between 0.76% to 6.97%.

Interest rate sensitive banking stocks gained triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. India's largest private sector bank by net profit ICICI Bank jumped 6.76%. India's second largest private sector bank by net profit HDFC Bank rose 2.72%. India's largest bank by net profit and branch network State Bank of India (SBI) rose 3.2%. Bank of India, Punjab National Bank and Bank of India gained by between 1.61% to 1.91%.

Interest rate sensitive auto stocks gained triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. The cut of Rs 0.78 per litre in petrol prices by PSU OMCs and strong sales in November month also supported auto stocks. The reduction in petrol prices was effective from midnight on Wednesday, 30 November 2011. India's largest truck maker by sales Tata Motors jumped 6.06% after total sales rose 41% to 76,823 vehicles in November 2011 over November 2010.

India's largest tractor maker by sales Mahindra & Mahindra rose 0.82% after the company said total auto sales jumped 52.7% to 40,722 units in November 2011 over November 2010. Mahindra & Mahindra's (M&M) domestic sales jumped 51.63% to Rs 38,159 units, while exports surged 70.90% to 2,563 units in November 2011 over November 2010. The 4-wheeler commercial segment, which includes the passenger and load categories, has registered an impressive growth of 74% at 13,362 units. Speaking on the numbers, Rajesh Jejurikar, Chief Executive, Automotive Division, M&M said, "We are delighted with our outstanding growth in November wherein in spite of the market slowdown post the festive season, we have been able to maintain a consistent performance. All our brands are doing well with the excitement around XUV5OO continuing, as we ramp up production."

India's largest motorcycle maker by sales Bajaj Auto rose 1.82%. India's largest motorcycle maker by sales Hero MotoCorp gained 4.33%. The company said on Thursday its sales rose 27.4% to 536,772 units in November 2011 over November 2010. TVS Motor Company fell 2.78%. The company's total sales rose 12% to 175,535 units in November 2011 over November 2010.

India's largest car maker by sales Maruti Suzuki India fell 0.69% reversing initial gains. The company announced during market hours today that total sales fell 18.5% to 91772 units in November 2011 over November 2010.

ACC rose 2.24% after company announced during market hours today that cement dispatches rose 5.17% to 1.83 million tonnes in November 2011 over November 2010.

Among other cement stocks, Jaiprakash Associates, India Cements, Ambuja Cement, and Ultratech Cement gained by between 0.54% to 4.59%.

Oil exploration stocks rose along with crude oil prices. Cairn India, and ONGC rose by between 1.15% to 3.64%. Oil India fell 0.2%. 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, Dolphin Offshore, Jindal Drilling, SEAMEC, Great Offshore and Deep Industries gained by between 1.94% to 8.1%.

Oil prices edged higher to near $101 a barrel Thursday in Asia amid a surge in global equities after the central banks of most of the world's biggest economies pledged to lower borrowing costs. Benchmark crude for January delivery was up 10 cents to $100.46 a barrel in Asian electronic trading. The contract rose 57 cents to settle to $100.36 on Wednesday.

Consumer durables stocks edged higher in a firm market. Gitanjali Gems, Rajesh Exports, Titan Industries and Videocon Industries gained by between 0.31% to 4.58%.

IT stocks rose after major central banks moved to tame a liquidity crunch for European banks by providing cheaper dollar funding. Europe is the second largest outsourcing market for the Indian firms after US. India's third largest software services exporter Wipro rose 2.1%. India's largest software services exporter TCS gained 1.95%, with the stock gaining for the fourth straight day. Tata group holding firm, Tata Sons, last week named Cyrus Pallonji Mistry as the successor to Tata Group Chairman Ratan Tata. India's second largest software services exporter by revenue Infosys rose 1.74%.

BPCL, HPLC and Indian Oil Corporation declined by between 0.27% to 1.85% after they have decided to revise petrol prices downwards by Rs. 0.65 per litre (excluding state levies) with effect from. 1st December 2011. With taxes, the cut works out to Rs. 0.78 per litre. There was a cut of 3.2% earlier this month, too. Petrol was deregulated in June 2010.

Ranbaxy Laboratories rose 2.14% after the U.S. Food and Drug Administration confirmed it had given approval to the drugmaker to make the first generic version of the cholesterol-lowering drug Lipitor.

Avance Tech clocked highest volume of 5.33 crore shares on BSE. Empower India (69.75 lakh shares), Cals Refineries (62.53 lakh shares), Suzlon Energy (52.05 lakh shares) and Shree Renuka Sugars (32.10 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 100.37 crore on BSE. ICICI Bank (Rs 88.81 crore), RIL (Rs 69 crore), Tata Steel (Rs 65.38 crore) and Ranbaxy Laboratories (Rs 59.02 crore) were the other turnover toppers in that order.

A government statement in parliament has dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam, last week, said the government has no proposal to lower the securities transaction tax (STT). There has been a speculation that the government will reduce STT in Union Budget 2012-2013 in a bid to revive sagging volumes on the bourses. Palanimanickam said in a written reply to Rajya Sabha that the securities transaction tax receipts had declined by around 18% to Rs 2960 crore during the first six months in the current fiscal year from a year ago period.

The Indian economy expanded at a substantially lower rate in the second quarter of the current fiscal year as a series of rate increases by the RBI and a global slowdown hurt local demand. India's economy grew 6.9% in Q2 September 2011, in line with expectations, after expanding by 7.7% in the first quarter, government data showed on Wednesday. The manufacturing sector grew an annual 2.7% during the July-September quarter while farm output rose an annual 3.2% the data showed. India's GDP growth in the first six months of FY12 stood at 7.3% versus 8.6% in the corresponding period of the last financial year, the CSO data showed on Wednesday.

The output of the eight infrastructure industries dropped to an over six-year low of 0.1% in October, data released on Wednesday showed, suggesting further slowdown in already wobbly industrial growth. The eight infrastructure industries together have a 38% weight in the index of industrial production (IIP), which makes the infrastructure index a good leading indicator of industrial production.

India's manufacturing sector expansion slowed in November as factory output grew at its slowest pace in nearly three years although export demand should provide some cheer for factories, a survey showed on Thursday. The HSBC Markit India Manufacturing PMI fell to 51.0 from 52.0 in October, but has stayed above the 50 mark that divides growth from contraction for 32 months. The PMI was 50.4 in September.

India's merchandise exports in October rose by 10.8% to $19.87 billion, while imports during the same month climbed by 22% to $39.51 billion, data released by the Government showed on Thursday. As a result, the trade deficit for October 2011 stood at $19.64 billion versus $14.53 billion in the corresponding month a year earlier.

Food inflation tumbled in the third week of November but fuel inflation increased marginally, data released by the Government showed on Thursday. Food inflation declined to 8% in the week ended November 19 from 9.01% in the preceding week, the Commerce & Industry Ministry said Thursday. Food inflation stood at 9.03% in the corresponding week last year. Inflation in the Primary Articles group fell to 7.74% in the week under review, from 9.08% in the week ended November 12, according to the Commerce Ministry statement. It was at 14.32% in the year-ago period. Inflation in the Fuel & Power group stood at 15.53% in the week ended November 19 versus 15.49% in the previous week, the Government data showed. It was at 10.07% in the comparable week of the previous year.

India's inflation rate will fall sharply over the next few months and the country's economy should hold up despite the global economic slowdown, Prime Minister Manmohan Singh said on Tuesday.

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 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.

European shares slipped on Thursday as the market seeks further guidance from policymakers about their plans to help end the region's debt crisis. Key benchmark indices in France and Germany fell by between 0.64% to 0.76%. UK's FTSW 100 rose 0.31%.

The U.S. Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said on Wednesday they would lower the cost of existing dollar swap lines by 50 basis points from 5 December 2011 and arrange bilateral swaps to provide liquidity for other currencies.

Asian shares extended gains on Thursday after the world's six major central banks moved to tame a liquidity crunch for European banks by providing cheaper dollar funding. Key benchmark indices in China, Hong Kong, Japan, Indonesia, Singapore, South Korea and Taiwan were up by between 1.93% to 5.63%.

A move by China's central bank to cut the reserve ratio requirement for banks to 21% from 21.5% effective 5 December 2011 also boosted sentiment. China's factory sector shrank in November for the first time in nearly three years, an official purchasing managers' index showed on Thursday.

Trading in US index futures indicated that the Dow could fall 29 points at the opening bell on Thursday, 1 December 2011. US stocks soared by four percent Wednesday after major central banks joined hands to ensure commercial banks would not be undermined by market worries over the eurozone crisis. The Federal Reserve's periodic Beige Book review, released Wednesday, described the US economy growing at a "slow to moderate pace," a slightly more positive phrasing than the previous report on October 19.