Market soars on firm global cues

The market surged last week as global stocks climbed on renewed optimism that European officials were poised to take action to alleviate debt crisis wreaking havoc in the euro zone. Investors shrugged off India's weak GDP data amid expectation that the Reserve Bank of India (RBI) may pause its aggressive monetary stance to prop up growth.

The BSE Sensex surged 1,151.40 points or 7.34% to 16,846.83 in the week ended Friday, 2 December 2011. The 50-share S&P CNX Nifty surged 340.10 points or 7.22% to 5,050.15.

The BSE Mid-Cap index jumped 2.69% while the BSE Small-Cap index rose 2.32%. Both these indices underperformed the Sensex.



The government unveiled Q2 September 2011 GDP data on Wednesday, 30 November 2011. 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. 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 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, 1 December 2011. 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, 1 December 2011. Food inflation declined to 8% in the week ended 19 November 2011. 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 12 November 2011, 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 19 November 2011 versus 15.49% in the previous week, the Government data showed. It was at 10.07% in the comparable week of the previous year.

The row over foreign direct investment (FDI) in the retail sector continued to disrupt Parliament proceedings with the opposition forcing adjournment of both Houses on 9th Day of the winter session on Friday, 2 December 2011. However, Prime Minister Manmohan Singh strongly defended the Cabinet decision to allow foreign direct investment in retail sector and ruled out a rollback.

The Union Cabinet on Thursday, 24 November 2011, cleared a proposal to allow 51% FDI in multi-brand retail and increase in FDI in single brand retail to 100% from current 51%, paving way for global chains like Wal-Mart, Carrefour and Tesco to open mega stores in Indian cities.

Manmohan Singh on Tuesday (29 November 2011) said he was confident that FDI in India's retail sector would benefit all as it would bring modern technology to the country, improve rural infrastructure, reduce wastage of agricultural produce, enable farmers to get better prices for their crops and consumers will get commodities of daily use at reduced prices.

Coming back to equity markets. Trading for the week started on a firm note, with key benchmark indices soaring on Monday, 28 November 2011 as global stocks surged on renewed optimism that European officials were poised to take action to alleviate debt crisis wreaking havoc in the euro zone. The BSE Sensex jumped 471.70 points or 3.01% to settle at 16,167.13. The S&P CNX Nifty jumped 141.25 points or 3% to settle at 4,851.30.

Key benchmark indices edged lower in choppy trade on Tuesday, 29 November 2011 as the deadlock over allowing foreign direct investment (FDI) in retail sector continued as an all-party meeting failed to reach an agreement and both houses of Parliament were adjourned for the day amid protests by parties opposed to the move. The BSE Sensex lost 158.79 points or 0.98% to settle at 16,008.34. The S&P CNX Nifty shed 46.20 points or 0.95% to settle at 4,805.10.

Key benchmark indices edged higher on Wednesday, 30 November 2011, amidst volatility supported by gains in index heavyweight Reliance Industries (RIL), which jumped nearly 2%. News trickled in after market hours that China's central bank cut the reserve requirement ratio for its banks by 50 basis points for the first time in nearly three years to ease credit strains and shore up activity in the world's second-largest economy. The BSE Sensex was up 115.12 points or 0.72% to 16,123.46. The S&P CNX Nifty was up 26.95 points or 0.56% to 4,832.05.

Key benchmark indices gained for the second straight day to hit highest level in two weeks on Thursday, 1 December 2011 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% to 16,483.45. The S&P CNX Nifty was up 104.80 points or 2.17% to 4,936.85.

Key benchmark indices rallied on Friday, 2 December 2011, on the back of positive cues from European peers. World stocks edged higher as markets awaited U.S. employment figures which are expected to be robust and a key speech by German Chancellor Angela Merkel in hopes she might unveil new steps to save the global economy from burgeoning European debt crisis. The BSE Sensex rose 363.38 points or 2.20% to 16,846.83. The S&P CNX Nifty rose 113.30 points or 2.29% to 5,050.15.

All the 30 shares in the Sensex pack rose last week.

India's largest aluminium maker by sales Hindalco Industries was the top Sensex gainer. The stock jumped 19.10% to Rs 135.30. Among other metal shares, Tata Steel (up 11.96% to Rs 418.85), and Sterlite Industries (up 9.40% to Rs 109.45), surged. Metal shares tracked firmness in industrial metal prices in the global market.

Interest rate sensitive banking stocks rose on anticipations that a slowing economy could prompt the RBI to pause interest rate hikes. India's largest bank by net profit and branch network State Bank of India (SBI) rose 11.58% to Rs 1886.50. India's largest private sector bank by net profit ICICI Bank rose 9.49% to Rs 787.65. India's second largest private sector bank by net profit HDFC Bank rose 7.94% to Rs 465.75.

IT stocks rose on positive economic data in US and after major central banks on Wednesday, 30 November 2011, moved to tame a liquidity crunch for European banks by providing cheaper dollar funding. India's largest software services exporter TCS rose 10.59% to Rs 1175.50. India's third largest software services exporter Wipro rose 6.70% to Rs 394.35. India's second largest software services exporter by revenue Infosys rose 3.70% to Rs 2696.80.

Manufacturing activity in the U.S. rose to its highest in five months, while recent data on consumer spending and private-sector job creation were also positive. Europe is the second largest outsourcing market for the Indian firms after US.

Interest rate sensitive auto stocks gained on anticipations that a slowing economy could prompt the RBI to pause interest rate hikes. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. The recent cut in petrol prices of Rs 0.78 per litre 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 rose 11.32% to Rs 191.25. The company's total sales rose 41% to 76,823 vehicles in November 2011 over November 2010.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) rose 5.91% to Rs 748.05. M&M's total auto sales jumped 52.7% to 40,722 units in November 2011 over November 2010. 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, registered an impressive growth of 74% at 13,362 units.

India's largest motorcycle maker by sales Bajaj Auto rose 4.25% to Rs 1712.50. The company's total vehicle sales were up 25% at 374,477 units in November 2011 over November 2010.

India's largest motorcycle maker by sales Hero MotoCorp rose 1.68% to Rs 2083.55. The company's total sales rose 27.4% to 536,772 units in November 2011 over November 2010.

India's largest car maker by sales Maruti Suzuki India rose 4.40% to Rs 991.85 on reports that it is considering an increase in prices of its products from January next year to offset the impact of rupee depreciation. The company's total vehicle sales fell 18.5% to 91772 units in November 2011 over November 2010.

Infrastructure developer Jaiprakash Associates rose 10.87% to Rs 67.30. The company's cement dispatches jumped 43.2% to 1.59 million tonnes in November 2011 over November 2010.

Index heavyweight Reliance Industries (RIL) rose 7.53% to Rs 810.80. The company after market hours on Monday, 28 November 2011, said it had 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.