Market scales 4-1/2-week high in broad-based rally

Key benchmark indices surged to attain their highest level in 4-1/2 weeks as firm global stocks boosted sentiment. The market sentiment was also boosted by media reports that state governments in India have given their in-principle approval to a proposed national goods and service tax (GST), raising hopes that the ambitious tax reform could be included in the upcoming budget. The barometer index BSE Sensex reclaimed the psychological 16,000 mark. The Sensex jumped 350.37 points or 2.22%, up close to 265 points from the day's low and off about 15 points from the day's high.

The Sensex has jumped 710.17 points or 4.59% so far in this month. From a 52-week high of 19,811.14 on 6 April 2011, the Sensex has lost 3,646.05 points or 18.4%. From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1,029.23 points or 6.79%.



Today's rally on the bourses was broad-based. The market breadth was quite strong. All the 13 sectoral indices on BSE were in the green. Capital goods stocks rose on bargain hunting after last month's steep slide. Index heavyweight Reliance Industries (RIL) jumped 4%. Interest rate sensitive auto, realty and banking stocks surged on expectations that the Reserve Bank of India (RBI) will start cutting interest rates in the coming months to prop up slowing economy.

The market opened on a firm note on higher Asian stocks. The market extended initial gains to hit fresh intraday high in morning trade. The uptrend continued, with the Sensex hitting fresh intraday high in mid-morning trade. The market trimmed gains after hitting fresh intraday high in early afternoon trade. The market held firm in afternoon trade. The market strengthened further to hit fresh intraday high in mid-afternoon trade. The market extended gains in late trade.

The BSE Sensex jumped 350.37 points or 2.22% to settle at 16,165.09, its highest closing level since 9 December 2011. The index jumped 366.25 points at the day's high of 16,180.97 in late trade. The index gained 83.60 points at the day's low of 15,898.32 in early trade.

The S&P CNX Nifty jumped 106.75 points or 2.25% to settle at 4,849.55, its highest closing level since 9 December 2011. The index hit a high of 4,855.90 and a low of 4,768.25 in intraday trade.

The BSE Mid-Cap index rose 2.24% and the BSE Small-Cap index gained 2.63%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2545 crore, higher than Rs 1986.31 crore on Monday, 9 January 2012.

The market breadth, indicating the overall health of the market, was quite strong. On BSE, 2,152 shares rose and 681 shares fell. A total of 95 shares were unchanged.

From 30-member Sensex pack, 28 shares gained and two of them fell.

Index heavyweight RIL gained 3.99%. RIL last week said it has scheduled a planned maintenance turnaround of one of the crude distillation unit of its SEZ Refinery at Jamnagar complex for a period of approximately three weeks starting mid February 2012. This maintenance turnaround is planned for the first time after its commissioning during the Financial Year 2008-09, RIL said. This opportunity would also be utilised to take up productivity improvement related jobs in other secondary processing units as necessary, RIL said. During this period, other three crude distillation units at Jamnagar refining complex are expected to sustain normal operations, RIL added.

RIL had announced early last week that it is divesting a part of the interest in ETV channels in favour of TV18 Broadcast, a Network18 Group firm. RIL said that as a part of the deal with TV18 Broadcast, Infotel Broad Band Services (Infotel), a subsidiary of RIL, has entered into a Memorandum of Understanding with TV18 Broadcast and Network18 Media and Investments for preferential access to all content of the latter for distribution through the 4G Broadband Network being set up by RIL.

Essar Oil rose 3.27% after the company announced the successful commissioning of Amine Regeneration Unit (ARU), which is a part of the Phase I expansion at its Vadinar refinery in Gujarat. When completed, the Phase I expansion will increase the Vadinar refinery's capacity from 14 MMTPA (3 lakh barrels per day) currently to 18 MMTPA (3.75 lakh barrels per day), as well as increase its complexity from 6.1 to 11.8. The project is nearing completion and increased throughput of 18 MMTPA will commence by March 2012, Essar Oil said during trading hours on Monday, 9 January 2012.

Metal stocks rose after US aluminium major Alcoa at the time of announcing its Q4 results on Monday said it has bullish view of the global aluminum market. The aluminum company's results were in line with expectations overall. It swung to a fourth-quarter loss as prices slumped and costs rose but it has a bullish view of the global aluminum market. NMDC, Bhushan Steel, Sail, Hindalco Industries, Jindal Steel & Power, Nalco, JSW Steel, Hindustan Zinc, and Sterlite Industries gained by between 0.36% to 10%.

India's largest steel maker by sales Tata Steel rose 2.76%. The company on Monday said that sales from its Indian operations fell 1.1% to 1.62 million tonnes in Q3 December 2011 over Q3 December 2010.

Shares related to education business surged. Educomp Solutions, ACE EduTrend, Edserv Softsystems, Aptech, and Everonn Education jumped by between 4.83% to 20%.

Construction shares, too, rallied in a firm market. Hindustan Construction Company, IRB Infrastructure Developers, NCC, Patel Engineering, and Jaiprakash Associates gained by between 2.61% to 10.2%.

Capital goods stocks rose on bargain hunting after last month's steep slide. Gammon India, Reliance Industrial Infrastructure, Usha Martin, Thermax, L&T, Bhel, Praj Industries, ABB and Punj Lloyd rose by between 0.23% to 20%.

Interest rate sensitive realty stocks gained on expectations that the RBI will start cutting interest rates in the coming months to prop up slowing economy. Lower interest rates may help revive demand for properties. Purchases of both residential and commercial property are largely driven by finance. DLF, Indiabulls Real Estate, Unitech, Anant Raj Industries and HDIL rose by between 1.45% to 20%.

Interest rate sensitive banking stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy. India's largest private sector bank by branch network ICICI Bank rose 3.85%. India's second largest private sector bank by branch network HDFC Bank gained 1%.

India's largest commercial bank by net profit and branch network State Bank of India (SBI) rose 3.93%. The bank early last week said it has cancelled the negotiations for establishing a joint venture entity with Visa Inc and Elavon Inc for conducting the merchant acquiring business. In terms of the bank's earlier letter dated 4 May 2010, a joint venture was proposed between SBI Payment Services, the wholly owned subsidiary of SBI and Visa Inc and Elavon Inc.

The government will infuse Rs 5000 crore ($942 million) to Rs 6000 crore ($1.13 billion) in State Bank of India by the end of the current fiscal year in March, the bank's chairman Pratip Chaudhuri said on Thursday, 5 January 2012. After the capital infusion, the government's share [in the bank] will increase to 64%, Chaudhuri told media reporters. The government currently owns 59% of India's largest lender by assets. Mr. Chaudhuri also said that the bank may raise further capital next fiscal year through a follow-on share sale or a private sale of shares to institutional investors.

Among other banking stocks, Canara Bank, Axis Bank, Union Bank of India, Bank of India, Yes Bank, IDBI Bank, Bank of Baroda, Punjab National Bank, Federal Bank and Kotak Mahindra Bank rose by between 1.51% to 5.7%.

IndusInd Bank jumped 6.19% after the bank announced during market hours today that net profit jumped 33.86% to Rs 205.96 crore on 48.97% growth in total income Rs 1654.86 crore in Q3 December 2011 over Q3 December 2010.

In its draft guidelines on Basel III capital regulation norms for banks unveiled recently, the RBI has suggested that Common Equity Tier 1 (CET1) capital must be at least 5.5% of risk-weighted assets (RWAs). Tier 1 capital must be at least 7% of RWAs and total capital must be at least 9% of RWAs, according to the draft guidelines. RBI has suggested capital conservation buffer in the form of Common Equity of 2.5% of RWAs.

The RBI said the implementation period of minimum capital requirements and deductions from Common Equity will begin from January 1, 2013 and be fully implemented as on March 31, 2017. Capital conservation buffer requirement is proposed to be implemented between March 31, 2014 and March 31, 2017. Instruments which no longer qualify as regulatory capital instruments will be phased-out during the period beginning from January 1, 2013 to March 31, 2022.

For OTC derivatives, in addition to the capital charge for counterparty default risk under Current Exposure Method, banks will be required to compute an additional credit value adjustments (CVA) risk capital charge. The parallel run for the leverage ratio will be from January 1, 2013 to January 1, 2017, during which banks would be expected to strive to operate at a minimum Tier 1 leverage ratio of 5%. The leverage ratio requirement will be finalized taking into account the final proposal of the Basel Committee.

Consumer durables stocks rose on renewed buying. Gitanjali Gems, Rajesh Exports, Blue Star, Videocon Industries and Titan Industries rose by between 0.31% to 2.96%.

Tyre shares rallied on falling rubber prices. Apollo Tyres, MRF, CEAT, JK Tyre & Industries, Goodyear India jumped by between 3.9% to 7.02%. Rubber is a key raw material in tyre making.

Shares of Reliance Anil Dhirubhai Ambani (ADA) group companies rallied. Reliance Capital, Reliance Infrastructure, Reliance MediaWorks, Reliance Communications and Reliance Power jumped by between 3.9% to 7.02%.

Pharma stocks extended recent gains. Lupin, Dr Reddy's Laboratories, Dishman Pharma, Cipla and Sun Pharmaceutical Industries rose by between 0.06% to 13.42%.

IT stocks rose on a slew of recent positive economic data in the US, the biggest outsourcing market for Indian IT firms. India's second largest software services exporter by revenue Infosys gained 0.94%. The company announces Q3 December 2011 results on Thursday, 12 January 2012.

India's third largest software services exporter by revenues Wipro rose 0.24%.

India's largest software services exporter by revenues Tata Consultancy Services (TCS) fell 0.41%. The company unveils Q3 results on 17 January 2012.

Airline stocks extended recent gains triggered by reports the Civil Aviation Ministry is likely to drop its opposition to higher investment by foreign airlines in the sector and agree to let them hold up to 49% in domestic carriers. Jet Airways, Kingfisher Airlines and SpiceJet rose by between 2.62% to 7.93%.

Interest rate sensitive auto stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy. Lower interest rates may help revive demand for vehicles. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.

Mahindra & Mahindra (M&M) rose 5.63% and was the top gainer form the Sensex pack. M&M on Monday introduced a hydrogen-powered three-wheeled vehicle that it jointly developed with the United Nations Industrial Development Organization and the Indian Institute of Technology, New Delhi, for $1 million. The project, called DelHy 3W, took three years to complete, the Indian auto maker said, adding that the UNIDO International Centre for Hydrogen Energy Technologies funded half the costs. US-based Air Products Inc. has set up a hydrogen station for the three-wheeler project in New Delhi. The vehicles will be operated at Pragati Maidan, which is the venue for several trade fairs including the ongoing auto show.

M&M's total automobile sales jumped 26% to 42,761 units in December 2011 over December 2010.

M&M's president for automotive and farm equipment Pawan Goenka Thursday, 5 January 2012, said that the company plans to start assembling SsangYong vehicles in China, Brazil and Russia in the next two years. M&M last year picked up a 70.03% stake in South Korean auto maker SsangYong Motor Co. for 522.5 billion Korean won. It is slated to launch SsangYong's sport-utility vehicle Rexton in India in the second half of 2012 and the Korando C SUV in 2013.

Ashok Leyland gained 2.35%. The company reported sales of 9,088 units for December 2011 including 1,099 units of the recently launched LCV for cargo transportation -- Dost. Adjusting for Dost, which was launched in October 2011, sales came in at 7,989 units, up 6% year-on-year.

Tata Motors gained 2.24%. The company's total sales of commercial and passenger vehicles jumped 22% to 82,278 units in December 2011 over December 2010. The domestic sales of the vehicles in both categories for the month stood at 76,663 cars, a 24% jump compared to 61,685 in December 2010, the company said in a statement. However, exports declined 3% to 5,615 units compared to 5,809 in December 2010.

Maruti Suzuki India rose 1.45%. Maruti on Friday, 6 January 2012, unveiled India's first compact multi purpose vehicle Ertiga at the auto expo. Ertiga's compact dimensions make it easy to park ad maneuver, Maruti said. Maruti had on Thursday, 5 January 2012 unveiled XA Alpha -- a concept for a compact sports utility vehicle (SUV).

Maruti's total vehicle sales fell 7.1% to 92,161 units in December 2011 over December 2010. Domestic sales dropped 13.4% to 77,475 units. Exports surged by 50.5% to 14,686 units.

Fiat India Automobiles said early last week that it expects to conclude shortly discussions with Maruti Suzuki India for the supply of diesel engines for cars, a step that will allow the local unit of Suzuki Motor Corp. cut the waiting period on its Swift model. Maruti currently sources all its diesel engines from Suzuki Powertrain, a joint venture between Maruti and Suzuki. These engines are made using Fiat's technology.

Two-wheeler makers gained on bargain hunting after the recent slide triggered by concerns of increased competition as global two-wheeler makers launched new models and announced expansion plans at the ongoing India auto show to attract more buyers in the world's second-largest market for motorcycles and scooters, Bajaj Auto rose 0.22%. The firm unveiled an ultra-low-cost car early last week, its first foray into the four-wheel market. The compact "RE60" boasts of high fuel efficiency and low carbon dioxide emissions, but the firm did not release a price tag.

Bajaj Auto's total sales rose 10% to 3.05 lakh units in December 2011 over December 2010. Motorcycle sales rose 8% to 2.63 lakh units and commercial vehicle sales rose 27% to 41,991 units. Exports jumped 25% to 1.19 lakh units. The company announced the monthly sales data at the beginning this month.

India's largest two-wheeler maker Hero MotoCorp gained 2.7%. Hero MotoCorp expects double-digit percentage growth in sales for the fiscal year starting in April, Managing Director Pawan Munjal said at the New Delhi Auto Expo. The company on Friday, 6 January 2012 unveiled its first concept hybrid scooter.

The company last week launched two motorcycle models and one scooter model. The company will start retail sales of the 110-cubic-centimeter scooter model Maestro later this month, while that of the 110cc motorcycle model Passion X Pro and 125cc motorcycle Ignitor will happen in the remainder of the year.

TVS Motor Company rose 2.88%. TVS Motor on Tuesday said it will launch four two-wheeler models this year and may make investments to raise output as it seeks to grow its market share amid growing competition from rivals such as Honda Motor Company. The Chennai-based company will introduce a motorcycle with a 125-cubic-centimeter engine in June and follow it with another in December, which will witness the reintroduction of the Victor brand. TVS will also introduce a 125cc scooter in December, the company said.

Car sales in India rose 8.5% to 1.59 lakh units in December 2011 over December 2010, the Society of Indian Automobile Manufacturers (SIAM) said. Sales of trucks and buses, a key pointer to the country's economic activity, rose 14.50% in December from a year previous to 72,192 vehicles, said SIAM. Total two-wheeler sales in December 2011 increased by 8.52% to 10,91,982 units from 10,06,289 units in the same period of previous year.

Cals Refineries clocked highest volume of 1.56 crore shares on BSE. DLF (62.38 lakh shares), Alok Industries (59.27 lakh shares), Resurgence Mines (54.42 lakh shares) and Suzlon Energy (53.02 lakh shares) were the other volume toppers in that order.

DLF clocked highest turnover of Rs 115.04 crore on BSE. Everonn Education (Rs 111.43 crore), SBI (Rs 101.17 crore), MMTC (Rs 82.14 crore) and JSW Steel (Rs 73.81 crore) were the other turnover toppers in that order.

State governments in India have reportedly given their in-principle approval to a proposed national goods and service tax (GST), raising hopes that the ambitious tax reform could be included in the upcoming budget. Finance ministers from different states agreed to the central government's GST proposal, but specified a list of services, such as luxury and entertainment, that would remain taxed at the state level. The GST will cut business costs and boost government tax revenue, but has missed several deadlines for implementation due to resistance from states that fear a loss of fiscal autonomy and the main opposition Bharatiya Janata Party.

The next major trigger for the market is Q3 December 2011 corporate earnings, which will start trickling in from later this week. The focus will be on guidance from the company managements on outlook for the remaining part of the year and for the next year. Analysts expect weak Q3 December 2011 results due to lower volume growth in a slowing economy, higher raw material costs and higher interest charges.

IT bellwether Infosys and housing finance major HDFC report Q3 results on 12 January 2012. TCS and HCL Tech unveil quarterly results on 17 January 2012. Jindal Steel & Power announces Q3 results on 18 January 2012. HDFC Bank, Hero MotoCorp and Bajaj Auto unveil Q3 results on 19 January 2012. ITC, Axis Bank and Jet Airways (India) unveil Q3 results on 20 January 2012. JSW Steel reports its Q3 standalone results on 20 January 2012.

Asian Paints, Zee Entertainment Enterprises and Godrej Consumer Products unveil Q3 results on 21 January 2012. L&T, Maruti Suzuki and Kotak Mahindra Bank unveil Q3 results on 23 January 2012. Cairn India and Biocon unveil Q3 results on 24 January 2012. Sesa Goa and Rural Electrification Corporation unveil Q3 results on 25 January 2012. Dabur India unveils Q3 results on 31 January 2012. Mahindra & Mahindra unveils Q3 results on 7 February 2012. India Cements announces Q3 results on 6 February 2012. BPCL unveils Q3 results on 10 February 2012. Aditya Birla Nuvo announces Q3 results on 11 February 2012.

The government has decided to allow Qualified Foreign Investors (QFIs) to directly invest in the Indian equity market from 15 January 2012. A QFI is an individual, group or association resident in a foreign country that is compliant with Financial Action Task Force (FATF) standards. QFIs include pension funds which normally tend to stay invested for a longer period of time. QFIs do not include FIIs/sub accounts. In August last year, the government allowed foreign investors to directly invest up to $13 billion in equity and debt schemes of mutual funds.

Qualified foreign investors, or QFIs, will now be able to invest individually up to 5% of the capital of the Indian company. Cumulatively, QFIs can invest up to 10% of the capital of the company being invested in. These limits are over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India, a government statement said.

Food inflation plunged into the negative territory in the fourth week of December mainly due to base effect, data released by the Government showed on Thursday, 5 January 2011. Fuel inflation edged up though. Food inflation shrank by 3.36% in the week ended December 24, after rising by 0.42% in the preceding week. Inflation in the Primary Articles group fell to 0.1% in the week under review, from 2.7% in the week ended December 17. Inflation in the Fuel & Power group stood at 14.60% in the week ended December 24, versus 14.37% in the previous week.

At its mid-quarterly monetary policy review meet on 16 December 2011, the RBI left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI had said in a statement on 16 December 2011. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI had said.

RBI had said inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces. RBI also said that the rupee remains under stress. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

Data on industrial production for November 2011 on Thursday, 12 January 2012, and data on inflation for December 2011 on Saturday, 14 January 2012, could provide cues on the central bank's likely policy stance at the third quarter review of Monetary Policy 2011-12 scheduled on 24 January 2012.

Credit rating agency Moody's Investors Service on 14 December 2011 said that the sharp decline in the value of the Indian rupee against the dollar over the past few months is generally exerting only a moderate impact on rated Indian companies. Risks for companies holding large amounts of dollar denominated debt are also manageable in the near term, given that debt maturities are limited for this time frame, Moody's said in a new report. This means Indian companies rated by Moody's do not have a significant dollar outflow at a time when the Indian rupee is losing ground.

The budget for 2012/13 ending March will be presented after elections scheduled in five states, Finance Minister Pranab Mukherjee said on Monday, 2 January 2012. State elections are scheduled between the end of January and early March. The annual budget is usually presented on the last working day of February. The Election Commission on 24 December 2011 announced the dates for the assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Manipur and Goa. Uttar Pradesh will have polling on February 4, 8, 11, 15, 19, 23 and 28, while Uttarakhand and Punjab will go to polls on January 30. Manipur will have polls on January 28 and Goa on March 3.

European stocks rose on Tuesday, after aluminium major Alcoa began the US earnings season with in line results on Monday and a bullish view of the global aluminum market. Key benchmark indices in France, Germany and UK rose by between 0.99% to 2.4%.

Germany and France warned Greece on Monday it will get no more bailout funds until it agrees with creditor banks on a bond swap and pressed for an early deal to avert a potential default in the euro zone's most debt-stricken nation. German Chancellor Angela Merkel and President Nicolas Sarkozy, the euro zone's two leading powers, insisted after talks in Berlin on Monday that private sector bondholders must share in reducing Greece's debt burden, along with new European and IMF lending. They rejected both a call by a European Central Bank policymaker to abandon plans to make private investors take losses, and a leaked International Monetary Fund memo that cast doubt on Athens' ability to reform its public finances. Several European countries are due to hold closely watched bond auctions later in the week.

Finance ministers from the European Union's (EU) 27 members will meet on 23 January 2012 before their leaders hold a summit a week later.

Asian stocks rose on Tuesday, 10 January 2012, on optimism the US economy is weathering Europe's sovereign-debt crisis. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.38% to 2.69%.

China's trade surplus yawned wider in December 2011, beating expectations as exports shot higher. December exports rose 13.4% compared to a year earlier, the General Administration of Customs said on Tuesday. Exports had risen 13.8% in November. Imports rose 11.8% in December 2011, cooling sharply from November's 22.1% increase. This resulted in a $16.52 billion surplus for December 2011. November's surplus amounted to $14.5 billion.

Trading in US index futures indicated that the Dow could gain 96 points at the opening bell on Tuesday, 10 January 2012. US stocks rose Monday as hopes for the impending US earnings season overpowered a batch of unsettling headlines from Europe. Consumer borrowing in the US surged by the most in 10 years, indicating households are optimistic enough to take on debt and banks are willing to lend again.