Nifty scales 1-1/2-week high

Key benchmark indices edged higher for the second day in a row as bank stocks rose after the Reserve Bank of India (RBI) announced a reduction of 75 basis points in banks' cash reserve ratio (CRR) requirement to ease liquidity situation in the banking system. The 50-unit S&P CNX Nifty attained its highest closing level in more than a week and half. The barometer index, BSE Sensex, scaled its highest closing level in more than one week. Index heavyweight Reliance Industries (RIL) edged higher. The Sensex advanced 84.43 points or 0.48%, up close to 90 points from the day's low and off about 185 points from the day's high.

Auto and IT stocks were mixed. Engineering and construction major L&T rose for the second day in a row after naming a new CEO and MD. GAIL (India) rose after twin bulk deals. The market breadth was positive. BSE Small-Cap and Mid-Cap indices outperformed the Sensex.



From a recent low of 17,145.52 on 7 March 2012, the BSE Sensex has gained 442.15 points or 2.57% in two trading sessions. The barometer index has lost 161.02 points or 0.9% in March 2012 so far (till 12 March 2012). The index has surged 2,132.75 points or 13.79% in calendar 2012 so far (till 12 March 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 2,451.81 points or 16.19%. From a 52-week high of 19,811.14 on 6 April 2011, the Sensex has lost 2,223.47 points or 11.22%.

Coming back to today's trade, the market pared gains after a firm start triggered by the Reserve Bank of India's announcement after markets hours on Friday, 9 March 2012, of a reduction in cash reserve ratio (CRR) of banks by 75 basis points to ease liquidity situation in the banking system. The market came off lows in morning trade. Key benchmark indices regained positive zone after slipping into the red in mid-morning trade. The market regained strength in afternoon trade. The market held positive zone in mid-afternoon trade.

The BSE Sensex advanced 84.43 points or 0.48% to settle at 17,587.67, its highest closing level since 3 March 2012. The index jumped 268.86 points at the day's high of 17,772.10 in opening trade, its highest level since 29 February 2012. The index fell 8.59 points at the day's low of 17,494.65 in early afternoon trade.

The S&P CNX Nifty advanced 26 points or 0.49% to 5,359.55, its highest closing level since 29 February 2012. The index hit a high of 5,421.90 and a low of 5,327.30 in intraday trade.

The BSE Mid-Cap index gained 1.06% and the BSE Small-Cap index rose 0.7%. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 2339 crore, lower than Rs 3475.67 crore clocked on Friday, 9 March 2012.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,599 shares rose and 1,246 shares fell. A total of 121 shares were unchanged.

Among the 30-share Sensex pack, 17 gained while the rest declined.

Index heavyweight Reliance Industries (RIL) advanced 3.02% to Rs 796.95 in volatile trade. The stock hit a high of Rs 802.80 and low of Rs 781. RIL along with BP PLC will reportedly submit a joint plan to the government to develop the D6 natural gas block and its satellite fields as an integrated unit. The proposal is significant in that it will seek approval to develop an entire block as one unit, rather than follow the current practice of getting clearance for one oil or natural gas field at a time.

In 2011, BP purchased a 30% stake in 21 RIL's oil and gas blocks across India, including D6, which is India's biggest gas discovery so far. RIL is facing declining output at D6 due to reservoir complexity, a natural decline in reserves and delays in developing satellite fields. Output at the D1, D3 and MA fields in the D6 block has plunged to about 38 million metric standard cubic meters a day (MMSCMD) from 60 MMSCMD in June 2010. It is estimated that output will fall further to 27.60 MMSCMD in the next financial year starting April, and to 22.60 MMSCMD in the year after that.

GAIL (India) rose 1.59% to Rs 354.30 on volume of 17.3 lakh shares. A bulk deal of 8 lakh shares at Rs 351.75 per share was executed in the counter on BSE in morning trade. Another bulk deal of 7 lakh shares at Rs 352 per share was also struck on the counter on the BSE.

India's largest engineering and construction major L&T advanced 3.54%, with the stock extending Friday's 5.27% gain. During market hours on Friday, 9 March 2012, the company said K. Venkataramanan will take over as the Chief Executive Officer and Managing Director of L&T from 1 April 2012. He will succeed A. M. Naik who will step down as Managing Director, but continue as Executive Chairman of the group, the company added. The decision was taken by the board of directors to bifurcate the position of Chairman & Managing Director.

Most bank stocks rose after the Reserve Bank of India (RBI) announced a reduction of 75 basis points in banks' cash reserve ratio (CRR) requirement to ease liquidity situation in the banking system. The announcement was made after trading hours on Friday, 9 March 2012.

India's largest bank by branch network State Bank of India jumped 3.96% and was the top gainer from the Sensex pack. The bank's chairman Pratip Chaudhuri was quoted by the media as saying on Sunday, 11 March 2012, that the bank may go in for a follow-on-public-offer (FPO) or institutional placement of shares next fiscal to fund its business growth.

India's biggest private sector bank in terms of branch network, ICICI Bank gained 1.63%. India's second largest bank by net profit HDFC Bank shed 0.57%.

Interest rate sensitive auto stocks were mixed. India's largest commercial vehicles maker by sales Tata Motors gained 1.54%, with the stock extending two-day 4.96% gain.

India's largest utility vehicles maker Mahindra & Mahindra (M&M) declined 1.88%. During market hours Friday, 9 March 2012, M&M said, as part of its ongoing rationalisation of finished stocks, it would be observing no production days up to 2 days per week for the remaining period of March 2012 at the company's tractor plants located at Rudrapur, Nagpur and Jaipur. The management does not envisage any material adverse impact on availability of tractors in the market due to adequacy of tractor stocks to serve the market requirements, the company said.

India's largest car maker by sales Maruti Suzuki India slipped 0.32%.

India's largest bike maker by sales Hero MotoCorp rose 0.96% on reports the company is building in-house capabilities to make its own engines by teaming up with the world's largest privately-owned engine developer AVL of Austria.

India's second largest bike maker by sales Bajaj Auto rose 2.31%.

The Budget announcement by Finance Minister Pranab Mukherjee on 16 March 2012 is expected to bring bad news for the automobile sector, with a likelihood of more taxes, especially on diesel vehicles, which will lead to price hikes and further slowdown in demand.

IT pivotals were mixed. India's third largest software services exporter by revenues Wipro rose 1.16%. India's second largest software services exporter by revenue Infosys declined 1.51%. India's largest software services exporter by revenue TCS fell 1.35%.

Shares of companies whose fortunes are linked to orders from Indian Railways jumped ahead of the railway budget this week. Kernex Microsystems, Kalindee Rail Nirman, Titagarh Wagons, BEML, and Stone India rose by between 1.15% to 3.78%. The Railway Budget will be presented on Wednesday, 14 March 2012.

Given the financial condition of railways, this Rail Budget is likely to seek a two-year moratorium on paying dividend to the government.

Textile stocks were mostly lower after trade secretary Rahul Khullar told reporters on Monday a panel of ministers will likely review a halt on fresh cotton exports from India in two weeks. Arvind Mills, Patspin India, Jindal Cotex, Jindal Worldwide, Alok Industries and Ruby Mills fell by between 0.94% to 3.23%. The government has flip-flopped on the issue of banning cotton exports. After saying it was lifting a ban on overseas sales of the fibre on the weekend, Khullar said on Monday no fresh exports would be allowed and only the quantity permitted to be sold before the ban will be allowed to be shipped.

Realty stocks gained. DLF, HDIL and D B Realty rose by between 0.29% to 8.02%. Unitech was flat. Property consultants and real estate developers have reportedly demanded industry status to the realty sector in the forthcoming Budget. They have also sought incentives to promote affordable housing and an increase in the tax exemption on home loans. To boost supply, they have also asked for a single-window clearance for real estate development projects and foreign direct investment (FDI) in multi-brand retail to create demand for retail space in shopping malls.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange gained 1.86% on Friday, 9 March 2012. Bhushan steel, Sterlite Industries, Hindalco Industries, Tata Steel, Nalco, and Jindal Steel & Power rose by between 0.09% to 2.69%.

JSW Steel rose 2.27% after the company said it is foraying into the manufacture of electrical steel in line with the company's strategy of increasing its portfolio of value added products.

Coal India rose 0.39%. The company announced after market hours today that the board of directors of the company at its meeting held on today, 12 March 2012, has approved payment of interim dividend for the financial year 2011-12 of Rs 9.50 per share as recommended by the Audit Committee of the company.

Avance Technologies clocked highest volume of 1.98 crore shares on BSE. Dazzel Confindiv (89.67 lakh shares), Cals Refineries (79.11 lakh shares), Lanco Infratech (71.38 lakh shares) and SpiceJet (55.65 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 159.19 crore on BSE. Multi Commodities Exchange of India (MCX) (Rs 152.21 crore), GAIL (India) (Rs 61.30 crore), L&T (Rs 53.41 crore) and Reliance Power (Rs 50.51 crore) were the other turnover toppers in that order.

Foreign institutional investors (FIIs) bought shares worth a net Rs 1284.65 crore on Friday, 9 March 2012, as per provisional data from the stock exchanges.

Industrial production grew 6.8% in January 2012 from a year earlier, sharply higher than a revised 2.5% rise in December 2011, helped by a strong rebound in manufacturing output. Manufacturing output, which has a 75.5% weight in the index of industrial production, rose 8.5% from a year earlier in January. It had risen a revised 2.6% on year in December. Electricity production increased 3.2% from a year earlier in January while capital goods output shrank 1.5%.

The Reserve Bank of India (RBI) after market hours on Friday, 9 March 2012, surprised the markets by slashing the cash reserve ratio (CRR) by 75 basis points to 4.75% from 5.5% to ease liquidity situation. The CRR cut, effective the fortnight beginning 10 March 2012, will inject around Rs 48000 crore of primary liquidity into the banking system. At the 3rd quarter policy review in late January 2012, RBI had announced a cut of 50 basis points in CRR, thereby injecting Rs 32000 crore into the cash-strapped system.

The government will release data on inflation based on the wholesale price index (WPI) for February 2012 on Wednesday, 14 March 2012. WPI inflation for February 2012 is projected at 6.7% as per the median estimate of a poll of economists carried out by Capital Market. WPI inflation stood at 6.55% in January 2012.

Meanwhile, data on advance tax for the last installment of 15 March 2012 may provide cues on Q4 March 2012 corporate earnings.

The Reserve Bank of India (RBI) is slated to announce a mid-quarter review of the monetary policy on Thursday, 15 March 2012, a day before the presentation of the Union Budget 2012/13.

The government is working with state governments for early implementation of a goods and services tax (GST), Finance Minister Pranab Mukherjee said on 22 February 2012.

Stating that the United Progressive Alliance (UPA) was committed to honest and efficient governance, President Pratibha Patil on Monday said the country would soon be back on the high growth path of eight to nine percent from the seven percent estimated for the current fiscal. Addressing the joint session of Parliament on first day of the budget session, the President said the long-term fundamentals of the Indian economy remain robust. The government plans to achieve a 9% annual growth target in the five-year plan period ending on 31 March 2017.

Mukherjee will present the annual budget for 2012/13 on Friday, 16 March 2012, while the railways budget will be presented on Wednesday, 14 March 2012. The government will present on Thursday, 15 March 2012 the Economic Survey for 2011/12, a document on the state of economy prepared by the economic division in the ministry of finance. The annual budget is usually presented on the last working day of February. However, the budget has been delayed this time due to the assembly polls.

Reports indicate that the finance ministry is considering a proposal to increase excise duty from 10% to 12%, although still lower than the level before the 2008 financial crisis. The move is aimed at helping the government improve its fiscal situation but it is expected to push up the cost of almost all manufactured goods from food products to consumer durables and automobiles.

Meanwhile, the parliamentary standing committee on finance has given its approval to a revised version of the proposed Direct Taxes Code (DTC) Bill, 2010. The committee has recommended a more progressive tax regime, which entails widening of the income-tax slabs, increasing the exemption limit for savings and raising the ceiling for wealth tax. If accepted, these recommendations will increase disposable incomes in the hands of taxpayers, encourage savings and levy a higher tax on the rich, besides reducing compliance costs for the income-tax department.

The DTC Bill, 2010, consolidates and integrates all the direct tax laws and replaces both the Income Tax Act, 1961, and the Wealth Tax Act, 1957. The committee headed by Bharatiya Janata Party leader Yashwant Sinha, which submitted its report to the Lok Sabha speaker on Friday, 9 March 2012, has also recommended abolition of the securities transaction tax that is levied on the trading of equity shares and some other instruments.

European markets were mixed in volatile trade on Monday as China posted larger-than-expected trade deficit for February. Key benchmark indices in UK, and France were down by between 0.06% to 0.11%. Germany's DAX was up 0.16%.

Asian markets were trading lower on Monday, 12 March 2012, as sentiment sagged after China reported a much bigger than expected trade deficit of $31.48 billion in February, turning around sharply from a $27.28 billion surplus in January. Key benchmark indices in China, Japan, Indonesia, Singapore, South Korea and Taiwan were down by between 0.03% to 1.1%. Hong Kong's Hang Seng rose 0.23%.

China's exports rose less than expected while imports climbed more than anticipated by economists, with the country importing record volumes of crude-oil in February 2012.

Trading of US index futures indicated a flat opening of US stocks on Monday, 12 March 2012. US stocks advanced on Friday, 9 March 2012 as investors brushed off the technical default by Greece and focused instead on another strong monthly jobs report. The Dow Jones Industrial Average advanced 14.08 points, or 0.11%, to 12,922.02. The Standard & Poor's 500 Index rose 4.96 points, or 0.36%, to 1,370.87. The Nasdaq Composite index gained 17.92 points, or 0.60%, to 2,988.34.

In economic data, US employers added 227,000 jobs to their payrolls in February 2012, government data showed, while the unemployment rate held at a three-year low of 8.3%.