Market cheers Q4 earnings; Sensex vaults 513 points

The market extended its recovery that began early this month on the back of firm global markets, reports of a good monsoon in the offing this year and strong inflow of funds from FIIs.

The 30-share BSE Sensex gained jumped 513.33 points (3.8%), to settle at 13,897.41 in the week ended 20 April 2007, its highest closing in almost two months. The S&P CNX Nifty advanced 166.20 points (4.2%), to 4,083.55, a two-month closing high.

Small-cap and mid-cap stocks extended their recovery. The BSE Small-Cap Index advanced 217.91 points (3.2%), to finish at 6,974.37. The BSE Mid-Cap Index gained 122.58 points (2.1%), to settle at 5,699.08.

Trading for the week began firm, as the Sensex jumped 312 points on Monday. A rally in global markets and forecasts for a good monsoon in India, boosted the bourses. Stock markets of the world hit record peaks on Monday after top policymakers highlighted the strength and improving balance of global economic growth, encouraging already bullish investors to increase their appetite for risk. The G7 leaders said the US economy remained solid despite the weight of a housing slump, while Europe was showing a healthy upswing and Japan's economic recovery was on track.

Fall in IT stocks pulled the Sensex lower 86 points on Tuesday. IT stocks slipped after the rupee hit its highest level in nine-years.

Firm Asian markets lifted the Sensex 65 points on Wednesday. But the barometer index came off the higher level from an intra-day 155.88 point rise, to 13,762.92, its highest since 23 February 2007.

The market drifted lower on Thursday, reeling under the weakness spread across Asian markets after latest data showed strong GDP growth in China. The Sensex ended 52 points lower. Nevertheless, the barometer index staged a solid intra-day rebound from an initial 248.55 points fall. The strong Chinese GDP data sparked fears of a hike in interest rates in China, which, in turn, raised fears of a sharp fall in emerging markets.

The market returned to its winning ways on Friday, as strong guidance for FY 2008 by IT bigwig Satyam Computer and firm global markets together, propelled the Sensex to a two-month high. The Sensex jumped 278 points.

FIIs stepped up buying after Infosys gave a strong guidance for FY 2008 in dollar terms, putting to rest concerns about the impact of a slowdown in the US on India's IT sector. Their net inflow in three trading sessions, between Monday and Wednesday, aggregated Rs 2076.90 crore. However, foreign funds pulled out a net Rs 73.40 crore on Thursday. Their inflow for April 2007, till Thursday 19 April 2007, totaled Rs 4371 crore.

Reliance Industries (RIL) struck an all-time peak of Rs 1545 on Friday. The stock surged during the week after Chairman Mukesh Ambani said on Monday that the petrochemicals cycle was yet to culminate. RIL said on Wednesday its board will meet on 26 April 2007, to consider Q4 March 2007 and FY 2007 results.

Satyam Computer surged on Friday after it gave a strong guidance for FY 2008. Satyam Computer net profit rose 38% year-on-year in the March 2007 quarter, to Rs 394 crore. Just like Infosys, Satyam Computer has given strong earnings and revenue guidance in dollar terms as per US GAAP. Also, just like Infosys, Satyam Computer has given muted earnings and revenue guidance as per Indian GAAP.

Satyam Computer forecast 27 - 29% growth in basic earning per ADS for fiscal 2008, between $ 1.16 and $ 1.18. The US GAAP revenue is expected to rise 28 - 30%, between $ 1.87 billion and $1.9 billion for FY 2008. As per Indian GAAP, Satyam Computer has forecast between 18 - 20% growth in EPS for FY 2008, between Rs 25.32 and Rs 25.73. Satyam Computer has forecast 20 - 22% growth in revenue as per Indian GAAP for FY 2008.

On the same day, Wipro, too, reported strong Q4 results. It reported 44% year-on-year growth in net profit in the March 2007 quarter to Rs 861 crore as per US GAAP. It also forecast strong growth on more outsourcing and higher billing rates.

After trading hours on Monday, TCS reported 6.16% growth in sequential consolidated net profit as per US GAAP for Q4 March 2007 at Rs 1172.77 crore, compared to a net profit of Rs 1104.70 crore in Q3 December 2006. Consolidated US GAAP revenue rose 5.88% to Rs 5146.37 crore.

HCL Tech surged on Wednesday after it reported strong Q3 March 2007 results after trading hours on Tuesday. The consolidated net profit as per US GAAP rose 15.9% on a sequential basis to Rs 331.80 crore from Rs 286.20 crore in Q2 December 2006. Revenue rose 7.6% to Rs 1577.10 crore from Rs 1465.10 crore.

Dish TV was listed on the bourses on Wednesday. The stock settled at Rs 102.55 on BSE on the same day. Dish TV has nearly 2 million subscribers and competes with a joint venture between Tata group and News Corp as well as state-owned Prasar Bharti. Dish TV India, previously known as ASC Enterprises, got demerged from Zee Entertainment Enterprises (ZEEL) with effect from 12 February 2007, as part of the Zee group’s restructuring exercise.

Advanta India, a subsidiary of United Phosphorus, settled at Rs 850.05 on BSE, a premium of 32.8% over the IPO price of Rs 640, on Thursday. A day before its listing, the Reserve Bank of India (RBI) had on Wednesday (18 April) notified that no further purchases of equity shares of Advanta India should be made on behalf of foreign institutional investors (FIIs) under portfolio investment scheme (PIS) through stock exchanges in India. This is because FII investment in the company has reached the 24% limit

Cement shares edged up on expectations of strong March 2007 quarter results. On Thursday, ACC reported a 54.5% surge in net profit in Q1 March 2007 to Rs 363.75 crore from Rs 235.42 crore in the March 2006 quarter. Net sales surged 26.1% to Rs 1674.83 crore from Rs 1327.52 crore.

Banking stocks were in demand on value-buying and also on expectation of decent-to-strong Q4 results from private sector banks. On 17 April 2007, UTI Bank reported 40% growth in net profit in the March 2007 quarter.

ICRA witnessed volatile trade. After an initial surge, the stock succumbed to profit taking.

Tata Steel bounced back on Friday, after the scrip had come under selling pressure on Wednesday and Thursday on equity dilution concerns. The company after trading hours on Tuesday unveiled funding plan for its $12 billion takeover of Corus. The Indian steelmaker will offer a rights share at Rs 300 each in 1:5 ratio. Tata Steel also plans to raise Rs 4350 crore from the rights issue of preference shares, the company said. It was also looking at a foreign issue of an equity-related instrument to raise up to $500 million, with an issue of global depositary receipts (GDRs) being an option.

Commerce Minister Kamal Nath said on Thursday all service exports would be exempted from service tax. Announcing the annual supplement of the Foreign Trade Policy, Nath said the export target of $125 billion for 2006-07 had been met and the government hoped to achieve $160 billion in the current financial year.

India's annual June-September monsoon rains are likely to be 95% of the long-term average, the weather office said on Thursday, PS Goyal, a top Met Department official, told a news conference on Thursday.

The wholesale price index rose 6.09% in the 12 months to 7 April 2007, higher than previous week's increase of 5.74%, data showed on Friday. The annual rate had moderated to below 6% recently after hitting 6.69% on 27 January 2007, its highest in more than two years, on the back of Reserve Bank of India (RBI) tightening policy and the government cutting duties on a range of items to rein in prices

The Reserve Bank of India (RBI) reviews policy next Tuesday. It has raised the reserve requirement for banks three times since December and has raised its main lending rate five times since early June last year to try and curb credit growth and inflation.

Strong FY 2008 guidance by Infosys, firm global bourses and continued FII-buying, have boosted the bourses this month after the Sensex had tanked 617 points in a single trading session on 2 April following the Reserve Bank of India (RBI)’s surprise hike in interest rates announced after trading hours on 30 March 2007. From a low of 12,455.37 on 2 April 2007, the Sensex has gained 1,442.04 points (11.5%) in a short while.

Sensex’s all time peak is of 14723.88 which it had reached on 9 February 2007. Its all-time closing high is 14,652.09, of 8 February 2007.

The market may remain volatile next week, ahead of the expiry of the April 2007 derivative contracts on Thursday (26 April 2007). RIL announces Q4 results on 26 April.