Bajaj Auto left behind in the Sensex's 145-point climb

The market rallied for the second straight day as buying momentum continued for index pivotals, specially index heavyweight Reliance Industries (RIL) which struck a fresh all-time high of Rs 1688.15.

The highlight of the day was auto major Bajaj Auto, which swung sharply and tumbled over 10% reacting to results which were unveiled today afternoon.

The 30-shares BSE Sensex settled 145.30 points higher at 14,272.61, as per provisional closing. It opened higher at 14,217.36, after notching a 198-point rally yesterday, 16 May 2007, and surged to a high of 14,352.98 as buying intensified. Firm global markets have been aiding the rally in the Indian markets.

From a recent low of 13,771.23 on 10 May 2007, the Sensex gained 356.08 points, or 2.58%, to 14,127.31 on 16 May 2007 in four trading sessions.

The market was further boosted after Bank of Japan (BOJ) left rates unchanged. The world's second largest economy cooled in the first quarter as companies cut spending on concern that exports to the US will slow. Gross domestic product grew at an annual 2.4% rate in the three months ended 31 March 2007, the Cabinet Office said in Tokyo today. The fourth-quarter figure was revised to 5% from 5.5%.

All the Asian indices except the Nikkei 225 (down 0.17%) logged gains, while all the European markets, except Swiss Market, advanced. The Hang Seng index rose 0.27%.

The total turnover on BSE amounted to Rs 5715 crore, which was higher than Wednesday’s turnover of Rs 5,179 crore

The market breadth turned negative on BSE, with 1,362 shares declining as compared to 1,254 that advanced, while 88 remained unchanged. This is in sharp contrast from the morning session, when 1,097 shares had advanced as compared to 311 that slipped.

Among the Sensex pack, 23 advanced while the rest declined.

The Rahul Bajaj-led Bajaj Auto tumbled 10.45% to Rs 2400, from a high of Rs 2747, in the last 15 minutes of trade, following announcement of its results and demerger into three separate entitities. About 6.79 lakh shares were traded on the counter on BSE.

Bajaj Auto reported today a 13% increase to Rs 1,248.28 crore in consolidated income attributable to the group in the year ended March 2007 when compared with Rs 1,104.60 crore in FY 2006. According to a release issued to the BSE today, net sales increased to Rs 10,118.67 crore, from Rs 8,103.74 crore in FY 2006.

Income attributable to consolidated group stood at Rs 377.39 crore in the quarter ended March 2007 as against Rs 357.34 crore in Q4 FY 2006. Income from operations increased to Rs 2,589.50 crore, from Rs 2,297.52 crore.

On a stand-alone basis, Bajaj Auto posted profit after adjustments of Rs 308.31 crore in Q4 F0Y 2007 when compared with Rs 346.97 crore in Q4 FY 2006. Total income increased to Rs 2,471.25 crore from Rs 2,268.95 crore in Q4 FY 2006.

The company posted a net profit of Rs 1,237.10 crore in the year ended March 2007 as against Rs 1,123.27 crore in FY 2006. Income increased to Rs 10,076.05 crore from Rs 8,106.35 crore.

The board has recommended a dividend of 400%, i.e, Rs 40 per share for the year ended March 2007.

Bajaj Auto’s board also approved the demerger scheme leading in the incorporation of two new companies to eventually result in three companies in all. The two new entities are Bajaj Finserve and Bajaj Holdings. The shareholders will get one share of Bajaj Holdings and Finserve for every one held. The face value of Bajaj Finserv will be Rs 5 and that of Bajaj Holdings will be Rs. 10.

Auto business to be transferred to Bajaj Holdings. Bajaj Auto, consequently, will be renamed Bajaj Holdings. Rs 1,500 crore cash will be transferred to Bajaj Holdings.

HLL (down 1.40% to Rs 194.55), Cipla (down 1.10% to Rs 207.50), and Hero Honda (down 0.63% to Rs 674), were the other losers.

Banking shares were in strong demand today. State-run banking major State Bank of India (SBI) was the top gainer, up 3.31% to Rs 1327 on 9.17 lakh shares, following its plans to consolidate ownership in associate banks, dilution of stake in unlisted associates, and a further dilution of its holding in the already listed arms to augment its resources.

SBI has seven subsidiaries, of which State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed with SBI`s stake in these banks between 75% and 98%.

The SBI Act's amendment to reduce the government`s stake to 51% and the idea of consolidation is being mulled to create a bank of greater size and strength.

The four unlisted units of the State Bank of India: State Bank of Indore, State Bank of Patiala, State Bank of Hyderabad and State Bank of Saurastra plan to raise Rs 20-30 billion from the market in the coming few months after the Lok Sabha cleared the SBI Subsidiary Bank (Amendment) Bill.

Bank ADRs surged overnight on the NYSE. ICICI Bank's ARD was up 7%, while HDFC Bank ADR advanced 4.8%.

Other shares from banking and financial sector including ICICI Bank (up 1.73% to Rs 935), HDFC (up 0.44% to Rs 1705) also participated in the rally. These shares have been consistently rising in the past few days, buoyed by market rumours of a cut in the cash reserve ratio. Also strong set of results from banking major SBI boosted the sentiment further.

Also there is a buzz of consolidation in the Indian banking industry. HDFC Bank is reportedly planning a merger with parent HDFC, SBI diluting its stake in its seven associates; Chinese giant ICBC eyeing a stake in ICICI Bank, Citibank having a greater handle on HDFC, Canara-Dena merger and LIC seeking a bigger play in banking, justify this.

Aditya Puri, CEO and Managing Director of HDFC Bank, said on Wednesday, 16 May 2007, that the recent legislation allowing the Reserve Bank of India (RBI) to do away with the floor on banks’ government securities investments would make his bank’s merger with its parent company, Housing Development Finance Corporation (HDFC), a lot easier. Puri also added that his company has never said no to a merger.

Tata Steel eased from high of Rs 608.20, to gain 1.96% to Rs 600, after its quarterly net profit rose 41% on higher steel prices, but the result lagged analysts' forecasts. Tata Steel, which bought Anglo-Dutch firm Corus Group for $12.9 billion earlier this year, said standalone net profit for Q4 March 2007 rose to Rs 1104 crore from Rs 783 crore reported a year earlier. Net sales rose 21.5% to Rs 4980 crore in the March 2007 quarter, from Rs 4100 crore a year earlier. The company said steel production slightly rose to 1.27 million tonnes in the quarter, from 1.23 million tonnes a year ago.

Index heavyweight RIL advanced 3.07% to Rs 1684.50 on 9.84 lakh shares. It also struck an all-time high of Rs 1,688.15 in late afternoon session of trade. The stock has seen sustained buying interest after it struck natural gas in the Krishna-Godavari basin and Gujarat-Saurashtra basin on 12 May 2007. It is in the deepest location drilled to date, at 4,860 meters. India's directorate general of hydrocarbons awarded this block to a consortium of RIL and NIKO, in which RIL has 90% stake and NIKO 10%. The commerciality of the above discoveries is currently under evaluation.

A key event to watch today is a Union cabinet meeting scheduled later in the day to take up a proposal to allow public sector enterprises to invest their surplus funds in mutual funds. With state owned companies sitting on huge cash surpluses, even a small percentage of this money entering equities indirectly through mutual funds will pep up markets.

FIIs pressed sales worth a net Rs 330.80 crore on Tuesday, 15 May 2007 as compared to an inflow of Rs 60.50 crore on Monday, 14 May 2007. As per provisional data, FIIs were net sellers of Rs 245- crore equities on Wednesday, 16 May 2007, the day when Sensex had surged 198 points. Domestic institutional investors were net buyers of Rs 403- crore equities on that day.

Over the next few months, the progress of the June-September monsoon will hold the key to the direction of the domestic bourses. The Indian meteorological department on Monday, 14 May 2007, forecast annual monsoon rains would arrive in Kerala on 24 May 2007. The weather office said last month that this year's monsoon rains were likely to be 95% of the long-term average, with a 5% margin of error.

US stocks advanced on Wednesday, 16 May 2007, amid expectations of further corporate takeovers, driving the blue-chip Dow to another record closing high. The Dow gained 103.69 points, or 0.77%, to 13,487.53. The tech laden Nasdaq Composite Index gained 22.13 points, or 0.88%, to 2,547.42.

Oil prices rose slightly in Asian trading on Thursday following continued concerns about gasoline supply — despite a U.S. government report that showed stockpiles of the fuel increased last week. Light, sweet crude for June delivery added 13 cents to $62.68 a barrel in electronic trading on the New York Mercantile Exchange, midday in Singapore. The contract fell 62 cents Wednesday to settle at US$62.55 a barrel after crude oil, gasoline and distallate inventories were all reported to have increased last week.