Sensex settles a little under 13,800

Intense volatility characterised trading today (11 May 2007). Global markets, Uttar Pradesh election results, inflation and industrial production figures, apart from regular institutional activity were the key events that made the market oscillate either way. Fresh shorting was seen at every rise, with value buying emerging at every fall.

Battered down sugar stocks bounced back on strong buying interest in anticipation of fiscal sops from the new government in the Uttar Pradesh, where most of the sugar companies have their production facilities.

The 30-shares BSE Sensex gained 24.93 points, or 0.18%, to settle at 13,796.16. After opening at 13,691.86, the Sensex had slumped to a low of 13,562.95, as selling continued, tracking weak global markets.

However, the index recovered as some buying resumed at lower levels. It surged to a high of 13,864.18, when inflation and industrial production data were released at noon.

The Sensex gyrated 301.23 points during the course of day’s trading session.

The S&P CNX Nifty gained 9.85 points or 0.24% at 4076.65.

Meanwhile. Mayawati-led Bahujan Samaj Party (BSP) was way ahead of the ruling Samajwadi Party and the Bharatiya Janata Party as the latest trends in the 403-member Uttar Pradesh assembly polls indicated.

Out of 304 trends available at the state election headquarters, BSP was leading in 145 seats while the SP and BJP followed with 70 and 45, respectively. The Congress was ahead in 23 seats, while Ajit Singh-led RLD's candidates leading in 7 seats.

Independents were in lead in 8 seats, while JD(U) and Loktantrik Congress were ahead on one seat each.

Technically, the Sensex seems stuck in a trading range of 13,700 and 14,300 points since the past few weeks. Traders are waiting for a breakout either way, which is likely to provide future direction.

The Sensex had rebounded after noon on good economic numbers. India's industrial production rose 12.9% per annum in March 2007, from a year earlier, higher than downwardly revised annual growth of 10.8% in February, due to strong manufacturing output, government data showed on Friday, 11 May 2007. Analysts had forecast annual industrial output growth of 10.40%.

But eventually the Sensex could not sustain at the higher levels. The muted rise of the Sensex was party due to weak Asian and European markets. The Nikkei average sank 1.03% on Friday, 11 May 2007, as Casio Computer Co. tumbled on a downbeat forecast and broker downgrades, and investors sold high-tech exporters such as Sony Corp. on growing concerns about the U.S. economic outlook. The Nikkei closed down 183.24 points at 17,553.72.

The Hang Seng declined 1.34% to 20,468.21

The total turnover on BSE amounted to Rs 4435.78 crore while the NSE F&O turnover was Rs 38697.93 crore. Total marketwide turnover was at Rs 52526.24 crore, which was much higher compared to the turnover of Rs 44,614.97 crore on Thursday, 10 May 2007.

The market breadth ended positive on alternate bouts of weakness and firmness. On BSE 1,311 shares advanced as compared to 1,258 that declined, while 83 remained unchanged.

The BSE Mid-Cap index ended at 5,851.27, rising 35.15 points, or 0.6%. The BSE Small-Cap Index rose 33 points, or 0.47%, to finish at 6,984.40.

Among the Sensex pack, 16 advanced while the rest declined.

Bajaj Auto rose 4.22% to Rs 2719, and was the top gainer from the pack, on its proposal to split the company into two. It had struck a high of Rs 2724.90. The market has been agog with talks of a split since the last two years. Transferring some of the Rs 6500-crore cash will improve the finance and insurance businesses, chariman Rahul Bajaj had said earlier.

Bajaj Auto is in both general as well as life insurance businesses through Bajaj Allianz General Insurance Company and Bajaj Allianz Life Insurance Company, respectively. Bajaj Auto holds a 74% stake in both firms with the rest held by Allianz. Bajaj Auto is also into the business of lending money through Bajaj Auto Finance, a listed entity. Bajaj Auto holds over 38% stake in Bajaj Auto Finance.

The Pune-based company will also announce its FY 2007 results on 17 May 2007.

Other group company Bajaj Auto Finance surged 4.98% to Rs 450. Promoters (Bajaj’s) hold 50% stake in this company.

Index heavyweight Reliance Industries (RIL) rose 0.61% to Rs 1591.05, after recovering sharply from its low of Rs 1555.05. On BSE, a high 13.25 lakh shares were traded. It was the second most traded counter on BSE with turnover of Rs 209.66 crore

Reliance Communications (up 3.28% to Rs 480), and NTPC (up 2.71% to Rs 155.20) were the other gainers.

The BSE Bankex was up 0.6% at 6,905.10, Banking stocks advanced on renewed buying interest after the latest set of data released noon today, showed strong industrial growth and fall in inflation.

ICICI Bank rose 0.90% to Rs 850 and State Bank of India (SBI) edged higher by 3.60% to Rs 1164. Expectations of good Q4 ending March 2007 results supported SBI. SBI unveils Q4 and FY 2007 results on Saturday, 12 May 2007.

Analysts expects SBI to post strong Q4 March 2007 results due to a low base effect. Merrill Lynch has projected a 72% growth in SBI’s net profit to Rs 1465.60 crore in Q4 March 2007, from Rs 853.29 crore in Q4 March 2006, due to much lower hit on its bond portfolio and lower taxes (SBI had accounted for whole year’s fringe benefit tax in Q4 March 2006).

Reportedly, SBI has decided to embrace advanced risk-management techniques under the Basel II standards by September 2007, well ahead of RBI's March 2008 deadline.

Stocks from the banking pack had started rising since a few days ago on speculation that that the Reserve Bank of India may be close to cutting the minimum SLR limit from the present level of 25%. SLR refers to the minimum amount of their deposits that banks must invest in government bonds. Currently, it is 25% and the market is expecting the central bank to cut to 23% in a month's time.

RBI expects deposits to grow by Rs 4,90,000 crore this year. This means banks will need 1,22,000 crore of government bonds this year. However, the government's borrowing program shows it will issue only 1,09,000 crore of fresh bonds this year. Clearly there is a mismatch.

Inflation is expected to slip to 5% by the end of May 2007, primarily because of the base effect. Together this would leave the RBI with little defense against an SLR cut.

Among other PSU banks, Bank of Baroda rose 4.07% to Rs 261 and Punjab National Bank advanced 1.66% to Rs 514.

IT stocks, which were hit over the past few days due to the rupee’s continued surge, edged up as the rupee backed away from the nine-year high hit on Monday 7 May 2007. The BSE IT Index up 0.94% at 4,924.12, and was the top gainer among the sectoral indices on BSE. Infosys (up 1.39% to Rs 2000), and TCS (up 2.47% to Rs 1260), MphasiS (up 2.25% to Rs 320), HCL Technologies (up 1.61% to Rs 330.35), and i-flex Solutions (up 1.49% to Rs 2350) were the other gainers from the pack.

In early trade, the partially convertible rupee was at 41.43/44, a level last traded on 30 April 2007, weaker than Thursday's (10 May) close of 41.28/30. It had hit a nine-year high of 40.53 on Monday, 7 May 2007, but has fallen 2% since then.

Due to the sharp swings in IT pivotals, the BSE IT index had turned volatile over the past few weeks, slipping to 4878.17 on 10 May 2007 from a recent peak of 5124.21 on 3 May 2007.

A rise in rupee directly impacts revenue and profits of IT firms, which derive a lion’s share of revenue from exports to the US. Brokerage CLSA said in a recent report that rupee earnings of software services firms were cut by 1.6% for every 1% rise in the currency.

ACC was the top loser, down 4.03% to Rs 840 on 3.79 lakh shares. Grasim (down 2.58% to Rs 2425), and HDFC (down 1.49% to Rs 1655), also declined.

The BSE FMCG Index lost the most among sectoral indices: down 1.1% to 1,798.86. Colgate (down 1.85% to Rs 369.50), HLL (down 1.84% to Rs 186.50) and ITC (down 0.70% to Rs 162.30) were the major losers

Maruti Udyog (MUL) slipped 0.20% to Rs 793. The Union government exited the country’s largest car maker on Thursday, 10 May 2007,selling its residual stake for Rs 2,360 crore to a clutch of financial institutions led by Life Insurance Corporation (LIC). The government had offered 2.96 crore shares in the company, representing 10.27% stake. Of this, LIC got all the 1.3 crore shares it had bid for at a price of Rs 800 per share. LIC now controls 12.5% and has become the second-largest shareholder in the company.

In all, 32 financial institutions and mutual funds have been alloted shares. State Bank of India (SBI) emerged as the second most successful bidder with 83 lakh shares at Rs 775 each. Corporation Bank and Exim Bank submitted the highest bids at Rs 850 per share. Both were granted 5.88 lakh and 1.18 lakh shares respectively.

Among mutual funds, Reliance Mutual Fund and HDFC Mutual Fund got 20 lakh and 10 lakh shares, respectively. SBI MF also got 49.76 lakh shares at Rs 775 per share and Punjab National Bank 12.29 lakh shares at Rs 815 per share.

Hindalco Industries lost 1.02% to Rs 145.10, after Novelis Inc. said its shareholders have approved acquisition by Indian aluminum producer. About 99.8% of the votes cast by shareholders were in favor of the transaction. Hindalco is buying Novelis for an estimated $5.9 billion, including debt.

Jockey inner wear licensee Page Industries was the top traded counter on BSE with total turnover of Rs 300.25 crore. The stock vaulted 8.93% to Rs 458.10 on huge volumes of 65.74 lakh shares, riding on back of strong set of results, declared on 9 May 2007 after market hours, for the second straight day. It has surged 15% to Rs 420.55 since 10 May 2007.

Page Industries posted a 49% jump in its net profit to Rs. 17.02 crore in the year ended March 2007 compared to Rs 11.39 crore in FY 2006. Net sales shot up 34% to Rs 135.94 crore, from Rs 101.18 crore. A lot of institutional buying has been happening on this counter post result.

Sugar shares surged as punters bet on sops from the new government in Uttar Pradesh. Most of the companies have sugar mills in the cane-rich state of UP. Balrampur Chini Mills (up 12.40% to Rs 70.30), Bajaj Hindustan (up 9.34% to Rs 171.50), Dhampur Sugar (up 9% to Rs 76.80), Shree Reunka Sugars (up 12.3% to Rs 70.30), Sakthi Sugars (up 10% to Rs 94.50) and Mawana Sugars (up 6.7% to Rs 40.55).

Domestic sugar prices have fallen 28% in the past six months, mirroring decline in sugar traded in London in the period as global production is heading for a surplus for the first time in four years.

Production of sugar in India, the world’s second largest producer after Brazil, is slated to surge to around 265 lakh tonnes in the current season ending September 2007 against 192.6 lakh tonnes the previous year, according to industry estimates. Sugar producers reported dismal financial performance in the March 2007 quarter amdi fall in sugar prices.

Gujarat Mineral Development Corporation jumped almost 10% to Rs 707.65 extending its recent rally fuelled by plans of 1:5 stock split and strong Q4 results

Television content provider Balaji Telefilms advanced 8.6% to Rs 179.35 as traders built positions on expectation of strong Q4 March 2007 results. Balaji Telefilms unveils Q4 March 2007 results on 16 May 2007. Analysts expect good Q4 numbers from the media firm. Merrill Lynch expects a 54.4% growth in Balaji’s net profit to Rs 23.90 crore in Q4 March 2007, from Rs 15.50 crore in Q4 March 2006. It estimates a 16.3% growth in revenue to Rs 89.50 crore, from Rs 76.90 crore.

Reliance Petroleum soared 7.7% to Rs 86.35 on renewed buying. On BSE, a massive 1.17 crore shares changed hands in the stock. Late last month, Reliance Petroleum (RPL) said it had made remarkable progress on all implementation fronts for its global sized, complex refinery coming up in a Special Economic Zone at Jamnagar in Gujarat with the overall project completion nearing 50%, in just 15 months since commencement of the project.

Sterlite Optical Technologies surged 6.5% to Rs 194.65. The stock had risen 3.5% to Rs 182.70 on Thursday, 10 May 2007, with the company reporting after trading hours on Wednesday, 9 May 2007, that it had a strong order backlog of $62 million for power transmission conductors and expected to complete deliveries within the next 6-8 months.

Britannia Industries slumped 4.75% to Rs 1501, breaking its winning streak since the last five trading sessions. It had advanced from Rs 1310.40 on 4 May, to Rs 1573.25 by 10 May 2007.

Britannia Industries controls over 38% of the Indian biscuit consumption by value, and has grossed annualised revenue in excess of Rs 200 crore from its non-biscuit basket led by bread, cakes and rusks rivaling the food businesses of Godrej and Dabur in size. The biscuit major has probably emerged on top of India's bread market reporting depletion of over 250 million loaves annually.

The company doubled the turnover from around Rs 100 crore in the last two years, and is looking for a repeat act by 2010. And, this figure does not include Daily Bread, a high-end bakery products chain serving European breads amongst others. Britannia acquired a strategic 50% stake in the boutique-manufacturer last year.

Cairn India rose 2.68% to Rs 134 after it had announced two new oil and gas discoveries in its Rajasthan block on Thursday. It also said it had received a six month extension from the government for exploration of the northern appraisal area of the block.

Fact advanced 3.70% to Rs 23.80 after the Union government approved a package of Rs 2,200 crore for the revival plan of the loss-making Kochi-based fertiliser company The revival package put-forward by the management of Fact includes capacity expansion of urea and caprolactum plants. New proposals include setting up a Rs 300 crore Nylon plant, which will utilise 25 % the caprolactum production.

Domestic brokerage and financial services firm Indiabulls Financial Services lost 2.04% to Rs 532 after it priced its $275 million global depository receipt (GDR) offering at a slight discount to its prevailing market price in India. The GDR, is priced at $13.06 (Rs 535.46 calculated at Rs 41 a dollar).

Piramyd Retail jumped 10% to Rs 72.70 after reports that said Aditya Birla group was in talks to acquire the company.

Finolex Cables slumped 5.85% to Rs 88.75 after reporting a 58% fall in net profit to Rs 8.83 crore in Q4 March 2007. Sales rose 30.90% to Rs 292.22 crore. Net profit jumped 36.97% to Rs 68.99 crore in the year ending March 2007. Sales were up 38.14% to Rs 1033.02 crore.

US stocks suffered their steepest fall in two months on Thursday, 10 May 2007, as disappointing retail sales and a widening trade deficit renewed worries about the economic outlook. The Dow Jones Industrial Average lost 147.74 points, or 1.1%, to 13,215.13. Tech laden Nasdaq Composite Index lost 42.60 points, or 1.65%, to 2,533.74.

The Bank of England raised interest rates to a six-year high of 5.5% on Thursday, 10 May 2007, as it voiced concern that diminishing spare capacity in the UK economy and greater pricing power skewed inflation risks to the upside. On the same day, the European Central Bank kept its key lending rate unchanged at 3.75%

As per provisional figures, FIIs were net sellers to the tune of Rs 514.26 crore while Domestic Institutional Investors (DIIs) were net buyers of Rs 440.05 crore today.

Oil prices showed little movement on Friday as a lack of fresh news kept the market within a tight range. Light, sweet crude for June delivery fell 6 cents to $61.75 a barrel in midmorning Asian electronic trading on the New York Mercantile Exchange. A day earlier, prices rose 26 cents amid broader gains in energy futures as traders noticed a gas supply imbalance in Wednesday's government inventory report.

China's monthly trade surplus more than doubled in April to nearly $17 billion, the government said on Friday, adding to pressure on Beijing ahead of closely watched talks with Washington on its swollen trade gap.

The April trade gap of $16.88 billion was below February's $23.7 billion, the second-highest level on record, but in line with steady increases in monthly trade surpluses over the past year.

Exports in April rose 26.8%, while imports rose 21.3%, the General Administration of Customs said on its Web site. The government reported a monthly trade surplus of just $6.9 billion in March.

China reported a global trade surplus in 2006 of $177.5 billion. The Asian Development Bank said in a report in March that figure could balloon to more than $250 billion next year.

Last year, the United States reported a record $232.5 billion trade deficit with China. China's gap with the United States is bigger than its global surplus because it runs deficits with other countries.