Sensex vaults 507 points on firm global markets

The market surged, last week, tracking firm global markets, and on reports that there will be early onset of monsoon. Rally in two bank shares State Bank of India, ICICI Bank and in index heavyweight Reliance Industries (RIL) aided the rally.

The 30-share BSE Sensex 507.25 points or 3.67% to settle at 14303.41 in the week ended Friday 18 May 2007. The S&P CNX Nifty rose 137.85 points or 3.3% to 4214.50 in the week.

Small-cap and mid-cap shares which have been rising since early last month extended gains. BSE Small-Cap index gained 235.90 points or 3.3% to 7220.30 in the week. BSE Mid-Cap index rose 238.68 points or 4% to 6089.95 in the week.

Trading for the week started on an upbeat note. The market surged on Monday, 14 May 2007, on firm global markets, strong Q4 March 2007 results announced by the State Bank of India (SBI) on Saturday, 12 May 2007, and on prospects of political stability in Uttar Pradesh. But the Sensex came off the higher level after an initial 229.86-point rally that took it above 14,000 to 14,026.02.

The Sensex settled on a weak note on Tuesday, 15 May 2007, tracking negative cues from global markets. It was highly volatile throughout the day’s trading session. It lost 36.53 points.

A rally in interest-rate-sensitive banking, auto and real-estate shares, telecom stocks and index heavyweight Reliance Industries (RIL) boosted the market in a volatile trading session on Wednesday 16 May 2007. The BSE 30-share Sensex’s surge materialised in the last one hour of trading. Higher Asian markets supported domestic bourses as Sensex added 198 points.

The market rallied for the second straight day on Thursday, 17 May 2007, as buying momentum continued in index pivotals, specially index heavyweight Reliance Industries (RIL) which struck a fresh all-time high. Firm global markets aided the surge as Sensex rose 172 points.

A late surge in Reliance Industries (RIL) helped Sensex end a tad higher on Friday, 18 May 2007, after it moved between positive and negative zone throughout the day. Subdued Asian markets and a powerful bomb blast at Meeca Masjid near Charminar in Hyderabad that took place in afternoon capped market’s gains.

FIIs bought shares worth a massive Rs 1060.80 crore on Thursday 17 May 2007. The large inflow came after they had pulled out Rs 470 crore in two trading sessions from Tuesday 15 May 2007 to Wednesday 16 May 2007.

Reliance Industries was in demand in the week. The stock hit a record high above Rs 1700 on Friday 18 May 2007. The company said on Tuesday, 15 May 2007, it had made two gas discoveries in separate blocks off the east and west coasts of the country. The commerciality of the above discoveries is currently under evaluation.

But rupee’s rise weighed on IT shares. A rise in the rupee directly impacts revenue and profit of IT firms, which derive a lion’s share of revenue from exports to the US.

State Bank of India spurted on strong Q4 March 2007 results which it had unveiled on Saturday 12 May 2007. The Lok Sabha, on Tuesday, 15 May 2007, passed the State Bank of India (Subsidiary Bank Laws) Amendment Bill, 2006. The amendment bill will allow SBI to reduce its stake in subsidiary banks to 51%, from the existing 55% and above.

Shares of SBI subsidiaries also spurted as the amendment will allow them to raise their authorized capital, split the face value of their shares and lift the ceiling on purchases of shares by individual investors.

ICICI Bank rallied following the move by the Reserve Bank of India to allow banks to trade credit default swaps, which are used to hedge credit risk. The private sector bank on Tuesday, 15 May 2007, filed a draft prospectus with Sebi to seek approval for raising Rs 17500 crore through an equity issue in the domestic and overseas market.

PSU power equipment major Bhel firmed up as traders accumulated the stock ahead of record date for bonus issue.

Bulk drug maker Matrix Laboratories gained 12.6% to Rs 224 in a single trading session on Monday 14 May 2007 on expectation of significant additional business after parent Mylan Laboratories Inc. said it will buy the generics unit of Merck KGaA. The stock firmed up further during the week. Mylan may transfer some of this business to Matrix's low-cost operations in India.

Wind turbine maker Suzlon Energy plunged 9% to Rs 1138.30 on Tuesday 15 May 2007 after reporting a 3.4% fall in consolidated net profit in Q4 March 2007 to Rs 359 crore.

Sterlite Optical Technologies, Moser Baer and Peninsula Land which entered in future & options segment from Monday 14 May 2007, rose on fresh speculative buying.

United Spirits spurted after the UB group company said on Wednesday it had acquired Scottish spirits maker Whyte & Mackay for 595 million pound sterling.

Alfa Laval India spurted 18% to Rs 1232.85 in a single trading session on Wednesday 16 May 2007 after Swedish engineering group Alfa Laval said it was raising its bid for the outstanding shares in its Indian subsidiary. Alfa Laval raised its public offer to Rs 1,300 per Alfa Laval India share from the initial offer of Rs 875. The Swedish firm owns 64% of Alfa Laval India. Alfa Laval repeated it intended to raise its stake to 90%.

Bajaj Electricals jumped 20% to Rs 503.60 on Wednesday 16 May 2007 after scheduling a board meet on 29 May 2007 to consider a bonus issue.

Bajaj Auto tumbled in two trading session on Thursday 17 May 2007 and Friday 18 May 2007 following company’s disclosure on Thursday 17 May 2007 of the call option that partner Allianz has if it opts to raise its stake in its two insurance ventures.

RBI, on Wednesday 16 May 2007, released the long-awaited draft guidelines for banks and dealers to begin trading credit default swaps in the country – derivatives that allow banks to hedge against the risk of default. The move will enable banks in India to step up lending to the corporate sector by allowing them to offload some of the risk to third-party investors.

The Indian meteorological department on Monday, 14 May 2007, forecast annual monsoon rains would arrive in Kerala on 24 May 2007. "The predictors for this year suggest an early monsoon onset over Kerala," an official statement from the Indian Meteorological Department said. "The forecast model suggests that the monsoon onset over Kerala is likely to be on 24 May, with a model error of plus or minus three days," it added. The meteorological department has forecast that annual monsoon this year would be 95% of the long-term average.

Petroleum and Natural Gas Minister Murli Deora said on Tuesday, 15 May 2007, there was no immediate plan to raise domestic retail prices of petroleum products

BSE said on, Friday 18 May 2007, it had completed the sale of 51% of equity shares to 19 domestic and overseas investors, including 10% sold to two foreign exchanges. The BSE's member-brokers tendered their shares in the exchange at Rs 5,200 per share. "With the new ownership structure in place, BSE is well poised to pursue growth opportunities aggressively," said Rajnikant Patel, BSE’s Managing Director and CEO.

China on Friday 18 May 2007 raised interest rates for a second time this year. The one-year benchmark lending rate will be raised to 6.57%, the highest in more than eight years, from 6.39%, starting tomorrow, the People's Bank of China said on its Web site. The one-year deposit rate will be increased to 3.06% from 2.79%

In another major development, China's central bank said on Friday, 18 May 2007, it would widen the daily trading band for the yuan against the dollar by 0.5% effective from 21 May 2007.