BSE Mid-Cap, Small-Cap indices outperform Sensex

The key benchmark indices edged higher in choppy trade, gaining for the fourth straight day, tracking firm global stocks. Concerns on the domestic political front eased after Prime Minister Dr. Manmohan Singh today, 16 February 2011, said there is no danger of any inner tensions that may lead to the break up of the ruling Congress-led coalition government at the Centre. The BSE 30-share Sensex was up 27.10 points or 0.15%, off close to 60 points from the day's high and up close to 85 points from the day's low. The S&P CNX Nifty fell below the psychological 5,500 level after hitting that mark in intraday trade. The market breadth was strong.



Index heavyweight Reliance Industries (RIL) nudged higher. Auto stocks fell. Infrastructure, capital goods and FMCG stocks gained. Realty stocks reversed initial losses. Metal stocks were in demand on fresh buying. Tata Steel vaulted on strong Q3 result. Construction shares surged after the Prime Minister Manmohan hinted at some big initiatives for infrastructure development in the Budget.

The market slipped into the red after initial small gains. The market soon regained positive zone. The Sensex moved between the positive and negative terrain in morning trade. The market swung between gains and losses in choppy mid-morning trade. The market recovered after hitting a fresh intraday low in early afternoon trade. The market struck a fresh intraday high in afternoon trade. The market regained positive zone after slipping into the red for a brief period from in mid-afternoon trade. The market once again pared gains after hitting fresh intraday high in late trade.

Though the market witnessed high intraday swings, the Sensex's movement for the day was confined to 142.72 points.

Addressing editors of the electronic media, Prime Minister Manmohan Singh on Wednesday said the government is dead serious to bring to book all the wrongdoers regardless of their position in 2G spectrum, CWG, ISRO and Adarsh scams. Singh said he was not able to make up his mind whether anything was wrong with actions of the former telecoms minister despite 2G complaints in 2009. He added that the government is making all efforts to ensure orderly functioning of the next session of parliament. He further said food inflation has been a problem in recent months and that India has effectively tackled global financial meltdown. Exuding confidence that inflation will fall to 7% by March-end, Dr. Singh said the government was trying to tackle the situation without hurting growth, which he pegged at around 8.5% for the entire fiscal.

The Prime Minister added that India needs to develop a corporate debt market to meet the projected investment of $1 trillion required to sustain the country's economic growth rate in the 12th Five-Year Plan (2012-2017). A corporate debt market enables private industry to raise funds through debt instruments and channelise these into specific sectors, including infrastructure.

The Prime Minister said more reforms will be unveiled in the 2011-12 Budget, but blamed the Opposition for delaying the introduction of crucial Bills in Parliament. There will be a restructuring of the Cabinet after the Budget Session of Parliament, the Prime Minister said.

Indicating big initiatives for infrastructure development in the Budget, Singh said: "I believe we are going to have a fresh wave of infrastructure investment with the help of PPP (public-private partnership) model." Stating that discussions are going on to create a infrastructure development fund, he said finance minister Pranab Mukherjee may make some announcements. "Some discussions are going on...and most probably, finance minister will outline something in that direction."

The Prime Minister said the Congress-led United Progressive Alliance (UPA) is a strong coalition. He said the UPA allies are as committed to this coalition government.

Reliance Anil Dhirubhai Ambani (ADA) group chairman Anil Ambani met officials of Central Bureau of Investigation (CBI) on Wednesday, as the investigating agency widened its probe into the 2G spectrum allocation scam. Reliance ADA Group said in a statement that Anil Ambani met the CBI agents in New Delhi to "clarify ongoing issues" and had not been summoned by them as reported by television channels. Reliance ADAG reiterated that it had not made any financial gains from the granting of telecoms licences to Swan Telecom, which has been named by the CBI as having benefited from a flawed allocation policy.

The CBI has summoned several executives from the sector to answer questions regarding a probe into whether there were any irregularities in the sale of lucrative licences below market prices in 2007-2008. A former telecoms minister has been arrested over the case as has a senior executive of one of the companies in question.

On the corporate earnings front, there are concerns of slowdown in corporate profit growth going ahead. With the rise in key policy rates by the Reserve Bank of India (RBI) recently, interest cost will only rise in the coming quarters that could hurt earnings going forward. If raw material costs keep rising at a fast clip, companies will feel the heat of slowing sales growth and rising cost of operations that could start eating into profit growth.

The combined net profit of a total of 3,564 companies rose 19.6% to Rs 88235 crore on 18.4% rise in sales to Rs 986854 crore in Q3 December 2010 over Q3 December 2009.

Japan and India on Wednesday signed an agreement to abolish tariffs on about 94% of the goods traded between the two countries within a decade, according to reports. The free-trade agreement was signed between Japan's Foreign Minister Seiji Maehara and Indian Commerce Minister Anand Sharma in Tokyo. The Japanese government will submit the pact to its parliament for ratification to ensure its enforcement at an early date, according to report. Ninety percent of Japanese exports to India, including auto parts and machinery items, and 97% of imports from India, including farm and fishery products, will be covered under the agreement, the report said. Two-way trade between the two countries stood at 900 billion yen ($10.7 billion) in 2009, according to reports.

European shares rose on Wednesday, with beverage firms lifted by forecast beating results from peer Heineken, which added to optimism about the pace of recovery in corporate earnings. The key benchmark indices in France, Germany and UK rose by between 0.13% to 0.73%.

Most Asian stock markets rose with shares in Hong Kong leading gains after latest data showed Chinese inflation hit a lower-than-forecast 4.9% in January. The key benchmark indices in China, Indonesia, Hong Kong, Singapore and Japan rose by between 0.01% to 1.12%. The key benchmark indices in South Korea and Taiwan fell by between 0.1% to 1.06%.

After Egyptian demonstrators were successful in the ouster of President Hosni Mubarak, similar protests are being held in Iran, Bahrain and Algeria this week. The latter countries are important oil exporters, and the planned protests are again raising concerns that global crude supplies could be disrupted.

Trading in US index futures indicated that the Dow could gain 32 points at the opening bell on Wednesday, 16 February 2011. US stock market slipped off 2-1/2-year highs in light volume on Tuesday, 15 February 2011. Meanwhile, US retail sales data cast doubts on a rebound in consumer spending, a vital part of the economic recovery. On the flip side, a gauge of manufacturing in New York State climbed to its highest in eight months.

The euro zone economy ended last year with stable growth, failing to meet expectations for an acceleration as expansion in the three largest nations fell short of forecasts and Greece and Portugal contracted. The European Union's statistics office Eurostat said gross domestic product in the 16 countries using the euro grew 0.3% in the October-December period, the same as in the third quarter, and 2.0% year-on-year.

The BSE 30-share Sensex was up 27.10 points or 0.15% to 18,300.90. The index rose 85.04 points at the day's high of 18,358.84 in late trade. The Sensex lost 57.68 points at the day's low of 18,216.12 in early afternoon trade.

The S&P CNX Nifty was up 0.70 points or 0.01% to 5481.70. The Nifty hit a high of 5,504.80 in intraday trade

The BSE Mid-Cap index rose 0.53% and the BSE Small-Cap index gained 1.01%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was strong. On BSE, 1,745 shares advanced while 1,130 shares declined. A total of 87 shares remained unchanged.

Among the 30-member Sensex pack, 16 fell while the rest rose.

BSE clocked turnover of Rs 3070 crore, lower than Rs 3791.96 crore on Tuesday, 15 February 2011.

Index heavyweight Reliance Industries (RIL) rose 0.24% to Rs 944, after gyrating between Rs 951 and Rs 937. The RIL stock rose for the second straight day aided by reports the company is now going after the tablet PC market, presently dominated by Apple and Samsung at the premium end. RIL's subsidiary, Infotel Broadband, is expected to launch broadband wireless access (BWA) services with low-cost tablet PCs and affordable data plans in the next five months.

Construction shares surged after Prime Minister Manmohan Singh today, 16 February 2011, hinted at some big initiatives for infrastructure development in the Budget. Hindustan Construction Company, Nagarjuna Construction Company, IVRCL Infrastructure & Projects and Jaiprakash Associates rose by between 5.07% to 6.67%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 1.51%. The stock had jumped 6.7% on Monday after company announced during market hours on Monday that it had bagged a Rs 1100-crore EPC order from GSECL.

Among other capital goods stocks, BEML, Thermax, Punj Lloyd and Siemens rose by between 0.14% to 2.83%.

Some FMCG stocks also gained. Hindustan Unilever, Dabur India and United Spirits rose by between 0.52% to 3.87%.

Most auto stocks edged lower on concerns higher input costs will adversely impact profit margin. Car maker Maruti Suzuki India fell 0.53% to Rs 1230.35. The stock had hit a 52-week low of Rs 1146 on Thursday, 10 February 2011.

Mahindra and Mahindra (M&M) shed 1.55%. The company recently unveiled plans to acquire a 38% stake in BSE-listed EPC Industrie. The acquisition would be through preferential allotment of shares by EPC, following which M&M will make the mandatory open offer to acquire a 20% stake in the Nashik-based micro-irrigation firm.

India's top bike maker by sales Hero Honda Motors fell 1.41%. India's second biggest two-wheeler maker by sales, Bajaj Auto declined 0.06%, reversing initial gains.

Tata Motors inched up 0.05%, in volatile trade. The stock had risen 2.41% on Tuesday after company said its global vehicle sales rose 16% in January 2011 to 98,998 units. Jaguar and Land Rover sales rose 25% to 20,377 units, driven by a 30% rise in Land Rover sales. The stock had surged 5.6% on Monday after consolidated net profit jumped 272.9% to Rs 2424 crore on 22% rise in consolidated revenue to Rs 31685 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 result at the fag end of the trading session on Friday, 11 February 2011, when the stock had jumped 3.79%.

Steel giant Tata Steel jumped 3.97% after consolidated net profit jumped 112.21% to Rs 1003.02 crore on 8.91% rise in total income to Rs 28985.12 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 result after market hours on Tuesday, 15 February 2011.

Jindal Steel & Power advanced 3.28%, extending Tuesday's 0.4% rise, on reports the company has got the environment ministry approval to build a Rs 25000 crore steel plant in Orissa.

Sterlite Industries rose 0.24% after company announced completion of acquisition of Lisheen mine in Ireland. The company made this announcement during market hours today.

JSW Steel, Steel Authority of India, Bhushan Steel, National Aluminum Company and Jindal Saw rose by between 0.21% to 3.87%. .

Unitech jumped 9.3%, with the stock rebounding after a sell-off amid allegations that the company was among those who favoured in telecoms licence grants in 2008. The stock came off the day's low of Rs 34. The stock rose on heavy volume of 2.28 crore shares on BSE.

On Tuesday, the CBI questioned Unitech's managing director as part of a probe into the alleged telecoms corruption scandal. Unitech has denied any wrongdoing.

Among other realty stocks, Phoenix Mills, Indiabulls Real Estate and HDIL rose by between 0.48% to 2.04%.

PSU OMCs rose after oil marketing companies on Tuesday announced another 4.12% increase in the prices of aviation turbine fuel (ATF) or jet fuel on the back of a 4.5% increase in prices announced on 1 February 2011. BPCL and HPCL rose 0.15% and 0.47%, respectively. Indian Oil Corporation fell 0.51%, reversing initial gains. This is the ninth straight increase in jet fuel rates since October 2010. State-run oil marketing companies in India revise jet fuel prices on the 1st and 16th of every month, based on the average international price in the preceding.

Interest rate sensitive banking stocks were mixed. India's largest commercial bank by branch network State Bank of India rose 0.9% extending recent gains. State Bank of India recently raised term deposit rates on two maturity buckets -- 555 days and 1,000 days -- by 25 basis points. Simultaneously, to protect its margins, the bank has marked up its lending rate by 25 basis points. All rate hikes are effective from 14 February 2011.

India's largest private sector bank by market capitalisation ICICI Bank was flat. India's second largest private sector bank by market capitalisation HDFC Bank declined 0.69%.

IT stocks came off the day's lows on brightening US economic prospects for 2011. US is the key market for Indian IT firms. India's second largest IT exporter by sales Infosys shed 0.14% to Rs 3096.65, off the day's low of Rs 3082.80. India's third largest IT exporter by sales Wipro rose 3.03% to Rs 437.15, off the day's low of Rs 419.90.

India's largest IT services company Tata Consultancy Services rose 0.14% to Rs 1098.30, off the day's low of Rs 1081.15. The company said on Tuesday it is eyeing $1 billion in revenue over five years from its new cloud-based business solution targeted at small and medium businesses (SMBs). The company on Tuesday formally unveiled iON, the cloud computing platform-based solution for SMBs, although it did not divulge the product pricing.

Telecom stocks were mixed. Bharti Airtel and Reliance Communications fell 0.18% and 1.72% respectively. Idea Cellular rose 2.35%.

Reliance Anil Dhirubhai Ambani Group edged lower. Reliance Capital, Reliance Infrastructure and Reliance MediaWorks fell by between 0.42% to 2.72%.

Unitech clocked highest volume of 2.28 crore shares on BSE. SpiceJet (77.71 lakh shares), Cals Refineries (70.26 lakh shares), Shree Ashtavinayak Cine Vision (43.11 lakh shares) and Karuturi Global Solutions (42.98 lakh shares) were the other volume toppers in that order.

Tata Steel clocked highest turnover of Rs 218.52 crore on BSE. State Bank of India (Rs 102.18 crore), Unitech (Rs 87.37 crore), LIC Housing Finance (Rs 72.64 crore) and JBF Industries (Rs 70.13 crore) were the other turnover toppers in that order.

On the macro front, the latest economic data showed that the headline inflation eased slightly in January 2011 on some moderation in prices of manufactured products. The wholesale price index (WPI), rose 8.23% in January 2011 from a year earlier. The index had risen 8.43% in December 2010. Food prices in the WPI index jumped 15.7% in January compared with 13.6% rise in December.

The industrial output in December 2010 rose a slower-than-expected 1.6% from a year earlier. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 1%, the statistics office said in a statement. Growth in industrial output in November 2010 was revised upwards to 3.62% from earlier 2.7%

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by the finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations. The Finance Minister may announce a new road map for the Goods & Services Tax (GST). The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

The government may also announce some populist measures in the Budget given that assembly elections are due in Kerala, Tamil Nadu, West Bengal and Assam. In all these states, the Congress is potentially looking to regain power or to retain it.