Sensex, Nifty attain 3-week high in pre-budget rally

The key benchmark indices rose for the fifth consecutive trading session, registering their longest stretch of gains this calender year, after the latest data showed easing of food inflation early this month. Banking and some auto stocks rose. The barometer index BSE Sensex and the 50-unit S&P CNX Nifty attained 3-week closing highs. Barring the realty index, all the other sectoral indices on BSE were in green. The BSE Capital Goods index gained the most. Index heavyweight Reliance Industries (RIL) extended initial gains. The market breadth was strong.



The BSE 30-share Sensex rose 205.92 points or 1.13% to 18,506.82, up close to 273 points from the day's low and off 26 points from the day's high. The S&P CNX Nifty marched past the 5,500 mark. The BSE Sensex closed above 18,500 mark. The Sensex has jumped 1,043.78 points or 5.97% from a recent low of 17,463.04 on 10 February 2011.

The market slipped into the red after a positive start. The Sensex moved between positive and negative zone in early trade. The market recovered after hitting fresh intraday low in morning trade. The market moved into the positive terrain in mid-morning trade. The market surged to fresh intraday high in early afternoon trade as the latest data showed easing of food inflation in early February 2011. The market extended gains in afternoon trade. The market further extended gained to hit fresh intraday high in mid-afternoon trade. The market hit a fresh intraday high in late trade.

Food inflation eased to a two-month low in early February 2011 on moderating prices of onions and other vegetables. The food price index rose 11.05% and the fuel price index climbed 11.92% in the year to 5 February 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 13.07% and 11.61%. The primary articles price index was up 14.59% in the latest week, compared with an annual rise of 16.24% a week earlier.

The government is trying to make it mandatory for companies to spend 2% of profits on corporate social responsibility, the junior minister for corporate affairs, R.P.N. Singh said today, 17 February 2011.

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by 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.

Meanwhile, the government has reportedly scrapped a contract to lease telecom spectrum between Indian Space Research Organisation (ISRO) and private firm Devas Multimedia. ISRO is being probed for granting Devas a lucrative mobile Internet bandwidth in 2005 without a proper bidding process that reports say may have cost the government up to Rs 2 lakh crore.

Billionaire Anil Ambani, who controls India's No. 2 mobile carrier Reliance Communications (RCom), was questioned on Wednesday, 16 February 2011, by the Central Bureau of Investigation (CBI) in a widening corruption investigation that has battered the government . Anil Ambani is the latest and highest-profile company executive to be quizzed by CBI officials in the probe into whether lucrative mobile phone licences and radio spectrum were sold at below-market prices in return for kickbacks.

The telecoms scandal has brought down a former telecoms minister, leading to his arrest by the CBI. The CBI has ordered companies who were involved in the telecoms licence process to answer a series of questions as it probes irregularities and possible corruption.

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.

European shares reversed initial gains. The key benchmark indices in France, Germany and UK fell by between 0.04% to 0.10%.

Asian stock markets were mixed as tensions continued to simmer in the Middle East. The key benchmark indices in Singapore, South Korea and Taiwan fell by between 0.33% to 0.60%. The key benchmark indices in China, Japan, Hong Kong and Indonesia rose by between 0.10% to 0.63%.

At least two people were killed early Thursday in Bahrain's capital Manama when the police dispersed thousands of anti-government protesters from the central Pearl Square, news reports said.

Trading in US index futures indicated a flat opening of US stocks on Thursday, 17 February 2011.

US stocks rose on Wednesday boosted by Dell earnings and deal announcements. The market overcame concerns about tensions between Israel and Iran. Two Iranian warships planned to sail through the Suez canal en route to Syria on Wednesday, an Israeli official said, calling it a "provocation" by the Islamic Republic. In economic news, US core wholesale prices rose in January at the fastest rate in more than two years, raising some concerns about inflation.

The BSE 30-share Sensex rose 205.92 points or 1.13% to 18,506.82, its highest closing level since 27 January 2011. The index rose 231.71 points at the day's high of 18,532.61 in late trade. The Sensex lost 67.11 points at the day's low of 18,233.79 in morning trade.

The S&P CNX Nifty rose 64.75 points or 1.18% to 5,546.45, its highest closing level since 27 January 2011. The Nifty hit high of 5,553 in late trade.

Most sectoral indices on BSE rose. Capital Goods index (up 1.93%) and Bankex index (up 1.50%), outperformed the Sensex. Auto index (up 1%), FMCG index (up 0.80%), Teck index (up 0.74%), Consumer Durables index (up 0.71%), Metal index (up 0.70%), Power index (up 0.45%), Oil & Gas index (up 0.45%), PSU index (up 0.37%), IT index (up 0.33%), Healthcare index (up 0.32%) and Realty index (down 0.89%), underperformed the Sensex.

The BSE Mid-Cap index rose 0.91% and the BSE Small-Cap index rose 0.94%. Both these indices underperfomed the Sensex.

The market breadth, indicating the health of the market, was strong. On BSE, 1681 shares advanced while 1126 shares declined. A total of 179 shares remained unchanged.

BSE clocked turnover of Rs 3302 crore higher than Rs 3094.03 crore on Wednesday, 16 February 2011.

Among the 30-member Sensex pack, 19 rose while the rest fell.

Index heavyweight Reliance Industries (RIL) was up 1.01% at Rs 953.50, off the day's low of Rs 937. As per reports company is planning major investments, totalling up to $ 30 billion over next five years in its various businesses, including energy and telecom sectors. The investments would be mainly targetted at petrochemicals, exploration and production and telecom businesses of the corporate conglomerate. The company expects its five main businesses in the next 5-10 years to be petrochemicals, refining, oil exploration and production (E&P), retail and telecom.

India's largest engineering and construction firm by sales Larsen & Toubro rose 2.69% to Rs 1693.80, reversing initial losses. 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 shares, Suzlon Energy, Crompton Greaves, Kalpataru Power, BEML, Alstom Projects, Bharat Heavy Electricals, Praj Industries, ABB and Punj Lloyd rose by 0.60% to 4.34%.

Marketmen expect the government to continue thrust on development spending in the Union Budget 2011-2012 to be unveiled on 28 February 2011. The government may selectively raise import barriers for capital equipment, especially power equipment to facilitate domestic players. The government could also unveil policies to increase capital flows to the infrastructure sector at lower financing costs.

Auto stocks were mixed. Mahindra and Mahindra (M&M) rose 1.84%. 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 second biggest two-wheeler maker by sales, Bajaj Auto rose 1.62%. India's top bike maker by sales Hero Honda Motors gained 0.27%.

Tata Motors rose 1%. The stock had surged recently 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%.

India's largest car maker by sales Maruti Suzuki India almost flat at Rs 1229.50. The stock had hit a 52-week low of Rs 1146 on Thursday, 10 February 2011.

Marketmen expect the government to keep excise duty rate unchanged in the Budget. In the previous budget, the excise duty was increased by 2%.

India's second largest IT exporter by sales Infosys rose 0.33% after company said it has expanded operations in Thiruvananthpuram, inaugurating first Software development block (I) at Technopark Campus II (SEZ) with a total investment of Rs 180 crore.

Among other IT sector shares, Tech Mahindra, MphasiS, Aptech, Financial Technologies and TCS rose by 0.99% to 3.84%, rose. Wipro and HCL Technologies declined by 1.34% and 1.68%, respectively.

The IT industry expects extension of the sunset clause on tax exemption for software technology parks under Section 10 A/10 B which is due to expire in March 2011.

Metal stocks were mixed. Steel giant Tata Steel rose 2.16% extending Wednesday's 3.97% jump after consolidated net profit surged 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.

Steel Authority of India rose 1.75% on reports the company is setting up a steel plant in Mongolia with around Rs 15000-crore investment.

JSW Steel, Sesa Goa, Hindustan Zinc, Jindal Saw and Bhushan Steel rose by 0.06% to 2.41%. However, National Aluminium Company, Sterlite Industries, Hindalco Industries, Jindal Steel & Power and NMDC fell by 0.02% to 1.17%.

Marketmen expect hike in import duty on HR coil from 5% to 10% in the Budget. The industry also expect a continued thrust on infrastructure spending.

Interest rate sensitive banking stocks rose as food inflation eased. India's second largest private sector bank by market capitalisation HDFC Bank rose 4.15%.

India's largest commercial bank by branch network State Bank of India rose 0.96%, 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 gained 0.46%.

Indian Overseas Bank, Allahabad Bank, IndusInd Bank, Yes Bank, IDBI Bank, Axis Bank, Kotak Mahindra Bank and Punjab National Bank rose by 0.35% to 5.08%.

It is anticipated that the government might reduce the tenure limit for tax exempt deposits from five years to three years in the Budget. Market men also expect government subsidy/concessions on interest rates to be provided on lending to State Electricity Boards (SEBs) given their weak financial health. Another expectation is that of a hike in limit of refinancing from India Infrastructure Finance Company (IIFCL) to commercial bank loans for public-private partnership (PPP) projects in critical sectors from the current Rs 6000 crore.

Everonn Systems India clocked a highest turnover of Rs 132.96 crore on BSE. Tata Steel (Rs 120.30 crore), State Bank of India (Rs 112.03 crore), LIC Housing Finance (Rs 107.27 crore) and ARSS Infrastructure Projects (Rs 84.05 crore), were the other turnover toppers on BSE in that order.

Unitech reported a highest volume of 1.18 crore shares on BSE. Shree Ashtavinayak Cine Vision (77.28 lakh shares), Spicejet (72.20 lakh shares), Cals Refineries (70.81 lakh shares) and Jupiter Bioscience (59.40 lakh shares), were the other volume toppers on BSE in that order.

On the macro front, 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%