Market extends gains for the fourth day

Hopes for financial sector reforms and the latest data showing easing of food inflation in mid-February 2011 and the services activity expanding at its fastest pace in three months in February 2011, helped Indian stocks eke out small gains in a highly volatile trading session. The BSE 30-share Sensex rose 43.26 points or 0.23%, up 236.14 points from the day's low and off 113.81 points from the day's high. The BSE Sensex and the 50-unit S&P CNX Nifty attained two-week closing highs.



The BSE Sensex has jumped 875.35 points or 4.86% in four trading sessions from its close of 17,632.41 on 24 February 2011, as the government refrained from raising excise duties in Union Budget 2011-2012 on Monday, 28 February 2011. But, the barometer index has lost 2019.33 points or 9.84% in calendar year 2011 so far, with investors worried about slowdown in corporate earnings growth due to higher input costs, interest rates and salaries.

Coming back to today's trade, the market breadth was positive. Index heavyweight Reliance Industries (RIL) pared intraday losses in volatile trade. Cement stocks rose on reports cement manufacturers have hiked cement prices by Rs 6 per 50 kilogram bag in Mumbai, after a change in excise duty structure in the Budget and after 30% hike in coal prices by Coal India. Interest rate sensitive auto stocks rose on higher sales in February 2011 and as the government kept excise duties on automobiles unchanged in the Budget contrary to market expectations of a 2% hike.

Banking pivotals saw mixed trend after the Union Cabinet cleared the Banking Regulation (Amendment) Bill 2011, which will now be placed for parliament's approval. IT pivotals saw mixed trend in reaction to the government not extending tax exemption for software technology parks under Section 10 A/10 B which is due to expire in March 2011. Metal stocks fell across the board on concerns higher crude oil prices may impact global economic recovery. Infrastructure and construction stocks rose for the third straight day after the finance minister proposed a 23% hike in infrastructure spending in the Union Budget 2011-2012.

Intraday volatility was high. The market edged lower in early trade as oil held firmly above $100 a barrel level. The market recovered soon to hit fresh intraday high. The market weakened once again to hit fresh intraday low in morning trade. The market trimmed losses in mid-morning trade. It turned positive to hit two week highs in early afternoon trade. The market staged a strong intraday rebound later as the key benchmark indices hit their highest level in nearly 2-weeks. The market pared gains in early afternoon trade.

The market held positive zone in range bound afternoon trade. The market reversed direction in mid-afternoon trade. The market regained positive in late trade on reports the Union Cabinet has approved the Banking Regulation (Amendment) Bill 2011 which will now be placed for parliament's approval.

The BSE 30-share Sensex was up 43.26 points or 0.23% to 18,489.76, its highest closing since 17 February 2011. The index gained 157.07 points at the day's high of 18,603.57 in early afternoon trade. The Sensex lost 192.88 points at the day's low of 18,253.62 in morning trade.

The S&P CNX Nifty was up 13.90 points or 0.25% to 5,536.20, its highest closing since 17 February 2011. The Nifty hit high of 5,570.75 in early afternoon trade.

The market breadth, indicating the health of the market, was marginally positive. On BSE, 1,425 shares advanced, 1,417 declined and 107 remained unchanged.

The BSE Mid-Cap index rose 0.33% to 6,598.95 and outperformed the Sensex. The BSE Small-Cap index rose 0.21% to 8,019.88, underperforming the Sensex.

Sectoral indices on the BSE displayed mixed trend. The BSE Capital Goods index (up 2.35%), the BSE Auto index (up 1.86%), and the BSE Consumer Durables index (up 0.45%), outperformed the Sensex. The BSE Metal index (down 0.79%), The BSE Oil & Gas index (down 0.67%), and the BSE TecK index (down 0.66%), underperformed the Sensex.

BSE clocked turnover of Rs 3,806 crore, higher than Rs 3,374.56 crore on Tuesday, 1 March 2011.

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

Index heavyweight Reliance Industries (RIL) fell 0.89% to Rs 980.10. The stock hit high of Rs 985.15 and low of Rs 968.70. The stock had risen 2.49% on Tuesday. Lower corporate surcharge will offset increase in minimum alternate tax (MAT) in the Budget. MAT was increased by 50 basis points to 18.5% from 18% in the Budget. RIL pays MAT. The government simultaneously cut surcharge on corporate tax to 5% from 7.5%.

Infrastructure and construction stocks rose for the third straight day after the finance minister proposed a 23% hike in infrastructure spending in the Union Budget 2011-2012. Larsen & Toubro, Hindustan Construction Company, and IVCRL Infrastructure & Projects rose by between 1.13% to 3.23%.

Jaiprakash Associates jumped 3.55% after the company's cement shipments rose 36% to 1.52 million tonnes in February 2011 over February 2010.

India's top power equipment maker by sales Bharat Heavy Electricals gained 3.13%, on reports the company has bagged an order worth Rs 3,220 crore related to a thermal power project in West Bengal.

The Finance Minister has proposed an allocation of Rs 2,14,000 crore for infrastructure sector in 2011-2012, which is 23.3% higher than current year. In order to give a boost to infrastructure development in railways, ports, housing and highways development, it has been proposed to allow tax-free bonds of Rs 30,000 crore to be issued by various government undertakings in the year 2011-12. India Infrastructure Finance Company Limited (IIFCL) is expected to achieve a cumulative disbursement of Rs 25000 crore by 31 March 2012.

The finance minister has also raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion and also extended income tax exemption on tax-saving infrastructure bonds up to a maximum of Rs 20,000 a year for one more year.

Punj Lloyd rose 4.74% on reports Libyan leader Muammar Gaddafi has accepted a peace plan from Venezuela's President Hugo Chavez to end the crisis in the North African country. Punj Lloyd has large operations in Libya with around 1,800 employees. Forces loyal to Gadhafi launched air strikes on Thursday against the oil port town of Brega, which is controlled by rebels, according to media reports.

Interest rate sensitive auto stocks rose on higher sales in February 2011 and as the government kept excise duties on automobiles unchanged in the Budget contrary to market expectations of a 2% hike. India's largest tractor and utility vehicles maker by sales Mahindra & Mahindra rose 1.38%, with the stock extending last two days' sharp gains as the company's total sales rose 25.4% to 52,419 units in February 2011 over February 2010, aided by robust 36.8% growth in tractor sales to 19,041 and 19.7% growth in automotive sales to 33,378 units.

India's largest bike maker by sales Hero Honda Motors gained 0.56%, after sales rose 23.54% to 4,72,055 units in February 2011 over February 2010.

Another bike maker Bajaj Auto rose 1.06%, after company's total sales rose 21.7% to 3.26 lakh units in February 2011 over February 2010. Motorcycle sales jumped 22.2% to 2.86 lakh units and commercial vehicle sales increased 18.4% to 40,217 units in February 2011 over February 2010.

India's largest car maker by sales Maruti Suzuki India rose 2.71%, extending Tuesday's 7.14% surge after total vehicle sales rose 15.5% to 1.11 lakh units in February 2011 over February 2010. The company's domestic sales increased 19.8% to 1.01 lakh units, whereas exports fell 15% to 10,102 units in February 2011 over February 2010. Last month, the company launched the luxury sporty Kizashi sedan.

The government's focus on the rural economy also aided gains in shares of two-wheeler and car makers. Higher rural incomes may spur demand for two-wheelers and cars.

Tata Motors rose 3.65%, extending Tuesday's 5.42% surge after the company said its total sales of commercial and passenger vehicles rose 12% to 77,543 units in February 2011 over February 2010. Domestic sales rose 10% to 73,039. Exports, at 4,504 vehicles in February, were up 39% from 3,237 in the year-earlier period.

IT stocks were mixed as the government did not extend tax exemption for software technology parks under Section 10 A/10 B which is due to expire in March 2011. Infosys fell 1.88%. Wipro rose 0.17%, reversing initial losses.

TCS rose 2.19% after company won a contract for establishing and managing the State Data Center (SDC) for the state of Puducherry to help the state government in providing enhanced citizen services. The SDC will enhance the infrastructure required to consolidate the state-level application like commercial taxes application, state service delivery gateway and e-District and will be interoperable with the existing infrastructure.

The government has also proposed to levy Minimum Alternate Tax (MAT) of 18.5% on the book profits of units located in Special Economic Zone, where many of the technology firms have their units.

Most metal stocks fell on concerns higher crude oil prices may impact global economic recovery. LMEX, a gauge of six metals traded on the London Metal Exchange, fell 0.15% on Wednesday, 2 March 2011. Steel Authority of India, Sterlite Industries, Jindal Saw, Jindal Steel & Power, Hindalco Industries and Hindustan Zinc fell by between 0.1% to 2.5%.

India's largest steel maker by sales Tata Steel fell 1.76%, on reports the company has increased its stake in Riversdale Mining, Australia, by close to 3%. The move gives a clear sense that the company has no intention to exit Riversdale anytime soon, putting to rest speculations to the contrary. Tata Steel has raised its stake Riversdale from 24.2% to about 27.1%

Cement stocks rose on reports cement manufacturers have hiked cement prices by Rs 6 per 50 kilogram bag in Mumbai, after a change in excise duty structure in the Budget and after 30% hike in coal prices by Coal India. UltraTech Cement rose 1.97%, after company said on Tuesday cement shipments rose 4.3% to 3.33 million tones in February 2011 over February 2010. Ambuja Cements gained 0.99%.

ACC rose 0.77%, after the company announced after market hours on Tuesday that its cement dispatches rose 16.95% to 2 million tones in February 2011 over February 2010.

Banking pivotals saw mixed trend after the Union Cabinet cleared the Banking Regulation (Amendment) Bill 2011, which will now be placed for parliament's approval. India's largest private sector bank by market capitalisation ICICI Bank fell 0.96% and India's second largest private sector bank by market capitalization HDFC Bank gained 2.89%. India's largest commercial bank by branch network State Bank of India slipped 0.33%.

The Banking Regulation (Amendment) Bill seeks to give shareholders of banks voting rights in proportion to their holding. Currently, the voting rights of a shareholder are limited to 1% of the holding for state-run banks and 10% for private banks. Several banks and investors have been demanding changes to these rules. The bill also proposes that an individual or institution can hold a more than 5% stake in a bank only after receiving approval from the central bank.

Bajaj Finserv spurted 20% to Rs 527.45 on reports US-based Berkshire Hathaway Inc aims to enter the Indian insurance sector as a corporate agent of Bajaj Allianz General Insurance. Bajaj Finserv holds 74% stake in Bajaj Allianz General Insurance. Berkshire Hathaway is run by legendary investor Warren Buffett.

State Bank of India clocked highest turnover of Rs 192.86 crore on BSE. Tata Motors (Rs 114.46 crore), Larsen & Toubro (Rs 92.68 crore), Reliance Infrastructure (Rs 88.98 crore) and TTK Prestige (Rs 87.22 crore) were the other turnover toppers in that order.

Lanco Infratech clocked highest volume of 1.28 crore shares on BSE. SpiceJet (82.92 lakh shares), Reliance Communications (79.94 lakh shares), Camlin (71.61 lakh shares) and Cals Refineries (57.26 lakh shares) were the other volume toppers in that order.

The services sector expanded in February at its fastest pace in seven months, helped by a steady expansion of new business, even as input price pressures intensified, a survey showed on Thursday. The HSBC Markit Business Activity Index based on a survey of around 400 companies, rose to 60.2 in February 2011 from 58.1 in January 2011, staying above the 50 mark that separates growth from contraction for the 22nd consecutive month. The PMI's new business sub-index, at 59.6, recorded its strongest growth since June as market conditions improved, and developed economies recovered. The degree of positive sentiment in the business expectations sub-index was the strongest in 16 months.

The food price index rose 10.39% and the fuel price index climbed 12.56% in the year to 19 February 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 11.49% and 12.14%. The primary articles price index was up 14.85% compared with an annual rise of 15.77% a week earlier.

A steep rally in oil prices in recent weeks is concern for India which imports majority of its crude oil requirements. Oil prices have seen big gains recently as unrest gripped the Middle East and North Africa, spreading from Tunisia to the surrounding areas, including Libya. There are concerns that a pro-democracy movement could spread to large-scale oil producer Saudi Arabia. The Reserve Bank of India is expected to raise rates by 25 basis points at its mid-quarter policy review on 17 March 2011 as headline inflation remains high.

The Union Cabinet today, 3 March 2011, approved the Banking Regulation (Amendment) Bill 2011, which will now be placed for parliament's approval. The bill seeks to give shareholders of banks voting rights in proportion to their holding. Currently, the voting rights of a shareholder are limited to 1% of the holding for state-run banks and 10% for private banks. Several banks and investors have been demanding changes to these rules. The bill also proposes that an individual or institution can hold a more than 5% stake in a bank only after receiving approval from the central bank.

Finance minister Pranab Mukherjee, in his Budget speech on 28 February 2011 had said the UPA government was committed to taking financial sector reforms further. He said the government planned to move on the Insurance Laws (Amendment) Bill 2008, Life Insurance Corporation (Amendment) Bill 2009, the revised Pension Fund Regulatory and Development Authority (PFRDA) bill, first introduced in 2005 and the Banking Regulation (Amendment) Bill 2011, among others.

Insurance Laws (Amendment) Bill 2008 seeks to hike the foreign direct investment cap in the insurance sector, currently pegged at 26%, while the PFRDA Bill would give a legal backing to the interim regulator -- the PFRDA. The bill on LIC seeks to raise the capital base of the entity to Rs 100 crore from the existing Rs 5 crore.

European shares rose on Thursday buoyed by positive US economic news overnight and a falling oil price, with staffing firm Adecco among the top gainers on its forecast-beating quarterly results. The key benchmark indices in France, Germany and UK rose by between 0.83% to 1%.

Asian stocks edged higher on Thursday, with upbeat US economic data helping to offset worries about surging oil prices caused by turmoil in the Middle East. The key benchmark indices in Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose by between 0.32% to 2.20%. China's Shanghai Composite fell 0.34%, reversing initial gains on reports China may raise required reserves later this month.

Trading in US index futures indicated that the Dow could gain 76 points at the opening bell on Thursday, 3 March 2011.

US stocks eked out gains on Wednesday as the latest data signaled the economy could absorb expected higher energy costs. Economic data was positive, with the Federal Reserve's Beige Book suggesting economic activity picked up in 2011 and a private survey pointing to strong private-sector hiring.

Back home, the manufacturing sector expanded at its fastest clip in three months in February 2011 as more new orders poured in, but input prices rose at a record pace, a survey showed on Tuesday, 1 March 2011. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 Indian companies, rose to 57.9 in February from 56.8 in January. This was the 23rd consecutive month the key index of manufacturing in Asia's third largest economy has been above the 50 mark that divides growth from contraction.

The output of six key industries expanded 7.1% in January 2011, faster than a downwardly revised growth of 6.1% in December 2010, government data showed on Tuesday, but slower than the 9.1% growth during the corresponding period last year.

Exports in January rose an annual 32.4% to $20.6 billion, while imports for the month rose 13.1% on the year to $28.6 billion, government data released on Tuesday showed.

The gross domestic product (GDP) growth for the third quarter stood at 8.2% in Q3 December 2010 against 8.9% in Q2 September 2010.

The Finance Minister announced in the budget 2011-12 on Monday, 28 February 2011, cut surcharge on corporate tax on domestic firms to 5% from 7.5% and projected a lower fiscal deficit target of 4.6% for the year ending March 2012 (FY 2012). He said while growth in 2010-11 has been broad-based, food inflation continues to remain a concern. Mukherjee also put emphasis on increasing agricultural productivity to curb food inflation. He added that financial sector reforms will move forward with the Insurance amendment Bill, LIC bill and Pension Development Authority Bill in current session.

The Finance Minister said Goods and Services Tax (GST) bill will be introduced in this session of parliament and that the new Direct Tax Code will be implemented from 1 April 2012. The Finance Minister allowed foreign institutional investors (FIIs) to invest in mutual fund schemes and raised limit the FII investment limit in corporate bonds for investment in infrastructure. He said government will introduce Public Debt Management Bill in 2012.

Mukherjee said Indian economy is back to pre-crisis growth trajectory and that economy is set for double-digit growth in coming years. He said government expects average inflation to be down next year. He added current account deficit poses a concern.

The government will spend Rs 1.6 lakh crore on social projects, up 17% from the last year. The finance minister said the government is on course to introduce the food security bill this year. The new Companies Bill will also be introduced he added. He said the economy is resilient to the external shocks. He said removal of supply bottlenecks in the food sector will be in focus in 2011-12.

The finance minister also proposed the issuance of tax-free bonds worth Rs 30,000 crore for infrastructure financing. Mukherjee said the government intends to spend Rs 2.14 lakh crore as budgetary support for the infrastructure sector in 2011-12, which is 23.3% higher than current year.

The Finance Minister re-iterated the Government's resolve to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner. He said that the Nutrient Based Subsidy (NBS) has improved the availability of fertilizers and the Government is actively considering extension of NBS regime to cover urea.

The finance minister raised tax exemption limit on personal tax to Rs 1.8 lakh from Rs 1.6 lakh. For senior citizens, tax exemption limit has increased to Rs 2.5 lakh from Rs 2.4 lakh and the eligibility age for senior citizens will be 60 years against 65 years earlier. The Rs 20000 exemption for investment in infra bonds has been raised by another year.

The projected fiscal deficit for FY 2011 has been revised downwards to 5.1% from 5.5%. The fiscal deficit for FY 2012 has been projected at 4.6%. The projected fiscal deficit for FY 2013 is 4.1%.