Some auto shares extend gains on strong February sales

The key benchmark indices pared initial strong gains to close flat as high crude oil prices triggered profit taking. The BSE 30-share Sensex was down 3.31 points or 0.02%, up close to 40 points from the day's low and off close to 245 points from the day's high. The Sensex and the 50-unit S&P CNX Nifty came off 5-week highs struck earlier in the day. World stocks rose as investors' confidence in the global economy was boosted by a drop in US jobless claims.



The market breadth, indicating the health of the market, turned negative in late trade from strong breadth earlier in the day. Select auto stocks extended recent gains 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. Capital goods stocks declined on profit taking. Index heavyweight Reliance Industries edged higher in volatile trade. Some FMCG stocks fell on profit taking. Most metal stocks fell. Airline stocks declined on higher crude oil prices.

The market surged to 5-week high in early trade on hopes for financial sector reforms after the Union Cabinet on Thursday, 3 March 2011, cleared the Banking Regulation (Amendment) Bill 2011, which will now be placed for parliament's approval. The Sensex and the 50-unit S&P CNX Nifty scaled 5-week highs. The market pared gains in morning trade as oil rose. The market held positive zone in range bound mid-morning trade.

The key benchmark recovered after hitting fresh intraday lows in early afternoon trade. The market held positive zone in afternoon trade. The market regained positive zone after slipping into the red for a brief period to hit fresh intraday lows in mid-afternoon trade. The market swung between gains and losses in late trade.

High crude oil prices remain a cause for concern for India which imports majority of its crude oil requirements. US crude futures were up 61 cents or 0.6% at $102.52 a barrel. 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 BSE 30-share Sensex was down 3.31 points or 0.02% to 18,486.45. The index jumped 247.21 points at the day's high of 18,736.97 in early trade, its highest level since 27 January 2011. The Sensex fell 41.07 points at the day's low of 18,448.69 in late trade.

The S&P CNX Nifty was up 2.25 points or 0.05% to 5,538.75, its highest closing level since 17 February 2011. The Nifty hit high of 5608.20 in early trade, its highest level since 28 January 2011.

The BSE Mid-Cap index fell 0.1% and the BSE Small-Cap index declined 0.26%. Both these indices underperformed the Sensex.

The market breadth, indicating the health of the market, turned negative from positive breadth earlier in the day. On BSE, 1,493 shares declined while 1,387 shares advanced. A total of 118 shares remained unchanged.

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

BSE clocked turnover of Rs 3150 crore, lower than Rs 3833.73 crore on Thursday, 3 March 2011.

Index heavyweight Reliance Industries (RIL) rose 0.34% to Rs 981.75, as the sharp increase in global crude oil prices will improve refining margins. The stock swung between a high of Rs 993 and a low of Rs 978.50.

Oil & Natural Gas Corporation (ONGC) fell 0.37%, on reports the company's follow-on share sale is likely to be delayed to the first week of April 2011 from an earlier launch date of 15 March 2011. According to reports, ONGC is yet to complete some regulatory formalities, which are expected to be sorted out in the next few weeks. The government has approved a 5% stake sale in ONGC via a follow-on public offer that is expected to raise more than $3 billion. The Centre currently holds 74.14% stake in ONGC (as per the shareholding pattern as on 31 December 2010).

Larsen & Toubro declined 3.08%, on profit taking after a recent strong rally triggered by the government's thrust on the infrastructure sector in the Budget. The stock had jumped 9.8% in three trading sessions to Rs 1,662 on Thursday, 3 March 2011 from a recent low of Rs 1,513.10 on 25 February 2011.

Among other capital goods stocks, Gammon India, Praj Industries, Bhel and Siemens fell by between 0.14% to 4.86%.

Tata Power Company rose 2.27%. The stock was the biggest gainer from the Sensex pack. Tata Powers plans to spend Rs 70000 crore ($15.5 billion) to increase capacity eightfold to 25,000 megawatt by 2017.

Most banking pivotals gained after the Union Cabinet cleared the Banking Regulation (Amendment) Bill 2011, which will now be placed for parliament's approval India's second largest private sector bank by market capitalization HDFC Bank gained 1.16%. India's largest commercial bank by branch network State Bank of India rose 0.38%. India's largest private sector bank by market capitalisation ICICI Bank fell 0.12%, reversing initial gains.

Most auto stocks extended recent gains 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 0.48%, extending three-day 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 2.15%, after sales rose 23.54% to 4,72,055 units in February 2011 over February 2010. As per reports a total of six private equity firms will acquire 45% in Hero Investments, which will buyout Japan-based Honda's stake in Hero Honda Motors.

India's second largest bike maker by sales Bajaj Auto advanced 2%, 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.

Ashok Leyland rose 1.6%, extending gains for the third consecutive day, as the company's total vehicle sales grew 24.54% to 9,800 units in February 2011 over February 2010.

India's largest car maker by sales Maruti Suzuki India fell 1.09%, reversing initial gains. The stock had surged past few days 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 may spur demand for two-wheelers and cars.

India's top truck maker by sales Tata Motors fell 0.48%, reversing initial gains. The stock had surged past few days 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.

Most metal stocks fell. Steel Authority of India, Jindal Steel & Power, Sterlite Industries, JSW Steel, National Aluminum Company and Tata Steel fell by between 0.18% to 1.46%. LMEX, a gauge of six metals traded on the London Metal Exchange, rose 0.46% on Thursday, 3 March 2011.

FMCG stocks fell on profit taking after recent strong gains triggered by the government's thrust on rural sector which could boost rural income. FMCG firms derive a large chunk of revenue from the rural sector. Hindustan Unilever, Marico, and Britannia Industries fell by between 0.32% to 1.15%.

The agriculture sector has received a boost from Union Budget 2011-12. The target of credit flow to the farmers has been raised sharply from Rs 3,75,000 crore this year to Rs 4,75,000 crore in 2011-12. Meanwhile, the interest subvention to those farmers who repay their crop loans on time has been increased from 2% to 3% leading to effective rate of interest for such farmers to be 4% per annum. The Finance Minister also announced a number of measures to strengthen the agricultural sector particularly in the areas of pulses, vegetables and oil palm.

India's largest cigarette maker by sales ITC fell 0.23%, after a recent sharp surge triggered by no change in excise duty on cigarettes unchanged in the Budget. A section of the market had expected increase in excise duty on cigarettes in the Budget.

India's largest listed cellular services provider by sales Bharti Airtel fell 1.19%. The company on Thursday launched third generation (3G) mobile services in the National Capital Region (NCR) spanning Delhi, Gurgaon, Faridabad and Noida. The 3G services will give consumers access to facilities like mobile TV, video calls, high-speed internet and video capabilities with customized tariff plans.

Pharma major Cipla shed 0.64%. The company's whole-time director S Radhakrishnan was quoted by the media as saying that the government's proposal to levy 18.5% MAT on developers of special economic zones and units that are located in these enclaves in budget 2011-12 will impact the company's cash flows.

Realty stocks were mixed. Ackruti City, DLF, HDIL and Phoenix Mills fell by between 0.39% to 4.75%. Anant Raj Industries, Indiabulls Real Estate and Unitech rose by between 0.73% to 4.09%.

IT stocks were mixed after strong economic data in the US, the key market for Indian IT firms. India's second largest IT exporter by sales Infosys advanced 1.23%. India's third largest IT exporter by sales Wipro fell 0.6%, reversing initial gains.

Tata Consultancy Services (TCS) shed 1.37%, reversing initial gains The company has won a contract from The Law Society of England and Wales. TCS will work with The Law Society initially on a significant system development project, which aims to create a more effective online service for The Law Society and its members.

Airline stocks fell on higher crude oil prices. Kingfisher Airlines, SpiceJet and Jet Airways declined by between 0.3% to 3.79%. Jet fuel prices are linked to crude oil prices. Jet fuel constitute more than 40% of the operating cost of airliners.

Cals Refineries clocked highest volume of 1.06 crore shares on BSE. Unitech (83.7 lakh shares), SpiceJet (71.20 lakh shares), Reliance Power (51.1 lakh shares) and IFCI (44.64 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 175.39 crroe on BSE. Bajaj Finserv (Rs 167.31 crore), Larsen & Toubro (Rs 75.41 crore), Tata Motors (Rs 70.53 crore) and Tata Steel (Rs 67.96 crore) were the other turnover toppers in that order.

Investors are keenly watching whether the government is able to push through financial sector reforms in parliament when it lack a majority in Rajya Sabha. The Banking Regulation (Amendment) Bill 2011 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 is 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 advanced for a second straight day on Friday on growing optimism that a key jobs report will show the recovery in the United States, the world's largest economy, is gathering momentum. The key benchmark indices in France, Germany and UK rose by between 0.54% to 0.84%.

Asian shares rose on Friday, helped by solid overnight gains on Wall Street. The key benchmark indices China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan gained by between 0.53% to 1.73%.

US stocks clocked their best one-day rally in three months on Thursday buoyed by strong economic data. Initial jobless claims fell last week to 368,000 -- a 2-1/2 year low. The data came one day after a robust report on private-sector hiring. The Institute for Supply Management's non-manufacturing index rose to 59.7 in February, slightly above forecasts and higher than the January result.

Trading in US index futures indicated that the Dow could gain 30 points at the opening bell on Friday, 4 March 2011. The market is now awaiting U.S. jobless figures for February due later in the global day today, 4 March 2011.

The European Central Bank left interest rates at record lows on Thursday. ECB President Jean-Claude Trichet said policy makers must exercise "strong vigilance" as inflation risks increase.

Back home, 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.

World food prices hit record highs in February 2011, after rising for an eighth consecutive month, the UN Food and Agriculture Organisation (FAO) in Rome said on Thursday, 3 March 2011. FAO's Food Price Index rose to 236 points in February 2011 from 231 points in January 2011. The index, which monitors average monthly price changes for a variety of key staples, showed the sharpest increases were for dairy products and cereals. The general rise in food prices has been blamed on rising oil prices, adverse weather conditions in key crop-growing countries such as China and Russia and increased speculation on financial commodity markets.

Meanwhile, India's 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 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 cut surcharge on corporate tax on domestic firms to 5% from 7.5% in Union Budget 2011-2012 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%.