Auto, banking stocks lead rally

The key benchmark indices extended gains for the second straight day as bargain hunting emerged after recent steep slide. Gains in European stocks also supported Indian stocks. But, political uncertainty pulled the market off highs after a sharp intraday surge on reports that a court has ordered arrest of Dravida Munnetra Kazhagam (DMK) party MP Kanimozhi in the 2G scam spectrum case. The DMK is a part of the Congress-led United Progressive Alliance (UPA) government at the Centre. The BSE 30-share Sensex was up 184.69 points or 1.02%, off close to 105 points from the day's high and up about 165 points from the day's low.



The market gained for the second straight day today, 20 May 2011, after tumbling to eight-week closing low on Wednesday, 18 May 2011. The market breadth was positive.

Cigarette maker ITC fell on profit taking after the firm reported good Q4 results. Index heavyweight Reliance Industries (RIL) nudged higher in volatile trade. Shares of oil exploration major ONGC declined on reports the government has hiked the contribution of upstream oil companies towards fuel subsidies for revenue losses suffered by oil retailers (PSU OMCs) on fuel sales to 38.7% from current 33.33%. Shares of PSU OMCs rose. Realty shares gained on bargain hunting after recent losses. Auto, banking and metal stocks also rose.

Engineering and construction major Larsen & Toubro surged near 4% after jumping close to 6% on Thursday after company said at the time of announcing Q4 March 2011 results during trading hours on Thursday that it is well positioned to sustain the revenue growth momentum in the medium term.

The market edged higher in early trade. The Sensex soon extended initial gains. The market held firm in morning trade. Stocks remained firm in mid-morning trade. The market pared gains later as many Asian equities reversed initial gains. The market soon came off lows. The market firmed up further in early afternoon trade. The market surged to hit fresh intraday high in mid-afternoon trade. The market pared gains in late trade after reports that a special Central Bureau of Investigation (CBI) has ordered arrest of DMK MP Kanimozhi and Kalaignar TV MD Sharad Kumar after rejecting their bail pleas in the 2G spectrum case.

The court directed that 43-year-old Kanimozhi and Kumar should be produced before it at 10:00 IST tomorrow, when the case comes up for hearing. The 2G spectrum scam relates to irregularities in the allocation of airwaves to telecom companies that caused huge losses to the exchequer.

The BSE 30-share Sensex was up 184.69 points or 1.02% to 18,326.09. The index gained 288.07 points at the day's high of 18,429.47 in mid-afternoon trade. The Sensex rose 19.98 points at the day's low of 18,161.38 in early trade.

The S&P CNX Nifty was up 56.25 points or 1.04% to 5,484.35.

The BSE Mid-Cap index rose 0.61% and the BSE Small-Cap index gained 0.49%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 2764 crore, higher than Rs 2432.79 crore on Thursday, 19 May 2011.

The market breadth, indicating the health of the market, was positive. On BSE, 1548 shares gained while 1288 shares declined. A total of 117 shares remained unchanged. The breadth was much stronger at the onset of the trading session.

From 30-member Sensex pack, 27 shares gained while three of them declined.

Cigarette maker ITC fell 1.82% on profit taking after reporting good Q4 results. The company announced during market hours today that net profit rose 24.63% to Rs 1281.48 crore on 16.53% rise in total income to Rs 6062.15 crore in Q4 March 2011 over Q4 March 2010. The company's board recommended a dividend of Rs 2.80 per share for the year ended March 2011. The board has also recommended a special dividend of Rs 1.65 per share.

The ITC stock had witnessed a pre-result rally on expectations of good results. It had risen 12.78% to Rs 189.25 on Thursday, 19 May 2011, from a recent low of Rs 167.80 on 18 March 2011.

Index heavyweight Reliance Industries (RIL) rose 0.71% to Rs 921.40. The stock hit high of Rs 925 and low of Rs 910.50. The company is reportedly negotiating with US-based finance company American Express to form a joint venture that could offer services such as payment gateways.

Shares of upstream oil companies -- ONGC, Oil India and GAIL (India) declined on reports the government has hiked the contribution of upstream oil companies towards fuel subsidies for revenue losses suffered by oil retailers (PSU OMCs) on fuel sales to 38.7% from current 33.33%. India's largest oil exploration firm by sales Oil and Natural Gas Corporation (ONGC) lost 1.17% on reports its subsidy burden will aggregate Rs 24892 crore in the year ended March 2011 (FY 2011). ONGC chairman reportedly said today that additional subsidy burden may create some problem for company's share sale.

Oil India fell 0.86%. Reportedly, the company's subsidy burden will total Rs 3293 crore in FY 2011. GAIL (India) shed 0.34% on reports the company's subsidy burden will total Rs 2111 crore in FY 2011.

Upstream companies and explorers have to sell crude oil and products at a discount to PSU OMCs, which sell fuel at government-capped prices.

Shares of PSU OMCs rose. HPCL, BPCL and Indian Oil Corporation gained by between 0.46% to 1.43%

Realty shares gained on bargain hunting after recent losses. Orbit Corporation, Housing Development and Infrastructure (HDIL), Indiabulls Real Estate, Ackruti City, Sobha Developers, Anant Raj Industries and DLF rose by between 0.63% to 2.5%.

Metal stocks also rose on bargain hunting. Sterlite Industries Sail, Jindal Steel & Power, Hindalco Industries and Nalco rose by between 0.01% to 1.64%. LMEX, a gauge of six metals traded on the London Metal Exchange, fell 1.72% on Thursday, 19 May 2011.

Tata Steel rose 2.76%. The company said after market hours today that it has proposed a restructuring of its long products business in Europe to target high value markets and introduce greater flexibility into its costs and operations. To support this strategy, Tata Steel plans to invest 400 million pounds over a five-year period.

The company said its long products business has continued to make losses over the last two years. As a consequence the business has proposed a plan to further reduce costs, focus on products that create value and improve its ability to respond quickly to demand fluctuations. This strategy includes a proposal to close or mothball parts of the Scunthorpe plant and puts at risk 1,200 jobs at Scunthorpe and 300 jobs at its Teesside sites, Tata Steel said in a release.

India's largest engineering and construction firm by sales Larsen & Toubro surged 3.57% and was the top gainer from the Sensex pack. The stock extended Thursday's 5.92% surge triggered by positive order book and revenue outlook. L&T said at the time of announcing Q4 March 2011 results during trading hours on Thursday that it is well positioned to sustain the revenue growth momentum in the medium term given its excellent execution capabilities, presence in diverse sectors of the economy, a healthy order book and leadership position in most of the sectors where it operates.

Larsen & Toubro (L&T)'s net profit rose 17.25% to Rs 1686.21 crore on 12.74% increase in net sales to Rs 15078.39 crore in Q4 March 2011 over Q4 March 2010. Net profit fell 9.54% to Rs 3957.89 crore on 18.60% rise in net sales to Rs 43495.93 crore in the year ended March 2011 over the year ended March 2010. On a consolidated basis, the company's net profit declined 18.25% to Rs 4456.17 crore on 18.47% increase in net sales to Rs 51552.03 crore in the year ended March 2011 over the year ended March 2010.

As on 31 March 2011, the company's order book stood at Rs 130217 crore, which is almost 3 times its net sales of Rs 43495.93 crore for the year ended March 2011, giving strong revenue visibility. The company's order inflow rose 27% in Q4 March 2011. The company said the completion of the several expansion projects underway will strengthen its position of pre-eminence in its various businesses. The company also said that intense competition and spiraling input costs may exert some pressure on the operating margin going forward.

Among other capital goods stocks, Thermax, Bhel, Siemens and Praj Industries rose by between 0.36% to 1.78%.

India's largest thermal power generation firm Tata Power Company rose 1.67% after the company's board of directors approved a 10-for-1 stock split. Consolidated net profit after statutory appropriations declined 29.8% to Rs 661.54 crore on 4% growth in revenue to Rs 4985.84 crore in Q4 March 2011 over Q4 March 2011. The company attributed the decline in profit mainly to lower forex gains.

Shares of Reliance Anil Dhirubhai Ambani (ADA) group edged higher on bargain hunting after recent decline. Reliance Infrastructure (up 2.73%), Reliance Capital (up 1.15%), Reliance Power (up 3.02%), Reliance MediaWorks (up 2.88%) and Reliance Communications (up 0.84%), rose.

IT stocks also rose in a firm market. India's largest software services exporter TCS gained 1%. India's third largest software exporter Wipro added 0.84%. India's second largest software services exporter Infosys gained 0.15%

Banking stocks rose on bargain hunting after recent losses. Bank of India, Bank of Baroda and Punjab National Bank rose by between 0.22% to 2.27%.

India's second largest private sector bank by net profit HDFC Bank rose 1.97%. The bank raised its base rate by 55 basis points (bps) to 9.25% per annum and prime lending rate (PLR) by 50 bps to 17.75% effective 12 May 2011.

India's largest private sector bank by net profit ICICI Bank, gained 1.33% after the bank announced before market hours today that it has successfully priced issue of 5.5 year $1 billion international bond offering. The bonds carry a coupon rate of 4.75%.

India's largest commercial bank by branch network State Bank of India (SBI) fell 0.24%, as the stock turned ex-dividend today, 20 May 2011, for dividend of Rs 30 per share for the year ended March 2011. The SBI shares has tumbled recently on weak Q4 results. Net profit slumped 98.88% to Rs 20.88 crore on 18.07% rise in total income to Rs 26536.84 crore in Q4 March 2011 over Q4 March 2010. The result hit the market during trading hours on Tuesday, 17 May 2011.

SBI's net profit declined sharply as provisions for non-performing assets jumped 49.2% to Rs 3263.91 crore in Q4 March 2011 over Q4 March 2010. A sharp surge in tax provision to Rs 1901.85 crore from Rs 977.88 crore in Q4 March 2010 pulled down the profit to a measly figure in Q4 March 2011.

The Reserve Bank of India (RBI) on Thursday said it has decided to discontinue the second liquidity adjustment facility for banks held every fortnight effective from 20 May 2011. The RBI allows banks to meet their cash shortfall by borrowing or parking surplus money with it through two windows on every reporting Friday. The move to discontinue the second liquidity adjustment facility comes after the RBI introduced the marginal standing facility (MSF), where banks can borrow from it at 8.25%. The MSF rate is one percentage point higher than the RBI's key lending rate.

Auto stocks also rose on bargain hunting after recent losses. India's largest car maker by sales Maruti Suzuki India rose 0.59%.

India's second largest bike maker by sales Bajaj Auto rose 3.05%, with the stock gaining for the second straight day after the company announced during market hours on Wednesday that net profit surged 164.89% to Rs 1400.39 crore on 23.54% rise in total income to Rs 4199.97 crore in Q4 March 2011 over Q4 March 2010. The stock had lost 1.65% on Wednesday.

Huge extraordinary (EO) income boosted Bajaj Auto's net profit in Q4 March 2011. Bajaj Auto said that in Q4 March 2011 sales tax deferral incentive/loan to the extent eligible under Rule 84 of the Maharashtra Value Added Tax Rules, 2005, has been prepaid at a discounted value of Rs 368 crore, thereby resulting in a surplus of Rs 827 crore. Meanwhile, considering the longer gestation period and initial losses made in PT. Bajaj Auto Indonesia, the company has written of an impairment amount of Rs 102 crore as a diminution in the value of investment in Q4 March 2011.

India's largest truck maker by sales Tata Motors rose 1.27%, with the stock gaining for the second straight day. The company's global sales rose 12% to 87,114 units in April 2011 over April 2010 on good demand for both commercial and passenger vehicles. The company unveils its year ended March 2011 result on 26 May 2011.

India's top bike maker by sales Hero Honda Motors gained 0.78%. Recent reports indicated the company is evolving strategies for branding, resource allocation for exports and identifying potential overseas markets to export its bikes following the break-up with its long-standing joint venture partner Japan's Honda Motor Company. The joint venture pact had barred Hero Honda Motors from exporting two-wheelers to countries where Honda sells bikes and scooters.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) added 2.07%, with the stock gaining for the second straight day. The company unveils its year ended March 2011 result on 30 May 2011.

Ashok Leyland jumped 5.25%, extending Thursday's 4.18% surge triggered by strong Q4 results. Net profit rose 33.93% to Rs 298.22 crore on 30.3% rise in total income to Rs 3832.64 crore in Q4 March 2011 over Q4 March 2010.

Resurgence Mines clocked highest volume of 1.77 crore on BSE. Birla Cotsyn (1.2 crore shares), Paramount Printpackaging (80.30 lakh shares), Cals Refineries (74.03 lakh shares) and HFCL (49.06 lakh shares) were the other volume toppers in that order.

Larsen & Toubro clocked highest turnover of Rs 152.32 crore on BSE. Kirloskar Industries (Rs 143.63 crore), State Bank of India (Rs 129.65 crore), Tata Coffee (Rs 87.86 crore) and Kirloskar Pneumatic (Rs 80.79 crore) were the other turnover toppers in that order.

The Q4 March 2011 results announced so far have been a mixed bag. The combined net profit of a total of 2250 companies rose 16,5% to Rs 65908 crore on 22.5% rise in sales to Rs 699181 crore in Q4 March 2011 over Q4 March 2010.

On the macro front, the food price index rose 7.47% and the fuel price index climbed 12.11% in the year to 7 May 2011, government data showed on Thursday. In the previous week, annual food and fuel inflation stood at 7.70% and 12.25% respectively. The primary articles price index was up 10.94%, compared with an annual rise of 11.96% a week earlier.

State-run oil marketing companies hiked petrol rates by a steep Rs 5 per litre late last week. Expectations are that the government may soon let oil retailers increase diesel and cooking fuel prices as well. If diesel price is hiked, it could further stoke inflationary pressure in the economy -- diesel being a key transportation fuel. The Reserve Bank of India (RBI) at its annual 2011-2012 monetary policy review on 3 May 2011 said it will continue with its anti-inflationary stance. Short-term sacrifices in economic growth will have to be made to rein in surging prices, the central bank said.

European markets gave up initial gains and were mixed on Friday. The key benchmark indices in Germany and France were down by between 0.21% to 0.55%. UK's FTSE 100 rose 0.16%.

Most Asian stocks edged lower in volatile trade on Friday with the Japanese market capped by caution about the economic outlook and losses in the utilities sector. The key benchmark indices in China, Japan, Singapore and Taiwan fell by between 0.04% to 0.63%. The key benchmark indices in Hong Kong, Indonesia, and South Korea rose by between 0.16% to 0.76%.

The Bank of Japan kept its policy interest-rate target steady at its meeting Friday, held off on announcing any new easing steps, and stuck to its view that the economy will pick up speed later this year as the nation recovers from the March disaster.

Trading in US index futures indicated that the Dow could fall 33 points at the opening bell on Friday, 20 May 2011. US index futures moved between the gains and losses.