BSE Small-Cap, Mid-Cap indices slide

The market recovered last week as value buying emerged after a recent steep slide. The recovery helped the Sensex regain the psychological 18,000 level. A steep fall in crude prices on Thursday, 23 June 2011, boosted sentiments. But, the broad market depicted weakness. The BSE Small-Cap index and the BSE Mid-Cap index, both declined.

Stock prices witnessed a steep intraday slide in early trade on Monday, 20 June 2011, on reports the Indian government is reviewing a double tax avoidance treaty with Mauritius. The reports rattled the market given that a big chunk of India's foreign direct investment (FDI) and FII money comes from Mauritius. The market came off lows after the steep intraday slide in early trade on that day after reports later suggested that the government was not currently in talks with Mauritius to review the double tax avoidance treaty with Mauritius. The Sensex ended with a loss of more than 2% on that day as world stocks fell after European finance ministers delayed a decision to hand more bailout cash to Greece.



The India-Mauritius tax treaty provides that capital gains arising in India from the sale of securities can only be taxed in Mauritius, and since the island nation does not tax capital gains, it leads to zero taxation. Talks on the treaty were last held in 2008 but had failed following Mauritian government's insistence to continue with the existing agreement. India is estimated to lose over $600 million a year in revenues on account of the double tax avoidance treaty with Mauritius.

The barometer index BSE Sensex rose 370.15 points or 2.07% to 18,240.68 in the week ended Friday, 24 June 2011. The 50-unit S&P CNX Nifty rose 104.85 points or 1.95% to 5,471.25. But, the broad market depicted weakness. The BSE Small-Cap index tumbled 3.08% and the BSE Mid-Cap index fell 2.10%. Both these indices underperformed the Sensex.

The food price index rose 9.13% and the fuel price index climbed 12.84% in the year to 11 June 2011, data released by the government on Thursday showed. In the previous week, annual food and fuel inflation stood at 8.96% and 12.84% respectively. The primary articles price index was up 12.62% compared with an annual rise of 12.86% a week earlier.

The India Meteorological Department (IMD) revised downwards the forecast for the vital monsoon rains this year to slightly below normal from the normal forecast given in April 2011. On the flip side, crop output may not be adversely affected significantly due to the onset of the monsoon rains on time this year and expectations that the rains will be well distributed.

The seasonal rain was 11% above normal until 20 June. Most regions have so far received normal or above-normal rains except Gujarat, the largest cotton producer, and the northeastern region. In northern India, known as the country's grain-bowl region, the seasonal rainfall has so far touched only its peripheral parts in Uttar Pradesh state. The monsoon has advanced to half of the country and is expected to cover most regions by the first week of July.

Rainfall in July is considered crucial. Sowing of a number of crops starts in June and good July rains determine the soil moisture and ensure proper development of the crops planted in June.

Trading for the week began on a weak note. Key benchmark indices declined for the fourth straight day on Monday, 20 June 2011, to hit their lowest level in more than 18 weeks as world stocks fell due to uncertainty over a long-term fix for Greece's debt issues. The BSE Sensex was down 363.90 points or 2.04% to 17,506.63. The S&P CNX Nifty was down 108.50 points or 2.02% to 5,257.90.

Key benchmark indices eked out small gains in a volatile trading session on Tuesday, 21 June 2011, as world stocks rose on optimism that the Greek government would push through austerity measures to pave the way for a second bailout loan. The BSE Sensex rose 53.67 points or 0.31% to settle at 17,560.30. The S&P CNX Nifty was up 17.95 points or 0.34% to 5,275.85.

Key benchmark indices closed flat on Wednesday, 22 June 2011, after witnessing intraday volatility as European stocks and US index futures edged lower. The BSE Sensex shed 9.67 points or 0.06% to 17,550.63. The S&P CNX Nifty rose 2.45 points or 0.05% to 5,278.30.

Key benchmark indices surged on Thursday, 23 June 2011, as investors bought index pivotals such as Reliance Industries (RIL), ONGC, ICICI Bank, Larsen & Toubro and Infosys. Indian shares defied mostly lower global stocks on that day. The BSE Sensex rose 176.86 points or 1.01% to 17,727.49. The S&P CNX Nifty rose 41.70 points or 0.79% to 5,320.

Key benchmark indices galloped to settle near the day's highs on Friday, 24 June 2011, buoyed by firm world stocks. The BSE Sensex surged past the psychological 18,000 mark. The BSE Sensex rose 513.19 points or 2.89% to 18,240.68. The S&P CNX Nifty rose 151.25 points or 2.84% to 5,471.25.

Among the 30 Sensex shares, 23 gained and the rest declined.

India's largest two-wheeler maker by sales Hero Honda Motors was the biggest Sensex gainer last week. The stock jumped 7.85% to Rs 1866.15. The company's promoter group firm Hero Investments revoked 3.46 crore pledged shares in three tranches on 7, 8 and 10 June 2011. The promoter group firm revoked 1.19 crore shares each from IL&FS Trust Company and IDBI Trusteeship Services and 1.07 crore shares from Axis Trustee Services. Post the revocation, only about 6% of Hero Investments' stake in Hero Honda, which is 52 lakh shares, remain pledged. This works out to 2.6% of Hero Honda's equity.

India's largest dedicated mortgage lender by market capitalisation HDFC galloped 4.35% to Rs 666.95. The company kicks off the Q1 June 2011 results season on 8 July 2011.

India's largest tractor maker by sales Mahindra & Mahindra jumped 4.23% to Rs 672.20.

Software majors--Infosys (up 3.53%), Wipro (up 3.53%) and TCS (up 2.31%), rose after the industry body National Association of Software and Services Companies (Nasscom) president Som Mittal said that demand for outsourcing services remains strong.

Nasscom has reiterated a 16%-18% growth in export revenue for IT outsourcing services in this fiscal year that began on 1 April 2011. "We live in a world of uncertainties, but within that world there is a need for the kind of work we do," Mittal said. His comments come in the wake concerns recently of a cut in outsourcing demand due to a slowdown in the US economy and ongoing visa issues.

India's biggest engineering & construction firm in terms of outstanding order book Larsen & Toubro (L&T) rose 3.52% to Rs 1739. L&T's metallurgical & material handling unit has secured new orders aggregating Rs 1610 crore from Tata Steel, Indiabulls Power and other clients in Q1 June 2011. Further, L&T's building & factories unit, a part of construction division of the company, secured orders aggregating Rs 4100 crore in Q1 June 2011 for construction of airport expansion, hospital, commercial, residential buildings including factories.

Additionally, L&T's special purpose vehicle (SPV) signed a Rs 2600-crore concession agreement with National Highways Authority of India for four laning road project in the state of Rajasthan. The project is scheduled to be executed within a period of 30 months. With this project, L&T currently has 16 projects in its BOT road portfolio with a total project book size of Rs 15800 crore, L&T said.

India's largest listed telecom operator by sales Bharti Airtel rose 2.89% to Rs 391. The company signed up 2.45 million mobile subscribers in May 2011, taking its total subscriber base to 167.1 million.

Index heavyweight Reliance Industries (RIL) inched up 0.23% to Rs 870. The company has made another natural gas discovery in the D-9 block in the hydrocarbon rich Krishna Godavari (KG) basin. The resource potential of the block is estimated at 5.210 trillion cubic feet (tcf) by RIL's minority partner Hardy Oil. When extracted, a 5 tcf of gas is worth over $20 billion at current market prices, reports added.

The RIL stock had witnessed a sell-off recently following reports a government watchdog has accused the Oil Ministry for favouring RIL by allowing it to double the development cost of its KG-D6 gas field. The stock had hit a 52-week low of Rs 829 in intraday trade on Monday, 20 June 2011. As per recent reports, a draft report of the Comptroller and Auditor General of India (CAG) has questioned the decision of the oil ministry and its technical arm, the Director General of Hydrocarbons (DGH), to allow RIL to raise the development cost of RIL's KG-D6 field. RIL had said last week it has fully complied with the requirements in its production sharing contract at all times in conducting petroleum operations.

RIL's advance tax payment reportedly jumped 38.46% to Rs 900 crore in Q1 June 2011 over Q1 June 2010. Higher advance tax payment normally indicates higher profit for the period under review.

Anil Ambani-controlled Reliance Infrastructure (down 8.62% to Rs 530) and Reliance Communications (down 1.68% to Rs 94), declined after the Bombay Stock Exchange said it will remove Reliance Infrastructure and Reliance Communications from the BSE Sensex from 8 August 2011.

State-run coal giant Coal India and pharma major Sun Pharmaceutical Industries will replace Reliance Infrastructure (R-Infra) and Reliance Communications (RCom) in Sensex from 8 August 2011. With this, no Reliance Anil Dhirubhai Ambani (ADA) Group company will be present in the BSE Sensex. The two ADA group companies--R-Infra and RCom--along with Reliance Power and Reliance Capital, however, continue to be part of the National Stock Exchange's 50-unit Nifty index.

India's largest small car maker by sales Maruti Suzuki India fell 3.95% to Rs 1121 on concerns arising from intense competition in the small-car segment in India. Toyota Motor Corp.'s India unit on Wednesday, 22 June 2011, said it will introduce its Etios Liva small car on 27 June 2011. The Etios Liva will be "competitively priced" and has been positioned in the premium hatchback segment, Toyota Kirloskar Motor had said. The company had earlier postponed the introduction of the Etios Liva to June 2011 from April 2011 due to capacity constraints at its factories.

India's largest truck and bus maker by sales Tata Motors fell 1.65% to Rs 965. The company's advance tax reportedly fell 4.61% to Rs 62 crore in Q1 June 2011 over Q1 June 2010. Tata Motors' global vehicle sales rose 11% to 88,251 units in May 2011 over May 2010. Jaguar and Land Rover sales were up 17% to 22,296 units, driven by a 30% rise in Land Rover sales.