Market opens on a firm note as crude drop

Key benchmark indices edged higher in early trade on firm Asian stocks, which rose as European leaders voiced support for Greece and as a slump in energy prices eased concern the global recovery will falter. The BSE Sensex was up 135.52 points or 0.76%. The market breadth was strong. Index heavyweight Reliance Industries (RIL) advanced for the second day in a row. PSU OMCs jumped on a steep slide in crude oil prices and ahead of a meeting of the empowered group of ministers (EGoM) to discuss fuel prices.

At 09:25 IST, the BSE Sensex was up 135.52 points or 0.76% to 17,863.01. The Sensex jumped 163.51 points at the day's high of 17,891 in early trade, its highest level since 20 June 2011. The index rose 77.45 points at the day's low of 17,804.94 in early trade.



The S&P CNX Nifty was up 55.15 points or 1.04% to 5,375.15. The Nifty hit a high of 5,375.95 in early trade, its highest level since 20 June 2011.

The market breadth, indicating the overall health of the market, was strong. On BSE, 656 shares advanced while 212 shares declined. A total of 25 shares remained unchanged.

Among the 30-member Sensex pack, 27 stocks rose while the rest of them fell. State Bank of India, M&M and TCS rose by between 1.23% to 1.37%. Tata Power Company, Bhel and Maruti Suzuki India fell by between 0.15% to 0.66%.

Index heavyweight Reliance Industries (RIL) rose 0.5%, extending Thursday's 2.9% gains triggered by reports 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.

ONGC rose 2.02% on hopes its subsidiary sharing burden will reduce if the recent steep fall in oil prices is sustained or if the government raised fuel prices.

Shares of state-run oil marketing companies (PSU OMCs) -- HPCL, BPCL and Indian Oil Corporation jumped 2.78% to 4.26% on reports a meeting of the empowered group of ministers (EGoM), headed by finance minister Pranab Mukherjee is scheduled today, 24 June 2011, to discuss fuel prices. The oil ministry has reportedly sought a reduction in taxes on crude oil and fuel products and has demanded an increase in the prices of diesel and cooking fuels to help PSU OMCs reduce losses on selling fuel products at state-set discounted prices.

Incidentally, crude oil prices declined sharply in New York on Thursday, 23 June 2011, after the US and other members of the International Energy Agency unexpectedly said they would release 60 million barrels of oil onto world energy markets to counter production lost from Libya. The Indian government has been dithering on raising diesel and cooking gas prices, which was last increased a year ago.

On the macro front, 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) on Tuesday 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 IMD said this year's monsoon rains would be 95% of the long-term average overall, down from its earlier forecast of 98% and just short of the 96-104 percent range which counts as normal monsoon. India, one of the world's largest producers and consumers of crops such as rice, sugar and corn, relies heavily on the June to September monsoon for agricultural output.

Monsoon rains in July 2011 are likely to be 27 centimetres compared with 29 centimetres average over a 50-year period. For August 2011, rains are forecast to be 24 centimetres compared with a long-term average of 26 centimetres. The monsoon season brings about 70% of India's annual rainfall and is crucial for summer-sown crops such as rice, sugarcane, pulses, cotton and oilseeds as about 60% of the country's farmland is rain-fed. The rainfall forecast has been lowered because of weakening La Nina conditions, neutral temperatures over the Indian Ocean region and unfavorable North Atlantic pressure.

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.

Asian stocks climbed on Friday as European leaders voiced support for Greece and as a slump in energy prices eased concern the global recovery will falter. The key benchmark indices in China, Hong Kong, Indonesia, South Korea, Japan, and Singapore were up by between 0.36% to 1.55%. Taiwan's Taiwan Weighted Average fell 0.55%

Oil prices plunged in New York on Thursday after the US and other members of the International Energy Agency unexpectedly said they would release 60 million barrels of oil onto world energy markets to counter production lost from Libya.

Trading in US index futures indicated that the Dow could gain 44 points at the opening bell on Friday, 24 June 2011. The US Federal Reserve on Wednesday, 22 June 2011, reiterated that it was ending its $600 billion bond-buying program at the end of the month.

European Union leaders promised more money to help Greece stave off looming bankruptcy, provided its parliament enacts an austerity plan finalised in fraught last-minute talks with international lenders. Greek Prime Minister George Papandreou promised to push through radical economic reform after his new finance minister clinched agreement with EU and IMF inspectors on extra tax rises and spending cuts to plug a 3.8 billion euro funding gap.