Market recovers from 2-week trough

The key benchmark indices recovered as bargain hunting emerged after the market hit its lowest level in more than two weeks at the onset of the trading session. The barometer index BSE Sensex ended 2.51 points or 0.01% lower, up close to 145 points from the day's low and off close to 45 points from the day's high. Capital goods, consumer durables and infrastructure stocks gained. Metal stocks declined. Auto stocks rose on bargain hunting. The market breadth turned positive from negative in late trade. Index heavyweight Reliance Industries edged lower.



The market dropped in early trade, tracking weak Asian shares. The market extended losses in morning trade. The barometer index BSE Sensex and the 50-unit S&P CNX Nifty hit their lowest level in more than 2 weeks. The market trimmed losses in mid-morning trade. The intraday recovery gathered steam in early afternoon trade as the Sensex moved into positive zone. The market hit a fresh intraday high in afternoon trade. The market slipped into the red after moving between positive and negative terrain in mid-afternoon trade. The market continued to swing between positive and negative terrain in late trade.

The BSE Sensex lost 2.51 points or 0.01% to settle at 18,266.03, its lowest level since 30 May 2011. The Sensex rose 44.67 points at the day's high of 18,313.21 in afternoon trade. The index fell 147.78 points at the day's low of 18,120.76 in morning trade, its lowest level since 27 May 2011.

The S&P CNX Nifty was down 3 points or 0.05% to 5482.80, its lowest level since 30 May 2011. The Nifty hit low of 5,436.95 in intraday trade, its lowest level since 27 May 2011.

The BSE Mid-Cap index rose 0.28% and the BSE Small-Cap index gained 0.3%. Both these indices outperformed the Sensex.

The market breadth turned positive from negative in late trade. On BSE, 1,437 shares rose while 1,389 shares declined. A total of 115 shares were unchanged.

Among the 30-member Sensex pack, 17 stocks rose while the rest of them declined.

BSE clocked turnover of Rs 2472 crore, lower than Rs 2638.60 crore on Friday, 10 June 2011.

Index heavyweight Reliance Industries (RIL) declined 1.84% to Rs 926.65 on reports oil regulator DGH has refused to accredit three natural gas discoveries made by the company at its KG-D 6 block, where revival of the sagging output depends on production from new finds. Nevertheless, the stock came off the day's low of Rs 921.30. As per reports, the Directorate General of Hydrocarbons (DGH) has rejected D-30, D-31 and D-34 finds in the KGDWN-98/3 or KG-D 6 block as commercially exploitable discoveries on account of low reserves they may hold.

Meanwhile, RIL has agreed to buy Bharti Enterprises' stake in its general insurance and life insurance ventures with France's AXA S.A. for an undisclosed amount. Reliance Industries and its unit, Reliance Industrial Infrastructure, will buy Bharti's 74% stake in the two ventures, subject to negotiations with AXA and approvals from India's insurance regulator. AXA will retain its 26% stake and continue to manage the operations of the ventures. Indian rules limit foreign holdings in insurance companies at 26%. Reliance Industries said AXA has the option to buy up to 24% more in the two ventures when local rules permit.

PSU OMCs gained after oil minister S Jaipal Reddy said a panel of ministers will meet shortly to discuss a possible hike in diesel, cooking gas and kerosene prices. BPCL, HPCL and Indian Oil Corporation rose by between 1.52% to 2.71%. Higher fuel prices will reduce under-recoveries of PSU OMCs on domestic sale of diesel, LPG and kerosene at government controlled prices. The government has already freed pricing of petrol.

Capital goods stocks rose on renewed buying. Larsen & Toubro, Bhel, ABB, Praj Industries and Punj Lloyd rose by between 0.28% to 7.59%.

Some Infrastructure stocks edged higher on bargain hunting after heavy losses over the past few months. IRB Infrastructure, Jaiprakash Associates, Unity Infrastructure and Patel Engineering rose by between 1.67% to 4.8%.

Metal stocks extended recent losses as weaker-than-expected Chinese bank lending data for May 2011 raised concerns about slowdown of Chinese economy. Hindalco Industries, Tata Steel, Nalco, Sail, Jindal Steel & Power and JSW Steel fell by between 0.59% to 2.22%.

China is the world's largest consumer of copper and aluminum. LMEX, a gauge of six metals traded on the London Metal Exchange, declined 1.41% on Friday, 10 June 2011. China is due to release data on inflation for May 2011 tomorrow, 14 June 2011.

Most auto stocks rose on bargain hunting after recent losses. Bajaj Auto rose 1.25% after Finance Secretary Sunil Mitra said the government has extended the popular tax refund scheme offered to exporters viz. the Duty Entitlement Pass Book scheme until 30 September 2011. The Bajaj Auto scrip had lost 3.38% last week to settle at Rs 1,325.50 on Friday, 10 June 2011, on concerns the firm's earnings will be impacted adversely if the government did not extend the Duty Entitlement Pass Book (DEPB) scheme beyond 30 June 2011, the original deadline for the end of the scheme.

Bajaj Auto is among one of leading exporters which avail benefit under the popular DEPB scheme. At a conference call held at the time of announcing Q4 March 2011 results last month, Bajaj Auto's management had said that Bajaj Auto usually receives export incentive of 10% of revenue together from DEPB and FPS. Under DEPB, the company receives export incentive at 9% while under Focused Product/Market Sales at 2.5-3%.

The DEPB scheme is part of incentives provided by the government to Indian exporters under which they can avail of a pre-determined credit on the free-on-board value of shipments. After the expiry of this scheme there will be only one kind of tax refund plan available to exporters, Mitra said today, 13 June 2011.

Maruti Suzuki India fell 0.17% in volatile trade. The company's management is reportedly willing to recognize a new trade union as sought by the agitating workers at the company's Manesar, Haryana plant. Nearly 2,000 workers at Maruti's factory at Manesar have struck work since early this month demanding recognition of their union, Maruti Suzuki Employees Union. Maruti currently has only one management-recognized union, Maruti Udyog Kamgar Union. Maruti had suspended 11 striking workers on 6 June 2011, citing "indiscipline."

The strike is causing Maruti a daily revenue loss of Rs 40 crore or a production loss of 1,200 vehicles. Maruti produces cars such as the Swift and A-Star hatchbacks as well as the mid-sized Swift Dzire and SX4 at Manesar.

Mahindra & Mahindra (M&M) rose 0.3%. The company's auto sales rose 20% to 34,323 units in May 2011 over May 2010. The figures were announced on 1 June 2011. Speaking on the May 2011 sales numbers, Rajesh Jejurikar, CEO, Automotive Division, M&M, said, "We are happy with the 20% growth that we have clocked in May 2011. All our brands have been doing well, with the recently launched Verito having sold 1,290 vehicles, almost three times last May".

India's biggest motorcycles maker by sales, Hero Honda Motors gained 0.93%, reversing initial losses.

India's largest truck and bus maker, Tata Motors shed 0.68%, extending recent losses triggered by weak sales in May 2011.

Most realty stocks fell as higher interest rates could dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance. Indiabulls Real Estate, HDIL, DLF, D B Realty and Ackruti City shed by between 0.37% to 2.42%.

Telecom stocks edged higher. RCom and Bharti Airtel rose by between 0.94% to 1.78%.

Cement shares reversed initial losses. ACC, Ambuja Cements, and UltraTech Cement rose by between 0.24% to 3.18%.

Banking stocks were mixed. Axis Bank, ICICI Bank, HDFC Bank, Bank of Baroda and Union Bank of India rose by between 0.09% to 1.08%. State Bank of India, Bank of India, and Punjab National Bank fell by between 0.67% to 1.2%.

IT bellwether Infosys rose 0.56%, reversing initial losses. In a re-structuring of the board at Infosys, V. Balakrishnan, chief financial officer, B.G. Srinivas, senior vice president and head, manufacturing, and Ashok Vemuri, senior vice president and head, banking and capital markets, have been appointed as executive directors. Ann Fudge, a non-executive director at Unilever, Novartis AG and General Electric Company has been appointed as additional independent director. In April, the company had announced that its chief mentor N R Narayana Murthy will quit the position of company chairman on the day he turns 65 in August this year. He is being succeeded by K V Kamath who will take over as the chairman.

India's largest software services exporter TCS declined 1.1%. The company recently said Ahli Brokerage QSC has selected the company's TCS BaNCS product to extend its brokerage footprint in the Middle East.

India's third largest software exporter Wipro fell 0.49%. The company recently said that the Jammu and Kashmir state government has selected the company for automating its state power distribution department.

Airline stocks gained as a fall in crude oil prices eased concerns about the impact of high jet fuel prices on operating costs. Jet Airways, Kingfisher Airlines and SpiceJet rose by between 0.29% to 2.79%. Jet fuel prices are linked to crude oil prices. Jet fuel constitutes 40% of the operating cost for airliners.

Cals Refineries clocked highest volume of 2.67 crore shares on BSE. Sanraa Media (1.64 crore shares), Nova Iron (1.47 crore shares), Delta Corp (86.37 lakh shares) and Punj Lloyd (73.10 lakh shares) were the other volume toppers in that order.

Lovable Lingerie clocked highest turnover of Rs 116.21 crore on BSE. State Bank of India (Rs 93.49 crore), Delta Corp (Rs 86.11 crore), Titan Industries (Rs 77.84 crore) and Aanjaneya Lifecare (Rs 61.48 crore) were the other turnover toppers in that order.

On the political front, the DMK on Friday, 10 June 2011, decided not to snap ties with the ruling coalition at the Centre and the partly decided to legally fight the 2G scam cases being faced by its top leaders. Party chief M Karunanidhi said the party's general council would meet in July to decide on political ties.

On the macro front, industrial output grew 6.3% in April 2011 from a year earlier, according to a new index released by the government on Friday, 10 June 2011. Industrial production had risen 7.3% in March 2011 according to the earlier index. The pace of growth under the new index is far quicker than the 3.65% increase in February 2011 and 3.95% rise in January 2011. The readings for January and February are based on the old index. The latest data under the new index also showed that manufacturing output rose 6.9% in April 2011 from a year earlier.

The government unveils data on headline inflation for May 2011 on Tuesday, 14 June 2011. Economists expect inflation at 8.7% in May 2011 according to a poll carried out by Capital Market, much above the Reserve Bank of India's (RBI) perceived comfort level of about 5%. The RBI is seen raising its key-lending rate by 25 basis points at its mid-quarter monetary policy review on 16 June 2011 to tame inflation.

European shares edged higher on Monday, 13 June 2011, on bargain hunting after previous week's sell-off. The key benchmark indices in France, Germany and UK were up by 0.16% to 0.37%.

Asian stocks though weak were off the day's lows. South Korea's Kospi was up 0.1% and Hong Kong's Hang Seng was up 0.39%. The key benchmark indices in Singapore, Taiwan, Indonesia and China were down by between 0.16% to 1.41%. Japan's Nikkei Average dropped 0.7% after Japan's machinery orders fell in April, missing economist forecasts for a gain.

Trading in US index futures indicated that the Dow could gain 41 points at the opening bell on Monday, 13 June 2011. In the US this week, key data releases include retail sales, consumer price index inflation, industrial production and manufacturing surveys.

The Federal Reserve's second round of quantitative easing or QE2, a temporary policy designed to increase the money supply, keep interest rates low and stimulate the economy, ends on 30 June 2011. A section of the market has been speculating about the possibility of a third quantitative easing program by the Fed after the current one expires in June 2011.