Sensex vaults 6.5% in five days as FIIs resume buying

Key benchmark indices extended their winning streak to the fifth day to attain their highest closing level in more than eight weeks as world stocks rose, buoyed by hopes that the Greek parliament will vote in favor of additional austerity measures. The BSE Sensex jumped 201.41 points or 1.09%, up about 140 points from the day's low and off close to 20 points from the day's high. The market breadth was strong. Recent aggressive buying by foreign funds underpinned sentiment.

FMCG stocks rose with ITC, Hindustan Unilever (HUL), Colgate and Marico hitting record highs. Consumer durables stocks also gained. Index heavyweight Reliance Industries (RIL) extended intraday gains in late trade. Metals stocks rose as prices of base metals rose on the London Metal Exchange. Steel giant Tata Steel rose more than 2% after the company's managing director Hemant Nerurkar said operating profit at the company's European unit will rise by two-thirds of its current level to $100 a metric tonne over the next three years. Bank stocks extended recent gains.



The market opened on a firm note tracking higher Asian shares. A bout of volatility was witnessed as the key benchmark indices regained strength after paring gains from 3-1/2-week highs in morning trade. The Sensex surged to 6-1/2-week high in mid-morning trade. The market trimmed gains in early afternoon trade. A bout of volatility was witnessed in afternoon trade as the key benchmark indices pared gains after hitting fresh intraday highs. The market held firm in mid-afternoon trade. The market surged to fresh intraday high in late trade.

Foreign institutional investors (FIIs) bought shares worth a net Rs 1016.70 crore on Tuesday, 28 June 2011, on the top of a heavy inflow of Rs 1790.90 crore on Monday, 27 June 2011. FII inflow in June 2011 totaled Rs 3800.40 crore (till 28 June 2011). FIIs had offloaded shares worth a net Rs 6614.40 crore in May 2011. FII inflow in calendar 2011 totaled Rs 1898.50 crore (till 28 June 2011).

The market may remain volatile in the near term as traders roll over positions in the derivatives segment from June 2011 series to July 2011 series. The near-month June 2011 derivatives contracts expire on Thursday, 30 June 2011.

The BSE Sensex jumped 201.41 points or 1.09% to 18,693.86, its highest closing level since 2 May 2011. The Sensex advanced 222.94 points at the day's high of 18,715.39 in late trade. The index rose 59.74 points at the day's low of 18,552.19 in early trade.

The S&P CNX Nifty was up 55.15 points or 0.99% to 5,600.45, its highest closing level since 2 May 2011. The Nifty hit high of 5,608.65 in intraday trade.

The BSE Mid-Cap index rose 0.78% and the BSE Small-Cap index gained 0.95%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 3073 crore, higher than Rs 2824.01 crore on Tuesday, 28 June 2011.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,804 shares advanced while 1,062 shares declined. A total of 119 shares remained unchanged.

Among the 30-member Sensex pack, 23 stocks rose while the rest of them fell.

Index heavyweight Reliance Industries (RIL) rose 1.69% to Rs 885.30, off the day's low of Rs 871.55. 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.

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 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 clarified that it has fully complied with the requirements in its production-sharing contract at all times in conducting petroleum operations.

State-run ONGC fell 2.13% and was the top loser from the Sensex pack on reports the company's board has approved a follow-on public offer (FPO). The company will file papers with the market regulator for the FPO after it gets the greenlight from the government. The company expects to launch the offer in July 2011.

Bank stocks extended recent gains. India's largest commercial bank by branch network State Bank of India (SBI) rose 1.81%, with the stock gaining for the fifth straight day. The bank's advance tax reportedly rose 29.41% to Rs 1100 crore in Q1 June 2011 over Q1 June 2010.

India's largest private sector bank by net profit ICICI Bank gained 0.38%, with the stock gaining for the sixth straight day. The bank aims to grow its loan book by 18%-20% in the current financial year, its chief financial officer N.S. Kannan, said in an interview on Monday, 27 June 2011.

India's second largest private sector bank by net profit HDFC Bank added 2.65%, with the stock gaining for the fifth straight day. The bank's advance tax reportedly rose 26.98% to Rs 400 crore in Q1 June 2011 over Q1 June 2010.

Some realty stocks rose on bargain hunting. HDIL, Ackruti City, Indiabulls Real Estate and Unitech rose by between 0.48% to 2.1%.

The ASK Group has reportedly raised Rs 520 crore through the first close of its second real-estate fund. The fund will invest in urban and suburban projects up to 12 months ahead of the projects' launch.

Consumer durables stocks edged higher on renewed buying. Blue Star, Videocon Industries, Gitanjali Gems and Rajesh Exports rose by between 1.28% to 2.5%.

FMCG stocks rose across the board. India's largest cigarette maker by sales ITC was up 2.79% to Rs 199.25. The stock hit a record high of Rs 199.75.

India's largest FMCG company by sales Hindustan Unilever was up 2.72% to Rs 332.20. The stock hit a record high of Rs 334.40.

Among other FMCG stocks, United Spirits, Colgate, Dabur India, Nestle India and Marico gained by between 0.14% to 7.5%.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange, gained 1.05% on Tuesday, 28 June 2011. Sterlite Industries, Hindalco Industries, Nalco, Sesa Goa, Hindustan Zinc, and Jindal Steel & Power rose by between 0.21% to 3.45%.

India's largest steel maker by sales Tata Steel gained 2.38% after the company's managing director Hemant Nerurkar on Tuesday, 28 June 2011, said operating profit at the company's European unit will rise by two-thirds of its current level to $100 a metric tonne over the next three years. Tata Steel Europe generates earnings of $60 per tonne before interest, tax, depreciation and amortization at present. Nerurkar said higher operating margin at the European unit will be driven by increase in value-added products and control over costs.

Reliance Infrastructure jumped 2.38%. According to reports, the Worli-Haji Ali sea link project in Mumbai bagged by the company's subsidiary Reliance Sea Link One (RSLOP) has hit a road-block. The Maharashtra state government and the Maharashtra State Road Development Corporation (MSRDC) are yet to confirm the availability of viability gap funding of Rs 1390 crore, making available space for casting yard at the site, execution of state support agreement and issuance of toll notification.

The project is caught in red tape due to the conflict between the state government and MSRDC regarding the funding of Rs 1390 crore. The cash-strapped MSRDC has been requesting to the state government since June 2010 for providing this amount for payment to RSOPL. But, the state government has refused the MSRDC's proposal of releasing Rs 1390 crore towards viability gap funding citing that the grant amount is very high. Instead, the state government has asked MSRDC to explore options to reduce the viability-gap funding by altering a project scope including reduction in the lanes from eight to four, development of coastal road instead of sea link and phasing of the Worli-Haji Ali sea project, reports suggest.

Auto stocks rose for the third straight day as the recent hike in diesel price of Rs 3 per litre was lower than market expectations of a hike of Rs 4 per litre. The government late last week announced a hike in the price of diesel by Rs 3 a litre, kerosene Rs 2 a litre and cooking gas by a steep Rs 50 a cylinder.

India's largest truck and buses maker, Tata Motors gained 1.48%, with the stock gaining for the fourth straight day. As per recent reports, the Supreme Court has ordered the West Bengal state government not to proceed with the distribution of land to farmers who sold their plots to allow Tata Motors to set up a manufacturing facility in the town of Singur. It may be recalled that the Calcutta High Court had refused to stay a law enacted by the West Bengal state government to take over 997.17 acres of land allotted to Tata Motors to build a facility to manufacture the Nano, the world's cheapest passenger car. Tata Motors therefore moved Supreme Court.

The Tata Motors stock was under pressure recently on reports of lower advance tax payment by the auto major. Tata Motors' advance tax reportedly fell 4.61% to Rs 62 crore in Q1 June 2011 over Q1 June 2010.

India's top small car maker by sales Maruti Suzuki India rose 1.59%, with the stock gaining for the fourth straight day. The stock was under selling pressure recently on concerns arising from intense competition in the small-car segment. The stock had hit 52-week low of Rs 1,087.15 in intraday trade on 24 June 2011.

Toyota Motor Corp. on Monday entered India's small-car market with the Etios Liva. The new car will supplement the Etios sedan, which was introduced in December, and will compete with industry leader Maruti Suzuki India's Swift, Ford's Figo, Volkswagen's Polo and Hyundai's i20 hatchback models.

Hero Honda Motors rose 0.28%, recovering from last two days' losses. The stock had surged 6.07% on Friday, 24 June 2011, after the company said its promoter group firm Hero Investments revoked 3.46 crore pledged shares. Hero Honda Motors said 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.

Tractor and utility vehicles maker Mahindra & Mahindra (M&M) fell 0.27%, snapping six days' gains. The company's advance tax reportedly rose 42.85% to Rs 90 crore in Q1 June 2011 over Q1 June 2010.

Bajaj Auto fell 1.32% as the stock turned ex-dividend today, 29 June 2011, for dividend of Rs 40 per share for the year ended March 2011.

Automobile firms will start releasing monthly sales volume data for June 2011 from Friday, 1 July 2011.

IT stocks gained across the board on renewed buying. TCS, Infosys and Tech Mahindra rose by between 0.62% to 1.8%. Wipro rose 0.31%. The stock turned ex-dividend today, 29 June 2011, for dividend of Rs 4 per share for the year ended March 2011.

Sugar shares rose on reports the government on Tuesday, 28 June 2011, issued a formal order allowing export of additional 5 lakh tonnes of sugar. Shree Renuka Sugars, Balrampur Chini Mills and Bajaj Hindusthan gained by between 4.27% to 8%.

Footwear makers rose on a recent slide in rubber prices which could help improve profit margins if lower prices are sustained. Bata India, Liberty Shoes and Relaxo Footwear gained by between 5.97% to 9.23%.

Lanco Infratech clocked highest volume of 2,3 crore shares on BSE. Cals Refineries (1.21 crore shares), Timbor Home (1.16 crore shares), GTL (85.21 lakh shares) and Birla Cotsyn (79.11 lakh shares) were the other volume toppers in that order.

Orissa Minerals clocked highest turnover of Rs 98.69 crore on BSE. Timbor Home (Rs 98.55 crore), Jubilant FoodWorks (Rs 90.55 crore), Financial Technologies (Rs 87.65 crore) and GTL (Rs 81.50 crore) were the other turnover toppers in that order.

The market has witnessed a strong rally recently on the back of resumption of buying by foreign funds. The BSE Sensex has risen 1,143.23 points or 6.5% in five trading sessions from a recent low of 17,550.63 on 22 June 2011. The substantial inflow from FIIs recently followed a sustained outflow earlier.

Expectations for Q1 June 2011 results will start building as the first quarter draws towards a close. Housing finance major HDFC kicks off the results season on 8 July 2011. IT bellwether Infosys Technologies will unveil Q1 results on 12 July 2011.

A hike in transportation costs will add to cost pressure of India Inc. As per reports, freight rates have gone up by 8% to 9% with immediate effect on all routes across India following the latest hike in diesel prices.

As per reports, capital expenditure projects worth a whopping Rs 8 lakh crore are expected to be completed in the year ending March 2012 (FY 2012). Many of these projects have rolled over from the previous year, reports added.

Meanwhile, the recent hike in diesel and LPG prices will also add to inflationary pressure in the economy. 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 23 June 2011 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.

At a meeting with five editors Prime Minister Manmohan Singh today, 29 June 2011, dismissed allegations that he is a lameduck Prime Minister as "clever propaganda" by the Opposition. With regard to the much-anticipated Cabinet reshuffle, which is expected to get rid of under-performing ministers, the PM said the exercise is "a work in progress" but refused to indicate when it would take place. When asked about recent comments by some of the party leaders that Rahul Gandhi is ready to be the prime minister, Dr Singh said that he doesn't mind handing over leadership to younger person, "but the question has not been put on the agenda or raised by the party".

Dr Singh said he has no hesitation in bringing the Prime Minister of the country under the purview of Lokpal Bill. He added that many of his Cabinet colleagues feel that bringing the institution of Prime Minister under Lokpal Bill will create instability.

US Treasury Secretary Timothy Geithner on Tuesday, 28 June 2011, said India's economic growth continues to hold "untapped potential" for US firms. Changes to India's banking and insurance systems, as well as manufacturing and infrastructure development, will benefit both countries, Geithner said at the close of bilateral talks between the two countries in Washington.

Geithner said the two sides discussed ways to allow foreign investors to make inroads in India's pensions, insurance and banking sectors. He noted that the two sides have agreed to restart, at a technical level, talks on a bilateral investment treaty. Finance Minister Pranab Mukherjee said India plans to raise $1 trillion in infrastructure financing over the next five years.

European equity markets rose Wednesday, buoyed by hopes that later in the session the Greek parliament will vote in favor of additional austerity measures. Key benchmark indices in UK, France and Germany were up by 1.47% to 1.81%.

The Greek parliament conducts a two-day session of parliament on key austerity measures beginning today, 29 June 2011. Greece is required to slash spending in order to receive its next round of assistance funds.

Asian shares rose on Wednesday, 29 June 2011, ahead of a vote in the Greek parliament that investors hope will approve an austerity program demanded by international lenders. The key benchmark indices in Indonesia, Japan, Singapore, South Korea and Taiwan were up by between 0.44% to 1.53%. China's Shanghai Composite fell 1.11%. Hong Kong's Hang Seng was flat.

Trading in US index futures indicated that the Dow could gain 66 points at the opening bell on Wednesday, 29 June 2011. The US Federal Reserve has decided to end its $600 billion bond-buying program at the end of this month, as per schedule.