Banking, realty shares advance in volatile market

Key benchmark indices closed marginally higher, giving up strong intraday gains as euro-zone debt worries resurfaced and after Moody's warned on Wednesday, 13 July 2011, that the United States may lose its top credit rating. US is the world's biggest economy. The BSE Sensex was up 22.18 points or 0.12%, off close to 185 points from the day's high and up close to 170 points from the day's low.

Bajaj Auto dropped as first quarter growth at the two-wheeler maker fell short of market expectations. Index heavyweight Reliance Industries (RIL) ended flat after intraday swings. Interest rate sensitive banking and realty shares rose after Chief Economic Adviser Kaushik Basu said wholesale price index-based inflation rate may ease to a little above 6% by March 2012. Metal shares extended Wednesday's gains triggered by strong macroeconomic data in China. IT stocks declined. TCS dropped ahead of Q1 results. The market breadth was positive.



The market edged lower in early trade reacting to three serial bomb blasts in Mumbai on Wednesday evening. A bout of volatility was witnessed as the key benchmark indices trimmed losses after hitting fresh intraday lows in morning trade. The market further trimmed intraday losses in mid-morning trade. The market moved into positive zone in early afternoon trade. The market surged in afternoon trade. The market trimmed gains after hitting fresh intraday high in mid-afternoon trade. High volatility was witnessed in late trade as the key benchmark indices gave up strong intraday gains.

The BSE Sensex was up 22.18 points or 0.12% to 18,618.20, its highest closing level since 11 July 2011. The Sensex jumped 207.03 points at the day's high of 18,803.05 in mid-afternoon trade. The index shed 146.79 points at the day's low of 18,449.23 in early trade, its lowest level since 12 July 2011.

The S&P CNX Nifty was up 14.35 points or 0.26% to 5599.80, its highest closing level since 11 July 2011. The Nifty hit a high of 5,653.95 in intraday trade, its highest level since 8 July 2011.

The BSE Mid-Cap index rose 0.38% and the BSE Small-Cap index gained 0.18%. Both these indices outperformed the Sensex.

The market breadth was positive. On BSE, 1,601 shares advanced and 1,234 shares declined. A total of 136 shares remained unchanged. The breadth was negative at the onset of the trading session.

Among the 30-member Sensex pack, 18 stocks rose while the rest of them fell.

BSE clocked turnover of Rs 2768 crore, higher than Rs 2578.92 crore on Wednesday, 13 July 2011.

Index heavyweight Reliance Industries (RIL) rose 0.27% to Rs 866.90. The stock was volatile. The stock hit high of Rs 878 and low of Rs 859.05. As per reports, the Cabinet Committee on Economic Affairs (CCEA) is unlikely to discuss at a meeting scheduled today, 14 July 2011, RIL's proposal to sell a stake in its oil and gas fields to BP PLC. Earlier, there were reports that the CCEA will clear the deal this week.

In February, RIL agreed to sell a 30% stake in 23 oil and gas blocks in India for $7.2 billion plus another $1.8 billion linked to exploration success. RIL intends to use BP's deepwater-drilling expertise to resolve gas-production problems at its key gas fields in KG basin where the company has reported a fall in output in recent months.

Bajaj Auto declined 1.25% as first quarter growth at the two-wheeler maker fell short of market expectations. The company announced during market hours today that net profit rose 20.48% to Rs 711.06 crore on 22.8% increase total operating income to Rs 4777 crore in Q1 June 2011 over Q1 June 2010. Both revenue growth and net profit growth lagged market expectations. According to a poll of 6 brokerages carried out by Capital Market, Bajaj Auto's net profit was expected to rise 24.6% to Rs 735.50 crore on 25.2% growth in total operating income to Rs 4870.90 crore in Q1 June 2011 over Q1 June 2010.

Bajaj Auto said there was a marked increase in cost of raw materials and components in Q1 June 2011. Material as a percentage of operating income rose to 72.6% in Q1 June 2011 from 71.2% in Q1 June 2010. Despite these inflationary pressures, higher volumes and focus on high-end motorcycles enabled the company to declare an operating EBITDA margin of 19.1% in Q1 June 2011-- the best in the industry, Bajaj Auto said in a release.

Mahindra & Mahindra fell 0.78% at Rs 712.95 after the stock turned ex-dividend today, 14 July 2011, for dividend of Rs 11.50 per share for the year ended March 2011. Mahindra & Mahindra (M&M) had declared a final dividend of Rs 10.50 per share for the year ended March 2011 (FY 2011). Additionally, the company had declared a special dividend of Rs 1 per share for FY 2011 in view of the profit made by the company on the sale of its entire holdings of Owens Coming (India).

India's largest bike maker by sales Hero Honda Motors fell 1.09%. The company, early this month, reported 20.12% jump in sales at 5.12 lakh units in June 2011 over June 2010. "This is the first time the company has sold five lakh-plus units in each of the three months of a quarter. Sequentially, this is the fourth consecutive month of five lakh-plus sales for the company," Hero Honda had said in a statement recently.

India's largest small car maker by sales Maruti Suzuki India rose 1.2%, extending Wednesday's 1.25% gain triggered by reports the Japanese parent Suzuki Motor Corp is considering a plan to raise its stake in the company by 5% through open-market purchases over a year. The report said Suzuki will likely buy the stake from financial institutions via block deals on the stock exchanges. Suzuki Motor Corp holds 54.21% stake in Maruti Suzuki India (as at end 30 June 2011).

India's largest truck maker by sales Tata Motors rose 1.95%, reversing initial losses.

Reliance Communications' (RCom's) declined 1.42% on reports the company's deal to buy cable operator Digicable has come under the scanner of the information & broadcasting (I&B) ministry over the issue of cross-holding rules.

India's largest listed cellular services provider by sales Bharti Airtel rose 0.55%, extending Wednesday's 1.72% gain triggered by reports the company is considering raising up to $1 billion through an initial public offering (IPO) of its mobile tower arm Bharti Infratel. Bharti Infratel deploys, owns and manages passive infrastructure in 11 telecom circles in India. It also holds 42% share in Indus Towers (a joint venture between Bharti, Vodafone and Idea). Indus Towers is the world's top telecom tower firm with more than 1,10,000 towers.

IT stocks witnessed selling pressure after Moody's Investors Service said it may cut United States' triple-A rating. US is the key market for Indian IT firms. Infosys Technologies lost 1.55%, with the stock extending losses for the third straight day on disappointing Q1 June 2011 results. Consolidated net profit as per International Financial Reporting Standards fell 5.3% to Rs 1722 crore on 3.2% growth in revenue to Rs 7485 crore in Q1 June 2011 over Q4 March 2011. The result was announced before trading hours on Tuesday, 12 July 2011.

India's third largest software services exporter Wipro shed 0.59%. The firm declares its Q1 June 2011 results on 20 July 2011.

IT giant TCS declined 2.23%, reversing initial gains ahead of the company's Q1 June 2011 results today, 14 July 2011. The stock was the top loser from the Sensex pack.

HCL Technologies fell 0.84%. Eli Lilly, a global pharmaceutical corporation and HCL Technologies today, 14 July 2011, announced the opening of a Co-Innovation Lab in Singapore for developing novel technologies and improve operational efficiencies to enhance Eli Lilly's global competitiveness. This unique collaboration, the first globally for both companies, will accelerate the process of bringing ideas to fruition by leveraging this Co-Innovation lab and HCL's wider collaborative Ecosystem, using new disruptive technologies and solutions, and through rapid development of Proof of Concept (PoCs), HCL Tech said in a release.

Interest rate sensitive banking and realty stocks rose after Chief Economic Adviser Kaushik Basu said wholesale price index-based inflation rate may ease to a little above 6% by March 2012. Among realty stocks, Phoenix Mills, Housing Development & Infrastructure (HDIL), Indiabulls Real Estate, and Unitech rose by between 0.93% to 3.98%.

India's largest real estate by sales DLF rose 3.15%, extending Wednesday's 2.95% gain triggered by reports HCL Group is in advanced discussions with the company to acquire a substantial stake in DLF Pramerica Life Insurance Company for about Rs 450 crore in a two-phase transaction. It was the top gainer from the Sensex pack.

From the banking space, India's largest commercial bank by branch network State Bank of India (SBI) rose 1.39% to Rs 2466.40. The stock came off the day's low of Rs 2414. SBI recently raised base rate by 25 basis points (bps) from 9.25% per annum to 9.50% per annum. The bank has revised the Benchmark Prime Lending Rate upwards by 25 bps from 14% to 14.25%. The bank has also revised upwards deposit rates on some maturities by up to 100 basis points.

India's largest private sector bank by net profit ICICI Bank rose 1.4% to Rs 1068.90, off the day's low of Rs 1046.90. ICICI Bank raised its base rate by 25 basis points to 9.5% per annum with effect from 4 July 2011. The private sector bank also raised its benchmark prime lending rate (BPLR) and its floating reference rate (FRR) for consumer loans, including home loans. BPLR and FRR are used for determining interest rates on loans and advances sanctioned up to 30 June 2010.

India's second largest private sector bank by net profit HDFC Bank rose 0.55% to Rs 505.90. A 5-for-1 stock split of HDFC Bank took effect from today, 14 July 2011.

Most mining and metal stocks reversed initial losses as LMEX, a gauge of six metals traded on London Metal Exchange, rose 2.16% on Wednesday, 13 July 2011. Tata Steel, Sterlite Industries, JSW Steel, Hindustan Zinc, National Aluminium Company, Sesa Goa and Jindal Steel and Power gained by between 0.15% to 3.64%.

Some capital goods stocks rose on renewed buying. Larsen & Toubro, Punj Lloyd, BEML and ABB gained by between 0.35% to 0.86%.

Reliance Power was down 0.43% to Rs 116.45, recovering from the day's low of Rs 115.40. The company said today that its 8000 megawatts of power projects in Madhya Pradesh are on schedule. The company added that it is proceeding ahead with the implementation of its projects as per schedule.

FMCG stocks fell on profit taking. Nestle India, ITC, and Marico shed by between 0.07% to 2.1%.

Fertiliser shares rose, extending their recent gains on buzz the government is considering changes in the urea policy. Urea is the only fertiliser that remains under full price control after the government partially freed the prices of phosphatic and potash fertilisers at the beginning of the previous fiscal. GNFC, GSFC, Tata Chemicals and Chambal Fertiliser & Chemicals rose by between 0.26% to 1.92%.

Cement stocks rose as cement dispatches are likely to pick up post monsoons due to acceleration in construction activities with current year being the last year of the eleventh five-year plan period. Jaiprakash Associates, ACC, Ambuja Cements and UltraTech Cement rose by between 0.2% to 2.39%.

Cals Refineries clocked highest volume of 2.37 crore shares on BSE. Rushil Decor (1.34 crore shares), SpiceJet (1.05 crore shares), Development Credit Bank (75.52 lakh shares) and Readymade Steel (74.70 lakh shares) were the other volume toppers in that order.

Rushil Decor clocked highest turnover of Rs 210.04 crore on BSE. Power Finance Corporation of India (Rs 96.44 crore), State Bank of India (Rs 95.60 crore), Infosys (Rs 74.59 crore) and Rural Electric Corporation (Rs 66.02 crore) were the other turnover toppers in that order.

As the crucial corporate earnings season has begun, investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs. 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% on all routes across India following the recent hike in diesel prices.

HDFC Bank, Ashok Leyland and Crompton Greaves report Q1 results on 19 July 2011. Wipro, Dr Reddy's Lab and Exide Industries are set to announce Q1 results on 20 July 2011. Zee Entertainment Enterprises, JSW Energy, Biocon, Hero Honda, Hindustan Zinc and Kotak Mahindra Bank unveil Q1 results on 21 July 2011. Private sector bank Axis Bank reports Q1 results on 22 July 2011. Godrej Consumer Products reports Q1 earnings on 23 July 2011. Sterlite Industries and Rural Electrification Corporation will announce Q1 results on 25 July 2011.

Car major Maruti Suzuki, steel major JSW Steel, decorative paints major Asian Paints and Shriram Transport Finance Company are set to unveil Q1 results on 26 July 2011. Bank of Baroda, Infrastructure Development Finance Company (IDFC) and Lupin unveil Q1 results on 27 July 2011. State-run oil exploration giant ONGC and cement major Ambuja Cements unveil results on 28 July 2011. ICICI Bank, Power Finance Corporation and TVS Motor unveil Q1 results on 29 July 2011. M&M announces Q1 results on 8 August 2011. ABB announces Q2 results on 9 August 2011. Tata Power unveils Q1 results on 10 August 2011. Hindalco unveils Q1 results on 12 August 2011.

On the macro front, the latest government data showed that wholesale price index (WPI) rose an annual 9.44% in June 2011, driven by higher manufactured goods and fuel prices. The rate of rise in inflation was lower than market expectation of a 9.7% rise. The inflation figure for April 2011 was revised upwards to 9.74% compared to 8.66% reported earlier.

The government is working with the Reserve Bank of India (RBI) to bring down inflation, finance minister Pranab Mukherjee said in a statement on Thursday. Mukherjee also said that June inflation data was a matter of concern and he was monitoring the price situation closely. Mukherjee said an increase in fuel prices, seasonal effects and an upward movement in prices of minerals as well as manufactured products were driving inflation.

The Reserve Bank of India (RBI) is seen raising its key lending rate by another 25 basis points at its first quarter review of the monetary policy 2011-12 on 26 July 2011.

Industrial output in May 2011 rose a slower-than-expected 5.6% from a year earlier, government data showed on Tuesday. April's industrial output growth was revised downwards to 5.8% from 6.3%. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 5.6% in May 2011, compared with a revised 6.3% growth a month earlier.

Key monsoon rains were 19% below normal in the week to 13 July 2011 improving from a quarter below average rains in the previous week, the weather office said on Thursday. Rainfall in the month of July is considered crucial as 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.

At least 21 people died and 141 were injured in three bomb blast in Mumbai on Wednesday evening. The terror attacks in Mumbai were not attacks on India's financial markets, Home Minister P Chidambaram said on Thursday. "These cannot be seen as attacks on India's commercial capital or on (our) markets," Chidambaram told a news conference.

European equity markets dropped on Thursday, 14 July 2011, after Italy saw its borrowing costs rise and Moody's Investors Service put the US credit rating on review for possible downgrade. The key benchmark indices in UK, France and Germany were down by 0.72% to 1.01%.

Italy successfully sold government bonds on Thursday, but its borrowing costs rose sharply. The Italian auction reinforced sovereign-debt worries and weighed on financial stocks in Europe.

Asian markets reversed initial losses on Thursday after data on Wednesday showed that the Chinese economy grew a stronger-than-expected 9.5% in Q2 June 2011. The key benchmark indices in China, Indonesia, Hong Kong, Singapore and South Korea rose by between 0.01% to 0.54%. The key benchmark indices in Japan and Taiwan were down by between 0.08% to 0.27%.

Singapore's economy contracted at a sharper-than-expected rate in the second quarter, as manufacturing output slowed and service-sector growth eased, the government said Thursday. Gross domestic product for the three months to 30 June fell 7.8% on a seasonally adjusted and annualized basis, compared to a revised 27.2% increase in the first quarter.

US index futures were volatile. Trading in US index futures indicated that the Dow could fall 6 points at the opening bell on Thursday, 14 July 2011. Moody's Investors Service on Wednesday put the US government's triple-A credit rating on review for a possible downgrade because of a small, but rising default risk. The rating agency said its review was prompted by the possibility that the US debt limit won't be increased in time to prevent a missed payment on outstanding debt.

US Federal Reserve Chairman Ben Bernanke on Wednesday said in prepared remarks to Congress that the Fed was contemplating some "untested steps" to further stimulate the US economy if conditions deteriorate, though the central bank believes temporary shocks limiting economic activity will pass. The comments arrived two weeks after the Fed completed another stimulative plan, its purchase of $600 billion of Treasury bonds known as QE2.