BSE Small-Cap, Mid-Cap indices extend recent strong gains

Key benchmark indices edged lower for the second straight day and were near one-week closing lows as world stocks fell on Europe's sovereign-debt worries and amid a political standoff in the US over raising the US government's debt limit. The BSE Sensex was down 54.88 points or 0.3%, off close to 150 points from the day's high and up close to 40 points from the day's low. Two index heavyweights--Reliance Industries and Larsen & Toubro edged lower.

IT stocks fell on US and European debt concerns. Most auto stocks fell on concerns higher interest rates could crimp sales of automobiles. Bank shares were mixed. Realty and metal stocks rose. The market breadth was positive. BSE Small-Cap and Mid-Cap indices rose, extending their recent strong gains.



The market edged lower in early trade as US index futures dropped. A bout of volatility was witnessed as the key benchmark indices pared gains after hitting fresh intraday highs in morning trade. The market regained positive terrain after slipping into the red once again in mid-morning trade. The market once again slipped into the red in early afternoon trade as most Asian stocks fell. The market hit a fresh intraday low in afternoon trade as European shares dropped in early trade. The market hovered in the red in mid-afternoon trade. Volatility ruled the roost in late trade as the market hit a fresh intraday low.

The BSE Sensex was down 54.88 points or 0.3% to 18,507.04, its lowest level since 12 July 2011. The Sensex rose 60.64 points at the day's high of 18,622.56 in morning trade. The index fell 92.39 points at the day's low of 18,469.53 in late trade.

The S&P CNX Nifty was down 14.05 points or 0.25% to 5,567.05, its lowest closing level since 12 July 2011. The Nifty hit a low of 5,550.95 in intraday trade.

The BSE Small-Cap index gained 0.37% to settle at 8,393.95. The BSE Mid-Cap index rose 0.22% to settle at 7,022.25. Both these indices outperformed the Sensex. The BSE Small-Cap index has jumped 612.01 points or 7.86% from a recent low of 7,781.94 on 23 June 2011. The BSE Mid-Cap index has risen 498.04 points or 7.63% from a recent low of 6,524.21 on 23 June 2011.

BSE clocked turnover of Rs 2413 crore, higher than Rs 2098.74 crore on Friday, 15 July 2011.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,565 shares advanced and 1,326 shares declined. A total of 127 shares remained unchanged. The breadth was much stronger earlier in the day.

Among the 30-member Sensex pack, 19 stocks fell while the rest of them rose. Cipla, Reliance Communications and ONGC fell by between 0.41% to 1.9%. HDFC, Bhel and Tata Power Company rose by between 0.99% to 2.7%.

Index heavyweight Reliance Industries (RIL) declined 0.71% to Rs 867.10. The stock hit high of Rs 874.70 and low of Rs 865.05.

Realty stocks extended recent gains. Housing Development & Infrastructure (HDIL), Indiabulls Real Estate, DLF and Phoenix Mills, Orbit Corporation rose by between 0.81% to 5.41%.

Most metal shares rose as LMEX, a gauge of six metals traded on the London Metal Exchange, gained 0.21% on Friday, 15 July 2011. NMDC, Sterlite Industries, Welspun Corp, Jindal Saw, Hindustan Zinc, Hindalco Industries, JSW Steel, National Aluminium Company and Steel Authority of India rose by 0.01% to 3.09%.

Larsen & Toubro shed 1.46%. L&T Finance Holdings' up to Rs 1750 crore initial public offering will open on 26 July and close 29 July 2011. The offer will be open for anchor investors on 26 July, while it will open for retail bids the next day. L&T Finance Holdings is a subsidiary of L&T.

Bank shares were mixed after state-run Bank of Baroda's Chairman and Managing Director M.D. Mallya today, 18 July 2011, said demand for loans in India is slowing. "We are not seeing many projects coming from the infrastructure sector," Mallya told reporters after the customary bankers' meeting with central bank officials ahead of its first-quarter review of monetary policy. Mallya also said some loans given to small- and medium-sized enterprises could turn bad.

India's largest commercial bank by branch network State Bank of India (SBI) rose 0.05%, reversing initial losses. SBI recently raised base rate by 25 basis points (bps) from 9.25% per annum to 9.50% per annum. The bank has also 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 fell 1.09%. 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 1.06% to Rs 514.40, as the bank is seen reporting a more than 30% growth in net profit in Q1 June 2011 tomorrow, 19 July 2011. The stock hit record high of Rs 518.90 today.

IT stocks fell on US and European debt concerns. The US and the Europe are the two key markets for Indian IT firms. India's largest IT company by sales TCS fell 1.97%. The stock had risen 2.03% on Friday after CEO and Managing Director N Chandrasekaran said at the time of announcing Q1 June 2011 results on Thursday, 14 July 2011, that TCS continues to see steady demand flow for its services.

TCS' consolidated net profit fell 7.9% to Rs 2415 crore on 6.3% growth in revenue at Rs 10797 crore in Q1 June 2011 over Q4 March 2011. Operating profit declined 2% to Rs 2820 crore in Q1 June 2011 over Q4 March 2011. The result was announced after trading hours on Thursday, 14 July 2011.

India's second largest IT company by sales Infosys Technologies fell 0.6%, with the stock extending recent losses triggered by 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 early last week.

India's third largest IT company by sales Wipro shed 0.45% ahead of its Q1 results on Wednesday, 20 July 2011. Investors will focus on Wipro' revenue guidance for Q2 September 2011 at a time when the company is undergoing an internal restructuring. The guidance could provide an early indication whether the company's new strategy is yielding results.

Most auto stocks fell on concerns higher interest rates could crimp sales of automobiles. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. India's largest tractor maker by sales Mahindra & Mahindra fell 1.71%. India's largest motorbike maker by sales Hero Honda Motors declined 0.63%.

India's largest commercial vehicle maker by sales Tata Motors declined 1.94% extending Friday's 2.61% losses. The company reported a 1% fall in its global auto sales to 89,846 units in June 2011 over June 2010, primarily due to lower demand for Jaguar sedans globally and its cars and sport-utility vehicles in India.

Global sales of trucks and buses in the past month, however, grew 13% to 45,285 vehicles. The figure includes sales of Tata Daewoo and Tata Hispano Carrocera commercial vehicles. Global sales of cars and SUVs slipped 12% in June to 44,561 vehicles while those in India decreased 21% to 24,203 units. Total sales of Jaguar and Land Rover vehicles increased 1% to 20,358 units. Sales of Land Rover SUVs jumped 22% to 16,320 vehicles but that of Jaguar cars slumped 40% to 4,038 units. Tata Motors announced the global vehicles sales data during trading hours on Friday, 15 July 2011.

Bajaj Auto declined 0.16%, extending recent losses triggered by disappointing Q1 June 2011 results. 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. The company announced the results during trading hours on 14 July 2011.

Bajaj Auto, last week, said it has shelved a project to develop a low-cost minicar in India for Renault S.A. and Nissan Motor Co. as the company found the project commercially unviable. Bajaj Auto Managing Director Rajiv Bajaj said the company will instead unveil a low-cost commercial vehicle at the auto show at New Delhi in January 2012. "We will stay in the commercial space...it could be a passenger or a goods carrier," Bajaj said at the time of announcing the company's Q1 June 2011 results. "It will be a low-capex, high-EBITDA [earnings before interest, taxes, depreciation and amortization] project," he added.

Kevin D'sa Bajaj Auto's president in charge of finance said Bajaj Auto may raise vehicle prices during July 2011 to March 2012 if raw material costs don't stabilize.

India's largest small car maker by sales Maruti Suzuki India declined 0.2%.

Ashok Leyland rose 2.06%. The company is seen reporting weak Q1 June 2011 results tomorrow, 19 July 2011, as lower volumes resulting in weak operating leverage offset a hike in vehicle prices. Net profit is seen sliding 37.8% to Rs 76.24 crore on 1.37% fall in net sales at Rs 2315.70 crore in Q1 June 2011 over Q1 June 2010, according to average estimate of 5 brokerages.

Reliance Infrastructure rose 0.64%. As per reports the company's arm Reliance Sealink One has tied up the entire debt of Rs 2000 crore for Mumbai's Worli-Haji Ali sea link but the project may be delayed by another 2-3 months because of pending issues related to financial obligations of state authorities. The company was scheduled to start construction by 3 July 2011 but Reliance Sealink One, a joint venture between the Anil Dhirubhai Ambani group's Reliance Infrastructure and Hyundai Engineering, will take over the project only after sorting out these issues, particularly the viability gap funding, or financial support to make economically essential infrastructure projects commercially viable, report added.

Airline stocks fell, reversing initial gains after state-owned oil marketing companies (PSU OMCs) on Friday, 15 July 2011, hiked jet fuel or aviation turbine fuel (ATF) price by Rs 78 per kilolitre with effect from Friday midnight. Jet Airways, Kingfisher Airlines and SpiceJet gained by between 0.21% to 2.24%. ATF in Delhi now costs Rs 56,324.79 per kilolitre (kl), an increase of Rs 77.93 per litre or 0.13%. ATF in Mumbai, home to the nation's busiest airport, now costs Rs 57,031.66 per kl. Fuel cost accounts for more than 50% of the airlines' operating cost and rates vary from airport to airport depending upon the local sales tax.

Cals Refineries clocked highest volume of 20.49 crore shares on BSE. Redington India (1.34 crore shares), Rushil Decor (95.99 lakh shares), SpiceJet (51.45 lakh shares) and Birla Pacific (42.48 lakh shares) were the other volume toppers in that order.

Rushil Decor clocked highest turnover of Rs 157.19 crore on BSE. Redington India (Rs 125.18 crore), SKS Microfinance (Rs 65.56 crore), Infosys (Rs 64.68 crore) and TTK Prestige (Rs 62.35 crore) were the other turnover toppers in that order.

Bihar Deputy Chief Minister and Finance Minister Sushil Kumar Modi was on Monday elected the new chairman of the Empowered Committee of State Finance Ministers, which is spearheading the implementation of Goods and Services Tax. Modi, who also handles the finance portfolio in the Bihar state government, replaces Asim Dasgupta, who had served in the post for over a decade since the formation of the body. The post of the chairman of the group fell vacant after the defeat of Dasgupta in the West Bengal Assembly polls in May.

One of the major tasks before Modi, as the new chairman, will be to build a consensus on the proposed goods and service tax regime. The GST would subsume most of the indirect taxes like excise duty and service tax at the central level and VAT on the state front, besides local levies. Implementation of GST, considered to be a major tax reform, has been delayed due to differences between the Centre and some states over the new structure. The Constitution Bill would need the approval of two-thirds of Parliament and half of India's 28 states to become a law. Hence, BJP support is crucial at the state as well as the central level for GST to see the light of the day.

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. Reliance Industries, Sterlite Industries and Rural Electrification Corporation will announce Q1 results on 25 July 2011. Car major Maruti Suzuki, steel major JSW Steel, power equipment major Bhel, decorative paints major Asian Paints and Shriram Transport Finance Company are set to unveil Q1 results on 26 July 2011.

HCL Technologies, GAIL (India), Bank of Baroda, Infrastructure Development Finance Company (IDFC), Oil India and Lupin unveil results on 27 July 2011. State-run oil exploration giant ONGC, cement major Ambuja Cements, Jindal Steel & Power, and GSFC 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.

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, to tame inflation, which remains much above its perceived comfort level of 5% to 6%.

Investors will continue to monitor the progress of the monsoon rains. Monsoon rains were above average in June 2011, but dropped to 3% below average after slowing in the first week of July. Rainfall between July 7 and July 13 was 19% below average, while it was 25% below average between June 30 and July 6. As per reports, the rainfall distribution so far has been good except for areas in the country's extreme northwest and southeast, mainly in Gujarat's Saurashtra region and the Andhra Pradesh coast. While Gujarat is India's largest groundnut and cotton producer, Andhra Pradesh is a key rice-producing region.

The central state of Chhattisgarh and the Vidarbha region in Maharashtra are also rainfall-deficient, but the gap is expected to be bridged over the next few days. The grainbowl northern states of Punjab and Haryana, as well as parts of Uttar Pradesh, have all received above normal to normal rains, while eastern rice-growing states, including key producer West Bengal, have received good rains. Oilseed-growing regions in central India have also been lashed by abundant rains.

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.

European stocks edged lower on Monday, 18 July 2011, amid ongoing worries over Europe's sovereign-debt woes and a political standoff in the US over raising the US government's debt limit. The key benchmark indices in France, Germany and UK fell by between 1.26% to 1.57%.

Worries escalated on Monday, 18 July 2011, over European officials' ability to finalize a new funding package for Greece, weighing on Italian and Spanish bond yields, and also on European stocks. Euro-zone leaders are due to meet on Thursday, 21 July 2011, to work out details of the package.

The European Banking Authority (EBA) said on Friday that of the 90 European banks tested, only eight had failed the "stress tests" performed to determine if they could withstand a long recession. Expectations were for up to 15 banks to fall short. The EBA said 16 banks narrowly passed the stress tests. Of the banks that failed the tests, five were in Spain, two in Greece and one in Austria, while all of the region's biggest firms passed the test.

Asian stocks declined on Monday, 18 July 2011, as US and European debt concerns kept investors wary. The key benchmark indices in China, Hong Kong, Singapore, South Korea and Taiwan were down by between 0.12% to 0.69%. Indonesia's Jakarta Composite was up 0.24%. Japanese markets were closed for a holiday.

US index futures fell amid ongoing worries over Europe's sovereign-debt woes and a political standoff in the US over raising the US government's debt limit by an August 2 deadline. Trading in US index futures indicated that the Dow could fall 96 points at the opening bell on Monday, 18 July 2011.

Standard & Poor's on Friday raised the pressure on debt negotiators in Washington, saying it could downgrade insurers, securities clearing houses, mortgage agencies and a laundry list of other firms without a deal soon to lift the US debt ceiling and cut the deficit. They include the Depository Trust Co, which facilitates payment transfers among major banks, as well as several Federal Home Loan Banks and Farm Credit System Banks. They also singled out Fannie Mae and Freddie Mac, the two government-sponsored enterprises that are central to the US residential mortgage market.