Market scales one-week high as strong earnings boost European shares

Key benchmark indices surged to their highest closing level in more than a week as European stocks and US index futures rose on the back of solid financial results from Swiss pharmaceuticals group Novartis AG and an upward revision in full year earnings forecast on Monday, 18 July 2011, from IBM, the world's biggest computer-services company. The market snapped losses in the preceding two trading sessions. The BSE Sensex rose 146.83 points or 0.79%, off about 40 points from the day's high and up close to 170 points from the day's low. The market breadth was positive.

HDFC Bank reversed intraday gains on profit taking after reporting strong Q1 results during trading hours today. Other banking stocks rose after strong Q1 results from HDFC Bank. IT stocks rose after IBM on Monday said business at its services division was running ahead of expectations, easing fears of a cyclical slowdown in other tech companies. Realty stocks reversed initial losses. Ashok Leyland and Crompton Greaves declined after announcing weak Q1 results. Dr Reddy's Laboratories, Wipro and Exide Industries rose ahead of their Q1 results tomorrow, 20 July 2011.

The market regained positive terrain after slipping into the red for a brief period after a positive start. The market regained strength after paring gains from the day's high in morning trade. The market pared gains after hitting fresh intraday high in morning trade. Intraday volatility continued as the key benchmark indices recovered after slipping into the red to hit fresh intraday lows in early afternoon trade.

The market surged in afternoon trade as European stocks rose at the onset of the trading session. A bout of volatility was witnessed in mid-afternoon trade as the key benchmark indices pared gains after hitting fresh intraday highs. Volatility continued in late trade as the market pared gains after hitting a fresh intraday high.

The BSE Sensex advanced 146.83 points or 0.79% to settle at 18,653.87, its highest level since 11 July 2011. The Sensex jumped 183.38 points at the day's high of 18,690.42 in late trade. The index fell 25.21 points at the day's low of 18,481.83 in mid-morning trade.

The S&P CNX Nifty rose 46.50 points or 0.84% at 5,613.55, its highest closing level since 11 July 2011. The Nifty hit a high of 5,627.65 in intraday trade.

The BSE Mid-Cap index rose 0.41% and underperformed the Sensex. The BSE Small-Cap index gained 0.82% and outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,657 shares advanced and 1,226 shares declined. A total of 127 shares remained unchanged.

Among the 30-member Sensex pack, 24 stocks rose while the rest of them rose.

BSE clocked turnover of Rs 2850 crore, higher than Rs 2642.91 crore on Monday, 18 July 2011.

Index heavyweight Reliance Industries (RIL) was up 1.39% at Rs 879.15, up from the day's low of Rs 865.35. The company unveils Q1 June 2011 results on 25 July 2011.

Some realty stock reversed initial losses. DLF, Unitech, Ackruti City and Orbit Corporation gained by between 0.31% to 2.89%.

Crompton Greaves declined 14.23% to Rs 207.65 after consolidated net profit fell 58.36% to Rs 79.47 crore on 5.7% rise in total income to Rs 2452.87 crore in Q1 June 2011 over Q1 June 2010. The stock hit a 52-week low of Rs 203.70 in intraday trade. Crompton Greaves' net profit slumped due to 34.54% increase in cost of consumption of raw materials to Rs 1610.37 crore and 46.40% surge in depreciation to Rs 60.77 crore in Q1 June 2011 over Q1 June 2010.

Since Q1 figures include the results of the subsidiaries acquired during the quarter, Q1 June 2011 figures are not comparable to Q1 June 2010, Crompton Greaves said.

IT stocks rose after IBM, the world's biggest computer-services company, on Monday, 18 July 2011, said business at its services division was running ahead of expectations, easing fears of a cyclical slowdown in other tech companies. IBM raised its full year earnings forecast to at least $13.25 a share, compared with analysts' average estimate of $13.21.

India's largest IT company by sales TCS rose 1.24%. 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 gained 1.45% on bargain hunting. The stock had witnessed selling pressure recently after disappointing Q1 June 2011 results announced early last week. 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.

India's third largest IT company by sales Wipro rose 0.55% ahead of its Q1 results tomorrow, 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.

HDFC Bank fell 0.7% to Rs 510.80 on profit taking after strong Q1 results. The stock had hit a record high of Rs 519.50 before the results today. The HDFC Bank stock had seen a pre-result rally on expectation of strong Q1 earnings. The stock had jumped 11.66% in 20 trading sessions to settle at Rs 514.40 on Monday, 18 July 2011, from a recent low of Rs 460.70 on 20 June 2011

HDFC Bank's net profit rose 33.67% to Rs 1084.98 crore on 31.2% growth in total income to Rs 7098 crore in Q1 June 2011 over Q1 June 2010. The result was announced during trading hours today, 19 July 2011. The bank's asset quality remains healthy.

The bank's CASA (current and savings account) ratio stood at 49.1% at end June 2011. The CASA ratio is the ratio of deposits in the current and savings accounts of a bank to its total deposits. A high CASA ratio indicates that a higher portion of the banks' deposits come from current and savings accounts. This means that the bank is getting money at low cost, since no interest is paid on the current accounts and the interest paid on savings account is usually low.

Other banking stocks on strong Q1 results from HDFC Bank. India's largest commercial bank by branch network State Bank of India (SBI) gained 1.59%. 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.

Bank of India, Bank of Baroda and Punjab National Bank gained by between 0.12% to 1.39%.

India's largest private sector bank by net profit ICICI Bank rose 1.18%. 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.

Steel Authority of India (Sail) rose 0.84% after the company said during market hours today that its board will meet on 29 July 2011 to fix record date for amalgamation of Maharashtra Elektrosmelt (MEL) with the company. The shareholders of MEL are entitled to receive fully paid-up equity shares of Sail in the share exchange ratio of 1:1.7 i.e. 1 fully paid-up equity share of Sail for every 1.7 fully paid-up equity shares held in MEL.

Jindal Steel & Power rose 0.27%. The company announced during market hours today that Jindal Steel and Power (Australia) (JSPA), a step down wholly owned subsidiary of the company has purchased an additional 12.83% stake in Rocklands Richfield (Rocklands) at a revised offer price of AUD $0.30 per share thereby increasing its stake from 14.46% to 27.29%. The on-market takeover offer for all of the shares in Rocklands Richfield (Rocklands), listed on Australian Stock Exchange closed on 5 July 2011.

Truck and buses maker Ashok Leyland fell 2.69% as net profit fell 29.67% to Rs 86.25 crore on 6.28% increase in net sales to Rs 2495.50 crore in Q1 June 2011 over Q1 June 2010. The result was announced during trading hours today, 19 July 2011. The company said a change in accounting policy on amortization of the value of leasehold land in Q1 June 2011, resulted in a reduction in expenditure by Rs 9.46 crore during the quarter.

Ashok Leyland's net profit was expected to fall 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.

Tata Motors fell 3.16% as the stock turned ex-dividend today, 19 July 2011, for dividend of Rs 20 per share for the year ended March 2011. Chairman Ratan Tata said in the company's annual report for year ended 31 March 2011 (FY 2011), which was released Monday, 18 July 2011 that Tata Motors is considering a joint engine development program with its UK-based Jaguar Land Rover unit. Tata Motors bought Jaguar Land Rover from Ford Motor Co. for $2.3 billion in 2008. The goal is "to optimize the synergetic strengths between JLR and Tata Motors in India," Tata said. The program could have engine manufacturing facilities in the UK and India, he added.

India's largest tractor maker by sales Mahindra & Mahindra rose 1.33%. India's largest motorbike maker by sales Hero Honda Motors declined 1.22%. India's largest small car maker by sales Maruti Suzuki India declined 0.79%.

Exide Industries, the country's largest lead acid storage battery manufacturer, rose 2.68% as company is seen reporting good sequential performance in Q1 June 2011 tomorrow, 20 July 2011. Net profit is seen rising 9.16% to Rs 178.67 crore on 8.5% growth in net sales to Rs 1354.71 crore in Q1 June 2011 over Q4 March 2011 according average estimate of seven brokerages.

National Thermal Power Corporation (NTPC) gained 1.16% after the company said after market hours on Monday that it has signed a MoU with the state government of Kerala on 18 July 2011. The MoU was signed with the objective to plan and develop around 200 megawatts (MW) wind energy based power projects in Kerala on Build, Own & Operate (BOO) basis using state-of-the-art technology subject to establishment of techno-commercial viability. Out of total 200 MW, first 80 MW wind energy projects will be developed on fast track basis at Ramakkalmadu by NTPC.

Dr Reddy's Lab (DRL) rose 1.66% as the company is seen posting good Q1 June 2011 results tomorrow, 20 July 2011, driven by good sales growth at its US, India and Russia operations. DRL's consolidated net profit as per International Financial Reporting Standards (IFRS) is seen surging 31.97% to Rs 276.56 crore on 18.3% growth in sales at Rs 1990.67 crore in Q1 June 2011 over Q1 June 2010 according average estimate of seven brokerages.

Sun Pharmaceuticals Industries rose 1.75% after the company said it has received US drug regulator's approval for generic Uroxatral ER Tablets, with a 180-day marketing exclusivity. Uroxatral ER Tablets are used in treating benign prostatic hyperplasia.

Some FMCG stocks edged higher on expectation of good Q1 results. Dabur India, ITC, United Spirits and Marico gained by between 0.13% to 2.82%.

Larsen & Toubro gained 1.07%. The the initial public offer (IPO) of L&T Finance Holdings, a unit of engineering and construction major L&T, opens for biding on 27 July 2011. The IPO closes on 29 July 2011. The share sale to raise up to Rs 1245 crore is an important part of L&T's plan to spin off some of its non-core businesses into self-sustaining units with independent access to capital markets.

Cals Refineries clocked highest volume of 7.42 crore shares on BSE. Sanraa Media (3.57 crore shares), Rushil Decor (1.19 crore shares), Delta Corp (57.03 lakh shares) and Birla Cotsyn (52.58 lakh shares) were the other volume toppers in that order.

Rushil Decor clocked highest turnover of Rs 169.41 crore on BSE. Crompton Greaves (Rs 95.70 crore), State Bank of India (Rs 84.10 crore), VIP Industries (Rs 74.49 crore) and Delta Corp (Rs 64.31 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.

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.

UltraTech Cement, 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. Bharti Airtel unveils Q1 results on 3 August 2011. IL&FS Transportation Networks announces Q1 results on 5 August 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.

US Secretary of State Hillary Clinton hopes to cement gains in ties with emerging global power India in her two-day trip. Clinton will meet Indian leaders for a US-India "strategic dialogue" session, regular meetings designed to get officials from both sides working more closely together.

European stock markets rose on Tuesday, 19 July 2011, boosted by solid results from Novartis AG. Technology stocks rose following an upward revision in full year earnings forecast from IBM, the world's biggest computer-services company, on Monday, 18 July 2011. The key benchmark indices in UK, France and Germany were up by 0.51% to 1.51%.

A meeting of euro-zone leaders is scheduled on Thursday, 21 July 2011, to finalize a bailout package for Greece in an effort to contain the region's ongoing debt crisis.

Asian stocks dropped on Tuesday, 19 July 2011, as a lack of resolution on US and European debt problems weighed on financials and other companies with global exposure. The key benchmark indices in China, Indonesia, Japan, South Korea and Taiwan fell by between 0.01% to 0.7%. The key benchmark indices in Hong Kong and Singapore rose by between 0.45% to 0.56%.

Trading in US index futures indicated that the Dow could jump 80 points at the opening bell on Tuesday, 19 July 2011. US stocks dropped on Monday as bank shares bore the brunt of investor frustration over governments' inability to solve debt crisis in the United States and Europe. The US government is approaching an August 2 deadline, after which the Treasury Department says it will be unable to meet all obligations, though a deal to raise the legally mandated borrowing limit remained elusive on Monday.