Cement, construction shares rally on PM's infra push

Key benchmark indices edged higher for the second straight trading session as world stocks rose on the back of upbeat US housing data and on prospects of more monetary easing by the Federal Reserve. US is the world's biggest economy. The barometer index, BSE Sensex, advanced 36.83 points or 0.22%, off close to 65 points from day's high and up about 55 points from the day's low. The market breadth was positive. BSE Small-Cap and Mid-Cap indices outperformed the Sensex. From a recent low of 16,705.83 on 18 June 2012, the Sensex has risen 190.80 points or 1.14% in two trading sessions. The Sensex has risen 678.10 points or 4.18% so far in this month (till 20 June 2012). The barometer index has gained 1,441.71 points or 9.32% in calendar 2012 so far (till 20 June 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1,760.77 points or 11.63%. From a 52-week high of 19,131.70 on 8 July 2011, the Sensex has lost 2,235.07 points or 11.68%. Coming back to today's trade, index heavyweight Reliance Industries (RIL) rose in choppy trade. FMCG major Hindustan Unilever scaled record high. Software pivotals were mixed. Bank stocks edged higher. Cement and construction shares rose on renewed buying as Prime Minister Manmohan Singh recently said that the government is focusing heavily on infrastructure investment and it has set ambitious targets to keep infrastructure investment on track and also put in place a problem resolution mechanism to overcome implementation bottlenecks. The market pared gains after a firm start triggered by higher Asian equities. Key benchmark indices regained strength in morning trade after giving up almost entire intraday gains in early trade after a firm start. The market extended gains in mid-morning trade. A bout of volatility was witnessed as key benchmark indices recovered soon after paring intraday gains in early afternoon trade. Volatility continued as key benchmark indices cut almost all the intraday gains in afternoon trade as European stocks edged lower in early trade there, with investors awaiting a policy announcement from the US Federal Reserve later in the day global day. The Sesnex regained positive zone in mid-afternoon trade after sliding into the red to hit fresh intraday low in afternoon trade as European stocks reversed initial losses on expectations of more monetary easing by the Federal Reserve. The market cut losses after hitting a fresh intraday high in late trade. The BSE Sensex advanced 36.83 points or 0.22% to settle at 16,896.63, its highest closing level since 15 June 2012. The index jumped 102.69 points at the day's high of 16,962.49 in late trade. The Sensex shed 19.70 points at the day's low of 16,840.10 in afternoon trade. The S&P CNX Nifty advanced 16.70 points or 0.33% to settle at 5,120.55, its highest level since 15 June 2012. The index hit a high of 5,141.70 and a low of 5,100.70 in intraday trade. The BSE Mid-Cap index rose 0.83% and the BSE Small-Cap index gained 0.79%. Both these indices outperformed the Sensex. The total turnover on BSE amounted to Rs 1806 crore, lower than Rs 1865.85 crore on Tuesday, 19 June 2012. The market breadth, indicating the overall health of the market, was positive. On BSE, 1,614 shares rose and 1,111 shares fell. A total of 141 shares were unchanged. Among the 30-share Sensex pack, 18 gained while the rest declined. Index heavyweight Reliance Industries (RIL) rose 0.05% to Rs 737.60. The stock was volatile. The scrip hit a high of Rs 742.50 and low of Rs 733.15. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in Mumbai early this month that the company has cumulatively bought back a total of 2.7 crore shares under the share buyback programme, which is 22.5% of share buyback target. Ambani said the company's buyback programme represents highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future. Ambani said RIL will invest about Rs 1 lakh crore over the five years in expanding its business in India. Ambani said RIL is targeting to double its operating profit in about five years. State-run oil exploration major ONGC rose 1.91%. ONGC and China's China National Petroleum Corp. have decided to jointly explore oil and gas assets in other countries, cementing their existing partnerships in Myanmar, Syria and Sudan. State-run Coal India (CIL) lost 1.53%. CIL has reportedly entered into fuel supply agreement (FSA) with 27 power units, including Adani's Mundra power plant in Gujarat. The signings come even as the Prime Minister's Office (PMO) is slated to convene a meeting on Friday, 22 June 2012, to iron out issues in the pact, mainly the penalty clause, which have kept power firms like NTPC from inking the fuel supply agreement (FSA) with CIL. The government had issued a presidential directive to CIL in April to sign FSAs with the power producers assuring them of at least 80% of the committed coal delivery. The directive was given to the PSU, as it did not meet the deadline of March 31 set by PMO for CIL to enter into agreements with power producers which were facing fuel crunch. Software pivotals were mixed. India's largest IT company by revenue Tata Consultancy Services (TCS) shed 1.71%. India's third largest software services exporter by revenue, Wipro, rose 0.19%. The company last week said that Wipro Technologies, the global information technology, consulting and outsourcing business of Wipro, has been chosen by Australia based MMG, a mid-tier global resources company as its strategic partner to define and deliver MMG's integrated business management program over a period of three years. India's second largest software services exporter by revenues, Infosys, extended Tuesday' losses triggered by reports that the company may be forced to pare its already low revenue growth guidance in dollar terms for the year ending March 2013 due to the wild swings of global currencies, including pound sterling, Australian dollar and euro, against the US dollar. The stock slipped 0.32%. Bank stocks were in demand. India's largest private sector bank by net profit ICICI Bank rose 0.83%. India's largest commercial bank in terms of branch network State Bank of India (SBI) rose 0.65%. As per recent reports, the bank has slashed interest rates on term loans, agriculture loans and loans to small and medium enterprises (SMEs) by 50-350 basis points (bps), or 0.5%-3.5% with effect from 1 June 2012. SBI has kept the base rate unchanged at 10%. India's second largest private sector bank by net profit HDFC Bank shed 0.45%. Bank of India rose 1.58%. During market hours today, 20 June 2012, the state-run bank said it has floated a 100% subsidiary namely "Bank of India (Uganda)". It has started its operations from 18 June 2012 in Uganda. Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, and IDBI Bank gained by between 0.23% to 1.39%. Infrastructure lender Infrastructure Development Finance Company (IDFC) fell 0.92%. Fitch Ratings has revised the Outlook on the 'BBB-' Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) of India-based financial institutions to Negative from Stable, while affirming the rating. The list of affected institutions include State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Bank of Baroda (New Zealand), Canara Bank, IDBI Bank, ICICI Bank, Axis Bank, Export-Import Bank of India (EXIM), Housing and Urban Development Corporation (HUDCO) and Infrastructure Development Finance Company (IDFC). The rating action follows Fitch's revision of the outlook on India's credit rating to negative from stable recently. The outlook revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt, Fitch said. Construction shares rose on renewed buying. Jaiprakash Associates, IVRCL, Gammon India, Valecha Engineering, Hindustan Construction, NCC, Patel Engineering and L&T, IRB Infrastructure & Developers rose by between 0.74% to 4.45%. Prime Minister Manmohan Singh recently said that the government is focusing heavily on infrastructure investment and it has set ambitious targets to keep infrastructure investment on track and also put in place a problem resolution mechanism to overcome implementation bottlenecks. Singh early this month said that the government plans to award 9,500 kms of roads for construction this year and over 4,000 kms for maintenance under the new system. Metal shares rose on renewed buying. Hindustan Zinc, Sterlite Industries, Sail, JSW Steel, Tata Steel, Sesa Goa and Bhushan Steel rose by between 0.52% to 4.47%. India's largest sponge iron steel maker by capacity Jindal Steel & Power gained 2.62%. The company is reportedly likely to exit from a three-year long takeover tussle for listed Australian coal explorer Rocklands Richfield, following an aggressive bid by China's Linyi Mining Group, which has swung the support of Rocklands senior management to the Chinese offer. Most cement stocks edged higher, reversing their initial losses triggered by reports the Competition Commission of India (CCI) has slapped penalty of about Rs 3000 crore on 11 big cement manufacturers which were found guilty of being involved in price cartel. ACC, India Cements, Ambuja Cements, and Jaiprakash Associates gained by between 2.07% to 4.64%. But, UltraTech Cements fell 0.97%. Prime Minister Manmohan Singh recently said that the government is focusing heavily on infrastructure investment and it has set ambitious targets to keep infrastructure investment on track and also put in place a problem resolution mechanism to overcome implementation bottlenecks. Singh early this month said that the government plans to award 9,500 kms of roads for construction this year and over 4,000 kms for maintenance under the new system. Capital goods stocks rose across the board. India's largest power equipment maker by capacity Bhel advanced 1.68% on reports the Prime Minister's Office (PMO) has called a meeting today, 20 June 2012, to revive the contentious issue of imposing duty on foreign power equipment in the country. The meeting will be chaired by Pulok Chatterjee, principal secretary in the PMO, and will be attended by representatives of the ministries of finance, power and heavy industries. The move, primarily aimed at discouraging the purchase of cheap power equipment from China and to provide a level playing field to domestic manufacturers, has been in the works since 2010. Among other capital goods stocks, ABB, Punj Lloyd, Thermax, Siemens and BEML rose by between 1.53% to 2.24%. Auto stocks were mixed. India's largest utility vehicles maker Mahindra & Mahindra (M&M) declined 0.06%. The company early this month said it has received an overwhelming 7,200 plus bookings for its cheetah-inspired XUV500 from customers within just 2 days of opening all India bookings for the vehicle. All India bookings for the XUV500 were opened from 8 June 2012. Small-car major Maruti Suzuki India declined 1.14%. The company early this month said that the board of directors of the company has approved a proposal to merge Suzuki Powertrain India (SPIL) with the company. SPIL, which supplies diesel engines as well as transmissions for vehicles to Maruti Suzuki, is a subsidiary of Suzuki Motor Corporation (SMC), Japan. SMC holds 70% share in SPIL and remaining 30% is held by Maruti Suzuki. As per the terms of the proposed merger, SMC will receive one share of MSIL of Rs 5 each for every 70 shares of Rs 10 each it holds in SPIL. There will be no cash outflow from MSIL due to the merger. MSIL proposes to make a fresh issue of about 1.31 crore equity shares to SMC in lieu of SMC's 70% holding in SPIL. Consequent to the merger, SMC's holding in MSIL will go up from 54.2% to 56.2%. With the merger, MSIL will be able to bring its entire diesel engine capacity under a single management control. All key initiatives to strengthen the business, including sourcing, localization, production planning, manufacturing flexibility and cost reduction can be controlled, monitored and improved by the MSIL management, MSIL said in a statement. The proposed merger also promises benefits for the combined entity through synergies in areas like finance, capital structuring, and administration and consequent reduction of transaction costs, MSIL said. India's largest truck maker by sales Tata Motors advanced 2.83%. Tata Motors has decided to close its truck plant in Pune for three days from June 22 to June 24 to ensure alignment of production with demand. Tata Motors on Friday, 15 June 2012, intimated to the Bombay Stock Exchange (BSE) that Chairman Ratan N Tata purchased additional 4.25 lakh equity shares of Tata Motors from open market purchases on Thursday, 14 June 2012, for about Rs 9.94 crore. After the latest acquisition, Ratan N Tata now holds a total of 13.61 lakh ordinary equity shares of Tata Motors and 1.09 lakh 'A' Ordinary shares of Tata Motors, aggregating to 0.05% of voting rights of Tata Motors. Tata Motors on Friday, 15 June 2012, said sales of its luxury vehicles -- Jaguar Land Rover -- jumped 35% to 30,094 in May 2012 over May 2011. Tata Motors derives almost two-third of its revenue from its British unit Jaguar Land Rover. Tata Motors' global vehicle sales rose 12% to 96,089 units in May 2012 over May 2011. The company's overall global passenger vehicles sales rose 21% to 51,064 units in May 2012 over May 2011. Commercial vehicle sales rose 3% to 45,025 in May 2012 over May 2011 Shares of two-wheeler makers were mixed. India's second largest motorcycle maker by sales Bajaj Auto slipped 0.15%. The company early this month said its total sales fell 2% to 3,52,219 units in May 2012 over May 2011, as exports to Sri Lanka were nil in May 2012 against a typical monthly average of 10,000 motorcycles and 3-wheelers each per month. The company expects recovery in Sri Lankan exports from July 2012 onwards. The company's exports rose 3% to 1,30,573 units in May 2012 over May 2011. Hero MotoCorp (HMCL) rose 1.27%. The board of directors of the company recently approved a proposal to merge Hero Investments (HIPL), the investment arm of the Hero Group, into HMCL. The shareholders of HIPL include the partnership firm Brijmohan Lall Om Prakash (BMOP) which holds 71.63%, and private equity (PE) investors BC India Private Investors (19.81%) and Lathe Investment (8.56%). BC India Private Investors is an affiliate of Bain Capital LLC, while Lathe Investment is a wholly-owned subsidiary of Government of Singapore Investment Corporation (GIC). Hero MotoCorp reported its best-ever monthly sales in May 2012, thus underlining the robust momentum the company has sustained since embarking on its solo journey. Marking its 10th consecutive month of over five lakh sales, Hero MotoCorp total sales rose 11.3% to 5,56,644 two-wheelers in May 2012 over May 2011. The company's sales in May this year surpassed its previous highest of 5,51,557, recorded only last month (April 2012). Interest rate sensitive realty stocks extended recent losses after the Reserve Bank of India (RBI) kept its key policy rate viz. the repo rate unchanged after a mid-quarter policy review early this week, contrary to market expectations of a 25 basis points reduction. Purchases of both residential and commercial property are largely driven by finance. D B Realty, Sunteck realty, Parsvnath Developers and DLF shed by between 0.16% to 1.61%. But, Unitech rose 0.48%. Ranbaxy Laboratories rose 0.81%. Daiichi Sankyo Company and Ranbaxy Laboratories today, 20 June 2012 announced that Daiichi Sankyo's subsidiary Daiichi Sankyo Venezuela S.A. would begin marketing products of Ranbaxy in Venezuela as part of the hybrid business model. Till now, Ranbaxy Laboratories has been marketing the products in Venezuela through a local distributor. To kick off the new arrangement, Daiichi Sankyo Venezuela has already started the promotion of Ranbaxy products starting this month. The Venezuelan pharmaceutical market is the third largest in Latin America. Daiichi Sankyo has started its business in Venezuela prior to the other Japanese pharmaceutical companies and has built its presence with innovative pharmaceuticals such as the hypertension medicine Benicar. Daiichi Sankyo will now also focus on expanding Ranbaxy's portfolio of medicines to promote the hybrid business model, encompassing both innovative and established pharmaceuticals to expand and strengthen its presence in Venezuela. Power generation stocks extended this month's gains as lower international coal prices could boost profitability. Adani Power, Reliance Infrastructure, JSW Energy, Tata Power Company, and Reliance Power rose by between 1.04% to 2.06%. But, NTPC fell 0.23%. Fall in international coal prices this year could boost the profitability of power generation firms using imported coal. FMCG stocks rose on reports monsoon rains have covered half of India after having briefly stalled last week. Marico, Dabur India, United Spirits, Colgate Palmolive India rose by between 1.1% to 3.56%. FMCG firms derive substantial sales from rural India. Good monsoon may boost farm incomes and consumer spending. India's largest FMCG firm by sales Hindustan Unilever rose 1.27% to Rs 454.60. The stock hit a record high of Rs 456.85 in intraday trade today, 20 June 2012. Shares of public sector oil marketing companies rose for the third day in a row after Prime Minister Manmohan Singh said that the government is determined to take tough decisions, including on controlling subsidies. HPCL (up 0.55%), BPCL (up 1.38%) and Indian Oil Corporation (up 1.84%), edged higher. Media reports suggest that the government will raise prices of diesel and cooking gas shortly as part of broader policy measures that the government is planning to unveil to attract capital inflows and boost investor confidence. These measures are reportedly aimed at averting a possible sovereign downgrade to junk status by rating agencies and reviving faltering growth. The three public sector oil marketing companies (PSU OMCs) -- BPCL, HPCL and IOC -- suffer revenue loss on domestic sale of diesel, LPG (cooking gas) and kerosene at a controlled price. The government decontrolled pricing of petrol in 2010. Aviation stocks edged higher on reports the civil aviation ministry will meet with its finance ministry counterparts to discuss lowering aviation turbine fuel taxes. Kingfisher Airlines (up 5.76%), Jet Airways (India) (up 4.35%) and SpiceJet (up 3.79%), moved higher. The civil aviation ministry had proposed earlier to slash state taxes on jet fuel, which would help bring down costs for ailing local airlines that are reeling under a debt load of $20 billion and annual losses of around $2 billion. Meanwhile, state-run oil marketing companies reduced the prices of aviation turbine fuel by 5%, effective 16 June 2012. The price of aviation turbine fuel or jet fuel, in Delhi was reduced by Rs 3,260 per kilo litre (kl), or 5%, to Rs 62,410 per kl. ATF typically makes up almost half of an airline's operating cost. State-run oil marketing companies revise jet fuel prices on the 1st and 16th of every month, based on the average international price in the preceding fortnight. Cals Refineries clocked highest volume of 72.03 lakh shares on BSE. Kingfisher Airlines (66.60 lakh shares), Lanco Infratech (61.42 lakh shares), Manappuram Finance (58.23 lakh shares) and Dazzel Confindiv (56.97 lakh shares) were the other volume toppers in that order. SBI clocked highest turnover of Rs 116.11 crore on BSE. Educomp Solutions (Rs 54.87 crore), ACC (Rs 49.79 crore), Tata Motors (Rs 44.02 crore) and L&T (Rs 42.04 crore) were the other turnover toppers in that order. The next major trigger for the market is Q1 June 2012 corporate earnings, which will start trickling from the second week of July 2012. HDFC announces Q1 results on 11 July 2012. Bajaj Auto reports Q1 results on 18 July 2012. Several major emerging-market countries early this week detailed their plans to lift the International Monetary Fund's bailout fund by more than euro 90 billion ($114 billion) to euro 456 billion to help contain the European sovereign-debt crisis. India will contribute $10 billion to the crisis management fund. The Reserve Bank of India governor D Subbarao on Tuesday warned that inflation is above acceptable levels and he called on the government to do more to support the flagging economy after a controversial decision early this week to leave rates unchanged in the face of pressure for a cut. In his first comments since the rate meeting, Subbarao said it was critical that the RBI contained demand pressures while the government works on easing supply bottlenecks in the economy, particularly in food distribution. Subbarao said there is "no new normal for inflation" in India, referring to unyielding price pressures that have plagued the economy for several months. The Reserve Bank of India's "medium-term inflation goal is still 4%-5%," Subbarao said in a presentation on the central bank's web site. Prime Minister Manmohan Singh at the G20 Plenary Session on Monday, 18 June 2012, said that the Indian government is determined to create an environment that will boost investor sentiment and promote an atmosphere conducive to enterprise and creativity. He said that the government's policies will be transparent, stable and designed to provide a level playing field to both domestic and foreign investors. Singh said that the government is focusing heavily on infrastructure investment and it has set ambitious targets to keep infrastructure investment on track and also put in place a problem resolution mechanism to overcome implementation bottlenecks. Like other countries, we too allowed the fiscal deficit to expand after 2008 to impart a stimulus. We are now focussing on reversing the expansion. Singh said that the government is determined to take tough decisions, including on controlling subsidies The Congress-led United Progressive Alliance (UPA) coalition last week named Finance Minister Pranab Mukherjee as its nominee for the post of president in the upcoming presidential poll. Mukherjee is expected to step down as the country's finance minister later this month. Prime Minister Manmohan Singh is widely expected to handle the finance portfolio himself. Singh early this month laid out ambitious infrastructure development plans for the current fiscal year, in an effort to counter criticism over a perceived policy paralysis that has led India into its worst slowdown in nearly a decade. European stocks rose on Wednesday, 20 June 2012, on expectations of more monetary easing by the Federal Reserve. Key benchmark indices in Germany and UK were up 0.11% and 0.42%. France's CAC 40 shed 0.24%. Four members of the Bank of England's Monetary Policy Committee (MPC) voted in favor of an increase in the bank's asset purchase program, while the committee unanimously agreed on keeping interest rates at a record low of 0.5%, minutes from the latest meeting in early June showed on Wednesday. Three members recommended raising the quantitative easing program by 50 billion pounds ($78.6 billion) to 375 billion pounds, while one member preferred to increase the program to 350 billion pounds. However, most members noted that key events in the euro zone in coming weeks could affect the situation in the euro zone and that there was merit in waiting to see how matters evolved there before the MPC reached a conclusion on whether to add any further monetary stimulus, the minutes said. The MPC further discussed a cut in interest rates, but judged that lower rates would not have any advantages over the asset purchase program. A key summit of the European Union is scheduled on 28 and 29 June 2012 to discuss the ongoing European debt crisis. Tighter European banking supervision and measures to strengthen the monetary union are largely expected to be among top proposals at an EU summit. The Spanish government holds a critical bond auction tomorrow, 21 June 2012. At its bond auction Thursday, Spain will offer euro 1 billion to euro 2 billion of three bonds, maturing in 2014, 2015 and 2017. Moody's Investors Service today, 20 June 2012, upgraded Turkey's government bond ratings by one notch to Ba1 from Ba2, and maintained the positive outlook. Asian stocks rose on Wednesday, 20 June 2012, on the back of upbeat US housing data overnight. US is the world's biggest economy. Key benchmark indices in Singapore, Japan, Taiwan, South Korea, Hong Kong and Indonesia were up by 0.47% to 1.63%. China's Shanghai Composite shed 0.34%. China shouldn't allow annual economic growth to slip below 7.5%, and more support measures might be needed, Ministry of Finance researcher Jia Kang said Wednesday. The People's Bank of China has already shifted to a more accommodative monetary stance, and new easing measures can be expected if growth weakens further in the second half, Mr. Jia said at a financial seminar. He said lowering taxes for enterprises isn't enough to solve any corporate difficulties affecting growth unless combined with fiscal support. The Chinese government has set a gross domestic product growth target of 7.5% for 2012, but concern over global economic conditions has raised doubts that the target can be met The latest data showed Japan's trade deficit widening by a larger-than-expected margin in May 2012. Trading in US index futures indicated a flat opening of US stocks on Wednesday, 20 June 2012. US stocks advanced on Tuesday on hopes that the Federal Reserve will agree to extend stimulus measures to support growth in world's largest economy. The two-day meeting of the Federal Open Market Committee on US interest rates ends today, 20 June 2012. Investors are expecting further easing from the US central bank amid slower economic growth in the world's biggest economy, either through extension of its $400 billion Operation Twist program or possibly another round of quantitative easing. The Fed launched Operation Twist in September 2011 to lower long-term borrowing costs. Operation Twist is officially scheduled to end on 30 June 2012.