Interest rate sensitive stocks lead rally

Key benchmark indices attained their highest closing level in nearly 4-1/2 weeks after Prime Minister Manmohan Singh after trading hours on Wednesday, 6 June 2012, announced a big push to the infrastructure sector to revive sagging economic growth. The 50-unit S&P CNX Nifty regained the psychological 5,000 mark. The barometer index, BSE Sensex, jumped 194.75 points or 1.18%, up about 129 points from the day's low and off close to 32 points from the day's high. Gains in world stocks underpinned sentiment. Indian shares gained for the fourth straight trading session today, 7 June 2012. The Sensex has risen 683.89 points or 4.28% in four trading sessions from a recent low of Rs 15,965.16 on 1 June 2012. The barometer index has gained 1,194.13 points or 7.73% in calendar 2012 so far (till 7 June 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1,513.19 points or 10%. From a 52-week high of 19,131.70 on 8 July 2011, the Sensex has lost 2482.65 points or 12.98%. Coming back to today's trade, index heavyweight Reliance Industries (RIL) edged higher after RIL chairman Mukesh Ambani said at the company's Annual General Meeting today, 7 June 2012, that RIL is targeting to double its operating profit in about five years. Engineering and construction major L&T moved up after the company announced new orders. FMCG stocks rose on arrival of monsoon in Kerala early this week. Metal stocks gained on hopes for Chinese policy-easing. The market breadth was positive. Interest rate sensitive banking, auto and realty stocks extended recent gains triggered by hopes the Reserve Bank of India (RBI) will cut interest rates at mid-quarter monetary policy review on 18 June 2012 to prop up slowing economy after data released by the government last week showed India's economy grew 5.3% in Q4 March 2012, its slowest pace of expansion in nearly a decade. Indian shares edged higher to hit their highest level in four weeks at onset of the trading session on firm Asian stocks. The market regained strength after trimming initial gains to hit fresh intraday low in morning trade. Intraday volatility continued as key benchmark indices trimmed gains after regaining strength in mid-morning trade. Volatility continued as the market regained strength after trimming intraday gains to hit fresh intraday low in early afternoon trade. Key benchmark indices hit fresh intraday highs in afternoon trade as European shares rose in early trade there. Firmness continued in mid-afternoon trade. The Sensex and the Nifty hit their highest level in more than four weeks in late trade. The BSE Sensex rose 194.75 points or 1.18% to 16,649.05, its highest closing level since 7 May 2012. The index jumped 226.29 points at the day's high of 16,680.59 in late trade. The index gained 65.59 points at the day's low of 16,519.89 in early afternoon trade. The S&P CNX Nifty rose 52.55 points or 1.05% to 5,049.65, its highest closing level since 7 May 2012. The index hit a high of 5,059.65 in intraday trade. The index hit a low of 5,007.75 in intraday trade. The BSE Mid-Cap index rose 0.72% and the BSE Small-Cap index rose 0.46%. Both these indices underperformed the Sensex. The market breadth, indicating the overall health of the market, was positive. On BSE, 1,527 shares rose and 1,172 shares fell. A total of 125 shares were unchanged. BSE clocked turnover of Rs 2168 crore, higher than Rs 2060.29 crore on Wednesday, 6 June 2012. From 30-share Sensex pack, 25 stocks gained and the rest fell. Wipro (down 1.88%), GAIL (India) (down 1.33%) and TCS (down 1.02%), edged lower from the Sensex pack. Sterlite Industries (up 3.85%), Maruti Suzuki India (up 3.14%) and NTPC (up 1.61%), edged higher from the Sensex pack. Index heavyweight Reliance Industries (RIL) rose 0.92% to Rs 720.70, off the day's high of Rs 731.90. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in Mumbai today, 7 June 2012, 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. With regard to the company's oil and gas exploration and production business, Ambani said, "Ten years since its discovery, the KG 06 still remains India's first and only producing deep water development project. And like similar projects elsewhere, it has not been without its unique set of geological challenges. The reserves from the existing D1 D3 field have proved far more difficult to produce than anticipated. We have experienced some disappointment with the reserves and consequently seen production drop below the originally estimated quantities. Today, RIL and BP teams are working closely to understand the complex geology of this block. We are chalking out an exploration and development campaign that will efficiently target high quality prospects in the deeper zones and also optimize existing as well as future development plans. We are well on the way to creating a pipeline of projects for our next wave of oil and gas development projects which would include R series discoveries and all the satellite discoveries. Subject to receiving the requisite approvals, we hope to add around 30 mmscmd of additional production through the new wave of planned developments. We are targeting to achieve, in the next three to four years, a total production of 60 mmscmd gas for a sustained period". FMCG stocks rose on arrival of monsoon in Kerala early this week. Good monsoon may boost farm incomes and rural consumer spending. FMCG firms derive substantial sales from rural India. United Spirits (up 3.18%), Marico (up 1.72%), Tata Global Beverages (up 1.06%), ITC (up 1.02%), Ruchi Soya Industries (up 0.86%), Hindustan Unilever (up 0.58%), Colgate-Palmolive (India) (up 0.5%), United Breweries (up 0.28%) and Britannia Industries (up 0.01%), edged higher. Interest rate sensitive banking stocks extended recent gains triggered by hopes the Reserve Bank of India (RBI) will cut interest rates at mid-quarter monetary policy review on 18 June 2012 to prop up slowing economy after data released by the government last week showed India's economy grew 5.3% in Q4 March 2012, its slowest pace of expansion in nearly a decade. India's second largest private sector bank by net profit HDFC Bank rose 3.45%. India's largest private sector bank by net profit ICICI Bank gained 2.83%. India's largest commercial bank in terms of branch network State Bank of India rose 0.39%. The state-run bank said during market hours today it has decided to revise its retail term deposit interest rates with a reduction by 0.25% in tenors up to 240 days with effect from 8 June 2012. India's second-largest software exporter by revenue Infosys rose 1.78%. Infosys' Executive Co-chairman S. Gopalakrishnan told reporters that company has been witnessing delays by clients in deciding on their information-technology spending, but the company hasn't seen any contract cancellations. In the medium-to long-term, unless and until there is a certainty in the euro zone, it is not good for business, Gopalakrishnan said. When there is uncertainty, companies pull back on investments, even though they are doing well, he added. Overall, the environment continues to be uncertain, he added. Interest rate sensitive auto stocks rose on hopes Reserve Bank of India (RBI) will cut interest rates at mid-quarter monetary policy review on 18 June 2012 to prop up slowing economy after data released by the government last week showed India's economy grew 5.3% in Q4 March 2012, its slowest pace of expansion in nearly a decade. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Small-car major Maruti Suzuki India rose 3.14%. The company has reportedly cut the production of its gasoline-powered models by as much as 15% because of weak demand for vehicles which use the fuel that is priced much higher than diesel. Gasoline is about 79% more costlier than diesel in India, where the government subsidizes the sale of diesel and cooking fuels to help control inflation. Maruti early this month said total sales declined 5% to 98,884 units in May 2012 over May 2011. India's largest commercial vehicle maker by sales Tata Motors rose 0.98%, with the stock extending Wednesday's 5.71% rally. Tata Motors' total sales (including exports) of Tata commercial and passenger vehicles rose 4% to 64,347 vehicles in May 2012 over May 2011. The company's domestic sales of Tata commercial and passenger vehicles for May 2012 rose 6% to 60,128 units in May 2012 over May 2011. The company announced the monthly sales data early this month. India's largest utility vehicles maker Mahindra & Mahindra (M&M) gained 1.81%, with the stock reversing initial losses after the company said it unequivocally denies all allegations of fraud, misrepresentation and conspiracy. M&M said it has seen the press release issued by the legal firm of Diaz Reus and Targ which claims to represent some US automobile dealers in a suit apparently filed on 4 June 2012 in the US District Court in Atlanta, Georgia against M&M and Mahindra USA Inc. M&M said it cannot comment on this as the matter is in the courts. M&M said some dealers had earlier filed a suit against M&M and Global Vehicles in the US District Court in Missouri. The Missouri Court dismissed all claims against M&M in that suit, M&M said. Significantly, the Missouri Court also ruled that M&M could not be held liable for any action of Global Vehicles with respect to its dealers, M&M said. In a separate related development, an International Arbitral tribunal in February 2012 dismissed similar allegations and claims against M&M made by Global Vehicles, M&M said. M&M is in the process of enforcing that arbitration award, it said. M&M announced on 1 June 2012 that its total automobile sales rose 28.2% to 43,988 units in May 2012 over May 2011. Domestic sales rose 24.2% to 39,938 units. Passenger vehicles 26.7% to 21,154 units. Exports rose 87.2% to 4,050 units in May 2012 over May 2011. Shares of two-wheeler makers also edged higher. India's second largest motorcycle maker by sales Bajaj Auto rose 0.12%, with the stock extending Wednesday's 3.33% gains. The company early this week 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 2.38%, with the stock extending Wednesday's 4.29% rally. 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). Metal stocks gained on hopes for Chinese policy-easing. Sesa Goa (up 3.77%), JSW Steel (up 3.56%), Jindal Steel & Power (up 1.91%), Bhushan Steel (up 1.44%), Tata Steel (up 0.48%), Sail (up 0.21%), Nalco (up 0.17%) and NMDC (up 0.09%), edged higher. China is the world's largest consumer of copper and aluminum. LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.36% on Wednesday, 6 June 2012. Hindalco Industries fell 0.41%. The company will announce its audited consolidated results for the year ended 31 March 2012 on 27 June 2012. Interest rate sensitive realty stocks extended recent gains triggered by hopes the Reserve Bank of India (RBI) will cut interest rates at mid-quarter monetary policy review on 18 June 2012 to prop up slowing economy after data released by the government last week showed India's economy grew 5.3% in Q4 March 2012, its slowest pace of expansion in nearly a decade. Lower interest rates may help revive demand for properties. Purchases of both residential and commercial property are largely driven by finance. Phoenix Mills (up 4.55%), HDIL (up 3.46%), DLF (up 3.11%), Indiabulls Real Estate (up 2.66%), Prestige Estates (up 2.04%), D B Realty (up 2.02%), Oberoi Realty (up 2%), Sobha Developers (up 1.39%), Unitech (up 1.36%), Godrej Properties (up 1.04%), Parsvnath Developers (up 0.57%) and Sunteck Realty (up 0.23%), edged higher. Engineering and construction major L&T rose 0.75% after the company announced during trading hours today, 7 June 2012, that L&T Construction has bagged new orders worth Rs 2410 crore across various businesses in Q1 June 2012. HCL Technologies clocked a highest turnover of Rs 145.27 crore on BSE. State Bank of India (Rs 138.23 crore), Reliance Industries (Rs 69.27 crore), Reliance Capital (Rs 66.15 crore) and Larsen & Toubro (Rs 57.30 crore), were the other turnover toppers on BSE in that order. Suzlon Energy reported a highest volume of 78.80 lakh shares on BSE. Cals Refineries (73.47 lakh shares), Kingfisher Airlines (62.89 lakh shares), Lanco Infratech (62.41 lakh shares) and Sybly Industries (50.68 lakh shares), were the other volume toppers on BSE in that order. Data on industrial production for April 2012 due on 12 June 2012 and inflation for May 2012 due on 14 June 2012 could provide cues on the central bank's likely policy stance at mid-quarter monetary policy review on 18 June 2012. Industrial production registered a surprise 3.5% contraction in March 2012. The annual rate of inflation, based on monthly wholesale price index (WPI), stood at 7.23% (provisional) for the month of April 2012. Data released by the government last week showed India's economy grew 5.3% in Q1 March 2012, the slowest pace of growth in nearly a decade. The low growth numbers led the Reserve Bank of India's Deputy Governor Subir Gokarn to say early this week that the central bank could further look at cutting interest rates. Gokarn also underlined the need to take some corrective action to rein in India's deficits. The Union Cabinet today, 7 June 2012, deferred a decision on amending the Pension Fund Regulatory and Development Authority Bill that aims to allow foreign investments in the sector. The bill, which also seeks to set up an authority to regulate retirement funds, has been held up due to a lack of political consensus over allowing foreign investments in pension funds. Although the bill doesn't mention the extent to which foreign investment could be allowed in Indian pension funds, the finance ministry has proposed to set the cap at 26%. A parliamentary panel that examined the bill had accepted the ministry's suggestion. Prime Minister Manmohan Singh on Wednesday 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. Singh said that the government plans to award 9,500 kilometer (kms) of roads for construction this year and over 4,000 kms for maintenance under the new system. In Railways, the government plans to award work on the Elevated Rail Corridor in Mumbai, two new Loco manufacturing units and the public private partnership (PPP) stretch of the Dedicated Freight corridor, in addition to redeveloping 4 or 5 stations through PPP mode in the current year. In shipping, Singh said the government has set the challenging task of awarding work for two new major PPP Ports, the first in decades, in addition to capacity addition targets which are three times the targets for the last year. In civil aviation, work will be awarded in the current year on three new Greenfield airports in Navi Mumbai, Goa and Kannur and new international airports at Lucknow, Varanasi, Coimbatore, Trichy and Gaya, Singh said. Also, two new hubs will be developed in the country making India a destination as well as a transit point. In power, the government plans to add a record 18,000 megawatts (MW) of capacity this year, Singh said. "I would urge all the ministries to go the extra mile in implementing what we have planned. I would expect them to very expeditiously resolve any inter-ministerial differences or turf battles that might arise as we move forward. I wish you all the very best and I look forward to reviewing the second and third quarterly progress reports," Singh said after chairing a meeting with ministers holding key infrastructure portfolios. Monsoon rains were 36% below average in the week to June 6, the weather office said on Thursday, reflecting the delay in the arrival of the seasonal rains over Kerala from the usual June 1 start date. India Meteorological Department (IMD) said on 6th June 2012 that the southwest monsoon has further advanced into most parts of central Arabian Sea, remaining parts of coastal Karnataka, entire Goa, some parts of south Konkan and south Madhya Maharashtra, some parts of north interior Karnataka, some more parts of south & central Bay of Bengal, most parts of northeast Bay of Bengal, entire Nagaland, Manipur, Mizoram, Tripura, Assam, Meghalaya, Arunachal Pradesh and some parts of Sub-Himalayan west Bengal & Sikkim. IMD in its weather forecast till 9th June 2012 said Rain/thundershowers would occur at many places over Kerala, coastal Karnataka, Konkan & Goa, Lakshadweep and Andaman & Nicobar Islands and at a few places over interior Karnataka and south Madhya Maharashtra and at one or two places over Gujarat. Rain/thundershowers would occur at many places over Sub-Himalayan West Bengal & Sikkim and northeastern states. Rain/thundershowers would occur a few places over Jammu & Kashmir, Himachal Pradesh and at one or two places over Uttarakhand. India's services sector grew at its fastest pace in three months during May, and firms were more optimistic about the year ahead, a survey showed early this week. HSBC's services purchasing managers' index, compiled by Markit, rose almost two points to 54.7 in May from 52.8 in the previous month. It has posted an above-50 growth reading since November. The index measuring business expectations jumped to a 15-month high of 76.7 last month from 73.8 in April, more than 14 points above its March level. European stock markets rose on Thursday after the Spanish government sold more debt than it had targeted in a keenly watched auction. Key benchmark indices in UK, France and Germany were up by 0.79% to 0.95%. Spain today, 7 June 2012, sold 2.07 billion euros ($2.6 billion) in government bonds. Borrowing costs rose versus previous auctions, but the sale saw strong demand and the government sold more than euro 1 billion to euro 2 billion targeted by the Treasury. News reports this week said European officials are moving toward a plan to recapitalize Spanish banks that would see Madrid escape some of the onerous conditions placed on bailout recipients such as Greece, Ireland and Portugal. The Bank of England (BoE) left its key lending rate unchanged and made no adjustments to its bond-buying program on Thursday. The central bank's nine-member Monetary Policy Committee left its key bank rate at a record low 0.5%, where it has stood since March 2009. The panel also made no adjustment to its 325 billion pounds ($523 billion) asset-buying program. The European Central Bank (ECB) held its main interest rate at 1% on Wednesday, resisting international pressure to provide more support for the euro zone's ailing economy. The ECB also said the interest rate on its deposit facility would remain at 0.25% and the rate on the marginal lending facility would stay at 1.75%. The ECB indicated that it stands ready to cut rates. Meanwhile, Greek voters return to the polls on 17 June 2012 after the splintered results of a May 6 parliamentary election left no party able to put together a government. Most Asian stocks rose on Thursday, 7 June 2012, as investors hoped for US and European monetary easing to counter growing economic woes. Key benchmark indices in Hong Kong, Japan, South Korea, and Taiwan rose by between 0.34% to 2.56%. Key benchmark indices in China, Indonesia and Singapore fell by between 0.02% to 0.71%. The Chinese central bank today, 7 June 2012, announced a surprise cut in interest rates. The People's Bank of China lowered both its benchmark and deposit rates by a quarter-point, with the move taking effect from Friday, 8 June 2012. China is the world's second biggest economy after the US. If the financial stresses in Europe jump the fence to the US, then the impact upon Asia could be greatly magnified, according to the ratings agency Moody's, which looked at various implications if policy markers lose their grip on the euro zone's darkening financial situation. In a situation where financial market contagion is limited to Europe, factory activity in Asia is likely to slow to around 5% growth year-on-year. However, if the US succumbs to the contagion, the negative impact would be four times worse, Moody's said. Under such a scenario, Asian production could contract 8.5%, bottoming in March of 2013. "When the US is dragged into the financial turmoil, the impact quadruples instead of doubling, as might be expected given that the euro zone and US economies are of similar size," Moody's Sydney-based analysts said in a report released to media on Thursday. Moody's said Europe and the US each had very different linkages to Asia, with the former playing a big role in export financing, while the US role was larger in terms of trade. "Europe is responsible for a lot of Asia's export financing, as well as some final demand, whereas the US provides only a modest amount of Asian trade financing, but a lot of final demand," Moody's said. It said studies showed that export demand is about three times more important for manufacturers in Asia than trade finance. Trading in US index futures indicated that the Dow could gain 60 points at the opening bell on Thursday, 7 June 2012. US stocks surged to their best one-day performance so far this year on Wednesday after the European Central Bank indicated that it stands ready to cut rates and on hopes for fresh easing from the Federal Reserve. The Fed's No. 2 official said late Wednesday that the door remained open for more easing should conditions require such a move. "I am convinced that scope remains for the Federal Open Market Committee to provide further policy accommodation," Janet Yellen asserted in an evening speech to the Boston Economic Club. US Federal Reserve Chairman Ben Bernanke will testify before a congressional panel today, 7 June 2012, which is expected to shed light on the Fed's view of the economy and possible policy moves.