Market gains for fourth week in a row

Key benchmark indices surged after European Union (EU) leaders agreed on a growth and bank recapitalization plan for Europe which is designed to alleviate the worst of the current debt crisis gripping euro-zone. The market sentiment also improved after the government said Prime Minister Dr. Manmohan Singh who took charge of the finance ministry on Wednesday, 27 June 2012, is chalking out plan for the country's economic revival. The barometer index, BSE Sensex, regained psychological 17,000 level. The Sensex gained in four out of five trading sessions of the week that ended on Friday, 29 June 2012. The Sensex and the Nifty gained for the fourth week in a row. Volatility was high during the week as traders rolled over positions from June 2012 series to July 2012 series. The June 2012 derivatives contracts expired on Thursday, 28 June 2012. The BSE Sensex rose 457.47 points or 2.69% to 17,429.98, its highest closing level since 19 April 2012. The 50-unit S&P CNX Nifty gained 132.85 points or 2.58% to settle at 5,278.90, its highest closing level since 20 April 2012. The BSE Mid-Cap index rose 2.39% and the BSE Small Cap index gained 2.13%. Both these indices underperformed the Sensex. Trading for the week began on a weak note. Key benchmark indices dropped in choppy trade on Monday, 25 June 2012, as Reserve Bank of India's announcement of measures to attract greater foreign investment in government bonds and increase in the total amount that Indian companies can borrow by way of external commercial borrowing (ECB), fell short of investors' expectations. The BSE Sensex lost 90.35 points or 0.53% to settle at 16,882.16, its lowest closing level since 19 June 2012. Key benchmark indices logged small gains after seeing wild gyrations either ways throughout the day on Tuesday, 26 June 2012 as European stocks rose in choppy trade. The BSE Sensex advanced 24.42 points or 0.14% to 16,906.58, its highest closing level since 22 June 2012. Key benchmark indices edged higher in choppy trade on Wednesday, 27 June 2012, on hopes the government will speed up its long-awaited reforms program after Prime Minister Manmohan Singh took additional charge of the finance ministry after Pranab Mukherjee on Tuesday resigned as finance minister to contest the presidential polls next month. The BSE Sensex advanced 61.18 points or 0.36% to settle at 16,967.76, its highest closing level since 22 June 2012. Key benchmark indices edged higher on Thursday, 28 June 2012 after the government said Prime Minister Dr. Manmohan Singh who took charge of the finance ministry on Wednesday, 27 June 2012, is chalking out plan for the country's economic revival. The BSE Sensex rose 23 points or 0.14% to 16,990.76, its highest closing level since 21 June 2012. Key benchmark indices jumped on Friday, 29 June 2012, after European leaders agreed on a growth and bank recapitalization plan for Europe which is designed to alleviate the worst of the current debt crisis gripping euro-zone. The BSE Sensex surged 439.22 points or 2.59% to 17,429.98, its highest closing level since 19 April 2012. From the 30-share Sensex pack, 26 stocks rose and only four of them fell during the week. Index heavyweight Reliance Industries (RIL) rose 3.71%. RIL on Wednesday, 27 June 2012, said it has bought back 3 crore shares for Rs 2144.73 crore till 22 June 2012. Under the ongoing share buyback program, RIL has set a maximum buyback price of Rs 870. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in Mumbai early this month that the company's buyback program represents a 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. Metal stocks edged higher as global commodity prices rose after euro zone leaders unveiled a series of measures aimed at introducing stability to Europe's financial markets. India's largest steel maker by sales Tata Steel jumped 5.41%. India's largest sponge iron maker by capacity Jindal Steel & Power surged 8.68%. Private sector aluminium major Hindalco Industries rose 2.26%. The company on Wednesday, 27 June 2012, reported a strong 38% growth in consolidated net profit to Rs 3397 crore on 12% growth in revenue from operations to Rs 80821.40 crore in the year ended March 2012 (FY 2012) over the year ended March 2011 (FY 2011). The result was announced after market hours on Wednesday, 27 June 2012. The company said the growth in net profit was primarily attributable to strong performance of copper business in India and also due to strong performance of its US unit Novelis. The top line growth was driven by better product mix and depreciating rupee, Hindalco said. Hindalco Industries said that despite economic headwinds during the year, the balanced portfolio approach, low cost operation and strong value added businesses resulted in commendable performance. With the low cost advantage and formidable global presence in aluminium downstream, Hindalco is well set for being the Last Man Standing and the First Man Forward, Hindalco said. Hindalco Industries' US based wholly owned subsidiary, Novelis Inc., reported strong operating results in FY 2012 despite challenging market conditions globally. The premium product portfolio, long-term customer base and focused business model enabled Novelis to produce solid results for the year. Hindalco Industries also said that the company has completed issuance of Secured Redeemable Non-convertible Debentures amounting to Rs 1500 crores on private placement basis at the coupon of 9.55% per annum. The proceeds of the issue will be used, for general, business purposes including capital expenditure, working capital, refinancing of existing debt. The debentures are proposed to be listed on WDM segment of National Stock Exchange of India, Hindalco said. Sterlite Industries (India) advanced 3.01%. The company early this week said shareholders have approved the scheme of amalgamation and arrangement with valid voting of 89.75% representing 92% votes in value voted in favor of the resolution approving the scheme. India's largest power equipment maker by sales Bharat Heavy Electricals surged 4.98%. The company has secured a contract worth Rs 950 crore for a 1,020 megawatts hydroelectric project in Bhutan. Bhel announced the order win early this week. India's largest engineering & construction firm by sales L&T gained 2.62%. During market hours on Friday, 29 June 2012, L&T said that the infrastructure vertical of its construction division has won a major order valued at Rs 2040 crore from a leading infrastructure developer. The highway project will be executed on EPC (Engineering, Procurement & Construction) mode, L&T said. The scope of work involves six laning of the existing road, including construction of rail over bridges, underpasses, flyovers, major bridges and viaducts. The mega project is a part of National Highway system being developed under the National Highways Development Programme (NHDP), L&T said. The company also said during market hours on Friday, 29 June 2012, its construction division has won new orders valued at over Rs 1002 crore in June 2012. Interest rate sensitive banking stocks rose on fresh buying. India's second largest private sector bank by net profit HDFC Bank gained 3.39% to Rs 563/50. The stock hit a record high of Rs 565 in intraday trade on Friday, 29 June 2012. India's largest private sector bank by net profit ICICI Bank jumped 5.58%. India's largest commercial bank in terms of branch network State Bank of India (SBI) rose 0.11%. The Reserve Bank of India (RBI) unveiled its fifth Financial Stability Report on Thursday, 28 June 2012. The report said that though the Indian financial system remains robust, risks to financial stability have increased over the past six months due to worsened global and local economic conditions. RBI said that banks remain resilient to credit, market and liquidity risks and would be able to withstand macroeconomic shocks, given their comfortable capital adequacy positions. Asset quality concerns, however, persist and liquidity pressures have intensified. Credit and deposit growth in the banking sector have decelerated while banks' reliance on borrowed funds has increased. Distress dependencies between banks have risen. The analysis of the network of the Indian banking system reveals that the systemic importance of the most connected banks has increased, warranting a closer monitoring of the banks. RBI added that there could be unintended consequences of the implementation of the reform measures for emerging economies, like India, e.g. due to the deleveraging induced by the new capital and liquidity standards. Banks in India will migrate to Basel III from a position of relative strength but there could be challenges in the form of higher cost of capital. The new Principles for Financial Market Infrastructure, issued by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO), propose stringent risk management requirements, which could necessitate a relook at the risk management practices of domestic central counterparties, RBI said. Shares of two-wheeler firms were in demand. State-run oil marketing companies (PSU OMCs) announced reduction in petrol prices by Rs 2.46 per litre effective Friday, 29 June 2012. India's second largest motorcycle maker by sales Bajaj Auto rose 1.73%. India's largest motorcycle maker by sales Hero MotoCorp (HMCL) advanced 2.76%. Small-car maker Maruti Suzuki India advanced 6.21% after PSU OMCs announced reduction in petrol prices by Rs 2.46 per litre effective Friday, 29 June 2012. India's largest utility vehicles maker Mahindra & Mahindra (M&M) gained 1.36%. 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. Tata Motors, India's biggest auto maker by revenue, fell 2% and was the top loser from the Sensex pack. Tata Motors has stopped production of medium and heavy trucks at its Jamshedpur unit starting Thursday, 28 June 2012. The closure of production is for three days till Saturday, 30 June 2012, as the company wants to avoid piling up stocks amid tepid demand. Earlier this week, Tata Motors shut its truck factory in Pune, Maharashtra for three days to align production with demand. India's largest pharmaceutical firm by market capitalization Sun Pharmaceutical Industries surged 4.53% to Rs 635.55. The stock hit a record high of Rs 643 in intraday trade on Friday, 29 June 2012. Among other pharma stocks, Dr Reddy's Laboratories rose 4.26% and Cipla gained 0.86%. Index heavyweight and cigarette major ITC rose 3.35% to Rs 258.95. The stock hit a record high of Rs 259.95 in intraday trade on Friday, 29 June 2012. FMCG major Hindustan Unilever shed 1.3%. Software pivotals were mixed. India's largest IT company by revenue, Tata Consultancy Services (TCS), rose 3.55%. India's second largest software services exporter by revenues, Infosys, rose 1.11%. India's third largest software services exporter by revenue, Wipro, fell 0.32%. Tata Power Company surged 10.91%. The company said after market hours on Thursday, 28 June 2012, it has completed the purchase of 51% equity shares of Tata BP Solar India, which were held by BP Alternative Energy Holdings. Consequently, Tata BP Solar India is now a wholly owned subsidiary of the company. Meanwhile, the Delhi Electricity Regulatory Commission (DERC) early this week approved a steep tariff hike in Delhi. New Delhi's electricity regulator has approved higher electricity tariffs in the country's capital, by an average of 20.8%, starting July 1 to help these companies narrow their losses. On average, the electricity tariffs for industrial and household consumers will rise to Rs 6.63 a kilowatt hour from Rs 5.49 a kilowatt hour. The four electricity distribution companies that operate in New Delhi -- Reliance Infrastructure's BSES Rajdhani Power and BSES Yamuna Power and Tata Power Company's Delhi Distribution along with provincial government's New Delhi Municipal Council had sought the raise, citing the need to cut their electricity distribution losses. India's largest thermal power generator by sales NTPC jumped 5%. Gas distribution major GAIL (India) rose 3.17%. European leaders on Friday, 29 June 2012, unexpectedly announced a raft of measures designed to alleviate the worst of the current debt crisis gripping euro-zone. European Union leaders announced a plan for a single financial supervisor for the region, as part of a range of short-term measures to try to stabilize markets, amid the ongoing debt crisis gripping the region. European banks will now have the possibility of direct recapitalization, he said, with financial assistance provided by the region's current bailout fund -- the European Financial Stability Facility (EFSF) -- until the new European Stability Mechanism (ESM) becomes available. Loans will be transferred from the EFSF to ESM without a change in seniority of the debt, he said. The Indian government on Thursday, 28 June 2012, issued draft guidelines for implementing the controversial anti-avoidance tax proposal. A panel of seven members suggested that the provisions be applied from 1 April 2013, and that the onus of proving wrongdoing should be on the authorities. The panel has proposed that to avoid the indiscriminate application of the General Anti-Avoidance Rules (GAAR) provisions and to provide relief to small taxpayers, there should be monetary threshold for invoking the GAAR provisions. The anti-avoidance rules and a retrospective tax amendment -- both proposed in the federal budget in March -- have rattled investor confidence and sparked a wave of criticism both domestically and overseas. Prime Minister Manmohan Singh, who took charge as the finance minister on Wednesday, 27 June 2012, has already identified problems on the tax front as having contributed to a general negative mood. The panel has suggested that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The panel suggested that the GAAR provisions are meant for cases of tax evasion, not avoidance, or tax mitigation, where a tax payer takes advantage of a fiscal incentive allowed by a tax law. In a case where only a part of an arrangement is not allowed, the provisions will be limited to only that part, the panel proposed. Consistency of approach is essential for invoking GAAR, and the panel felt that there should be absolute certainty about the time limits during which the various actions under the provisions are to be completed. The Prime Minister's office (PMO) on Friday, 29 June 2012, clarified that the GAAR guidelines that have been put up on the government website from the official level of the Finance Ministry and shared with some stakeholders are only draft guidelines and have been put out for receiving wide-ranging feedback and for discussion purposes only. These guidelines have not been seen by the Prime Minister and will be finalised with the approval of the Prime Minister only after considering the feedback received. Prime Minister Dr. Manmohan Singh on Wednesday, 27 June 2012, met senior officials from the Finance Ministry after taking over the Finance portfolio to chalk out plan for the country's economic revival. He stressed that reviving investor sentiment is on top of his priorities as the country is passing through challenging times, economically. Singh said India needs to work towards making the country resilient in meeting external challenges. In the short run, there is a need to revive investor sentiment, both domestic and international, Singh said. Prime Minister Manmohan Singh took additional charge of the finance ministry after Pranab Mukherjee on Tuesday, 26 June 2012 resigned as finance minister to contest the presidential polls next month. The shift comes at a time when the economy is going through a slowdown amid deteriorating domestic conditions and euro-zone troubles. Mr. Mukherjee is the leading contender in the July 19 presidential election, having been nominated by the Congress party-led United Progressive Alliance government for the largely ceremonial post. The Reserve Bank of India (RBI) on Monday, 25 June 2012, announced hike of the foreign investment cap on government bonds by $5 billion and hike of limit on overseas commercial borrowings by $10 billion. The RBI also allowed sovereign wealth funds, multilateral agencies, endowment funds, insurance and pension funds as well as foreign central banks to invest in government bonds. These measures are aimed at attracting foreign funds and arresting the recent sharp slide of the rupee against the US dollar. The government also said on Monday, 25 June 2012, that the withholding tax would be liberalized as announced in the 2012-13 Budget. In Budget 2012-13, Finance Minister Pranab Mukherjee had proposed to reduce the rate of withholding tax on interest payments on external commercial borrowing (ECBs) from 20% to 5% for three years, for certain stressed infrastructure sectors.