Market spurts on rate cut hopes

The market spurted last week on hopes that 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. The market sentiment also got a boost after Prime Minister Manmohan Singh on Wednesday, 6 June 2012, announced a big push to the infrastructure sector to revive sagging economic growth. The barometer index, BSE Sensex rose 753.71 points or 4.72% to 16,718.87. The 50-unit S&P CNX Nifty rose 226.75 points or 4.68% to 5,068.35. The BSE Mid-Cap index rose 2.86% and the BSE Small-Cap index rose 2.13%. Both these indices underperformed the Sensex. Foreign institutional investors (FIIs) sold shares worth net Rs 1807.70 crore in June 2012 so far (till 6 June 2012). FIIs sold shares worth net Rs 347.10 crore in May 2012. They had sold shares worth net Rs 1109.10 crore in April 2012. FIIs have bought shares worth net Rs 40686.70 crore in calendar 2012 so far (till 6 June 2012). FIIs had offloaded shares worth a net Rs 2714.20 crore in 2011. 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. 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 Chinese central bank on Thursday, 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. 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. Trading for the week began on an optimistic note. In a dramatic turn around, key benchmark indices wiped off intraday losses to hit the day's high in late trade on Monday, 4 June 2012, as hopes for further rate cuts triggered bargain hunting in stocks. The BSE Sensex rose 23.24 points or 0.15% to 15,988.40. The S&P CNX Nifty rose 6.55 points or 0.14% to 4,848.15. Key benchmark indices eked out small gains on Tuesday, 5 June 2012, amid a volatile trading session. The BSE Sensex rose 32.24 points or 0.20% to 16,020.64. The S&P CNX Nifty rose 15.15 points or 0.31% to 4,863.30. Key benchmark indices jumped on Wednesday, 6 June 2012, on expectations that Prime Minister Manmohan Singh's meeting with ministers later in the day would result in fresh steps to boost the sagging infrastructure sector. The BSE Sensex jumped 433.66 points or 2.71% to settle at 16,454.30. The S&P CNX Nifty jumped 133.80 points or 2.75% to settle at 4,997.10. Key benchmark indices attained their highest closing level in nearly 4-1/2 weeks on Thursday, 7 June 2012. The BSE Sensex rose 194.75 points or 1.18% to 16,649.05. The S&P CNX Nifty rose 52.55 points or 1.05% to 5,049.65. Key benchmark indices rose for the fifth straight trading session on Friday, 8 June 2012. The BSE Sensex was up 69.82 points or 0.42% to 16,718.87. The S&P CNX Nifty was up 18.70 points or 0.37% to 5,068.35. All the 30 shares in the Sensex pack rose last week. Engineering and construction major L&T spurted 15.39% to Rs 1309.05. The company announced during trading hours on Friday, 8 June 2012, that L&T Shipbuilding -- a subsidiary of the company -- has bagged orders valued at Rs 483 crore for four specialized commercial vessels in Q1 June 2012. L&T announced during trading hours on Thursday, 7 June 2012, that L&T Construction has bagged new orders worth Rs 2410 crore across various businesses in Q1 June 2012. India's largest state-run power equipments maker by sales Bhel rose 7.04% to Rs 221.25. Several construction shares rallied last week after Prime Minister Manmohan Singh announced a big push to the infrastructure sector to revive sagging economic growth. Copper and aluminium maker Sterlite Industries rose 10.31% to Rs 100.60 after the Chinese central bank on Thursday, 7 June 2012, announced a surprise cut in interest rates. China is the world's largest consumer of copper and aluminum. Motorcycle maker Hero MotoCorp (HMCL) jumped 10.07% to Rs 2005.30. 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). Small-car major Maruti Suzuki India rose 4.72% to Rs 1124.55. 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 6.41% to Rs 238.90. 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) 6.67% to Rs 687.85. The company on Thursday denied allegations of fraud, misrepresentation and conspiracy. M&M during trading hours on Thursday 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. Interest rate sensitive banking stocks rose on hopes that 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. India's largest private sector bank by net profit ICICI Bank rose 6.05% to Rs 829. India's largest commercial bank in terms of branch network State Bank of India rose 7.59% to Rs 2180.05. The state-run bank said during market hours on Thursday 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 private sector bank by net profit HDFC Bank rose 9.53% to Rs 538.30. India's largest real estate company by market capitalisation DLF rose 7.68% to Rs 196.40 on rate cut hopes. Lower interest rates may help revive demand for properties. Purchases of both residential and commercial property are largely driven by finance. Index heavyweight Reliance Industries (RIL) rose 6.68% to Rs 729.40. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in Mumbai on Thursday, 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. FMCG stocks extended recent gains 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. Hindustan Unilever (up 2.23% to Rs 428.35) and ITC (up 2.52% to Rs 239.70), edged higher. Tata Steel (up 3.14 to Rs 410.50), Jindal Steel & Power (up 2.58 to Rs 440.10), Sun Pharmaceutical Industries (up 2.50 to Rs 583.05), Bajaj Auto (up 1.94 to Rs 1528.65), Tata Power (up 1.84 to Rs 94.15), HDFC (up 1.80 to Rs 655.45), Coal India (up 1.65 to Rs 326.60), Infosys (up 1.32 to Rs 2419.20) and Bharti Airtel (up 0.96 to Rs 303.85), edged higher from the Sensex pack.