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Market holds positive zone
July, 23rd 2010

The key benchmark indices held positive zone in mid-afternoon trade, having recovered from lower level earlier. But, the market breadth was negative in contrast to a strong breadth earlier in the day. European stocks and US index futures edged higher. The BSE 30-share Sensex was up 45.57 points or 0.25%, off 78.84 points from the day's high and up 64.79 points from the day's low.

Telecom major Bharti Airtel surged. Pivotals Reliance Industries and State Bank of India held firm. But, software major Wipro pared early gains.

Stocks were volatile as traders rolled over positions in the derivatives segment from July 2010 series to August 2010 series ahead of the expiry of the near-month July 2010 contracts next Thursday, 29 July 2010.

The market surged at the onset of the trading session on firm Asian stocks. The two key benchmark indices - the 30-share BSE Sensex and the 50-unit S&P CNX Nifty, both, struck their highest level in more than 29 months at the onset of the trading session. The market pared gains in early trade. The market moved in a range in morning trade.

The market came further off the day's high in mid-morning trade. The market slipped into the red in early afternoon trade. The Sensex soon regained positive. It once again slipped into the red shortly only to regain positive zone later. The market held positive zone in mid-afternoon trade as European stocks and US index futures rose.

NSE's volatility index India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, rose 2.2% to 19.32. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

Investors poured money into equity funds focused on India and China in the week ended 21 July 2010 as concern about economic growth spurred withdrawals from developed-market stocks, global fund tracker EPFR Global said. India funds received a net $187 million, the most in 51 weeks, while China money managers took in $138 million, EPFR said.

Foreign funds have bought Indian equities worth a net Rs 6053.03 crore this month so far, till 22 July 2010, as per data from the stock exchanges. Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010.

Domestic funds have sold shares worth a net Rs 3539.31 crore this month so far, till 22 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.

As per a UN report released on 22 July 2010, India climbed four notches to be ranked the ninth most attractive investment destination in 2009 with a total foreign direct investment inflow of $34.61 billion. The World Investment Report-2010, prepared by the United Nations Conference on Trade and Development (Unctad) said that India attracted sizeable overseas investment despite the overall drop in such inflows due to the global financial crisis.

The Prime Minister's Economic Advisory Panel on Friday, 23 July 2010, forecast 8.5% growth in GDP in the fiscal year that ends in March 2011 (FY 2011). It expects 4.5% growth in farm output in FY 2011. The headline inflation will be at 6.5% by March 2011, the panel said in a report. The report also said net capital inflows would be $73 billion.

Prime Minister's Economic Advisory Council C. Rangarajan said fertiliser subsidy bill must come down and diesel prices could be freed once inflation begins to come down.

The Reserve Bank of India (RBI) said on Thursday, 22 July 2010, it will allow take-out financing through external commercial borrowing for refinancing of rupee loans availed from domestic banks. Refinancing of domestic rupee loans with external commercial borrowings is not permitted, Reserve Bank of India said.

The key near term event is the Reserve Bank of India's quarterly policy review on Tuesday, 27 July 2010. Analysts expect another 25 basis points rate hike aimed at anchoring inflation expectations. The Reserve Bank of India (RBI) on 2 July 2010, hiked the repo rate by 25 basis points to 5.5% from 5.25%, with immediate effect. It also hiked the reverse repo rate, at which it absorbs excess cash from the banking system, by an equal 25 basis points to 4% from 3.75%. The central bank said the latest rate hike was a part of the calibrated exit from the expansionary monetary policy.

European shares were trading slightly higher on Friday as the data showed the Ifo Institute's German business-climate index rose to 106.2 in July 2010 from 101.8 in the previous month. The key benchmark indices in France, UK and Germany were up by between 0.13% to 0.67%.

British gross domestic product grew by a much stronger-than-expected 1.1% in the second quarter, government data showed Friday, 23 July 2010.

Investors are keenly awaiting the results of the stress tests on 91 European banks due after the close of business Friday, 23 July 2010. The European stress test exercise comes in the wake of an earlier US effort to instill new confidence in its own battered banking sector. European regulators had asked the region's biggest banks to publish a list of each lender's gross and net exposure to central and local governments in 30 countries in the region, including Greece, Spain, Ireland, Italy and Portugal to determine if they can survive potential losses from both a recession and a decline in the value of their government- bond holdings.

Asian markets rose on Friday, 23 July 2010, as commodity prices climbed and on upbeat guidance from select US bluechip companies. The key benchmark indices in Hong Kong, China, Indonesia, South Korea, Japan, Taiwan, and Singapore were up by between 0.38% and 2.28%.

US stocks rebounded Thursday, 22 July 2010, amid better-than-expected corporate earnings, shrugging off a series of mixed economic data. The Dow Jones Industrial Average jumped 201.77 points or 1.99% to 10,322.30. The tech-rich Nasdaq composite index gained 58.56 points or 2.68% at 2,245.89 and the broader S&P 500 index climbed 24.08 points or 2.25% to 1,093.67.

In economic news, the Labor Department reported that new claims for US unemployment benefits rose more than expected last week, after two weeks of sharp declines linked largely to seasonal layoffs. Initial jobless claims surged more than eight percent to a seasonally adjusted 464,000 in the week ending 17 July 2010.

Existing US home sales fell for the second straight month in June, the National Association of Realtors (NAR) said, reflecting weakness in the housing industry which was at the epicenter of the financial crisis. Sales of single-family, town homes and condominiums dropped 5.1% to 5.37 million units from 5.66 million in May 2010.

Trading in US index futures indicated that the Dow could rise 42 points at the opening bell on Friday, 23 July 2010.

Back home, government data released on 22 July 2010 showed the fuel price index rose 14.27% in the year to 10 July 2010, unchanged when compared to previous week's rise of 14.27%. The food price index climbed 12.47%, lower than previous week's annual rise of 12.81%. The primary articles index was up 16.48%, compared with the previous week's reading of 16.25%.

The headline inflation rose lower-than-expected 10.55% in June 2010. The rate of increase was higher than May's rise of 10.16%. Inflation for April 2010 was revised upwards to 11.23% from 9.59%.

On the corporate front, the combined net profit of a total of 318 companies rose 25.8% to Rs 21776 crore on 17.97% rise in sales to Rs 145361 crore in Q1 June 2010 over Q1 June 2009.

The goods and services tax (GST), which is to replace the existing value added tax (VAT), service tax, excise duties and central sales tax among others, will be in place from 1 April 2011. Reports indicated that the Centre and states on Wednesday, 21 July 2010 arrived at a broad consensus on rolling out independent India's biggest tax reforms that will simplify the manner in which corporates, small enterprises and traders will be levied taxes on goods and services. The new indirect tax reform is to streamline the movement of goods and services across India with a single tax structure.

A committee set up by the stock market regulator Securities & Exchange Board of India (Sebi) has recommended major changes in the existing law governing substantial acquisition of shares and takeovers. The committee headed by C. Achuthan has recommended an increase in the acquisition threshold for the initial trigger of an open offer from the current level of 15% to 25% of the voting capital of a listed company. While no change has been recommended in the annual creeping acquisition limit of 5%, the committee has recommended that creeping acquisition be permitted only to acquirers who already hold more than 25% of the voting capital, subject to the aggregate post-acquisition shareholding not exceeding the maximum permissible non-public shareholding.

The committee has recommended that an open offer should be made for all the shares of the target company to ensure equality of opportunity and fair treatment of all shareholders, big and small. The exception to this rule is the size of an open offer where the same is voluntary in nature. The current regulations mandate a minimum offer size of only 20%.

Investors are closely monitoring the progress of the monsoon rains. The annual monsoon rains were 17% below normal in the week to 21 July 2010, improving after a 24% deficit in the previous week, the India Meteorological Department said on Thursday, 22 July 2010. The seasonal monsoon rains during 1 June to 22 July 2010 were 12% below normal, the weather office added.

Southwest monsoon was vigorous over Sub-Himalayan West Bengal & Sikkim and active over Bihar, West Uttar Pradesh, Uttarakhand, Himachal Pradesh, Punjab, Konkan & Goa, Vidarbha, Telangana, Coastal & South Interior Karnataka and Kerala during past 24 hours, the weather office said in its daily report on Thursday 22 July 2010.

The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The weather office expects this year's monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

At 14:20 IST, the BSE 30-share Sensex was up 45.57 points or 0.25% to 18,158.72. The Sensex rose 124.41 points at the day's high of 18,237.56 at the onset of the trading session, its highest level since 19 February 2008. The index lost 19.22 points at the day's low of 18,093.93 in early afternoon trade.

The S&P CNX Nifty was up 10.50 points or 0.19% to 5,452.45. Nifty struck an intra-day high of 5,477.50 in early trade, its highest level since 5 February 2008.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1575 shares declined while 1326 shares advanced. A total of 122 shares remained unchanged. The breadth was strong earlier in the day.

From the 30-share Sensex pack, 16 stocks fell and the rest of them advanced. HDFC Bank (down 1.21%), ONGC (down 0.97%), and DLF (down 0.92%), edged lower from the Sensex pack.

Index heavyweight Reliance Industries (RIL) rose 0.65% to Rs 1066.05 after swinging in a band of Rs 1060.10- 1070.70 so far during the day. As per recent reports, RIL has rejected the oil ministry's directive to sell gas from its Krishna Godavari basin field to new customers by reducing supply to existing ones. As many as 16 companies are waiting to sign gas sale and purchase agreements with RIL.

India's largest listed telecom services provider by sales Bharti Airtel gained 2.42% to Rs 309.35 on reports the company plans to launch iPhone 4, the latest product from Apple Computer's stable, by October this year. It was the top gainer from the Sensex pack.

But, India's second largest listed telecom services provider by sales Reliance Communications (RCom) slipped 0.39%.

India's largest power equipment maker by sales Bharat Heavy Electricals rose 1.26% as net profit surged 41.85% to Rs 667.66 crore on 15.78% increase in net sales to Rs 6479.69 crore in Q1 June 2010 over Q1 June 2009. The company declared its results during trading hours today, 23 July 2010.

But, India's largest dam builder by sales Jaiprakash Associates dipped 1.11% ahead of its June 2010 quarterly result today, 23 July 2010.

India's biggest commercial bank in terms of branch network, State Bank of India (SBI) gained 0.56% to Rs 2491.05, after striking a record high of Rs 2504 in intra-day trade today, 23 July 2010. The bank is reportedly hitting the overseas debt markets to raise funds for overseas lending requirement of the bank. The size of the medium term notes, having a tenure of five years, to be raised by the bank may be somewhere between $500 million and $1.5 billion.

India's largest engineering & construction firm by sales Larsen & Toubro rose 0.61% to Rs 1939, after hitting a 52-week high of Rs 1944 in intra-day trade today, 23 July 2010. As per recent reports, the company has bagged the Rs 12,132 crore Hyderabad Metro Rail project.

India's third largest software services exporter Wipro gained 0.12% to Rs 416.10, off day's high of Rs 433. The company reported strong results before trading hours today, 23 July 2010. Consolidated net profit rose 30.50% to Rs 1318.60 crore on 16.17% increase in total income to Rs 7371.50 crore in Q1 June 2010 over Q1 June 2009.

Wipro's chairman, Azim Premji said the company is seeing strong demand environment across industry verticals despite macro challenges. Wipro added the highest number of billable employees ever in Q1 June 2010. For Q2 September 2010, the company expects revenues from its IT services business to be in the range of $1,253 million to $1,277 million, a sequential increase of 4.1% to 6.1%

BF Utilities was the top traded counter on the BSE with turnover of Rs 116.56 crore followed by JSW Steel (Rs 93.12 crore), United Breweries (Rs 93.03 crore), Tata Steel (Rs 85.96 crore), and United Breweries (Holdings) (Rs 77.92 crore).

From the side counters, Tulsi Extrusions (up 20%), Sutlej Textiles (up 13.85%), Vaibhav Gems (up 12.30%), GM Breweries (up 12.16 %), and Jaipan Industries (up 11.65%), surged.

Panchmahal Steel (down 9.23%), Choksi Laboratories (down 8.93%), Haldyn Glass (down 8.13%), Dolphin Offshore Enterprises (down 7.38%), and Bharat Fertilisers (down 6.95%), declined.

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