The key benchmark indices regained positive territory after slipping into the red for a brief period in mid-morning trade as index heavyweight Reliance Industries turned negative. Firm Asian stocks supported market. The BSE 30-share Sensex was up 19.54 points or 0.11%, off close to 110 points from the day's high and up close to 30 points from the day's low. The S&P CNX Nifty hit its highest level in more than 17 months in early trade. Realty and banking stocks rose. Oil exploration stocks gained whereas PSU OMCs fell on rally in crude oil prices. IT stocks rose on tech major Apple's better than expected result on Monday. But Capital goods stocks fell. The market breadth was positive.
The market was volatile. It surged in early trade on firm Asian stocks. Market regained positive territory after slipping into the red for a brief period in mid-morning trade.
Emerging-market equity fund inflows surged in the second week of October 2009 on optimism improving US earnings and China's trade figures signal increased demand for commodities, fund tracker EPFR Global said on Friday, 16 October 2009. Heavy inflows were seen in funds specialized in BRIC countries -- Brazil, Russia, India and China. Asia ex-Japan funds received $823 million in the week ended 14 October 2009.
Meanwhile, the government on Monday approved stake sales in state-run power producer NTPC and another unlisted power firm Satluj Jal Vidyut Nigam which reflects the country's resolve to speed up reforms and raise more resources for social schemes. On Monday, Trade Minister Anand Sharma said the Union Cabinet had approved a 5% stake sale in NTPC, and 10% in, an unlisted power producer. On Friday, 16 October 2009, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.
Meanwhile, the Union Cabinet has approved a plan to release the key wholesale inflation number every month rather than on a weekly basis to improve the measurement of price movements. The new wholesale price index with 2004 as the base year will debut on 14 November 2009, Commerce Minister Anand Sharma said. The base year used for the current weekly index is 1993.
Faster industrial output growth and rising inflationary pressures have strengthened case for an end to the RBI's accommodative monetary stance next year. Industrial output grew at its fastest pace in 22 months in August at 10.4 %.
The RBI pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. While as exit from the loose monetary policy is imminent, speculation on the bourses is the timing of the exit policy. The RBI is expected to keep its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on 27 October 2009.
Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.
Cement firms, too, are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.
Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.
Banks are seen reporting a sedate growth in core lending amid sluggish credit offtake. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.
Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.
The aggregate net profit of 169 companies which have announced results so far, rose 21.1% to Rs 7624 crore on 7.5% rise in sales to Rs 46895 crore in Q2 September 2009 over Q2 September 2008.
Asian stocks rose today after reassuring earnings reports in the US from Apple and Texas Instruments on Monday. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.09% to 0.9%.
Trading in US index futures indicated Dow could gain 26 points at the opening bell today.
US markets rallied to new 2009 highs on Monday, 19 October 2009, on earnings optimism. The S&P 500 closed just shy of the 1,100 mark. The Dow added 96.28, points or 1%, to 10,092.19. The S&P 500 index rose 10.23 points, or 0.9%, to 1,097.91. The Nasdaq Composite Index rose 19.52 points, or 0.9%, to 2,176.32.
In important earnings from the US, tech major Apple's profit and sales beat analysts' forecasts. The company reported fourth quarter earnings at nearly 2 dollars a share, up from little over a dollar per share in the same period last year. This was above analyst estimates of around 1.4 dollars per share.
Federal Reserve Chairman Ben Bernanke warned on Monday that Asian export-promotion policies and large US budget deficits could refuel global economic imbalances and put efforts to achieve more durable growth at risk if not curbed. Throwing his weight behind a recent call by leaders of the Group of 20 major powers to rebalance the global economy in the wake of a devastating financial shock, Bernanke said Asian nations like China that enjoy large trade surpluses should discourage excess saving and boost consumption.
At the same time, he said the United States needed to increase its saving and substantially reduce federal deficits over time.
Closer home, a section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. As per reports, 30 companies have filed their draft red herring prospectuses in September 2009 with market regulator Securities & Exchange Board of India (Sebi) for raising funds through initial public offering.
The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.
As per one report, companies plan to raise over Rs 50,000 crore through initial public offers (IPOs), follow-up public offers, divestment of stake sale in the second half of the current financial year. Reliance Infratel also announced on 22 September 2009, its intention to raise Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest. Divestment of state-run firms by the government may also increase the supply of paper in the market.
At 11:20 IST, the BSE 30-share Sensex was up 19.54 points or 0.11% to 17,345.55. The Sensex rose 131.25 points at the day's high of 17,457.26 in early trade. The barometer index fell 9 points at the day's low of 17,317.01 in mid-morning trade.
The S&P CNX Nifty was up 9.45 points or 0.18% to 5,151.25. It hit a high of 5,181.95, its highest since 6 May 2008.
The market breadth, indicating the overall health of the market was positive. Breadth weakened compared to strong breadth in early trade. On BSE, 1181 shares advanced as compared with 1079 that declined. A total of 64 shares remained unchanged.
Among the 30-member Sensex pack, 19 rose while the rest fell.
The BSE Mid-Cap index rose 0.29% and the BSE Small-Cap index rose 0.26%.
Index heavyweight Reliance Industries (RIL) fell 0.87% to Rs 2205.50 as a hearing on the gas dispute with Reliance Natural Resources (RNRL) begins in the Supreme Court today afternoon. The stock came off the day's high of Rs 2240.30. RNRL rose 1.44%.
A three-judge bench, headed by Chief Justice K G Balakrishnan, will today hear the gas dispute between RIL and RNRL. This is the first hearing on the case after Anil Ambani offered to make peace with Mukesh Ambani. The younger brother had earlier accused the Ministry of Petroleum and Natural Gas of siding with Mukesh.
RIL had first moved the apex court, challenging the decision of the Bombay High Court delivered on 15 June 2009 and which had asked RIL to provide 28 million metric standard cubic metres per day (mmscmd) of gas to RNRL at a price of $2.34 per million British thermal unit (mBtu). The government had also moved a special leave petition in the case, asserting its right on pricing and distribution of natural gas. RNRL argued that the government has no role to play either in the utilisation or the fixation of gas price on its contract with RIL. However, RIL has contended that it was only a contractor for the gas from the KG-D6 block and did not have the power to fix the price.
Oil exploration stocks rose as US crude futures rose more than half a percent on Tuesday to a one-year high of $80.05 a barrel on a weak dollar and firm US stock markets. Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms.
Cairn India rose 0.37%. UK-based oil and gas exploration major Cairn Energy Plc recently mopped up $240 million by selling 2.3% in its Indian subsidiary Cairn India to Malaysia's Petronas International Corporation.
With this move, Petronas' stake in Cairn India jumps to 14.94%, within touching distance of an open offer trigger. Cairn UK now retains a 62.75% interest in Cairn India, which made a major oil discovery (Mangala) in Rajasthan in the north west of India in 2004. Cairn India, the Indian arm of the UK firm, has interests in a total of 13 acreage blocks in India and Sri Lanka.
India's second biggest state-run oil exploration firm by revenue Oil India rose 0.34%. But, India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) fell 0.99%. ONGC has bagged over a third of the 70 blocks offered under the government's eighth New Exploration Licensing Policy (NELP 8), amid luke-warm response towards the bidding round. ONGC bid for 25 blocks and was awarded 11 offshore and two onshore concessions.
Nearly half of 70 blocks offered under NELP 8 found no bidder, with 76 bids submitted for 36 exploration blocks, D.N. Narasimha Raju, joint secretary in the oil ministry said on Monday.
PSU OMCs fell as higher crude oil prices will increase under-recoveries on domestic sale of petrol, diesel, kerosene and LPG at controlled prices. HPCL, BPCL and Indian Oil Corporation (IOC) fell by between 0.47% to 2.21%.
Bank stocks rose on expectations of better than expected Q2 September 2009 result. India's largest bank by net profit and branch network State Bank of India rose 1.24%. Among other PSU banks, Bank of India, Punjab National Bank, Union Bank of India, Punjab National Bank and Bank of Baroda, rose by between 0.07% to 1.14%.
India's largest private sector bank by net profit ICICI Bank rose 1.63% as its ADR rose 1.8% on Monday. The bank recently reduced auto loan rates by 50 basis points.
But, India's second largest private sector bank by net profit HDFC Bank fell 0.4% even as its ADR rose 1.65% on Monday. The bank's net profit rose 30.2% to Rs 687.46 crore in Q2 September 2009 over Q2 September 2008. The results, which hit the market last week were more or less in line with market expectations.
The central bank will reportedly hike the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM) category. Banks do not have to make any mark-to-market provisions on securities held this basket if prices of securities fall. Provisions have to be made out of profit and therefore, impact a bank's bottom line. Yields on ten-year government bonds have risen sharply this year. Bond prices and bond yields are inversely related.
Indian banks can put bonds equal to 25% of the value of deposits in their HTM accounts. The market expectations is for an increase in the ceiling by up to 2 percentage points, possibly at a quarterly monetary policy review on 27 October 2009.
India's largest dedicated housing finance firm HDFC rose 0.37%. HDFC, after last week announced its net profit rose 24.27% to Rs 663.94 crore in Q2 September 2009 over Q2 September 2008. The results beat market expectations.
IT stocks rose on tech major Apple's better than expected result on Monday. IT bellwether Infosys Technologies rose 1.01% as its ADR rose 0.78% on Monday. Infosys raised its earnings and revenue guidance in both dollar and rupee terms for the year ending March 2010 (FY 2010) at the time of announcing Q2 September 2009 results before trading hour on Friday, 9 October 2009.
Infosys, however, said strengthening rupee is a big concern for its earnings. The rupee is hovering near its highest level in more than a year. The rupee rose towards the 46 per dollar mark early on Tuesday buoyed by the dollar's fall versus major units. The partially convertible rupee was at 46.03/04 per dollar, stronger than its Friday's close of 46.29/30.
A stronger rupee negatively impacts operating margins of IT firms as the sector earns a lion's share of revenue from exports.
India's third largest software services exporter Wipro rose 3.39% as its ADR rose 2.51% on Monday.
India's largest software services exporter TCS rose 1.65% after the company after market hours on Friday, 16 October 2009, reported stronger-than-expected Q2 September 2009 results. Consolidated net profit as per US accounting standards rose 6.81% to Rs 1623.90 crore on 3.16% growth in revenue to Rs 7435.10 crore in Q2 September 2009 over Q1 June 2009.
TCS has a good business pipeline and is pursuing 20 to 25 large outsourcing deals, chief executive N. Chandrasekaran said. The management is seeing signs of recovery but it believes it will be slow. The discretionary spent is still tight but there is spent seen in banking, finance services and insurance (BFSI), retail, utility and pharma verticals, TCS said at a conference call after the results. However, a continuous improvement in volumes cannot be expected, it said. The company is seeing stability in demand environment. The management expects to maintain margins at current levels provided there is no adverse rupee movement.
NIIT Technologies jumped 8.12% after consolidated net profit surged 80.90% to Rs 32.20 crore in Q2 September 2009 over Q1 June 2009.
Realty stocks rose on recent reports that demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and a recovery in the job market. Realty market had slumped last year amid a global credit crunch and buyers fearing job losses. DLF, Indiabulls Real Estate, Omaxe, rose by between 0.32% to 1.57%.
Unitech rose 2.4% after the Cabinet Committee on Economic Affairs (CCEA) on Monday approved Norway-based Telenor's proposal to hike stake in Unitech Wireless, its telecom venture with realtor Unitech, to 74%.
India's largest engineering and construction firm by sales Larsen & Toubro fell 0.85%. The company on Wednesday announced bagging orders worth Rs 966 crore.
India's largest power maker by sales Bharat Heavy Electricals fell 0.85%. The government on Thursday ruled out any immediate plan to disinvest its stake in the power equipment maker. The government owns 67% stake in Bhel.
Among other capital goods stocks, BEML, Siemens, Punj Lloyd fell by between 0.05% to 0.45%.
Some tyre stocks rose on strong replacement demand. MRF, CEAT, Apollo Tyres rose by between 0.45% to 3.68%.
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