The key benchmark indices regained strength in early afternoon trade supported by firm Asian stocks. Index heavyweight Reliance Industries fell in choppy trade ahead of a Supreme court hearing on gas tussle with Reliance Natural Resources (RNRL). Another index heavyweight Larsen & Toubro was also weak. Telecom and cement stocks fell. But FMCG and construction stocks rose. The BSE 30-share Sensex was up 66.85 points or 0.39%, off close to 65 points from the day's high and up close to 75 points from the day's low.
Realty stocks gained. Metal stocks jumped on gains in commodity prices on the London Metal Exchange on Monday. The market breadth was positive.
The market surged in early trade on firm Asian stocks. The S&P CNX Nifty hit its highest level in more than 17 months in early trade. The market regained positive territory after slipping into the red for a brief period in morning trade. Market regained strength in early afternoon trade.
Hedge fund manager Galleon Group's founder Raj Rajaratnam was arrested Friday, 16 October 2009, on charges of insider trading. Galleon Hedge Fund, which currently has assets under management of about $3.7 billion, has a 7% stake in broking firm Edelweiss Capital, 4.6% stake in construction firm Shriram EPC and 0.3% stake in Pipavav Shipyard.
Rajaratnam's lawyer has insisted his client isn't guilty of the charges. But investors in the group's funds could follow the lead of Rochdale Investment Management, which said Monday it was liquidating its stake in the Galleon Diversified fund. If enough investors left Galleon, managers at the firm could be forced to sell shares of companies it owns in order to meet those redemptions. Galleon could also seek to prevent investors from redeeming money immediately.
Galleon's troubles already had an impact Monday in Sri Lanka, where Rajaratnam was born and is a citizen--he is also a citizen of the US. That market's benchmark lost as much as 3% early Monday, and ended down 1.6%.
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.
Closer home, 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 0.03% to 1.07%.
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 12:20 IST, the BSE 30-share Sensex was up 66.85 points or 0.39% to 17,392.86. 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 morning trade.
The S&P CNX Nifty was up 22.05 points or 0.43% to 5,163.85. 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. But breadth weakened compared to a strong breadth in early trade. On BSE, 1344 shares advanced as compared with 1142 that declined. A total of 72 shares remained unchanged.
Among the 30-member Sensex pack, 20 rose while the rest fell.
The BSE Mid-Cap index rose 0.6% and the BSE Small-Cap index rose 0.65%.
Index heavyweight Reliance Industries (RIL) fell 0.53% to Rs 2,213 as a hearing on the gas dispute with Reliance Natural Resources (RNRL) begins in the Supreme Court today afternoon. The stock was volatile. It hit a high of Rs 2240.30 and a low of Rs 2,194.30. RNRL rose 3.28%.
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.
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 0.89% to 1.66%.
Unitech rose 2.97% 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 0.41%. The company, last week, announced bagging orders worth Rs 966 crore.
Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange, rose 3.16% on Monday.
India's largest copper maker by sales Sterlite Industries rose 0.53%. The company, last week, raised $500 million in convertible senior notes and plans to use the proceeds primarily for expansion of its copper business. The notes are convertible into American depositary shares at $23.33 per share.
Among other metal stocks, Steel Authority of India, Hindalco Industries, National Aluminum Company, Hindustan Zinc rose by between 0.83% to 3%.
Steel Authority of India rose 4.35% on renewed market talk the government is considering a stake sale in the state-run firm,
Some FMCG stocks rose on hopes of revival in consumer demand. Hindustan Unilever, ITC, United Spirits, Marico, Dabur India Britannia Industries rose by between 0.64% to 2.25%.
Ultratech Cement fell 0.51% extending Friday's fall after the company issued a cautious outlook at the time of announcing Q2 results on Friday. Net profit jumped 53% to Rs 251 crore in Q2 September 2009 over Q2 September 2008.
UltraTech said the performance was affected on a sequential basis due to lower demand in Southern India. The net profit dropped 39.94% to Rs 250.90 crore in Q2 September 2009 over Q1 June 2009.
The company said the cement demand may grow 9% in the year ending March 2010 on the back of government's initiative to boost rural development, infrastructure and housing. It, however, said new capacities which at various stages of implementation will result in pressure on margins.
The company said its focus on higher volume growth, captive power generation and capital productivity will help offset the impact of lower prices on margins.
Among other cement stocks, Grasim Industries, Birla Corporation and Ambuja Cements, fell by between 0.01% to 1.02%.
Some construction shares rose as higher government spending on infrastructure sector in the Union Budget 2009-2010 to provide a stimulus to the economy, may result in increase order flow for construction. Era Infra Engineering, Jaiprakash Associates, Nagarjuna Construction Company, Valecha Engineering rose by between 0.57% to 1.29%.
The government has set a target of spending $20 billion a year on road construction.
India's second largest mobile services provider by sales Reliance Communications (RCom) fell 1.01%. Anil Ambani chairman of RCom on Thursday alleged there was a 'vicious and malafide' campaign against his telecom company Reliance Communications by a 'known rival group' and dubbed the special audit report, which claimed that RCom was mis-stating its revenues as 'biased and prejudiced'. But the auditor, Parekh & Co defended its work and also denied a claim by Mr Ambani that it had not sought feedback from RCom.
India's largest mobile services provider by sales Bharti Airtel fell 0.96%.
Subex surged 4.64% after the company's managing director and chief executive officer Subash Menon said the business has stabilized and the future looks positive.
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