Market settles at 1-1/2 month high; extends gains for seventh day

The key benchmark indices extended gains for the seventh day in a row to settle at one and a half month highs after a largely successful Spanish bond auction eased worries about the euro-zone crisis. Expectations of strong earnings growth underpinned sentiment, with most front line firms paying higher advance tax in Q1 June 2010. The BSE 30-share Sensex jumped 153.82 points or 0.88%, up 221.79 points from the day's low and off 30.73 points from the day's high. The market breadth was positive, though not as strong as it was earlier in the day. European stocks and US index futures rebounded after the Spanish bond auction.

The market has staged a strong rebound since late May 2010, with heavy buying by foreign funds aiding the recent surge. The Sensex has jumped 1,594.21 points or 9.94% from a low of 16,022.48 on 25 May 2010. The Sensex has gained 0.86% in calendar year 2010 so far, after jumping 81% in 2009. The barometer index is off 353.33 points or 1.96% from a peak of 17,970.02 on 7 April 2010.
Coming back to today's trade, intraday volatility was high. The market moved in a narrow range in early trade. The BSE Sensex surged to a fresh intraday high in early afternoon trade. A bout of volatility was witnessed as the Sensex soon slipped into the red, led by fall in index heavyweight ICICI Bank counter. The Sensex hit a fresh intraday low. The market regained positive zone later, as ICICI Bank came off lows. The market surged sharply to scale one and a half month high in mid-afternoon trade as European shares shrugged off initial weakness and moved into positive zone. The market rallied to fresh intraday high in late trade on buying in heavyweight stocks.
NSE's volatility index, India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, declined 8.03% to 20.85. The index had risen 3.14% to 22.67 on Wednesday, 16 June 2010. 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.
Infrastructure stocks gained on fresh buying. Auto stocks extended recent gains as Q1 June 2010 advance tax payments from frontline auto companies surged. Metal stocks gained in volatile trade. Realty shares saw mixed trend. Shares from the Mukesh and Anil Ambani stable sizzled on the bourses on speculation the scrapping of non-compete agreement would improve business prospects of group companies. Mahindra & Mahindra, ITC, and GAIL India hit record highs whereas L&T and HDFC struck 52-week highs.
Foreign funds today, 17 June 2010, bought stocks worth a net Rs 462.60 crore, as per provisional data from the stock exchanges. Domestic funds offloaded shares worth a net Rs 363.63 crore.
Foreign funds have bought equities worth a net Rs 3250.05 crore in six trading sessions from 10 June 2010 to 17 June 2010, as per data from the stock exchanges. The net inflow totaled Rs 2161.35 crore in June 2010 so far (till 17 June 2010) compared to a massive outflow of Rs 12071.13 crore in May 2010.
Domestic funds, which had absorbed some of the heavy selling from foreign funds last month, offloaded stocks worth a net Rs 951.90 crore this month so far. Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.
On the macro front, the annual food inflation eased to 16.12% in the week ended 5 June 2010, compared to previous week's annual rise of 16.74%, data released by the government today showed. The fuel price index climbed 13.18%, lower than an annual rise of 14.23% in the previous week.
European shares rose on Thursday, extending gains into a seventh session, on reports a bond auction in Spain proceeded smoothly on Thursday, with the country selling 3 billion euros of 10-year bonds with a maximum yield of 4.911%. The key benchmark indices in France, UK and Germany were up by between 0.65% to 0.82%.
Asian stocks were mixed on Thursday on concern a global economic recovery may take longer than expected after US housing starts dropped. The key benchmark indices in Indonesia, South Korea, Hong Kong and Taiwan were up by 0.15% to 1.13%. However, key benchmark indices in China, Japan, and Singapore were down 0.11% to 0.68%.
US markets saw a flat closing on Wednesday after FedEx's cautious comments and mixed economic data. The Dow Jones industrial average added 4.69 points, or 0.05%, to 10,409.46. The Standard & Poor's 500 Index fell 0.62 points, or 0.06%, to 1,114.61 and the Nasdaq Composite Index rose 0.05 points to 2,305.93.
A Commerce Department report showed housing starts fell 10% in May 2010, the biggest drop since March 2009. The weak housing market data released by the Commerce Department on Wednesday contrasted with a separate report that showed a surge in industrial output, highlighting the uneven nature of the economic recovery.
Trading in US index futures indicated that the Dow could gain 28 points at the opening bell on Thursday, 17 June 2010. US index futures were in the red earlier.
Back home, the collection of indirect taxes, which include customs, central excise and service tax, jumped 49% to around Rs 35,000 crore during April-May 2010 from a year ago period on the back of industrial buoyancy. The government proposes to raise the collection of indirect taxes by 29% this fiscal ending March 2011.
The government after market hours on Tuesday, 15 June 2010 proposed to impose capital gains tax on all stock market transactions by Indians and overseas funds as a part of changes in tax laws. As per the second draft of the direct tax code (DTC) released on Tuesday, the securities transaction tax (STT) will stay and rates will be calibrated. In its first draft DTC unveiled last year, the government had proposed to scrap the securities transaction tax.
The DTC has proposed taxing gains from investments in the stock market and also equity-linked mutual fund units at the applicable rate of taxation. The DTC has also proposed some taxes on income of foreign funds, treating all incomes from their investments in the stock market in India as capital gains.
The revised discussion paper on DTC has proposed computation of minimum alternate tax (MAT) on book profits basis. The earlier code had proposed MAT on gross assets. The revised discussion paper also makes it clear that profit-linked deductions of units already operating in special economic zones would be protected for the unexpired period. The tax proposals, which will replace the existing direct tax laws introduced decades ago, are expected to come into force in the next financial year starting 1 April 2011.
Meanwhile, many Indian firms have reportedly paid higher advance tax in Q1 June 2010. Higher advance tax payment normally indicates higher profits for the period under review. Reliance Industries (RIL) has paid Rs 653 crore, an increase of 108%, while HPCL paid Rs 61 crore, a 307% increase. Bajaj Auto paid Rs 110 crore against Rs 50 crore last year.
Infosys Technologies, the country's second-largest software company, reported an advance tax payment of Rs 275 crore, compared to Rs 230 crore in the previous year. TCS paid Rs 128 crore in advance taxes in Q1 June 2010, up 142% from Rs 53 crore it paid in the April-June period last fiscal.
The country's top consumer goods company Hindustan Unilever paid Rs 75 crore, the same as last the last fiscal year. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year
The country's top pharmaceutical companies have also paid higher taxes, with GlaxoSmithkline Pharma paying Rs 42 crore against Rs 39 crore in the year-earlier period and Ranbaxy's payments rising to Rs 17.5 crore from Rs 15 crore.
The banking sector was a mixed bag during the quarter. The country's largest bank State Bank of India (SBI) paid Rs 860 crore against the Rs 1170 crore it paid a year before. Union Bank of India's advance tax payments rose to Rs 168 crore from Rs 104 crore, while ICICI Bank paid Rs 350 crore, the same as it paid in the last fiscal.
Housing finance major HDFC has paid advance tax of Rs 215 crore in Q1 June 2010 verses Rs 175 crore in Q1 June 2009. Private sector lender HDFC Bank has paid advance tax of Rs 315 crore in Q1 June 2010 versus Rs 250 crore in Q1 June 2009.
Bharat Heavy Electricals (Bhel) has paid Rs 400 crore verses Rs 320 crore, ITC has paid Rs 230 crore versus Rs 200 crore. ONGC has paid Rs 1093 crore, up 24.20% from Rs 880 crore paid during the corresponding period a year ago. L&T's advance tax has risen 18.2% to Rs 130 crore.
Mahindra and Mahindra paid Rs 63 crore, up 270.5%, and Tata Motors paid Rs 65 crore, more than double last year's outgo. Steel Authority of India (SAIL) paid Rs 362 crore against Rs 344 crore a year before, while Gas Authority of India paid Rs 280 crore against Rs 250 crore. Ambuja Cement's advance tax payment dipped marginally to Rs 65 crore from Rs 70 crore
Global rating agency Fitch, early this week, raised India's local currency rating outlook to stable from negative as the rating agency forecast a decline in government debt to GDP ratio to 80% by March 2011 from 83% at the end of March 2010. It also upgraded India's growth forecast to 8.5% in the year to March 2011 from earlier forecast of 7% growth.
The Reserve Bank of India (RBI) is likely to raise interest rates further after government data released on 14 June 2010 showed a surge in headline inflation. Inflation based on the wholesale price index (WPI) rose an annual 10.16% in May 2010, faster than 9.59% rise in April 2010, government data showed on Monday. Meanwhile, inflation for March 2010 was revised upwards to 11.04% from a provisional rise of 9.9%.
Industrial output rose much faster than expected at 17.6% in April 2010 from a year earlier on strong consumer demand and government spending. March's annual growth rate was revised upwards to 13.9% from 13.5%. Manufacturing output rose 19.4% in April 2010. The industrial output rose 10.4% in the 2009/10 fiscal year (April-March), faster than the 2.6% clocked in the previous fiscal year.
Investors will also keep a close eye on the progress of the monsoon rains. Annual monsoon rains in the week to 16 June 2010 were 8% below normal, the India Meteorological Department (IMD) said on 17 June 2010. As per IMD update on 16 June 2010, southwest monsoon was vigorous over Saurashtra & Kutch and Madhya Maharashtra and active over Gujarat Region, Konkan & Goa, Marathwada, Vidarbha and South Interior Karnataka during past 24 hours.
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. Monsoon rains had hit Kerala on 31 May 2010, a day ahead of schedule. The south-west monsoon usually covers the entire country by mid-July. The weather office late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
The BSE 30-share Sensex jumped 153.82 points or 0.88% to 17,616.69, its highest closing since 27 April 2010. The index advanced 184.55 points at the day's high of 17,647.42 in late trade. The Sensex fell 67.97 points at the day's low of 17,394.90 in afternoon trade.
The S&P CNX Nifty was up 41.50 points or 0.79% to 5,274.85, its highest closing since 30 April 2010. It struck a day's high of 5,285.55 in late trade.
The market breadth, indicating the overall health of the market, was positive. The breadth had turned negative in afternoon trade in contrast to a strong breadth earlier in the day. On BSE, 1544 shares advanced as compared with 1339 that declined. A total of 104 shares remained unchanged.
The BSE Mid-Cap index gained 0.41% and the BSE Small-Cap index rose 0.58%. Both these indices underperformed the Sensex.
Except the BSE Consumer Durables index, all the other sectoral indices on BSE logged gains. The BSE Consumer Durables index lost 0.10%. The BSE Auto index surged the most, by 1.78%.
The total turnover on BSE amounted to Rs 4556 crore, lower than Rs 4821.86 crore on Wednesday, 16 June 2010.
Among the 30-member Sensex pack, 21 advanced while the rest declined.
Infrastructure stocks gained on fresh buying. India's largest engineering & construction firm by sales Larsen & Toubro (L&T) jumped 3.57% to Rs 1780 after striking a 52-week high of Rs 1782. It was the top gainer from the Sensex pack. Higher advance tax payment aided the rally in the counter.
Gammon Infrastructure Projects rose 2.15% after Punjab Biomass Power, a special purpose vehicle of the company commissioned its first biomass based plant of 12 megawatt at Patiala in the state of Punjab. The company made this announcement during trading hours today, 17 June 2010.
Punj Lloyd rose 0.16% after the company's overseas unit won a large order worth Rs 1394 crore. The company announced the large order win after market hours on Wednesday, 16 June 2010.
Among other infrastructure stocks Nagarjuna Construction Company (up 0.53%), Jaiprakash Associates (up 2.92%), GMR Infrastructure (up 1.25%), and GVK Power Infrastructure (up 3%), gained.
Shares from the Mukesh and Anil Ambani stable sizzled on the bourses on speculation the scrapping of non-compete agreement would improve business prospects of group companies.
India's second largest listed cellular services provider by sales Reliance Communications (RCom) gained 2.33%, extending a three-day 8.37% surge. The stock rose on reports the company is looking to raise cash by selling up to 26% stake in its private undersea cable system unit Reliance Globalcom for $500 million.
Index heavyweight Reliance Industries jumped 1.40% to Rs 1072.20 on reports the firm is looking to enter thermal power projects and may bid for the ultra mega power projects of 4,000 megawatt each in Chhattisgarh and Orissa.
Anil Dhirubhai Ambani Group (ADAG)-led Reliance Capital (up 0.95%), Reliance MediaWorks (up 1.39%), Reliance Power (up 0.66%), Reliance Infrastructure (up 1.69%), and RNRL (up 0.15%), gained.
Shares of the Mukesh Ambani-led Reliance Industrial Infrastructure gained 0.92%.
State-run oil marketing companies gained on reports the government is considering freeing petrol price from government control and possibly giving limited autonomy to state oil firms to price diesel closer to market rates. BPCL (up 0.39%), HPCL (up 0.38%) and Indian Oil Corporation (up 1.02%), rose.
ONGC rose 1.96% on higher advance tax payment and on higher crude oil prices. Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms.
Telecom stocks were in demand with the highly competitive sector seeing buoyancy in anticipation of likely merger & acquisition activity.
India's largest listed cellular services provider by sales Bharti Airtel rose 0.34% on reports its first quarter advance tax payment jumped 79% to Rs 179 crore.
Mahanagar Telephone Nigam jumped 4.49% after the company's American depository receipt, or ADR soared 10.29% to $2.68 on the New York Stock Exchange on Wednesday, 16 June 2010.
India's largest real estate developer by sales DLF rose 2.20%, extending a three-day 5.79% advance.
Other realty stocks were mixed. Unitech (up 0.21%), Indiabulls Real Estate (up 0.44%), Omaxe (up 1.73%), and HDIL (up 0.47%), gained. But, Orbit Corporation (down 0.92%), Ackruti City (down 1.98%) and Godrej Properties (down 1.19%), declined
India's largest private sector bank by market capitalisation ICICI Bank rose 0.51% to Rs 882.10 in highly volatile trade. It had tumbled as much as 3.49% at the day's low of Rs 846.95 in afternoon trade. It had hit a high of Rs 890.95 earlier in the day, when it rose 1.52% intraday.
Volumes in the ICICI Bank stock were heavy. On BSE, 24.95 lakh shares changed hands in the counter. The average daily volume in the scrip in the past one quarter to 11 June 2010 stood at 6.5 lakh shares.
The private sector bank said there are baseless rumours circulating in the market through SMS and emails about a law suit filed against ICICI Bank in the US. The bank categorically denies any such law suit and state that these are malicious and unfounded rumors. The bank has lodged a complaint with regulatory and law enforcement agencies, it said.
India's second largest private sector bank by sales HDFC Bank rose 1.22% after its ADR gained 0.61% on Wednesday.
But, PSU bank stocks declined. India's largest bank by net profit and branch network State Bank of India declined 0.64%. Bank of Baroda slipped 2.03%, Bank of India declined 1.66% and Punjab National Bank slipped 1.22%
Reserve Bank of India on Wednesday announced a plan to buyback Rs 10000-crore of short-dated government securities to help ease tight liquidity conditions in the money market.
India's largest mortgage lender Housing Development Finance Corporation was up 0.79% to Rs 2935 after hitting a 52-week high of Rs 2943.
India's largest non-ferrous metal producer by sales Sterlite Industries (India) rose 0.73% to Rs 694.50, off day's low of Rs 683.30. The stock today extended a three-day 8.57% surge. The company after market hours on 11 June 2010 fixed 22 June 2010 as the record date for a 2-for-1 stock split and a liberal 1:1 bonus issue.
Other metal stocks edged higher, rebounding after an intra-day dip. Hindalco Industries (up 1.21%), Jindal Saw (up 0.88%), Sesa Goa (up 1.61%), Steel Authority of India (up 0.10%), Nalco (up 0.44%) advanced. However, India's largest private sector steel maker by sales Tata Steel fell 0.93%.
Ramsarup Industries spurted 12.05% on reports the world's largest steelmaker ArcelorMittal is eyeing a stake in the company.
Auto stocks extended recent gains as Q1 June 2010 advance tax payments from frontline auto companies surged. India's largest tractor maker by sales Mahindra & Mahindra (M&M) rose 0.25% to Rs 631.80, after striking an all-time high of Rs 641.80.
India's largest small car maker by sales Maruti Suzuki India rose 1.58%. The stock rose for the second day in a row on reports car makers are preparing to raise prices to offset rising input costs.
India's top truck maker by sales Tata Motors rose 3.13%. The company's global vehicle sales rose 50% to 79,819 units in May 2010 over May 2009. These included 19,053 vehicles sold by Jaguar Land Rover in the month, 72% higher from a year ago.
However, India's top bike maker by sales Hero Honda Motors lost 1.24% to Rs 1984.85 and was the top loser from the Sensex pack.
India's largest FMCG maker by sales Hindustan Unilever declined 1.06%, extending Wednesday's 1.63% fall.
Other FMCG stocks also edged lower on profit booking. Colgate Palmolive India (down 1.41%), Ruchi Soya (down 1.17%), Nestle India (down 0.88%), and United Spirits (down 1.12%), declined.
However, India's largest cigarette maker by sales ITC gained 1.07% to Rs 293.85 after striking a record high of Rs 296.75. The stock was in demand ahead of a board meeting on 18 June 2010 to consider issue of bonus shares.
IT stocks were mixed. India's third largest software services exporter by sales Wipro rose 1.24% and India's largest software services exporter by sales TCS advanced 0.16%. But, India's second largest software services exporter by sales Infosys lost 0.07%.
Cals Refineries clocked the highest volume of 3.76 crore shares on BSE. Karuturi Global (1.67 crore shares), Reliance Natural Resources (1.59 crore shares), Shree Ashtavinayak Cinema Vision (67.98 lakh shares) and Reliance Communications (60.93 lakh shares) were the other volume toppers in that order.
ICICI Bank clocked the highest turnover of Rs 217.85 crore on BSE. Reliance Industries (Rs 140.06 crore), Sesa Goa (Rs 118.94 crore), Reliance Communications (Rs 116.31 crore), and TTK Prestige (Rs 112.67 crore) were the other turnover toppers in that order.