Friday, November 5, 2010

BSE and NSE Weekly Review 4 Nov 2010

Dalal Street witnessed a festive boost last week. The market surged on US Federal Reserve's decision to buy $600 billion in government bonds to stimulate the US economy, robust corporate earnings and on sustained buying by foreign funds.

The stock market remains closed on Friday, 5 November 2010, on account of Diwali. But, there will be a special one hour Muhurat trading session on that day between 18:00 IST To 19:00 IST, to mark the begging of the Samavat Year 2067.

The BSE Sensex surged 861.23 points or 4.29% to 20,893.57 in the week. The S&P CNX Nifty soared 264.1 points or 4.38% to 6,281.80. The BSE Mid-Cap index rose 3.61% and the BSE Small-Cap index rose 2.66%. Both these indices underperformed the Sensex.

Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflows in 2010 now stands at a record $26.75 billion, above last year's $17.45 billion. US Federal Reserve's asset purchase programme would further boost the fund flows into emerging markets, such as India, and provide a further impetus to the rally.

While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. State-run Power Grid Corp, Steel Authority of India and Indian Oil Corp are some of the companies that are planning large share sales in coming months.

India's Chief Economic Adviser to the Finance Ministry Kaushik Basu on Thursday, 4 November 2010, said India needs all its options to handle a surge and volatility in inflows.

Boosting the sentiment, the seasonally adjusted HSBC Purchasing Managers' Index (PMI) -- a headline index designed to measure the overall health of the manufacturing sector -- was at 57.2 in October 2010, rising from September's reading of 55.1. Moreover, the strengthening of business conditions regained the momentum lost in September. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

For investors, another good news last week was the listing of Coal India, which had raised about $3.5 billion in the country's largest-ever IPO. The world's largest coal miner, which made its stock market debut on Thursday, 4 November 2010 found a place among the top 5 companies in market capitalisation.

Another news that encouraged investors was that the Reserve Bank of India (RBI) on Tuesday, 2 November 2010, signaled a pause in its policy tightening drive that began in October 2009. The RBI at its second quarterly monetary policy review on Tuesday, 2 November 2010, hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The RBI raised its repurchase or repo rate (at which it lends money to bank) to 6.25%, while increasing the reverse repurchase or reverse repo rate to 5.25%. It left the cash reserve ratio (the amount of deposits that commercial banks are required to keep with the RBI) unchanged at 6%. RBI Governor D Subbarao said that some controls on debt flows will be maintained.

The central bank imposed stringent norms on housing loans by commercial banks such as increasing the risk weights, higher provisioning for teaser rate loans, among others. At present, there is no regulatory ceiling on the loan to value (LTV) ratio in respect of banks' housing loan exposures. In order to prevent excessive leveraging, RBI has proposed that the LTV ratio in respect of housing loans hereafter should not exceed 80%.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said.

Trading for the week started on a buoyant note. The BSE 30-share Sensex jumped 323.29 points or 1.51% to 20,355.63 on Monday, 1 November 2010, as the latest data showing surge in manufacturing activity in October 2010, good Q2 September 2010 results, and firm global stocks boosted investor sentiments. The 50-unit S&P CNX Nifty was up 99.85 points or 1.66% to 6,117.55.

The key benchmark indices were little changed at close after undergoing intraday volatility on Tuesday, 2 November 2010. The BSE 30-share Sensex was down 9.94 points or 0.05% to 20,345.69. The S&P CNX Nifty was up 1.45 points or 0.02% to 6,119.

Banking, metal and PSU shares led modest gains on the domestic bourses on Wednesday, 3 November 2010, a day after the central bank on Tuesday, 2 November 2010, signaled a pause in its policy tightening drive that began in October 2009. Good Q2 September 2010 results and sustained buying by foreign funds underpinned sentiments. The BSE 30-share Sensex was up 120.05 points or 0.59% to 20,465.74. The S&P CNX Nifty was up 41.50 points or 0.68% to 6,160.50.

The Key benchmark indices surged to their highest level in nearly 34 months on Thursday, 4 November 2010, as stocks rose across the globe after the US Federal Reserve's decision to buy $600 billion in government bonds to stimulate the US economy. A rally in Coal India shares on its debut on the bourses, good Q2 September 2010 results, sustained buying by foreign funds, and data showing easing food inflation in late October 2010, underpinned sentiment. The BSE 30-share Sensex rose 427.83 points or 2.09% to 20,893.57. The S&P CNX Nifty rose 121.30 points or 1.97% to 6,281.80.

Cement maker ACC was the top Sensex gainer last week. The stock spurted 10.60% to Rs 1088.55. ACC's cement shipments rose 13.6% to 1.92 million tonnes in October 2010 over October 2009. The company, in which Swiss cement maker Holcim holds about 46%, said production in October 2010 rose 15.8% to 1.98 million tonnes from 1.71 million tonnes a year ago.

India's largest commercial bank by branch network State Bank of India soared 9% to Rs 3434.90. It was the second biggest Sensex gainer.

Aluminium maker Hindalco Industries climbed 7.51% to Rs 226.3. It was the third biggest Sensex gainer.

Larsen & Toubro (up 7.39%), Sterlite Industries (up 7.17%), HDFC (up 7.06%), Jaiprakash Associates (up 6.65%) and Tata Motors (up 6.35%), were the other major Sensex gainers.

India's largest car maker by sales Maruti Suzuki India fell 2.88% to Rs 1506.55. The stock was the top Sensex losers last week. A well-known foreign brokerage downgraded the stock to neutral from outperform, following a strong run-up in the stock price over the past few months.

Net profit of Maruti Suzuki India rose 4.95% to Rs 598.24 crore on 26.79% rise in net sales to Rs 8977.37 crore in Q2 September 2010 over Q2 September 2009. Maruti said its margins were under pressure during the quarter due to high commodity prices, foreign exchange fluctuations and also higher royalty payment to the parent Suzuki Motor Corp.

Royalty charges spiked due the increase in sales of K-series engine models and amendments in the various royalty agreements the company has entered with Suzuki Motor Corporation, resulting in additional royalty expense.

India's largest motorcycle maker by sales Hero Honda Motor declined 1.36% to Rs 1840.45. The stock was the second biggest Sensex loser last week. Hero Honda Motors' net profit declined 15.33% to Rs 505.60 crore on 11.66% rise in net sales to Rs 4511.29 crore in Q2 September 2010 over Q2 September 2009. The fall in net profit was mainly due to spiraling input costs. The company attributed the fall in bottom line to an increase in costs of raw materials such as steel and aluminium, and expenses linked to upgradation of products to Bharat Stage III norms. The company expects rising raw-material costs to continue impacting future profits.

The firm posted its quarterly sales of 12.85 lakh bikes and scooters, the highest in its history. But higher raw material costs, that rose 22% to Rs 3,385 crore against Rs 2,768 crore in the previous year, eroded virtually all the gains from higher sales.

Drug maker Cipla fell 0.82% to Rs 349.35. The stock was the third biggest Sensex losers last week.

State-run NTPC declined 0.13% to Rs 194.7. The stock was the fourth biggest Sensex losers last week.

India's largest private sector company by market capitalisation Reliance Industries rose 0.82% to Rs 1104.75. The company's net profit rose 27.80% to Rs 4923 crore on 22.69% rise in net sales to Rs 57,479.00 crore in Q2 September 2010 over Q2 September 2009.

RIL's gross refining margin (GRM) for quarter was at US$7.9 per barrel as against US$ 6/bbl in the corresponding period of the previous year. RIL's sophisticated refinery has the ability to process low-quality grades of crude, which are relatively cheap, and produce high-quality products that meet the tough specifications of all developed markets. Agarwal said RIL's gross refining margins could reach $9-10 per barrel, which it clocked in 2006-07.

RIL has also gained from the Asian demand for petroleum products. Agarwal said that the company was looking at exporting gasoline and diesel to the US and Europe as well.

A large pent up demand in its initial public offer (IPO) sent shares of Coal India (CIL) surging on its debut on the secondary equity market on Thursday, 4 November 2010. The stock settled at Rs 342.35 on BSE, a 39.73% premium over the IPO price of Rs 245. Retail investors have more to cheer as they got shares in the Coal India IPO at 5% discount to the IPO price.

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