Sunday, July 3, 2011

BSE / NSE Sectoral Analysis 1st July 2011

Banking, metal shares lead rally

Aggressive buying by foreign institutional investors (FIIs) and easing of Greece's debt worries triggered a strong rally on the domestic bourses, with the key benchmark indices surging to their highest level in more than 8 weeks. The market rose in four out of five trading sessions during the week ended Friday, 1 July 2011. Concerns of a disorderly debt default from Greece eased after the government's austerity program was passed in the parliament on Thursday, 30 June 2011.

The Sensex jumped 522.12 points or 2.86% to 18,762.80 in the week ended 1 July 2011. The BSE Mid-Cap index jumped 229.97 points or 3.45% to 6,901.67. The BSE Small-Cap index surged 302.03 points or 3.81% to 8,224.41. Both the BSE Small-Cap and Mid-Cap indices outperformed the Sensex.

Trading for the week began on an upbeat note as the key benchmark indices surged for third straight day on Monday, 27 June 2011, as a slide in global crude oil prices outweighed concerns that an increase in domestic fuel prices will stoke inflation. The BSE Sensex rose 171.73 points or 0.94% to settle at 18,412.41, its highest closing since 7 June 2011.

Key benchmark indices advanced for the fourth straight day on Tuesday, 28 June 2011, as the latest data showed that foreign institutional investors (FIIs) had stepped up buying of Indian stocks. The BSE Sensex rose 80.04 points or 0.43% to settle at 18,492.45, its highest closing level since 7 June 2011.

The market extended its winning streak to the fifth straight day on Wednesday, 29 June 2011, as world stocks rose, buoyed by hopes that the Greek parliament will vote in favor of additional austerity measures. The BSE Sensex jumped 201.41 points or 1.09% to 18,693.86, its highest closing level since 2 May 2011.

Key benchmark indices extended their winning streak into the sixth straight day on Thursday, 30 June 2011, attaining their highest closing level in more than 8-weeks, as data showing sustained buying by foreign funds over the past few sessions, firm global stocks and easing of food inflation in mid-June 2011 boosted sentiments. The BSE Sensex surged 152.01 points or 0.81% to settle at 18,845.87, its highest closing level since 2 May 2011

The market snapped 6-day winning steak on Friday, 1 July 2011, as investors booked profits after the Sensex jumped more than 7% the preceding six trading sessions. Index heavyweight Reliance Industries (RIL) and Bharti Airtel, led the decline. The BSE Sensex shed 83.07 points or 0.44% to 18,762.80.

Metal stocks rose as metal prices recovered on the London Metal Exchange after an earlier steep fall. Hindalco Industries jumped 7.8% to Rs 186.40 during the week. Sterlite Industries jumped 6.08% to Rs 170.10.

Tata Steel jumped 4.03% to Rs 602 after the company's managing director Hemant Nerurkar on Tuesday, 28 June 2011, said operating profit at the company's European unit will rise by two-thirds of its current level to $100 a metric tonne over the next three years. Tata Steel Europe generates earnings of $60 per tonne before interest, tax, depreciation and amortization at present. Nerurkar said higher operating margin at the European unit will be driven by increase in value-added products and control over costs.

India's largest engineering and construction firm by sales Larsen & Toubro gained nearly 4% to Rs 1,807.75 on a recent strong flow of new orders for the firm.

Bank stocks rose as the latest data showed that credit offtake remains strong. Credit offtake from banks grew by 20.9% to over Rs 41 lakh crore during the one-year period ended 17 June 2011. According to the RBI data, credit offtake during the period stood at Rs 41.23 lakh crore against Rs 34.10 lakh crore in the same period of the previous year.

India's biggest commercial bank in terms of branch network State Bank of India vaulted 5.8% to Rs 2,421.10. HDFC Bank jumped nearly 5% to Rs 2,496.90 on expectations of strong Q1 June 2011 earnings. ICICI Bank rose 2.7% to Rs 1,094.70 after the private sector bank's chief financial officer N.S. Kannan, said in a media interview that the bank aims to grow its loan book by 18%-20% in the current financial year.

Auto stocks rose as the hike in diesel price of Rs 3 per litre announced by the government after trading hours on Friday, 24 June 2011, was lower than market expectations of a hike of Rs 4 per litre. Tata Motors gained 3.09% to Rs 994.50 and M&M rose 2.8% to Rs 691.30.

NTPC rose 2.1% to Rs 186 after the company said a unit of 660 megawatt (MW) of Sipat Super thermal power project was commissioned on 28 June 2011. With this, the total capacity of NTPC group has become 34,854 MW. This is the first super-critical 660 MW unit of NTPC which has been added to the capacity. With the coming of this unit, the total installed capacity of Sipat super thermal power project has become 1,660 MW.

FMCG stocks rose on expectations that a strong monsoon will boost demand from rural areas and also reduce input prices. FMCG giant Hindustan Unilever rose nearly 4% to Rs 336.75 and cigarette major ITC gained 3.4% to Rs 201.70.

IT pivotals gained on expectations of good Q1 June 2011 results. TCS rose 4.4% to Rs 1,186.35 and Infosys gained 2.5% to Rs 2,934.30. The National Association of Software and Services Companies (Nasscom) recently reiterated its forecast of a 16%-18% growth in export revenue for IT outsourcing services in this fiscal year that began on 1 April 2011.

The Reserve Bank of India (RBI) has decided to allow companies to issue equity and preference shares under the government's foreign direct investment scheme to fund certain transactions. The clearance is for imports of capital goods and other machineries and equipment, the central bank said in a release. All such conversions of import payables into foreign direct investment should be completed within 180 days from the date of the shipment of goods.

The wholesale price index for primary articles fell 0.4% to 197.4 in the week ended 18 June 2011 from a provisional 198.1 in the previous week, according to the latest data issued by the Ministry of Commerce and Industry. On a year-on-year basis, prices of primary articles were up 11.84%, slower than the 12.62% rise recorded in the week ended 11 June 2011, the data showed. In the week to 18 June 2011, the food articles index decreased 0.8% to 189.8 from 191.3 in the previous week. The year-on-year inflation for food articles decelerated sharply to 7.78% from 9.13%. The fuel products index rose 0.2% to 160.2 in week ended 18 June 2011 from 159.9 in the previous week.

Going ahead, the inflation may remain high due to the recent hike in diesel, kerosene and LPG prices. The Indian government on 24 June 2011 announced a hike in the price of diesel by Rs 3 a litre, kerosene Rs 2 a litre and cooking gas by a steep Rs 50 a cylinder.

Our Recommendation :

Hot Sectors - Metal, Banking, FMCG and Pharma

Weak Sectors - PSU, Oil & Gas, IT

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