Key benchmark indices held firm in mid-morning trade as an agreement reached by European leaders to help contain the region’s two-year debt crisis lifted sentiments. Additional support came from data showing the US economy grew in the third quarter at its fastest pace in a year. The BSE Sensex was up 477.33 points or 2.76%, off close to 140 points from the day’s high and up about 95 points from the day’s low. The market breadth was strong. All the 13 sectoral indices on BSE were in the green. Metal stocks surged as global metal prices rallied. Interest rate sensitive realty stocks rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting. IT stocks advanced on strong economic data in the US, which is the largest outsourcing market for the Indian IT firms. Index heavyweight Reliance Industries extended initial gains.
The market surged in early trade to hit highest levels in 11-1/2 week on firm Asian stocks. It trimmed gains in morning trade. It held firm in mid-morning trade.
At 11:20 IST, the BSE Sensex was up 477.33 points or 2.76% to 17,766.16. The index jumped 619.30 points at the day’s high of 17,908.13 in early trade, its highest level since 4 August 2011. The index rose 383.03 points at the day’s low of 17,671.86 in early trade.
The S&P CNX Nifty was up 146.65 points or 2.82% to 5348.45. The Nifty hit a high of 5,399.70 in intraday trade, its highest level since 4 August 2011. Nifty hit a low of 5,329.05 in intraday trade.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1649 shares rose and 814 fell. A total of 87 shares were unchanged.
All the 30 shares from the Sensex pack rose.
Index heavyweight Reliance Industries (RIL) rose 2.42%, extending recent gains. RIL’s net profit rose 15.84% to Rs. 5703 crore on 34.73% rise in turnover to Rs. 80790 crore in Q2 September 2011 over Q2 September 2010. Operating profit rose just 5% to Rs. 9844 crore in Q2 September 2011 over Q2 September 2010. The core operating profit margin (OPM) declined sharply to 12.5% in Q2 September 2011 from 16.3% in Q2 September 2010. The result was announced on 15 October 2011.
RIL said its Infotel Broadband Services unit is in the process of setting up a 4G broadband wireless network and finalizing arrangements with global players.
RIL recently concluded a $7.2 billion deal with BP PLC under which it sold a 30% stake in 21 oil-and-gas exploration blocks to the British explorer. RIL said it has received all the payments that were due from BP, with the final installment of Rs. 14690 crore received on 3 October 2011. It said all the production-sharing contracts under the deal with BP have been revised and submitted to the government for approval. The integration process is currently under way, and the joint teams are evolving strategies to operate across the gas value chain in India from exploration, development, distribution and marketing, RIL said.
Meanwhile, RIL has neither confirmed nor denied media reports of a likely suspension of oil and gas drilling operations. RIL said on 17 October 2011 that RIL has always communicated any material event to the stock exchanges first before disseminating to the media. Media reports had suggested recently that RIL may suspend oil and gas drilling operations for an unspecified time until an internal valuation of its exploration and production strategy.
Interest rate sensitive realty stocks rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting. Purchases of both residential and commercial property are largely driven by finance. HDIL, Unitech, DLF, and Indiabulls Real Estate rose by between 2.69% to 5.02%.
IT stocks advanced on strong economic data in the US, which is the largest outsourcing market for the Indian IT firms. India’s largest software services exporter by sales Tata Consultancy Services (TCS) gained 2.37%. During market hours on Monday the company said that Scotwest and Capital Credit Unions chose the company’s BaNCS Core Banking as their IT platform to transform their infrastructure to address emerging opportunities in Community Banking in the United Kingdom.
After market hours on 17 October 2011, TCS reported a 4.7% fall in consolidated net profit to Rs. 2301 crore on 7.7% growth in revenue to Rs. 11633 crore in Q2 September 2011 over Q1 June 2011. The company’s operating profit rose 11.4% to Rs. 3143 crore in Q2 September 2011 over Q1 June 2011.
Commenting on the results TCS Chief Executive Officer and Managing Director N Chandrasekaran said, Our domain-rich solutions and disciplined execution helped us capture business across major markets and deliver stellar growth in international revenues. We see strong momentum for our full services strategy from customers who are looking for agility and growth. We have created a nimble organization on the ground to stay close and stay relevant to our customers as there are ambiguities in the external environment in the short term.
India’s second largest software services exporter Infosys gained 1.23%. The company’s consolidated net profit as per International Financial Reporting Standards (IFRS) rose 10.68% to Rs. 1906 crore on 8.2% growth in revenue to Rs. 8099 crore in Q2 September 2011 over Q1 June 2011. The company announced the results on 12 October 2011.
Infosys has forecast 9.72% to 11.11% growth in non-annualized earnings per American Depositary Share at $0.79 to $0.80 in Q3 December 2011 over Q2 September 2011. It has forecast 3.2% to 5.3% growth in revenue at $1.802 to $1.84 billion in Q3 December 2011 over Q2 September 2011.
The company has for the second quarter in a row revised upwards its dollar earnings guidance for the year ending March 2012 (FY 2012). The company expects 15.3% to 16.8% growth in earnings per American Depositary Share at $3.02 to $3.06 in FY 2012 over the year ending March 2011 (FY 2011). However, the company has revised downwards dollar revenue growth guidance for FY 2012. The company expects 17.1% to 19.1% growth in revenue at $7.08 billion to $7.20 billion in FY 2012 over FY 2011.
India’s third largest software services exporter Wipro rose 2.02% ahead of its Q2 results on Monday, 31 October 2011.
Metal and mining shares jumped after LMEX, a gauge of six metals traded on the London Metal Exchange, vaulted 4.76% on Thursday, 27 October 2011. Jindal Steel & Power, Sterlite Industries, Sesa Goa, JSW Steel, Nalco, Sail, Hindalco Industries, NMDC, Hindustan Zinc, Tata Steel, and Jindal Saw rose by between 1.61% to 8.5%.
Stock-specific activity may dominate trade in the near-term as earnings flow in. Investors will closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook.
Indian Hotels unveils Q2 results today, 28 October 2011. Maruti Suzuki and LIC Housing Finance report Q2 results on Saturday, 29 October 2011. ICICI Bank, Wipro, Hindustan Unilever, Dabur India, Colgate Palmolive (India), Bank of Baroda, NMDC and BPCL unveil Q2 results on 31 October 2011
Cement majors ACC and Ambuja Cements, Punjab National Bank, HPCL and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. Sun TV Network, Ashok Leyland and TVS Motor report Q2 results on 3 November 2011. ONGC, Bharti Airtel and GlaxoSmithKline Pharmaceuticals unveil quarterly results on 4 November 2011.
Infrastructure Development Finance Company and ABB unveil results on 8 November 2011. Ranbaxy Laboratories, Indian Oil Corporation, GMR Infrastructure and Power Finance Corporation unveil quarterly results on 9 November 2011. Tata Steel, Hindalco and Mahindra Satyam unveil Q2 results on 10 November 2011. Jet Airways (India) and Tata Chemicals unveil Q2 results on 11 November 2011. Coal India and Shipping Corporation of India report Q2 results on 12 November 2011. Tata Motors, Mahindra & Mahindra and India Cements unveil Q2 results on 14 November 2011. Tata Power unveils Q2 results on 15 November 2011.
RBI announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on Tuesday, 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably. RBI said that economic growth is moderating on account of the cumulative impact of past monetary policy actions as well as some other factors.
The central bank said that the likelihood of a rate action in the December mid-quarter review is relatively low. Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted, the central bank said in a statement. However, as always, actions will depend on evolving macroeconomic conditions, it added.
While the impact of past monetary actions is still unfolding, it is necessary to persist with the anti-inflationary stance, RBI said. The stance of the monetary policy is intended to maintain an interest rate environment to contain inflation and anchor inflation expectations. The stance of the monetary policy is also intended to stimulate investment activity to support raising the trend growth. The stance of the monetary policy is also intended manage liquidity to ensure that it remains in moderate deficit, consistent with effective monetary transmission.
RBI said that several factors–structural imbalances in agriculture, infrastructure capacity bottlenecks and distorted administered prices of several key commodities and the pace of fiscal consolidation–have combined to keep medium-term inflation risks in the economy high. These risks can only be mitigated by concerted policy actions on several fronts, RBI said. In the absence of progress on these, over the medium term, RBI’s monetary policy stance will have to take into account the risks of inflation surging in response to even a moderate growth recovery.
Food inflation has accelerated to a six-month high, propelled by soaring vegetable prices and highlighting limitations of the Reserve Bank of India’s monetary intervention after it raised rates for the 13th time in 19 months recently. Data released by the government on Thursday showed food inflation rose to 11.43% year on year for the week to October 15, compared with 10.6% in the preceding week, driven by a 25% jump in vegetable prices even as prices of food articles increased 0.25%.
Finance Minister Pranab Mukherjee on 19 October 2011 said that the government is concerned about the volatility of FII flows. Mukherjee said loose monetary policies adopted by central banks in advanced economies have added to global liquidity, driving investments into better off emerging economies and fueling inflation in these countries.
The falling rupee could bloat India’s already mammoth import bill and further strain government finances as the fuel subsidy burden swells, Finance Secretary R.S. Gujral said Friday, 21 October 2011. The rupee hit a near 30-month low below 50 against the dollar on 21 October 2011. Elevated crude oil prices are likely to push the government to spend an additional Rs. 40000 crore on fuel subsidies in the current year.
Meanwhile, the new takeover code regulations notified by the market regulator Sebi last month became effective from Saturday, 22 October 2011. With these rules coming into force, both promoter and public shareholders of a listed company would now get the same price for their shares being purchased by an acquirer. At the same time, an acquirer would have to make an open offer for purchase of a minimum 26% stake from public shareholders, as against 20% earlier.
The new rules would also help the listed companies to get more investment from private equity players and other investors who are not interested in a takeover, as the trigger point for an open offer has been raised to 25%, from 15% earlier. Now, an entity needs to make an open offer only if its holding reaches threshold limit of 25%, as against 15% earlier. The new regulations replace the takeover rules that were in force since 1997
Given the lackluster initial FII response to the government’s sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on 12 September 2011, further relaxed the norms on FII investment in such bonds. Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.
The government has raised its borrowing target for the current fiscal year by Rs. 52800 crore, fueling worries that it may even overshoot the new estimate because of muted revenue growth amid a slowing economy and swelling subsidies. The government will borrow Rs. 2.2 lakh crore during October 2011-March 2012 period, or the second half of the fiscal year, compared with the target of Rs. 1.67 lakh crore announced in budget in February 2011. C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council on 29 September 2011 said it is going to be difficult to achieve fiscal deficit target of 4.6% of GDP for the year ending March 2012.
The government’s new borrowing programme may crowd out private borrowers who come into the market in the second half of the year. Credit growth normally picks up after October every year when the busy season starts.
The Union Cabinet on Tuesday, 25 October 2011 approved a national manufacturing policy, the first of its kind in the country, to increase manufacturing’s share of national output as it aims to create millions of jobs and add capacity to sustain brisk economic growth through the next decade. The policy targets raising the share of manufacturing to 25% of gross domestic product by 2022 from the current 16% — a level that has remained stagnant since 1980.
The new policy proposes developing National Investment and Manufacturing Zones, or mega-industrial parks, that will reduce the compliance burden on industry, the government said in a statement. The policy also aims to create 100 million additional jobs over the next decade, Commerce and Industry Minister Anand Sharma said. The government has identified seven locations across India to set up such industry parks, the government statement said.
Under the policy, a special company will be established that will be a one-stop shop for all clearances for businesses interested in setting up operations in the industry parks, the statement said. Small- and medium-sized companies will be offered tax breaks to entice them to the parks.
Asian stocks rose, poised for their best week in nearly three years on Friday as a long-awaited plan to resolve the European debt crisis encouraged investors to put money back in markets driving up prices of risky assets such as the euro and commodities. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.41 % to 1.89%.
Japan’s industrial production contracted for the first time in six months, as domestic manufacturers struggled against a worldwide economic slowdown, figures released on Friday showed. Industrial output in the world’s third-largest economy fell at a seasonally adjusted rate of 4% in September from the previous month, the Ministry of Economy, Trade and Industry said today.
The deal in Europe calls for private banks and insurers to take 50 percent losses on their Greek debt as well as agreements on recapitalisation of hard-hit European banks and a leveraging of the bloc’s rescue fund.
Trading in US index futures indicated that the Dow could fall 46 points at the opening bell on Friday, 28 October 2011.
U.S. stocks surged 3% on Thursday as an agreement by European leaders to help contain the region’s two-year debt crisis lifted a cloud hovering over markets. In a positive sign for the U.S. economy, the government’s estimate of third-quarter growth expanded at the fastest pace in a year. The Commerce Department reported on Thursday that third-quarter GDP grew at an annual rate of 2.5% in the July to September period.
Source:http://www.indiainfoline.com/Markets/News/Market-remains-firm/3989297697
