Strong market breadth

All round buying demand pushed the key benchmark indices to fresh intraday high in early afternoon trade. Strong Asian markets and firm US index futures along with the recent resumption of buying by foreign funds supported gains. The BSE Sensex was up 208.23 points or 1.23%, up 148.73 points from the day’s low and off 7.69 points from the day’s low. Mild volatility was seen as the barometer index moved above and below the psychological 17,000 mark. The market breadth, indicating the overall health of the market, was strong.

Index heavyweight Reliance Industries (RIL) extended Tuesday’s rally after the company’s partner BP Plc reportedly said it is confident of raising natural gas production from its eastern offshore KG-D6 block in two years time. High beta infrastructure stocks were in demand on fresh buying. Software stocks rose on bargain hunting after the recent decline triggered by concerns that a likely economic slowdown in the US and Europe will hit technology spending by overseas clients. Banking pivotals gained on bargain hunting after recent steep losses triggered by concerns that elevated interest rates may restrict loan growth.

At 12:19 IST, the BSE Sensex was up 208.23 points or 1.23% to 17,071.04. The index gained 215.92 points at the day’s high of 17,078.73 in early afternoon trade. The index rose 59.50 points at the day’s low of 16,922.31 in early trade.

The S&P CNX Nifty was up 64.40 points or 1.27% to 5,128.70 after gyrating between 5,132.15 and 5,076.30 so far during the day.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1854 shares advanced and 743 shares declined. A total of 98 shares remained unchanged.

The BSE Mid-Cap index rose 1.29% and the BSE Small-Cap index gained 1.49%. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 1385 crore by 12:25 IST compared with Rs 1074 crore by 11:25 IST.

Among the 30-share Sensex pack, 23 gained while the rest declined. Sun Pharmaceuticals (down 0.67%), Hero MotoCorp (down 0.44%), and ITC (down 0.27%), edged lower from the Sensex.

Index heavyweight Reliance Industries (RIL) advanced 1.32% to Rs 831.95. The stock extended Tuesday’s 4.05% rally triggered after the company’s partner BP Plc reportedly said it is confident of raising natural gas production from its eastern offshore KG-D6 block in two years time. BP last month completed a $7.2 billion acquisition of a 30% stake in 21 oil and gas blocks that RIL operates in India.

BP will pay RIL an aggregate consideration of $7.2 billion subject to completion adjustments for the interests to be acquired in the 21 production sharing contracts, the two companies said in a joint statement. Further performance payments of up to $1.8 billion could be paid based on exploration success that results in development of commercial discoveries, the two companies said.

India’s largest oil exploration firm by market capitalization ONGC rose 0.56% after the state-run firm filed the prospectus for its follow-on public offer with the Securities and Exchange Board of India (Sebi) on Monday, 5 September 2011. The 5% stake sale will include an offer of 41.92 crore shares to the public and a reservation of 85.53 lakh shares for employees, the firm said.

High beta infrastructure stocks were in demand on fresh buying. India’s largest dam builder by sales Jaiprakash Associates shot up 6.42% to Rs 70.50 on reports the company is exploring the option to rope in a strategic partner for its cement business. It was the top gainer from the Sensex pack. According to reports, Jaiprakash Associates is open to diluting up to 26% in the cement business. The firm has reportedly roped in a clutch of investment bankers to advise on any strategic stake sale. Preliminary talks have already begun with large South America conglomerates such as Cemex and Votorantim Group, who have a global presence but are also looking at a bigger India play. A deal, if any, may still take some time to fructify, reports added.

Pipavav Defence and Offshore Engineering Company rose 0.71% after the company’s board approved issuing convertible warrants to a clutch of investors at Rs 78 each.

Larsen & Toubro (up 2.24%), Bhel (up 0.78%), Punj Lloyd (up 2.18%), Lanco Infratech (up 2.55%), GMR Infrastructure (up 1.93%), Reliance Infrastructure (up 1.71%), and GVK Power & Infrastructure (up 1.97%), gained.

Software stocks rose on bargain hunting after the recent decline triggered by concerns that a likely economic slowdown in the US and Europe will hit technology spending by overseas clients. The US and Europe are the two biggest markets for Indian IT firms.

India’s second largest software services exporter Infosys rose 0.25% to Rs 2309.15, reversing initial decline after falling to the day’s low of Rs 2267.90. The chief executive of Infosys said last month that the economic worries in the US and Europe were delaying decisions and clients may not spend all of their information-technology budgets for this year.

India’s third largest software services exporter Wipro rose 1.78%.

India’s largest software services exporter TCS gained 1.41%. The company has reportedly put in a $500-million bid to buy a controlling stake in the information technology unit of German flagship airline Lufthansa.

TCS after market hours on Monday announced that Westpac has selected TCS’ BaNCS Insurance to assist the financial institution to upgrade and transform the life insurance software platform to drive growth in New Zealand.

Banking pivotals gained on bargain hunting after recent steep losses triggered by concerns that elevated interest rates may restrict loan growth.

India’s largest private sector bank by net profit ICICI Bank rose 1.64% and India’s second largest private sector bank by net profit HDFC Bank advanced 2.66%.

India’s largest bank by branch network and net profit State Bank of India (SBI) vaulted 3.08%.

India’s largest mortgage lender by total income Housing Development Finance Corporation (HDFC) gained 2.04%. Reportedly HDFC on Monday launched dual-rate home loans named ‘Fixed First’ where interest rates are fixed for the first three or five years and then shifted to floating rates.

Foreign institutional investors (FIIs) bought shares worth Rs 431.48 crore on Tuesday, 6 September 2011, as per provisional data from the stock exchanges. Domestic institutional investors (DIIs) sold shares worth Rs 415.17 crore on that day.

The much awaited Land Acquisition Bill, which seeks to lay down norms for increased compensation to land owners, was approved by the Union Cabinet on Monday, 5 September 2011. It is to be introduced in the Parliament today, 7 September 2011. The bill integrates land acquisition and rehabilitation and resettlement, defines public purpose clearly, has clause for retrospective effect and draws timelines for compensation.

Moody’s Investors Services affirmed its Baa3 rating for India’s foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released on Monday, 5 September 2011. The ratings firm assigned a positive outlook to India’s rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.

The report was upbeat about India’s ability to weather a global economic downturn. While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors, the report said. It noted that India’s foreign currency reserves equal four times its foreign debt obligations.

A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India’s revenues annually. However, Moody’s expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio, the report said.

India’s services sector grew at its slowest pace in more than two years in August 2011, throttled by feeble expansion in new business as a faltering global economy and tight domestic monetary conditions weighed, a survey showed on Monday, 5 September 2011. The HSBC Markit Business Activity Index, based on a survey of around 400 companies, slumped to 53.8 in August from 58.2 in July, the index’s biggest one-month decline since January 2009. It was also the weakest growth since June 2009, but the index has stayed above the 50 mark that separates growth from contraction for 28 consecutive months.

The new business sub-index fell to its lowest level in three months in August, at 54.9 from July’s 59.3, as dampening global economic conditions knocked orders. Expectations for new business were also scaled back in August. The survey also showed a reduction in service sector employment levels for the second consecutive month as new business growth slowed while input costs and output prices continued to march ahead.

India’s manufacturing activity in August 2011 slowed to a 29-month low as exports took a beating amid the lingering uncertainty in the global economic environment, a survey showed Friday, 2 September 2011. The seasonally adjusted HSBC Purchasing Managers’ Index, prepared by Markit, fell to 52.6 in August from 53.6 in July. The pace of new order flows in August decelerated to the slowest in 29 months as export orders contracted at the sharpest rate since the series was started, HSBC said.

Production backlogs fell for the first time since March 2010 as pressure on operating capacity subsided. Also, inflationary pressures intensified as both input and output prices rose.

Food inflation firmed up to 10.05% in the week ended 20 August 2011, the highest in nearly six months and up from 9.8% rise in the previous week. The data highlights a prolonged battle against inflation that could prompt the Reserve Bank of India to raise its policy interest rate for the 12th time since March 2010 when it next meets to review monetary policy on 16 September 2011.

Exports surged 81.79% to $29.3 billion while imports jumped 51.5% to $40.4 billion in July 2011 over July 2010, leaving a trade deficit of $11 billion, data showed last week.

Asian markets edged higher on Wednesday as the yen weakened and valuations fell to the cheapest level since 2008. The key benchmark indices in Taiwan, Japan, South Korea, China, Hong Kong, Singapore and Indonesia were up by between 1.4% to 3.78%.

The European Central Bank (ECB) is expected to keep its key interest rate unchanged at 1.5% at its monthly policy meeting on interest rates on Thursday, 8 September 2011. On the same day, the Bank of England’s (BOE) Monetary Policy Committee is also expected to maintain its key benchmark rate at 0.5%, the thirty-first consecutive month at such a rate.

US markets declined on Tuesday on fears Europe still has failed to tackle its debt crisis. The Dow Jones Industrial Average fell 100.96 points, or 0.90%, to 11,139.30. The S&P 500 slid 8.73 points, or 0.74%, to 1165.24. The Nasdaq fell 6.50 points, or 0.26%, to 2473.83.

US President Barack Obama is scheduled to give a speech on Thursday, 8 September 2011, to propose steps to stimulate hiring in the backdrop of US unemployment crisis.

Trading in US index futures indicated that the Dow could gain 98 points at the opening bell on Wednesday, 7 September 2011.


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