Cement shares rally in volatile market

The key benchmark indices extended gains for the second consecutive trading session today, 7 September 2010, with good monsoon rains supporting stock prices. The barometer index BSE Sensex and the 50-unit S&P CNX Nifty scaled 31-month closing highs. But, trading was marked with immense volatility throughout the trading session.



Eight out of 13 sectoral indices on BSE rose. Capital goods and IT shares rose whereas realty and healthcare shares took a dip. The BSE 30-share Sensex jumped 85.01 points or 0.46%, off close to 66 points from the day's high and up close to 74 points from the day's low.

Intraday volatility was high. The market pared gains, soon after hitting 31-month high at the onset of the trading session. The key benchmark indices pared gains in morning trade, soon after hitting fresh 31-month highs. The market regained strength in mid-morning trade. Stocks were range bound in early afternoon trade. The movement was range bound in afternoon trade. The market pared gains soon after hitting a fresh 31-month high in afternoon trade. Immense volatility was witnessed during the last one hour of trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 4.01% at 15.83. The index had lost 4.04% to 15.22 on Monday, 6 September 2010. The index had lost 1.8% to 15.86 on Friday, 3 September 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.

Foreign funds continue to mop up Indian stocks. Foreign funds have bought shares worth a net Rs 1671.67 crore in the first four trading sessions this month, as per data from the stock exchanges. Their inflow in calendar 2010 has reached Rs 21166.76 crore.

India must be prepared for a newly-assertive China that wants a foothold in South Asia, Prime Minister Manmohan Singh said, in a rare open criticism of the Asia giant competing for regional resources and geopolitical clout. "China would like to have a foothold in South Asia and we have to reflect on this reality," the prime minister was quoted as saying by as newspaper. "We have to be aware of this." The newspaper also quoted Singh as saying that China could use India's "soft underbelly" of Kashmir and Pakistan "to keep India in low level equilibrium."

The comments follow repeated diplomatic sparring between the two Asian powers over the last two years. This tension has heightened recently. Last month, India criticised China's denial of a visa to an Indian army general who had operated in Kashmir and then New Delhi later said it was worried by China's growing influence in the Indian Ocean region.

European shares fell on Tuesday, 7 September 2010, with banks facing selling pressure after a news report renewed jitters about the health of the banking sector. The key benchmark indices in UK, France and Germany were down by 0.74% to 1.11%.

Investor concerns about the financial health of European banks came back to the fore after a Wall Street Journal analysis revealed that Europe's recent stress tests of the strength of major banks understated some lenders' holdings of potentially risky government debt.

Asian stocks fell for the first time in five days, led by Japanese automakers on concern a stronger yen will hurt the value of overseas sales. The key benchmark indices in Taiwan, South Korea and Japan fell by between 0.08% to 0.81%. But key indices in Indonesia, China, Hong Kong and Singapore rose by 0.05% to 0.43%.

China's four biggest banks issued CNY218.8 billion (US$32.2 billion) new yuan loans in August 2010, slightly lower than CNY243 billion in July 2010 and within the guidelines set by the government, the Century Weekly magazine reported Tuesday, citing unnamed sources. China's money supply and loans data have been in focus since Beijing shifted its goal to reining in inflation from boosting economic growth late last year.

The Bank of Japan's policy board voted unanimously to hold its overnight call rate at 0.1% and said that the economy appears to be recovering moderately, helped by a pick-up in business' fixed investments. The central bank said conditions in the labor market remain severe, but added that there has been some improvement.

Australia's central bank kept its key cash rate at 4.5% on Tuesday, saying that growth in the near term is likely to be close to trend, inflation close to target and the global market remains somewhat uncertain. The Reserve Bank of Australia said that information suggests the Australian economy has been growing at around trend pace, helped by high levels of public spending, and added that private demand has been firming. Business credit has stabilized and evidence of more willingness to lend is slowly emerging, the bank said.

US index futures reversed initial gains. Trading in US index futures indicated that the Dow could fall 52 points at the opening bell on Tuesday, 7 September 2010. The US stock market was closed on Monday, 6 September 2010, for the Labor Day holiday.

US president Barack Obama is expected to announce that businesses will be allowed to write off 100% of all new investments in plant and equipment in 2011, The Wall Street Journal reported Monday, 6 September 2010. The president is expected to make the announcement on Wednesday, 8 September 2010, with the tax break to be retroactive from the same day, according to the report. Congress will need to approve the proposal which, if implemented, would cut business taxes by almost $200 billion over a two-year period, the report said. On Monday, Obama unveiled a $50 billion plan to upgrade roads, airports and railways as part of an effort to create jobs and support the US economic recovery.

Closer home, good rains in August 2010 and in the first week of September 2010 has strengthened the optimism about a record kharif harvest this season. Further, the weather office's prediction that the monsoon will not start withdrawing before mid-September 2010 has boosted the outlook for the next rabi as well.

The kharif sowing is more or less over in most of the country, barring some pockets in the east where soil moisture remained inadequate for seeding till the second half of August 2010. Paddy growers in such tracts of Jharkhand, West Bengal and Bihar are now sowing alternative crops like urad, moong, nigerseed and fodder on the advice of agriculture experts and officials of the state agriculture departments, as per media reports.

With 16% above-normal rainfall in the last week of August, the overall deficiency in the season's cumulative monsoon rainfall till 4 September 2010 has shrunk to just 1%, from 5% at July-end and 16% at June-end. The forecast issued by the India Meteorological Department (IMD) projects 15% excess rainfall in September 2010, the last month of the four-month monsoon season (June to September). The rain-starved tract in the north-east is also projected to receive good rainfall till at least 10 September 2010. The cumulative seasonal rainfall in the eastern region as a whole, however, may remain in the deficient domain, according to IMD.

While the traditional high rainfall region in the east and north-east has remained rain deficient in this monsoon this, the usually arid tracts, such as western Rajasthan, Leh and Ladakh in Jammu and Kashmir, Vidarbha, Marathwada, Saurashtra and Kutch, have got excess rainfall in the current monsoon season. This has facilitated extensive sowing of coarse cereals, pulses and cotton in these tracts, as per media reports. High ruling prices of these commodities has also encouraged the farmers to go for these crops.

The good and sustained waterfall since the last week of July, moreover, has refilled most of the reservoirs which were depleted substantially due to last year's drought. According to the Central Water Commission, total water stock in the 81 major reservoirs was 90.777 million cubic metres (BCM) on 1 September 2010. This level is nearly 34% above the last year's corresponding level and 2% above the long period average.

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.

Bond yields declined. The yield on the benchmark 10-year 2020 bond was hovering at 7.95%, lower than Monday's (6 September 2010) close of 7.99%. The yield on the second most traded, 8.13% 2022 bond was hovering at 8.03%, lower than Monday's close of 8.05%.

The BSE 30-share Sensex rose 85.01 points or 0.46% to 18,645.06, its highest closing since 5 February 2008. The index gained 151.15 points at the day's high of 18,711.20 in late trade. The index rose 11.38 points at the day's low of 18,571.43 in early trade.

The S&P CNX Nifty rose 27.05 points or 0.49% at 5,604, its highest level since 21 January 2008. The index hit a high of 5625.50 in late trade.

The BSE Mid-Cap index rose 0.09%, underperforming the Sensex. The BSE Small-Cap index outperformed the Sensex, rising 0.62%.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1664 shares rose while 1282 shares declined. A total of 127 shares remained unchanged. The breadth was much stronger earlier in the day.

BSE clocked turnover of Rs 5622 crore, higher than Rs 5442.84 crore on Monday, 6 September 2010.

The BSE Capital Goods index (up 1.29%), BSE IT index (up 0.99%), BSE Metal index (up 0.81%), outperformed the Sensex. The BSE Realty index (down 1.04%), BSE Healthcare index (down 0.33%), BSE banking index -- the Bankex (down 0.32%), BSE Auto (down 0.29%), BSE Consumer Durables index (down 0.09%), BSE FMCG index (up 0.13%), BSE Power index (up 0.15%), BSE PSU index (up 0.37%) and Oil & Gas (up 0.44%), underperformed the Sensex.

From the 30-share Sensex pack, 18 stocks rose while the rest of them fell.

Index heavyweight Reliance Industries rose 0.91% to Rs 961.85 with the stock gaining for the second straight day. But, the stock came off the day's high of Rs 969.80. RIL said on 1 September 2010, it bought additional 26.7 lakh shares or about 0.68% stake in EIH, raising its stake in the hotel chain to 14.8%. It may be recalled that RIL had early this week bought a 14.12% stake in EIH from EIH promoters in an off-market deal valued at Rs 1,021 crore, or an average price of Rs 184 a share.

Hindustan Unilever, State Bank of India, HDFC Bank, Tata Power Company, Mahindra & Mahindra and Bharat Heavy Electricals fell by between 0.55% to 0.90%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 2.33%. As per recent reports the Andhra Pradesh (AP) government has signed a concession agreement with L&T Hyderabad Metro Rail, for development of the Rs 12,132-crore Hyderabad Metro Rail (L&T HMR) Project, under the public-private partnership initiative.

High beta realty stocks reversed initial gains. Unitech, Anant Raj Industries, Indiabulls Real Estate, Parsvnath Developers, HDIL, DLF and Orbit Corporation fell by between 0.24% to 2.04%. However, Sobha Developers, Ansal Properties, Peninsula Land, Phoenix Mills and Omaxe rose by 0.50% to 2.28%.

Banking stocks fell on profit taking. India's second largest private sector bank by net profit HDFC Bank fell 0.62%, with the stock snapping last five days gains. The bank on Monday raised its benchmark prime lending rate (BPLR) by 50 basis points to 16.25%.

India's largest bank by net profit and branch network State Bank of India fell 0.81%. State Bank of India said during market hours today that the executive committee of the central board of the bank has accorded approval for raising tier II capital by way of public issue of lower tier-II bonds for an amount of Rs 500 crore, with an option to retain 100% oversubscription (green shoe option).

State Bank of India Chairman O.P. Bhatt said on Tuesday that loan quality in the banking sector had deteriorated in the last two years.

Punjab National Bank, Bank of Baroda and Bank of India fell by between 0.67% and 0.77%.

India's largest private sector bank by net profit ICICI Bank fell 0.15%, reversing initial gains. The stock hit a 52 week high of Rs 1047.90 today.

Cement stocks rose across the board on on reports cement prices in South India have risen by Rs 25 to Rs 40 per 50-kilogram bag. The maximum price hike has been reported in the Andhra Pradesh market. Prism Cement, Madras Cement, Saurashtra Cements, India Cements, Dalmia Cement, Ambuja Cements, UltraTech Cement, ACC, Binani Cement and Shree Cement rose by between 3.32% to 16.44%.

The government's continued thrust on infrastructure development augurs well for the cement sector in India.

High beta metal and mining stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange rose 1.22% on Monday, 6 September 2010. NMDC, JSW Steel, Jindal Steel & Power, Welspun Corporation, Hindustan Zinc, Steel Authority of India, Hindalco Industries, Sterlite Industries and Tata Steel rose by between 0.12% to 2.95%.

Shares of software exporters extended Monday's gains on positive economic data in the US, the biggest market for Indian IT firms. India's largest software services exporter by sales TCS rose 1.89%, with the stock gaining for the second straight day. India's second largest software services exporter by sales Infosys rose 0.85%, reversing initial losses.

India's third largest software services exporter Wipro rose 0.72%. Wipro has appointed billionaire founder-chairman Azim Premji's oldest son Rishad Premji as chief strategy officer.

Man Industries (India) gained 1.73% after the company secured orders aggregating Rs 1200 crore from various international and domestic customers for supply of approximately two lakh tonnes of large diameter pipes.

Piramal Healthcare clocked a highest turnover of Rs 387.05 crore on BSE. Raymond (Rs 124.07 crore), Reliance Industries (Rs 116.61 crore), Midfield Industries (Rs 109.82 crore) and Tata Steel (Rs 97.81 crore), were the other turnover toppers on BSE.

Cals Refineries reported a highest volume of 6.30 crore shares on BSE. Sanra Software (1.12 crore shares), Mahindra Satyam (85.74 lakh shares), FCS Software (83.95 lakh shares) and Ispat Industries (83.57 lakh shares), were the other volume toppers on BSE.