The key benchmark indices regained strength in mid-morning trade as data showing sustained buying by foreign funds and good monsoon rains, boosted sentiment. Cement stocks surged. Index heavyweight Reliance Industries (RIL) rose for the second straight day. But, banking stocks fell on profit taking after recent strong gains. IT stocks rose. The BSE 30-share Sensex was up 67.47 points or 0.36%, off close to 20 points from the day's high and up close to 55 points from the day's low. The market breadth was strong. Most Asian stocks edged lower and US index futures were off initial highs.
The market pared gains, soon after hitting 31-month high at the onset of the trading session. A bout of volatility was witnessed in morning trade as the key benchmark indices pared gains, soon after hitting fresh 31-month highs. The market regained strength in mid-morning 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 3.02% at 15.68. 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 bought shares worth a net Rs 946.53 crore on Monday, 6 September 2010, as per the provisional data released by the stock exchanges. Domestic funds bought shares worth a net Rs 392.13 crore on that day.
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.
As per reports, the 24-hour nationwide strike called by trade unions today, 7 September 2010, to protest against price rise, violation of labour laws and disinvestment of PSUs has disrupted normal life in Left-ruled West Bengal and Kerala. Elsewhere life remained unaffected by the strike which comes two months after a nation-wide bandh called by BJP and Left parties against the UPA Government's economic policies and the spiralling prices.
Flight operations to and from Kolkata were crippled as private airlines including Kingfisher, Indigo, Jet Airways, Spicejet together cancelled nearly 80 flights. Passengers were stranded at the airport as they faced difficulty in getting vehicles, agency reports said. Banking services are also reported to have been affected in some places, with employees of some of the nationalised banks joining the strike.
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, Singh was quoted as saying in a newspaper report. 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.
Most Asian stocks fell, led by Japanese automakers, on concern a stronger yen will hurt the value of overseas sales. The key benchmark indices in China, Taiwan, Hong Kong, South Korea, Japan and Singapore fell by between 0.01% to 0.88%. But, Indonesia's Jakarta Composite rose 0.38%.
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 were off initial highs. Trading in US index futures indicated that the Dow could gain 4 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.
The yield on the benchmark 10-year 2020 bond was hovering at 7.96%, 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 8.04%, slightly lower than Monday's close of 8.05%.
At 11:20 IST, the BSE 30-share Sensex was up 67.47 points or 0.36% to 18,627.52. The index gained 88.64 points at the day's high of 18,648.69 in morning trade, its highest level since 5 February 2010. The index rose 11.38 points at the day's low of 18,571.43 in early trade.
The S&P CNX Nifty was up 16.75 points or 0.3% at 5,593.70. The index hit a high of 5601.20 in morning trade, its highest level since 21 January 2008.
The BSE Mid-Cap index rose 0.52% and the BSE Small-Cap index gained 0.93%. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1694 shares rose while 970 shares declined. A total of 75 shares remained unchanged.
From the 30-share Sensex pack, 20 stocks rose while the rest of them fell.
Index heavyweight Reliance Industries rose 1.37%, with the stock gaining for the second straight day. 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.
HDFC, Tata Power Company, BHEL, Hindustan Unilever fell by between 0.57% to 1.07%.
Cement maker ACC jumped 4.59% and was the top gainer from the Sensex pacl.
Among other cement stocks, Ambuja Cements, Ultratech Cements, India Cements rose by between 4.21% to 8.49%.
Larsen & Toubro, Jaiprakash Associates, Tata Motors, Maruti Suzuki India rose by between 1.37% to 1.92%.
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 1.1%, with the stock gaining for the second straight day.
India's third largest software services exporter Wipro rose 0.1%. Wipro has appointed billionaire founder-chairman Azim Premji's oldest son Rishad Premji as chief strategy officer. But, India's second largest software services exporter by sales Infosys fell 0.53%, with the stock snapping last two days' gains.
Banking stocks fell on profit taking. India's second largest private sector bank by net profit HDFC Bank fell 0.68%, 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 0.31%, on reports the bank may extend its teaser home loan scheme for yet another time beyond 30 September 2010. SBI currently offers home loans at 8% for first year, at 9% for second and third and 1.75% above the base rate from fourth year for loans up to Rs 50 lakh.
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 India fell by between 0.01% and 0.61%. But, Bank of Baroda rose 0.1%.
India's largest private sector bank by net profit ICICI Bank rose 0.22%, extending Monday's 3.81% gains . The stock hit a 52 week high of Rs 1047.90 today.
PVR jumped 6.22% on reports the company has put its multiplex at Phoenix Mill mall in central Mumbai on the block with a price tag of Rs 80-100 crore.
Gujarat NRE Coke surged 4.9% after the company scheduled a board meeting on 10 September 2010 to consider fund raising.
Shree Renuka Sugars gained 2.74% on reports the company is looking to set up an integrated sugar-cum-ethanol plant in a joint venture with oil marketing company -- Hindustan Petroleum Corporation, in Maharashtra.
Hanung Toys & Textiles jumped 2.3% after a foreign fund purchased 0.6% stake in the company on Monday, 6 September 2010.