Capital goods stocks rise in firm market

Capital goods stocks rise in firm market

The key benchmark indices remained firm in afternoon trade supported
by strong European markets. Earlier, the market had firmed up in early
afternoon trade despite the latest data showing a surge in inflation
to highest level in more than three years. The market had pared gains
in mid-morning trade after a strong start ahead of the inflation data.
It had surged in early trade on positive cues from global equities.
European markets which opened after Indian markets were strong.

Except BSE Metal index all the sectoral indices on BSE were trading in
green. Metal stocks declined as global base metal prices retreated.
Banking, IT, capital goods, power, auto stocks rose. The market
breadth was strong.

Asian markets which opened before Indian markets were strong. US
stocks rose on Thursday, 1 May 2008, as a rebound in the dollar and
retreating oil prices calmed fears about inflation, renewing
investors' appetite for riskier assets, including undervalued
technology shares.

The wholesale price index rose 7.57% in 12 months to 19 April 2008,
accelerating from the previous week's annual rise of 7.33%, government
data released today showed. The rate was the highest since a reading
of 7.68% on 13 November 2004.

At 13:23 IST, the 30-share BSE Sensex was up 226.53 points or 1.29% at
17,509.58. Sensex was up 158.62 points at the day's low of 17,445.93
hit in mid-morning trade. Sensex hit a high of 17,621.24 in early
trade. At the day's high, Sensex rose 333.93 points.

The broader based S&P CNX Nifty was up 42.85 points or 0.83% at
5,208.75.

The market breadth was strong on BSE with 1,498 shares advancing as
compared to 1089 that declined. 71 remained unchanged.

The BSE Mid-Cap index rose 1.4% to 7,240.36 and BSE Small-Cap index
rose 0.71% to 8,836.19.

India's largest private sector firm by market capitalisation and oil
refiner Reliance Industries rose 1.34% to Rs 2,650.10 after the
company said it had signed an agreement to buy a 90% stake in an
exploration block in Peru.

Capital goods stocks rose. Larsen & Toubro (up 3.7% to Rs 3,112.50),
Bharat Heavy Electricals (up 1.27% to Rs 1,921), Suzlon Energy (up
1.01% to Rs 290.05) edged higher.

Banking stocks rose across the board despite surge in inflation. HDFC
Bank (up rose 1.76% to Rs 1541.50), ICICI Bank (up 4.28% to Rs
918.20), State Bank of India (up 2.85% to Rs 1,827) edged higher.

Bank of India rose 5.75% to Rs 362.34 after it posted 70 % net profit
rose to Rs 757 crore over Rs 447 crore in Q4 March 2008 over Q4 March
2007.

Finance Minister (FM) P Chidambaram on Thursday, 1 May 2008, said
state-run banks are unlikely to hike interest rates in the near
future. FM said banks were quite happy that only the CRR (cash reserve
ratio) has been raised by the Reserve Bank of India and policy rates
have been untouched. RBI on Tuesday, 29 April 2008, hike CRR by 25
basis points to 8.25% in its annual monetary policy review.

Auto stock rose on strong monthly sales. India's largest car maker by
sales Maruti Suzuki India rose 5.81% to Rs 785. Maruti Suzuki India
has recorded a 22.4% growth in domestic sales in April 2008 compared
with April 2007. The company's exports grew 64.5% during the month
compared with the year-ago period. In April Maruti Suzuki sold 59,539
units in the domestic market compared with 48,652 units in April
2007.

Bajaj Holdings rose 3.5% to Rs 734. Erstwhile Bajaj Auto reported a
23.60% growth in motorcycle sales during April 2008 at 2,03,081 units
against 1,64,304 units in the same month last year. The company's
total two-wheeler sales also rose 23.08% during the month at 2,03,930
units as compared to 1,65,692 units in April last year.

India's largest motorbike maker by sales Hero Honda Motors declined
0.67% to Rs 845. Hero Honda Motors reported a 9.03% jump in motorcycle
sales during April 2008 at 2,86,252 units against 2,62,544 units in
the same month last year.

India's largest tractor maker by sales Mahindra & Mahindra rose 3.45%
to Rs 693.50 on reports the company is exploring buying stake in Pune-
based two-wheeler maker Kinetic Motor. India's largest truck maker by
sales Tata Motors rose 3.45% to Rs 685.05.

IT stocks rose. Wipro (up 1.88% to Rs 497.80), Tata Consultancy
Services (up 2.13% to Rs 939.10), Satyam Computer services (up 2.87%
to Rs 496.05) and Infosys (up 1.49% t o Rs 1,779.85) edged higher.

Power stocks rose. Reliance Infrastructure (up 5.48% to Rs 1,503),
NTPC (up 1.96% to Rs 200.60), Tata Power Company (up 3.07% to Rs
1,434) edged higher.

Reliance Power rose 1.01% to Rs 398.30. Reliance Coal Resources, a
wholly owned subsidiary of Reliance Power, has acquired 100% in three
coal mines in Indonesia.

Metal stocks declined as global base metal prices retreated. Sterlite
Industries (down 4.42% to Rs 824.50), Hindalco Industries (down 3.49%
to Rs 186.85) and Tata Steel (down 1.88% to Rs 802.85),Steel Authority
of India (down 1.32% to Rs 182.60) edged lower. However, India's
largest aluminium maker by sales National aluminium Company rose 0.35%
to Rs 450.80.

Jaiprakash Associates (up 4.09% to Rs 282.35), ITC (up 0.64% to Rs
221.50) edged higher from Sensex pack.

HDFC (down 0.72% to Rs 2,784.50), ACC (down 0.2% to Rs 757.10), Ambuja
Cement (down 0.57% to Rs 113.25) edged lower from Sensex pack.

India's largest real estate player by market capitalisation DLF rose
1.5% to Rs 715.35. DLF reported a net profit of Rs 638.55 crore on a
sales of Rs 1613.32 crore in Q4 March 2008.

India's largest telecom services provider by sales Reliance
Communications declined 3.33% to Rs 560.45. Reliance Communications is
reportedly looking to bid for South African telecom major MTN.
Reliance Communications is talking to leading global banks to raise
resources and be ready, in case MTN's management decides to invite
bids, the reports added.

India's third biggest motorcycle maker by sales, TVS Motor Company
rose 6.26% to Rs 45.80 after it ended a 13-month decline in two-
wheeler sales and registered a 4.8 % growth to 109,937 units in April
2008 over April 2007.

The Dow Jones industrial average shot up 189.87 points, or 1.48
percent, to 13,010 on Thursday, 1 May 2008. The Standard & Poor's 500
Index surged 23.75 points, or 1.71 percent, to 1,409.34. The Nasdaq
Composite Index climbed 67.91 points, or 2.81 percent, to 2,480.71.

All these three major indexes closed at the highest level since the
first half of January 2008 as equities extended a rally started in mid-
March 2008 on optimism that credit markets and the economy have begun
to stabilize.

European markets opened strong. France's CAC 40, Germany's DAX and
UK's FTSE 100 were up by between 0.81% to 0.99%.

In Asia, key benchmark indices in Hong Kong, Japan, South Korea,
Singapore and Taiwan were up by between 0.49% to 2.53%. China's
markets remained shut for its two-day Labour Day holiday and will
resume trading on Monday, 5 May 2008.

Earlier, the US Federal Reserve on Wednesday, 30 April 2008, cut Fed
Funds rate by 25 basis points to 2% and hinted at a pause in its
recent campaign to lower borrowing costs.

Inflation remains the biggest concern for the Indian stock market. The
measures taken by the Union government to control inflation have also
added to uncertainty on corporate profit. Finance Minister P
Chidambaram on Tuesday, 29 April 2008, said government will impose
export tax on basmati rice and some steel products, and cut import
duties on key inputs like ferro alloys and metallurgical coke. He said
the measures were being taken to improve domestic supplies and to
moderate prices. The government has already banned export of cement
and non-basmati rice.

Given that parliamentary elections are scheduled next year (in May
2009), the government may leave no stone unturned in its attempt to
rein in inflation. This is bad news for commodity scrips like cement,
steel etc.

In a bid to rein in inflation, the Reserve Bank of India, on Tuesday,
29 April 2008, raised cash reserve ratio (CRR) by 25 basis points to
8.25%, to suck out excess liquidity in the banking system, in its
annual monetary policy review. While the central bank has mentioned
price stability as its key priority, the overall undertone of the
policy is not as hawkish as market had feared. That in turn boosted
the bourses with Sensex jumping 362.50 points or 2.13% on that day (29
April 2008) to settle at 17,378.46. The RBI governor Y V Reddy expects
inflation to moderate in the next 2-3 months.

Good Q4 results March 2008 results and firm global markets, triggered
a solid rebound in the Indian market over the past few days. Buying by
domestic institutions has supported the market.

The structural growth drivers of the Indian economy remain intact –
India's economy is expected to witness a decent-to-strong growth for a
long period of time due to favourable demographics. Acceleration in
infrastructure creation will be another driver of strong growth in
India's economy. Rating agency CRISIL in its latest outlook for Indian
economy for the year through March 2009 has stated that the overall
growth scenario is expected to remain strong with investment as the
main driver.

Another pointer to the fact that the long term India growth story
remains intact is the outcome of the latest 2008 US-India Business
Council (USIBC) survey, according to which, India is, and will
continue to be, a premier destination for investment by US firms, with
a large number of respondents rating future economic growth in India
as highly sustainable.

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