Share prices showing remarkable strength: Wednesday Closing Report
Moneylife Digital Team 30 March 2011

In the face of high oil prices and subdued expectations of economic growth, stock prices have been exceptionally strong. But the real test of the upmove will be after Thursday

The upmove in the Indian market continued today with the Sensex opening at 19,179, 58 points above its previous close and the Nifty was 20 points up at 5,756. The US markets were strong yesterday.

The uptrend in the Asian space emanating from the optimism that Japanese factories have resumed production after the devastating earthquake earlier this month, spurred investor sentiment in the domestic market. Institutional buying pushed the indices further northwards as trade progressed. All sectoral indices were in the positive zone in morning trade.

Share prices are in an overbought zone and are due for a correction. Besides, the exceptionally strong showing will be tested on Thursday and Friday, after the derivatives of March and the financial year are over.

US-based International Paper (IP) said today that it will buy a key stake in India's Andhra Pradesh Paper Mills (APPM) for up to $423 million, as it seeks a foothold in the booming Indian economy. IP said it would buy 53.5% of APPM from the parent LN Bangur group for $257 million in cash and make a public offer for an additional 21.5% of APPM's shares for $104 million. Besides, it has agreed to a $62 million non-compete payment to the sellers, taking the deal's potential value to $423 million.

The APPM stock hit the upper circuit limit of 19.99% on the Bombay Stock Exchange at Rs236.15 a piece today. A similar trend was seen on the National Stock Exchange where the stock touched Rs236.95, a gain of 20.01%.

The indices touched the day's high minutes after 1pm, with the Sensex at 19,357 and the Nifty scaling 5,803. However, profit booking amid choppy trade led the market to its intra-day low at 2.20pm. The Sensex fell to 19,179 and the Nifty was at 5,754 at the day's low.

Another bout of buying in the last half hour pushed the indices marginally higher and they closed in the green for the seventh consecutive day. The Sensex settled 169 points higher at 19,290 and the Nifty ended 51 points up at 5,787 as the benchmarks logged their best closing since 13th January. The advance-decline ratio on the NSE was 1341:428.

As we mentioned yesterday, the Nifty has witnessed a continuous rally of seven consecutive days 77 times since July 1990 and the current rally is the 78th instance. Of the prior 77 times, the Nifty has been positive 42 times on the eighth trading day and 35 times in the negative.

The Sensex has added 1,451 points in this financial year-end rally that began on 22nd March and the Nifty has put on 423 points in the period.

After being left behind for the last couple of days, the broader markets outperformed the Sensex today with the BSE Mid-cap index surging 1.51% and the BSE Small-cap index jumping 2.20%.

With the exception of the BSE Fast Moving Consumer Goods index, all other sectoral gauges ended in the positive. BSE Consumer Durables (up 3.98%), BSE Realty (up 3.14%), BSE Healthcare (up 1.95%), BSE Bankex (up 1.67%) and BSE Auto (up 1.49%) were the top gainers. BSE FMCG fell 0.38%.

Cipla (up 5.17%), Jaiprakash Associates (up 4.19%), DLF (up 3.83%), Mahindra & Mahindra (up 3.46%) and State Bank of India (up 3.27%) were the top Sensex gainers. Hindalco Industries (down 1.15%), ITC (down 0.84%), BHEL (down 0.47%), Tata Power (down 0.30%) and ONGC (down 0.28) were at the bottom of the index.

Markets in Asia posted smart gains with the Nikkei 225 leading the pack on weakening of the yen against the dollar and news that some companies will restart production that was halted after the earthquake in Japan. Gains in the region's stock markets are an indication that the global economic recovery is still strong. However, the Shanghai Composite, considered the best performing market so far this year, ended lower today.

The Hang Seng surged 1.70%, the Jakarta Composite gained 1.38%, the KLSE Composite rose 0.76%, the Nikkei 225 jumped 2.64%, the Straits Times advanced 1.26%, the Seoul Composite rose 0.93% and the Taiwan Weighted climbed 0.58%. Bucking the trend, the Shanghai Composite lost 0.07% today.

Back home, continuing its declining trend for the eighth consecutive month, India's iron ore exports in February went down by 18.60% to 10.13 million tonnes (MT), from 12.54 MT in February 2010.

Outbound shipment of the vital steel-making raw material also declined in the April 2010-February 2011 period by 17.98% to 85.43 MT, mainly on account of a ban on exports imposed by the Karnataka government.

Foreign institutional investors continued their buying spree on Tuesday, emerging as net buyers of stocks worth Rs1,291.54 crore. On the other hand, domestic institutional investors were net sellers of stocks worth Rs474.17 crore.

Dr Reddy's Laboratories (up 2.65%) today said it has acquired GlaxoSmithKline's US penicillin manufacturing facility and the rights to the Augmentin and Amoxil brands in the United States for an undisclosed sum.

The acquisition of the oral penicillin manufacturing facility in Bristol and product portfolio was completed on Tuesday and is pursuant to the agreement signed by the companies on 23 November 2010.

IT services major Tata Consultancy Services (up 1.06%) is planning to expand its operations in the European healthcare segment. The company is also planning to acquire companies in the German market which can bring certain domain expertise, particularly in the healthcare segment.

Lanco Infratech (down 1.13%) has signed an agreement for raising debt of Rs5,500 crore from a consortium of financiers led by state-run Power Finance Corporation to finance its upcoming 1,320MW power generation unit in Chhattisgarh. It has raised the debt at an average rate of around 12%-12.5%. The company has signed the loan document for Amarkantak unit 3 and 4, both the expansion units are scheduled to be commissioned in phases by 2014.

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