Sensex Index Swings Between Gains and Losses on Monsoon Forecast, Greece

India’s benchmark stock index was little changed after swinging between gains and losses. A forecast of a below normal monsoon outweighed optimism that Greece may avoid a default on its debt.

Hindustan Unilever Ltd. (HUVR), India’s biggest home-products maker, dropped the most in five months. Monsoon rain in India will be below normal for the second time in three years, the weather office said yesterday, potentially lowering farm output and stoking inflation which is the highest among Asia’s major economies. Infosys Ltd., a software exporter that earns 22 percent of its revenue from Europe, rose the most in two weeks. Greek Prime Minister George Papandreou secured a parliamentary confidence vote, sparking a rally in global equities.

The Bombay Stock Exchange Sensitive Index, or Sensex, was little changed at 17,550.63 at the 3:30 p.m. close in Mumbai. The S&P CNX Nifty Index on the National Stock Exchange climbed less than 0.1 percent to 5,278.30 and its June futures settled at 5,283. The BSE 200 Index fell 0.2 percent to 2,178.43.

“A weak monsoon will lead to a further spike in inflation, which is being driven by rising commodity and crude oil prices,” said Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services Ltd. (GBNP)

Hindustan Unilever lost 3.6 percent to 310.75 rupees, its biggest slide since Jan. 27.

Rainfall will be 95 percent of the 50-year average in the June-September season, the weather office said yesterday after the markets closed. That compares with 98 percent predicted by the state-owned forecaster in April. A variation of 4 percent from the long-term average is deemed normal by the agency.

Record Harvests

Prime Minister Manmohan Singh is relying on adequate rain to harvest record quantities of food grain and oilseeds for a second year and cool inflation, which has led the central bank to raise rates 10 times since mid-March 2010. Farming makes up almost 14 percent of the economy and a reduced farm output can also lower rural incomes, hurting sales of tractors and cars.

Infosys increased 1 percent to 2,755.05 rupees and its June futures settled at 2,760 rupees.

The MSCI Asia Pacific Index rose 0.8 percent. A total of 155 lawmakers supported the motion in the 300-seat parliament in Athens, bolstering Papandreou’s chances of pushing through austerity measures to secure international financial aid for Greece. The International Monetary Fund, contributor of a third of the bailout money for the nation, has warned EU leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.”

“Markets may see a dead-cat bounce on good news from Greece but it will not sustain in the long term,” Geojit BNP’s Shah said.

‘Gloomy Horizon’

The Sensex has declined 14 percent in 2011, the worst performer in Asia. The stocks on the gauge are valued at 14.2 times estimated earnings, compared with 10.8 for the MSCI Emerging Markets Index.

“The horizon is still gloomy,” said Deepak Chatterjee, managing director of SBI Funds Management Pvt., which manages $9.3 billion in assets. “Inflation doesn’t seem to be tamed and we’re not at the end of the rate-increase regime. The government has to try to fix the structural problems. It is a question of sentiment rather than fundamentals.”

The central bank raised the repurchase rate to 7.5 percent from 7.25 percent on June 16, extending the longest streak of tightening in a decade, joining its peers from China to South Korea in stepping up the fight against surging living costs.

Rising borrowing costs have begun to crimp demand and hurt corporate earnings. India’s $1.4 trillion economy expanded 7.8 percent in the three months through March 31, the slowest pace in five quarters. Some 33 percent of companies in the Sensex reported profits that missed analysts’ estimates in the March quarter, compared with less than a quarter last year.

Overseas investors sold a net 5.51 billion rupees ($122.7 million) of Indian stocks on June 21, taking their total withdrawals from equities this year to 21.5 billion rupees, according to data fromthe Securities and Exchange Board of India.

To contact the reporter on this story: Santanu Chakraborty in Mumbai atschakrabor11@bloomberg.net

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net

Satyam-Tech Mahindra merger likely in 2012: report

The report stated that the company is in talks with the US regulator, Securities and Exchange Commission (SEC), to clear certain issues

The merger of Mahindra Satyam with its parent company Tech Mahindra will take place by 2012, according to a report.

The report stated that the company is in talks with the US regulator, Securities and Exchange Commission (SEC), to clear certain issues and is hopeful of its relisting on the New York Stock Exchange (NYSE).

Mahindra Satyam chief executive C P Gurnani has reportedly said that the company plansto add about 12,000 staffers over the next four to five quarters.

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India gains as FIIs divert funds to emerging markets

With global investors shifting focus from developed to emerging markets in the last few days, India has emerged as a major beneficiary.

Since March 22, foreign institutional investors (FIIs) have net-bought Indian shares worth Rs 12,345.30 crore, according to data from the Securities and Exchange Board of India. More than half of this, or Rs 6,749.60 crore, has come in just six sessions ended April 7, data compiled by the BS Research Bureau show.

The surge in inflows on March 31, when FIIs invested Rs 3,300 crore, was due to shifting of some funds from derivatives to the cash market on the expiry day, said the head of institutional equities at a domestic brokerage.
The last time such strong inflows came in such a short span was in early November last year, when the Bombay Stock Exchange (BSE) Sensex closed at an all-time high of 21,005.

Not surprisingly, the Sensex, which closed at 19,451.45 on Friday, has gained 9 per cent since March 22.

“For the last few months, investors were exiting emerging markets and deploying money into developed markets. The trend is reversing, with emerging markets becoming relatively cheaper,” said U R Bhat, managing director, Dalton Capital Advisors (India). “Despite oil prices rising, the macro situation in India is looking better, with interest rates peaking and the balance of payment situation likely to be better than expected, on the back of robust export performance,” he said.

Net inflows into emerging market equities were $2.7 billion (Rs 12,150 crore) in the week to April 6, according to Lipper, the fourth-highest since the fund tracker began compiling this data in 1992.

“Following a 20 per cent rally since the announcement of second quantitative easing by the US at the end of August 2010, investors appear to believe that developed market equities reflect the positive outlook and emerging market equities are worth another look,” Clive McDonnell, head of equity strategy at BNP Paribas Securities Asia, said in a note to clients. “An additional factor is the improvement in valuations following the outflow of $25 billion from the emerging market equity universe in the first quarter of 2011,” he added.

Several FIIs have changed their India stance in the last one month. Early this week, JP Morgan’s Adrian Mowat, the Asian and emerging market strategist, upgraded India to overweight, citing lower inflation, normalisation of the yield curve and the progress on various legislation. After March 31, HSBC strategists have changed their India rating from underweight to neutral.

Some other influential foreign firms such as Deutsche, Morgan Stanley and Citi have also been optimistic in their India outlook.

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