Markets recover from day's lows

The markets retraced all the lost ground on the back of a return of composure on the global market front and stellar set of numbers from State Bank of India.

The Sensex recovered nearly 200 points from intra-day lows and comprehensively regained the 18k mark to end at 18073, higher by three points, and the Nifty ended at 5416, down four points.

The midcap index ended at 7567, higher by 22 points and the smallcap index ended at 9645, up three points.

It has been a reasonable closing, considering that we were staring at a bleak day ahead of us this morning. Wall Street had surrendered more than 2% on Wednesday as fears of sustained global economic stagnation caused investors to flee to safer assets.

The Dow had shed 265 points at 10,378 and Nasdaq had lost 68 points at 2,208. And on cue, there was a sea of red across Asia and a domino effect on Dalal Street.

But a partial recovery in the Hang Seng and Nikkei (both closed down less than a percent each) and the return of composure across Europe (CAC, DAX and FTYSE flat in early trades) and the US (trading in Dow futures suggests a positive opening) resurrected our markets from the early morass.

And SBI, the country's largest lender, posted a jump of 25% in net profit for the April-June quarter to Rs 2,914.2 crore, compared to Rs 2,330.37 crore in the same period a year-ago. 

The consolidated net profit of the bank, however, showed a growth of 21.5 per cent to Rs 3,467.09 crore for the quarter ended June 30, 2010.

Meanwhile, the food inflation for week ended July 31 rose to 11.4% from 9.5% in the previous week. On a yearly basis, cereals registered a growth of 6.9%, driven mainly by higher prices of pulses, rice and wheat.

Pulses became dearer by 20.74%, prices of rice and wheat rose by 6.89%  and 7.93% respectively during the week under review over the same period last year.

The industrial output in June increased at a slower-than-expected 7.1% from a year earlier, its slowest pace in 13 months. Growth in manufacturing, which constitutes around 80% of the Index of Industrial Production (IIP), fell to 7.3% from 8% a year ago.

According to Ashutosh Datar, Economist, IIFL, the June IIP growth of 7.1% YoY is lower than an estimated 8%. The MoM IIP grew 0.8% in seasonally adjusted terms (9.6% annualized) and thus the sharp deceleration from May largely reflects the base effect of last year.

However, with the base effect not so pronounced in the next couple of months, Datar expects the YoY IIP growth to be higher than the June growth in the next few months.

According to Dr Arun Singh, Sr. Economist, Dun & Bradstreet India, the moderate growth in the Index of Industrial production during June 10 should not be a cause for concern as the lower pace of growth is partly a statistical phenomenon due to base effect of the previous fiscal.

Moreover, the moderating trend in IIP growth rate is a sign of consolidating industrial activity and the IIP growth is likely to remain around the current level in the next few months.

SBI hit a life-time high of Rs 2,784 and topped the gainers list on the BSE after the announcement of its numbers. ONGC ended at Rs 1266, higher by 2.4% and Hindustan Unilever ended at Rs 266, up 2.1%. Tata Motors continued itsb dream run by adding another 1.7% at Rs 1024.

The laggards included Sterlite (weakened by 2.5% at Rs 167), Jaiprakash Associates (shed 1.4% at Rs 119) and ITC (lost 1.2% at Rs 153). And index heavyweight RIL lost another 1% to end at Rs 972.

The market breadth was weak. Out of 3045 stocks traded on the BSE, there were 1293 advancing stocks as against 1640 dcelines.

Ashit Suri, JV Capital Services, expects the markets to consolidate in the trading band of 5300-5500. With the earnings season coming to an end, a relatively good monsoon, absence of  triggers on the domestic front and the slowdown in the US and Europe, fund flows are likely to target India, Suri reckons.