US Ready to Back Bigger EU Stability Fund..

The key benchmark indices edged higher in a highly volatile trading session on firm global stocks. Stocks rose across the world on expectations that Ireland will soon accept a bailout package from the European Union and International Monetary Fund. The 50-unit S&P CNX Nifty closed slightly below the psychological 6,000 mark after alternatively moving above and below that level throughout the day.

The market breadth was weak, in contrast with a strong breadth in early trade. Mid and small-cap stocks witnessed selling pressure. Metal and auto stocks rose. But, banking stocks fell. Index heavyweight Reliance Industries edged higher. Unitech and Reliance Communications slumped after a government panel highlighted irregularities in 2G spectrum allocation.

The BSE 30-share Sensex advanced 65.50 points or 0.33%, off close to 125 points from the day's high and up close to 315 points from the day's low. The Sensex was below the psychological 20,000 mark, after regaining that level earlier in the day. A steep sell-off on Tuesday, 16 November 2010, had pulled the Sensex and Nifty had below the psychological 20,000 and 6,000 levels respectively. The stock market was closed on Wednesday, 17 November 2010, for a public holiday.

Intraday volatility was high as traders rolled over positions in derivatives segment from the near month November 2010 series to December 2010 series ahead of the expiry of the November 2010 contracts next Thursday, 25 November 2010. The market pared gains after a firm start. The Sensex slipped into the red in morning trade. The market cut losses after falling sharply to hit fresh intraday low in mid-morning trade.

The market regained positive zone in early afternoon trade. The market pared gains in afternoon trade. The market regained positive zone after slipping into the red for a brief period in mid-afternoon as European stocks rose in early trade. The market slipped into the red for a brief period in late trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was down 2.41% at 20.62. The index had risen 4.34% to 21.13 on Tuesday, 16 November 2010. The index had lost 6.38% to 20.25 on Monday, 15 November 2010, a day after Friday's (12 November 2010) sharp surge. 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.

The food price index rose 10.30% while the fuel price index climbed 10.57% in the year to 6 November 2010, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 12.30% and 10.67% respectively. The primary articles price index was up 13.30% in the latest week compared with an annual rise of 14.87% a week earlier.

Economies in the Asia-Pacific region will continue to recover in the next two years thanks to solid domestic demand and exports, but many countries need higher interest rates to counter inflation, the OECD said on Thursday. Capital is flowing to emerging economies in the region because their growth prospects are better than those of major economies, leading some countries to intervene in the currency market or introduce capital controls, the Organisation for Economic Cooperation and Development said in its twice-yearly outlook report. A certain amount of appreciation in Asia-Pacific currencies would help correct economic imbalances, and countries should refrain from currency intervention as it could encourage protectionism, the OECD said.

European stocks rose as expectations grew that Ireland would accept billions of euros in international loans to rescue its ailing banks. The key benchmark indices in France, Germany and UK rose by between 1.34% to 2.41%.

Ireland is likely to end up tapping a loan worth "tens of billions" of euros as a result of talks between the government and officials from the European Commission, European Central Bank and the International Monetary Fund, the head of Ireland's central bank said Thursday. The talks aren't about a bailout, but will lead to a loan to Ireland that the government would have to accept, Central Bank of Ireland Governor Patrick Honohan said in an interview, according to Irish state broadcaster RTE.

Britain, which is not part of the 16-nation bloc that uses the euro, offered Wednesday to provide additional support to Ireland beyond what it gets from the European Union or the International Monetary Fund.

British retail sales volumes saw a 0.5% monthly rise in October and were down 0.1% compared to the same month last year, the Office for National Statistics reported Thursday.

Asian stock markets were higher Thursday as European officials sought a way to fix the region's debt crisis and China appeared poised to cool rising food costs with price controls rather than interest rate hikes. The key benchmark indices in China, Hong Kong, Japan, Taiwan, Singapore, Indonesia and South Korea rose by between 0.1% to 2.06%.

Trading in US index futures indicated that the Dow could gain 88 points at the opening bell on Thursday, 18 November 2010.

Closer home, the Supreme Court today, 18 November 2010, asked the Centre to file an affidavit on Prime Minister's silence on Janata Party president Subramaniam Swamy's petition seeking sanction to prosecute former telecom minister A Raja in the 2G spectrum scam case. The Supreme Court asked the Centre to file the affidavit by Saturday and fixed the hearing on Tuesday. The SC wants the affidavit to be filed on behalf of the Prime Minister by a responsible officer explaining the 11 long months inaction and silence.

The court had on Tuesday, 16 November 2010, asked the government to explain within two days why the "sanctioning authority" - in this case, the Prime Minister - remained silent for 11 months over a request seeking sanction for the prosecution of A Raja in the 2G case.

On the macro front, India's exports in October 2010 rose an annual 21.3% to $18 billion, while imports for the month grew 6.8% on the year to $27.7 billion, Trade Secretary Rahul Khullar said on Monday, 15 November 2010. Khullar said exports could touch $200 billion in the fiscal year that ends in March 2011 (FY 2011). He also said that the trade deficit will not top $135 billion. The trade deficit had widened to a 23-month high of $13.06 billion in August 2010 and Khullar had said the deficit could touch $135 billion for FY 2011, higher than his earlier forecast of $120 billion. The government is targeting close to 15% export growth in the current fiscal.

The wholesale price index rose 8.58% in October 2010, a touch slower than 8.62% increase in September 2010, data released by the government Monday, 15 November 2010, showed. The annual reading for August 2010 was upwardly revised to 8.82% from 8.5%.

Industrial output in September 2010 rose at a much slower-than-expected 4.4% in September 2010 from 8.2% a year ago, government data released on Friday, 12 November 2010, showed. The September IIP data is the lowest in 15 months. Meanwhile, the index of industrial production for August was revised upwards from 5.6% to 6.9%.

The Reserve Bank of India (RBI) at its second quarterly monetary policy review on 2 November 2010 hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said. The Reserve Bank of India (RBI) next reviews monetary policy on 16 December 2010.

Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflow in 2010 stands at $28.53 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.

While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. Steel Authority of India and Indian Oil Corp are some of the other state-run firms that are planning large share sales in coming months. The $1.7 billion follow-on public offer of state-run Power Grid Corporation received strong response. The issue was subscribed 14.88 times.

Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said.

Chairman of the prime minister's Economic Advisory Council C. Rangarajan, last week, said that the Indian economy has the capacity to absorb capital inflows of up to $70 billion annually without government intervention. "The quantitative easing by the US Federal Reserve may have implications in terms of capital inflows, but as I had indicated earlier, India's current-account deficit will be around 3% of gross domestic product" this fiscal year, C. Rangarajan said.

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 3377 firms surged 45.3% to Rs 104431 crore on 19.8% growth in sales to Rs 934274 crore in Q2 September 2010 over Q2 September 2009.

The BSE 30-share Sensex was up 65.50 points or 0.33% to 19,930.64. The Sensex jumped 191.30 points at the day's high of 20,056.44 in early trade. The Sensex fell 249.63 points at the day's low of 19,615.51 in mid-morning trade.

The S&P CNX Nifty was up 10.10 points or 0.17% to 5,998.80. The Nifty hit a high of 6,076.20 and a low of 5,906.75

The BSE Mid-Cap index fell 0.3%. The BSE Small-Cap index fell 1.06%. Both these indices underperformed the Sensex.

Sectoral indices on BSE were mixed. The BSE Metal index (up 1.89%), Auto index (up 1.4%), Healthcare index (up 0.97%), Capital Goods index (up 0.89%), and FMCG index (up 0.53%), outperformed the Sensex. The BSE IT index (up 0.29%), Power index (down 0.07%), Oil & Gas index (down 0.11%), PSU index (up 0.37%), Realty index (down 0.77%), Consumer Durables index (down 1.42%), and banking sector index Bankex (down 1.6%), underperformed the Sensex.

BSE clocked turnover of Rs 5278 crore almost same as that of Rs 5276.14 crore on Tuesday, 16 November 2010.

The market breadth, indicating the health of the market, was weak, in contrast with a strong breadth in early trade. On BSE, 1943 shares fell while 1051 shares rose. A total of 91 shares remained unchanged.

From 30 share Sensex pack, 19 rose and rest fell.

Index heavyweight Reliance Industries (RIL) rose 0.21% to Rs 1032.55. The stock hit a high of Rs 1045.20 and low of Rs 1015. The stock rebounded after falling for the last six days.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.93% on Wednesday, 17 November 2010. Steel Authority of India, Hindustan Zinc, Tata Steel, JSW Steel, Hindalco Industries and Sterlite Industries rose by between 0.24% to 4.86%.

Bank stocks fell on concerns over their exposure to the microfinance institutions. India's largest bank by branch network and net profit State Bank of India (SBI) fell 0.55 %, with the stock falling for the second straight day. The bank reported lower than expected Q2 result last week. On a consolidated basis, SBI's net profit fell 22.52% to Rs 2363.95 crore on 14.57% increase in total income to Rs 37925.44 crore in Q2 September 2010 over Q2 September 2009. As State Bank of Indore was merged with SBI with effect from 26 August 2010, the Q2 September 2010 are not comparable with the corresponding period of the previous year. The bank announced Q2 result after market hours on 8 November 2010.

India's second largest private sector bank by net profit HDFC Bank fell 0.82%, with the stock falling for the second straight day. India's largest private sector bank by net profit ICICI Bank fell 3.14%, with the stock falling for the second straight day.

SKS Microfinance dropped 20% after the microfinance company warned that an ordinance enacted on 15 October 2010 by Andhra Pradesh state government on collections could have an impact on its profitability.

Axis Bank shed 2.7%, erasing initial gains triggered by its $456 million deal to buy investment banking and broking units of Enam Securities

Unitech fell 4.24% after a government panel highlighted irregularities in 2G spectrum allocation. Unitech, said on Thursday its telecoms arm had received licences after complying with guidelines prescribed by the telecoms ministry. The company said in a statement it was providing full cooperation and information to all government authorities.The Comptroller and Auditor General (CAG) of India said in a recent report that Unitech, a company with no prior experience in the telecoms sector at the time, was allocated spectrum at "a throw away price" by the department of telecommunications. Norway's Telenor later bought into the Unitech telecoms venture and now owns a 67.25% stake.

The Comptroller of Auditor General (CAG) has said that the 2G spectrum allocation scam cost the exchequer Rs 1,76,000 crore. According to CAG, 85 of the 122 companies that were allotted 2G spectrum licence did not have the requisite paid-up capital to qualify for the bidding. The scandal had prompted the resignation of Telecom Minister Andimuthu Raja.

Reliance Communications fell 4.88% and was the top loser from the Sensex pack. Reliance Communications, India's No. 2 mobile operator, said it had no shareholding in unlisted Swan Telecom at the time when the company was granted licence to start operations. A government audit report has said Swan Telecom, which has since been bought into by the UAE's Etisalat, was given a licence despite a unit of Reliance Communications holding over 10% of equity, a violation of rules. Reliance Communications said its wholly owned unit was a 9.9% shareholder in Swan till 5 December 2007, while Swan was granted licence on 10 January 2008. The company said it would provide all relevant information to resolve the doubts expressed by the auditor.

Bharti Airtel rose 3.77%. The company added 3 million users in October 2010.

Auto stocks rose on expectations of strong sales. Tata Motors, India's largest auto maker by sales, rose 2.02%. The company's global sales rose 18% to 86,705 units in October 2010 over October 2009. Sales growth was led by 20% and 17% growth in the commercial and passenger vehicle segments, respectively. Sales of luxury brands Jaguar and Land Rover (JLR) posted 12% growth to 18,845 units in October 2010 over October 2009. While Jaguar sales declined by 19% to 3,219 units, Land Rover sales continued to see a strong traction, growing by 22% to 15,626 units.

India's largest bike maker by sales Hero Honda Motors rose 5.46%. The company reported its highest ever monthly sales at 5,05,553 units in October 2010, registering a jump of 42.75% over the same month last year.

India's top small car maker by sales Maruti Suzuki India rose 2.09%, with the stock snapping last four days losses. The company's total sales rose 39.2% to 1.18 lakh vehicles in October 2010 over October 2009.

Bajaj Auto rose 0.47%. The company reported 32% surge in total sales to a 3.7 lakh units in October 2010 over October 2009. The company clocked record motorcycle and commercial vehicle sales in October 2010.

India's largest tractor maker by sales Mahindra & Mahindra rose 0.31%. The stock hit record high of Rs 826.40 on Thursday, 11 November 2010. The company's auto sales rose 34% to 34,495 units in October 2010 as against 25,670 units during October 2009.

Car sales in India rose an annual 37.9% in October, an industry body said last week. Firms sold 1,82,992 cars in the month, data from the Society of Indian Automobile Manufacturers (SIAM) showed. Sales of trucks and buses, a barometer of economic activity, rose 18.17% to 50,835 units in October, SIAM said.

IT stocks were mixed. India's largest IT exporter by sales Tata Consultancy Services (TCS) fell 0.69%, reversing initial gains. The uncertainty around the Rs 4300-crore deal awarded to TCS to administer Britain's National Employee Savings Trust (NEST) has come to an end, after the government gave a go ahead. Britain's Personal Accounts Delivery Authority (PADA), which had awarded TCS the deal to administer NEST for 10 years, has confirmed the long-term contract and has provided an option to extend the deal for up to five years beyond.

India's second largest software services exporter by sales Infosys rose 1.07%. Infosys is eyeing acquisitions in Japan as India's second-largest outsourcer looks for growth outside its main markets in the United States and Europe, its chief executive S Gopalkrishnan said recently. India's third largest software services exporter by sales Wipro fell 0.76%.

Shares of oil marketing companies rose after crude oil prices declined more than 2% on the New York Mercantile Exchange on Wednesday, 17 November 2010. Hindustan Petroleum Corporation (HPCL) (up 1.12%), Bharat Petroleum Corporation (BPCL) (up 2.16%) and Indian Oil Corporation (IOC) (up 1.87%) edged higher. Lower crude oil prices will reduce under-recoveries of state-run oil marketing firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Light, sweet crude oil declined $1.90 or 2.31%, to $80.44 a barrel on the New York Mercantile Exchange on Wednesday, 17 November 2010

Consumer durables stocks fell on profit taking. Blue Star, Titan Industries, Blue Star, Lloyd Electric and Videocon Industries fell by between 0.98% to 2.85%.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) rose 1.56%, rebounding after falling 3.53% on Tuesday 16 November 2010. A consortium led by L&T has bagged its largest overseas EPC order worth $764 million for the design and development of the New Salalah International Airport in Oman. The project is in consortium with Oman-based Galfar Engineering & Contracting SAOG. L&T's size of the order is pegged at $500 million, to be completed in 30 months. Upon completion, the airport will have a capacity to handle two million passengers per annum.

FMCG stocks rose on renewed buying. Hindustan Unilever, ITC, United Spirits and Dabur India rose by between 0.06% to 2.89%.

Cals Refineries clocked highest volume of 2.48 crore shares on BSE. Karuturi Global (1.19 crore shares), Alok Industries (1.19 crore shares), Unitech (1.06 crore shares) and IFCI (1.02 crore shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 317.86 crore on BSE. Coal India (Rs 258.37 crore), Gravita India (Rs 151.92 crore), Tata Steel (Rs 147.59 crore) and Axis Bank (Rs 121.07 crore) were the other turnover toppers in that order.

LONDON -- The U.S. government's stress tests are fueling concerns that European banks could be falling behind in their efforts to bolster their own finances.

Unlike in the U.S., there has been no major policy initiative to force banks in Europe to increase capital cushions, and governments have intervened only on a piecemeal basis. Meanwhile, as U.S. banks pile in with efforts to raise capital from investors, European banks aren't taking advantage of a stock rally to do the same.

"Compared to the U.S., the European banking system is rapidly being left behind," said Philip Finch, bank analyst at UBS AG. "If anything, the rally that has taken place has allowed complacency to come back at the bank level and at the policy level."

European banks have raised only about 40% of the $1 trillion they need to cover losses since the beginning of the financial crisis and maintain healthy capital levels, according to the latest estimates from the International Monetary Fund.

By contrast, U.S. banks have raised or announced plans to raise about two-thirds of the $666 billion the IMF believes they need.

The divergence partly reflects a different attitude toward how to scrutinize battered banks. The U.K., one of a handful of European countries to stress-test its banks, never disclosed the parameters or detailed results.

A spokeswoman for the Committee of European Bank Supervisors said national authorities are carrying out stress tests of their domestic banking systems, with results due by September. The examinations are aimed at assessing the European financial system's resilience to shocks, not the capital needs of individual banks. The findings and methodology won't be disclosed publicly.

Some bankers prefer the discreet approach. The U.S. strategy was "not the way to instill confidence in the process," Stephen Green, chairman of HSBC Holdings PLC, said in an interview Monday, noting the haggling between banks and regulators. But that openness boosted the credibility of the U.S. stress tests -- and last week's results -- in the eyes of some analysts and investors.

One reason European banks are behind those in the U.S. in raising capital: The economic downturn took as much as a year to ripple across the Atlantic Ocean. That delayed the pain for most banks, except a small number of European financial institutions that invested in shaky U.S. assets or U.K. banks hurt by a decline in real-estate values.

European banks now face potential losses from risk-taking that U.S. banks largely avoided, such as investments in Eastern Europe, which is suffering from a severe recession. Banks in Europe also are more vulnerable to skittish wholesale money markets because of their higher ratios of loans to deposits.

Weakened banks in Europe have a potentially bigger economic impact than U.S. financial institutions do, since some 80% of lending to companies in Europe is through banks, compared with only one-fifth in the U.S. If replenishing capital levels causes European banks to pull back on lending, it could slow economic recovery.

Of the $600 billion in additional capital still needed by European banks, financial institutions in the 16-nation euro zone need $375 billion, followed by $125 billion in the U.K. and $100 billion elsewhere on the Continent, according to the IMF. The IMF's figures are larger than other estimates, partly because they include all banks. In Germany, many of the so-called Landesbanks owned by individual German states are seen as needing more capital.

The U.K. has injected £80 billion ($121.88 billion) of new capital into its banks and is insuring some £562 billion of bank assets under a government program aimed at putting a lid on losses.

Analysts at investment firm Keefe, Bruyette & Woods Ltd. who attempted to replicate the U.S. stress tests for European banks came up with what they called a "broadly positive" result. Six banks with widely traded shares, including Commerzbank AG and Danske Bank AS, would need to raise a total of only about €8 billion ($10.9 billion) in capital to meet the 4% equity Tier 1 capital ratio used in the U.S. tests.

In reality, the European banks probably would want to raise a lot more capital -- as much as €60 billion -- to maintain investor and customer confidence under a bad scenario similar to one used by the U.S. government, said Andrew Stimpson, a KBW analyst.

Tonny Thierry Andersen, finance chief at Danske Bank, said the Danish bank raised about 26 billion kronor ($4.76 billion) in early May, making it the best-capitalized bank in the Nordic region. A representative for Commerzbank said the German bank is "capitalized adequately."

By STEPHEN FIDLER and NEIL SHAH