Market ends in green

The Indian stock market ended on a positive note during the week. The BSE Sensex and the NSE Nifty ended higher by 3.0% and 2.8%, respectively, backed by positive global cues and higher first quarter advance tax payments. However, both BSE mid-cap index and BSE small-cap index underperformed the broader market, ending the week with gains of 1.3% and 2.4%, respectively. During the week, Fitch Ratings, a global rating agency, raised India's local currency rating outlook to stable from negative as windfall gains from the sale of spectrum raised expectations of a steeper cut in the country's fiscal deficit. On the sectoral front, all sectoral indices ended in green, with the BSE IT index and BSE capital goods index gaining the most by 4.6% and 4.5%, respectively.

BSE IT Index surges by 4.6%
The BSE IT index gained 4.6% during the week, outperforming the Sensex that gained 3.0%. The weekly momentum of the IT index gathered strength with Infosys, Wipro, HCL Tech, TCS, Mphasis and Tech Mahindra gaining by 5.6%, 5.6%, 4.9%, 3.0%, 1.4% and 1.2%, respectively. This was despite the 1.5% appreciation in average Rupee versus US Dollar over a week's time. The surge in the index can be attributed to certain positive events such as Infosys mulling over the long-awaited M&A, TCS's deal with Telenor and HCL Tech's deal with SGX. Further, during the week Tech Mahindra announced to disclose the audited financial statements of Mahindra Satyam by September 2010, which gave clarity on the ambiguity of the issue. Our top picks in the sector are TCS, Wipro, Tech Mahindra and Mphasis.

SpiceJet - Event Update: Sun TV promoter Kalanithi Maran has announced to buy 37.75% stake in SpiceJet from the company's promoter Bhupendra Kansagra (Royal Holdings Services) and investor Wilbur Ross at Rs47.3/share, which is at a 16.7% discount to the current market price. We recommend Buy on the stock with a Target Price of Rs65.

BWA - Event Update: The Broadband Wireless Access (BWA) auction raised Rs38,543cr for the government, over 3x of the budgeted estimate. Infotel Broadband bagged the pan-India spectrum (22 circles) for Rs12,848cr, backed by Reliance Industries, which acquired 95% stake in Infotel for Rs4,800cr. Aircel won 6 circles, Tikona won 5 circles, Bharti Airtel won 4 circles, Qualcomm won 4 circles and Augere won 1 circle. The operators will have to pay the amount before June 22, which would result in increased capex and incremental strain on their balance sheet position.

Cement Sector - Monthly Update: The growth in cement dispatches decelerated during May 2010 due to lower off-take from the real estate and infrastructure segments. Cement dispatches grew at a 8.1% yoy in May 2010 as against 10.7% yoy growth in May 2009. Cement prices declined across the country in May 2010, with the Southern region experiencing the highest price correction in the range of Rs20-45 per bag till date.