With the political environment showing signs of cooling down after yesterday's unsuccessful terrorist attack in Ayodhya, the markets turned their attention back to the economic environment. Traders were greeted in the morning by reports of good rains across the country, though flooding has caused some damage in Gujarat.

The Met department expects rains during the current month to be very close to normal and the deficiency reported in June will be wiped out by the end of the season. A strong showing by the US markets yesterday added to the positive sentiment and helped the markets to bounce back after yesterday's correction.

After remaining indecisive for the first hour, the indices started an up trend which took them above the all time closing highs posted on Monday. Early afternoon saw some decline on profit booking.

The last one hour saw the indices surging again which took the Sensex very close to the 7300-mark.

Both the Sensex and Nifty closed at a new all time closing highs of 7287 and 2228 respectively. Gains on both indices were more than three fourths of a per cent each. Nifty July futures discount to the spot index narrowed considerably to just 1 point.

Among Nifty stocks, ABB, MTNL and HDFC were the major percentage gainers while Bajaj Auto, Maruti and ONGC were the major losers.

US markets opened strong yesterday after the long holiday weekend. The strong manufacturing outlook supported by surging factory orders as per data released last week and improved guidance from Wal-Mart supported the up trend.

Oil company stocks gained on surging crude prices and helped the US indices. The Dow closed with gains of two thirds of a per cent while NASDAQ gained a per cent.

Crude futures for August delivery on the NYMEX continued its surge yesterday after Friday's bounce back of over 4 per cent. The commodity gained 84 cents to a barrel to close at $59.59.

Tuesday was a good day for most Indian ADR's as well. ICICI Bank, Dr. Reddy's and Tata Motors closed with gains of over 3 per cent while VSNL gained close to 3 per cent. Tech stocks were largely subdued. Wipro and Satyam closed with marginal gains while Infosys closed marginally lower. HDFC Bank was the other loser yesterday.

After the acquisition of Adlabs, Reliance Capital is reportedly looking at buying life insurer AMP Sanmar. Reliance Capital had received a life insurance license some years back which was cancelled as the company did not start the business.

AMP Sanmar is on the block as its joint-promoter, AMP of Australia, is not keen on the life insurance business anymore. Many domestic and international insurers are believed to be interested in acquiring the company.

After the consolidation of last few days, Reliance Capital surged over 6 per cent in early afternoon trades today. Rumours of impending announcements are rife in the market. There were reports that Reliance Capital may acquire a large stake in IndusInd Bank, which the company denied later. The stock closed over 9 per cent higher.

Mahindra group may come out with IPO's of three of the larger companies in the group in future. While Mahindra British Telecom is a major software exporter, M&M Financial Services is an NBFC and Mahindra Automotive Steels manufactures automobile components.

Mahindra Automotive Steels had recently acquired some facilities of forging company Amforge. M&M closed with gains of close to 2 per cent at a new 52-week high.

Videocon group is reportedly close to acquiring the Indian operations of Swedish appliances major Electrolux. The group would also get the Electrolux and Kelvinator brands for the domestic market under license from Electrolux.

Electrolux may also source appliances from Videocon for its global operations. According to reports, this may bring business worth over Rs5,000 crore to the group annually.

Videocon group is also planning to merge Videocon International and Videocon Industries. Videocon International gained close to 10 per cent while Videocon Industries was locked in the 5 per cent upper circuit today.

Indian Oil is reportedly facing a serious liquidity crunch because of the large subdivides on petroleum products. The company may report a net loss in excess of Rs1,500 crore for the first quarter ended June, unless the subsidies are shared with refineries and crude producers.

Metal stocks staged a smart comeback after the correction over last few weeks on declining product prices. The bounce back was triggered by unconfirmed reports that prices of scrap metal has started going up again. Scrap prices are considered to a leading indicator of finished metal prices.

SAIL closed with gains of close to 3 per cent while Tata Steel closed with gains of close to a per cent. Among smaller steel companies, Essar Steel gained close to 10 per cent while Ispat Industries gained over 5 per cent. JSW Steel gained 3 per cent.

Recovery was seen in aluminium stocks as well. Both Hindalco and Nalco closed with gains of over 2 per cent each.

The rally in engineering major ABB continued today as well and the stock gained over 5 per cent to touch a new lifetime high. Siemens also closed with gains of well over a per cent. L&T closed with gains of over 2 per cent while BHEL gained close to 3 per cent.

Power stocks also saw significant gains today. NTPC led the pack with gains of around 4 per cent. Tata Power gained well over 2 per cent while Reliance Energy closed with gains of over a per cent.

Mid-Cap Action

Mid-caps bounced back smartly today after the sharp fall seen yesterday afternoon. CNX Mid-Cap 200 index closed at 3128, a gain of 46 points or close to one and a half per cent, a new life time high.

3i Infotech, which had come out with an IPO recently, is planning to acquire companies in both the domestic market and abroad. It is targeting companies with a top line of around Rs100 crore. The company has also received orders worth over $11 million recently. The stock closed over 3 per cent higher.

Hindustan Constructions has won a new contract worth over Rs180 crore from the National Highway Authority. The stock closed with marginal gains.

Many mid-cap banking stocks saw considerable gains on renewed speculation of possible mergers between smaller banks. If rumours are to be believed, discussions are going on between some of the South-based private banks. There are also rumours that Reliance Capital has set its eyes on some of these banks as well.

Karnataka Bank closed with gains of 20 per cent while South Indian Bank gained over 10 per cent. IndusInd Bank, Bank of Rajasthan, Federal Bank and UTI Bank all saw gains of 4 per cent or more.

Sugar stocks also saw some buying interests on speculation that some of the sugar manufacturers are planning projects which may be eligible for carbon credits under the Kyoto Protocol. There is also speculation that Pakistan may lift the ban on sugar imports from India.

Balrampur Chini, Upper Ganges, Bajaj Hindustan and Bannari Amman were among the major gainers.

PSU telecom equipment company ITI Limited gained over 5 per cent to touch a new high. There are reports that the company will start manufacture of mobile handsets with technology from Alcatel of France.

Shares of plywood manufacturer Uniply Industries got listed on the bourses today after the recent IPO. The stock, issued at Rs24, opened on the BSE at Rs29.6.

Zodiac Clothing has proposed to issue bonus shares in the ratio of one share for every share held, subject to shareholder approval.

Jindal Polyfilms is planning to invest around Rs300 crore in Jammu for setting up a BOPP plant. The new plant will raise the company's capacity to 90,000-tonnes per annum. The company had raised funds from the market recently through a public issue and the stock had seen a substantial drop after the issue closed.

Geodesic Info, Crest Animation and India Bulls were among the best performing stocks among mid-caps.

Ruby Mills, Swaraj Engines and Hexaware were among the significant mid-cap losers.

*Disclaimer: The author does not have any position in the stocks specifically mentioned above at the time of writing this article. This analysis / report is only for the purpose of information and is not an investment advice. Readers are advised to consult a certified financial advisor before taking any investment decisions. While efforts have been made to ensure the accuracy of the information provided in the content the author or publisher shall not be held responsible for any loss caused to any person whatsoever.

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