BSE Sensex up for 2nd month; lags other BRIC peers

People walk pass the Bombay Stock Exchange (BSE) building displaying India's benchmark share index on its facade, in Mumbai September 30, 2009.

MUMBAI (Reuters) - The BSE Sensex rose for the second straight month in July after ending 0.7 pct lower on Friday, but underperformed emerging market peers in the month, as the Reserve Bank's key rates hike and mixed earnings limited gains.

The Sensex rose 0.9 percent in July, but underperformed China's Shanghai Composite Index, Brazil's Bovespa and Russia's RTS Index, which gained between 9.9 and 10.6 percent so far this month.

"For this month, we really had nothing much to cheer about," said Prakash Diwan, head of institutional business at Networth Stock Broking.

"High inflation, two consecutive interest rate hikes, mixed corporate results, all contributed to the underperformance of our market this month."

Diwan expects Indian market to be volatile in August due to uncertainty in the global markets.

For a graphic on Indian benchmark's performance in July vs Other BRIC peers, please click here

For a graphic on comparison of their performance so far in 2010, click here

But, for the year to date, the Indian benchmark has outsmarted its rivals other than Russia by notching a 2.3 percent gain. Its peers in China and Brazil shed 19.5 percent and 2.4 percent respectively while the Russian benchmark gained 2.5 percent.

Foreign funds have poured in $9.3 billion in Indian stocks in the year to July 28 after a record $17.5 billion in 2009.

MARKETS ON FRIDAY

The 30-share BSE index closed 0.69 percent or 123.71 points lower on Friday at 17,868.29, with 22 of its components closing in the red.

The benchmark eased, in line with weak world equities, and on disappointing quarterly earnings from Oil & Natural Gas Corp(ONGC.BO) and Hero Honda(HROH.BO).

Top motorcycle maker Hero Honda shed nearly 3 percent to 1,815.40 rupees after it posted a 1.6-percent drop in quarterly net profit, its first decline in 11 quarters, and analysts said margins would remain under pressure in the current quarter as well.

JPMorgan cut its share price target for the stock to 1,845 rupees by next March from 1,915 rupees.

"Some of the key earnings are disappointing the market. After Maruti, people were expecting Hero Honda to follow suit and that was the case," said Diwan.

State-controlled explorer ONGC closed barely changed after dropping as much as 1.7 percent as it reported a more-than-expected 24.5 percent drop in quarterly profit, as a rise in crude oil prices meant it had to make higher subsidy payouts.

Outsourcers contributed the most to the main index's losses on gloomy outlook by U.S. tech majors and as Federal Reserve official's downbeat comments raised concerns over the speed of economic recovery in the world's largest economy.

Top outsourcer Tata Consultancy dropped 1 percent, while smaller rivals Infosys and Wipro shed 1.6 percent and 1.2 percent respectively.

In the broader market, declining shares outnumbered gainers in the ratio of 1.2:1. A total of 367 million shares changed hands on the BSE.

The 50-share NSE index closed 0.8 percent lower at 5,367.60 points.

STOCKS THAT MOVED

* ABB Ltd, a unit of Swiss engineering group ABB, fell 4.1 percent to 812.05 rupees as it posted a 54 percent fall in quarterly net profit on certain exit costs in some projects and increasing pricing pressure in the market.

* Hindustan Construction Company climbed 3.8 percent to 133.70 rupees as the construction and civil engineering firm posted a 56-percent rise in quarterly net profit and also declared a 1:1 bonus share issue, sending its shares up as much as 8.3 percent.

* Real estate firm Omaxe jumped 6.6 percent to 117.85 rupees on a 38.7 percent rise in quarterly profit.

* Titagarh Wagons rose 2.3 percent to 409.40 rupees after its April-June net profit jumped 84 percent.

MAIN TOP THREE BY VOLUME

* Spicejet on 12.5 million shares

* Aster Silicates on 12 million shares

* IFCI on 9.8 million shares

(For more business news on Reuters India click in.reuters.com)