The key benchmark indices slipped to the fresh day's low in afternoon trade tracking weak European stocks and lower US index futures. The BSE 30-share Sensex was down 129.04 points or 0.88% off close to 150 points from the day's high and up close to 30 points from the day's low. The market breadth was positive from the strong breadth in early trade. Index heavyweight Reliance Industries was weak. Capital goods stocks and auto stocks fell.
Volatility was high right from the onset of the trading session. The market was volatile. The key benchmark indices dropped after a positive start triggered by higher Asian markets. Concerns arising from a glue in share sales weighed on the bourses in early trade. Worries over inflation was another reason for nervousnesses in early trade after the hike in fuel price announced by the government after market hours on Wednesday, 1 July 2009. The market bounced back in mid-morning trade. The market pared soon after a surge after surging to the fresh day's high after the presentation of the annual economic survey by the finance ministry in parliament which suggested strong policy reforms. Market slumped to the fresh day's low in afternoon trade tracking weak European stocks.
The Economic Survey released ahead of Monday's (6 July 2009) budget announcement for the fiscal year ending in March 2010, said economy could grow around 7% in the year ending March 2010 if the US economy recovers by September 2009. It further said economy could return to 8.5-9% growth in medium terms if reforms are pursued. It said government should free diesel and petrol prices at the earliest. The report said government should take advantage of the recent low price in oil costs to free petrol and diesel prices.
The Economic Survey has called for introduction of standardized credit default swaps on exchanges subject to strict contols, introduction of exchange traded derivatives such as interest rates swaps, foreign direct investment in multi format retail starting with food retail, raising foreign equity share in insurance to 49%, rationalising dividend distribution tax and revival of disinvestment plan to generate at least Rs 25,000 crore . The survey has also called for reforms in petroleum, fertilizers, food subsidies to reduce leakages, ensure targeting.
It also called for implementation of a goods and services tax (GST) by April 2010 to maximise revenues and simplify the tax regime. It also called for greater urgency to removing hurdles to investment in infrastructure by government and the private sector. The survey said inflation is no longer a worry and called for an urgent return to the targeted fiscal deficit of 3%
Meanwhile, data released just ahead of the survey showed inflation declined 1.3% in 12 months to 20 June 2009 compared to fall of 1.14% in the preceding week . Inflation had dipped to negative in early June 2009 for the first time since 1977-78. But inflation for the year through 25 April 2009 was revised upwards to 1.75% from 0.7%.
The government had on Wednesday hiked petrol price by Rs 4 per litre and diesel by Rs 2 per litre.
Meanwhile, corporate India appears to be in a rush to raise funds by share sales to institutional investors. Bajaj Hindusthan (BHL) on Wednesday raised Rs 723 crore through a qualified institutional placement (QIP). A number of firms have announced plans this week to raise funds through shares sales to institutional investors, taking advantage of a solid surge in share prices in the past three months. Brokers expect companies to raise over $10 billion in the current financial year by way of share placements and initial public offers.
A glut in share sales by companies may keep a lid on share prices in the secondary market. On the flip side, the raising of funds will help corporates finance expansion and reduce debt. But it will result in equity dilution which the stock market normally does not like due to earnings dilution.
European shares were lower in early trade on Thursday as investors took a cautious stance ahead of U.S. non-farm payroll figures, with commodities the biggest fallers tracking weakness in crude and metal prices. The key benchmark indices in France, Germany and UK were down by between 1.37% to 1.84%.
Most of the Asian stocks were trading lower today, 2 July 2009. While, Key benchmark indices in Japan, Singapore, Hong Kong and South Korea fell by between 0.01% to 1.24%. The key benchmark indices in China and Taiwan rose by between 1.35% to 1.73%.
Trading in the US index futures indicated Dow could fall 48 points at the opening bell today, 2 July 2009.
US markets shut in the green but off highs yesterday, 1 June 2009 after a barrage of economic reports. The Dow gained 57.06 points, or 0.7%, to 8,504.06. The S&P 500 index rose 4.01 points, or 0.4%, to 923.33. The Nasdaq composite index was up 10.68 points, or 0.6%, to 1,845.72.
In economic news, the June 2009 ISM manufacturing index rose to 44.8 from 42.8 in May 2009, slightly higher than expected. Meanwhile, the ADP employment change report showed more than-expected job losses for June 2009 at 4,73,000 jobs.
At 13:24 IST, the BSE 30-share Sensex was down 129.04 points or 0.88% to 14,516.43. The Sensex opened 48.84 points higher at 14,694.31. At the day's high of 14,764.35, the Sensex rose 118.88 points in early afternoon trade. The Sensex lost 159.08 points at the day's low of 14,486.39 in afternoon trade.
The S&P CNX Nifty was up 7 points or 0.16% to 4,341.60.
The market breadth, indicating the overall health of the market, turned positive from the strong breadth earlier in the day. On BSE, 1,292 shares rose as compared with 1,117 that fell. 69 shares remained unchanged.
Among the 30-member Sensex pack, 23 fell while rest advanced.
The BSE Mid-Cap index fell 0.35%. The BSE Small-Cap index gained 0.35%.
India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 2.65% to Rs 2,002.90 after the company said on Wednesday, 1 July 2009, it would appeal to the Supreme Court against a ruling that it should enter into a gas supply agreement with former group firm Reliance Natural Resources (RNRL).
RIL had said on Tuesday, 30 June 2009, it could not sign a gas supply agreement with Reliance Natural Resources (RNRL) as there was no clarity on government approval for the terms. RIL said it wanted the terms such as price, quantity and tenure to be subject to government approval. The Bombay High Court, in its order dated 15 June 2009, had directed that Anil Ambani's RNRL will get assured gas supply of 28 million metric standard cubic metre per day (mmscmd) of gas from RIL's Krishna-Godavari basin for 17 years at $2.34 million per metric British thermal unit (mmbtu). This is 44.28% less than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 million per metric British thermal unit.
PSU OMCs rose as government hiked petrol and diesel prices yesterday. BPCL, HPCL and IOCL rose by between 0.07% to 2.82%. Higher fuel prices will reduce underrecoveries at the state-run oil firms on domestic sale of petrol and diesel at a controlled price.
India's largest oil exploration firm by sales ONGC rose 5.52% after company's chairman and Managing Director R. S. Sharma said the company's fuel subsidy burden for the current year will be significantly lower than the previous year, if the crude prices stay around the current level. GAIL India jumped 7.87%.
The current government-controlled fuel pricing regime in India forces state-run producers such as ONGC to partially subsidise state oil marketing companies to sell products at low prices to consumers.
Auto stocks fell on worries fuel price hike may hamper auto sales. India's top small car maker by sales Maruti Suzuki India fell 2.55%. The company's total vehicle sales rose 22.63% to Rs 75,109 units in June 2009 over June 2008. Maruti's domestic sales rose 9.5% to Rs 61,773 units, while exports soared 175.8% to Rs 13,336 units in June 2009 over June 2008. The company announced June 2009 sales figures during trading hours on Wednesday, 1 July 2009.
India's largest tractor maker by sales Mahindra & Mahindra fell 1.59% even as its domestic sales jumped 24% to 22,526 units in June 2009 over June 2008.
India's largest commercial vehicle maker by sales Tata Motors fell 3.11%. Tata Motors on Wednesday reported a 3.91% decline in its total sales to 45,399 units in June 2009 over June 2008.
India's largest bike maker by sales Hero Honda Motors slipped 1.03% despite a 23.7% surge in sales to 3,65,734 units in June 2009 over June 2008.
Bajaj Auto fell 2.32% after total vehicle sales fell 2% to 1.93 units in June 2009 over June 2008.
Capital goods stocks fell on profit taking after the recent surge triggered by hopes the government may boost spending on the infrastructure sector. Siemens, Thermax, Siemens, ABB, Larsen & Toubro, Bharat Heavy Electricals fell by between 1.63% to 2.75%.
Telecom firms were weak even as economic survey said auctioned spectrum to the telecom firms must be freey tradeable. Bharti Airtel, Reliance Communications, Idea Cellular fell by between 1.35% to 2.95%.
Economic survey also said to allow open access to local telecoms infrastructure to provide broadband Internet services and for telecoms services to rural areas and waive charges on telecoms providers if they provide broadband services in villages.
Fertiliser firms rose as economic survey called for reforms in fertilizer sector. GNFC, GSFC, National Fertiliser, Rashtriya Chemical & Fertilisers rose by between 0.59% to 8.1%.
Economic survey suggested to remove pricing controls on fertilizers and convert subsidies to fertiliser producers into subsidies for consumers.
Suagr stocks fell even as economic survey suggested to remove pricing controls on sugars and convert subsidies to sugar producers into subsidies for consumers. Bajaj Hindustan, Balrampur Chini and Shree Renuka Sugars fell by between 1.5% to 3.01%.
Retail firms fell even as economic survey suggested foreign direst investment in multi format retail starting with food retail. Pantaloon Retail Vishal Retail, Shopper's Stop fell by between 1.67%t o 4.95%.
Shares of companies that run insurance business fell on profit booking after they rose following the Economic Survey's suggestion for hiking foreign direct investment limit in the sector. Bajaj Finserv was down 0.13% at Rs 371.30, after hitting an intraday high of Rs 385. Aditya Birla Nuvo was down 0.37% at Rs 882.60, after hitting an intraday high of Rs 912. Reliance Capital was down 0.29% at Rs 936, after hitting an intraday high of Rs 954.40.
Kavveri Telecom Products was locked at 5% upper limit at Rs 49.25 after the company said its overseas unit has acquired Trackcom Systems International of Canada, a design and development company.
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