The key benchmark indices slumped to hit fresh day's low in mid-afternoon trade tracking weak European markets. Investors took home cash after recent sharp surge in indices backed by huge foreign fund inflows. Index heavyweight Reliance Industries extended fall ahead of a Supreme court hearing on gas tussle with Reliance Natural Resources (RNRL). Capital goods, Banking and telecom stocks led the fall. The BSE 30-share Sensex was down 90.11 points or 0.52% off close to 220 points from the day's high. But, realty stocks rose. The market breadth turned negative.
The market was volatile. The market surged in early trade on firm Asian stocks. The S&P CNX Nifty hit its highest level in more than 17 months in early trade. The government's decision to sale stake in two state-run power firms indicated a resolve to speed up reforms, also boosted sentiment. The market regained positive territory after slipping into the red for a brief period in morning trade. The market pared gains in choppy trade later. Market slumped to hit fresh day's low in mid-afternoon trade tracking weak European markets.
Hedge fund manager Galleon Group's founder Raj Rajaratnam was arrested Friday, 16 October 2009, on charges of insider trading. Galleon Hedge Fund, which currently has assets under management of about $3.7 billion, has a 7% stake in broking firm Edelweiss Capital, 4.6% stake in construction firm Shriram EPC and 0.3% stake in Pipavav Shipyard.
Rajaratnam's lawyer has insisted his client isn't guilty of the charges. But investors in the group's funds could follow the lead of Rochdale Investment Management, which said Monday it was liquidating its stake in the Galleon Diversified fund. If enough investors left Galleon, managers at the firm could be forced to sell shares of companies it owns in order to meet those redemptions. Galleon could also seek to prevent investors from redeeming money immediately.
Galleon's troubles already had an impact Monday in Sri Lanka, where Rajaratnam was born and is a citizen--he is also a citizen of the US. That market's benchmark lost as much as 3% early Monday, and ended down 1.6% for the day.
Emerging-market equity fund inflows surged in the second week of October 2009 on optimism improving US earnings and China's trade figures signal increased demand for commodities, fund tracker EPFR Global said on Friday, 16 October 2009. Heavy inflows were seen in funds specialized in BRIC countries -- Brazil, Russia, India and China. Asia ex-Japan funds received $823 million in the week ended 14 October 2009.
Closer home, the government on Monday approved stake sales in state-run power producer NTPC and another unlisted power firm Satluj Jal Vidyut Nigam which reflects the country's resolve to speed up reforms and raise more resources for social schemes. On Monday, Trade Minister Anand Sharma said the Union Cabinet had approved a 5% stake sale in NTPC, and 10% in, an unlisted power producer. On Friday, 16 October 2009, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.
Meanwhile, the Union Cabinet has approved a plan to release the key wholesale inflation number every month rather than on a weekly basis to improve the measurement of price movements. The new wholesale price index with 2004 as the base year will debut on 14 November 2009, Commerce Minister Anand Sharma said. The base year used for the current weekly index is 1993.
Faster industrial output growth and rising inflationary pressures have strengthened case for an end to the RBI's accommodative monetary stance next year. Industrial output grew at its fastest pace in 22 months in August at 10.4 %.
The RBI pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. While as exit from the loose monetary policy is imminent, speculation on the bourses is the timing of the exit policy. The RBI is expected to keep its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on 27 October 2009.
Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.
Cement firms, too, are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.
Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.
Banks are seen reporting a sedate growth in core lending amid sluggish credit offtake. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.
Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.
The aggregate net profit of 181 companies which have announced results so far, rose 22.2% to Rs 7714 crore on 7.2% rise in sales to Rs 47474 crore in Q2 September 2009 over Q2 September 2008.
European shares fell in a choppy trade on Tuesday retreating after strong gains the previous session. Key benchmark indices in France, Germany and UK were down by between 0.31% to 0.5%.
Asian stocks rose today after reassuring earnings reports in the US from Apple and Texas Instruments on Monday. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.61% to 1.52%. Bu, Singapore's Straits Times fell 0.08%.
US index futures weakened from a early surge. Trading in US index futures indicated Dow could have a flat opening on Tuesday, 20 October 2009.
US markets rallied to new 2009 highs on Monday, 19 October 2009, on earnings optimism. The S&P 500 closed just shy of the 1,100 mark. The Dow added 96.28, points or 1%, to 10,092.19. The S&P 500 index rose 10.23 points, or 0.9%, to 1,097.91. The Nasdaq Composite Index rose 19.52 points, or 0.9%, to 2,176.32.
In important earnings from the US, tech major Apple's profit and sales beat analysts' forecasts. The company reported fourth quarter earnings at nearly 2 dollars a share, up from little over a dollar per share in the same period last year. This was above analyst estimates of around 1.4 dollars per share.
Federal Reserve Chairman Ben Bernanke warned on Monday that Asian export-promotion policies and large US budget deficits could refuel global economic imbalances and put efforts to achieve more durable growth at risk if not curbed. Throwing his weight behind a recent call by leaders of the Group of 20 major powers to rebalance the global economy in the wake of a devastating financial shock, Bernanke said Asian nations like China that enjoy large trade surpluses should discourage excess saving and boost consumption.
At the same time, he said the United States needed to increase its saving and substantially reduce federal deficits over time.
Closer home, a section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. As per reports, 30 companies have filed their draft red herring prospectuses in September 2009 with market regulator Securities & Exchange Board of India (Sebi) for raising funds through initial public offering.
The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.
As per one report, companies plan to raise over Rs 50,000 crore through initial public offers (IPOs), follow-up public offers, divestment of stake sale in the second half of the current financial year. Reliance Infratel also announced on 22 September 2009, its intention to raise Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest. Divestment of state-run firms by the government may also increase the supply of paper in the market.
At 14:20 IST, the BSE 30-share Sensex was down 90.11 points or 0.52% to 17,235.90. The Sensex rose 131.25 points at the day's high of 17,457.26 in early trade. The barometer index fell 120.63 points at the day's low of 17,205.38 in mid-afternoon trade.
The S&P CNX Nifty was down 25.65 points or 0.45% to 5,118.45. It hit a high of 5,181.95, its highest since 6 May 2008.
The market breadth, indicating the overall health of the market turned negative. Breadth was strong in early trade. On BSE, 1213 shares advanced as compared with 1459 that declined. A total of 71 shares remained unchanged.
Among the 30-member Sensex pack, 19 fell while the rest rose.
The BSE Mid-Cap index rose 0.1% and the BSE Small-Cap index rose 0.22%.
Index heavyweight Reliance Industries (RIL) fell 1.2% to Rs 2,198.10 as a hearing on the gas dispute with Reliance Natural Resources (RNRL) begins in the Supreme Court today afternoon. The stock was volatile. It came off a day's high of Rs 2240.30. RNRL rose 2.36%.
A three-judge bench, headed by Chief Justice K G Balakrishnan, will today hear the gas dispute between RIL and RNRL. This is the first hearing on the case after Anil Ambani offered to make peace with Mukesh Ambani. The younger brother had earlier accused the Ministry of Petroleum and Natural Gas of siding with Mukesh.
RIL had first moved the apex court, challenging the decision of the Bombay High Court delivered on 15 June 2009 and which had asked RIL to provide 28 million metric standard cubic metres per day (mmscmd) of gas to RNRL at a price of $2.34 per million British thermal unit (mBtu). The government had also moved a special leave petition in the case, asserting its right on pricing and distribution of natural gas. RNRL argued that the government has no role to play either in the utilisation or the fixation of gas price on its contract with RIL. However, RIL has contended that it was only a contractor for the gas from the KG-D6 block and did not have the power to fix the price.
Realty stocks rose on recent reports that demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and a recovery in the job market. Realty market had slumped last year amid a global credit crunch and buyers fearing job losses. Anant Raj Industries, DLF, Indiabulls Real Estate, rose by between 0.07% to 3.46%.
Unitech rose 2.11% after the Cabinet Committee on Economic Affairs (CCEA) on Monday approved Norway-based Telenor's proposal to hike stake in Unitech Wireless, its telecom venture with Unitech, to 74%.
Bank stocks fell on profit taking. India's largest private sector bank by net profit ICICI Bank fell 0.43% even as its ADR rose 1.8% on Monday. The bank recently reduced auto loan rates by 50 basis points.
India's second largest private sector bank by net profit HDFC Bank fell 1.13% even as its ADR rose 1.65% on Monday. The bank's net profit rose 30.2% to Rs 687.46 crore in Q2 September 2009 over Q2 September 2008. The results, which hit the market last week, were more or less in line with market expectations.
But, India's largest bank by branch network State Bank of India rose 0.2%.
The central bank will reportedly hike the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM) category. Banks do not have to make any mark-to-market provisions on securities held this basket if prices of securities fall. Provisions have to be made out of profit and therefore, impact a bank's bottom line. Yields on ten-year government bonds have risen sharply this year. Bond prices and bond yields are inversely related.
Indian banks can put bonds equal to 25% of the value of deposits in their HTM accounts. The market expectations is for an increase in the ceiling by up to 2 percentage points, possibly at a quarterly monetary policy review on 27 October 2009.
India's largest dedicated housing finance firm HDFC fell 0.88%. HDFC, last week, announced its net profit rose 24.27% to Rs 663.94 crore in Q2 September 2009 over Q2 September 2008. The results beat market expectations.
India's largest engineering and construction firm by sales Larsen & Toubro fell 1.15%. The company, last week, announced bagging orders worth Rs 966 crore.
India's largest power maker by sales Bharat Heavy Electricals fell 1.47%. The government, last week, ruled out any immediate plan to disinvest its stake in the power equipment maker. The government owns 67% stake in Bhel.
Among other capital goods stocks, ABB, Praj Industries, BEML, Siemens, Punj Lloyd fell by between 0.23% to 2.36%.
Telecom stocks fell. India's second largest mobile services provider by sales Reliance Communications (RCom) fell 2.81%. Anil Ambani chairman of RCom on Thursday, 15 October 2009, alleged there was a 'vicious and malafide' campaign against his telecom company Reliance Communications by a 'known rival group' and dubbed the special audit report, which claimed that RCom was mis-stating its revenues as 'biased and prejudiced'. But the auditor, Parekh & Co defended its work and also denied a claim by Mr Ambani that it had not sought feedback from RCom.
India's largest mobile services provider by sales Bharti Airtel fell 1.5%.
Reliance Infrastructure rose 0.72% after company announced today it won an order worth Rs 590 crore.
Apollo Tyres gained 3.47% after consolidated net profit galloped 755.33% to Rs 129.24 crore on 62.12% rise in net sales to Rs 2046.19 crore in Q2 September 2009 over Q2 September 2008.
Other tyre shares, MRF, CEAT and JK Tyres rose by between 0.01% to 5.71%.
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