The key benchmark indices remained weak and were trading marginally lower in afternoon trade. Market shrugged off higher opening for European markets. Index heavyweight Reliance Industries (RIL) remained firm in choppy trade as the hearing on a gas dispute with Reliance Natural Resources (RNRL) continues in the Supreme Court for the second day in a row today, 21 October 2009. Another index heavyweight Larsen & Toubro edged higher ahead of Q2 result tomorrow.
The BSE 30-share Sensex was down 32.93 points or 0.19% off close to 50 points from the day's low and up close to 55 points from the day's high. A subdued trend in Asian stocks weighed on sentiment. A section of the market is concerned that a glut in share sales by Indian firms may suck liquidity from the secondary market. Banking, cement stocks fell. But, power stocks rose.IT stocks gained after US Internet firm Yahoo reported better-than-expected results on Tuesday. The market breadth was positive.
Intraday volatility was high. The market drifted lower in choppy early trade on subdued Asian stocks and lower US index futures. It soon bounced back in morning trade and moved into green from red. But the intraday recovered proved short lived as the market once again slipped into the red. The market cut losses after hitting a fresh intraday day low in early afternoon trade. Market was trading marginally lower in afternoon trade.
The Prime Minister's economic advisory council today, 21 October 2009, said the economy is likely to grow 6.5% in 2009/10 with inflation at around 6 % by the end of March 2010. The panel also forecast a consolidated fiscal deficit, which includes shortfalls at the state level, of 10.09 % of GDP in the current fiscal year, compared with 8.6 % last year, and the influential panel urged a return to fiscal consolidation.
The panel of advisers headed by former central bank governor C. Rangarajan said growth in the current fiscal year would be at least 6.25% and could reach 6.75%. The panel said the recently poor summer monsoon would erode farm output in the current fiscal year by 2% although 8.2% growth in both the industrial and services sectors would help offset that.
India's accommodative monetary policy may continue until the end of March, with the need for tightening once inflation picks up, a government panel said.
Former Reserve Bank of India (RBI) governor C. Rangarajan, who heads the panel, said growth in the fiscal year that ends in March 2011 would accelerate to 7 to 8 % after growing by about 6.5 % in 2009/10, with inflation at around 6 % by the end of March 2010.
The government may collect Rs 4,00,000 crore as direct tax for the current fiscal year ending March 2010, a government panel member said on Wednesday.
The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market. As per reports, Indian firms have garnered about $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April 2009. Indian companies are taking advantage of a surge in liquidity to recapitalize and fund capital expenditure after being starved of cash last year.
Most of these companies - from industries ranging from liquor and spirits to infotech - issued equity shares to a select group of investors by way of qualified institutional placement or QIP. If the enabling resolutions passed by the companies are any indication, Indian firms are gearing up to raise $15 billion (Rs 69,427 crore) in the next six months. The list includes Hindalco (Rs 2,900 crore), JSW Steel ($1 billion), India Cements ($100 million), Essar Oil ($2 billion), Tata Steel (Rs 5,000 crore), Jet Airways ($ 400 million) and Bharat Forge ($150 million).
Unlisted Reliance Infratel announced on 22 September 2009 its intention to raise Rs 5,000 crore from the primary market. Divestment of state-run firms by the government may also increase the supply of paper in the market.
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.
Singh said on Tuesday the Indian economy will expand at 6-6.5% in the year to March 2010, despite uncertainty whether signs of a global recovery will lead to a return to a sustained growth path. Singh also said the drought in the country, the worst in decades, had further hit the poorest sections of its people.
Finance secretary Ashok Chawla said on Tuesday the Reserve Bank of India (RBI) would hopefully continue its current easy monetary stance when it reviews policy later this month as it was justified for the present economic scenario. The RBI governor D Subbarao is scheduled to meet the Prime Minister and finance ministry officials on 23 October 2009 to review the economic situation ahead of the policy.
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.
The finance secretary said Tuesday the auctions for the 3G spectrum would take place by December this year. The Department of Telecommunications had earlier said that the auction would start from 7 December 2009, though there are apprehensions about the date since the defence forces are yet to vacate spectrum. The auction has already been postponed several times.
With the availability of 3G spectrum, telecom companies are expected to offer a combined mobile and internet platforms.
Stock and sector-specific activity may dominate trade on the bourses 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 210 companies which have announced results so far, rose 19.1% to Rs 8544 crore on 5.8% rise in sales to Rs 54001 crore in Q2 September 2009 over Q2 September 2008.
European shares drifted higher on Wednesday to trade near one-year highs, boosted by banks and oils, with investors awaiting more corporate results from companies such as Morgan Stanley and Boeing . The key benchmark indices in France, Germany and UK were up by between 0.12% to 0.29%.
Asian stocks declined today led by materials and technology companies, on declines in commodity prices and worse-than-forecast US housing starts. Key benchmark indices in Hong Kong, Japan, South Korea, China, Singapore and Taiwan fell by between 0.2% to 0.67%.
Bank of Japan Deputy Governor Kiyohiko Nishimura on Wednesday warned that the downside risks facing the country's economy remain high, meaning the central bank must stick to its easy monetary policy for now. Nishimura said the biggest risk facing the Japanese economy remained the world economic outlook. The bank's main scenario is for the world economy to return to moderate growth, but Nishimura also outlined some of the risks to that scenario.
Trading in US index futures indicated Dow could fall 10 points at the opening bell on Wednesday, 21 October 2009.
US markets retreated on Tuesday on poor economic data even though several earnings reports beat expectations. The Dow Jones Industrial Average fell 50.71 points, or 0.5%, to 10,041.48. The S&P 500 index fell 6.85 points, or 0.6%, to 1,091.06. The Nasdaq Composite index was down 12.85 points, or 0.6%, to 2,163.47.
In the day's economic news, housing starts were the bigger disappointment gaining 0.5% last month, less than the 2.8% increase expected. In earnings from the US, Yahoo reported a profit that was higher than last year and went past expectations.
The Obama administration will shutter programs at the heart of a $700 billion financial bailout but remains focused on supporting a fledgling economic recovery, Treasury Secretary Timothy Geithner said in an interview to a news agency on Tuesday. The administration will focus on more-targeted programs directed at what are the principal areas where there's still weakness in access to credit, he said, specifically citing housing and small businesses.
San Francisco Fed President Janet Yellen on Tuesday said the time for the US Federal Reserve to start pulling back its extensive support for the economy is not close at hand and policymakers have time to decide what sequence of steps they will take
Hedge funds attracted $1.1 billion from investors in the third quarter ended September 2009, ending a one-year streak of net withdrawals, according to Hedge Fund Research Inc. More than two-thirds of hedge funds experienced inflows in the quarter. Funds with assets of more than $5 billion experienced outflows while those with less than $500 million attracted money in the quarter.
Meanwhile, 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.
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.
At 13:20 IST, the BSE 30-share Sensex was down 32.93 points or 0.19% to 17,190.06. The Sensex rose 25.68 points at the day's high of 17,248.69 in early trade. The barometer index fell 82.73 points at the day's low of 17,140.28 in early afternoon trade.
The S&P CNX Nifty was down 15.80 points or 0.31% to 5,098.60.
The market breadth, indicating the overall health of the market was positive. On BSE, 1376 shares advanced as compared with 1182 that declined. A total of 103 shares remained unchanged.
Among the 30-member Sensex pack, 19 fell while the rest rose.
The BSE Mid-Cap index fell 0.01%. The BSE Small-Cap index rose 1.23%.
Index heavyweight Reliance Industries rose 0.58% to Rs 2,196.55. The stock hit a high of Rs 2203.30 and a low of Rs 2169.95. The legal battle between Reliance Industries (RIL) and Reliance Natural Resources (RNRL), owned by estranged brothers Mukesh and Anil Ambani, entered its final phase on Tuesday with the counsel for RIL commencing his arguments. The hearing will continue on Wednesday.
RIL's lawyer Harish Salve argued that the memorandum of understanding (MoU) signed between the members of the Ambani family on 18 June 2005, was not binding on the company, as it had never been shown to its board of directors. But even if it was, RIL would be unable to supply 28 million standard cubic metres per day (mmscmd) of gas to RNRL at $2.34 per million British thermal unit (mmBtu) as it contradicted the government's gas pricing and utilisation policy, Mr Salve said. The proceedings, which lasted for over two hours, were marked by interjections from the three-judge bench.
The apex court will have to rule on a number of issues. Apart from the main dispute, as to whether a valid contract exists and what is the correct price, it will have to decide if the government can intervene in the case.
Meanwhile, the government on Tuesday formed an Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee to allocate additional gas from the RIL's field to new users. Besides Mukherjee and Deora, the EGoM would include Power Minister Sushil Kumar Shinde, Fertilizer Minister M K Alagiri, Law Minister Veerappa Moily and Planning Commission Deputy Chairman Montek Singh Ahluwalia.
PSU OMCs were mixed after a government panel member said on Wednesday the government does not need to raise fuel prices, if global oil prices remain in the range of $70 to $75 a barrel. BPCL, HPCL fell by between 0.56% to 2.27%. But, Indian Oil Corporation rose 2.46%.
Bank stocks fell after a Reserve Bank of India (RBI) panel on Tuesday proposed a transparent pricing structure for floating rate loans wherein benchmark rates get automatically revised on shrinking cost of funds. India's largest private sector bank by net profit ICICI Bank fell 1.72% as its ADR fell 1.26% on Tuesday. The bank recently reduced auto loan rates by 50 basis points.
India's second largest private sector bank by net profit HDFC Bank fell 0.32% as its ADR rose fell 2.6% on Tuesday. 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.
India's largest bank by branch network State Bank of India fell 1.26%. SBI has reportedly raised $750 million (around Rs 3500 crore) in the overseas market through five-year bonds as part of its medium-term note programme (MTN). SBI's $5 billion MTN programme was launched in 2004. It targets investors, including banks, insurance companies, hedge funds and private equities in the global market.
Among other PSU Stocks, Bank of Baroda and Punjab National Bank fell by between 0.57% to 2.84%.
Bank of India lost 2.45%, after the Reserve Bank of India, barred further buying in the state-run bank's shares by the foreign institutional investors.
Private sector, Yes bank fell 1.63% despite its net profit rose 75.58% to Rs 111.71 crore in Q2 September 2009 over Q2 September 2008.
The committee headed by RBI executive director Deepak Mohanty has suggested discontinuing the usage of a bank's prime lending rate (PLR) as the benchmark for variable rate loans. Instead, it wants banks to arrive at a base rate that reflects the cost of one-year deposits and price loans over this base rate.
The panel has also proposed a ceiling on the extent of loans that can be granted below the benchmark rate. Most banks typically pass on the benefit of falling rates only to fresh customers. RBI governor D Subbarao has repeatedly said though the central bank has slashed its repo rate (at which it lends to banks) by 425 basis points in the last one year, prime lending rates of banks have fallen by only around 200 basis points.
Meanwhile, the central bank may hike the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM) category, possibly at a quarterly monetary policy review on 27 October 2009. 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
India's largest dedicated housing finance firm HDFC fell 1.89%. 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 rose 0.17%. Strong project execution is seen driving growth in L&T's top line and bottom line in Q2 September 2009. A total of five brokerages expect a between 19% to 42.3% growth in L&T's net profit at between 546.30 crore to Rs 654.70 crore in Q2 September 2009 over Q2 September 2008. L&T unveils Q2 September 2009 results on Thursday, 22 October 2009.
India's largest thermal power generator by sales NTPC rose 0.53% extending gains for the second straight day after Union Cabinet approved a 5% stake sale in the firm by the government.
Among other power stocks, Tata Power Company, PowerGrid Corporation of India, Areva T&D rose by between 0.27% to 1.72%.
Reliance Infrastructure rose 0.26% gaining for the for the second straight day after company announced on Tuesday company had won an order worth Rs 590 crore.
Ultratech Cement fell 1.16% falling for third straight day after the company issued a cautious outlook at the time of announcing Q2 results on Friday, 16 October 2009. Net profit jumped 53% to Rs 251 crore in Q2 September 2009 over Q2 September 2008.
UltraTech said the performance was affected on a sequential basis due to lower demand in Southern India. The net profit dropped 39.94% to Rs 250.90 crore in Q2 September 2009 over Q1 June 2009.
The company said the cement demand may grow 9% in the year ending March 2010 on the back of government's initiative to boost rural development, infrastructure and housing. It, however, said new capacities which at various stages of implementation will result in pressure on margins.
The company said its focus on higher volume growth, captive power generation and capital productivity will help offset the impact of lower prices on margins.
Among other cement stocks, ACC, Grasim Industries, Birla Corporation and Ambuja Cements, fell by between 0.18% to 1.42%.
IT stocks extended Monday's gains after Yahoo Inc, the top US seller of online display ads, reported better-than-expected results on Tuesday. India's third largest software services exporter Wipro rose 1.54% even as its ADR fell 0.43% on Tuesday.
India's largest software services exporter TCS rose 2.33%. The company after market hours on 16 October 2009, reported stronger-than-expected Q2 September 2009 results. Consolidated net profit as per US accounting standards rose 6.81% to Rs 1623.90 crore on 3.16% growth in revenue to Rs 7435.10 crore in Q2 September 2009 over Q1 June 2009.
TCS has a good business pipeline and is pursuing 20 to 25 large outsourcing deals, chief executive N. Chandrasekaran said at the time of announcing Q2 results. The management is seeing signs of recovery but it believes it will be slow. The discretionary spent is still tight but there is spent seen in banking, finance services and insurance (BFSI), retail, utility and pharma verticals, TCS said at a conference call after the results. However, a continuous improvement in volumes cannot be expected, it said. The company is seeing stability in demand environment. The management expects to maintain margins at current levels provided there is no adverse rupee movement.
IT bellwether Infosys Technologies rose 1.57%. Its ADR rose 0.27% on Tuesday. Infosys raised its earnings and revenue guidance in both dollar and rupee terms for the year ending March 2010 (FY 2010) at the time of announcing Q2 September 2009 results before trading hour on 9 October 2009.
Infosys, however, said strengthening rupee is a big concern for its earnings. A stronger rupee negatively impacts operating margins of IT firms as the sector earns a lion's share of revenue from exports. The rupee is hovering near its highest level in more than a year.
Sterlite Technologies rose 3.98% as the company has emerged as the lowest bidder for the country's first private power transmission project.
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