The key benchmark indices hit fresh day's low in mid-afternoon trade on weak global markets. Jump in headline inflation above 1% mark also weighed on the sentiment. The BSE 30-share Sensex was down 99.19 points or 0.58%, off close to 120 points from the day's high. The Sensex was below the psychological 17,000 mark after regaining that level in mid-morning trade for a short while. The market breadth turned negative.
Index heavyweight Reliance Industries declined as the hearing on a gas dispute with Reliance Natural Resources (RNRL) continues in the Supreme Court. Capital goods, FMCG, auto, power and cement stocks fell. But IT stocks rose on a weak rupee.
After opening slightly higher, the market soon lost ground on lower Asian stocks. The Sensex fell below the psychological 17,000 mark. The market cut losses later after initial trends showed that the Congress-Nationalist Congress Party combine was surging ahead in assembly election in Maharashtra. The Sensex regained 17,000 level in mid-morning trade. It soon fell below that level as weak Asian stocks weighed on domestic bourses. Market fell to the fresh day's low in mid-afternoon trade.
Hedge fund Galleon Group is winding down all its hedge funds and looking at alternatives for the business, company founder Raj Rajaratnam told employees and investors in a letter Wednesday. One of those alternatives is selling all or part of Galleon to another firm
Rajaratnam was one of six people arrested and charged last Friday in a massive insider-trading case. The charges had already caused many Galleon investors to try to withdraw their money. The deadline for redemption requests in most of Galleon's funds was 15 November 2009. The hedge fund has assets under management of about $3.7 billion
As far as Galleon's India operations are concerned, it has a 7% stake in broking firm Edelweiss Capital, 4.6% stake in construction firm Shriram EPC and 0.3% stake in Pipavav Shipyard.
On the macro front, inflation based on the wholesale price index (WPI) rose 1.21% in the year through 10 October 2009, higher than previous week's annual rise of 0.92%, date released by the government today showed. Within the WPI, the food articles index rose 13.34%. The government revised upwards inflation for the year through 27 August 2009 to a much smaller fall of 0.21% from an estimated 0.95% decline.
The Prime Minister's economic advisory council said on Wednesday that it sees inflation at around 6% by the end of the current fiscal year to March 2010. 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 2009 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.
On the political front, the ruling Congress-Nationalist Congress Party alliance in Maharashtra appeared set to retain power with its candidates leading in 118 of the 288 assembly constituencies in the state. The results showed it won 20 seats so far.
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.
European stocks fell on Thursday, tracking losses in Asia and Wall Street, with Ericsson's poor results hitting tech shares. The key benchmark indices in France, Germany and UK were down by between 1.07% to 1.43%.
Asian stocks fell amid disappointment that Chinese growth data, though robust, offered few surprises. The Shanghai Composite Index was down 0.62%.
China's gross domestic product expanded 8.9% in the third quarter compared to the same period a year ago, according to data released by the National Bureau of Statistics. The increase was greater than the 7.9% expansion in the second quarter
In other figures released Thursday, urban fixed-asset investment in China rose 33.3% in the first three quarters, edging up from 33% growth in the first eight months of the year. Industrial production in September rose 13.9% on year, higher than expectations of a 13.3% rise and above August's 12.3% gain. For the first nine month of the year industrial production rose 8.7%.
The apparent economic pick-up could lead to inflation, which would add to pressure on Beijing for a tightening of policy. China's State Council said Wednesday the economy is firming, signaling that is may exceed its official 8% growth target this year, and raising possibility that Beijing is edging closer to a tightening stance. For the time being, China said it has no plans to walk back from its current expansionary lending policy and large fiscal stimulus.
In other Asian markets, key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan fell by between 0.18% to 1.21%.
Japan's Nikkei 225 Stock Average slumped 0.64%. Japan's exports fell at the slowest pace in 10 months in September 2009 as stimulus spending in China drove demand for the nation's cars and machinery. Shipments abroad dropped 30.7% from a year earlier, compared with a 36% decline in August 2009, the Finance Ministry said today in Tokyo. Exports to China, Japan's biggest market, fell 13.8%, half the pace of the previous month.
US index futures turned gree. Trading in US index futures indicated Dow could rise 5 points on Thursday, 22 October 2009.
US markets edged lower on Wednesday on profit taking despite strong earnings from Morgan Stanley. The Dow Jones industrial average fell 92.12 points, or 0.9%, to 9,949.36. The S&P 500 index was down 9.66 points, or 0.9%, to 1,081.40. The Nasdaq Composite index slipped 12.74 points, or 0.6%, to 2,150.73.
Morgan Stanley reported better-than expected quarterly profit on strong fixed income sales and trading revenue.
The US economy is firmly poised for a recovery from its deep recession but growth may be moderate and the job market will not revive immediately, senior White House aide Lawrence Summers predicted on Wednesday. In an interview to a news agency, Summers said job growth would lag behind a broader economic recovery. Summers, who heads the White House's National Economic Council, also gave strong backing to the beleaguered US dollar, which has fallen to a 14-month low against major currencies.
A high-level commission on the World Bank on Thursday called for sweeping changes to reflect the world's new economic order and said European countries are overrepresented in the decision-making executive board. In a long-awaited report, the 11-member commission, led by former Mexican president Ernesto Zedillo, said the Bank's effectiveness was undermined by a hierarchy dominated by the United States and Europe offering many member countries too little voice and too few opportunities for participation.
Closer home, the supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary equity 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.
The government has approved a follow-on public offering of 20% of state run Steel Authority of India, the steel minister said on Wednesday, 21 October 2009. The Government of India owns nearly 86% of Sail.
At 13:20 IST, the BSE 30-share Sensex was down 99.19 points or 0.58% to 16909.98. The Sensex rose 22.37 points at the day's high of 17,031.54 in early trade. The barometer index fell 110.36 points at the day's low of 16,898.81 in afternoon trade.
The S&P CNX Nifty was down 38.55 points or 0.75% to 5025.85.
The market breadth, indicating the overall health of the market turned negative. On BSE, 1232 shares advanced as compared with 1322 that declined. A total of 83 shares remained unchanged.
Among the 30-member Sensex pack, 18 fell while the rest rose.
The BSE Mid-Cap index rose 0.06% and the BSE Small-Cap index rose 0.49%.
Index heavyweight Reliance Industries fell 1.29% to Rs 2154.30 after a lawyer for the firm said company he will conclude initial arguments before the Supreme Court in a gas-pricing dispute with Reliance Natural Resources by 29 October 2009. It came off the day's low of Rs 2140.
Mukesh Ambani-controlled Reliance Industries, India's top conglomerate, is fighting with Reliance Natural Resources, led by younger brother Anil Ambani, over the terms of a deal to sell gas to Reliance Natural at below the price set by the government. Reliance Industries has been presenting initial arguments in the case before the Supreme Court since Tuesday, saying the private deal between the Ambani brothers is not binding on the company, and it can sell the gas only at the government-approved price.
The government, which has the power to decide who can buy gas and at what price, had filed an application asserting it is the rightful owner of the disputed gas.
India's largest engineering and construction firm by sales Larsen & Toubro fell 2.73% on muted sales growth in Q2 September 2009 over Q2 September 2008. L&T's net profit rose 26.1% to Rs 580.4o crore on 3.54% rise in total income to Rs 8136.39 crore in Q2 September 2009 over Q2 September 2008. The result hit the market during trading hours today.
L&T attributed the muted sales growth to delay in clearances of infrastructure projects from some clients and lower offtake of industrial and machinery products. The company said order backlog is at Rs 81623 crore, which is 2.4 times its revenue of Rs 33926.37 crore in the year ended March 2009, giving strong revenue visibility.
L&T said the recent surge in crude oil prices may boost orders from the hydrocarbon sector. The company said revival of infrastructure development in the Gulf augurs well as the company has a significant presence in the region.
India's largest power maker by sales Bharat Heavy Electricals fell 1.56%. Strong project execution, fall in input costs and lower employee costs are seen driving growth in Bhel's top line and bottom line in Q2 September 2009. Metal prices were sharply on year on year basis which will help boost margins of the power equipment major. Further, Bhel had provided Rs 116 crore for wage hike provisions in Q2 September 2008 which had pulled down profit in that quarter. The margins will rise with no such provision in Q2 September 2009.
A total of seven brokerages expect a between 10.8% to 32.4% growth in Bhel's net profit at between Rs 681.50 crore to Rs 815.40 crore in Q2 September 2009 over Q2 September 2008. Their expectations peg a between 24.8% to 28% growth in revenue at between Rs 6667.70 crore to Rs 6838.60 crore in Q2 September 2009 over Q2 September 2008. Bhel unveils Q2 September 2009 results on Friday, 23 October 2009
Among other capital goods stocks, Thermax, BEML, Praj Industries and Punj Lloyd fell by between 0.11% to 2.49%.
India's largest thermal power producer by sales NTPC fell 0.75%. The government on Monday approved 5% stake sale in NTPC.
Among other power stocks, Reliance Power, Tata Power Company, Reliance Infrastructure fell by between 0.34% to 1.28%.
Ultratech Cement fell 2.18% after the company issued a cautious outlook at the time of announcing Q2 results late last week. 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, and Ambuja Cements, fell by between 0.99% to 1.6%.
Auto stocks fell on profit taking. India's top small car maker by sales Maruti Suzuki India fell 2.02%. The company's total sales rose 17.3% to 83,306 vehicles in September 2009 over September 2008. The figures were released during trading hours on 1 October 2009.
India's largest truck maker by sales Tata Motors fell 1.75%. Tata Motors said it may undertake a preemptive check on the 7,500-odd Nanos that have been delivered till date after a faulty combination switch in the world's cheapest car resulted in fires in at least three cases across the country. Three cases of fire in the car had been reported in the past few days in Delhi, Lucknow and Ahmedabad.
Bajaj Auto fell 1.33%. Bajaj Auto's net profit jumped 117.85% to Rs 402.83 crore in Q2 September 2009 over Q2 September 2008. The company announced the Q2 results during trading hours on 15 October 2009.
But, Hero Honda Motors rose 0.13% as net profit rose 95% to Rs 597.14 crore on 26.8% rise in revenue to Rs 4059.44 crore in Q2 September 2009 over Q2 September 2008. The company announced result after market hours on Wednesday.
India's largest tractor maker by sales Mahindra & Mahindra rose 1.51%. Total sales rose 10.94% to 28434 vehicles in September 2009 over September 2008. The company unveiled the sales figures during trading hours on 1 October 2009.
Total domestic automobile sales in the country in the first half of the financial year 2009-10 rose by 14.51% year-on-year to 57,82,920 units, according to automobile sales figures released by the Society of Indian Automobile Manufacturers (Siam). The jump in sales for the April-September period came from the double-digit growth posted by the passenger vehicle segment (comprising cars and sports utility vehicles) which grew by 13.46%, by the 15.68% spurt in two-wheeler sales and by an increase of 12.37% in sales of three-wheelers.
IT stocks rose as the rupee dropped to one week low against the dollar. India's largest software services exporter TCS rose 0.1%. 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 3.45% even as its ADR fell 0.56% on Wednesday. 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.
But, India's third largest software services exporter Wipro fell 0.32% as its ADR fell 0.84% on Wednesday.
The partially convertible rupee was trading at 46.65/46.66 per dollar, lower than Wednesday's close of 46.485/495. A weak rupee boosts revenues of IT firms in rupee terms as the sector earns a lion's share of revenue from exports.
Sugar stocks rose on bargain hunting after they fell on Wednesday after government extended tax free white sugar imports till December 2010 to improve supplies to tide over a shortage. Balrampur Chini, Bajaj Hindustan, Shree Renuka Sugars rose by between 0.34% to 1.74%.
Indraprastha Medical Corporation jumped 7.63%, after net profit surged 45.29% to Rs 8.63 crore in Q2 September 2009 over Q2 September 2008.
Sesa Goa rose 1.41% on bargain hunting after the stock corrected over 10% in the preceding two trading sessions.
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