The key benchmark indices pared gains after extending gains to hit fresh day's high in mid-afternoon trade. Positive global stocks and higher US index futures supported market. The BSE 30-share Sensex was up 40.69 points or 0.24% up close to 140 points from the day's low and off close to 90 points from the day's high. The S&P CNX Nifty was above the psychological 5,000 mark after regaining that level in early afternoon trade. But the market breadth was still negative.
Index heavyweight Reliance Industries fell amid volatile trade. The stock had tumbled on Friday, 23 October 2009, after its partner Hardy Oil said on Friday a D9 well will be plugged and abandoned. FMCG, IT stocks rose. But banking stocks fell. India's largest truck maker by sales Tata Motors reversed early losses and rose 3.04% ahead of its Q2 September 2009 result today.
Intraday volatility was high as traders rolled positions in the derivatives segment from October 2009 contracts to November 2009 contracts ahead of the expiry October 2009 contracts on Thursday, 29 October 2009. Firm Asian stocks helped the market briefly hit positive zone in early trade after an initial slide. Volatility continued later. The market moved into positive zone from negative zone in early afternoon trade. The Sensex hit a fresh intraday high in afternoon trade. Market pared gains after extending gains in mid-afternoon trade.
Emerging market equity funds continue to get large sums of month. As per latest data from global fund tracker EPFR Global, emerging market equity funds took in a total of $4.9 billion in the week ended 21 October 2009, their biggest inflow total since the third week of December 2007. Brazil, China, India and Russia equity funds, all had inflows. Emerging market equity funds have now pulled in over $50 billion in net inflows year-to-date.
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%. 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%, data released by the government on 22 October 2009 showed.
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 Tuesday, 27 October 2009.
A section of market, however, expects the RBI to raise the cash reserve ratio (CRR), the proportion of deposits that banks keep with the central bank, to tame inflationary pressures in the economy. A possibility of a hike in the statutory liquidity ratio (SRL) cannot be ruled out either. In November 2008, the RBI had reduced the SLR by one percentage point to 24% - its first move in 11 years - as part of its measures to boost liquidity to cushion the impact of the global credit crisis after Lehman Brother's collapse. SLR is the minimum share of bank deposits to be held in approved government securities.
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 shares were higher on Monday, with banks and oils taking the lead. The key benchmark indices I France, Germany and UK were up by between 0.2% to 0.52%.
Asian stocks gained on Monday on signs the global economy is recovering. Key benchmark indices in China, Singapore, Japan, South Korea and Taiwan rose by between 0.06% to 1.71%.
South Korea's economy expanded at the fastest pace in seven years. Gross domestic product increased 2.9% in the third quarter from three months earlier, when it grew 2.6%, the central bank said in Seoul today
Japanese Prime Minister Yukio Hatoyama on Sunday said the global economy has likely bottomed out but employment conditions are dire and stimulus is needed across Asia to spur domestic demand
Meanwhile, senior Chinese officials on Monday said the government will maintain its fiscal stimulus and loose monetary policy even as they said economic growth is likely to speed up this quarter.
The market has been agog with talks off late that Beijing is thinking about how to start unwinding its ultra-loose pro-growth policies.
In Europe, GfK AG's consumer climate indicator is forecasting a value of 4.0 points for November 2009, a decline from a revised value of 4.2 points in October 2009, the Nuremberg-based GfK Group said in a statement on Monday. This is the first decline since September 2008.
Trading in US index futures indicated Dow could rise 39 points at the opening bell on Monday, 26 October 2009.
The earnings-fueled rally fizzled on the Wall Street on Friday, 23 October 2009, as investors began to lock in some profits. The Dow Jones Industrial Average was down 109.13 points, or 1.1%, to 9,972.18. The S&P 500 Index fell 13.31 points, or 1.2%, to 1,079.60. The Nasdaq Composite slipped 10.82 points, or 0.5%, to 2,154.47.
Microsoft's results beat Wall Street expectations. Amazon too reported better-than-expected third quarter profit and stronger sales outlook.
IMF deputy managing director Takatoshi Kato on Monday said it is too early for countries to abandon economic stimulus policies but they should start mapping out exit strategies
Back 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 last week 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 14:20 IST, the BSE 30-share Sensex was up 40.69 points or 0.24% to 16851.50. The Sensex rose 128.07 points at the day's high of 17,938.88 in mid-afternoon trade. The barometer index fell 102.15 points at the day's low of 16,708.66 in early trade.
The S&P CNX Nifty was up 5.30 points or 0.11% to 5,006.65.
The market breadth, indicating the overall health of the market was negative. On BSE, 1224 shares advanced as compared with 1393 that declined. A total of 76 shares remained unchanged.
Among the 30-member Sensex pack, 13 fell while rest rose.
The BSE Mid-Cap index fell 0.79 % and the BSE Small-Cap index fell 0.35%.
Energy major Reliance Industries fell 0.6% to Rs 2035, extending Friday's 4.04% looses, as partner Hardy Oil said on Friday a D9 well will be plugged and abandoned. But the stock came off the day's low of Rs 2005.10. Hardy holds a 10% participating interest in the D9 block, which is located in the Krishna Godavari basin on the east coast of India. Reliance Industries is the operator and holds a 90% stake.
Meanwhile, RIL told the Supreme Court, last week, it had no knowledge of the pact between its chairman Mukesh Ambani and his younger brother Anil. On the third day of hearing on the gas supply dispute between the group firms of the Ambani brothers, Justice R.V. Raveendran asked RIL to satisfy the bench that the MoU, signed in 2005, was not between two companies, but two individuals. The bench also enquired if the pact, which has not been made public till date, could be produced before the court.
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 20 October 2009, 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.
Anil Ambani's Reliance Natural Resources claims the contract is valid and wants the court to direct Reliance Industries to supply it with 28 mmscmd of gas for 17 years at almost half the government-set price of $4.2 per mmBtu.
The Supreme Court will resume hearing the case on Tuesday, 27 October 2009, with Reliance Industries expected to conclude its initial arguments by Thursday, 29 October 2009. The court will then hear arguments by Reliance Natural Resources, following which it will consider a petition by the government to become a party to the dispute.
Bank stocks fell after comments from a finance ministry official on Friday, 23 October 2009, dashed hopes for the central bank relaxing mark-to-market rules for bank's debt holdings. The market has been agog with talks of the central bank hiking the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM) category, possibly at the quarterly monetary policy review on 27 October 2009.
India's largest bank by branch network State Bank of India fell 1.86%. State Bank of India (SBI) announced on Saturday that it has concluded the issue of $750 million fixed rate senior notes having a maturity of 5 years at a coupon of 4.50% under the Medium Term Notes (MTN) Programme in the form of Regulation S Global Note. The bonds have been issued through the bank's London branch as of 23 October 2009
India's second largest private sector bank by net profit HDFC Bank fell 0.55% as its ADR fell 1.2% on Friday. The bank's net profit rose 30.2% to Rs 687.46 crore in Q2 September 2009 over Q2 September 2008. The results were more or less in line with market expectations.
But India's largest private sector bank by net profit ICICI Bank rose 0.1% even as its ADR fell 1.73% on Friday. The bank recently reduced auto loan rates by 50 basis points.
Banks do not have to make any mark-to-market provisions on securities held in the HTM 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.
Meanwhile, a committee headed by RBI executive director Deepak Mohanty recently 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.
Lenders currently offer loans at less than the benchmark prime lending rate to about 10 categories of borrowers, according to the central bank. Some of these loans are at rates that don't make much commercial sense for the banks, according to the report.
Global rating agency Moody's on 21 October 2009 assigned moderate credit risk rating to 13 Indian commercial banks, including the country's largest public sector lender State Bank of India and private entity ICICI Bank. The agency has given the supported ratings an assessment of the government's ability to support the banks to the 13 entities, following the review of systemic support for individual banking systems. Moody's Investor Service in a statement said it has changed the systemic support input for Indian banks' ratings to Baa2 from the A1 local currency deposit ceiling. Baa2 generally refers to moderate credit risk.
The RBI in its report on trend and progress of banking in India for 2008/09 released on Thursday, 22 October 2009, said it needs to assess and initiate measures to raise the capital base of state-run banks. The central bank said off-balance sheet exposures of local banks declined by 26% in 2008/09, but it was necessary to monitor and evaluate risks from such exposure
India's largest dedicated housing finance firm HDFC rose 2%. HDFC's 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 cigarette maker by sales ITC rose 1.37%, extending Friday's near 5% rise, after net profit rose 25.81% to Rs 1009.91 crore in Q2 September 2009 over Q2 September 2008. The result which hit market during market hours on Friday 23 October 2009, surpassed market expectations.
A surge in profit margins and a decent growth in revenue boosted the bottom line. ITC's operating profit margin surged to 36.59% in Q2 September 2009 from 31.4% in Q2 September 2008
Among other FMCG stocks, Marico, United Spirits, Tata Tea, Britannia Industries, rose by between 0.25% to 3.1%.
REI Agro rose 5.48% after net profit rose 169.77% to Rs 48.91 crore in Q2 September 2009 over Q2 September 2008. The result hit during market during trading hours
India's largest drugmaker by sales Ranbaxy Laboratories rose 2.78% after the company reported net profit of Rs 186.08 crore in Q3 September 2009 as against a net loss of Rs 352.93 crore in Q3 September 2008.
Ranbaxy Laboratories CEO and Managing Director Atul Sobti said revenue growth in some strategic geographical markets and a sharp focus on cost efficiency, were the underlying themes in the third quarter. With good achievements in these fronts, the company is confident that it is on the path to recovery.
IT stocks rose on a weak rupee. India's largest software services exporter TCS rose 1.56%. 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.
India's third largest software services exporter Wipro rose 1.84%. Its ADR rose 0.27% on Friday. Wipro has bagged a 10-year total outsourcing contract from Delhi International Airport (DIAL) to provide information technology infrastructure and services for the Indira Gandhi International Airport (IGIA).
IT bellwether Infosys Technologies rose 1.25% as its ADR rose 0.89% on Friday. 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 foreign brokerage said in a recent note that it expects 2010 IT budgets to be strong given a significant pent-up demand.
The partially convertible rupee was trading at 46.55/57, weaker than Friday's close of 46.50/51 per dollar. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.
India's second- largest wireless operator by sales Reliance Communications fell 1.24% after company has said it did not have to pay any additional licence or spectrum fee to the government nor had it inflated its revenues. The statement came after the company said it had completed a preliminary review of a report issued by a government-appointed auditor which had accused it of various malpractices.
India's largest truck maker by sales Tata Motors reversed early losses and rose 3.04% ahead of its Q2 September 2009 result today.
India's largest engineering and construction firm by sales Larsen & Toubro rose 1.82% on bargain hunting after a recent sharp slide triggered by a muted sales growth in Q2 September 2009. 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 on 22 October 2009.
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.
The company is likely to see order inflows rise over 30% in 2009/10 and sales rise of 15%, Chief Financial Officer Y.M. Deosthalee said on Thursday at the time of announcing Q2 results.
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.
Century Enka rose 3.07% after net profit jumped 552.6% to Rs 32.76 crore in Q2 September 2009 over Q2 September 2008.
Welspun Gujarat Stahl Rohren rose 3% after the net profit surged 114.69% to Rs 140.22 crore on a 21.35% increase in total income to Rs 1816.34 crore in Q2 September 2009 over Q2 September 2008.
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