The key benchmark indices recovered sharply and turned green in early afternoon trade as investors resorted to bargain hunting after steep losses in share prices in the past few days. The BSE 30-share Sensex was up 3.16 points or 0.03%, up close to 210 points from the day's low. But the market breadth was still weak. Index heavyweight Reliance Industries extended early gains Another index heavyweight Reliance Industries also gained. Telecom stocks fell. But auto and sugar stocks rose.
Concerns that interest rates may rise sooner-than-expected had spooked the market on Tuesday, 27 October 2009, after the Reserve Bank of India at a quarterly policy review sharply raised inflation forecast. However, analysts says that monetary policy could be ineffective in reining in a rise in inflation caused by supply shortage. A surge in food prices caused by production shortage has been a key reason for the rise in inflation in the past few weeks
Meanwhile, a heightened volatility in the rupee against the dollar in the past few days has raised worries that the corporate sector may suffer losses on hedging. The rupee weakened past the 47 per dollar mark for the first time in three weeks in early trade on Wednesday, 28 October 2009, as Asian stocks fell
Bank stocks fell for the second straight day as the RBI did not relax 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). Another trigger for the sharp slide in banking stocks was the central banks' decision to streamline provisioning requirement on non-performing assets. The RBI asked banks to ensure by September 2010 that the total provisioning coverage against non-performing or bad loans aren't less than 70% of the outstanding amount.
After a weak opening, the market extended losses in early trade before staging a strong rebound. Market turned green in early afternoon Volatility may remain high on the bourses over the next two days as traders rollover positions in the derivatives segment from October 2009 series to November 2009 series ahead of the expiry October 2009 contracts on Thursday, 29 October 2009.
Reserve Bank deputy governor Shyamala Gopinath today said the challenge at the current juncture is to revive private credit demand.
The Reserve Bank of India (RBI) on Tuesday withdrew emergency liquidity support measures that were implemented in the aftermath of the global financial crisis. The central bank warned of possible asset price bubbles and raised banks' provisioning requirements for commercial real estate loans. The central bank said the precise challenge for the Reserve Bank of India is to support the economic recovery process without compromising on price stability. Growth drivers warrant a delayed exit, while inflation concerns call for an early exit, it said. Premature exit will derail the fragile growth, but a delayed exit can potentially engender inflation expectations, the RBI said.
The RBI raised the statutory liquidity ratio (SLR) to 25% from 24% with effect from 7 November 2009. SLR is the minimum share of bank deposits to be held in approved government securities. By hiking the SLR, the RBI seems to be sending a signal that the high fiscal deficit will continue. The SLR hike will ensure easy funding of the government's borrowing programme for not just this year but the next fiscal as well
The RBI raised projection of inflation to 6.5% with an upside bias at end March 2010 from earlier 5%.
Meanwhile, the latest economic data showed infrastructure sector output grew 4% in September 2009 from a year earlier, slower than upwardly revised annual growth of 7.8% in August 2009. The infrastructure sector accounts for 26.7% of the industrial output. During April-September, the first half of the 2009/10 year, output rose 5% compared with 3.4% in the same period in 2008/09.
Asian share markets were lower Wednesday as shipping stocks and shipbuilders fell on worries about the strength of the global economic recovery, though Honda was buoyant in Tokyo after lifting its earnings forecast. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan fell by between 0.11% to 2.41%.
A Wall Street Journal report that GMAC Financial Services and the US Treasury Department were in advanced talks to prop up the lender with its third helping of taxpayer money was adding to the cautious tone, serving as a reminder of how some battered financial firms remain dependent on government lifelines.
Trading in US index futures indicated a flat opening of US stocks on Wednesday, 28 October 2009.
US stocks closed mostly lower in volatile trade on Tuesday as a weaker-than-expected consumer confidence report undermined the market outlook on the pace of economic recovery from recession. The technology sector was under pressure following downside guidance from internet search engine baidu.com. Consumer-discretionary and tech stocks declined even as energy stocks rose along with oil prices. The Dow rose 14.21 points, or 0.1%, to 9,882.17. The S&P 500 index fell 3.54 points, or 0.3%, to 1,063.41, while Nasdaq fell 25.76 points, or 1.2%, to 2,116.09.
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 recently 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 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 12:20 IST, the BSE 30-share Sensex was up 3.16 points or 0.03% to 16,355.56. The Sensex rose 3.63 points at the day's high of 16,357.03 in early afternoon trade. At the day's low of 16144.17 Sensex fell 209.23 points in early trade.
The S&P CNX Nifty was up 6.85 points or 0.14% to 4,853.55.
The market breadth, indicating the overall health of the market was weak. On BSE, 840 shares advanced as compared with 1551 that declined. A total of 63 shares remained unchanged.
Among the 30-member Sensex pack, 20 fell while rest rose.
The BSE Mid-Cap index rose 0.24%. The BSE Small-Cap index fell 0.1%.
Energy major Reliance Industries rose 2.18% after the government on Tuesday allocated an additional 50 million cubic metres a day (mmscmd) of gas from Reliance Industries-operated east coast block D6. Power plants and refineries will get the bulk of Reliance Industries' gas from the Krishna-Godavari basin beyond the previously allotted 40 million metric standard cubic metres per day (mmscmd).
The empowered group of ministers (eGoM) also made some allotments for Reliance's petrochemical plants and refineries.
Meanwhile, the continued pressure on gross refining margins, or the difference between the price of crude and the price of refined petroleum products, is seen weighing on the company's bottom-line in Q2 September 2009, in spite of higher gas production and refining throughput. RIL unveils Q2 results on Thursday, 29 October 2009.
A total of eight brokerages expect a between a 9% fall to a 1.4% rise in RIL's net profit at between Rs 3752.10 crore to Rs 4178 crore in Q2 September 2009 over Q2 September 2008. Their expectations peg a between 23% fall to a rise of 19.8% in revenue at between Rs 34292.90 crore to Rs 53667.70 crore in Q2 September 2009 over Q2 September 2008.
Reliance Industries on Tuesday told the Supreme Court that it would lose money by selling natural gas at $2.34 per million British thermal units or mmBtu. The company's lawyer Harish Salve told the court that RIL had not told the Bombay HC that sale at $2.34 per unit would be profitable and that the HC appeared to have misunderstood the matter.
The hearing before India's apex court was also marked by interjections by the justices. The judges observed that the natural gas belongs to the government and all contracts on sharing of gas are subject to the government's approval. The court also said that it may issue a direction to the two feuding companies, RIL and Reliance Natural Resources (RNRL), to arrive at a suitable arrangement.
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.
Bank stocks fell after Reserve Bank held key rates unchanged on Tuesday. India's largest private sector bank by operating income ICICI Bank fell 2.3% as its ADR fell 8.19% on Tuesday. Singapore's Temasek cut its stake to 5.76% as of 30 September 2009 from 7.6% as of end of June 2009. Temasek said in a statement in Singapore on Tuesday that any stake sales are part of regular moves to review and rebalance its portfolio.
India's largest bank by branch network State Bank of India fell 2.02%. State Bank of India (SBI) announced on 24 October 2009 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
But, Bank of Baroda rose 3.5% as its net profit rose 60.43% to Rs 634.18 crore in Q2 September 2009 over Q2 September 2008. The result hit the market during market hours today.
India's second largest private sector bank by net profit HDFC Bank fell 2.33% as its ADR fell 2.21% 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 were more or less in line with market expectations.
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.
India's largest engineering and construction firm by sales Larsen & Toubro rose 2.67%. The company announced on 26 October 2009 sale of its shares in Voith Paper Technology India (VPTIL) to its long term joint venture partner Voith GmbH, Heidenheim, Germany. VPTIL is a 50:50 joint venture partner between L&T and Voith GmbH providing design, consultancy and other value added services to Indian paper industry .
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.
But among other capital goods stocks, Bharat Heavy Electricals, BEML, Siemens and Praj Industries fell by between 0.08% to 3.17%.
Punj Lloyd rose 3.37% on bargain hunting after the stock corrected 30% in the preceding six consecutive sessions after the company reported dismal earnings in Q2 September 2009.
Crompton Greaves jumped 4.94% after the net profit rose 47.1% to Rs 136.10 crore on a 16.8% increase in sales to Rs 1268.56 crore in Q2 September 2009 over Q2 September 2008.
Telecom stocks fell after Idea Cellular's Managing Director Sanjeev Aga, said on 26 October 2009 the price war in the teleocom sector which he described as a 'bloodbath' would cut local call charges, currently at 40 paise a minute, to 'unsustainable' levels. Idea Cellular fell 1.2% extending recent fall even as net profit rose 81.62% to Rs 273.15 crore in Q2 September 2009 over Q2 September 2008. The result hit the market during trading hours on 26 October 2009.
India's second- largest wireless operator by sales Reliance Communications fell 2.4%. The company said on Monday it does 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.
But, India's largest wireless operator by sales Bharti Airtel rose 3.1%.
Rate sensitive auto stocks rose after posting strong Q2 September 2009 result. Bajaj Auto rose 0.1%. 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.
India's largest commercial vehicle maker by sales Tata Motors rose 1.59% after its net profit jumped 110.13% to Rs 729.14 crore on 11.87% rise in total income to Rs 8399.75 in Q2 September 2009 over Q2 September 2008. The results were announced after market hours on 26 October 2009.
India's largest tractor maker by sales Mahindra & Mahindra rose 1.43%. 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.
But, Hero Honda Motors fell 1.7% even as net profit jumped 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 21 October 2009.
India's largest car maker by sales Maruti Suzuki India fell 2.11% even after net profit rose 92.5% to Rs 570 crore on 46.6% rise in sales to Rs 7080.67 crore in Q2 September 2009 over Q2 September 2008. The company announced the results on Saturday, 24 October 2009
Maruti said the company remains cautiously optimistic with regard to volume growth in the near future. It said margins in the future may be under pressure due to hardening of commodity prices and strengthening of the Japanese yen. The company said it continues to focus on cost optimization.
Some sugar stocks rose on reports the government is likely to cut the levy sugar quota for November 2009 by around 9%. Bajaj Hindustan, Balrampur Chini, Shree Renuka Sugars and Ponni Sugar rose by between 0.33% to 3.52%.
Ispat Industries declined 1.67%, after the company posted net loss of Rs 79.41 crore in Q2 September 2009 higher than net loss of Rs 26.74 in Q2 September 2008.
Mcleod Russel India gained 3.88% after net profit surged 57.9% to Rs 192.19 crore in Q2 September 2009 over Q2 September 2008.
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