The key benchmark indices slipped into the red after hitting fresh day's high in afternoon trade. The BSE 30-share Sensex was down 83.24 points or 0.51%, off close to 140 points from the day's high and up close to 125 points from the day's low. The market breadth was negative and improved from weak breadth in early trade. Index heavyweight Reliance Industries pared gains. Construction stocks rose. Realty stocks gained on bargain hunting after Tuesday's sharp fall. IT stocks rose on a weak rupee. But, FMCG stocks fell.
After a weak opening, the market extended losses in early trade before staging a strong rebound. The market moved into the green from red in early afternoon trade. Market slipped into the red after hitting fresh day's high in afternoon trade.
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.
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.
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 Hong Kong, Japan, South Korea, Singapore and Taiwan fell by between 1.3% to 2.41%. But, China's Shanghai Composite rose 0.33%.
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 13:20 IST, the BSE 30-share Sensex was down 83.24 points or 0.51% to 16,270.16. The Sensex rose 57.74 points at the day's high of 16,411.14 in afternoon trade. At the day's low of 16144.17 Sensex fell 209.23 points in early trade.
The S&P CNX Nifty was down 19.10 points or 0.39% to 4,827.60.
The market breadth, indicating the overall health of the market was negative. Breadth improved from weak breadth in early trade. On BSE, 1063 shares advanced as compared with 1432 that declined. A total of 70 shares remained unchanged.
Among the 30-member Sensex pack, 18 fell while rest rose.
The BSE Mid-Cap index rose 0.11%. The BSE Small-Cap index fell 0.24%.
Energy major Reliance Industries rose 1.13% to Rs 2012.80 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. The stock came off the day's high of Rs 2042.60. 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 3.35% 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 0.62%. 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
India's second largest private sector bank by net profit HDFC Bank fell 2.5% 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.
But, Andhra Bank rose 2.34% aftr its net profit rose 69.6% to Rs 273.97 crore in Q2 September 2009 over Q2 Septmber 2008.
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.
IT stocks rose on a weak rupee. India's third largest IT exporter by sales Wipro rose 2.46% extending Tuesday's 2.18% gains on better than expected results. As per consolidated Indian GAAP results, the company recorded 19% rise in net profit to Rs 1162 crore in Q2 September 2009 over Q2 September 2008. The net profit rose 14% to Rs 1162 crore in Q2 September 2009 over Q1 June 2009. The results hit the market before trading hours on Tuesday.
Wipro said order book has gone up and it is seeing a strong second half as pricing stabilises. Wipro expects its IT services revenue to rise 3.8% to 5.7% to $1.09-$1.11 billion in Q3 December 2009 ovfrom Q2 September 2009
IT bellwether Infosys Technologies rose 0.22% even as its ADR fell 2.17% 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 foreign brokerage said in a recent note that it expects 2010 IT budgets to be strong given a significant pent-up demand.
But, India's largest software services exporter TCS fell 0.84%. 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.
The Indian rupee weakened to new three-week lows on Wednesday as a lower opening in the stock market raised worries of foreigners repatriating funds while weaker Asian units added to the woes. The partially convertible rupee was trading at 47.08/47.09, weaker than its previous close of 46.88/90 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.
Realty stocks rose on bargain hunting after falling on Tuesday as the central bank raised the provisioning requirement for banks' advances to the commercial real estate sector classified as 'standard assets' from the present level of 0.40% from 1%. This will raise the borrowing costs for realty firms which depend heavily on borrowing.
Indiabulls Real Estate, DLF, Ackruti City, Unitech, Omaxe rose by between 0.99% to 1.36%.
In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said.
The recent report suggests 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. The housing market had slumped last year amid a global credit crunch and buyers fearing job losses
India's largest cigarette maker by sales ITC fell 1.88% on profit taking after a recent strong rally triggered by robust Q2 results. 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, Hindustan Unilever, Marico, REI Agro, Britannia Industries fell by between 0.05% to 0.75%.
Construction stocks rose on the government's thrust on the infrastructure sector. Higher government spending on infrastructure sector in the Union Budget 2009-2010 to provide a stimulus to the economy, may result in increase order flow for construction. Hindustan Construction Company, Nagarjuna Construction Company Era Infra Engineering, Gayatri Projects rose by between 1.2% to 2.75%.
An expected fall in cement prices in the coming months due to capacity new capacity addition may boost margins for construction firms as cement is a key raw material
Jaiprakash Associates rose 0.59% on bargain hunting after recent sharp fall. Net profit rose 327.9% to Rs 870.19 crore on 53% rise in sales to Rs 1824.26 crore in Q2 September 2009 over Q2 September 2008. The company announced result after market hours on 21 October 2009. The company also announced 1:2 bonus issue at the time of announcing Q2 results
UltraTech Cement fell 0.97%. The stock fell sharply in the past few days after the company issued a cautious outlook at the time of announcing Q2 results on 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.
India's largest cement maker by sales ACC rose 0.1% ahead of its Q3 September 2009 result today.
Sun TV Network jumped 3.27% after the net profit rose 20.5% to Rs 130.56 crore on a 20.7% increase in total income to Rs 331.86 crore in Q2 September 2009 over Q2 September 2008.
Shriram Transport fell 0.47% even after its net profit rose 25.26% to Rs 207.45 crore in Q2 September 2009 over Q2 September 2008.
Austin Engineering Company fell 3.13% after net profit slumped 43.73% to Rs 1.48 crore in Q2 September 2009 over Q2 September 2008.
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