The key benchmark indices remained weak in mid afternoon trade tracking weak global cues. Lower US index futures also weighed on sentiment. The BSE 30-share Sensex was down 114.01 points or 0.71%, off close to 170 points from the day's high and up close to 95 points from the day's low. The market breadth was weak. Index heavyweight Reliance Industries rose. But, metal and FMCG stocks fell. India's largest cement maker by sales ACC fell despite strong Q3 result.Sun Pharmaceutical Industries fell after poor Q2 result
Volatility was high as traders rolled 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.
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. The market slipped into the red once again after hitting fresh intraday high in early afternoon trade.
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.
Global consumer confidence is rebounding, and in the United States has risen for the first time since 2007, amid signs the world economy is picking up although spending is still restrained, according to a quarterly survey by The Nielsen Company, conducted between 28 September 2009 and 16 October 2009. Confidence was highest in India, followed by Indonesia and Norway, and was weakest in Japan, Latvia, Portugal and South Korea, although in Korea it had improved markedly, the survey showed.
In the United States - the world's biggest consumer market - consumer sentiment rose from three months ago for the first time since early 2007. The data contrasts with a Conference Board index of US consumer confidence, released on Tuesday, which showed a sharp deterioration in confidence this month.
European shares hit a three-week low on Wednesday as investors digested a slew of earnings news, including results from BG Group and Banco Santander , with energy and banking stocks the biggest fallers. The key benchmark indices in France, Germany and UK were down by between 0.61% to 0.76%.
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 1.39% to 2.41%.
But, China's Shanghai Composite rose 0.33%, erasing earlier losses, as airlines, brokerages and coal producers advanced on higher profits.
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 Dow could fall 18 points 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 14:20 IST, the BSE 30-share Sensex was down 114.01 points or 0.71% to 16,239.39. 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 27.55 points or 0.57% to 4,8191.15.
The market breadth, indicating the overall health of the market was weak. On BSE, 953 shares advanced as compared with 1622 that declined. A total of 66 shares remained unchanged.
Among the 30-member Sensex pack, 24 fell while rest rose.
The BSE Mid-Cap index rose 0.03%. The BSE Small-Cap index fell 0.59%.
Energy major Reliance Industries rose 1.61% to Rs 2022.40 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. But 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 3.44% 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 0.93%. 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 3.04% 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 cigarette maker by sales ITC fell 2.71% 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 0.28% to 1.23%.
Metal stocks fell after a gauge of six metals traded on the London Metal Exchange fell 0.43% on Tuesday, 27 October 2009. Jindal Steel & Power, JSW Steel, Jindal Saw, Hindalco Industries fell by between 0.75% to 3.03%.
India's largest copper maker by sales Sterlite Industries fell 1.88% as its ADR fell 6.67% on Tuesday. The company recently raised $500 million in convertible senior notes and plans to use the proceeds primarily for expansion of its copper business. The notes are convertible into American depositary shares at $23.33 per share.
Steel Authority of India (Sail) fell 2.85%. The steel minister said last week the government has approved a follow-on public offering of 20%. The government holds 85.82% stake in Sail.
India's largest steel maker by sales Tata Steel fell 2.89% extending Tuesday's 7.26% fall as net profit fell 49.49% to Rs 902.94 crore in Q2 September 2009 over Q2 September 2008. The results hit the market during market hours on Tuesday.
Sesa Goa jumped 3.06% after the company said had not received any notification or communication from Serious Fraud Investigation Office.
India's largest cement producer by sales ACC fell 1.43% even as its net profit rose 53.69% to Rs 435.63 crore in Q3 September 2009 over Q3 September 2008. The results hit market during market hours today,
Sun Pharmaceutical Industries fell 1.3% after its net profit fell 33.01% to Rs 203.06 crore in Q2 September 2009 over Q2 September 2008.
Shree Cement rose 3.94% after the net profit soared 169.2% to Rs 288 crore on a 40.9% increase in total income to Rs 909 crore in Q2 September 2009 over Q2 September 2008.
India Cements rose 1.02% after its net profit remained flat at Rs 136.94 crore in Q2 September 2009 over Q2 September 2008.
HPCL fell 1.12% after it reported a net loss of Rs 136.68 crore in Q2 September 2009 as compared to a net loss of Rs 3218.92 crore in Q2 September 2008.
Jain Irrigaton rose 0.26% after its net profit rose 73.71% to Rs 42.56 crore in Q2 September 2009 over Q2 September 2008.
Areva T&D India fell 3.04% to, extending loss for the seventh session in a row after the company reported weak third quarter earnings after market hours on Monday, 26 October 2009.
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