The key benchmark indices cut losses in a range-bound afternoon trade. The BSE 30-share Sensex was down 165.02 points or 1.02%, up close to 125 points from the day's low and off close to 75 points from the day's high. The BSE Sensex fell below the psychological 16,000 mark at the onset of the trading session but regained that level soon. Rise in headline inflation data and weak global stocks weighed on investor sentiment.
The market slumped in early trade on weak global stocks. The Sensex fell below the psychological 16,000 level. The Sensex soon regained that mark. Intraday volatility may remain high toady as traders roll over positions in the derivatives segment from October 2009 series to November 2009 series ahead of the expiry October 2009 contracts today, 29 October 2009.
Index heavyweight Reliance Industries dropped ahead of Q2 result today. Realty, metal, construction and telecom stocks also fell. But cement stocks rose. Oil exploration stocks fell whereas PSU OMCs rose on slide in crude oil prices. The market breadth was weak.
Inflation based on the wholesale price index (WPI) rose 1.51% in the year through 17 October 2009, higher than previous week's annual rise of 1.21%. Within the WPI, the food articles index rose 12.85%. The government revised upwards inflation for the year through 22 August 2009 to rise of 0.17% from an estimated fall of 0.21%.
The Reserve Bank of India at its monetary policy review early this week left its key rates unchanged, but raised the wholesale price-based inflation projection for end-March 2010 sharply to 6.5% with an upward bias, from 5 % earlier.
The IMF said on Thursday the economies of India, China and Australia were recovering especially rapidly, suggesting it notices growing pressures for authorities there to tighten monetary policy ahead of others in the region. It called the three economies special cases, while adding a tightening of monetary policy seemed unnecessary elsewhere in the region in the near future.
It also advised Asian central banks not to raise interest rates only to calm asset price growth, saying lifting rates ahead of advanced economies could attract carry trade-type capital inflows and aggravate asset price pressures.
Indian stocks had drifted lower for the second day in a row on Wednesday, 28 October 2009, after steep losses on Tuesday, 27 October 2009. Concerns that interest rates may rise sooner-than-expected had spooked the market on Tuesday after the Reserve Bank of India sharply raised inflation forecast. However, analysts say 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 for the fourth consecutive session on Thursday, 29 October 2009, dropping to its lowest in nearly a month, as weak equities and month-end demand from refiners pushed up dollar purchases. The rupee was hovering at 47.47/51 against the dollar, weaker than Wednesdays' close of 47.34/35.
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 Reserve Bank of India (RBI) deputy governor K.C. Chakrabarty said on Wednesday commercial banks expect credit growth to pick up. At its quarterly monetary policy review on Tuesday, the RBI said bank credit growth continues to be sluggish and cut its full-year forecast for non-food credit growth to 18% from 20%. It urged banks to step up lending while preserving credit quality.
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 stocks dropped on Thursday after new-home sales unexpectedly fell in the US. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan fell by between 0.85% to 2.55%.
The decline in Chinese stocks was also due the government's plans to tighten rules on personal loans. China's banking regulator said it's tightening rules to ensure loans enter the real economy instead of being used for speculation. Loans exceeding 300,000 yuan ($43,937) will be given directly to the counterparty of the borrower rather than the borrower, the China Banking Regulatory Commission said on Wednesday
Meanwhile, another data showed Japanese manufacturers increased production for a seventh month in September 2009, extending the longest stretch of gains in 12 years, as spending by governments worldwide helped to revive trade. Output rose 1.4% in September 2009 from August 2009, when it climbed 1.6%.
Trading in US index futures indicated Dow could rise 14 points at the opening bell on Thursday, 29 October 2009.
US markets on Wednesday posted their biggest losses since 1 October 2009 on the back of worries about the recovery process. An unexpected decrease in new-home sales weighed on the markets. Sales dropped 3.6% in September 2009 and August's gain was revised lower. Also Goldman Sachs slashed its forecast for US third-quarter GDP to a rise 2.7% from earlier 3%. The Dow was down 119.48 points, or 1.2%, to 9,762.69. The S&P 500 index was down 20.78 points, or 2%, to 1,042.63. The Nasdaq dropped 56.48 points, or 2.7%, to 2,059.61.
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 165.02 points or 1.02% to 16,118.47. The Sensex fell 92.10 points at the day's high of 16,191.39 in early trade. The Sensex fell 289.66 points at the day's low of 15993.83 in early trade.
The S&P CNX Nifty was down 51.20 points or 1.06% to 4,774.95.
The market breadth, indicating the overall health of the market was weak. On BSE, 666 shares advanced as compared with 1864 that declined. A total of 59 shares remained unchanged.
Among the 30-member Sensex pack, 22 fell while rest rose.
The BSE Mid-Cap index fell 1.47% and the BSE Small-Cap index shed 1.31%.
Energy major Reliance Industries fell 0.92% ahead of its Q2 September 2009 result today. 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.
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.
The government on Tuesday 27 October 2009 allocated 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.
Oil exploration stocks fell as crude oil futures fell 2.6% on Wednesday, pressured by an unexpected rise in US inventories of gasoline. Crude oil for December 2009 delivery finished down $2.09, or 2.6%, at $77.46 a barrel on Wednesday. Fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.
Cairn India fell 2.51% ahead of its Q2 September 2009 result today. India's second biggest state-run oil exploration firm by revenue Oil India fell 0.12% ahead of its Q2 September 2009 result today. But India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) rose 0.91% ahead of its Q2 September 2009 result today.
PSU OMCs rose as fall in crude oil prices will reduce under-recoveries on domestic sale of petrol, diesel, kerosene and LPG at controlled prices. HPCL rose 3.27%. BPCL rose 2.27% ahead of its Q2 September 2009 result today. But, Indian Oil Corporation (IOC) fell 0.97%.
Realty stocks fell after the central bank's decision on Tuesday to raise 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, Omaxe, Unitech fell by between 2.09% to 6.65%.
India's largest realty player by sales DLF fell 3.97% ahead of its Q2 September 2009 result today.
India's largest cement producer by sales ACC rose 0.27% as 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 on Wednesday.
At the time of announcing Q3 results, ACC said a sizeable additional cement capacity is expected to materialise in all the regions withing the next one year. ACC, however, said it expects a significant surge in cement demand from the infrastructure sector and various development schemes of the government. It expects robust demand from smaller cities and semi-urban markets
Grasim Industries rose 0.69% ahead of its Q2 September 2009 result today.
Telecom stocks fell triggered by concerns about price war in the sector. 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 0.55%.
India's largest wireless operator by sales Bharti Airtel fell 1.59%. But India's second- largest wireless operator by sales Reliance Communications fell 4.51%. The company said early this week 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.
Construction stocks fell on profit taking. Hindustan Construction Company, Nagarjuna Construction Company Era Infra Engineering, Gayatri Projects fell by between 0.78% to 4.59%.
The stocks rose recently 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.
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 fell 4.59% extending 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
Corporation Bank rose 1.49% after the net profit rose 52.30% to Rs 291.67 crore on a 27.70% increase in total income to Rs 2072.34 crore in Q2 September 2009 over Q2 September 2008.
Metal stocks fell after a gauge of six metals traded on the London Metal Exchange fell 3.17% on Wednesday, 28 October 2009. JSW Steel, Jindal Saw, Hindustan Zinc, National Aluminum Company, Hindalco Industries fell by between 1.24% to 2.74%.
India's largest copper maker by sales Sterlite Industries fell 2.44% ahead of its Q2 September 2009 result today.
Steel Authority of India (Sail) fell 1.64%. The steel minister said recently 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 3.01% extending recent steep looses on weak Q2 results. 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 27 October 2009.
Sesa Goa fell 1.84% after company said on Thursday it received a letter from the government ordering an investigation into the company. The investigation by the Serious Fraud Investigation Office (SFIO) will look into financial and other irregularities, the company said in a statement. The investigation must be completed within six months, it said
Sundram Fasteners rose 1.03% , after net profit surged 105.78% to Rs 18.87 crore in Q2 September 2009 over Q2 September 2008.
Indian Overseas Bank fell 6% after its net profit fell 50.96% to Rs 176.04 crore in Q2 September 2009 over Q2 September 2008.
Punjab National Bank fell 2.55% even after its net profit rose 31.09% to Rs 926.95 crore in Q2 September 2009 over Q2 September 2008.
CESC fell 2.2% after its net profit remained flat at Rs 126 crore in Q2 September 2009 over Q2 September 2008.
Glenmark Pharmaceuticals fell 1.71% after its net profit fell 14.03% to Rs 575.01 crore in Q2 September 2009 over Q2 September 2008.
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