The key benchmark indices recovered sharply and were trading marginally lower in mid afternoon trade as index heavyweight Reliance Industries recovered sharply ahead of Q2 result today.. The BSE 30-share Sensex was down 50.72 points or 0.31%up close to 230 points from the day's low and off close to 85 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. India's largest tractor maker by sales Mahindra & Mahindra rose on strong Q2 result.
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. The intraday recovery proved short-lived. The market weakened again later before cutting losses. It further extended recovery in mid-afternoon trade.
Intraday volatility may remain high today 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.
Realty and metal stocks fell. But FMCG stocks rose. Oil exploration stocks were mixed 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%, data released by the government today showed. 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 recovered from near one month lows on Thursday, 29 October 2009. The rupee was hovering at 47.36/38 against the dollar, slightly 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.
European shares hit a three-week low for a second session on Thursday, with energy and banking stocks the biggest losers after results from Royal Dutch Shell and Deutsche Bank . The key benchmark indices in France, Germany and UK were down by between 0.01% to 0.16%.
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 0.53% 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 39 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.
The key data due later today is third-quarter US gross domestic product figures. The financial markets are watching the data keenly to see whether it can confirm that world's largest economy has emerged from the recession. Expectations are that GDP grew at an annual rate of 3.2% in the third quarter, after contracting for three straight quarters.
Meanwhile, financial markets will be watching next week's US Federal Reserve's policy-setting meeting for any hint the central bank is moving closer to withdrawing its extensive support for the economy. The US Federal Reserve holds a two-day regular policy meeting on Tuesday, 3 November 2009 and Wednesday, 4 November 2009, on interest rates.
Closer 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 50.72 points or 0.31% to 16,232.77. The Sensex fell 35.36 points at the day's high of 16,248.13 in mid-afternoon 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 15.50 points or 0.32% to 4,810.65.
The market breadth, indicating the overall health of the market was weak. On BSE, 805 shares advanced as compared with 1769 that declined. A total of 66 shares remained unchanged.
Among the 30-member Sensex pack, 20 fell while rest rose.
The BSE Mid-Cap index fell 0.91% and the BSE Small-Cap index shed 0.54%.
Energy major Reliance Industries was flat at Rs 2034.05 ahead of its Q2 September 2009 result today. The stock came off the day's low of Rs 1996.60. 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 wee mixed even 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 2.3% ahead of its Q2 September 2009 result today. India's second biggest state-run oil exploration firm by revenue Oil India rose 0.23% 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 2.31% 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 2.91% ahead of its Q2 September 2009 result today. But, Indian Oil Corporation (IOC) fell 1%.
India's largest tractor maker by sales Mahindra & Mahindra rose 2.62% after its net profit jumped 184.98% to Rs 702.94 crore inn Q2 September 2009 over Q2 September 2008. The results were announced during market hours today.
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 1.76% to 6.04%.
India's largest realty player by sales DLF fell 4.43% ahead of its Q2 September 2009 result today.
Housing Development & Infrastructure fell 4.68% after its net profit fell 43.93% to Rs 148.95 crore in Q2 September 2009 over Q2 September 2008.
India's largest cigarette maker by sales ITC rose 1.49% on 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, Dabur India, Nestle India, Tata Tea, rose by between 0.28% to 2.03%.
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 1.13% to 2.18%.
India's largest copper maker by sales Sterlite Industries fell 2.18% ahead of its Q2 September 2009 result today.
Steel Authority of India (Sail) fell 0.76%. 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 1.55% 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.
Grasim Industries rose 0.73% ahead of its Q2 September 2009 result.
Ranbaxy Laboratories rose 4.8% . 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. The results were announced on 26 October 2009.
Tata Chemicals fell 5.17% after its net profit fell 23.19% to Rs 165.76 crore in Q2 September 2009 over Q2 September 2008.
Everest Kanto Cylinders fell 5% to Rs 145.50, extending recent steep losses, after the company reported dismal Q2 September 2009 earnings on Tuesday, 27 October 2009.
LIC Housing Finance fell 3.15% even as its net profit rose 26.78% to Rs 171.24 crore in Q2 September 2009 over Q2 September 2008.
Bank of India fell 5.91% after its net profit fell 57.61% to Rs 323.34 crore in Q2 September 2009 over Q2 September 2008.
Madhucon Projects galloped 6.50% even as the net profit fell 6.6% to Rs 11.97 crore on a 63% rise in sales to Rs 254.73 crore in Q2 September 2009 over Q2 September 2008.
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