Rebound in IT stocks restricts fall in key benchmark indices

The key benchmark indices ended lower as investors resorted to profit booking due to lack of positive triggers in the market. Selling pressure was seen in mid-caps and small-caps counters with their barometers underperforming the Sensex.

Realty and power stocks were the worst hit, whereas FMCG and metal stocks were on the positive side. IT pivotals recovered at the fag end of the session after rupee slipped to eight-month low against the dollar.

European markets, which were mostly positive in early trade, slipped later led by Swiss bank UBS after it unveiled big job cuts. Key indices in Germany, France and UK were down 0.16% to 0.42%. UBS said it will slash 5,500 jobs or almost 7% of its workforce, and has a preliminary deal with US asset manager BlackRock Inc to sell a $15 billion portfolio of subprime mortgages. It also reported a sharp slowdown in new money entrusted to it by wealthy clients.

In contrast, most of the Asian markets recovered after trading negative in early trades. Key indices in Singapore, South Korea, Hong Kong and Taiwan were up 0.23% to 0.58%. However, China's Shanghai Composite was down 0.73%. Japanese markets are closed today on account of holiday.

The 30-share BSE Sensex fell 117.89 points or 0.67% at 17,373.01. The index lost 253.22 points at day’s low of 17,237.68, hit in mid-afternoon trade. Sensex gained 11.25 points at day’s high of 17,502.15, hit at the onset of trading session.

The broader based S&P CNX Nifty fell 47.6 points or 0.92% at 5144.65. Nifty May 2008 futures were at 5174.50, a premium of 29.85 points as compared to spot closing.

As per provisional data, foreign funds sold shares worth a net Rs 815.61 crore today. Domestic funds bought shares worth a net Rs 295.35 crore.

The market breadth was negative on BSE with 965 shares advancing as compared to 1722 stocks that declined. 68 stocks remained unchanged.

The BSE Mid-Cap index fell 0.94% to 7,230.31 and BSE Small-Cap index fell 1.09% to 8,749.24. Both the indices underperformed the Sensex.

BSE clocked a turnover of Rs 6691 crore as against Rs 6,393.68 on Monday, 5 May 2008. The NSE's futures & options (F&O) segment turnover was Rs 32856.62 crore, which was lower than Rs 32972.85 crore on Monday, 2 May 2008.

IT stocks moved up after rupee touched a 8-month low as oil refiners stepped up dollar buying after oil hit a record high, adding to concerns of a widening trade deficit and slowing capital inflows. The BSE IT index outperformed the Sensex, gaining 1.53% to 4,383.36.

Tech Mahindra (up 2.49% at Rs 943.40), Satyam Computer (up 1.96% at Rs 497.05), Infosys Technologies (up 1.84% at Rs 1,820.30), Wipro (up 1.70% at Rs 498.45) and TCS (up 1.44% at Rs 937.85), rose. The partially convertible rupee was at 40.85 per dollar, its lowest since 6 September 2007.

India’s largest private sector firm by market capitalisation and oil refiner Reliance Industries rose 0.42% at Rs 2654.40.

India’s top listed cellular service provider by market share Bharti Airtel slipped 5.29% to Rs 846.60. Bharti Airtel has reportedly bid for 51% of South African telecommunications group MTN. According to reports, Bharti had tabled a bid for MTN at 165 rand per share and had secured $12 billion from banks to finance the deal, which would make Bharti a top player in emerging markets telecoms.

The BSE Realty index underperformed the Sensex, sliding 4.63% to 8,337.03. Unitech (down 7.21% at Rs 307.05), Housing Development & Infrastructure Corporation (down 6.15% at Rs 781.70), Omaxe (up 5.48% at Rs 232), and Indiabulls Real Estate (down 1.44% at Rs 556.35), slipped.

India's largest real estate developer by market capitalisation DLF fell 5.26% to Rs 667.95.

The BSE Power index underperformed the Sensex, falling 2.15% to 3,315.61. Reliance Infrastructure (down 4.92% at Rs 1,442.30), Tata Power (down 4.49% at Rs 1,331.75), Torrent Power (down 2.23% at Rs 135.80), NTPC (down 1.28% at Rs 195.95) and Power Grid Corporation of India (down 0.80% at Rs 105.15), tumbled.

The BSE Bankex outperformed the Sensex, falling 0.46% to 9,088.70. Bank of India (down 2.47% at Rs 353.60), Yes Bank (down 2.46% at Rs 174.45), State bank of India (down 1.29% at Rs 1,756.20), and Kotak Mahindra Bank (down 1.28% at Rs 858.30), declined from the Bankex pack.

Union Bank of India (up 2.07% at Rs 172.25), Bank of Baroda (up 1.66% at Rs 325.35), HDFC Bank (up 0.66% to Rs 1,539.90) and Axis Bank (up 0.10% at Rs 947.85), moved higher from the Bankex pack.

India's largest private sector bank by assets ICICI Bank fell 0.55% to Rs 928.05.

Oil refiner Cairn India rose 1.67% to Rs 259.10 after the Goldman Sachs Group Inc raised its estimate on the stocks by 14% to Rs 325 a share.

PVC pipes maker Finolex Industries soared 6.73% to Rs 76.95 on repors the firm has decided to sell off its plot at Chinchwad near Pune. It is close to signing a deal with a US-based developer to sell the land for between Rs 350 crore and Rs 400 crore.

Dairy products maker Anik Industries was locked at upper limit of 5% to Rs 57.75 after posting 76.4% surge in net profit to Rs 8.96 crore on 58.1% increase in total income to Rs 333.27 crore in Q4 March 2008 over Q4 March 2007.

State-run lender UCO Bank jumped 1.99% to Rs 51.20 on reports the bank would raise Rs 325 crore through an equity issue in June 2008, and convert government equity worth Rs 300 crore into preference shares. The stock touched a high of Rs 54.20 earlier in the session.

Civil construction firm Patel Engineering rose 1.88% to Rs 607 after its unit's joint venture in the United States received a dam reconstruction contract worth $280 million. The stock had earlier touched a high of Rs 632.

Textiles manufacturer Mohit Industries spurted 10% to Rs 24 after posting 180.13% surge in net profit to Rs 0.42 crore on 1.93% fall in total income to Rs 29.71 crore in Q4 March 2008 over Q4 March 2007.

Steel maker JSW Steel fell 2.12% to Rs 879.60 on reports the firm will moderate any price hike this year and raise capacity to offset pressure on margins.

Polyester filament yarn maker Century Enka plunged 5.38% to Rs 121.40 after the company reported net loss of Rs 0.89 crore in Q4 March 2008 as compared to net profit of Rs 1.38 crore in Q4 March 2007. Total income rose 31.50% to Rs 326 crore in Q4 March 2008 over Q4 March 2007.

Titagarh Wagon clocked the highest turnover of Rs 263.39 crore. Reliance Capital (Rs 236.40 crore), Reliance Natural Resources (Rs 210.91), Reliance Petroleum (Rs 204.49 crore) and Reliance Infrastructure (Rs 177.87 crore), were the other turnover toppers on BSE in that order.

Reliance Natural Resources reported the highest volume of 1.74 crore shares on BSE. IFCI (1.73 crore shares), Ispat Industries (1.50 crore shares), Tata Teleservices (Maharastra) (1.19 crore shares) and Reliance Petroleum (1.01 crore shares), were the other volume toppers on BSE in that order.

US markets declined yesterday, 5 May 2008, with financial shares facing the maximum brunt on fears of Bank of America Corp likely to abandon its deal to buy Countrywide Financial Corp. However, Bank of America said after the closing bell that it remained committed to acquiring Countrywide.

The Dow Jones industrial average fell 88.66 points, or 0.68%, to 12,969.54 on Monday, 5 May 2008. The Nasdaq Composite index fell 12.87 points, or 0.52%, to 2,464.12. The S&P 500 fell 6 points to 1,407.

Meanwhile, in a move that will help stock market investors and brokers use their margin funds efficiently, the Securities and Exchange Board of India (Sebi) on Monday, 5 May 2008, approved cross-margining across cash and derivatives segments. The Sebi circular also said that near-month stock futures positions would not be considered for cross-margin benefit three days prior to expiry (the last Thursday of every month).

The asset base of the Indian mutual fund industry increased by 7.32% during the month of April 2008. The mutual fund industry now has Rs 5,67,601.98 crore of assets under management.

High inflation remains the biggest concern for the Indian stock market. The measures taken by the Union government to control inflation have also added to uncertainty on corporate profit. Finance Minister P Chidambaram on Tuesday, 29 April 2008, said government will impose export tax on basmati rice and some steel products, and cut import duties on key inputs like ferro alloys and metallurgical coke. He said the measures were being taken to improve domestic supplies and to moderate prices. The government has already banned export of cement and non-basmati rice.

Given that parliamentary elections are scheduled next year (in May 2009), the government may leave no stone unturned in its attempt to rein in inflation. This is bad news for commodity scrips like cement, steel etc.

In a bid to rein in inflation, the Reserve Bank of India, on Tuesday, 29 April 2008, raised cash reserve ratio (CRR) by 25 basis points to 8.25%, to suck out excess liquidity in the banking system, in its annual monetary policy review. While the central bank has mentioned price stability as its key priority, the overall undertone of the policy is not as hawkish as market had feared. The RBI governor Y V Reddy expects inflation to moderate in the next 2-3 months.

Good Q4 results March 2008 results and firm global markets, triggered a solid rebound in the Indian market over the past few days. Buying by domestic institutions has supported the market. From a recent low of 14,809.49 on 17 March 2008, the Sensex climbed 2,790.63 points or 18.84% to 17,600.12 on 2 May 2008.

The structural growth drivers of the Indian economy remain intact – India’s economy is expected to witness a decent-to-strong growth for a long period of time due to favourable demographics. Acceleration in infrastructure creation will be another driver of strong growth in India’s economy. Rating agency CRISIL in its latest outlook for Indian economy for the year through March 2009 has stated that the overall growth scenario is expected to remain strong with investment as the main driver.

Another pointer to the fact that the long term India growth story remains intact is the outcome of the latest 2008 US-India Business Council (USIBC) survey, according to which, India is, and will continue to be, a premier destination for investment by US firms, with a large number of respondents rating future economic growth in India as highly sustainable.