Sensex sheds 3.25% as global stocks slide on US bank, flu fears

Indian stocks joined global sell off after the Wall Street Journal reported Bank of America Corp. and Citigroup Inc. were told by US regulators that they need more capital. Concerns that the swine-flu outbreak will curtail travel and delay a recovery from the global recession also weighed on global stocks. The BSE 30-share Sensex slumped 370.10 points or 3.25%. Sensex closed just above the psychological 11,000 mark after falling below that level in late trade. Banking, metal and realty stocks led losses.

The market was choppy as traders rolled over positions from April 2009 contracts to May 2009 contracts ahead of the expiry of the near month April 2009 derivatives contracts on Wednesday, 29 April 2009. After a slide in early trade, the market cut losses shortly. The intraday recovery proved short-lived as the market weakened in early afternoon trade. Once again a recovery from lower level was witnessed in afternoon trade. The recovery proved short-lived. Market slumped in mid-afternoon trade.

The expiry of the near-month derivatives contracts has been advanced to 29 April 2009 from 30 April 2009 as the stock market remains closed on 30 April 2009 on account of voting for the parliamentary elections in Mumbai on 30 April 2009. As per reports, rollover of Nifty positions from April 2009 series to May 2009 series stood at 48% while those of stock futures were 37%, as on Monday, 27 April 2009.

Political uncertainty may lead to volatile swings on the bourses in the next few weeks with polling underway for India's 15th Lok Sabha. The month-long parliamentary elections that began on 16 April 2009 will conclude on 13 May 2009 with results due on 16 May 2009. Poll estimates point to a fractured mandate.

European stocks fell on Tuesday, knocked by growing fears about the economic impact of the swine flu outbreak and renewed concerns over capital increases in the banking sector. Key benchmark indices in France, Germany and UK were down by between 1.91% to 2.15%.

Asian markets fell today, 28 April 2009 after the world health organization raised its pandemic alert level for an outbreak of Swine Flu, spurring concern the spread of the disease will hurt government efforts to revive the global economy. Key benchmark indices in China, Hong Kong, Singapore, Taiwan, South Korea, and Japan were down by between 0.16% and 2.95%.

Stress tests showed Bank of America needs billions of dollars of capital, according to a report by the Wall Street Journal which cited people familiar with the situation. The report also said Bank of America and Citigroup are both challenging the findings. The Wall Street Journal also said Wells Fargo & Co, Fifth Third Bancorp and Regions Financial Corp. are all expected to need more capital. The Financial Times reported that Britain's largest banks may be forced to adopt higher capital ratios.

Credit-related losses and writedowns at the world's biggest financial companies have swelled to more than $1.34 trillion since the start of 2007.

On the flip side, the worst may be over for Asia's exporters as interest-rate cuts and a $585 billion stimulus package get China buying again. Singapore's shipments to China jumped 29% in March 2009 from February 2009, and those from Japan, South Korea and Taiwan also increased.

China's spending on roads, bridges and low-cost housing should contribute strongly to growth in Asia, the World Bank said this month. Goldman Sachs Group Inc. last week raised its 2009 growth forecast for China's economy to 8% from 6% previously, citing the stimulus.

Signs that the US economy is recovering may provide further demand for Asia's exporters. Federal Reserve Chairman Ben S. Bernanke said in mid-April 2009 that the world's largest economy's sharp decline may be slowing. Confidence among US consumers has risen two months running and sentiment last week reached its highest level since the bankruptcy of Lehman Brothers Holdings Inc. in September 2008.

Trading in US index futures showed the Dow could fall 113 points at the opening bell on Tuesday, 28 April 2009.

US stocks fell on Monday, 27 April 2009 as concern the swine flu outbreak will hurt travel, energy and hotel companies overshadowed gains in health care stocks. The Dow Jones Industrial Average dropped 51.29 points, or 0.64%, to 8,025, the Standard & Poor's 500 Index fell 8.73 points, or 1.01%, to 857.50 and the Nasdaq Composite index dropped 14.88 points, or 0.88%, to 1,679.41.

Closer home, the Reserve Bank of India (RBI) said on Tuesday it had extended up to 31 October 2009, the ceiling on the rates of interest on pre-shipment rupee export credit of up to 270 days and post-shipment rupee export credit up to 180 days at benchmark prime lending rate minus 2.5%. The earlier validity was up to 30 April 2009.

The Reserve Bank of India (RBI) governor D. Subbarao on Saturday, 25 April 2009, said unwinding of fiscal stimulus in an orderly manner is one of the major challenges going forward. The central bank governor also highlighted other challenges ahead. These include implementing the fiscal stimulus packages, particularly stepping up public investment, revival of private investment demand, maintaining flow of credit while ensuring credit quality.

For the central bank, which is also the regulator of the financial markets, preserving financial stability along with provision of adequate liquidity is another task that will have to be addressed, according to the RBI governor. Besides, it will have to ensure an interest rate environment that supports the return of the economy to a high growth path.

UBS's lead economic indicator in India has climbed for three consecutive months pointing to a strong recovery in industrial activity by June 2009, it said in a note late on Friday, 24 April 2009. UBS said the key variables which have boosted its lead indicator index was the government bond yield spread, real (M1) money supply and a revival in foreign capital inflows. "Our base-case scenario is for the Indian economy and corporate earnings to bottom out by the second half of 2009/10 and for full recovery in 2010/11," it said. UBS said it is positive on the Indian stock market on a 12 month view with overweight recommendation for autos, metals, banks, real estate and conglomerates.

India's industrial production may have risen 10% on a monthly basis in March 2009 as the effects of a recent spate of fiscal and monetary measures started showing up, Macquarie Research said in a note.

The Reserve Bank of India (RBI) on Tuesday, 21 April 2009 cut its key short-term rates by 25 basis points each to shore up faltering growth in the face of the global economic slowdown. The Reserve Bank also repeated a call for banks to pass on its rate cuts to customers and said deposit rates should also fall. "There is scope for the overall interest rate structure to move down within the policy rate easing already effected by the Reserve bank," it said adding its latest rate cut reinforced the case.

Reacting to the RBI rate cut, ICICI Bank, India's largest private sector bank by net profit, announced a reduction in both deposit and lending rates after trading hours on Tuesday, 21 April 2009.

While moderation in internal accruals has an adverse effect on corporate investment, decline in input prices and reduction in borrowing costs may have a favourable impact on profitability of the corporate sector going forward, the RBI said at the time of announcing the monetary policy.

The central bank said that managing large government borrowing in FY 2010 in a non-disruptive manner would be a major challenge, and said it would used a mix of monetary and debt management tools to ensure this was done smoothly. Large borrowings also militate against the low interest rate environment that the RBI is trying to maintain to spur investment demand in keeping with the stance of monetary policy, the central bank said in its policy statement.

A good news for the economy is forecast of a near normal monsoon by the India Meteorological Department (IMD) on 17 April 2009. The IMD said rainfall in the June-September 2009 monsoon season was expected to be 96% of the long-term average. The outlook is among the nation's most widely watched indicator as monsoon rains are a major influence on output of key crops, economic activity and also affects sentiment in the country's financial markets.

Foreign funds are on aggressive buying mode. Foreign institutional investors (FIIs) bought shares worth a net Rs 1839.70 crore on Monday, 27 April 2009. FII inflow in April 2009 totaled Rs 7,213.60 crore (till 27 April 2009). FII inflow in calendar year 2009 totaled Rs 542 crore (till 27 April 2009). With heavy buying in the last two months, foreign funds have turned net buyers in calendar 2009.

FIIs had resorted to heavy selling of Indian stocks in the first two months of calendar 2009. Domestic institutional investors had absorbed the selling by FIIs.

The BSE 30-share Sensex was down 370.10 points or 3.25% to 11,001.75. At the day's high of 11,375.97 Sensex rose 4.12 points in early trade. At the day's low of 10,961.76, the Sensex fell 410.09 points in late trade.

The S&P CNX Nifty was down 107.65 points or 3.1% to 3,362.35.

BSE clocked a turnover of Rs 4,238 crore, lower than Rs 4,898.38 crore on Monday, 27 April 2009.

Nifty April 2009 futures were at 3359, at a discount of 3.35 points as compared to the spot closing of 3362.35. Turnover in NSE's futures & options (F&O) segment surged to Rs 81,137.88 crore from Rs 75,777.22 crore on Monday, 27 April 2009.

The BSE Sensex is up 1,354.44 points or 14.03% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

Coming back to today's trade, the BSE Mid-Cap index was down 3.75%, and the BSE Small-Cap index fell 3.45%. Both the indices underperformed the Sensex.

The BSE IT index (down 0.69%), the BSE Auto index (down 1.5%), the BSE Healthcare index (down 1.8%), the BSE TECk (down 1.87%), the BSE Consumer Durables index (down 2.18%), the BSE FMCG index (down 2.2%), the BSE Oil & Gas index (down 2.33%), the BSE PSU index (down 2.85%), outperformed the Sensex.

The BSE Realty index (down 5.7%), the BSE Metal index (down 5.66%), The BSE Bankex (down 4.97%), the BSE Capital Goods index (down 4.17%), the BSE Power index (down 3.78%), underperfomed the Sensex.

The market breadth, indicating the overall health of the market was weak. On BSE, 669 stocks advanced as compared to 1,823 that declined. A total of 62 shares remained unchanged.

All the stocks from the 30 share Sensex pack fell. India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 2.69% to Rs 1,736.75. RIL's net profit fell 9.35% to Rs 3546 crore on 23.9% fall in sales to Rs 28,362 crore in Q4 March 2009 over Q4 March 2008. The company announced the results on Thursday, 23 April 2009.

As per reports, Reliance Industries has resumed crude oil production from one well in its east coast deepwater block. Reliance had stopped crude oil production form the Krishna Godavari block, popularly known as D-6, from 22 March 2009 to add more wells to raise the crude oil output.

Shares of oil exploration firms fell after crude oil prices dropped nearly 2% in the Asian electronic trading on Tuesday, 28 April 2009. Shares of India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) declined 1.91% while Cairn India dropped 2.75%. The fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

Crude oil prices fell 97 cents or 1.93% to $49.17 per barrel in the Asian electronic trading on Tuesday, 28 April 2009 extending 2.74% or $1.41 fall to $50.14 a barrel on the New York Mercantile Exchange on Monday, 27 April 2009, on concerns about the potential impact of a global swine flu outbreak on oil demand and a stronger dollar.

Lower oil prices benefited PSU OMCs. BPCL, HPCL and Indian Oil Corporation, rose by between 0.62% to 3.08%. Lower oil prices will reduce underrecoveries at the state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

India's largest telecom services provider by sales Bharti Airtel fell 2.3% to Rs 725.70 ahead of its Q4 March 2009 results tomorrow, 29 April 2009. A total of 12 brokerages expect a between 6% to 29.3% growth in Bharti's consolidated net profit as per US accounting standards at between Rs 1959.90 crore to Rs 2395.20 crore in Q4 March 2009 over Q4 March 2008. They expect a between 26% to 36% growth in sales at between Rs 9816.60 crore to Rs 10624.10 crore in Q4 March 2009 over Q4 March 2008.

Some FMCG stocks fell on profit taking after they rose recently triggered by expectations of a surge in sales due to forecast of a good monsoon this year. ITC, Tata Tea, Hindustan Unilever, Dabur India, United Spirits, United Breweries fell by between 0.59% to 4.01%. FMCG firms derive a substantial revenue from rural markets.

Capital goods stocks fell on profit taking after a sharp surge prices in the past few days. Praj Industries, Larsen & Toubro, Bharat Heavy Electricals, ABB, Thermax and Crompton Greaves fell by between 2.07% to 7.77%.

Some healthcare stocks fell on profit taking after recent surge in prices. Wockhardt, Dr Reddy's Laboratories, Cipla, Sun Pharmaceutical Industries fell by between 0.31% to 7.04%.

Banking stocks dropped on weak sentiment towards the sector globally on concerns US banks may have to raise more capital. India's second largest private sector bank by operating income HDFC Bank fell 4.01%. Its American depository receipts (ADRs) fell 0.69% on Monday. The banks' net profit rose 33.9% to Rs 630.88 crore on 53.1% rise in operating income to Rs 5,365,52 crore in Q4 March 2009 over Q4 March 2008. The results were more or less in line with market expectations. The bank announced the results on Thursday 23 April 2009.

HDFC Bank's gross non performing assets (NPA) stood at 1.98% of advances as of 31 March 2009 compared to 1.91% as of 31 December 2008. Net NPA as of 31 March 2009 was at 0.63% of net advances.

India's largest private sector bank by net profit ICICI Bank fell 6.11%. ICICI Bank's net profit fell 35.31% to Rs 743.76 crore on 11.42% fall in total income to Rs 9203.36 crore in Q4 March 2009 over Q4 March 2009. The bank's profit took a beating due to lower fee income, higher provisioning towards bad loans and an almost flat net interest income. As of 31 March 2009 bank's net non performing asset ratio was 1.96%.

ICICI Bank's rating was raised at Goldman, Sachs & Co. on improving core earnings. Its American depository receipts (ADRs) gained 2.05% on Monday, 27 April 2009.

ICICI Bank cut its lending rates by 50 basis points after the central bank cut official interest rates on Tuesday 21 April 2009. The benchmark advance rate, or the rate that it charges its top customers, now stands at 16.25% from 16.75%, effective from Wednesday, 22 April 2009.

ICICI Bank also cut rates for retail customers by 50 basis points. The rates on deposits have been cut between 25 to 50 basis points, with effect from Friday 24 April 2009.

India's largest bank in terms of assets and branch network State Bank of India (SBI) fell 3.29%. SBI chairman O.P. Bhatt on Tuesday 21 April 2009 said interest rate cuts by the Reserve Bank of India were a signal for commercial banks to lower their rates. He said a decision on whether SBI would lower rates would be taken after a meeting of the bank's asset-liability. SBI's advance tax payment jumped 27.64% to Rs 1810 crore in Q4 March 2009 over Q4 March 2008.

India's biggest dedicated housing finance firm by operating income HDFC fell 7.36%.

Realty stocks fell on profit taking after recent surge in prices DLF, Indiabulls Real Estate, Housing Development & Infrastructure, Omaxe fell by between 1.94% to 9.32%.

Metal stocks fell as copper prices fell on the commodities markets concern that the swine flu outbreak will exacerbate global economic slowdown. Steel Authority of India, National Aluminum Company, Hindalco Industries, Sterlite Industries fell by between 1.86% to 7.73%.

Hindustan Zinc declined 5.32% after the company lowered zinc prices and lead prices by 3% and 2.5%, respectively to match global rates.

Copper futures for July 2009 delivery dropped 6.45 cents, or 3.1%, to $1.9855 a pound on the New York Mercantile Exchange's Comex division. Earlier, the price touched $1.9505, the lowest for a most-active contract since 8 April 2009.

Cement stocks fell on profit taking after a recent surge in prices on good Q4 March 2009 results. ACC, Ambuja Cements, Ultratech Cement, Grasim Industries and India Cements fell by between 0.36% to 4.97%.

Cals Refineries clocked the highest volume of 4.56 crore shares on BSE. Unitech (2.3 crore shares), Birla Power Solutions (2.29 crore shares), Jaiprakash Associates (1.59 crore shares) and Reliance Natural Resources (1.38 crore shares) were the other volume toppers in that order.

Reliance Capital clocked the highest turnover of Rs 221.25 crore on BSE. Jaiprakash Associates (Rs 211.20 crore), ICICI Bank (Rs 205.22 crore), Reliance Industries (Rs 190.50 crore) and Reliance Infrastructure (Rs 171.25 crore) were the other turnover toppers in that order.