Sensex sheds 3.5% in two days on poll worries

The key benchmark indices extended losses for the second straight day as profit taking emerged on weak global stocks and on political uncertainty. Banking, metal, IT and capital goods stocks led the fall. Index heavyweight Reliance Industries also edged lower. The Sensex surged past the psychological 12,000 mark at the onset of the trading session but soon fell below that level. The barometer index fell 193.44 points or 1.63%, off close to 345 points from the day's high.

The market was volatile. After an early surge triggered by firm Asian markets, Indian stocks soon pared gains. The market recovered some ground after falling into the red in mid-morning trade. The market weakened later to hit fresh intrday day low in early afternoon trade. The market extended losses later.

Political uncertainty weighed on the bourses given the possibility of a fractured mandate - the month-long parliamentary elections that began on 16 April 2009 will conclude on 13 May 2009. Consumption and investment decisions will be significantly impacted by any signs that the new government is unstable. The counting of votes will take place on 16 May 2009. A party/alliance needs 272 seats in the 543-member parliament to claim power at the Centre.

European shares dropped on Monday, 11 May 2009, led by decline in shares banks, mineral extractors and oil producers, as investors took a breather after pushing shares sharply higher over the past few weeks. Key benchmark indices in France and Germany were down by between 0.61% to 1.49%. But UK's FTSE 100 rose 0.88%.

Asian stocks were mixed. Key benchmark indices in Hong Kong, China and Singapore fell by between 1.74% to 3.22%. Key benchmark indices in South Korea and Taiwan rose by between 0.21% to 0.97%.

Japan's Nikkei average rose 0.2% in a choppy trade after earlier hitting its highest point in six months led by rally in bank shares. But Toyota Motor Corp skidded after it reported a $7.7 billion quarterly loss and forecast another loss for the current fiscal year.

China's consumer prices fell for a third month on food and commodities, aiding government efforts to boost spending in the world's third-biggest economy. Prices dropped 1.5 % in April 2009 from a year earlier, after falling 1.2% in March 2009, the statistics bureau said today.

Trading in US index futures showed the Dow could fall 79 points at the opening bell on Monday, 11 May 2009. The US markets capped another strong week with a triple-digit rally on Friday 8 May 2009 as Wall Street breathed a sigh of relief after the Stress-Test results and banks soared. The Dow Jones Industrial Average was up 164.80 points, or 2%, to 8,574.65. The S&P 500 Index gained 21.84 points, or 2.4%, to 929.23, and the Nasdaq Composite rose 22.76 points, or 1.3%, to 1,739.

Payrolls in the US shrank in April 2009 by the least in six months as the worst recession in half a century started to ease and the federal government stepped up hiring for the country's next census. Payrolls fell by 539,000, fewer than economists forecast, after a 699,000 loss in March 2009, Labor Department figures showed in Washington. Still, the unemployment rate jumped to 8.9%, the highest level since 1983.

The Federal Reserve stress result announced on Thursday 7 May 2009 determined that 10 US banks need to raise a total of $74.6 billion in capital, a finding that Chairman Ben S. Bernanke said should reassure investors about the soundness of the financial system.

The results showed that losses at the banks under more adverse economic conditions than most economists anticipate could total $599.2 billion over two years. Mortgage losses present the biggest part of the risk, at $185.5 billion. Trading accounts were the second-largest vulnerability, with potential losses of $99.3 billion. The conclusion of the unprecedented probe of the health of the largest 19 lenders opens an exit for some of the firms from a tense partnership between Wall Street and the government. Others will have six months to fill their capital shortfalls and may be forced to accept expanded federal ownership that could prompt changes in their management.

Back home, a recovery in the Indian economy triggered a solid rally on the domestic bourses recently. The rally was also a part of a sharp surge in global equities triggered by hopes the worst of the global economic recession may be over. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex jumped 3,716.03 points or 45.53% to 11,876.43 on Friday, 8 May 2009.

Foreign institutional investors (FIIs) are in an aggressive buying mode. FIIs bought shares worth a net Rs 1240.60 crore on Friday, 8 May 2009 FII inflow in May 2009 totaled Rs 4,510.20 crore (till 8 May 2009). FII inflow in calendar year 2009 totaled Rs 5,223 crore (till 8 May 2009).

Emerging-market equity funds saw inflows of $4 billion in the week ended 6 May 2009, the largest weekly inflow since early December 2008 and the eighth largest on record, Merrill Lynch said Friday, 8 May 2009. Buying of exchange-traded funds was mostly responsible, but investing in funds that take long-only positions also saw strong inflows, Merrill said. Long-only funds represent one-way bets from investors ready to embrace more risk.

Brazil, in particular, saw very large flows, garnering its second-largest weekly inflows on record, while China, Taiwan, India and Russia also saw big gains. Merrill's data show the pace of inflows into emerging-market funds has been strong and accelerating, totaling $14 billion over the past seven weeks.

The BSE 30-share Sensex lost 193.44 points or 1.63% to 11,682.99. The Sensex rose 150.17 points at the day's high of 12,026.60 in early trade. At the day's low of 11,621.30 Sensex fell 255.13 points in mid-afternoon trade.

The S&P CNX Nifty was down 66.10 points or 1.83% to 3,554.60. Nifty May 2009 futures were at 3,550, at a discount of 4.60 points as compared to the spot closing of 3,554.60. Turnover in NSE's futures & options (F&O) segment was Rs 45,810.47 crore, much lower than Rs 56,236.37 crore on Friday, 8 May 2009.

The barometer index BSE Sensex has lost 433.95 points or 3.58% in the past two trading sessions from its close of 12,116.94 on 7 May 2009. From a recent high of 12,134.75 on 4 May 2009, the Sensex has lost 451.76 points or 3.72%. Yet, the Sensex is up 2,035.68 points or 21.1% in calendar year 2009.

Coming back to today's trade, the market breadth, indicating the overall health of the market, turned weak from a strong breadth earlier the day. On BSE, 938 shares rose as compared with 1,596 that fell. A total of 57 shares remained unchanged.

BSE clocked a turnover of Rs 4,348 crore, lower than Rs 6,596.56 crore on Friday, 8 May 2009.

The BSE Mid-Cap index fell 1.56%. It outperformed the Sensex. The BSE Small-Cap index fell 2.15%. It underperformed the Sensex.

The BSE Realty index (down 5.19%), the BSE Consumer Durables index (down 2.59%), the BSE Capital Goods index (down 2.48%), the BSE Power index (down 1.88%), the BSE TECk index (down 1.77%), the BSE Metal index (down 1.72%), the BSE Oil & Gas index (down 1.65%) underperfomed the Sensex.

The BSE Auto index (down 0.55%), the BSE Bankex (down 0.75%), the BSE IT index (down 1.05%), the BSE Healthcare index (down 1.06%), the BSE FMCG index (down 1.09%), the BSE PSU index (down 1.63%) outperformed the Sensex.

From the 30 share Sensex pack, 24 stocks fell and rest gained.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 1.98% to Rs 1,859.35, off the day's high of Rs 1,923, on profit taking after a recent sharp surge. Analysts expect strong growth in bottom line in coming quarters from sale of gas which it started pumping last month from its deep-sea field off the east coast.

Ratnagiri Gas & Power, which supplies electricity to the western Indian state of Maharashtra, on Friday, 8 May 2009, agreed to buy natural gas from an offshore field operated by Reliance Industries.

Outsourcing focussed IT stocks fell for the fourth straight day on US government plans to scrap tax incentives that encourage American firms to ship jobs overseas. India's second largest software services exporter by sales Infosys fell 0.45% even as its American depository receipt (ADR) gained 0.55% on Friday, 8 May 2009.

India's largest software services exporter by sales TCS fell 2.33%. India's third largest software services exporter by sales Wipro fell 1.58% even as its ADR rose 1.86% on Friday.

Analysts, however, feel that US government's plan to scrap tax incentives that encourages American firms to ship jobs overseas is unlikely to dent business for Indian outsourcers. On 4 May 2009, US president Barack Obama announced plans to reduce tax breaks for US-based multinationals shipping jobs to places like India. Instead, the tax incentives would now go to those creating jobs inside the US, in places like the Buffalo city, New York.

Currently, US businesses that invest overseas can take an immediate tax deduction for expenses supporting their overseas investments. They can also defer the payment of US taxes on the profits they make from such investments. But, now the Obama Administration wants to ensure that companies do not receive deductions for expenses supporting their offshore investments until they pay tax on their offshore profits. This is intended to disincentivise US companies from retaining profits abroad.

Infosys said the proposal, if implemented, was unlikely to reverse the outsourcing of a gamut of services by US firms to Indian companies. "The current proposal, as we understand, is to close corporate tax loopholes on US multinational corporations and crack down on their overseas tax havens," the company said in a statement. "We do not believe that it has anything to do with IT outsourcing done by US corporations.", Infosys said.

Metal stocks fell after metal prices retreated on the London Metal Exchange. Sterlite Industries, Tata Steel, Hindalco Industries, Steel Authority of India, fell by between 1.28% to 4.12%.

Copper prices fell for a third day on in a row on the London Metal Exchange (LME) on Monday, 11 May 2009, on speculation that Chinese import demand may slow.

Capital goods stocks fell on profit taking after a recent sharp surge. Larsen & Toubro, ABB, BEML, Crompton Greaves, Bharat Heavy Electricals, Praj Industries, Punj Lloyd fell by between 1.37% to 4.36%.

Rate sensitive realty stocks fell on profit taking after a recent sharp surge in prices. Unitech, Indiabulls Real Estate, Phoenix Mills, Akruti City fell by between 1.66% to 8.9%.

DLF fell 5.1% on reports the promoters are close to finalising a deal worth around Rs 3000 crore with some foreign and domestic institutional investors to offload a little over 7% stake.

Bank stocks pared gains after a firm start triggered by strong Q4 March 2009 results by State Bank of India (SBI), India's biggest bank in terms of branch network. SBI was down 4.86% to Rs 1,260.70, off the day's high of Rs 1,389. State Bank of India reported a forecast-beating 45.6% rise in net profit to Rs 2742.31 crore on a 34.6% increase in operating income to Rs 22060.61 crore in Q4 March 2009 over Q4 March 2008. Profit was boosted after gains from trading trebled and loan demand soared as borrowers scrambled for funds in a slowing economy. The bank announced he result on Saturday 9 May 2009.

India's largest private sector bank by net profit ICICI Bank was up 0.55% to Rs 523.45. But the stock came off the day's high of Rs 548. Its American depository receipt (ADR) rose 4.96% on Friday 8 May 2009.

India's second largest private sector bank by operating income HDFC Bank rose 0.11% to Rs 1,144.80. But the stock came off the day's high of Rs 1,200. Its ADR rose 3.43% on Friday, 8 May 2009.

India's biggest dedicated housing finance firm by operating income HDFC fell 1.7%.

India's largest FMCG major by sales Hindustan Unilever fell 2.94% as it reported a lower-than-expected rise of 3.68% in net profit to Rs 394.99 crore on a 6% rise in sales to Rs 3988.33 crore in Q4 March 2009 over Q4 March 2008. Profit fell short of expectations mainly due to provision for retirements and restructuring costs. It announced the result before market hours today. It was the major loser from the Sensex pack.

Other FMCG stocks, United Spirits, Nestle India, Britannia Industries, Tata Tea and ITC, fell by between 0.45% to 2.49%.

Telecom stocks fell on reports the telecom regulator has notified mobile number portability (MNP) from September 2009. Bharti Airtel, Reliance Communications and Idea Cellular fell, by between 2.57% to 4.64%, on fears that mobile users will hop service providers at a faster rate when MNP is introduced. Once MNP comes in force, it could force GSM operators to increase capital expenditure to improve service quality in the top-tier telecom zones in a bid to retain existing users.

Auto stocks fell on profit taking after a recent surge in prices. Bajaj Auto, Hero Honda Motors and Tata Motors fell by between 0.26% to 4.28%. But India's largest tractor maker by sales Mahindra & Mahindra rose 1.57%.

Ashok Leyland fell 5.48% after the company reported a 69.33% decline in commercial vehicles sales to 1,750 units in April 2009 over April 2008

But India's largest car maker by sales Maruti Suzuki India rose 0.33%. The company said on Saturday, 9 May 2009, it will be launching its premium compact car Ritz on 15 May 2009 in Delhi.

Cals Refineries clocked the highest volume of 3.79 crore shares on BSE. Unitech (2.04 crore shares), Dish TV (1.9 crore shares), Kaashyap Technologies (1.28 crore shares), Ispat Industries (1,24 crore shares) were the other volume toppers in that order.

ICICI Bank clocked the highest turnover of Rs 193.71 crore on BSE. State Bank of India (Rs 182.29 crore), Reliance Industries (Rs 173.79 crore), Tata Steel (Rs 165.76 crore) and Reliance Capital (Rs 152.76 crore) were the other turnover toppers in that order.