Biggest decline in Sensex in seven weeks

Weak global cues weighed on investor sentiment today as the key benchmark indices tumbled in the last one hour of trade recording their steepest drop in seven weeks. Index heavyweight Reliance Industries (RIL) declined sharply. Heavy selling was also witnessed in realty, metal and capital goods stocks. The BSE 30-share Sensex plunged 435.07 points, or 2.91%. The market breadth turned very weak in late trade in contrast to a positive breadth earlier in the day.

Selling by foreign funds in last two days after the recent aggressive buying also dampened sentiment.

The market was volatile. After an early slide triggered by weak global cues, the market cut losses in morning trade. It weakened again later. The market recovered from lower level again later. It extended recovery in early afternoon trade as Chinese stocks surged. The market lost ground once again in afternoon trade on weak European markets. The market cut losses after it slumped to fresh intraday low in mid-afternoon trade. A sell-off gripped the market in the last one hour of trade.

European shares were lower on Wednesday, extending a losing run to four days, with miners in the doldrums. Key benchmark indices in France, Germany and UK were down by between 0.65% to 0.77%.

The British unemployment rate in the three months ending in April 2009 rose to 7.2%, up from 6.5% in the three months to January, the Office for National Statistics reported Wednesday. The number of unemployed totaled 2.26 millions in the three months ending in April, a rise of 232,000 from the previous three-month period and a rise of 605,000 from the same period a year earlier. The seasonally-adjusted number of persons claiming jobless benefits rose 39,300 in May, equal to 4.8% of the workforce, the ONS said. Economists had forecast a 65,000 rise to 4.9% of the workforce.

Asian stocks fell after fluctuating between gains and losses in choppy trade. Key benchmark indices in South Korea, Hong Kong, Singapore and Taiwan were down by between 0.4% to 0.73%.

But Chinese shares rose after President Hu Jintao said Beijing's stimulus is showing results and China was determined to take the lead in emerging from the global economic crisis. The Shanghai Composite Index rose 1.23%.

Japan's Nikkei rose 0.9%. The Bank of Japan (BoJ) said Wednesday that in the coming months, Japan's economy is "likely to show clearer evidence of leveling out over time," according to the central bank's June report of Recent Economic and Financial Developments. The BoJ also reiterated comments made following the monetary policy meeting Tuesday that the nation's economic conditions have "begun to stop worsening."

US index slipped into the red from green. Trading in the US index futures indicated Dow could fall 21 points at the opening bell today, 17 June 2009.

US stocks dropped on Tuesday, 16 June 2009 after Best Buy Co., the world's largest electronics retailer, posted disappointing sales. The Dow declined 107.46 points, or 1.3%, to 8,504.67. The S&P 500 index fell 11.75 points, or 1.3%, to 911.97, while the Nasdaq Composite Index fell 20.20 points, or 1.1%, to 1,796.18.

In economic data, a report showed that the US housing starts surged 17.2% in May 2009 after sliding 12.9% in April 2009. In other data, producer prices rose at a slower pace at 0.2% while core prices dropped 0.1%. Industrial production fell 1.1% in May 2009, after a 0.7% drop in April 2009.

In an interview with Bloomberg News, US President Barack Obama predicted a 10% unemployment rate even as he said the engines of an economic recovery have begun to turn. Obama is due to unveil his plan to revamp financial market regulation later today, 17 June 2009.

Back home, the data on advance tax payments reported on Monday for the first quarter of the financial year indicated the manufacturing sector may take more time to recover, while the financial sector remains buoyant. Indian companies paid around Rs 23,000 croe in advance tax for the first quarter of FY10, almost flat at the previous year's receipts. Among manufacturing sector companies, Reliance Industries' first installment of advance tax payments fell by 7.65 % to Rs 314 crore. Similarly, almost all Tata group companies, barring Tata Power, have paid lower advance tax.

Engineering major Larsen and Toubro has seen a 15.79 % rise, while Mahindra and Mahindra's advance tax payment went up by 25%.Engineering major Larsen and Toubro has seen a 15.79 % rise, while Mahindra and Mahindra's advance tax payment went up by 25%.The banking sector has put up a healthy show. State Bank of India is the highest taxpayer during the first quarter of 2009-10 with a 61.09% jump to Rs 1,068 crore. HDFC Bank has paid 16.28% higher advance tax to Rs 250 crore.

Even smaller banks such as IndusInd Bank (122 % increase to Rs 20 crore), Dena Bank (75 % rise to Rs 35 crore) and Yes Bank (42 % increase to Rs 27 crore) have followed the trend.

ACC posted 11% rise in advance tax to Rs 600 crore. India Oil Corporation paid advance tax of Rs 1.30 crore, HPCL paid advance tax of Rs 0.15 crore and BPCL paid advance tax of Rs 0.4 crore advance tax in Q1 June 2009. These three PSU OMC had paid nil advance tax in Q1 June 2008.

Foreign funds have sold shares in last two days after aggressively buying in the past three months or so. Foreign funds sold shares totaling Rs 943.20 crore on Monday and Tuesday.

FII inflow in June 2009 totaled Rs 5189 crore (till 16 June 2009). FII inflow in calendar year 2009 totaled Rs 26,508.40 crore (till 16 June 2009).

Finance Minister Pranab Mukherjee would present the Union Budget on 6 July 2009. The Railway Budget will be presented on 3 July 2009 and the Economic Survey would be presented on 2 July 2009.

Interest rates in India are falling thanks to ample liquidity in the banking system, low headline inflation and a loose monetary policy stance of the Reserve Bank of India. However, inflation may rise if oil and metal prices which have risen sharply in 2009 continue to rally.

As per recent reports, the government may cut interest rates on small savings schemes which currently yields 8% by 50 to 75 basis ponits. A rate cut in the small savings scheme rate will allow banks to bring down their lending rates.

Finance minister Pranab Mukherjee last Wednesday said banks should provide credit at reasonable rates to spur growth, saying cuts in official rates by the Reserve Bank of India had not been passed on.

Indian stocks have soared in the past three months on a view that ample global liquidity and a return of risk appetite will help India Inc help raise funds for expansion which in turn will boost corporate profits. India Inc has already raised almost Rs 5,000 crore from three qualified institutional placements (QIPs) so far in 2009 and announced plans to raise another Rs 20,000 crore.

Many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will provide thrust on the infrastructure sector and push economic reforms to boost growth. Citigroup expects the economy to grow by 6.8% in 2009/10 and 7.8% in 2010/11.

A comfortable victory last month for the Congress-led United Progressive Alliance (UPA) government in elections for the 15th Lok Sabha has raised hopes for economic reforms. Reforms virtually came to a halt in the past five years of the Congress-led alliance government at the centre, when the Communists provided support to the government from outside for a large part of the five-year term. Left parties are opposed to economic reforms.

Investor expectations from the new government are high. Investors expect financial sector reforms such as increase in the cap on foreign direct investment in insurance sector to 49%, from 26% at present.

Unveiling the agenda of the government, President Pratibha Patil in her speech addressed to a joint session of both houses early this month had indicated government's intension to divest stake in state-run firms. The government, however, intends to retain control over state-run firms and will continue to hold at least 51% stake. But some investors are concerned that the government's two key allies viz. the DMK and Trinamool Congress (TC) may oppose economic reforms.

Finance minister Pranab Mukherjee recently said there was a need to find ways to bring the economy back to higher growth path without increasing the fiscal deficit. He said the government would focus on infrastructure, agriculture and employment generating sectors to protect growth and jobs.

But rising metal prices is a cause of concerns for manufacturing companies as their raw material costs may shoot up.

The government's oil subsidy bill may remain high and it could continue to put pressure on the already high fiscal deficit if the government does not resort to decontrol of oil prices. However, the surging rupee against the dollar may mitigate the impact to some extent as India is a major importer of crude.

Prime Minister Manmohan Singh recently said India will achieve an economic growth of at least 7% this fiscal and promised more resources for areas like infrastructure and public services. He said India will be able a growth rate of 8-9%, even when the world grows at a lower rate.

The Prime Minister said the reason behind his optimism was that India's savings rate, which determines the money that can be deployed for development projects, was still high at 35% of gross domestic product (GDP).

The BSE 30-share Sensex was down 435.07 points, or 2.91%, to 14,522.84 its steepest drop since 28 April 2009. The Sensex rose 38.48 points at the day's high of 14,996.39 in afternoon trade. At the day's low of 14,447.02, Sensex fell 510.89 points in late trade.

The S&P CNX Nifty was down 161.65 points or 3.58% to 4,356.15, its steep slide since 30 March 2009. Nifty June 2009 futures were at 4340, at a discount of 16.15 points as compared to the spot closing of 4356.15. Turnover in NSE's futures & options (F&O) segment surged to Rs 79,470.14 crore from Rs 68,737.85 crore on Tuesday, 16 June 2009.

BSE clocked a turnover of Rs 6,932 crore higher than Rs 6,892.33 crore on Tuesday, 16 June 2009.

The Sensex has jumped 4,875.53 points or 50.53% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,362.44 points or 77.96%

Coming back to today's trade, the market breadth turned weak in late trade from a positive breadth earlier in the day. On BSE, 664 shares rose as compared with 1,992 that declined. A total of 79 shares remained unchanged. From the 30 share Sensex pack 29 stocks fell and one rose.

The BSE Mid-Cap index fell 3.92% and the BSE Small-Cap index slipped 3.74%. Both the indices underperformed the Sensex.

All the sectoral indices on BSE fell. The BSE Realty index (down 5.9%), the BSE Metal index (down 5.63%), the BSE PSU index (down 4.29%), the BSE Oil & Gas index (down 4.26%), the BSE Capital Goods index (down 3.95%), the BSE Power index (down 3.32%), the BSE Consumer Durables index (down 3.24%), underperfomed the Sensex.

The BSE Healthcare index (down 1.66%), %), the BSE IT index (down 1.96%), the BSE FMCG index (down 2.06%), the BSE Bankex (down 2.19%), the BSE TECk index (down 2.49%), the BSE Auto index (down 2.49%) outperformed the Sensex

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 4.24% to Rs 2,050.80 extending past two days' fall triggered by an unfavourable court ruling on gas sales. The Bombay High Court has directed RIL and Reliance Natural Resources (RNRL) to sign gas supply deal.

The court has asked RIL to supply 28 million metric standard cubic meters per day (mmscmd) of gas for 17 years at $2.34 per million metric British thermal unit (mmbtu) to RRNL. This is much lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 million per metric British thermal unit. The lower gas sale price will result in lower-than-expected earnings from gas sales for RIL. Shares of RNRL fell 5.52%.

RIL's advance tax payment fell 7.65% to Rs 1,068 crore in Q1 June 2009 over Q1 June 2008.

In January 2009, the Bombay High Court had issued an interim order saying Reliance Industries was allowed to sell gas at $4.2 per million British thermal units from its KG-D6 block in the Krishna Godavari basin off eastern India, pending a final judgment.

Oil stocks fell as the dollar's bounce from its lows and persistent concerns about economic recovery helped pull oil back from its earlier peak above $72 a barrel. Cairn India fell 2.53%. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) fell 5.36% On the New York Mercantile Exchange, July crude settled down 15 cents, or 0.21 percent, at $70.47 a barrel on Tuesday. The fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

PSU OMCs fell on reports the government is unlikely to raise auto fuel prices immediately. A hike in fuel prices will be considered only when the average crude price reaches $70 a barrel in a quarter. BPCL, HPCL and Indian Oil Corporation fell by between 1.73% to 5.12%. State-run oil marketing firms suffer revenue loss on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

Realty stocks fell on profit taking after the recent surge triggered by expectations that stability at the Centre will attract more money from foreign investors into the sector which in turn will boost growth. Omaxe, Indiabulls Real Estate, DLF, Unitech fell by between 3.43% to 7.44%.

Unitech and Indiabulls Real Estate, have already raised funds through qualified institutional placements (QIPs). A number of other realty funds have decided to raised funds by way of QIPs. The promoters of DLF last month sold a 10% stake in the secondary equity markets.

Metal stocks fell after a gauge of six metals traded on the London Metal Exchange dipped for a third day in a row on Tuesday, the longest losing stretch since February 2009. National Aluminum Company, Sterlite Industries, Hindalco Industries, Jindal Steel, Steel Authority of India fell by between 1.6% to 5.25%.

India's largest steel maker by sales Tata Steel fell 7.52%. Its advance tax payment fell 36.39% to Rs 230 crore in Q1 June 2009 over Q1 June 2008.

Capital goods stocks fell on profit taking after a recent sharp surge triggered by hopes the government may boost spending on the infrastructure sector. Siemens, Thermax, Bharat Heavy Electricals, ABB, Punj Lloyd, fell by between 1.71% to 5.49%.

India's largest engineering and construction firm by sales Larsen & Toubro fell 3.93% even as its advance tax payment rose 15.79% to Rs 110 crore in Q1 June 2009 over Q1 June 2008.

Healthcare stocks fell on profit taking after recent surge triggered by hopes the government will give primary importance to healthcare segment and health of citizens. Biocon, Lupin, Dr Reddy's Laboratories, Ranbaxy's Laboratories, Piramal HealthCare, Pfizer fell by between 0.01% to 7.62%.

Bank stocks fell as higher bond yields will result in diminution in valuation of banks' bond portfolio. India's largest private sector bank by net profit ICICI Bank fell 1.48%. ICICI Bank cut prime lending rate by 50 basis points to 15.75% with effect from Friday, 5 June 2009. All the existing floating rate customers to benefit from the cut. ICICI Bank's advance tax payment rose 7.64% to Rs 366 crore in Q1 June 2009 over Q1 June 2008.

India's second largest private sector bank by operating income HDFC Bank fell 1.76%. Its ADR rose 0.66% on Tuesday. HDFC Bank's advance tax payment rose 16.28% to Rs 250 crore in Q1 June 2009 over Q1 June 2008.

India's biggest bank in terms of branch network State Bank of India (SBI) fell 2.96%. SBI's advance tax payment rose 61.09% to Rs 1,068 crore in Q1 June 2009 over Q1 June 2008. SBI cut deposit rates across all tenors by 25 basis points with effect from 15 June 2009.

SBI chairman O.P. Bhatt recently said SBI's first priority is to absorb its associate banks. It is also looking to grow by buying domestic banks.

India's biggest dedicated housing finance firm by operating income HDFC fell 1.14%. HDFC plans to raise up to Rs 4000 crore after its board recently approved a proposal to raise Rs 4000 crore by selling bonds and warrants. The maximum dilution on conversion of all warrants to shares would be 3.5% of the expanded capital.

Bond yields edged up on Wednesday as traders priced in a quicker economic recovery and ahead of a Rs 15000 crore bond auction later this week. At 10:23 IST, the yield on the most traded 6.07% bond maturing in 2014 was at 6.69%, above its previous close of 6.67%. There were no trades so far in the benchmark 10-year bond. Bond yields and bond prices are inversely related .

Auto stocks fell on profit taking after a recent surge triggered by improved sales in the month of May 2009. India's largest car maker by sales Maruti Suzuki India fell 1.21%.

India's largest tractor maker by sales Mahindra & Mahindra fell 3.27%. Its advance tax payment rose 25% to Rs 17.5 crore in Q1 June 2009 over Q1 June 2008.

India's largest commercial vehicle maker by sales Tata Motors fell 7.36%. Its advance tax payment remained flat at Rs 30 crore in Q1 June 2009 over Q1 June 2008.

FMCG stocks fell on profit taking after recent jump triggered by expectations the government to continue with its rural focus. FMCG firms derive substantial revenue from the rural market. Marico, Dabur India, United spirits, ITC, Hindustan Unilever fell by between 0.68% to 8.43%.

Cement stocks fell on profit taking after a recent surge triggered on hopes government may boost spending on the infrastructure sector to boost economic growth. ACC, Ultratech Cements, Ambuja Cements, India Cements, Grasim Industries fell by between 0.24% to 7.17%.

Reliance Natural Resources clocked the highest volume of 3.2 crore shares on BSE. Cals Refineries (2.94 crore shares), Unitech (2.7 crore shares), Satyam Computer Services (2.37 crore shares) and IFCI (1.98 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 350.91 crore on BSE. Reliance Natural Resources (Rs 304.84 crore), Reliance Infrastructure (Rs 259.06 crore), Unitech (Rs 226.85 crore) and Reliance Capital (Rs 221.94 crore) were the other turnover toppers in that order.