Sensex down 7% in nine trading sessions as foreign funds sell

The barometer index Sensex ended flat and the 50-unit S&P CNX Nifty clocked small gains on a day that saw wild intraday swings. The BSE was lost 2.21 points or 0.02%, up close to 310 points from the day's low and off close to 70 points from the day's high. Index heavyweight Reliance Industries and ONGC gained. Volatility ruled the roost as traders rolled over positions in the futures & options segments to July 2009 series from June 2009 series ahead of expiry of June 2009 contracts on Thursday, 25 June 2009.

After an initial sell-off triggered by weak global stocks, the market soon cut losses as index heavyweight Reliance Industries (RIL) rose. But the intraday rebound proved short-lived as the market weakened again in mid-morning trade. Selling by foreign funds also weighed on investor sentiment. Possibility of rollback in expansionary policies by the central bank further dampened the sentiment after a jump in consumer price inflation.

The market rebounded from lower level once again in early afternoon trade as Chinese stocks cut losses. The recovery gathered steam after US index futures reversed losses. Volatility was immense in mid-afternoon trade. The Sensex moved into the green from red for a brief period before the barometer index hit a fresh intraday high in choppy late trade. The market slipped into the red again later.

The market may remain volatile this week ahead of the expiry of June 2009 futures and options (F&O) contracts on Thursday.

European shares rose after fluctuating between gains and losses. Key benchmark indices in France, Germany and UK were up by between 0.08% to 0.62%.

As the preliminary data, Markit's purchasing managers index in the euro zone rose to 44.4 in June, up from 44.0 in May. A reading of less than 50 indicates a contraction in activity, while a figure of more than 50 signals expansion. Economists had forecast a rise to 45.5. The euro-zone services PMI reading fell to 44.5 from 44.8 in May, while the June manufacturing PMI rose to 42.4 from 40.7 in May. The euro-zone manufacturing output index rose to 44.2 in June from 42.6 the previous month.

Asian stocks fell today, as concern an economic recovery will be delayed dragged commodity prices lower and spurred demand for the yen as a safe haven. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 1.8% to 2.82%. China's Shanghai Composite Index fell 0.12% but well off day's moratorium.

World stocks were also cautious before a two-day meeting of the Federal Open Market Committee that begins later today, 23 June 2009. Although the Federal Reserve is expected to keep interest rates unchanged, investors will examine the post-meeting statement for clues as to how long the interest rates will remain at the current near zero. Investors also want to know whether the Fed policymakers will say the US economy is recovering or still in need of aid.

But US index futures reversed early losses. Trading in the US index futures indicated Dow could rise 27 points at the opening bell today, 23 June 2009.

Wall Street suffered its worst day in two months on Monday, 22 June 2009 as markets closed deep into the red. Financials and commodities led the decline. The Dow lost 200.72 points, or 2.4%, to 8,339.01. The S&P 500 fell below the psychological 900 level, dropping .28.19 points, or 3.1 %, to 893.04. The Nasdaq Composite Index fell 61.28 points, or 3.4%, to 1,766.19.

US stocks have lost ground several times in the last month on fears that rising interest rates and inflation would upend an economic recovery.

The World Bank on Monday predicted that the global economy will shrink 2.9% this year, a deeper fall than the 1.7% contraction it predicted in March 2009.

But the good news for India is that the World Bank has raised India's growth forecast for 2009 to 5.1% from earlier projection of 4%. It has projected an 8% growth for India in 2010 which will make it the fastest growing economy in the world in 2010, overtaking China's expected 7.7% growth relative to the robust performance prior to the current crisis.

On the flip side, the latest data showed the Consumer Price Index (CPI), inflation based on rural and agricultural workers rose to 10.2% in May 2009. The higher consumer inflation may cause Reserve Bank of India to reverse the expansionary monetary policy and might even curb the central government's spending plans which may cause hindrance in efforts to boost the slowing economy.

India's fiscal deficit in April 2009 was at Rs 54,158 crore ($11 billion), or 16.3 % of the full-year target, the government said in a statement on Tuesday.

Meanwhile, the south-west monsoon, which had been stalled since 7 June 2009, revived on 21 June 2009 and is likely to cover more parts of Maharashtra, Karnataka and Andhra Pradesh, the weather department said on Monday morning. The revived monsoon may cover Maharashtra and Madhya Pradesh by first week of July 2009.

A weak initial phase of the monsoon has stoked fears of fall in agricultural production and a surge in prices of essential commodities which may spur inflation. The country's monsoon rainfall during 1 June 2009 to 17 June 2009 was at 39.5 millimeter, 45% below the normal, the India Meteorological Department said on 18 June 2009. A weak monsoon in this season may cast its shadow on a likely recovery in India's economy. Rural demand has been strong in recent years due to good monsoon in the past few years.

The next major trigger for the market is the Union Budget 2009-2010. 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 the year ending March 2010 (FY 2010) and 7.8% in the year ending March 2011 (FY 2011).

Finance Minister Pranab Mukherjee would present the 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.

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.

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.

But foreign funds sold shares recently after aggressively buying during the past three months or so. Foreign funds sold shares totaling Rs 1,908.90 crore in six trading sessions from 15 June 2009 to 22 June 2009. FII inflow in June 2009 totaled Rs 4,223.40 crore (till 22 June 2009). FII inflow in calendar year 2009 totaled Rs 25,542.80 crore (till 22 June 2009).

Meanwhile, the data on advance tax payments reported last week for the first quarter of the financial year indicated banks and fast moving consumer goods (FMCG) firms have done well in the first quarter, but realty companies continue to perform badly. Automobile sector have also paid higher taxes this year, show the revenue department's initial estimates. Indian companies paid around Rs 23,000 croe in advance tax for the first quarter of FY 2010, almost flat at the previous year's receipts.

The BSE 30-share Sensex was down 2.21 points or 0.02% to 14,324.01. The Sensex rose 67.97 points at the day's high of 14,394.19 in late trade. At the day's low of 14,016.95, the Sensex fell 309.27 points in early trade.

The S&P CNX Nifty was up 11.75 points or 0.28% to 4,247. Nifty June 2009 futures were at 4230.30, at a discount of 16.70 points as compared to the spot closing of 4247. Turnover in NSE's futures & options (F&O) segment surged to Rs 85,073.05 crore from Rs 71,601.05 crore on Monday, 22 June 2009.

The market breadth was weak. On BSE, 1,118 shares rose as compared with 1,454 shares that declined. A total of 69 shares remained unchanged.

From the 30 share Sensex pack 16 stocks fell and rest rose.

BSE clocked a turnover of Rs 5,664 crore, higher than Rs 5,143.85 crore on Monday, 22 June 2009.

From a multi-month closing high of 15,466.81 on 10 June 2009, the Sensex has lost 1,142.80 points or 7.38% in the past nine trading sessions. The barometer index is up 4,676.70 points or 48.47% in calendar year 2009 as on 23 June 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 6,163.61 points or 75.53% as on 23 June 2009.

Coming back to today's trade, the BSE Mid-Cap index was up 0.24%, outperforming the Sensex. The BSE Small-Cap index was down 0.13% and underperformed the Sensex.

The BSE Oil & Gas index (up 2.62%), the BSE PSU index (up 2.11%), the BSE Power index (up 1.31%), outperformed the Sensex.

The BSE Bankex (down 2.14%), the BSE Metal index (down 1.52%), the BSE Consumer Durables index (down 1.44%), the BSE FMCG index (down 1.35%), the BSE Realty index (down 0.88%), the BSE IT index (down 0.67%), the BSE Auto index (down 0.55%), the BSE TECk index (down 0.51%), the BSE Capital Goods index ( down 0.37%), the BSE Healthcare index (down 0.23%), underperfomed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) rose 3.26% to Rs 2,016.05 after NTPC Chairman R S Sharma said the company is open to buying Reliance Industries' gas at $4.2 per million metric British thermal unit (mmBtu) except for the plants under dispute in the court. The RIL stock came off the day's low of Rs 1,901.10.

The RIL stock had tumbled in the past few days hit 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.

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.

India's largest oil exploration firm by sales ONGC rose 3.3% on reports it has struck oil and gas in three new blocks. One of these blocks, off the eastern coast of India, could prove as rich as the Reliance Industries' D-6 block.

ONGC's advance tax fell 33% to Rs 890.50 crore in Q1 June 2009 over Q1 June 2008.

India's largest thermal power producer by sales NTPC rose 2.54% on acquiring a 44.6% stake in Transformers & Electricals Kerala for Rs 31.34 crore from the Kerala state government. Transformers and Electricals, Kerala makes and repairs heavy duty transformers.

India's largest electric equipment maker by sales Bharat Heavy Electricals rose 1.94% after the heavy industries minister Vilasrao Deshmukh recently said the centre will consider selling 10% stake in the company.

FMCG stocks fell on profit taking after recent gains triggered by hopes the government will focus on the rural sector in the forthcoming budget. FMCG firms derive substantial revenue from the rural markets. ITC, Tata Tea, Marico, United Breweries, Nestle India fell by between 0.41% to 3.11%

But India's largest FMCG maker by sales Hindustan Unilever rose 0.42% on reports company has moved away from focusing on fewer bigger brands, and is deploying its entire portfolio in the marketplace to regain lost market share and drive growth.

India's largest commercial vehicle maker by sales Tata Motors rose 2.7% on reports it plans to introduce Jaguar and Land Rover, or JLR, brands to small towns in India and is likely to set up a broad dealer network for selling premium cars.

Metal stocks fell after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 5.39% on Monday, 22 June 2009. Hindustan Zinc, Sterlite Industries, Tata Steel, Hindalco Industries, Jindal Steel, National aluminum Company fell by between 0.53% to 5.69%.

Bank stocks fell after American depository receipts (ADR) fell overnight. India's second largest private sector bank by operating income HDFC Bank fell 3.55% as its American depository receipt (ADR) fell 7.04% on Monday. HDFC Bank's advance tax payment rose 16.28% to Rs 250 crore in Q1 June 2009 over Q1 June 2008.

India's biggest dedicated housing finance firm by operating income Housing Development Finance Corporation (HDFC) rose 2.34%.

HDFC and HDFC Bank recently reduced interest rates on term deposits by up to 0.25%.

India's largest private sector bank by net profit ICICI Bank fell 4.05% as its ADR fell 5.46% on Monday. ICICI Bank's advance tax payment rose 7.64% to Rs 366 crore in Q1 June 2009 over Q1 June 2008. ICICI Bank is reportedly taking cost control measures that could save the bank up to Rs 1300 crore in the year to March 2010.

But, India's biggest bank in terms of branch network State Bank of India (SBI) rose 0.8%. The boards of State Bank of India and its associate State Bank of Indore have approved an acquisition of the latter by the former. State Bank of India has already absorbed State Bank of Saurashtra and has said it is progressively looking to merge its other associate banks.

SBI aims to keep interest margins steady and has no plans for any rights issue or share sale in any unit, Chairman O.P. Bhatt said on Friday 19 June 2009.

Rate sensitive realty stocks fell on profit taking after a 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. DLF, Indiabulls Real Estate, Unitech, Akruti City fell by between 0.01% to 3.25%.

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.

Some healthcare stocks rose on hopes the government will give primary importance to healthcare segment and health of citizens. Ranbaxy's Laboratories, Dr Reddy's Laboratories, Lupin, Pfizer, rose by between 0.92% to 1.5%.

Construction and cement stocks rose on hopes the government may boost spending on the infrastructure sector. IVRCL Infrastructure & Projects, Gammon Infrastructure, Hindustan Construction Company rose by between 0.69% to 2.34%.

India's largest engineering and construction firm by sales Larsen & Toubro fell 1.62%. Its advance tax payment rose 15.79% to Rs 110 crore in Q1 June 2009 over Q1 June 2008.

Among cement shares, ACC, Grasim Industries, India Cements, Ultratech Cements rose by between 0.23% to 4.13%.

IT stocks fell on renewed economic worries as World Bank on Monday said the US economy will shrink 3% in 2009. US is the biggest market for the IT firms. India's second largest software firm by sales Infosys Technologies fell 1.12% as its American depository receipt (ADR) fell 2.99% on Monday 22 June 2009.

India's largest software services exporter by sales TCS fell 0.96%. TCS's advance tax payment fell 33.33% to Rs 50 crore in Q1 June 2009 over Q1 June 2008. India's third largest software services exporter by sales Wipro fell 0.45% as its ADR fell 6.08% on Monday.

Unitech clocked the highest volume of 2.38 crore shares on BSE. IFCI (2.26 crore shares), Suzlon Energy (2.2 crore shares), Reliance Natural Resources (1.67 crore shares) and Cals Refineries (1.48 crore shares were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 363.94 crore on BSE. Suzlon Energy (Rs 236.32 crore), Reliance Capital (Rs 230.34 crore), Unitech (Rs 183.72 crore) and ICICI Bank (Rs 172.90 crore) were the other turnover toppers in that order.