Below-normal rains rattle equities rains

The key benchmark indices fell for the second day in a row as weak global stocks and below normal rains weighed on investor sentiment. Strong response to the initial public offer (IPO) of NHPC raised concerns it will suck out liquidity from the secondary market. Power, auto, realty and banking stocks were the major losers. Index heavyweight Reliance Industries (RIL) slumped. The BSE 30-share Sensex was down 353.79 points or 2.28%. The market breadth, indicating the overall health of the market, was weak.

Foreign funds today, 7 August 2009, dumped stocks worth a net Rs 1,050.81 crore, provisional data released by the stock exchanges after trading hours showed. Domestic funds bought stocks worth a net Rs 414.43 crore.

The Sensex has lost 743.59 points or 4.67% in the past two trading sessions. The barometer index has shed 763.99 points or 4.79% in four trading sessions form a 14-month closing high of 15,924.23 on Monday, 3 August 2009.

The market was volatile today, 7 August 2009. Media reports that the IPO of state-run NHPC was fully bid within minutes of opening triggered a recovery on the bourses after an early slide triggered by weak global stocks. However, the recovery proved short-lived. The market weakened in morning trade. The market cut losses later. The market weakened again later. It cut losses before tumbling in late trade.

Finance Minister Pranab Mukherjee today said the government and Reserve Bank of India will balance a heavy borrowing plan and ensure adequate funds for the private sector.

The Reserve Bank of India (RBI) will maintain an accommodative monetary stance until the economy shows signs of recovery, a junior finance minister Namo Narain Meena told parliament on Friday, citing last month's policy review report.

The IPO of NHPC, which opened for subscription today, 7 August 2009, was subscribed 3.33 times by 16:00 IST, data on NSE website showed. The IPO received bids for 558.37 crore shares compared to the issue size of 167.7 crore shares. NHPC is planning to raise Rs 6,040 crore at the upper end of the issue price band of Rs 36. The government kickstarts the divestment process by selling shares in NHPC.

NHPC is selling 167.7 crore shares comprising of 5% divestment of stake by the government and infusion of 10% fresh equity. The strong response for the first state-run IPO in 18 months could embolden the government to sell stake in more firms. Steel minister Virbhadra Singh said today that the government has identified two state run steel firms for stake sale and may sell 20% stake in these firms.

Investors continue to bet that the government will undertake economic reforms which may boost economic growth and corporate earnings. The Q1 June 2009 results of India Inc were encouraging, with lower costs helping bottomline growth. The combined net profit of 3,091 companies rose 17% to Rs 73712 crore on 5% fall in sales to Rs 722557 crore in Q1 June 2009 over Q1 June 2008.

But, scanty rains remains a cause of concerns for investors. The South West monsoon rains were 64% below normal in the past seven days to 5 August 2009, dipping for the second straight week at a crucial period for oilseeds and sugarcane, and raising concerns of rising food prices. Last week's rainfall was the worst since mid-June, while total rainfall since the start of season on 1 June 2009 was a quarter below average, the India Meteorological Department said on Thursday.

Water level in the main reservoirs was at 36% of capacity in the week to August, crawling up 1 % point in seven days when the country received barely a third of normal rainfall. The June-September rains are the main source of irrigation for farms and are crucial for Asia's third-largest economy as more than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.

Planning commission deputy chairman Montek Singh Ahluwalia on Thursday said rising food prices are a matter of concern, but the country has comfortable food stocks to deal with any difficult situation. The wholesale price index fell 1.58% in the 12 months to 25 July 2009, but food prices are on the rise, government data showed on Thursday.

Heavy purchases by foreign funds has triggered a solid rally on the bourses this year. The Sensex was up 5512.93 points or 57.14% in calendar year 2009 as on 7 August 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex was up 6999.84 points or 85.77% as on 7 August 2009.

Foreign institutional investors' (FIIs) inflow in calendar year 2009 totaled Rs 36,114.20 crore (till 6 August 2009). Foreign funds sold shares worth Rs 246.50 crore on Thursday, 6 August 2009.

European shares were lower in early trade on Friday as investors awaited the influential US non-farm payroll data, with banking shares the biggest losers after RBS posted a first-half loss. The key benchmark indices in France, Germany and UK were down by between 0.57% to 1.14%.

Asian stocks fell for the third time in four days on Friday, 7 August 2009, as lower earnings from Konica Minolta Holdings Inc. and DBS Group Holdings fueled concern an equity rally in the past month had outpaced prospects for corporate profits. Key benchmark indices in China, Hong Kong and Singapore fell by between 2% to 2.85%. But key benchmark indices in Japan and South Korea rose by between 0.23% to 0.7%. The Taiwan stock market was closed for a holiday.

Trading in US index futures indicated Dow could fall 22 points at the opening bell today, 7 August 2009.

US stocks ended lower for a second straight session on Thursday, 6 July 2009 as tech stocks dragged after tepid outlook from Cisco. Investors also remained jittery ahead of Friday's jobs report. The Dow Jones Industrial Average lost 24.71 points, or 0.3%, to 9,256.26. The S&P 500 index fell 5.64 points, or 0.6%, to 997.08. The Nasdaq Composite Index shed 19.89 points, or 1%, to 1,973.16.

In economic news, weekly initial jobless claims fell by 38,000 last week; more than expected. But continuing claims were more-than-expected at over 6 million, up from the previous week.

The BSE 30-share Sensex was down 353.79 points or 2.28% to 15,160.24. The Sensex fell 12.09 points at the day's high of 15,501.94 in early trade. The Sensex tanked 410.03 points at the day's low of 15,104 in late trade.

The S&P CNX Nifty was down 104.10 points or 2.27% to 4,481.40. Nifty August 2009 futures were at 4467, at a discount of 14.40 points as compared to the spot closing of 4481.40. Turnover in NSE's futures & options (F&O) segment was Rs 65,231.26 crore, much lower than Rs 73,819.40 crore on Thursday, 6 August 2009.

BSE clocked a turnover of Rs 5424 crore, lower than Rs 7169.11 crore on Thursday, 6 August 2009.

The market breadth, indicating the overall health of the market, was weak. On BSE, 743 shares advanced as compared with 1921 that declined. A total of 78 shares remained unchanged.

Among the 30-member Sensex pack, 27 fell while the rest gained.

The BSE Mid-Cap index was down 2.27% and the BSE Small-Cap index was down 1.92%. Both the indices outperformed the Sensex.

The BSE Consumer Durables index (down 3.92%), the BSE Auto index (down 3.87%), the BSE Realty index (down 3.29%), the BSE Bankex (down 2.96%), the BSE Power index (down 2.65%), the BSE Capital Goods index (down 2.39%), underperformed the Sensex.

The BSE IT index (down 0.78%), the BSE Healthcare index (down 1.14%), the BSE PSU index (down 1.47%), the BSE Oil & Gas index (down 1.76%), the BSE Teck index (down 1.97%), the BSE Metal index (down 2.12%), the BSE FMCG index (down 2.25%), outperformed the Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 2.47% to Rs 1,995.90. The stock hit a high of Rs 2,064 and a low of Rs 1,990. Petroleum minister Murli Deora in Parliament on Thursday, 6 August 2009 said that the price approved by the empowered group of ministers (eGoM) for RIL gas from the KG D6 field was lower than the price it had approved for some of the other operators in the country.

Deora said the price of $4.2 was lower than the price of $5.5 charged for gas from the Panna-Mukta-Tapti (PMT) field by a group consisting RIL, ONGC and British Gas. The Anil Ambani group (ADAG) had called the price of $4.2 exorbitant, pointing out that most of the natural gas in the country is being sold at $1.8 to $2.4 per unit.

The Ambani brothers have been at loggerheads since the death of their father in 2002, and a 2005 settlement saw the Reliance group split into two. The Supreme Court on 30 July 2009 said, it will give a date on 1 September 2009 to expedite the decision.

Shares of three public sector oil marketing companies advanced as a hike in retail fuel prices in early July 2009 may boost Q2 September 2009 results. Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) rose by between 1.15% to 2.87%. On 1 July 2009,the government had hiked petrol price by Rs 4 per litre and diesel by Rs 2 per litre.

The three public sector oil marketing firms reported strong Q1 June 2009 results as they incurred negligible underrecoveries on domestic sale of fuel at controlled prices. The strong performance was despite lack of any oil bonds from the government.

Power stocks fell even as the NHPC IPO received a robust response. Reliance Infrastructure, Tata Power Company, CESC, Torrent Power and Reliance Power fell by between 0.27% to 4.78%.

Bank stocks fell as state-run banks remained shut on Friday as a nationwide strike by their employees demanding higher wages and pensions entered the second day. India's biggest bank in terms of branch network State Bank of India (SBI) fell 3.08%.

Other PSU stocks, Bank of India, Indian Overseas Bank, Bank of Baroda, Union Bank of India fell by between 0.7% to 2.52%.

State-run banks account for more than half of banking sector assets and have a dominant presence in the fixed income and foreign exchange markets.

India's largest private sector bank by net profit ICICI Bank fell 3.62% as its ADR fell 1.7% on Thursday. India's second largest private sector bank by net profit HDFC Bank fell 1.5% as its ADR fell 2.67% overnight.

Auto stocks fell on profit taking after recent surge triggered by healthy monthly sales figures for July 2009 and good Q1 June 2009 results. Weak monsoon also triggered profit taking as auto firms derive substantial revenue from rural India. Mahindra & Mahindra, Bajaj Auto, Hero Honda Motors, and Maruti Suzuki India, TVS Motor Company fell by between 2.51% to 5.72%.

India's largest truck market by sales Tata Motors fell 0.91%. Early this week, the global ratings agency Standard & Poor's downgraded long term corporate credit rating of the auto major to 'B' from 'B+'. The outlook is negative. At the same time, Standard & Poor's lowered the issue rating on the company's senior unsecured notes to 'B' from 'B+'.

Rate sensitive realty shares declined on profit booking after recent strong gains triggered by of the government's thrust on housing sector in the Union Budget 2009-2010. Unitech, Phoenix Mills, Omaxe, DLF, Anant Raj Industries, Ackruti City, fell by between 0.39% to 8.08%.

FMCG stocks fell on concerns over annual monsoon. FMCG firms derive substantial revenue from rural sector. Hindustan Unilever, Tata Tea, ITC, United Spirits, REI Agro, Nestle India fell by between 0.95% to 7.14%.

Capital goods and construction shares fell on profit booking after recent strong gains triggered by of the government's thrust on the infrastructure sector in the Union Budget 2009-2010.

From the capital goods space, Larsen & Toubro, Bharat Heavy Electricals, Crompton Greaves, Praj Indutries, ABB, BEML, Thermax, Siemens, fell by between 0.49% to 5.06%.

Among construction shares, Gayatri Projects, IVRCL Infrastructure & Projects, Era Infra Engineering, Hindustan Construction Company, fell by between 1.94% to 4.99%.

Cement stocks fell on profit taking after a recent surge triggered by healthy July 2009 monthly sales. UltraTech Cement, Ambuja Cements, ACC fell by between 0.24% to 2.97%.

IT stocks fell after a tepid outlook from Cisco. India's largest IT exporter by sales TCS fell 1.82%. The company recently bagged an order from multi-brand discount chain The Loot. TCS will manage the back-end and software support system for the retail chain.

India's second largest IT exporter by sales Infosys fell 0.62% as its American depository receipt (ADR) fell 2.14% on Thursday. The company signed an agreement with BanColombia SA for its Finacle software to be used by the Colombian bank and its overseas units.

But, India's third largest IT exporter by sales Wipro rose 0.13%. The company announced on Wednesday, 5 July 2009, that it has entered a five-year contract with US apparel retailer Charming Shoppes Inc. to provide information technology services.

Metal shares fell as LMEX, a gauge of six metals traded on the London Metal Exchange, fell 3.5% on Thursday, 6 August 2009. Tata Steel, Steel Authority of India, Jindal Steel, Sterlite Industries, National Aluminum Company, Hindalco Industries fell by between 1.16% to 2.96%.

Shipping stocks fell after the Baltic Dry Index, a measure of shipping costs for commodities, tumbled 4.7% in London on Thursday, a sixth-consecutive decline. Essar Shipping, GE Shipping and Company, Mercator Lines and Shipping Corporation of India fell by between 4.35% to 7.38%.

Ispat Industries clocked highest volume of 1.94 crore shares on BSE. Unitech (1.66 crore shares), Firstsource Solutions (1.58 crore shares), Suzlon Energy (1.34 crore shares) and Prism Cement (1.27 crore shares) were the other volume toppers in that order.

Tata Steel clocked highest turnover of Rs 234.09 crore on BSE. Reliance Industries (Rs 221.88 crore), Reliance Capital (Rs 150.22 crore), DLF (Rs 148.15 crore) and Unitech (Rs 142.74 crore) were the other turnover toppers in that order.