Market retraces from 15-month high on profit taking; breadth weak

The key benchmark indices registered small gains in choppy trade, extending a rally for the fifth day. The market retraced after hitting a 15-month high as weak European markets and lower US index futures triggered profit taking. The BSE 30-share Sensex rose 33.31 points or 0.21% to 16,216.86, off close to 220 points from the day's high. Banking and metal stocks gained. Realty and auto stocks declined.

Index heavyweight Reliance Industries fell in volatile trade. The market breadth was weak in contrast to a strong breadth earlier in the day.

Intraday volatility was high. The market surged in early trade on higher Asian stocks. It surged to a fresh intraday high in morning trade before paring gains. A brief recovery from lower level was witnessed in early afternoon trade. After hitting an intraday low, the market regained strength later. However, the recovery proved short lived with the Sensex slipping into the red in late trade

India's exports declined the least in eight months in August 2009 as overseas sales of coal, rice and tobacco picked up, Commerce Secretary Rahul Khullar said. Merchandise shipments dropped 19.7% from a year earlier to $14.3 billion after sliding 28.4% in July 2009, Khullar said.

A recent spell of good rains will help the next season crop to be sown from October and harvested in March and April next year, Farm Minister Sharad Pawar said on Thursday.

India's monsoon rains reportedly were 21% above average in the past week till 9 September 2009. But total rainfall since 1 June 2009, the start of the season, was 20% below average because of exceptionally dry spells in the past. More than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.

The wholesale price index (WPI) fell 0.12% in the year through 29 August 2009, lower than an annual decline of 0.21% in the previous week, data released by the government at 12:10 IST today, showed. The food article index surged 14.8%.

Analysts are concerned that a sharp surge in food prices in the past few days due to scanty rains may stoke inflationary pressures in the economy. Interest rates could rise on higher inflation which in turn may impact a nascent economic recovery and corporate profits.

Comments from Finance Secretary Ashok Chawla, however, helped soothe those concerns to some extent on Wednesday when he said the main worry is lifting growth rather than inflation and said he saw no need for the central bank to change policy. He further said India's government will not borrow more from the market than its budget target for 2009/10 (April-March).The government plans to borrow Rs 4,51,000 crore ($93 billion) in the fiscal year to fund a fiscal deficit forecast at 6.8% of gross domestic product.

Meanwhile, liquidity continues to support share prices and oversubscription to the Oil India initial public offering is a testimony to that. The Oil India IPO which opened for bidding on 7 September 2009, was subscribed 30.77 times by 17:00 IST on the last day of the issue today, 10 September 2009. The government has fixed Rs 950-1,050 per share price band for the initial public offering of Oil India (OIL), the second state-run firm to hit the market this year after NHPC, and will raise up to Rs 2,777 crore.

The strong response to Oil India IPO was despite a muted debut of another state-run firm NHPC on the secondary markets early this month

European shares turned negative in morning trade on Thursday, as weakness in banks and retailers outweighed gains in technology and engineering firms. Key benchmark indices in France, and UK were down by between 0.36% to 0.6%. But, Germany's DAX was flat in volatile trade.

The Bank of England left interest rates at a record low of 0.5% for the sixth month running on Thursday and said it would keep its 175 billion pound asset buying programme in place

Asian stocks climbed today as a surge in earnings of China Yurun Food Group and a positive update on earnings from US chip maker Texas Instruments lifted confidence the global economy is recovering. Key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan rose by between 1.05% to 2.3%. But, China's Shanghai Composite fell 0.73%.

Japan's Nikkei rose 1.95% even after a Cabinet Office report showed Japanese machinery orders dropped more than economists had estimated in July 2009. Orders are regarded as an indicator of capital spending in the next three to six months.

Trading in US index futures indicated Dow could shed 15 points at the opening bell today, 10 September 2009.

US stocks closed higher on Wednesday, 9 September 2009 with the S&P 500 touching an 11-month high after Goldman Sachs Group Inc. recommended industrial companies and investor Michael Price said he's finding value in American equities.

The Dow added 49.88 points, or 0.5%, to 9,547.22. The S&P 500 index rose 7.98 points, or 0.8%, to 1,033.37, and the Nasdaq Composite rose 22.62 points, or 1.1%, to 2,060.39.

The US Federal Reserve's Beige Book showed yesterday 11 of its 12 regional banks reported signs of a stable or improving economy in July and August.

The BSE 30-share Sensex rose 33.31 points or 0.21% to 16,216.86, its highest closing since 30 May 2008. The Sensex rose 251.22 points the day's high of 16,434.77 in morning trade. The barometer index fell 17.13 points at the day's low of 16,166.42 in late trade.

The S&P CNX Nifty rose 5.15 points or 0.11% to 4819.40 its highest closing since 30 May 2008. It hit a high of 4889.05 earlier in the day. Nifty September 2009 futures were at 4804.30 at a discount of 15.10 points as compared to the spot closing of 4819.40. Turnover in NSE's futures & options (F&O) segment spurted to Rs 75,583.39 crore from Rs 53,935.19 crore on Wednesday, 9 September 2009.

BSE clocked a turnover of Rs 6689 crore, lower than Rs 6249.54 crore on Wednesday, 9 September 2009.

The Sensex has jumped 818.53 points or 5.31% in five trading days to 16,216.86 on 10 September 2009 from a recent low of 15,398.33 on 3 September 2009 as a revival of monsoon rains, strong response to the initial public offer of Oil India and firm global stocks boosted sentiments.

Stocks have risen sharply this year on increased global risk appetite triggered by hopes of a recovery in the global economy after a setback from a financial sector crisis. The Sensex is up 6569.55 points or 68.09% in calendar year 2009 as on 10 September 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8056.46 points or 98.72% as on 10 September 2009. FII inflow in calendar year 2009 totaled Rs 41,795.70 crore (till 9 September 2009).

Coming back to today's trade, the market breadth indicating the overall health of the market, was negative. The breadth was strong in early trade. On BSE, 1086 shares rose as compared with 1709 that declined. A total of 77 shares remained unchanged.

Among the 30-member Sensex pack, 14 rose while the rest declined.

The BSE Mid-Cap index fell 0.17% and the BSE Small-Cap index fell 0.77%. Both the indices underperformed the Sensex.

The BSE Metal index (up 1.23%), the BSE Bankex (up 1.01%), the BSE Healthcare index (up 0.82%), the BSE IT index (up 0.82%), the BSE Teck index (up 0.8%), the BSE Power index (up 0.46%), outperformed the Sensex.

The BSE Realty index (down 2.26%), the BSE Consumer Durables index (down 1.58%), the BSE Auto index (down 0.76%), the BSE Oil & Gas index (down 0.58%), the BSE FMCG index (down 0.05%),the BSE PSU index (up 0.02%), the BSE Capital Goods index (up 0.03%), underperformed the Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 0.93% to Rs 2149.20. The stock hit a high of Rs 2205 and a low of Rs 2135. Anil Ambani group firm Reliance Natural Resources (RNRL) on Wednesday told the Supreme Court that the government has no role to play either in the utilisation or the fixation of gas price as per its contract with Mukesh-led RIL.

The two sides RIL and RNRL had approached Supreme Court challenging a decision by the Bombay High Court on 15 June 2009, which said RIL should provide 28 million cubic metres of gas per day to RNRL at $ 2.34 per mmBtu and both the parties should sign a necessary agreement for the same within a month. RIL, however, is pleading that it was only a contractor for the gas from the Krishna-Godavari basin's D6 block and did not have the power to fix the price, while the government has also moved a special leave petition in the case asserting its right on pricing and distribution of natural gas. The apex court has decided to commence hearing on this matter on 20 October.

A rally in crude oil failed to lift oil exploration counters. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) was flat at Rs 1180.45. Cairn India fell 2.83%. Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms.

Crude oil rose as the falling dollar spurred investors to buy commodities as an inflation hedge and an industry report showed a decline in US inventories. The American Petroleum Institute reported US stockpiles declined 7.22 million barrels, the biggest drop since 5 September 2008. Light, sweet crude for October delivery settled 21 cents, or 0.3%, higher at $71.31 a barrel on the New York Mercantile Exchange on Wednesday.

Telecom stocks rose. India's largest mobile services provider by sales Bharti Airtel rose 1.81% after the company denied media reports it had reached an agreement with South Africa's MTN on their planned multi-billion dollar share and cash swap. But the stock came off the day's high of Rs 424.40. A reports had suggested the two companies had reached a $24 billion preliminary agreement. But Bharti said talks between the two -- which could later lead to a full merger -- were still going on.

Bharti and South African telecom operator MTN have been in negotiations since 25 May 2009 on a $23 billion cash and share-swap deal aimed at an eventual full merger. The deadline for the talks has been extended twice.

India's second largest listed mobile services provider by sales Reliance Communications rose 1.19%.

Metal stocks rose on strong domestic demand. India's largest private sector steel marker by sales Tata Steel gained 2.27% after Steel Minister Virbhadra Singh said domestic consumption of steel could rise 6% this quarter. Tata Steel on Monday, 7 September 2009 said steel sales at its Indian operations rose 25% to 492,000 tonnes in August 2009 over August 2008.

Domestic operations contribute about 25% of the group's total annual global capacity, including Europe's second-largest steelmaker Corus.

Jindal Steel, Sterlite Industries, National Aluminum Company, Jindal Saw, rose by between 0.45% to 7.05%.

Realty stocks fell on profit taking extending losses for third straight day. DLF, Unitech, Omaxe, Indiabulls Real Estate, Anant Raj Industries fell by between 1.96% to 2.77%.

But, Omaxe surged 2.81% after the company's unit Rivaj Infratech signed a pact with Bulandshahar Development Authority for the development of hi-tech township in Bulandshahar, Uttar Pradesh.

Realty stocks had surged in the past few weeks on reports prices of residential units in key regions like New Delhi-NCR (National Capital Region) and Mumbai have risen 10-15% on gradual return of residential property buyers.

The demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and a recovery in the job market. Realty market had slumped last year amid a global credit crunch and buyers fearing job losses.

The Union Cabinet has approved 1% in interest subsidy on home loans up to Rs 10 lakh, Information and Broadcasting Minister Ambika Soni said on Thursday.

Auto stocks fell on profit taking. India's top small car maker by sales Maruti Suzuki fell 1.44%. India's largest tractor maker by sales Mahindra & Mahindra declined 1.77%.

Two-wheeler makers fell. India's largest bike maker by sales Hero Honda Motors fell 2.45%. India's second largest bike maker by sales Bajaj Auto fell 0.21%.

India's largest truck maker by sales Tata Motors rose 1.21% to Rs 563.70. It hit a 52 week high of 577.70 in intraday trade.

Car sales rose 26% to 120,669 units in August 2009 over August 2008 boosted by new launches and availability of cheaper loans, data released by the industry body Society of Indian Automobile Manufacturers on 8 September 2009, showed. Sales of trucks and buses rose 18.5% to 40,624 units and motorcycle sales rose 26% to 611,173 units.

Tyre stocks rose on hopes that the forthcoming festive season will boost auto sales which in turn may lift tyre sales. MRF, CEAT, Apollo Tyres, rose by between 0.69% to 5.02%.

Banking shares rose on hopes a recovery in the economy will boost lending growth. India's largest private sector bank by net profit ICICI Bank rose 3.12% to Rs 815.55. It was the major gainer from Sensex pack. The bank's managing director Chanda Kochhar said on 8 September 2009 credit growth in India is likely to pick up in the second half of this year.

India's second largest private sector bank by net profit HDFC Bank gained 0.6% to Rs 1483.10. But the stock came off the day's high of Rs 1500.

But, India's largest bank by net profit and branch network State Bank of India fell 0.81% to Rs 1879.30. The stock came off the day's high of Rs 1924.95. Chairman O.P. Bhatt on 8 September 2009 said the bank's earnings are likely to grow 30-35% in the current quarter. SBI's retail loan growth is likely to be twice of what it was in the year-ago quarter, he said.

The cabinet has approved 2% interest subsidy on bank loans taken by farmers, Soni said on Thursday. The subsidy would cost the exchequer about Rs 4000 crore ($826 million) in the fiscal year 2009/10, she said.

India's largest power equipment maker by sales Bharat Heavy Electricals rose 1.2% after the company received a Rs 990 crore contract to manufacture electric locomotives for Indian Railways.

India's largest engineering and construction firm by sales Larsen & Toubro was flat at Rs 1601.45 after company said it got orders worth Rs 405 crore

Construction shares fell on profit taking. IVRCL Infrastructures & Projects, Jaiprakash Associates, Gayatri Projects and Hindustan Construction Company fell by between 0.04% to 4.66%.

Higher government spending on infrastructure sector in 2009-2010 to provide a stimulus to the economy, may result in increase order flow for construction firms

Some power stocks rose on bargain hunting. Power Grid Corporation of India, NTPC, Torrent Power, Reliance Power rose by between 0.17% to 9.54%.

Cement stocks fell on reports cement makers have cut prices by Rs 3 per 50 kilogram bag in Mumbai. ACC, Grasim Industries,Ultratech Cement, Jaiprakash Associates, Ambuja Cements fell by between 0.57% to 1.7%.

Some FMCG pivotals rose on revival in India's annual monsoon since the second half of August 2009. FMCG firms derive substantial revenue from the rural sector . Britannia Industries, Dabur India, ITC rose by between 0.75% to 0.95%.

IT stocks rose on gains in American depository receipts (ADR) on Wednesday. India's second largest software services exporter by sales Infosys rose 1.92% as its ADR rose 1.78% on Wednesday, 9 September 2009. India's third largest software services exporter by sales Wipro rose 0.35% on 1.79% rise in its ADR on 9 September 2009.

But, India's largest software services exporter by sales Tata Consultancy Services fell 0.75%. TCS's Chief Executive S. Ramadorai on 7 September 2009 said TCS is seeing stability on the ground and the company's demand pipeline is good.

Mid-cap IT stocks fell. Mphasis, Financial Technologies, Rolta India fell by between 2.31% to 3.44%.

Tea stocks gained on reports average tea prices rose to Rs 133.80 a kilogram (kg) in seven months till July 2009 from Rs 106.27 per kg the year before on the back of fall in production.

Warren Tea, McLeod Russel, Harrisons Malayalam, Assam Company rose by between 0.18% to 5.6%.

Tea production in India fell by 3% to 127 million kilogram (kg) in July 2009 over July 2008 on a decline in output mainly in West Bengal, though higher realisation pushed up exports marginally, according to the Tea Board.

Some sugar stocks fell on reports the Indian government has asked tax authorities to monitor the release of sugar stocks by mills to ensure steady prices and supplies in the festival season when demand peaks.

Balrampur Chini, Dhampur Sugars and Oudh Sugar fell by between 0.92% to 1.15%.

Reliance Natural Resources clocked highest volume of 3.1 crore shares on BSE. Sanraa Media (2.21 crore shares), NHPC (1.74 crore shares), IFCI (1.38 crore shares) and Suzlon Energy (1.27 crore shares) were the other volume toppers in that order.

Reliance Natural Resources clocked the highest turnover of Rs 279.86 crore on BSE. Reliance Industries (Rs 231.78 crore), DLF (Rs 228.20 crore), Housing Development & Infrastructure (Rs 221.83 crore) and Sesa Goa (Rs 202.18 crore) were the other turnover toppers in that order.