Market snaps 5-day winning streak

The key benchmark indices snapped last five days' gains on fears a glut in share sales may suck liquidity from the secondary market. Profit taking emerged after a strong rally this month that took the market to a 16-month high on Tuesday, 22 September 2009. Volatility was the order of the day as traders rolled over derivatives contracts from September 2009 series to October 2009 series ahead of the expiry of September 2009 contracts on Thursday, 24 September 2009. The BSE 30-share Sensex fell 166.93 points or 0.99%, off close to 190 points from the day's high and up about 30 points from the day's low.

IT, realty, telecom and capital goods stocks led the losses. The S&P CNX Nifty closed below the psychological 5,000 mark after holding above that level for most part of the day. Nifty had settled above 5,000 mark for the first time in 16-months on Tuesday. The market breadth was weak.

Foreign funds continued their buying spree, pumping in a net Rs 1748.99 crore in equities today, 23 September 2009, provisional data released by the stock exchanges showed. Domestic funds bought stocks worth a net Rs 500.47 crore

Amid a bout of volatility the market hovered between positive and negative zone in early trade. It weakened later on lower Asian stocks. The market recovered from lower level in mid-morning trade after hitting a fresh intraday low. Volatility was witnessed again in early afternoon trade as the Sensex cut losses after hitting a fresh intraday low. The market moved into the positive zone for a short while before slipping into the red again in afternoon trade. The market hit positive zone for a brief period again before slipping into the red in mid-afternoon trade. The market slumped in the last one hour of trade.

Rollover in Nifty futures improved to 36% at end of Tuesday's (22 September 2009) trading from a mere 20% at the end of Friday's (18 September 2009)'s trading. The market was closed on Monday, 21 September 2009, for a public holiday. Rollover in Mini Nifty futures was about 35%.

Among individual stocks, L&T, Hero Honda, India Cements, Power Grid Corporation, and M&M, have seen substantial rollover. Stocks with low rollover include Welspun-Gujarat Stahl Rohren, Dish TV, Steel Authority of India, Indiabulls Real Estate and Shree Renuka Sugars.

There was a substantial fund raising by Indian firms and in one case by promoters on Wednesday, 23 September 2009. Construction and engineering firm Jaiprakash Associates has reportedly raised nearly $250 million through the sale of a large number of treasury shares. Promoters of wind turbine maker Suzlon Energy sold 7 crore shares to raise about $142 million. The proceeds would be infused into the company. Meanwhile, drug maker Cipla has reportedly raised about $140 million by selling shares to institutional investors at Rs 263.75 each.

The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.

As per one report, companies plan to raise at least Rs 40,000 crore through initial public offers (IPOs)/follow on public offers (FPOs) in the second half of the current financial year. Power companies such as GMR Energy, Indiabulls Power and JSW Energy and state-run Bharat Heavy Electricals and NTPC are likely to tap the primary market. Reliance Infratel also announced on Tuesday its intention to raise Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest.

Meanwhile, Finance Minister Pranab Mukherjee today said India's economic growth in the September 2009 quarter will be better than in the June 2009 quarter. The economy grew an annual 6.1% in the April-June quarter, the first of 2009/10 fiscal year.

Mukherjee had said on Saturday, 19 September 2009, that the Centre will not roll back the stimulus package given to the industry in wake of the global economic meltdown till signs of clear recovery are visible across recession-hit US and Europe. The Finance Minister also said on that day that the nation's equities index is moving steadily and authorities will avoid disturbing the pattern.

The Prime Minister today said the global economy and financial markets have shown an improvement since G20 summits earlier this year, but the world economy was still not out of woods.

The world economy is likely to be the focus of a two-day G20 financial summit in Pittsburgh on 24-25 September 2009. The G20 leaders will discuss overhauling global financial regulation and fixing long-term imbalances in the world economy. The G20 leaders are also considering ways to rein in bank bonuses that many say contributed to the global financial crisis by encouraging excessive risk-taking. Bank bonuses are part of the G20 agenda to consider ways to reshape global financial rules after the 2008-2009 crisis.

Leaders from some of the largest Western powers rallied support Tuesday behind a US plan to build a more balanced global economy and warned against returning to business as usual once recovery takes hold.

Closer home, there is optimism about Q2 September 2009 results after advance tax collections registered a positive growth in the second quarter after witnessing a negative growth in the first quarter. Corporate advance tax and advance personal income-tax were up by 14.7% and 1.7%, respectively in the September 2009 quarter. Higher advance tax payment indicates good Q2 September 2009 results from India Inc. next month.

Among top Indian firms, State Bank of India (SBI) paid advance tax of Rs 1,832 crore in the September 2009 installment, 17.4% higher than Rs 1,560 crore it paid in same period last year. But oil major ONGC's tax outgo dipped by 25.5% to Rs 1,796 crore in the second tranche this fiscal compared with last year's Rs 2,412 crore.

Bharti Airtel's advance tax outgo rose by a whopping 220% to Rs 484 crore in second installment while Infosys registered a 100% increase in its advance tax payment to Rs 300 crore. Similarly, Mukesh Ambani-led Reliance Industries registered a 69% jump in its tax payment to Rs 1,157 crore and Maruti Suzuki paid 97.76% higher tax at Rs 265 crore in the second installment.

Earlier, market expectations of strong Q2 results were tempered after a news agency quoted an unnamed government official as saying on 17 September 2009 that the government expects only a marginal improvement in corporate advance tax in second quarter.

The Prime Minister today said steps taken by the G20 to augment the resources of multilateral development banks have led to substantial stepping up of World Bank lending to India. The World Bank on Tuesday approved $4.3 billion in loans for India to help finance infrastructure building and to shore up the capital of some state banks.

Meanwhile, the Securities Exchange Board of India (SEBI) on Tuesday, 22 September 2009, revised takeover norms. Sebi Chairman C B Bhave said on Tuesday the board has approved two changes in the Indian Depository Receipts (IDR) norms and has allowed the concept of anchor investors for IDRs. He added that the takeover regulation were applicable for American Depositary Receipt (ADR) as well as Global Depositary Receipt (GDR) holders with voting rights. He said that GDR/ADR holders with voting right would now be on par with domestic shareholders but added that there would be no retrospective effect to the amendment on takeover norms.

Changes in the takeover code also made it compulsory for holders of depositary receipts to make an open offer once their holding crossed the 15% threshold limit in an Indian firm. Earlier, an open offer was triggered only on conversion of depositary receipts into shares with voting rights.

European stocks inched higher on Wednesday, led by banks ahead of the US Federal Reserve's rate decision. Key benchmark indices in France, Germany and UK were up by between 0.37% to 0.57%.

Asian stocks reversed initial gains on Wednesday as caution prevailed ahead of the US Federal Reserve policy meeting on interest rates. Key benchmark indices in Hong Kong, South Korea, and Taiwan were down by between 0.43% to 1.24%.

China's Shanghai Composite fell 1.89% after a regulator approved more listings on the planned trading board for smaller companies. Investors are worried that stock prices could be dampened by more initial public offerings.

Japanese stock markets have been shut since Monday, 21 September 2009, for national holiday. Trading will begin on Thursday, 24 September 2009.

US index futures reversed early losses. Trading in US index futures indicated the Dow could rise 18 points at the opening bell today, 23 September 2009.

US markets closed at fresh 2009 highs on Tuesday as the two-year treasury auction met with strong demand and the dollar retreated. The falling dollar drove buying in commodities and commodity-related stocks. The Dow Jones industrial average gained 51.01 points, or 0.5%, to 9,829.87. The S&P 500 index gained 7 points or 0.7%, to 1,071.66, while the Nasdaq Composite Index rose 8.26 points, or 0.4%, to 2,146.30.

At the end of the two-day policy meeting of the Federal Open Market Committee on Wednesday, 23 September 2009, the Fed policy makers may reportedly take note of an improving economy, while cautioning that high unemployment puts the recovery at risk. The Fed is expected to hold rates steady but markets will be interested to know when its ultra-loose policy will start to be tightened.

The BSE 30-share Sensex fell 166.93 points or 0.99% to 16719.50. The Sensex rose 19.07 points at the day's high of 16,905.58 in early trade. The barometer index fell 202.65 points at the day's low of 16,683.78 in late trade.

The S&P CNX Nifty fell 50.25 points or 1% to 4969.95. Nifty September 2009 futures were at 4966.60, at a discount of 3.35 points as compared to the spot closing of 4969.95. Turnover in NSE's futures & options (F&O) segment jumped to Rs 91,178.35 crore from Rs 82,944.72 crore on Tuesday, 22 September 2009.

BSE clocked turnover of Rs 6626 crore, higher than Rs 5679.29 crore on Tuesday, 22 September 2009.

The Sensex had jumped 672.24 points or 4.14% in five trading sessions to 16886.43 on Tuesday 22 September 2009 from a recent low of 16,214.19 on 14 September 2009 to 16886.43 on Tuesday 22 September 2009. The Sensex is up 7,072.19 points or 73.3% in calendar year 2009 as on 23 September 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8,559.10 points or 104.88% as on 23 September 2009. FII inflow in the calendar year 2009 totaled Rs 49554.60 crore (till 18 September 2009).

Coming back to today's trade, the BSE Mid-Cap index fell 1.23% and the BSE Small-Cap index fell 1.37%. Both the indices underperformed Sensex.

The BSE Realty index (down 2.31%), the BSE Teck index (down 1.98%), the BSE IT index (down 1.72%), the BSE Capital Goods index (down 1.55%), the BSE FMCG index (down 1.29%), the BSE Power index (down 1.12%), the BSE Auto index (down 1.07%), underperformed the Sensex.

The BSE Oil & Gas index (up 0.16%), the BSE Bankex (down 0.11%), the BSE Healthcare index (down 0.17%), the BSE PSU index (down 0.26%), the BSE Metal index (down 0.64%), the BSE Consumer Durables index (down 0.93%), outperformed the Sensex.

The market breadth, indicating the overall health of the market was weak. The breadth turned negative from strong breadth in early trade. On BSE, 996 shares rose as compared with 1,784 that declined. A total of 80 shares remained unchanged.

Among the 30-member Sensex pack, 25 fell and rest rose.

Index heavyweight Reliance Industries (RIL) was up 0.24% to Rs 2,101.40 on reports the outlook for Asian oil refiners, previously hit by a sharp fall in margins, is now improving on a likely ramp-up in demand and slowing capacity expansion. The stock also got support from higher advance tax payment in second installment. But the stock was off the day's high of Rs 2,115.

The stock was under pressure late last week following a large treasury share sale by the company in the secondary market. Petroleum Trust on Thursday sold 1.5 crore equity shares of RIL through block deals on the bourses at Rs 2125 per share. The financial impact of the transaction will be reflected in the consolidated statements, RIL said.

Reliance Industries on Tuesday said that it has fixed 29 September 2009 as the record date for shareholders of Reliance Petroleum (RPL) to receive equity shares of Reliance Industries under a merger scheme.

IT stocks fell on a rally in rupee against dollar. India's largest IT exporter by sales Tata Consultancy Services fell 1.6%. The company's unit last week secured overseas contracts worth around $25 million from different players for implementing its financial software products in the Asia-Pacific and the US.

India's second largest software services exporter by sales Infosys fell 1.66% even as its ADR rose 0.65 % on Tuesday, 22 September 2009. Infosys still finds the business situation quite challenging and decision making by clients continues to be slow, Chief Operating officer S.D. Shibulal said on Tuesday. He also said last month' s outsourcing contract from oil and gas major British Petroleum Plc was worth $116 million over five years.

India's third largest software services exporter by sales Wipro fell 1.57% even as its ADR rose 1.9% on Tuesday. The company recently won a three-year outsourcing contract from All Nippon Airways, Japan's No.2 carrier.

The rupee pared gains after rising to a six-week high on Wednesday. The partially convertible rupee was at 48.07/09 per dollar, weaker than Tuesday's close of 47.9550/9650. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports.

India's largest power equipment maker by sales Bharat Heavy Electricals fell 0.44%. As per recent reports, the company has won an order worth Rs 1300 crore for an upcoming Vallur Thermal Power project at Ennore in Tamil Nadu. The power project is being set up by a joint venture between NTPC and the Tamil Nadu Electricity Board (TNEB).

Among other capital goods stocks, Siemens, Larsen & Toubro, ABB, Thermax, fell by between 0.31% to 2.58%.

Realty stocks fell on profit taking. DLF, Omaxe, Sobha Developers, Indiabulls Real Estate and Unitech fell by between 1.3% to 5.7%.

Realty stocks have risen in the past few days on reports 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.

India's largest telecom player by sales Bharti Airtel fell 3.43%. Bharti Airtel on Tuesday said that the merger talks with South African major MTN will be compliant with the laws in both countries. The company said that it will approach relevant authorities for approvals or exemptions, if required, at the appropriate time. Sebi's amendment in takeover norms on Tuesday whereby the applicability of takeover norms has been extended to GDRs/ADRs may make fructification of the Bharti-MTN merger deal difficult.

Bharti and 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, most recently the deadline was put back another month to 30 September 2009.

India's second largest telecom player by sales Reliance Communications fell 2.94%. The company's chairman Anil Ambani at the annual general meeting held on Tuesday, 22 September 2009 said company hopes to achieve 100 million subscribers by March 2010 from the current 85 million subscribers.

Anil Ambani also said that the company will consider a qualified institutional placement at an appropriate time. He added that Reliance Communication (RCom)'s capital expenditure may decline significantly this year following the rollout of its GSM network in 2008/09. Meanwhile, the company on 22 September 2009, announced that its board approved a proposed listing of its telecom tower unit Reliance Infratel. The net issue will constitute 10% of the post-issue paid-up equity capital of the company.

Banking stocks fell on profit taking. Bank stocks have rallied recently after higher advance tax payment by some top banks in the second installment this fiscal.

India's largest private sector bank by net profit ICICI Bank fell 0.71% even as its ADR rose 2.22% on Tuesday. The bank has reportedly finalised sale of Point Of Sale (PoS) terminals to First Data Corporation for $ 80 million.

India's largest bank by net profit and branch network State Bank of India fell 1.38% on profit taking after recent surge. Chairman O.P. Bhatt on 8 September 2009 said the bank's earnings are likely to grow 30-35% in Q2 September 2009 over Q2 September 2008.

But, India's second largest private sector bank by net profit HDFC Bank rose 1.45% as its ADR rose 2.49% on Tuesday.

Shares of public sector banks rose on reports the World Bank is likely to provide $2 billion, or nearly Rs 10000 crore, to the government to recapitalise public sector banks. Union Bank of India, Bank of Baroda, Indian Overseas Bank, rose by between 0.12% to 7.43%.

Metal stocks fell on profit taking after recent strong gains. Tata Steel, Steel Authority of India, Jindal Saw, Hindalco Industries, Hindustan Zinc rose by between 0.19% to 2.39%.

But, India's largest copper maker by sales Sterlite Industries rose 1.09%. The company said on Monday that it would release Grupo Mexico from a potential legal liability of nearly $8 billion if the Indian miner can win control of bankrupt US copper miner Asarco LLC.

In a court document filed on Monday, Sterlite said that if a federal court approves its plan to acquire Asarco over rival bidder Grupo Mexico's offer, it would not hold Grupo Mexico liable for more than about $900 million of liability related to the 2003 transfer of a Peruvian mine. Sterlite, a unit of India-focused mining company Vedanta Resources, has been facing off with Mexican miner Grupo Mexico for acquiring control Asarco, which has been under bankruptcy protection since 2005.

India's largest thermal power generator by sales NTPC fell 0.38% . The company will reportedly sign an agreement to buy natural gas from Reliance Industries in two days to increase fuel supplies to plants other than those facing lawsuits.

Among other power stocks, Reliance Power, CESC, Torrent Power, Reliance Infrastructure, Tata Power Company fell by between 0.8% to 2.85%.

Auto stocks fell on profit taking after recent sharp gains. Auto stocks have rallied in the past few days on hopes of strong sales in the upcoming festive season. India's top small car maker by sales Maruti Suzuki fell 0.41%. India's largest tractor maker by sales Mahindra & Mahindra fell 2.61%.

As per reports, the government will release pay arrears to government employees under the second and final installment ahead of big festivals in October 2009. The payout would boost demand for cars and motorcycles.

India's largest truck maker by sales Tata Motors fell 1.09%. Commercial vehicle makers reportedly plan to raise prices in the range of 1-3% on pick up demand.

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.

FMCG pivotals fell on concerns over scanty rains so far this year. FMCG firms derive substantial revenue from the rural sector. Nestle India, Hindustan Unilever, United Spirits, ITC, Britannia Industries fell by between 0.09% to 2.38%

Cement stocks fell on profit taking. ACC, Ambuja Cements, Ultratech Cement fell by between 0.59% to 1.59%. A thrust on the infrastructure sector in the Union Budget 2009-2010 may keep cement demand strong. Cement makers recently cut prices by Rs 3 per 50 kilogram bag in Mumbai.

Construction shares fell on profit taking. Punj Lloyd, Valecha Engineering, Gammon India, IVRCL Infrastructure & Projects fell by between 2.58% to 5.03%. Higher government spending on infrastructure sector in the Union Budget 2009-2010 to provide a stimulus to the economy, may result in increase order flow for construction.

The government has set a target of spending $20 billion a year on road construction.

Jaiprakash Associates fell 6.34% after company sold treasury shares at an average price of Rs 238.50.

Sugar stocks fell after Union Cabinet late last week extended limits on stocks that can be held by traders of sugar until September 2010. The move is aimed at keeping a lid on prices of commodity. Shree Renuka Sugars, Dhampur Sugars, Bajaj Hindustan and Balrampur Chini fell by between 2.01% to 2.94%.

Suzlon Energy clocked highest volume of 6.82 crore shares on BSE. Cals Refineries (3.69 crore shares), Jaiprakash Associates (3.22 crore shares), Wire & Wireless (1.52 crore shares) and Ispat Industries (1.06 crore shares) were the other volume toppers in that order.

Jaiprakash Associates clocked highest turnover of Rs 756.18 crore on BSE. Suzlon Energy (Rs 646.01 crore), Reliance Industries (Rs 256.26 crore), Larsen & Toubro (Rs 127.87 crore) and DLF (Rs 120.62 crore) were the other turnover toppers in that order.