Firm rupee hits IT stocks; RIL announces bonus bounty

A surprise bonus issue announced by India's biggest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) after trading hours may boost the bourses at the onset of the trading session on Thursday, 8 October 2009, after a disappointing session today, 7 October 2009. Stocks faltered in second half of the day's trading session after an upbeat first half in what was a highly volatile trading session.

The two key benchmark indices - the BSE Sensex and the S&P CNX Nifty failed to hold on to key levels of 17,000 and 5,000 respectively after trading well above those at the onset of the day's trading session. The Sensex lost 151.88 points or 0.90%, off 313.90 points from the day's high and up 42.59 points from the day's low.

Despite correction in broad market, the market breadth was positive, although it was not as strong as it was in the opening session. Index heavyweight RIL which surprised the street with a liberal 1:1 bonus announcement after market hours, ended 1.5% lower ahead of the announcement. Shares from auto and FMCG entered correction zone. IT shares also faltered as rupee surged against the dollar. Telecom pivotals extended recent steep losses. However, metal shares surged on rally in metal prices on the London Metal Exchange with Sterlite Industries striking a 52-week high.

From the banking pack, HDFC Bank, held on to gains after striking a 52-week high. However, ICICI Bank reversed course after hitting a 52-week high earlier in the day. Shares from sugar and aviation sector gained on momentum buying.

Intraday volatility was immense. After an initial surge triggered by firm Asian stocks, the market came off the higher level soon as IT stocks dropped on a rally in rupee against the dollar. The market surged in mid-morning trade. Two bank pivotals State Bank of India and ICICI Bank led a sudden sell-off on the bourses that pulled the Sensex in the red in early afternoon trade. The market soon regained positive zone.

The market lost ground shortly with the Sensex hitting a fresh intraday low. Volatility ruled the roost later. A late sell-off pulled the Nifty below the psychological 5,000 mark.

Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. IT bellwether Infosys kickstarts the reporting season on Friday, 9 October 2009. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Cement firms too are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis

Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower. A sharp surge in equity markets may help treasury gains for some banks. As far as IT stocks is concerned the focus in mainly on the guidance from Infosys.

Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.

European shares dipped in red in volatile trade. Key benchmark indices in UK, Germany and France were down by between 0.18% and 0.39%

Gross domestic product in the 16-nation euro zone shrank by a larger-than-expected 0.2% in the second quarter, the statistics agency Eurostat said Wednesday, 7 October 2009 in its second estimate. Economists had expected Eurostat to leave its estimate unchanged at a decline of 0.1%. Second-quarter GDP fell 4.8% year on year, compared to an earlier estimate of a 4.7% decline

Most Asian markets were trading higher today, 7 October 2009 as commodity shares gained on rising commodity prices. Key benchmark indices in Japan, Taiwan, Hong Kong and Singapore were up by between 0.87% and 2.07%. However South Korea's Seoul Composite was down marginally by 0.03%. Indian indices underperformed their Asian counterparts today.

Chinese markets have been shut since 1 October 2009 for National day and Autumn festival celebrations. Trading will resume on 9 October 2009

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

US stocks jumped on Tuesday, 6 October 2009, gaining for a second straight session as a weaker dollar boosted commodities and currency-sensitive stocks. The Dow Jones Industrial Average rose 132 points, or 1.4%, to 9,731.25. The S&P 500 index gained 14 points, or 1.4%, to 1,054.72 and the Nasdaq Composite index rose 35 points, or 1.7%, to 2,103.57.

Global markets have advanced after Australia became the first major economy to boost interest rates since the financial crisis began. Australia's central bank hiked its overnight lending rate by a quarter percentage point to 3.25% on Tuesday, 6 October 2009, saying it was time to start taking away the stimulus of low rates as the economy is no longer weakening.

Kansas City Fed President Thomas Hoenig said on Tuesday that while the US economy is clearly rebounding, it is too soon to begin to withdraw the Federal Reserve's massive support.

Meanwhile, billionaire investors George Soros' Soros Fund Management has reportedly bought big stakes in a few US stocks in the past few weeks. Incidentally, Soros said this week that the US recovery is a long way off.

After a huge redemption last year, a number of hedge funds have begun to see net inflows again, reports suggest.

Back home, the International Monetary Fund (IMF) may raise India's 6.8% growth forecast for the 2010-2011 fiscal year as domestic demand and exports pick up. The IMF expects economic growth of 5.8% for 2009-10. India's growth slowed to 6.7% in 2008-09 as the global downturn hit harder than expected, after growing at 9% or more in the previous three years.

The government's direct tax collections grew just 3.69% in the first half of the fiscal to Rs 1.52 lakh crore because of higher refunds. The lower outgo towards refunds in the later part and revival in the economy would help the government achieve its full-year target of 7.24% growth in direct tax mop-up.

The Reserve Bank of India (RBI) Governor D Subbarao said on 5 October 2009 that while there was broad agreement that the central bank needs to wind back some of its easy policy stance, there were risks if the move was mistimed. An early exit from the accommodative monetary stance on inflation concerns runs the risk of derailing the fragile growth, while a delayed exit may engender inflation expectations, he said.

HDFC chairman Deepak Parekh today said he expects the central bank to raise interest rates in the March 2010 quarter on inflationary concerns. It would be a marginal, token hike, he said. Planning Commission deputy chairman Montek Singh Ahluwalia said on 5 October 2009 that economic recovery and job creation are more important than trying to tame inflation, as prices should ease because a drought is not as severe as first thought. Ahluwalia today, 7 October 2009, said the economy may growth over 7% in 2010/11.

The central bank has pumped huge liquidity in the system and drastically cut policy rates in the aftermath of the global financial crisis last year.

India's monsoon rainfall running between June to September was the worst since 1972 with cumulative seasonal rainfall for the country as a whole being 23% below the Long Period Average (LPA), the India Meteorological Department (IMD) said on 1 October 2009.

Considering district-wise rainfall during the period 1 June to 30 September, the rainfall was excess in 9%, normal in 32%, deficient in 51% districts and scanty in 8% of total districts of the country, the IMD release said. Monsoon has withdrawn from many parts of India and will gradually shift out of the country completely over the next few days.

Coming back to stocks, a section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. As per reports, 30 companies have filed their draft red herring prospectuses in September 2009 with market regulator Securities & Exchange Board of India (Sebi) for raising funds through initial public offering.

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 over Rs 50,000 crore through initial public offers (IPOs), follow-up public offers, divestment of stake sale in the second half of the current financial year. Reliance Infratel also announced on 22 September 2009, 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.

Divestment of state-run firms by the government may also increase the supply of paper in the market. As per recent reports, the government is planning to announce a blueprint for selling its stake in state-owned firms in the first week of October 2009. The policy is expected to suggest how the government will eventually bring down its stake in public sector companies to 75% over a period of time.

Some caution may prevail on the bourses ahead of assembly polls in three states viz. Maharashtra, Haryana and Arunachal Pradesh on 13 October 2009. The counting of votes will take place on 22 October 2009. Stock exchanges would remain shut on 13 October 2009 in view of the General Assembly Elections.

The BSE 30-share Sensex fell 151.88 points or 0.90% to 16,806.66. The Sensex opened 110.88 points higher at 17,069.42. The Sensex rose 162.02 points at the day's high of 17,120.56 in early trade. The barometer index lost 194.47 points at the day's low of 16,764.07 in late trade.

The S&P CNX Nifty was down 41.65 points or 0.83% to 4985.75. Nifty October 2009 futures were at 4,974.85, at a discount of 10.90 points as compared to the spot closing.

The Sensex is up 7159.35 points or 74.21% in calendar year 2009 as on 7 October 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8646.26 points or 105.95% as on 7 October 2009. FII inflow in the calendar year 2009 totaled Rs 61260.20 crore (till 5 October 2009).

Coming back to today's trade, turnover on BSE rose to Rs 6,602 crore from Rs 6,388.20 crore on Tuesday, 6 October 2009. Turnover in NSE's futures & options (F&O) segment was Rs 81,030.16 crore, lower than Rs 88,732.60 crore on Tuesday, 6 October 2009.

The market breadth, indicating the overall health of the market was positive. On BSE, 1445 shares advanced as compared with 1365 that declined. A total of 90 shares remained unchanged. The breadth was strong earlier in the day

The BSE Mid-Cap index rose 1.41% to 6,295.06 whereas the BSE Small-Cap index gained 0.46% to 7,406.45. Both the indices outperformed the Sensex.

Sectoral indices on BSE displayed mixed trend. The BSE FMCG index (down 0.52%), the BSE Capital Goods index (up 0.46%), the BSE Healthcare index (up 1.31%), the BSE PSU index (up 0.75%), the BSE Consumer Durables index (up 4.58%), the BSE Metal index (up 2.28%), the BSE Bankex (down 0.84%), the BSE Realty index (up 0.51%), the BSE Power index (up 0.58%), outperformed the Sensex.

The BSE IT index (down 2.74%), the BSE Auto index (down 1.03%), the BSE Oil & Gas index (down 1.06%), the BSE Teck index (down 1.97%), underperformed the Sensex.

Among the 30-member Sensex pack, 20 declined while the rest rose.

IT stocks declined as rupee surged against the dollar. A stronger rupee negatively impacts operating margins of IT firms as the sector earns a lion's share of revenue from exports.

India's third largest software services exporter Wipro lost 4.31% to Rs 572.90 and was the top loser from the Sensex pack

India's largest software services exporter TCS lost 3.38%. The company will pursue larger deals and leverage its full service offerings, its newly appointed chief executive and managing director N. Chandrasekaran said on Tuesday.

India's second largest software services exporter Infosys Technolgoes fell 2.56%. Given the improved business conditions and stability in global financial markets, analysts expect Infosys management to revise earnings guidance for the year ending March 2010 (FY 2010) when the company announces Q2 results on Friday, 9 October 2009. At the time of announcing Q1 June 2009 results in July 2009, Infosys projected EPS of between Rs 94.59 to Rs 96 for FY 2010, a decline of between 8.2% to 9.6%.

A total of eight brokerages expect a between 8.9% fall to a 6.7% rise in Infosys' net profit at between Rs 1390.80 crore to Rs 1629.10 crore in Q2 September 2009 over Q1 June 2009. Revenue is seen rising 1.2% to 2.9% at between 5540.30 crore to Rs 5628.90 crore in Q2 September 2009 over Q1 June 2009.

The rupee pared early gains on Wednesday on fall in equities but a weaker dollar overseas continued to support sentiment. The partially convertible rupee was at 46.58/60 per dollar, off a high of 46.49, its strongest since 26 September 2008 and above its previous close of 46.89/90.

Battered telecom shares got no respite and were subdued for the third straight day. Telecom stocks had tumbled in the past two days on Monday, 5 October 2009 and Tuesday, 6 October 2009, on concerns over declining tariffs and rising competition.

India's largest cellular services provider by sales Bharti Airtel was down 0.45%, extending two-day 17.45% slide. Chief Executive Manoj Kohli said on Wednesday that the company is considering a bid for Millicom's assets in Sri Lanka. Sweden's Millicom has put its mobile operations in Sri Lanka up for sale.

Bharti's chairman Sunil Mittal said on 5 October 2009 that the mobile services firm would continue to search emerging markets for acquisitions or alliances after its proposed talks for a $24 billion merger deal with South Africa's MTN collapsed last week. However, he declined to comment on speculation that Bharti was now eyeing a stake in Kuwait's Zain.

Kohli on Tuesday, 6 October 2009 said the company expects to reach a total of 20 crore subscribers in less than three years from the present subscriber base of about 11 crore

India's second largest cellular services provider by sales Reliance Communications (RCom) fell 2.74% after slumping 15.64% in the past two days.

RCom on Monday, 5 October 2009 reduced call charges across networks to a flat 50 paise per minute, heating up the tariff war in a market that is getting increasingly competitive. Its move came after an almost similar tariff cut by Bharti Airtel last month. A reduction in tariffs by Reliance Communications (RCom) also raised concerns of a fresh tariff war.

Among other cellular services provider, Tata Teleservices (Maharashtra) (down 0.15%), Mahanagar Telephone Nigam (down 0.12%) and Idea Cellular (down 1.08%) declined.

Telecom shares had slumped on Monday, 5 October 2009 on reports the auction of 3G telecom services by the government could be delayed. 3G, or third generation airwaves are vital for high-end services such as videoconferencing and ultra-fast internet on mobiles.

Telecom minister A Raja after market hours on Monday, 5 October 2009 said the auction of airwaves to offer third-generation mobile services will be concluded by the end of the financial year, making it clear that the government will miss the 7 December 2009, date to hold the auctions originally scheduled for 2007.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) lost 1.72% to Rs 2095.80 after swinging in a band of Rs 2083.10 and 2155 during the day. Reliance Natural Resources (RNRL) fell 1.7%.

On 6 October 2009, Anil Ambani's RNRL filed an affidavit accusing RIL of dishing out undue favours to Director General of Hydrocarbons, who is responsible for enforcing the production sharing contract between the Centre and RIL.

Mukesh Ambani's RIL was quick to respond by filing as many as eight affidavits alleging that if natural gas was supplied to RNRL at the demanded $2.34 per unit million British thermal units (mBtu), then the latter would indulge in profiteering by selling the same at market price, which would cause a huge loss to the exchequer and a windfall for RNRL.

RIL through its directors who filed separate affidavits also said that if RNRL's demands were granted, the government would lose large sums of money in profit sharing, royalties and taxes. RNRL would reap a windfall at the expense of the government and RIL and its shareholders, RIL added.

The latest development comes ahead of the Supreme Court's hearing scheduled to begin on 20 October 2009 on the long standing legal tussle between the Ambani brothers over supply and pricing of natural gas from KG basin. RNRL is demanding 28 million metric standard cubic meter per day (mmscmd) of gas from RIL for 17 years at a price of $2.34 per mBtu, which is 44% lower than the government-approved rate of $4.20 per mBtu.

Shiv Vani Oil & Gas Exploration Services jumped 4.11% after consolidated net profit rose 18.52% to Rs 56.39 crore in Q2 September 2009 over Q2 September 2008.

Metal stocks advanced after LMEX, a gauge of six metals traded on the London Metal Exchange jumped 2.89% on Tuesday, 6 October 2009.

India's largest non ferrous metal producer by sales Sterlite Industries India surged 5.74% to Rs 817.50 echoing a 4.88% rally in its American depository receipt (ADR) on Tuesday, 6 October 2009. The stock also struck a 52-week high of Rs 824.55 in intra-day trade. It was the top gainer from the Sensex pack.

India's largest private sector steel maker by sales Tata Steel gained 1.45%. The company's domestic steel sales rose 19% in July-September 2009 quarter to 1.46 million tonnes from a year earlier. Domestic operations account for about a quarter of the group's total annual global capacity of 30 million tonnes, which includes unit Corus, Europe's second-largest steelmaker.

JSW Steel rose 1.88% after the company reported 54% rise in crude steel production to 15.39 lakh tonnes units in Q2 September 2009 over Q2 September 2008. The company made this announcement after market hours on Tuesday, 6 October 2009.

Jindal Saw rose 1.60% after the company said its board will meet on 15 October 2009 to consider a stock split proposal. The company announced the board meet during trading hours today, 7 October 2009.

Steel Authority of India soared 3.72% on reports the government has decided to split the Chiria iron ore mine in Jharkhand and give half the reserves to the company.

Steel Strips Wheels jumped 4.83% after the company received an order from Renault for supply of 19,008 steel wheel rims. The company announced the new order win during trading hours today, 7 October 2009.

Hindustan Zinc (up 1.89%), Sesa Goa (up 4.08%), and Hindalco Industries (up 1.36%), were the other gainers from the metal pack.

India's largest power equipment maker by sales Bharat Heavy Electricals (Bhel) spurted 1.17%, extending Tuesday's 3.33% advance. The company had bagged a power plant equipment export contract valued at Rs 270 crore from Grodnoenergo, a state-owned enterprise in Belarus on 1 October 2009. Bhel will unveil its Q2 September 2009 results on 23 October 2009.

India's largest power generation fir by sales National Thermal Power Corporation (NTPC) rose 0.14%. As per reports the company would commission four power projects that can generate over 1,500 megawatt of electricity by 2017 in Uttarakhand.

India's largest engineering & construction company by sales Larsen & Toubro was unchanged at Rs 1680. As per reports, the firm aims to sell its entire 6.9% stake in Mahindra-Satyam soon after the lock in period expires early next week.

Other shares from capital goods sector also gained on fresh buying. Gammon India (up 2.06%), Crompton Greaves (up 5.21%), Punj Lloyd (up 1.85%), SKF India (up 2.24%), and Thermax (up 0.76%), rose.

Most auto stocks declined profit booking after recent strong gains. Most auto firms have reported decent to strong growth in sales for the month just gone by. India's top small car maker by sales Maruti Suzuki India lost 3.71%. The company's total sales rose 17.3% to 83,306 vehicles in September 2009 over September 2008. The figures were released during trading hours on 1 October 2009.

India's largest tractor maker by sales Mahindra & Mahindra slipped 1.45%. Total sales of the company rose 10.94% to 28434 vehicles in September 2009 over September 2008. The company unveiled the sales figures during trading hours on 1 October 2009.

India's largest truck maker by sales Tata Motors slipped 0.78% following a 1.99% rise in its American depository receipt (ADR) on 6 October 2009. The company's total sales rose 5.77% to 52,513 units in September 2009 over September 2008.

India's second largest bike maker by sales Bajaj Auto's rose 2.26%. The company's total sales rose 14% to 249,795 units in September 2009 over September 2008. India's largest bike maker by sales Hero Honda Motors gained 0.37%. The firm's total sales rose 4.16% to 4,01,290 units in September 2009 over September 2008.

India's second largest private sector bank by net profit HDFC Bank rose 0.39% to Rs 1665.10 buoyed by a 4.3% spurt in its ADR on Tuesday, 6 October 2009. The stock hit a 52-week high of Rs 1707 in intra-day trade.

India's largest private sector bank by net profit ICICI Bank fell 2.48% to Rs 915. The stock retraced from a 52-week high of Rs 983.70 hit earlier in the day. The Foreign Investment Promotion Board (FIPB) has reportedly asked ICICI Bank to obtain clearance from the market regulator Securities & Exchange board of India (Sebi) and banking regulator the Reserve Bank of India (RBI) for its Rs 500-crore fund that is proposed to set up in Mauritius for making equity and equity-related investments in the Indian market.

India's largest bank by net profit and branch network State Bank of India fell 2.74% to Rs 2099.70, off day's high of Rs 2188. As per recent reports, the state-run bank is planning to raise $1 billion by bond issuance as a part of the bank's Medium Term Note program or MTN, a tool that allows raising funds through various products including floating rate notes or on a fixed rate, subject to necessary regulatory approvals.

India's largest mortgage lender by total income Housing Development Finance Corporation (HDFC) was down 0.10%. Chairman Deepak Parekh sees loan disbursements picking up in the December 2009 quarter.

A number of state-run banks edged higher on hopes a recovery in the economy may boost lending growth which currently remains sluggish. Canara Bank (up 7.30%), Punjab National Bank (up 1.89%), Oriental Bank of Commerce (up 3.72%), Indian Overseas Bank (up 2.62%), Union Bank of India (up 0.86%), Bank of India (up 1.23%), Bank of Baroda (up 0.69%), gained.

Shares of diversified firm Grasim fell 1.85%. The company said on Saturday, 3 October 2009 it will transfer its cement business to its unlisted unit Samruddhi Cement. The demerger will be completed by March 2010 after which Samruddhi Cement will be listed. Samruddhi will then make an offer to UltraTech Cement for consolidation of the group's cement business. For every share, shareholders of Grasim will get one share of Samruddhi.

Meanwhile, shares of UltraTech Cement gained 1.07%. The cement maker at its board meet held on 6 October 2009 gave in principle approval to a proposal to absorb group firm Samruddhi Cement.

Aditya Birla group Grasim and UltraTech Cement currently operate a combined production capacity of 42 million tonnes a year or a fifth of India's cement capacity

India Cements rose 1.83% after the company said the Bank of New York Mellon Corporation, a global financial services firm has hiked its stake to 10.01% from 9.80% in the company after acquiring 6.01 lakh shares representing 0.21% stake through open market purchases on 30 September 2009. The company made this announcement during trading hours today, 7 October 2009.

India's largest phara firm by market capitalisation Sun Pharmaceutical Industries advanced 0.18% on reports the company has received final approval from the US Food and Drug Administration (USFDA) to market caffeine citrate solution in the strength of 30 mg/3 ml. Caffeine citrate is indicated for short term treatment of apnea in premature infants between 28 and less than 33 weeks gestational age.

Dr Reddy's Laboratories rose 1.11% after the company launched two products used for treating skin related problems. The company announced the launch of drugs after market hours on Tuesday, 6 October 2009.

Piramal Healthcare jumped 10.06%. Reports on 6 October 2009, suggested that the company has urged the government to increase retail prices of Vitamin C tablets, which are consumed mainly by Asthmatic patients, children and pregnant women, and its deficiency leads to scurvy, a skin disease.

Sugar shares gained on firm commodity prices globally. Bajaj Hindustan (up 4%), Balrampur Chini Mills (up 3.93%), and Shree Renuka Sugars (up 2.76%), gained.

Aviation stocks gained on momentum buying mirroring rally in global airline stocks which gained on improving monthly traffic trends. SpiceJet (up 9.55%), Jet Airways (up 3.91%), and Kingfisher Airlines (up 0.52%), rose.

Sanjay Agarwal, chief operating officer (CEO) of Spicejet was quoted by the media as saying that earnings of airline companies should improve in the ongoing quarter due to rise in passenger traffic on the back of holiday season.

Bharti Airtel was the top traded counter on BSE with turnover of Rs 205.51 crore followed by Reliance Capital (Rs 166.70 crore), HDIL (Rs 152.11 crore), State Bank of India (Rs 149.17 crore), and Jet Airways (Rs 148.56 crore).

Cals Refineries clocked highest volume of 15.04 crore shares on BSE. Ispat Industries (1.97 crore shares), SpiceJet (1.78 crore shares), Kingfisher Airlines (1.17 crore shares) and Unitech (1.06 crore shares) were other volume toppers in that order.

Select textile stocks gained after the textiles minister said on Wednesday India's apparel exports have grown 2-3% in April-September 2009 period compared to the same period last year.

Gitanjali Gems jumped 6.77% after the company bought Alliance Jewellers, which makes gold and diamond studded jewellery. No other details were provided. The announcement was made after trading hours on Tuesday, 6 October 2009.

Godrej Industries spurted 7.11% after the company said it will set up a special purpose vehicle to jointly develop property in Mumbai with Godrej Properties and Godrej & Boyce Mfg Co. The announcement was made during trading hours today, 7 October 2009.