Heavyweights under pressure

The key benchmark indices lost ground as lower European stocks and fall in US index futures triggered profit taking. Intraday volatility was high. The BSE 30-share Sensex fell 200.88 points or 1.19%, off close to 320 points from day's high and up 35 points from the day's low. Index heavyweights ICICI Bank, Infosys and Reliance Industries led the decline

The S&P CNX Nifty fell below the psychological 5,000 mark. It had settled just above that level on Thursday, 8 October 2009. The market breadth turned weak in late trade in contrast to a strong breadth in early trade.

IT stocks fell after IT bellwether Infosys said strengthening rupee is a big concern for its earnings. IT stocks had surged in early trade on good Q2 September 2009 results from Infosys before trading hours.

Tata Motors plunged on equity dilution worries. Index heavyweight Reliance Industries (RIL) dropped in volatile trade. The stock had risen slightly on Thursday boosted by a liberal 1:1 bonus issue. Banking and auto stocks fell on worries interest rates may harden. Capital goods stocks also fell.

The market was volatile. It slipped into the red soon after a firm opening triggered on good Q2 September 2009 results from IT bellwether Infosys before trading hours and higher Asian stocks. The Sensex regained positive zone on a strong rebound in RIL. The market faltered again later before cutting losses. The market cut losses after hitting a fresh intraday low in early afternoon trade. The market hit a fresh intraday low in mid-afternoon trade.

Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. 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.

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.

Finance Minister Pranab Mukherjee today said a proposed direct tax law would be implemented in 2011. The new direct tax law is expected to cut the corporate tax rate to 25%, phase out exemptions and simplify rules on mergers.

The chief statistian Pronab Sen today said industrial output numbers will cross double digits by December 2009. He also said inflation may cross Reserve Bank's comfort zone by then. He warned against contractioniary policies based on the data adding that both industrial production and inflation numbers are essentially on the base effect of last year.

Mukherjee said earlier in the day that there is steady expansion in domestic demand and savings and investment rates have picked up. The Finance Minister had on Thursday said the rate of economic expansion in the July-September quarter is not expected to be much faster than the 6.1% pace set in the previous three-month period, but he saw acceleration happening starting next month. But with wholesale price inflation expected to top 5% by the end of the fiscal year March 2010, the finance minister said the pursuit of growth would be balanced with the need to keep inflation under check.

Inflation based on the wholesale price index (WPI) rose 0.7% in the year through 26 September 2009, lower than a rise of 0.83% in the year through 19 September 2009, data released by the government on Thursday showed. Food article index in the WPI was up sharply at 15.45%. Meanwhile, the government revised upwards inflation for the year through 1 August 2009 to a decline of 0.83% from an estimated fall of 1.74%.

Early this week, the Reserve Bank of India (RBI) Governer, D Subbarao said 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. 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.

Meanwhile, the water level in main reservoirs was at 60% of capacity as on Thursday, unchanged from a week ago and about 10% below the 10-year average following a poor monsoon, government data showed on Thursday. Reservoir levels have been below average this year as monsoon rains in the June-September season were 23% below average, the worst since 1972. Reservoirs start depleting after the June-September monsoon ends as supply of water diminishes after the rainy season.

Reservoirs are important for hydropower, which accounts for a quarter of India's generation capacity. They also provide water to irrigate winter crops like wheat and rapeseed.

European equities edged lower on Friday, as weaker miners offset telecom shares that rose after Europe's largest telecom company Telefonica offered bigger-than-expected dividends. Key benchmark indices in France, Germany and UK were down by between 0.11% to 0.25%.

The prices of goods leaving British factories in September 2009 rose 0.4% compared to the same month last year, government data showed Friday. Economists had forecast a 0.1% drop. On a monthly basis, producer price inflation rose 0.5%, compared to forecasts for a 0.1% rise.

Most Asian stocks rose today as investors favored companies linked to the global economic recovery. Key benchmark indices in South Korea, Singapore, Taiwan and Hong Kong rose by between 0.03% to 1.94%. China's Shanghai Composite rose 4.76% after Chinese stock markets reopened after a long holiday.

Japan's Nikkei rose 1.48%. Japanese machinery orders rose less than estimated in August, barely rebounding from a record low. Orders, an indicator of business investment climbed 0.5% in August from July, when they fell 9.3%, the Cabinet Office said today in Tokyo.

US index futures reversed intraday gains. Trading in US index futures indicated the Dow could fall 13 points at the opening bell on Friday, 9 October 2009.

Federal Reserve Chairman Ben Bernanke said in early Asian hours on Friday, 9 October 2009, that the US central bank will be ready to tighten policy. "When the economic outlook has improved sufficiently, we will be prepared to tighten the stance of monetary policy and eventually return our balance sheet to a more normal configuration," the Fed chairman said.

The US central bank has cut interest rates to near zero percent and pumped hundreds of billions into the financial system to counter the worst financial crisis since the Great Depression.

US markets advanced on Thursday after jobless claims fell. The Dow gained 61.29 points, or 0.6%, to 9,786.87. The S&P 500 index added 7.90 points, or 0.8%, to 1,065.48, while the Nasdaq Composite index rose 13.60 points, or 0.6%, to 2,123.93. Stocks rose after the number of workers filing new claims for jobless insurance fell to a nine-month low last week. In other economic news, wholesalers pared inventories for a 12th straight month in August, while the same store sales gain was the largest in more than a year.

Closer home, a section of the market is, however, 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. The stock market remains shut on 13 October 2009 on account of the assembly elections

The BSE 30-share Sensex fell 200.88 points or 1.19% to 16,642.66. The Sensex rose 119.54 points at the day's high of 16,963.08 in early trade. The barometer index fell 236.95 points at the day's low of 16,606.95 in mid-afternoon trade.

The S&P CNX Nifty fell 57.05 points or 1.14% to 4,945.20. Nifty October 2009 futures were at 4,931, at a discount of 14.20 points as compared to the spot closing of 4,945.20. Turnover in NSE's futures & options (F&O) segment was Rs 63,622.53 crore, lower than Rs 69,732.16 crore on Thursday, 8 October 2009.

BSE clocked a turnover of Rs 5707 crore, lower than Rs 6474.18 crore on Thursday, 8 October 2009.

The market breadth, indicating the overall health of the market was weak. The breadth was strong in early trade. On BSE, 960 shares advanced as compared with 1790 that declined. A total of 71 shares remained unchanged.

Among the 30-member Sensex pack, 26 fell while the rest rose.

The Sensex is up 6995.35 points or 72.5% in calendar year 2009 as on 9 October 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8482.26 points or 103.94% as on 9 October 2009. FII inflow in the calendar year 2009 totaled Rs 61,714.40 crore (till 8 October 2009).

Coming back to today's trade, the BSE Mid-Cap index fell 0.69% and the BSE Small-Cap index fell 0.69%. Yet, both the indices outperformed the Sensex.

Sectoral indices on BSE displayed mixed trend. the BSE Consumer Durables index (up 0.35%), the BSE FMCG index (down 0.18%), the BSE Oil & Gas index (down 0.41%), the BSE Teck index (down 0.42%), the BSE Realty index (down 0.78%), the BSE PSU index (down 0.85%), the BSE Metal index (down 1.09%), the BSE Healthcare index (down 1.09%) outperformed the Sensex.

The BSE Auto index (down 1.72%), the BSE Bankex (down 1.6%), the BSE IT index (down 1.43%), the BSE Power index (down 1.43%), the BSE Capital Goods index (down 1.42%), underperformed the Sensex.

IT bellwether Infosys Technologies fell 1.49% to Rs 2,178.351 reversing early surge after the company said strengthening rupee is a big concern for its earnings. The stock came off the day's high of Rs 2293.65. The rupee has risen sharply in the past few days. A stronger rupee negatively impacts operating margins of IT firms as the sector earns a lion's share of revenue from exports.

Infosys raised its earnings and revenue guidance in both dollar and rupee terms for the year ending March 2010 (FY 2010) at the time of announcing Q2 September 2009 results before trading hour today, 9 October 2009.

The company has forecast a between 6.7% to 7.1% fall in earnings per American depositary share at between $ 2.09 and $ 2.10 for FY 2010. At the time of announcing Q1 June 2009 results, Infosys had forecast a between 11.1% to 12.4% fall in earnings per American depositary share.

The company has forecast a between 1% to 1.3% fall in revenue in dollar terms at between $4.60 billion to $ 4.62 billion for FY 2010. At the time of announcing Q1 June 2009 results, Infosys had forecast a between 3.1% to 4.6% fall in consolidated revenues in dollar terms.

The company has forecast 4.4% to 4.8% fall in EPS at between Rs 99.60 to Rs 100 for FY 2010. At the time of announcing Q1 June 2009 results, Infosys had forecast 8.2% to 9.6% fall in FY 2010 EPS.

The company has forecast 1.2% to 1.7% growth in revenue at between Rs 21961 crore and Rs. 22055 crore for FY 2010. At the time of announcing Q1 June 2009 results, Infosys had forecast a between 0.3% growth to a 1.3% decline in FY 2010 revenue.

Infosys' consolidated net profit rose 0.85% to Rs 1540 crore on 2.06% growth in revenue to Rs 5585 crore in Q2 September 2009 over Q1 June 2009. The operating profit margin rose to 34.6% in Q2 September 2009 from 34.1% in Q1 June 2009.

Infosys said pricing has stabilised. The company added 35 new clients in Q2 September 2009. It added a gross 6,069 employees in Q2 September 2009. The net employee addition was 1,548.

India's largest software services exporter TCS fell 1.98%. The company will pursue larger deals and leverage its full service offerings, its newly appointed chief executive and managing director N. Chandrasekaran said early this week. India's third largest software services exporter Wipro fell 2.17%.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 0.9% to Rs 2100.05. The stock was volatile. It hit a high of Rs 2132.45 and a low of Rs 2090. The stock had risen 0.96% on Thursday after the company announced liberal 1:1 bonus issue after market hours on Wednesday. Reliance, listed in 1978, has so far issued bonus shares thrice in its history - in 1980, 1983, and 1997. The company maintained its dividend for the fiscal year ended March 2009 at Rs 13 a share. Both the bonus and the dividend are applicable to shareholders of the erstwhile Reliance Petroleum, which has been merged with RIL.

Chief Financial Officer Alok Agarwal on Wednesday said the company was on track with the production ramp-up for its KG D6 oil and gas fields off India's east coast, and has the financial flexibility to make further investments. The company has produced 2.7 million tonnes of crude oil and 5 billion cubic metres of gas from the KG D6 field since 1 April 2009, and started 16 of 18 wells needed to achieve maximum capacity, he said.

Meanwhile, Anil Ambani Group firm Reliance Infrastructure has reportedly agreed to pay marketing margin to Reliance Industries in less than a month after it stopped paying the levy and has asked the Mukesh Ambani firm to resume natural gas supplies to its power plant. Reliance Infrastructure fell 2.91%.

The company, which had paid US$0.135 per million British thermal unit in marketing cost to RIL for over four months without protest, had on 15 September 2009 written to RIL saying it will no longer pay the "unauthorised and illegal" levy.

Oil exploration stocks rose as crude oil futures jumped on Thursday on renewed confidence in the global economy that buoyed equity markets. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) rose 1.4%. India's second biggest state-run oil exploration firm by revenue Oil India rose 1.92%. But Cairn India fell 1.43%. Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms.

But PSU OMCs fell as higher crude oil prices will increase under-recoveries on domestic sale of petrol, diesel, kerosene and LPG at controlled prices. HPCL, Indian Oil Corporation (IOC) and BPCL fell by between 0.9% to 2.27%.

Light, sweet crude for November delivery settled $2.12, or 3.1%, higher at $71.69 a barrel on the New York Mercantile Exchange on Thursday.

Banking stocks fell on profit taking after recent strong gains. India's largest private sector bank by net profit ICICI Bank fell 2.29% after it reduced auto loan rates by 50 basis points. The auto loans from the ICICI Bank will now cost 10.75% to 11% the bank said in a statement.

India's second largest private sector bank by net profit HDFC Bank fell 0.73% even as its ADR rose 1.46% on Thursday. The bank is seen reporting good Q2 results next week on the back of strong growth in fee income. A total of seven brokerages expect 16.3% to 31.5% growth in HDFC Bank Bank's net profit at between Rs 614.10 crore to Rs 694.10 crore in Q2 September 2009 over Q2 September 2008. HDFC Bank unveils Q2 results on 14 October 2009.

India's largest bank by net profit and branch network State Bank of India fell 2.32%. 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.

Auto stocks fell on profit taking. Auto stocks are seen reporting strong Q2 results on higher volumes and increase in profit margins. India's largest tractor maker by sales Mahindra & Mahindra fell 2.39%. Total sales 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 bike maker by sales Hero Honda Motors fell 1.42%. The firm's total sales rose 4.16% to 4,01,290 units in September 2009 over September 2008.

India's top small car maker by sales Maruti Suzuki India fell 2.37%. 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 truck maker by sales Tata Motors fell 6.66% on equity dilution concerns after the company said during market hours it has raised $750 million through an issue of global depositary receipts (GDRs) and convertible bonds. The company said it will use the funds to repay debt taken for acquisition of Jaguar Land Rover (JLR).

Tata Motors said the GDRs were issued at $12.54 each -- a 1.5% discount to Thursday's closing price of Rs 589.25 on NSE. The convertible notes were issued at a 7.5% conversion premium over the GDR price with a yield to maturity of 5.5%.

India's largest engineering & construction company by sales Larsen & Toubro fell 1.04% extending losses for the second straight day on equity dilution concerns. The company has reportedly raised $600 million through a share issue to qualified institutional buyers and convertible debentures. Meanwhile, Larsen & Toubro has also launched an offering of foreign currency convertible bonds for an aggregate amount of up to $200 million.

India's largest power equipment maker by sales Bharat Heavy Electricals fell 2.15% on profit taking. The stock had risen sharply in the past few days on expectations of good Q2 September results. The company unveils Q2 results on 23 October 2009.

Among other capital goods stocks, Praj Industries, Siemens, ABB, BEML fell by between 1.58% to 2.92%.

Shares of diversified firm Grasim fell 2.55%. 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 3.47%. 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.

Among other cement stocks, Ambuja Cements and Birla Corporation, rose by between 0.76% to 0.92%.

Construction shares fell on profit taking. 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. Nagarjuna Construction Company, Punj Lloyd, Valecha Engineering, Era Infra Engineering fell by between 0.49% to 2.55%.

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

India's largest thermal power generator by sales NTPC fell 1.2% on recent reports the government plans to sell 5% its stake in power producer through a follow-on public offering in January 2010.

Among other power stocks, Torrent Power, Power Grid Corpration of India, Tata Power Company fell by between 0.34% to 0.74%.

Telecom stocks rose after recent sharp fall after telecom regulator Telecom Regulatory Authority of India (TRAI) said on Thursday operators would be free to offer various tariff plans to their subscribers, including the per-second billing scheme, and they would also be free to fix the tariff per second.

This would come as a relief to the telecom operators who would have taken a hit on their revenues, if the per-second-billing model was to become mandatory, as telcos are already facing low revenues per subscriber. Telecom stocks had tumbled in the past four days on concerns over declining tariffs and rising competition.

India's largest cellular services provider by sales Bharti Airtel rose 2.54%. 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.

India's second largest cellular services provider by sales Reliance Communications (RCom) rose 1.24%.

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.

FMCG stocks fell on profit taking. FMCG firms derive substantial revenue from the rural sector. United Spirits, Dabur India, Hindustan Unilever, ITC, Britannia Industries fell by between 0.07% to 1.83%.

Metal stocks fell on profit taking. LMEX, a gauge of six metals traded on the London Metal Exchange rose 4.2% on Thursday, 8 October 2009.

India's largest private sector steel maker by sales Tata Steel fell 0.47%. 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.

Among other metal stocks, Hindalco Industries, National Aluminum Company, Hindustan Zinc, Sterlite Industries fell by between 0.21% to 3.35%.

Private sector ship builder Pipavav Shipyard settled at Rs 56.80 a discount of 2.07% over the initial public offer price of Rs 58. The stock debuted at Rs 60.05 a premium of 3.53% over its offer price of Rs 58.

Hotel stocks surged on hopes hotel occupancy rates may rise on a recovery in domestic economy. Indian Hotels, Hotel LeelaVentures and EIH rose by between 1.41% to 11.88%.

Pipavav Shipyard clocked highest volume of 5.03 crore shares on BSE. Cals Refineries (4.08 crore shares), Unitech (1.06 crore shares), Ispat Industries (0.94 crore shares) and SpiceJet (0.74 crore shares) were other volume toppers in that order.

Pipavav Shipyard clocked highest turnover of Rs 286.20 crore on BSE. Reliance Industries (Rs 191.98 crore), Bharti Airtel (Rs 168.72 crore), Reliance Capital (Rs 157.06 crore) and State Bank of India (Rs 154.37 crore) were other turnover toppers in that order.