Market loses ground after a strong beginning of the new Samvat year

The key benchmark indices closed the Muhurat trading sessions on a flat note after an upbeat start. Weak US stocks weighed on the domestic bourses. The BSE 30-share Sensex rose 3.19 points or 0.02%, off close to 170 points from the day's high and up close to 60 points from the day's low. A special one hour Muhurat trading is being held today on the bourses to mark the beginning of the new Samvat year as per the Hindu calendar. The market remains closed on Monday, 19 October 2009 on account of Diwali.

The market surged at the onset of the special one hour Muhurat trading session with the Sensex and Nifty hitting their highest levels in 17 months. It soon came off the day's high as the Dow Jones Industrial Average failed to hold 10,000 level on Friday, 16 October 2009

India's largest IT exporter by sales TCS rose after strong Q2 results. But other IT majors fell. Index heavyweight Reliance Industries pared gains. Auto stocks rose. But banking stocks fell after Bank of America on Friday posted its first quarterly loss of the current year in Q3 September 2009. Capital goods, FMCG and realty stocks also fell. India's largest copper maker by sales Sterlite Industries rose as its American depository receipt surged on Friday. Telecom stocks rose on bargain hunting after a recent sharp slide. The market breadth, indicating the overall health of the market was strong. BSE clocked a turnover of Rs 1723 crore.

The Sensex had ended Samvat 2065 with a gain of 8,812.80 points, or 103.56% at 17,322.82. Robust foreign fund inflows and a bullish trend in the global markets kept the market on a firm note.

The aggregate net profit of 167 companies announced so far rose 21.2% to Rs 7698 crore on 7.6% rise in sales to Rs 46778 in Q2 September 2009 over Q2 September 2008.

Meanwhile, inflation based on the wholesale price index (WPI) rose 0.92% in 12 months to 3 October 2009, slightly above previous week's annual rise of 0.7%, data released by the government on Thursday showed. Within the WPI, the food articles index rose 13.34%. The government revised upwards inflation for the year through 8 August 2009 to a much smaller decline of 0.37% from an estimated fall of 1.53%.

Faster industrial output growth and rising inflationary pressures have strengthened case for an end to the RBI's accommodative monetary stance next year. Industrial output grew at its fastest pace in 22 months in August at 10.4 %.

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. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.

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.

Banks are seen reporting a sedate growth in core lending amid sluggish credit offtake. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.

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.

US stocks fell, pulling the benchmark indices down from a one-year high on Friday, 16 October 2009, as General Electric and Bank Of America reported disappointing results. The Dow Jones Industrial Average slipped below the psychological 10,000 mark. The Dow was down 67.03 points, or 0.7%, to 9,995.91. The S&P 500 index fell 8.88 points, or 0.8%, to 1,087.68, and the Nasdaq Composite Index fell 16.49 points, or 0.8%, to 2,156.80.

Closer home, 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.

The BSE 30-share Sensex rose 3.19 points or 0.02% to 17,326.01, its highest closing since 16 May 2008. The Sensex rose 170.55 points at the day's high of 17,493.17 in early trade. The barometer index fell 62.16 points at the day's low of 17,260.66 in late trade

The S&P CNX Nifty fell 0.35 points or 0.01% to 5141.80. It hit a high of 5,176.80 in early trade, its highest since 6 May 2008

The BSE Mid-Cap index rose 0.65% and the BSE Small-Cap index rose 1.36%.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) was flat at Rs 2215.10. The stock came off the day's high of Rs 2304. RIL is in advanced talks to acquire refinery and petrochemical units in the US and Europe and could finalise a deal by end-2009, Maurice Bannayan, senior vice president at Reliance Industries said on Wednesday.

Anil Dhirubali Ambani group (ADAG) Chairman Anil Ambani called on Sunday, 11 October 2009, for a renewed effort to end a bitter feud with his brother Mukesh Ambani triggered by the carve-up of up a vast family business stretching from energy to telecommunications and financial services.

Anil Ambani said in a statement he believed "all disagreements can be sorted out in a constructive, cordial and conciliatory manner", and called for "a generous heart, a willing mind and accommodating spirit to resolve issues".

Reliance Industries (RIL) said it welcomes Anil Ambani's call to make a renewed effort to "resolve, reconcile and reciprocate" and said it hopes that it is a positive change in the negative, calumnious and malafide campaign launched by ADAG against RIL.

Their latest dispute is over a deal for Mukesh Ambani's Reliance Industries to sell gas to Anil Ambani's Reliance Natural Resources (RNRL) at below-market rates as agreed in a 2005 family settlement to divide the business following their father's death in 2002. The dispute has landed in the Supreme Court (SC). Anil Ambani said on Sunday the contentious gas dispute is a large national issue and can only be resolved through the SC.

The Supreme court will on Tuesday 20 October 2009 start hearing arguments in the case over a deal to sell gas to RNRL at below-market rates as per a 2005 family settlement.

RIL, last week, announced liberal 1:1 bonus issue. Both the bonus and the dividend are applicable to shareholders of the erstwhile Reliance Petroleum, which has been merged with RIL. Meanwhile, a sharp year on year fall in refining margins will weight on Q2 September 2009 results of RIL.

India's largest software services exporter TCS rose 1.25% after the company after market hours on Friday, 16 October 2009, reported stronger-than-expected Q2 September 2009 results. Consolidated net profit as per US accounting standards rose 6.81% to Rs 1623.90 crore on 3.16% growth in revenue to Rs 7435.10 crore in Q2 September 2009 over Q1 June 2009.;

TCS has a good business pipeline and is pursuing 20 to 25 large outsourcing deals, chief executive N. Chandrasekaran said. The management is seeing signs of recovery but it believes it will be slow. The discretionary spent is still tight but there is spent seen in banking, finance services and insurance (BFSI), retail, utility and pharma verticals, TCS said at a conference call after the results. However, a continuous improvement in volumes cannot be expected, it said. The company is seeing stability in demand environment. The management expects to maintain margins at current levels provided there is no adverse rupee movement.

But IT bellwether Infosys Technologies fell 0.22% as its ADR fell 1.92% on Friday. 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 on 9 October 2009.

Infosys, however, said strengthening rupee is a big concern for its earnings. The rupee is hovering near its highest level in more than a year. A stronger rupee negatively impacts operating margins of IT firms as the sector earns a lion's share of revenue from exports.

Bank stocks fell after Bank of America posted its first quarterly loss of the year as greater consumer and commercial loan losses more than offset strong trading profits and a boost in revenue from its acquisition of Merrill Lynch. India's largest private sector bank by net profit ICICI Bank fell 1.3% as its ADR fell 0.39% on Friday. The bank recently reduced auto loan rates by 50 basis points.

India's second largest private sector bank by net profit HDFC Bank fell 0.89% as its ADR fell 2.84% on Friday. The bank's net profit rose 30.2% to Rs 687.46 crore in Q2 September 2009 over Q2 September 2008. The results, which hit the market during trading hours on Wednesday, were more or less in line with market expectations.

India's largest bank by net profit and branch network State Bank of India fell 0.52%.

The central bank will reportedly hike the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM) category. Banks do not have to make any mark-to-market provisions on securities held this basket if prices of securities fall. Provisions have to be made out of profit and therefore, impact a bank's bottom line. Yields on ten-year government bonds have risen sharply this year. Bond prices and bond yields are inversely related.

Indian banks can put bonds equal to 25% of the value of deposits in their HTM accounts. The market expectations is for an increase in the ceiling by up to 2 percentage points, possibly at a quarterly monetary policy review on 27 October 2009.

India's largest dedicated housing finance firm HDFC fell 0.52%. HDFC, after market hours on Monday said net profit rose 24.27% to Rs 663.94 crore in Q2 September 2009 over Q2 September 2008. The results beat market expectations.

Realty stocks fell on profit taking. DLF, Indiabulls Real Estate and Unitech fell by between 0.92% to 2.37%.

Realty stock have risen sharply over the past few days on reports that 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.

Auto stocks rose on expectation of good Q2 September 2009 result. Bajaj Auto rose 1.04%. Bajaj Auto's net profit jumped 117.85% to Rs 402.83 crore in Q2 September 2009 over Q2 September 2008. The company announced the Q2 results during trading hours on Thursday, 15 October 2009.

India's largest motor bike maker by sales Hero Honda Motors rose 0.1%. Hero Honda is seen reporting robust Q2 results on the back of higher volumes and surge in profit margins due to fall in input costs. A total of nine brokerages expect a between 59.1% to 83.1% growth in Hero Honda's net profit at between Rs 487.20 crore to Rs 560.70 crore in Q2 September 2009 over Q2 September 2008. The company unveils Q2 results on Wednesday, 21 October 2009.

India's top small car maker by sales Maruti Suzuki India rose 0.35% 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. The company reportedly has sold 8,000 cars on Dhanteras, the largest on a single day.

But, India's largest truck maker by sales Tata Motors fell 0.31%. Tata Motors is planning to ramp up production of its Nano, billed as the world's cheapest car, by a fifth this month, Rajiv Dube, head of the company's passenger car business said on Wednesday. The company said during market hours on Friday 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).

India's largest tractor maker by sales Mahindra & Mahindra fell 0.44%. 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.

Total domestic automobile sales in the country in the first half of the financial year 2009-10 rose by 14.51% year-on-year to 57,82,920 units, according to automobile sales figures released by the Society of Indian Automobile Manufacturers (Siam). The jump in sales for the April-September period came from the double-digit growth posted by the passenger vehicle segment (comprising cars and sports utility vehicles) which grew by 13.46%, by the 15.68% spurt in two-wheeler sales and by an increase of 12.37% in sales of three-wheelers.

India's largest copper maker by sales Sterlite Industries rose 2.89% as its ADR rose 7.22% on Friday. The stock had slumped 5.44% on Friday on equity dilution worries after company said before market hours it had raised $500 million in convertible senior notes. The notes are convertible into American depositary shares at $23.33 per share.

FMCG stocks fell on profit taking. Hindustan Unilever, ITC, United Spirits fell by between 0.44% to 2.33%.

India's largest engineering and construction firm by sales Larsen & Toubro fell 0.19%. The company on Wednesday announced bagging orders worth Rs 966 crore.

India's largest power maker by sales Bharat Heavy Electricals fell 0.69%. The government on Thursday ruled out any immediate plan to disinvest its stake in the power equipment maker. The government owns 67% stake in Bhel.

India's second largest mobile services provider by sales Reliance Communications (RCom) rose 1.86% after Anil Ambani chairman of RCom on Thursday alleged there was a 'vicious and malafide' campaign against his telecom company Reliance Communications by a 'known rival group' and dubbed the special audit report, which claimed that RCom was mis-stating its revenues as 'biased and prejudiced'. But the auditor, Parekh & Co defended its work and also denied a claim by Mr Ambani that it had not sought feedback from RCom.

India's largest mobile services provider by sales Bharti Airtel rose 1.74%.

Monsanto India lost 3.2% after the company reported a net loss of Rs 4.59 crore in Q2 September 2009 as against a net profit of Rs 15.71 crore in Q2 September 2008.