Telecom stocks stumble in choppy market

Late buying demand in FMCG, metal and banking shares helped key benchmark indices register decent gains after a steep intra-day slide. Firm global stocks and expectations of strong Q2 September 2009 results aided a strong intraday rebound. High volatility was the hallmark of the day's trading session. The BSE Sensex rose 92.13 points or 0.55%, up 336.49 points from the day's low and off 30.02 points from the day's high. The 50-unit S&P CNX Nifty regained the psychological 5,000 level after falling below that mark at the onset of the trading session.

Despite the broad market recovery, the market breadth remained weak as small and mid-cap stocks failed to keep pace with their large-cap peers. Shares from FMCG pack extended gains for the second day on defensive buying. Shares from banking and metal pack also logged smart gains after an early hiccup. Telecom stocks were hammered for the second running day on worries falling tariffs and increasing competition will hurt the sector's profitability. Stocks from IT and realty pack also faltered.

As per provisional data, foreign funds today, 6 October 2009, sold equities worth a net Rs 156.97 crore. Domestic funds dumped stocks worth a net Rs 767.57 crore

Intraday volatility was immense. The market surged in early trade on a sharp surge in US stocks on Monday, 5 October 2009. A sell-off in telecom stocks sent the Sensex tumbling soon. The market cut losses later. Fresh selling in index pivotals dragged indices to a fresh intraday low in morning trade. The market once again cut losses later. However, the intraday recovery proved short-lived with the Sensex hitting a fresh intraday low in early afternoon trade.

Bank stocks led an intraday rebound in afternoon trade. The recovery gathered steam with the Sensex regaining positive zone in mid-afternoon trade. The market struck a fresh intraday high in late trade. It pared gains later

Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results which will start trickling in soon. Auto firms are seen reporting strong Q2 results on the back strong volume growth and on lower input costs. Cement firms, too, are seen reporting good Q2 numbers on the back of volume growth, higher realisations and decline in costs like imported coal. Banks are seen reporting a sedate growth in core lending. A sharp surge in equity markets may help treasury gains for some banks. As far as IT stocks are concerned, the focus in mainly on the guidance from IT bellwether Infosys.

A surprise hike in interest rate by Australia on Tuesday, 6 October 2009, eased pressure on the Reserve Bank of India from holding back on raising its own rates. The RBI may have to reverse its loose monetary policy if inflation surges. 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.

The Australian central bank said it was prudent to gradually take back policy accommodation since the worst danger for the economy had passed. It raised its key policy rate by a quarter-point to 3.25%. Australia is the first G20 nation to raise rates since markets crashed after the failure of Lehman Brothers in September last year.

The Reserve Bank of India (RBI) Governor D Subbarao said on Monday, 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.

On the same day, Planning Commission deputy chairman Montek Singh Ahluwalia said 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.

European markets extended early gains led by banking shares after data showed the US services sector expanded for the first time since 2008. Key benchmark indices in UK, Germany and France were up by between 1.33% and 1.60%

British manufacturing output saw a monthly fall of 1.9% in August 2009, for an 11.3% drop compared to the same month last year, the Office for National Statistics reported today, 6 October 2009. Economists had forecast a 0.4% monthly rise and a 9.1% year-on-year decline. Industrial production fell 2.5% in August 2009 for an 11.2% annual decline. Economists had forecast a 0.3% monthly increase and an 8.6% annual fall.

Most Asian stocks were trading higher today, 6 October 2009 after US stocks rebounded from four sessions of declines, with resource producers such as Rio Tinto getting a boost from a jump in gold and other commodities, while exporters also advanced in Japan and South Korea. Key benchmark indices in Taiwan, Hong Kong, Japan and Singapore were up by between 0.18% and 1.87%. However South Korea's Seoul Composite index fell 0.53%

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 66 points at the opening bell today, 6 October 2009.

US stocks rebounded on Monday, 5 October 2009 after two straight weeks of declines as investors used the recent sell-off as a chance to jump back into the market. A better-than-expected reading on the services sector of the US economy and strong demand for Treasury's first bond auction of the week bolstered the bulls.

The Dow Jones industrial average gained 112.08 points, or 1.18%, to 9,599.75. The Standard & Poor`s 500 index rose 15.25 points, or 1.49%, to 1,040.46 and the Nasdaq Composite index advanced 20.04 points, or 0.98%, to 2,068.15.

In economic data, the Institute for Supply Management's services sector index rose to 50.9 in September 2009 from 48.4 in August 2009. The reading indicates expansion in the sector after 11 straight months of contraction and was better than the 50 economists had expected. The report detailed that the new-orders index and the business activity index both hit their highest levels since October 2007. The new-orders index rose to 54.2% in September 2009 from 49.9% in August 2009. The business activity index rose to 55.1% from 51.3%.

Back home, the International Monetary Fund (IMF) may reportedly raise its 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.

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 by the government 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.

A section of the market is worried of hedge fund redemption after the one year moratorium on redemption ends this month. Buried under redemption pressure in the aftermath of the collapse of US investment bank Lehman Brothers, hedge funds took a moratorium period of one year in October last year.

Meanwhile, the Bombay Stock Exchange (BSE) on Monday, 5 October 2009 announced a differential pricing structure for its broker-members, while cutting transaction fees in the cash segment to boost trading volumes. For passive orders, defined as orders already existing in the order book at the time of trade matching, the transaction charges will be reduced from Rs 3.50 per Rs 1-lakh turnover to Rs 2.25 per Rs 1-lakh turnover. For active orders (buy or sell), defined as incoming orders that are matched against the passive orders, the transaction charges will be reduced from Rs 3.50 per Rs 1 lakh of turnover to Rs 3.25. The changes will be effective from Wednesday, 7 October 2009.

The BSE 30-share Sensex rose 92.13 points or 0.55% to 16,958.54. The Sensex opened 12.97 points higher at 16,879.38. The barometer index rose 122.15 points at the day's high of 16,988.56 in late trade. The Sensex lost 244.36 points at the day's low of 16,622.05 in early afternoon trade.

The S&P CNX Nifty was up 24.20 points or 0.48% to 5,027.40. Nifty recovered from day's low of 4921.05. Nifty October 2009 futures were at 5038.90 at a premium of 11.50 points as compared to the spot closing.

Turnover on BSE surged to Rs 6,353 crore from Rs 5,369.40 crore on Monday, 5 October 2009. Turnover in NSE's futures & options (F&O) segment jumped to Rs 88,732.60 crore from Rs 56,090.77 crore on Monday, 5 October 2009.

The market breadth, indicating the overall health of the market was weak in contrast to a strong breadth in early trade. On BSE, 1710 shares declined as compared with 1057 that rose. A total of 85 shares remained unchanged.

The Sensex is up 7311.23 points or 75.78% in calendar year 2009 as on 6 October 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8798.14 points or 107.81% as on 6 October 2009. FII inflow in the calendar year 2009 totaled Rs 61497.60 crore (till 1 October 2009).

Coming back to today' s trade, the BSE Mid-Cap index rose 0.20% to 6,208 whereas the BSE Small-Cap index fell 0.82% to 7,365.22. Both the indices underperformed the Sensex.

Sectoral indices on BSE displayed mixed trend. The BSE FMCG index (up 3.17%), the BSE IT index (down 1.10%), the BSE Capital Goods index (up 1.66%), the BSE Healthcare index (up 0.56%), the BSE Metal index (up 2.38%), the BSE Power index (up 1.32%), outperformed the Sensex.

The BSE Oil & Gas index (down 0.16%), the BSE PSU index (up 0.26%), the BSE Consumer Durables index (up 0.33%), the BSE Teck index (down 3.78%), the BSE Bankex (up 1.94%), the BSE Realty index (down 0.90%), underperformed the Sensex. The BSE Auto index rose 0.55%, matching the BSE Sensex's rise.

There were as many gainers as losers from the 30-member Sensex pack.

Metal stocks gained after LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.20% on Monday, 5 October 2009. India's largest private sector aluminium marker by sales Hindalco Industries jumped 6.39% to Rs 125.70 and was the top gainer from the Sensex pack. The stock rose on bargain hunting after the stock corrected 8.30% in the preceding two sessions.

Tata Steel (up 3.17%), and Sterlite Industries (up 2.90%), edged higher from the metal pack

Shares from FMCG pack extended gains for the second day on defensive buying. Hindustan Unilever (up 4.68%), Marico (up 1.93%), ITC (up 3.61%), Godrej Consumer (up 4.46%), and Colgate Palmolive (up 1.96%), were the other gainers from the FMCG pack.

Select food processing stocks rose after Prime Minister Manmohan Singh today, 6 October 2009 said there is an urgent need to rationalise and simplify the tax structure on the food processing industry. Nestle India (up 2.46%), Kwality Dairy (up 4.32%), Foods & Inns (up 2.41%), and Saboo Sodium (up 1.46%), rose.

Though primary agricultural commodities are mostly exempted from taxes, processed foods are subjected to multiple levies, he said

Banking shares rebounded from day' low on bargain hunting. India's largest bank by net profit and branch network State Bank of India advanced 1.60% to Rs 2166, after sliding to day's low of Rs 2097.10. The bank is reportedly 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 second largest private sector bank by net profit HDFC Bank gained 1.34% to Rs 1654 after declining to day's low of Rs 1605 in early trade. India's largest private sector bank by net profit ICICI Bank, too, recovered from its day's low of Rs 893.50 and was settled 3.21% higher at Rs 940.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) was down 0.51% to Rs 2126.10. Nevertheless, the stock recovered from day's low of Rs 2102.90. The government may reportedly review RIL's Krishna-Godavari basin gas price along with the allocation of additional gas production from the D-6 block. Reports added that some consumers from fertiliser and power sectors have claimed the $4.20 per million British thermal unit (mBtu) price for KG gas approved during the previous UPA government is 'high' and warrants a 'review'.

Meanwhile, the Supreme Court on Thursday, 1 October 2009 dismissed National Thermal Power Corporation's (NTPC) special leave petition seeking quashing of a Bombay high court order giving permission to Mukesh Ambani's RIL to amend its written submissions in its on-going dispute with the India's largest power generation firm by sales NTPC on the supply of gas from the Krishna-Godavari basin. Shares of NTPC declined 0.12%.

PSU OMC's declined as rise in crude oil prices will result in higher underrecoveries on domestic sale of petrol, diesel, LPG and kerosene at a controlled price. BPCL (down 1.91%), HPCL (down 1.18%), and Indian Oil Corporation (IOC) (down 0.60%), declined.

Oil exploration stocks rose after crude oil prices edged higher on Monday, 5 October 2009. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) rose 1.23%. India's second biggest state-run oil exploration firm by revenue Oil India was up 0.50%. India's largest private sector oil exploration firm by market capitalisation Cairn India gained 1.60%. Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms.

Light sweet crude for November 2009 delivery rose 46 cents to settle at $70.41 a barrel on the New York Mercantile Exchange on Monday, 5 October 2009, supported by rally in US stocks weakness in the US dollar

Telecom stocks were under severe selling pressure for the second running day spooked by reports the Telecom Regulatory Authority of India (TRAI) is reportedly planning to make the per second billing a mandatory tariff option for all operators, a move that will benefit customers by potentially reducing call charges and adding transparency to their tariff plans. However this move is likely to impact revenues of telecom service providers.

India's largest cellular services provider by sales Bharti Airtel slumped 10.80% to Rs 357.05 on high volume of 1.47 crore shares. It was the top loser from the Sensex pack. The company'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.

Meanwhile, Bharti Airtel's Chief Executive Manoj Kohli today, 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

A reduction in tariffs by Reliance Communications (RCom) also raised concerns of a fresh tariff war. RCom on Monday 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.

RCom tumbled 10.78% to Rs 267.85 on high volume of 1.16 crore shares.

Telecom shares had slumped on Monday, 5 October 2009 with RCom sliding 5.6% and Bharti Airtel declining over 8% on reports the auction of 3G telecom services by the government could be delayed.

Among other cellular services provider, Idea Cellular was down 8.22%, Tata Teleservices (Maharashtra) lost 3.71%, and Mahanagar Telephone Nigam shed 4.87%

3G, or third generation airwaves are vital for high-end services such as videoconferencing and ultra-fast internet on mobiles.

Telecom minister A Raja 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.

Shares of diversified firm Grasim were unchanged at Rs 2508.80. The stock had tanked over 7% on Monday, 5 October 2009 after 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 rose 0.89% ahead of its board will meet today, 6 October 2009 to consider a merger with the cement unit of Grasim Industries. 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's largest cement maker by sales ACC lost 2.86%. The company has raised Rs 300 crore through the issue of 3000 secured non-convertible debentures of the face value of Rs 10 lakh each, on a private placement basis. The bond carries a coupon of 8.45% payable annually and is for a tenor of 5 years. The company made this announcement after market hours on 5 October 2009.

India's largest dam builder by sales Jaiprakash Associates fell 0.39% despite reporting a 13% rise in its cement sales at 692,000 tonne in September 2009 over September 2008.

Cement shares declined after a foreign broker downgraded shares of key cement makers on worries of lower demand. Shree Cement (down 4.05%), Ambuja Cements (down 3.47%), India Cements (down 1.83%), Binani Cement (down 3.70%), Dalmia Cement Bharat (down 3.70%), Prism Cement (down 6.22%), and Madras Cement (down 5.26%), fell.

India's largest engineering & construction company by sales Larsen & Toubro rose 1.88% to Rs 1686. The stock rebounded from day's low of Rs 1621 after the company said its construction division won orders worth Rs 1513 crore in Q2 September 2009. The company made the announcement during trading hours today, 6 October 2009.

India's largest power equipment maker by sales Bharat Heavy Electricals gained 3.71% on fresh buying

India's largest private sector power generation firm by sales Reliance Infrastructure surged 5.47%. As per recent reports the company is considering offering shares of its newly created subsidiaries to the public and looking to bring in strategic financial partners as part of value unlocking. It was the top gainer from the Sensex pack.

The report said that of the six subsidiaries formed as part of a demerger scheme, yet to be approved by the Bombay High Court, the company plans to list at least the power distribution companies, Reliance Energy and Reliance Power Transmission in addition to its metro projects.

IRB Infrastructure Developers spurted 7.68% after a foreign brokerage issued a 'buy' rating on the stock by saying the firm will capitalise on spending on highways by the government.

Madhucon Projects jumped 4.59% after the company secured a contract worth $3.9 million from the Government of Nepal for a road project. The company announced the new order win after market hours on Monday, 5 October 2009.

Realty stocks edged lower for second day in a row on worries of increased supply of paper from the sector. DLF (down 1.67%), Sobha Developers (down 4.25%), Parsvnath Developers (down 1.14%), Unitech (down 1.59%), and Omaxe (down 1.27%), slipped.

Realty companies including Emaar MGF Land, Lodha Developers and Sahara Prime City have filed their draft red herring prospectuses on 29 September 2009 with the market regulator, Securities and Exchange board of India (Sebi), to raise a total of around Rs 9,800 crore through initial public offerings (IPO). In its second attempt at the primary market to raise funds, Emaar MGF Land is hoping to garner Rs 3,850 crore through its IPO.

Select auto stocks gained on the back of healthy monthly sales data. India's top small car maker by sales Maruti Suzuki India fell 0.16%. 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 lost 0.90%. The company's total sales rose 5.77% to 52,513 units in September 2009 over September 2008.

India's largest tractor maker by sales Mahindra & Mahindra rose 1.92%. 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 second largest bike maker by sales Bajaj Auto's rose 1.41%. The company's total sales rose 14% to 249,795 units in September 2009 over September 2008. But India's largest bike maker by sales Hero Honda Motors fell 0.14% after total sales rose 4.16% to 4,01,290 units in September 2009 over September 2008.

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 largest software services exporter TCS fell 0.89%. 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 slipped 0.66% despite 3.01% surge in its ADR on Monday, 5 October 2009. 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%.

India's third largest software services exporter Wipro lost 2.27% even as its ADR jumped 4.21% rise in its ADR on Friday, 2 October 2009

The Indian rupee was trading at 47.10, stronger than Monday's closeof 47.52/53

Jet Airways India spurted 10.35% on reports that the company's plan to raise funds from international institutional investors will come up for approval by the Foreign Investment Promotion Board (FIPB) this week. According to reports, the matter is likely to be taken up for discussion at the FIPB's meeting this Friday, 9 October 2009.

Bharti Airtel was the top traded counter on BSE with turnover of Rs 533.21 crore followed by Reliance Communications (Rs 314.75 crore), Reliance Industries (Rs 174.68 crore), ICICI Bank (Rs 160.76 crore), and DLF (Rs 158.55 crore).

Cals Refineries clocked highest volume of 2.13 crore shares on BSE. Ispat Industries (1.78 crore shares), Bharti Airtel (1.48 crore shares), Unitech (1.43 crore shares) and Reliance Communications (1.17 crore shares) were other volume toppers in that order.

Numeric Power Systems jumped 5.22% after the company fixed 15 October 2009 as the record for a liberal 1:1 bonus issue. The company announced the record date during trading hours today, 6 October 2009.

Container Corporation of India rose 1.87% to Rs 1229.80 after a block deal of 50,000 shares was executed on BSE at Rs 1180 per share. The block deal constituted 0.04% of the company's equity

Pyramid Saimira Theatre was locked at upper limit of 5% after the company tied up RDB Group to produce 28 films and 1785 hours of television content in 2010-2011. The announcement was made during trading hours today, 6 October 2009.

Lupin rose 3.95% after the company out-licensed a new drug delivery system to US based drug major Salix Pharmaceuticals. The company made this announcement after market hours on Monday, 5 October 2009.