Market drifts lower on profit booking lower

Year-end profit taking pulled the key benchmark indices lower in the week ended Friday, 18 December 2009. Selling was mainly in the frontline counters with mid-and small-caps witnessing lesser slide.

The spotlight during the week was on the war between the BSE and NSE for implementing extended trade timings. The BSE and NSE postponed the implementation of new trade timings to 4 January 2010 from 18 December 2009, giving the broking fraternity some respite.

In trying to wrest volumes away from NSE, the BSE on Tuesday, 15 December 2009, announced advancement of trade timing by 10 minutes to 9:45 IST from 18 December 2009. In reaction, NSE said the next day it would start trading at 9:00 IST from 18 December 2009. However, the two stock exchanges' decision to extend trading hours immediately without giving a sufficient notice period to market participants met with strong opposition from the brokering fraternity. Later, the two exchanges delayed the implementation of extended trading hours to 4 January 2010.

The BSE 30-share Sensex fell 399.20 points or 2.33% to 16,719.83 in the week ended 18 December 2009. The S&P CNX Nifty fell 129.60 points or 2.50% to 4987.70.

The BSE Mid-Cap index outperformed the Sensex, falling 1.58% to 6,470.58. The BSE Small-cap index, too, outperformed the Sensex, falling 1.04% to 7,885.72.

A surge in headline inflation pulled the market lower on Monday, 14 December 2009, with bank shares leading the slide. Metal and FMCG stocks, also fell. But, cement and IT stocks rose. The BSE Sensex fell 21.48 points or 0.13% to 17,097.55. The S&P CNX Nifty fell 11.60 points or 0.23% to 5,105.70.

The key benchmark indices slumped on Tuesday, 15 December 2009, as the dollar index, which tracks the greenback against a trade-weighted basket of six major counterparts, climbed roughly half a percent to a six-week high of 76.741. The BSE Sensex fell 220.39 points or 1.29% to 16877.16. The S&P CNX Nifty fell 72.65 points or 1.42% to 5,033.05.

The dollar's strength sparked fears of unwinding of dollar carry trade in which investors borrow in US dollars and invest it in high-yielding currencies and assets elsewhere. The dollar has been under pressure this year on speculation the US Federal Reserve will keep interest rates low for a prolonged period of time to aid recovery in the US economy.

The key benchmark indices ended a volatile trading session on a firm note on Wednesday, 16 December 2009, as European stocks and US index futures rose. Heavy bidding by foreign funds to the initial public offer of print media firm DB Corp also underpinned sentiment. The BSE Sensex rose 35.61 points or 0.21% to 16912.77. The S&P CNX Nifty rose 9 points or 0.18% to 5,042.05.

The key benchmark indices ended a choppy trading session lower on on Thursday, 17 December 2009T. The BSE Sensex fell 18.52 points or 0.11% to 16894.25. The S&P CNX Nifty fell 0.30 points or 0.01% to 5041.75.

The key benchmark indices slumped on Friday, 18 December 2009, on speculation the central bank will tighten monetary policy to help stem rising prices. The BSE Sensex fell 174.42 points or 1.03% to 16,719.83. The S&P CNX Nifty fell 54.05 points or 1.07% to 4987.70.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 5.47%. Reliance Industries' efforts to buy a controlling stake in bankrupt petrochemical maker LyondellBasell has reportedly got a bit complicated, as the Netherlands-based company submitted a new reorganisation plan to a court in the US, even as the Indian company evaluates a binding bid.

The new plan of Lyondell to emerge from bankruptcy through a rights issue and payment of its huge debt does not preclude Reliance from proceeding with its plans.

Reliance Industries told the Supreme Court on Thursday that the government can even undo a judicial verdict, if it is held that it has no powers to regulate gas prices based on production sharing contracts.

RIL counsel Harish Salve made this assertion before the three-member bench of Chief Justice K.G. Balakrishnan, in his counter-arguments in the legal battle with Reliance Natural Resources (RNRL) over gas supplies from the Krishna-Godavari basin. The RIL counsel also sought to refute RNRL's claim over a suitable bankable agreement on gas supplies with RIL for 28 million units for 17 years at $2.34 per unit.

Realty stocks fell on profit taking. India's largest realty player by market capitalization DLF fell 6.39%. DLF has announced a merger of its commercial realty arm DLF Assets (DAL) with itself a move aimed at repaying some of DAL's debt. The new structure involves the merger of DLF subsidiary DLF Cyber City Developers with Caraf Builders and Constructions, which is the holding company of DAL. The valuation ratio approved by the board for Cyber City and Caraf is in the ratio of 60:40.

This means that DLF shareholders will have access to 60% and promoters to 40% of the merged entity. However, this will be a cashless transaction. DLF sells commercial property to DAL, which is controlled by KP Singh who owns 78% in the latter along with his son and DLF promoter Rajeev Singh. DAL buys commercial property from DLF and collects lease rentals from it. With this merger, the debt on DLF's books would be an additional Rs 2,460 crore.

Among other realty stocks, Indiabulls Real Estate (down 4.62%), Phoenix Mills (down 4.67%), Unitech (down 7.62%), and Omaxe (down 4.45%), declined.

India's largest FMCG maker by sales Hindustan Unilever fell 3.46%. The company paid Rs 200 crore as advance tax in third quarter versus Rs 155 crore same quarter last year.

Banking shares fell on a likely monetary tightening by the Reserve Bank of India. India's second largest private sector bank by net profit HDFC Bank fell 6.64%. The bank's Q3 advance tax jumped to Rs 400 crore from Rs 300 crore.

India's largest bank by net profit and branch network State Bank of India declined 5.33%. The state-run bank paid advance tax of Rs 1795 crore versus Rs 1700 crore.

India's largest private sector bank by net profit ICICI Bank fell 6.31% The bank's Q3 advance tax fell to Rs 301 crore from Rs 625 crore. Its ADR fell 2.65% on Thursday. ICICI Bank has launched a home-loan scheme under which 8.25% interest rate will be fixed for the first two years. The floating rates will apply after 2 years. These rates will be applicable to loans sanctioned between December 2009 and January 2010.

Shares of country's largest commercial vehicle maker by sales Tata Motors rose 3.07%. The company on Thursday, 17 December 2009, reported a 62% jump in its total global sales in November 2009 to 75,775 units