Market slides as industrial production growth falls short of expectations

The key benchmark indices ended a choppy trading session lower as industrial production growth for October 2009 only matched estimates while market participants had hoped for a big surprise. Index heavyweight Reliance Industries (RIL) fell in volatile trade. Banking and realty stocks also fell on rate hike worries. Capital goods stocks rose.

The BSE Sensex fell 70.28 points or 0.41%, up close to 65 points from the day's low and off close to 230 points from the day's high. The S&P CNX Nifty came off the higher level after hitting 19-month high in early afternoon trade. The market breadth was weak. Stocks were firm across the globe.

Intraday volatility on the bourses was immense. The market surged in early trade on higher global stocks. It held firm in mid-morning trade. A sell-off gripped the market in early afternoon trade soon after the industrial production data for October 2009 hit the market at about 12:00 IST. The industrial production growth though robust at 10.3% fell below market expectations of a growth of 13% to 14% for the month. The lower than expected growth triggered a sell-off in equities. The market recovered from lower level in mid-afternoon trade. The market weakened once again later.

The latest data from global fund tracker EPFR Global showed emerging market equity funds received $2.3 billion in inflows in the week ended 9 December 2009, bringing 2009 inflows to $75.4 billion. Emerging-market funds are heading for record annual inflows in 2009. The previous record was $54 billion in 2007.

Asia excluding Japan and global emerging market stock funds each attracted net inflows of more than $800 million for the week. Among the largest developing nations, Russian stocks funds saw inflows rise to a seven-week high of $181 million while Indian equity funds absorbed $128 million, EPFR said.

The Congress-led government approved a plan on Thursday to create a new state called Telangana out of Andhra Pradesh, home to high-tech Hyderabad, after more than a week of violent protests and a hunger strike by a leading politician. But fresh protests and the mass resignation of local state lawmakers may still force the government to backtrack, fearing not only a political backlash, but also economic repercussions.

The economy may feel the pinch of the failed June-September monsoon in the quarter that ends this month, Finance Minister Pranab Mukherjee told parliament on Friday. He also said the country was likely to meet its tax target in the current fiscal year to March 2010, helped by higher direct tax receipts, which would make up for the deficiency in indirect tax collection.

The Lok Sabha on Friday approved extra spending of $5.5 billion for the fiscal year ending March 2010. The additional spending is needed for food and fertiliser subsidies, wages, infrastructure projects and an equity infusion into state-run carrier Air India. Finance Minister Pranab Mukherjee has said the additional spending need not be funded through additional borrowing.

Industrial output jumped 10.3% in October 2009 from a year earlier, helped by stimulus measures and robust domestic demand, data released by the government at 12:00 IST today showed. Manufacturing production rose 11.1% in October 2009 from a decline of 0.6% a year earlier. September's annual industrial growth rate was revised upward to 9.6% from 9.1% previously. Industrial output rose 2.6% in the 2008/09 fiscal year (April-March), slower than 8.5% in 2007/08.

The current trend in industrial output is likely to continue in the coming months, trade minister Anand Sharma said on Friday. The deputy chairman of India's planing commission Montek Singh Ahluwalia said on Friday he hoped the momentum in the country's industrial output would be sustained in coming months.

Investors fear that a recovery in the economy and a likely surge in wholesale price inflation will add pressure on the central bank to raise interest rates. The Reserve Bank of India holds a quarterly policy review in late January 2010.

Food prices rose at their fastest pace this year in late November, adding to the pressure on the Reserve Bank of India (RBI) to tighten monetary policy sooner to contain any likely spill-over to the broader economy. The food price index rose 19.05% in the 12 months to 28 November 2009, as the worst dry spell in nearly four decades and floods in parts of the country hurt summer crops. A week ago, the Organisation for Economic Cooperation and Development had cautioned India against complacency on rising prices.

The rise in food prices in India is mainly due to a supply shortfall, Finance Minister Pranab Mukherjee said on Friday. On Monday 7 December 2009, central bank Governor Duvvuri Subbarao said food price inflation was a supply-side issue and monetary policy was an inefficient tool to rein it in. The RBI holds its next policy meeting in late January, but it can adjust monetary policy at any time.

The government will conduct the auction for 3G wireless spectrum as scheduled, Communications Minister Andimuthu Raja, said on Friday. The auctions are slated to be conducted on 14 January 2010.

Reserve Bank of India (RBI) Governor D Subbarao said on Thursday capital flows into India are in line with requirement and as of now there is no concern of the flows building asset price bubbles. Deputy Governor Shyamala Gopinath said the new overseas borrowing norms are part of India's capital account management and they do not indicate capital control.

Subbarao said capital inflows into India were roughly in line with the current account deficit. "We cannot call it a capital surge like what happened in 2006-08," he said. Subbarao had said early this week that capital inflows in India reflected investor confidence in the economy. An economic adviser to the prime minister C Rangarajan has said India could absorb inflows of up to $100 billion in the current fiscal year, well above projected levels of $57-$60 billion.

RBI said after trading hours on Wednesday it would withdraw from 1 January 2010 some concessions on overseas borrowing for Indian firms introduced during the global credit crisis, although it also eased rules for the infrastructure and telecoms sectors.

Prime Minister Manmohan Singh said on Thursday the country needs to sharply increase public spending on agriculture, particularly on irrigation and technology, to raise farm output. This year, the worst monsoon in 37 years ravaged India's rice and cane crop, making the world's second-most populous country a big importer of sugar. The government is also considering rice imports to ensure the country has adequate grain stocks.

Meanwhile, DB Corp, India's second largest regional newspaper, was subscribed 0.66 times by 16:00 IST on the first day of issue today. The company has set a price band of Rs 185-212 a share.

Mumbai based realty firm Godrej Properties' initial public offering (IPO) was subscribed 3.98 times by 16:00 IST on last day of the issue today, 11 December 2009. The price band is at Rs 490-530 per share. The issue closes today, 11 December 2009.

European shares rose on Friday after snapping a three-day losing run in the previous session, ahead of key US macro data later in the day. The key benchmark indices in France, Germany and UK rose by between 1% to 1.73%.

Asian stocks rose the most in four days on Friday as a larger-than-expected surge in China's industrial production and a drop in US jobless claims to a one-year low boosted confidence in a global economic recovery. The key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by between 0.25% to 2.48%. But China's Shanghai Composite fell 0.21%.

China's industrial production grew more than economists estimated in November 2009, signaling a strengthening recovery in the world's third-biggest economy. Factory output climbed 19.2% in November 2009 from a year earlier, the biggest increase since June 2007, the statistics bureau said in Beijing today.

Trading in US index futures indicated Dow could gain 53 points at the opening bell on Friday, 11 December 2009.

US stocks edged higher on Thursday as signs of improving trends in the job market and a decline in the US October 2009 trade deficit reassured investors the economy was on a steady growth path. The Dow Jones industrial average was up 68.78 points, or 0.67%, at 10,405.83. The Standard & Poor's 500 Index ended up 6.40 points, or 0.58%, at 1,102.35. The Nasdaq Composite Index closed up 7.13 points, or 0.33 %, at 2,190.86.

The US initial jobless claims for the week ending 5 December 2009 came in worse than expected at 474,000. However, the continuing claims made a sharp move down to 5.16 million from 5.46 million. The consensus had called for 5.45 million continuing claims.

The trade deficit for October 2009 totaled 32.9 billion dollars which is less than the 36.8 billion dollar deficit that had been widely expected. It is also an improvement from the September numbers.

International Monetary Fund First Deputy Managing Director John Lipsky warned on Thursday that economic recovery around the world remains tentative and the return to growth is still vulnerable to new shocks. In a speech to the Japan Society, Lipsky said financial conditions have improved but are far from normal. Mounting credit losses, especially in commercial real estate, could dampen the recovery in business investment and inventories, he said.

Lipsky said monetary policy could likely remain accommodative for some time in rich economies given the absence of inflationary pressures. He said the fiscal challenges in rich countries were "formidable" and changes to taxes and spending would not be easy to design or implement. Reducing the debt levels would require fiscal adjustments in the order of 8% points of gross domestic product in advanced economies, he added.

Lipsky said the recent surge in capital flows into emerging markets could be a "catch up" from the previous sudden withdrawal from risk, and capital controls may be appropriate if the surge is temporary. But temporary capital controls should not be used to paper over real problems, or to avoid needed policy adjustment, Lipsky added.

The International Energy Agency has revised up by 130,000 barrels a day its forecast for 2010 global oil demand, which is now expected to average 86.3 million barrels a day. In its monthly oil report released Friday, the IEA also left its forecast for this year's oil demand virtually unchanged at 84.9 million barrels a day, a decline of 1.6% year-on-year.

The BSE Sensex fell 70.28 points or 0.41% to 17,119.03. The Sensex rose 162.40 points at the day's high of 17351.71 in early afternoon trade. The Sensex fell 133.19 points at the day's low of 17056.12 in afternoon trade.

The S&P CNX Nifty fell 17.35 points or 0.34% to 5,117.30. It hit a high of 5192.55 in early afternoon trade, its highest since 6 May 2008.

BSE clocked a turnover of Rs 4512 crore, lower than Rs 4587.95 crore on Thursday, 10 December 2009.

The market breadth, indicating the overall health of the market turned negative. On BSE, 1072 shares advanced as compared with 1765 that declined. A total of 73 shares remained unchanged. The breadth was strong in early trade.

Among the 30-member Sensex pack, 23 fell while rest rose.

A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex is up 7471.72 points or 77.44% in calendar year 2009, as on 11 December 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8958.63 points or 109.78% as on 11 December 2009.

Coming back to today's trade, the BSE Mid-Cap index fell 0.6% and the BSE Small-cap index fell 0.73% Both the indices underperformed the Sensex.

The sectoral indices on BSE showed a mixed trend. The BSE Capital Goods index (up 0.64%), the BSE Power index (up 0.59%), the BSE Auto index (up 0.25%), the BSE Metal index (up 0.24%), the BSE Consumer Durables index (up 0.23%), the BSE IT index (up 0.02%), the BSE PSU index (down 0.34%), outperformed the Sensex.

The BSE Bankex (down 1.22%), the BSE Realty index (down 0.94%), the BSE FMCG index (down 0.73%), the BSE Healthcare index (down 0.63%), the BSE Teck index (down 0.58%), the BSE Oil & Gas index (down 0.53%), underperformed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 0.15% to Rs 1068.95. The stock was volatile. It hit a high of Rs 1088 and a low of Rs 1064.15. With an aim to rope in a strategic partner for its Haryana special economic zone (SEZ) project, corporate giant Reliance Industries is reportedly in talks with IL&FS and a couple of other players for part-sale of its stake in Haryana SEZ.

Amid reports that Reliance Industries was mobilising funds for its acquisition, global petrochemical major LyondellBasell has said it has not yet received a final bid. RIL said on Wednesday it has no plans to buy any debt of LyondellBasell.

FMCG shares fell on profit taking. ITC, Hindustan Unilever, Dabur India, United Spirits fell by between 0.16% to 1.82%.

India's largest engineering and construction firm by sales Larsen & Toubro was flat at Rs 1040.15. The company said on Tuesday 8 December 2009 that it got orders worth Rs 844 crore.

Among other capital goods stocks, Bharat Heavy Electricals, BEML and ABB rose by between 1.2% to 3.12%.

India's second largest software services exporter Infosys Technologies rose 0.42%. Among other IT stocks TCS and Wirpo fell by between 0.27% to 0.62%.

Realty stocks reversed early gains on profit taking. India's largest realty player by market capitalization DLF fell 0.92%. New York-based hedge fund DE Shaw on Thursday sold a 36% stake in DLF Asset (DAL) to the promoters of DLF for $500 million, retaining only a four per cent stake which it intends to sell as and when the firm lists in Singapore. DLF Assets was set up as a real estate investment trust to put money into SEZs, infotech parks as well as to buy commercial property assets from group company DLF.

Among other realty stocks, Omaxe, Akruti City and Unitech fell by between 0.18% to 2.15%.

Banking shares fell on a likely monetary tightening by the RBI. India's largest private sector bank by net profit ICICI Bank fell 1.48% even as its ADR rose 1.87% on Thursday, 10 December 2009. 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.

India's second largest private sector bank by net profit HDFC Bank fell 0.14% even as its ADR rose 0.42% on Thursday.

India's largest bank by net profit and branch network State Bank of India fell 1.31%. The UPA government last week cleared the introduction of State Bank of India (Amendment) Bill in the current session of Parliament. The Bill seeks to bring the government's holding in the country's largest public sector bank on a par with other public sector banks at 51 %. Currently, the Union government holds 59% stake in SBI. At present, the stake of the promoter, that is Government of India, cannot fall below 55 %.

India's largest mortgage lender by total income Housing Development Finance Corporation (HDFC) fell 1.04% extending recent losses triggered by investor worry a dual interest rate scheme on home loans introduced by the company would hit margins.

HDFC, last week, announced a dual-rate loan scheme under which a borrower will be charged a fixed rate up to March 2012 and a floating rate thereafter. For a 20-year loan of Rs 30 lakh, a borrower will pay a fixed rate of 8.25% up to March 2012 and then a floating rate that's 500 basis points below the prime lending rate (PLR) - the institution's benchmark rate. Currently, the PLR is 13.75%.

Telecom stocks fell on profit taking. Telecom minister A Raja said there no change in 3G auction schedule. Meanwhile, the central bank on Wednesday allowed telecom firms to access oversees markets to fund their bids for 3G spectrum. India's largest mobile services provider by sales Bharti Airtel fell 3.21%. Bharti Airtel sees revenue pressured in the short term amid an intense price war in the country's wireless sector, director Akhil Gupta said on 7 December 2009.

India's second largest mobile services provider by sales Reliance Communications fell 1.1%. The company has reportedly won s the mgovernance contracts worth over Rs 500 crore. The government may impose a penalty on Reliance Communications after examining a state audit report that found the No. 2 telecoms firm under-reported revenue for two years, the telecoms minister A Raja said on Thursday.

Idea Cellular and Spice Communications fell by between 0.91% to 3.07%.

Mobile operators including Bharti Airtel, Vodafone Essar and Reliance Communications are locked in a tariff war, raising concerns about telecom firms' profitability. The price war is aimed at grabbing new users as new firms enter the market.

Construction stocks fell on profit taking. Hindustan Construction Company, Nagarjuna Construction Company, Valecha Engineering, Era Infra Engineering and Gayatri Projects fell by between 1.44% to 2.46%. Construction shares have jumped in the recent past on government's thrust on the infrastructure sector. The government has set a target of spending $20 billion a year on road construction.

India's largest thermal power generator by sales NTPC rose 0.43% The government is planning a 5% stake sale in the firm by March 2010.

Reliance Infrastructure rose 0.32% on reports it had won a Rs 1000 crore ($215 million) road project from Gujarat in western India.

Metal stocks were mixed. Hindalco Industries fell 0.84%. Hindalco Industries is reportedly raising Rs 4500 crore ($966 million) in debt to fund a new alumina refinery. The 1.5-million-tonne per year refinery, in the eastern state of Orissa, is expected to start production in July 2011 and involves about Rs 6500 crore as capital expenditure.

Steel Authority of India, National Aluminum Company, Sterlite Industries rose by between 0.02% to 2.41%.

Jindal Steel & Power gained 1.93%, after the board of directors of its subsidiary Jindal Power approved raising up to Rs 10000 crore through an initial public offer.

Tata Steel, the world's eighth-largest steelmaker by sales, fell 0.55%. The company said on 7 December 2009 its sales rose 34.5% to 498,000 tonnes, in November 2009 over November 2008.

The company on 4 December 2009 announced a partial closure of Corus' Teesside Cast Product (TCP) plant in north England, after four companies stopped buying metal from it. Operations will be suspended at the end of January 2010 forcing the loss of 1,700 jobs around 600 fewer than envisaged earlier, Tata Steel said in a statement.

After a downward trend, steel prices are reportedly headed for an increase next month, led by a demand push and steep increase in raw material prices. Rising demand and steep rise in raw material prices may lead to 10-30% hike in prices repot said.

Auto stocks fell on profit taking. India's largest small car maker by sales Maruti Suzuki India fell 0.23%. Germany's Volkswagen and Suzuki Motor, Maruti Suzuki 's parent, reportedly plan to develop a new small car for the Indian market. Japan's Suzuki Motor said on Wednesday 9 December 2009 it will sell a 19.9% stake to Volkswagen (VW) for $2.5 billion and use half the proceeds to buy shares in the German automaker, as the two firms form a formidable force in the auto industry. Japan's Suzuki has a 54.2% stake in Maruti Suzuki India

Suzuki's chief told the media on Wednesday that the company will cooperate with VW in India by sharing common components. VW's chief Winterkorn said the firm will pursue synergies in India between Suzuki, Volkswagen, Skoda brands.

Maruti's total vehicle sales spurted 66.60% to 87,807 units in November 2009 over November 2008. Domestic sales spurted 60.10% to 76,359 units, while exports surged 128.60% to 11,448 units in November 2009 over November 2008.

India's largest motorcycle maker by sales Hero Honda Motors fell 0.24%. The company's total vehicle sales jumped 32% to 3.81 lakh units in November 2009 over November 2008.

India's top truck maker by sales Tata Motors fell 0.27% . As per recent reports the company is negotiating to acquire Japanese conglomerate Sumitomo's 53.5% stake in the Punjab-based auto firm Swaraj Mazda in a deal worth up to $54 million. Tata Motors' total sales zoomed 65.49% to 54,108 units in November 2009 over November 2008.

India's top tractor marker by sales Mahindra & Mahindra (M&M) fell 1%. Mahindra & Mahindra will reportedly launch its first truck under a joint venture (JV) with Navistar, North America's largest commercial truckmaker, next month. The company's domestic auto sales soared 105.1% to 21,387 units in November 2009 over November 2008. M&M sold a total of 22,587 vehicles (domestic plus exports) in November 2009 as against 11,515 vehicles sold in November 2008.

But, India's second largest bike maker by sales Bajaj Auto rose 5% after a leading foreign broker raised its rating on the stock to 'buy' from 'neutral', saying that demand for two-wheelers is growing. Bajaj Auto will reportedly stop producing scooters by March 2010 to focus on motorcycles.

Bajaj Auto on Wednesday 9 December 2009 launched a 135 cc Pulsar, pushing the Pulsar brand into the mass segment. Bajaj expects a sell a minimum 30,000 units per month of the new Pulsar model. The automaker had recently refreshed the entire Pulsar lineup and expects total Pulsar sales to cross 80,000 units per month.

The company's total vehicle sales rose 73% to 2.76 lakh units in November 2009 over November 2008. Motorcycles sales jumped 84% to 2.42 lakh units.

Car sales in India rose an annual 61% to 1,33,687 in November 2009 over November 2008, boosted by improved consumer sentiment, easier availability of loans and a low sales base a year earlier, an industry body said on Tuesday. Sales of trucks and buses, a gauge of economic activity, doubled to 40,847 units in November from 20,631 a year earlier, data from the Society of Indian Automobile Manufacturers showed.

Cox and Kings (India) settled at Rs 426.05, a 29.11% premium over the initial public offer price of Rs 330. The Cox and Kings (India) stock debuted at Rs 304.10 (also its day's low so far), a 7.84% discount over its initial public offer price of Rs 330 per share.

Cals Refineries clocked highest volume of 1.88 crore shares on BSE. Cox & Kings (1.69 crore shares), FCS Software (1.37 crore shares), Unitech (0.92 crore shares) and Suzlon Energy (0.88 crore shares) were the other volume toppers in that order.

Cox & Kings clocked highest turnover of Rs 722.35 crore on BSE. Tata Steel (Rs 159.57 crore), State Bank of India (Rs 140.91 crore), DLF (Rs 97.58 crore) and Reliance Industries (Rs 87.41 crore) were the other turnover toppers in that order.