Key benchmarks slide on broad based selling

The market declined on Tuesday, shrugging off better-than-expected industrial production data for November 2009. Investors chucked shares due to fears that a robust industrial production data and a recent surge in inflation will provoke India's central bank to tighten monetary policy.

Weak European stocks and lower US index futures also dented sentiment. IT stocks bucked the weak trend after strong Q3 December 2009 results from IT bellwether Infosys Technologies.

The BSE 30-share Sensex fell 104.20 points or 0.59%, off close to 189.49 points from the day's high. FMCG, banking, realty and metal stocks fell. The market breadth was weak in contrast to a strong breadth earlier in the day

The market was volatile. It turned negative after a firm opening triggered by better-than-expected Q3 December 2009 results by IT bellwether Infosys which were announced just before trading started. It recovered from the day's low in morning trade after some Asian stocks reversed early losses. The market pared gains after hitting fresh intraday day high in early afternoon trade. The market slipped into the red in afternoon trade. The market extended losses later.

Trade minister Anand Sharma said on Tuesday the government will provide more incentives to exports of 2,000 products including those in engineering, electronics and chemicals. The country will target the Chinese and the Japanese markets for exports, he added.

A latest government data showed industrial output surged in November 2009. Industrial output rose at a faster-than-expected 11.7% in November 2009 from a year earlier, helped by stimulus measures that boosted domestic demand, data showed on Tuesday. The growth was the fastest since October 2007, when the industry grew an annual 12.2%.

Manufacturing production rose 12.7% in November 2009 from a rise of 2.7% a year earlier. The final figure for October's annual industrial growth rate was unchanged at 10.3%. Industrial output rose 2.6% in the 2008/09 fiscal year (April-March), slower than 8.5% in 2007/08 as the global economic downturn hit Asia's third-largest economy

Strong industrial production data along with an expected surge in the wholesale price inflation reinforced market expectations that the central bank will tighten monetary policy. The next policy review by the Reserve Bank of India is on 29 January 2010

The growth trend in the industrial output will continue in the coming months, Kaushik Basu, the chief economic adviser at the finance ministry, said on Tuesday.

Industrial output growth in the fiscal year to March 2010 will be higher than 2.6% recorded in 2008/09, Montek Singh Ahluwalia, the deputy chairman of Planning Commission said on Tuesday. He also said he hopes that the inflation would come down, without specifying any time frame.

The government will make all efforts to introduce the pension bill in the upcoming budget, R. Gopalan, secretary, financial services, in the finance ministry, said on Tuesday.

Meanwhile, the December 2009 export figures will be positive, trade minister Anand Sharma said on Monday. Sharma told a banking summit that higher December 2009 exports are due to a low base. The exports rose an annual 18.2 % in November 2009 to $13.2 billion, the first rise after 13 months of annual decline. Sharma also said that the government would spend $1.5 trillion on infrastructure over the next 10 years. Food prices are likely to come down due to good winter crop prospects and there was no need to import wheat and rice, Sharma said on Monday.

European shares turned negative after a firm start on Tuesday. The key benchmark indices in France, Germany and UK fell by between 0.08% to 0.67%.

Asian stocks were mixed. The key benchmark indices in China, Jakarta, Japan, and South Korea were up by 0.27% to 1.91%. However, indices in Hong Kong, Singapore and Taiwan fell by 0.17% to 0.38%.

China's central bank on Tuesday sold one-year bills at a higher yield for the first time since August 2009, fanning concern the government is moving to tighten liquidity. The People's Bank of China on Tuesday raised the auction yield on one-year bills by a bigger-than-expected 8.29 basis points and drained a record 200 billion yuan ($29 billion) from the market, signalling a bias to tighten monetary conditions. Last week, the bank had surprised markets by raising the interest rate on three-month bills for the first time since August 2009, raising fears of a tightening cycle to head off economic overheating.

Trading in US index futures indicated Dow could fall 46 points at the opening bell on Tuesday, 12 January 2010.

After Wall Street's close Monday, US aluminium maker Alcoa Inc posted earnings, excluding charges, of one cent per share for the fourth quarter, compared with expectations for five cents. Alcoa shares lost 5.3% in after-hours trade.

In regular trading on Monday, the Dow and the S&P 500 closed at fresh 15-month highs as shares of big manufacturers advanced on strong Chinese economic data. The Nasdaq fell as tech shares succumbed to profit-taking. The Dow was up 45.80 points, or 0.4%, to 10,663.99. The S&P 500 index added 2 points, or 0.2%, to 1,146.98, while the Nasdaq was down 4.76 points, or 0.2%, to 2,312.41.

Closer home, the BSE 30-share Sensex fell 104.20 points or 0.59% at 17,422.51. The barometer index lost 134.16 points at the day's low of 17,392.55 in late trade. The Sensex jumped 85.29 points at the day's high of 17,612 in early afternoon trade.

The S&P CNX Nifty fell 39 points or 0.74% at 5210.40.

The BSE Mid-Cap index fell 1.14% and the BSE Small-Cap index fell 1.14%.

The market breadth, indicating the overall health of the market was weak. On BSE, 1077 shares advanced as compared with 1850 that declined. A total of 64 shares remained unchanged. The breadth was strong earlier in the day.

BSE clocked a turnover of Rs 6168 crore higher than Rs 6124.9 crore on Monday, 11 January 2010.

Among the 30-member Sensex pack, 22 fell while rest rose.

Index heavyweight Reliance Industries (RIL) inched up 0.20%. The stock had lost 1.85% on Monday after the firm raised $763 million through a block sale of 3.3 crore shares. RIL raised $763 million through a block sale of 3.3 crore shares on Monday, the country head of UBS Manisha Girotra said on Monday. Girotra also said the share sale at Rs 1050 each would be the last of block trades by the company for a while. UBS was the sole arranger for the trade.

Reliance, which is bidding for bankrupt LyondellBasell Industries, had previously sold treasury shares to state-owned insurer Life Insurance Corp of India raising $577 million last week. As per reports last week, Reliance had sweetened its offer to buy a controlling stake that valued LyondellBasell at $13.5 billion.

FMCG stocks fell on profit taking. United Spirits (down 0.44%), ITC (down 2.30%) and Hindustan Unilever (down 1%), fell.

Shares of software outsourcers rose after encouraging third quarter result from Infosys. India's largest software services exporter TCS rose 4.88%. India's third largest software services exporter Wipro rose 4.89%.

IT bellwether Infosys rose 3.97%. Infosys raised its full-year revenue and profit outlook after strong Q3 results and on improving trend for outsourcing orders. The company's consolidated net profit as per Indian accounting standards rose 2.72% to Rs 1582 crore on 2.8% rise in consolidated revenue to Rs 5741 crore in Q3 December 2009 over Q2 September 2009.

Infosys has raised earnings and revenue guidance for the year ending March 2010 (FY 2010) both in rupee and dollar terms. Infosys has forecast a 1.8% to 2% growth in consolidated dollar revenue for FY 2010 compared from a drop it had projected at the time of announcing Q2 September 2009 results. Infosys said FY 2010 consolidated revenue in dollar terms could rise to $4.75 billion to $4.76 billion, from $4.6 billion to $4.62 billion forecast earlier. The consolidated earnings per American depository share for the full year is seen rising 0.4% to $2.26, the company said in a statement.

Infosys CEO and managing director S. Gopalakrishnan said the global economic recovery seems to be led by the US and the financial services segment. Though IT budgets are expected to be flat in 2010, offshore outsourcing is expected to benefit from this recovery, he added. Chief Operating Officer S.D. Shibulal said the contribution to revenues from top ten clients grew by 12.2% during the quarter adding that Infosys' clients are taking decisions much faster.

Banking stocks fell as strong industrial output data stoked expectations that the central bank may tighten monetary policy. India's largest bank by net profit and branch network State Bank of India fell 2.84%, extending Monday's 0.85% decline. Non-performing loans (NPAs) in the small and medium enterprise sector (SME) are on the rise, chairman O.P Bhatt said on Monday. The state-run bank paid advance tax of Rs 1795 crore versus Rs 1700 crore.

India's second largest private sector bank by net profit HDFC Bank fell 0.49% after its ADR fell 1.52% on Monday. India's largest private sector bank by net profit ICICI Bank fell 3.08%.

Results from aluminum maker Alcoa weighed on metal stocks. National Aluminium Company (down 0.87%), Sterlite Industries (down 3.18%), Hindalco Industries (down 2.36%), JSW Steel (down 1.37%), Jindal Saw (down 0.73%), Steel Authority of India (down 3.53%), and Ispat Industries (down 3.50%), fell.

Tata Steel, the world's eighth-largest steelmaker fell 3.42%, falling for the straight second day. The company said on 5 January 2010 sales from its Indian operations rose 73% in December 2009 to 636,000 tonnes from a year earlier. The Indian 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.

Telecom stocks fell after telecom minister A Raja today said the government is yet to finalise the schedule for third-generation wireless spectrum auction. The auction, scheduled to begin from 14 January 2010, looks set to be delayed as the government has not issued notice inviting applications as yet. "Some of the issues between defence and the Department of Telecommunications have not been resolved. Either the (ministerial panel) chairman will decide or another round of consultation may be held," Raja said.

Bharti Airtel, India's top mobile operator by sales fell 2.07% after the company said on Tuesday it would invest $1 billion in Bangladesh's Warid Telecom, in which it would have board and management control. India's second largest mobile operator by sales Reliance Communications fell 3.49%.

Among other telecom stocks, Idea Cellular (down 5.17%), and Reliance Communications (down 5.08%), declined.

Rate sensitive realty stocks fell on profit taking. India's largest realty player by market capitalization DLF fell 3.86%. On 16 December 2009, the company's board approved merger of its commercial realty arm DLF Assets (DAL) with itself, a move aimed at repaying some of DAL's debt.

Among other realty stocks, Omaxe (down 3.67%), Unitech (down 2.21%), Phoenix Mills (down 0.93%) and Indiabulls Real Estate (down 4.12%), fell.

Realty stocks had surged over the past two days after a foreign brokerage house raised its outlook on the realty sector citing a potential recovery in the office property market and a steady growth in key residential markets.

Ansal Properties & Infrastructure lost 1.83%, after the company said promoters have pledged additional 23.68 lakh shares representing 1.92% of the equity capital of the company

Kinetic Motor Company slipped 7.02% on profit booking after seeing a sharp recent upsurge.

Entertainment Network (India) soared 7.24% after the Reserve Bank of India allowed foreign investors to buy further shares in the Mumba-based media firm as FII holding had dipped below the prescribed trigger limit.

Cals Refineries reported a highest volume of 6.12 crore shares on the BSE. K Sera Sera Productions (1.78 crore shares), Kaashyap Technologies (1.45 crore shares), Mahindra Satyam (1.33 crore shares), and G V Films (1.01 crore shares), were the other volume toppers on the BSE.

Thinksoft Global Services clocked a highest turnover of Rs 179.44 crore on the BSE. Mahindra Satyam (Rs 154.07 crore), State Bank of India (Rs 142.21 crore), Infosys Technologies (Rs 141.22 crore), and Reliance Industries (Rs 137.54 crore), were the other turnover toppers on the BSE.