Market slips for the second straight day

The key benchmark indices in India edged lower extending losses for the second straight day, defying gains in global stocks and US index futures ahead of the release of the US non-farm payrolls data for December 2009 later in the global day. IT pivotals extended recent losses on concerns arising form the rupee's recent strength against the dollar. Metal and banking stocks also fell. But, realty stocks rose.

The BSE 30-share Sensex fell 75.43 points or 0.43%, up close to 30 points from the day's low and off 115 points from the day's high. Index heavyweight Reliance Industries edged lower in volatile trade. There was plenty of action in the side market indicated by strong market breadth. The Sensex had lost 85.41 points or 0.48% to settle 17,615.72 on Thursday, 7 January 2010.

The market moved into positive zone in early trade after opening lower, tracking gains in Asian stocks. The market lost ground later with the Sensex hitting a fresh intraday low in morning trade. The market staged a rebound shortly. It later moved between positive and negative zone. The market cut losses soon after hitting a fresh intraday low in early afternoon trade. The market moved in a narrow range in afternoon trade. The market weakened later with the Sensex hitting a fresh intraday low in late trade.

A gauge of economic activity in emerging markets showed the pace of recovery there is beginning to lose steam, although growth remains on an upward trajectory. HSBC's Emerging Markets Index climbed to 56.1 in the December-ended quarter from 55.3 in the third quarter, with measures for manufacturing and services output in the period expanding at their fastest pace in eight quarters. HSBC chief economist Stephen King said the data shows that emerging markets economies are leading a broad-based global upturn

Still, HSBC said the pace of the recovery appeared to be easing, as the gain in the index was "considerably weaker" than the 4.6-point advance registered by third quarter. The index is calculated on 19 manufacturing- and service-sector purchasing manager's indexes across 14 countries.

The Bank of England's monetary policy committee kept its bond-purchasing plan and interest rates unchanged on Thursday, as business surveys and official data indicated the UK economy returned to growth at the end of 2009. But the signs of recovery are fragile, and the prospects for expansion are weighed down by the large debts of the public sector and households. Huge amounts of spare capacity in the economy suggest inflationary pressures also will remain muted. That means BOE policy makers are likely to consider in February whether to extend their £200 billion (about $320 billion) quantitative easing bond-buying program, in light of their new quarterly forecasts for inflation and output.

Closer home, Finance Minister Pranab Mukherjee said on Friday that the economy could grow 7.75 % in the current fiscal year to end-March. Earlier in the day Prime Minister Manmohan Singh said at a conference of non-resident Indians that the economy is expected to grow at 7% this year and may soon return to sustained high growth path of 9-10%. Singh pledged that his administration would work to address key constraints in the infrastructure and the agriculture sectors as these were key priorities of the Congress-led government which swept to power last year.

The food price inflation eased slightly in late December 2009, data released by the government during trading hours on Thursday, 7 January 2010, showed. The food price index rose 18.22% in the 12 months to 26 December 2009, lower than an annual rise of 19.83% in the previous week.

The Reserve Bank of India (RBI) has said interest rate policy cannot address inflation caused by supply problems, but has also said it is worried about a spillover to other prices. Senior government officials have said it is too early to raise interest rates. C. Rangarajan, the prime minister's economic adviser, said on Tuesday some liquidity tightening might be needed to moderate price expectations

Last week, RBI Deputy Governor Shyamala Gopinath said the focus of monetary policy was shifting to managing recovery and containing inflation from fostering growth after the global downturn. Some policymakers have said that food prices may drop in coming months and ease the pressure on the central bank to hike rates.

The December exports data should be "encouraging", Trade Minister Anand Sharma said on Thursday. India's exports rose an annual 18.2% in November 2009 to $13.2 billion, the first rise after 13 straight months of decline.

The Government may reportedly introduce a legislation in the budget session of Parliament to make necessary constitutional amendments and facilitate the launch of the Goods and Services Tax (GST) although the rollout of this comprehensive indirect tax reform from the scheduled date of 1 April 2010, seems unlikely.

Meanwhile, the government will reportedly allow companies to adjust the fringe benefit tax (FBT) paid by them against the advance tax due in the March 2010 quarter, reducing the hazard of claiming a refund and slightly improving profits at a time of rising costs.

European shares were higher on Friday, with banks the major gainers while investors awaited the release of the US non-farm payrolls data in a hope it will give signs the job market is improving. The key benchmark indices in France, Germany and UK were up by between 0.03% to 0.57%.

Unemployment in the 16-nation euro zone rose to 10% in November, up from 9.9% in October. That's the highest rate since August 1998, and in Spain, unemployment was 19.4%, Eurostat said.

Asian stocks rose on Friday after gains in US retail sales boosted confidence in the global economic recovery. Key benchmark indices in Hong Kong, Singapore, Indonesia and Taiwan rose by between 0.12% to 1.06%.

Japan's Nikkei stock average rose 1.09%, a 15-month high, with chip-related shares climbing on growing global demand for high-tech shares, but gains were capped by profit-taking ahead of key US jobs data.

South Korea's Kospi index rose 0.70% after South Korea's central bank on Friday kept its interest rate unchanged at a record-low 2% for an 11th month amid a growing conflict with a government opposed to early monetary tightening.

Chinese shares turned positive, rising 0.10%. China shares had lost nearly 2% on Thursday after a surprise move by China's central bank to raise the interest rate on its three-month bills. The move sparked fears that policymakers were getting ready to use more forceful measures to cool growth and fight inflation

Trading in US index futures indicated the Dow could gain 14 points at opening bell on Friday, 8 January 2010.

US stocks struggled on Thursday as the dollar rose and investors remained skittish ahead of the jobs report. The Dow Jones Industrial Average rose 33.18 points, or 0.3%, to 10,606.86. The S&P 500 index added 4.55 points, or 0.4%, to 1,141.69. The Nasdaq was down 1.04 points, or 0.1%, to 2,300.05.

In economic news, the labor department reported jobless claims last week rose by just 1,000 to 434,000, which is less than expected. Continuing claims came in at 4.80 million, lesser than expectations of 4.98 million.

Senior US Federal Reserve officials placed different emphasis on inflation risks on Thursday, with one warning failure to withdraw support policies soon enough could could trigger inflation while another played down such risks. Kansas City Federal Reserve Bank President Thomas Hoenig said the Fed should act sooner rather than later to contain longer-term inflation pressures and avoid sowing the seeds of a future crisis.

In Shanghai, China, meanwhile, St. Louis Fed chief James Bullard said the US jobless rate will start to fall soon and played down price pressures facing the United States in the near term, saying that the Fed's moves to pump liquidity into the economy were not an inflationary concern. Both officials have votes on the Fed's interest-rate setting panel.

Closer home, the BSE 30-share Sensex fell 75.43 points or 0.43% at 17,540.29. The Sensex fell 106.76 points at the day's low of 17,508.96 in late trade. It gained 42.40 points at the day's high of 17,658.12 in early trade.

The S&P CNX Nifty fell 18.35 points or 0.35% at 5244.75. Nifty January 2010 futures were at 5,256.25, at a premium of 11.50 points as compared to the spot closing of 5,244.75. Turnover in NSE's futures & options (F&O) segment was Rs 48,481.59 crore, lower than Rs 53,412.08 crore on Thursday, 7 January 2010.

The market breadth, indicating the overall health of the market was strong. On BSE, 1711 shares advanced as compared with 1174 that declined. A total of 72 shares remained unchanged.

Among the 30-member Sensex pack, 15 fell while rest rose.

The BSE Mid-Cap index rose 0.02% and the BSE Small-Cap index rose 0.44%. Both the indices outperformed the Sensex.

Sectoral indices on BSE witnessed a mixed trend. The BSE Realty index (up 3.23%), the BSE Capital Goods index (up 0.59%), the BSE Power index (up 0.57%), the BSE Health Care index (up 0.38%), the BSE FMCG Index (up 0.04%), the BSE Auto index (down 0.07%), the BSE Oil & Gas index (down 0.14%), outperformed the Sensex.

Banking sector index Bankex shed 0.43%, matching the decline in Sensex. The BSE Consumer Durables index (down 0.65%), the BSE Metal index (down 0.73%), the BSE IT index (down 1.98%), underperformed the Sensex.

BSE clocked a turnover of Rs 6265 crore, higher than Rs 6189.15 crroe on Thursday, 7 January 2010.

Index heavyweight Reliance Industries (RIL) fell 0.29% to Rs 1102. The stock was volatile. It hit a high of Rs 1115 and a low of Rs 1097.25. As per reports, the company has sweetened its offer to buy a controlling stake in bankrupt LyondellBasell Industries. Reliance's new offer has pushed its valuation of Lyondell to about $13.5 billion, up from $12 billion in an initial bid made in November 2009.

The RIL stock rose 1.51% on Thursday in a weak market on talks of more fund raising by the company through sale of treasury shares. RIL, which raised Rs 2,675 crore through the sale of treasury shares on Monday, 4 January 2010, is reportedly looking to generate a similar amount over the next few weeks by selling more stock to institutional investors.

The stake is likely to be offered at a discount of 2% to 4% as part of a strategy to beef up its cash reserve. The funds would be used for its immediate requirement in exploration and production (E&P), debt repayments and acquisition of bankrupt chemical giant LyondellBasell.

Software pivotals fell for the third day in a row on expectations the Indian rupee may rise further this year driven mainly by inbound portfolio investment. India's second largest software services exporter Infosys fell 2.41% as its ADR fell 3.05% on Thursday.

Analysts expect weak performance from Infosys in Q3 December 2009 due to a firm rupee and hike in employee salaries. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports. Nevertheless, a favourable cross-currency movement will to some extent offset the impact of firm rupee and hike in salary bill. A number of analysts expect Infosys to revise upwards its guidance for the year ending March 2010 amid an improved global business environment. However, a section of the market feels that an adverse cross-currency movement will mean a muted guidance from Infosys for Q4 March 2010. Infosys unveils Q3 results on Tuesday, 12 January 2010.

A total of seven brokerages expect a between 0.79% to 8.65% fall in Infosys' Q3 consolidated net profit as per Indian accounting standards at between Rs 1406.80 crore to Rs 1527.70 crore in Q3 December 2009 over Q2 September 2009. They expect a between 1.29% fall to a rise of 0.37% in revenue at between Rs 5512.90 crore to Rs 5606.10 crore in Q3 December 2009 over Q2 September 2009

India's third largest software services exporter Wipro fell 1.25% as its ADR fell 3.74% on Thursday. India's largest software services exporter TCS fell 1.98%.

The partially convertible rupee rose to a high of 45.55 per dollar on Thursday, 7 January 2010, its strongest level since 23 September 2008.

Metal stocks fell after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 2.38% on Thursday, 7 January 2010. Among non-ferrous stocks, National Aluminium Company, Sterlite Industries, Hindalco Industries, Hindustan Zinc, fell by between 0.81% to 1.97%.

But, Tata Steel, the world's eighth-largest steelmaker rose 0.13%. 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. India sales for the December 2009 quarter rose 49% to 16 lakh tonnes, the company said in a statement. 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.

Sales of flat products, used in automobiles and consumer durables, surged 90% in December, while sales of long products, primarily used in construction, rose 56%, Tata Steel said. The company's crude steel production in India rose 21%.

Steel companies are reportedly eyeing higher prices in 2010 as stronger economic growth worldwide drives up demand for the critical building material.

Recently, Tata Steel raised prices by Rs 2,000 a tonne, while state-owned Steel Authority of India (SAIL) withdrew the Rs 750-1,500 per tonne rebate it had started offering in November 2009, following the increase in raw material cost. Other secondary steel makers such as Bhushan Steel and Uttam Galva also raised the prices of their products on 5 January 2010.

Banking stocks fell on profit taking. India's largest private sector bank by net profit ICICI Bank fell 1.29%. India's largest bank by net profit and branch network State Bank of India fell 0.24%. The state-run bank paid advance tax of Rs 1795 crore versus Rs 1700 crore. But, India's second largest private sector bank by net profit HDFC Bank was flat as its ADR rose 1.6% on Thursday.

As per recent reports credit offtake has picked up. According to the latest Reserve Bank of India (RBI) figures, total loans, including food credit loans to Food Corporation of India for foodgrain procurement and non-food credit (all other loans) amounted to Rs 29,41,293.07 crore as on 19 December 2009. This represents a sequential growth of Rs 34,028 crore since 27 November 2009 compared to a growth of Rs 7,698 crore in the whole of November 2009.

Rate sensitive realty stocks rose 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. India's largest realty player by market capitalization DLF rose 4.26%. 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, Ackruti City, Unitech, Indiabulls Real Estate rose by between 0.38% to 4.79%.

India's largest engineering & construction firm by sales Larsen & Toubro rose 0.58% after falling for the last two days. The company said on Wednesday, it has received contracts worth Rs 2,325 crore for commercial and residential construction in Maharashtra, Gujarat, West Bengal and Chandigarh. The company said on Monday it won orders worth Rs 987 crore. The company said on Thursday 31 December 2009 it won two orders totaling Rs 580 crore.

Among other capital goods stocks, Bharat Heavy Electricals, Punj Lloyd, Siemens, ABB rose by between 0.5% to 2.29%.

India's largest thermal power generator by sales NTPC rose 1.18%. The power ministry has reportedly asked the petroleum ministry to place a proposal before the empowered group of ministers (EGoM) to allot 12 million standard cubic meters per day (mscmd) of gas from the KG-D6 block to state-run NTPC at $2.34 per million British thermal unit (mBtu).

The power ministry's proposal comes despite a pending court battle between NTPC, India's largest power generator, and Mukesh Ambani-led Reliance Industries (RIL) over the pricing of gas from the same field. Meanwhile, the government plans to divest stake in NTPC.

Among other power sector stocks, Reliance Power, Reliance Infrastructure, Torrent Power and Tata Power Company rose by between 0.02% to 1.17%

Infrastructure shares were in demand after Prime Minister Manmohan Singh promised to improve infrastructure, a day after the head of the world's biggest steelmaker Arcelor Mittal blasted the country over delays in getting projects off the ground. Nagarjuna Construction Company, Gayatri Projects, Gammon India, Hindustan Construction Company rose by between 0.63% to 3.65%.

India's largest drug maker by sales Ranbaxy Laboratories rose 1.69% extending Thursday's 0.57% gains on reports the firm has started discussions to buy a privately-held Bangalore-based vaccine company in deal valued around Rs 50 crore.

Among other healthcare stocks, Sun Pharmaceutical Industries, Dr Reddy's Laboratories, Cadila Healthcare rose by between 0.55% to 2.11%.

Auto stocks fell on profit taking. Bajaj Auto fell 1.71%. Bajaj Auto sold 2,20,429 two-wheelers in December 2009, registering an 85% growth in sales over the same month last year, when it sold 1,19,215 units.

India's largest car maker by sales Maruti Suzuki fell 1.44%. The company said on Thursday it had priced newly launched five-seater multipurpose car Eeco at Rs 2,59,000 as competition for low-cost vehicles heats up. Maruti Suzuki's managing director and chief executive officer, Shinzo Nakanishi was quoted by the media as saying on 5 January 2010 that the company will see flat to lower exports next year because of the scrappage of incentives by Europe. He also said there would be lower offtake from Nissan for exports as a result of the removal of incentives.

Nakanishi said the company aims to keep operating margins at 10% in fiscal year 2009/10 but profitability will be impacted by a rise in raw material prices and a rise in the yen.

Maruti Suzuki India reported 50.6% increase in total vehicle sales to 84,804 units in December 2009 over December 2008. Domestic sales rose 36.5% to 71,000 units, while exports surged 223.7% to 13,804 units.

India's largest motorcycle maker by sales Hero Honda Motors fell 0.39%. Hero Honda will comfortably exceed its fiscal 2009/10 sales target of 40 lakh units, its managing director Pawan Munjal said to media on Thursday. Sales jumped 74% to 375,838 units in December 2009 over December 2008.

India's largest tractor marker by sales Mahindra & Mahindra (M&M) fell 0.11% after declining 2.14% on Thursday. M&M marked its entry on Monday into the heavy commercial vehicle (HCV) segment with its unveiling of 25 and 31 tonne trucks with its US-based joint venture partner Navistar Inc.

Mahindra & Mahindra, reported 122% rise in its domestic sales to 22,754 units in December 2009 over December 2008. The company sold a total of 24,001 vehicles (domestic plus exports) in December 2009 as against 11,172 vehicles sold in December 2008.

But, TVS Motors rose 0.22% on bargain hunting after falling for the last three days. Sales rose 34% to 119,701 units in December 2009 over December 2008.

India's top truck maker by sales Tata Motors rose 0.56%. Tata Motors has raised prices of some truck and bus models in January 2010 by about 1%. The company expects commercial vehicle sales to remain strong in the next 12 months. The company's chairman Ratan Tata said on 5 January 2010 that the company may consider launching its ultra-cheap Nano car in the United States in three years, following possible sales in Europe by the end of 2011.

Tata Motors registered 105% growth in sales to 51,627 units in December 2009 over December 2008.

Cals Refineries clocked the highest volume of 8.21 crore shares on BSE. Mahindra Satyam (1.86 crore shares), Kauturi Global Solutions (1.8 crore shares), IFCI (1.48 crore shares) and Unitech (1.19 crore shares) were the other volume toppers in that order.

Mahindra Satyam clocked the highest turnover of Rs 210.10 crore on BSE. Aban Offshore (Rs 149.17 crore), DLF (Rs 147.55 crore), Bombay Dyeing (Rs 145.96 crore) and Tata Steel (Rs 137.97 crore were the other turnover toppers in that order.