Market snaps four-day rally; RIL holds firm

The key indices snapped four-day winning streak on profit booking in frontline stocks. Weak global markets also dampened sentiment. Auto, IT and realty stocks led the fall. But Index heavyweight Reliance Industries held firm. Consumer durable stocks rose. The BSE 30-share Sensex fell 85.41 points or 0.48%, up close to 49.18 points from the day's low and off close to 117.62 points from the day's high.

The market was volatile. The market drifted lower in early trade as investors cashed in on some of the recent strong gains in share prices. The market recovered from lower level in morning trade. However, the intraday recovery proved short-lived. The market extended losses in early afternoon trade. A bout of volatility was witnessed in afternoon trade as the Sensex cut losses soon after hitting a fresh intraday low. The market weakened again with the Sensex hitting a fresh intraday low in mid-afternoon trade. After a strong rebound, the market lost ground once again in late trade

India VIX, a volatility index based on the S&P CNX Nifty index option prices, rose 1.72% to 22.50. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days

The market lost ground today after a recent strong showing. The BSE Sensex had jumped 357.31 points or 2.06% to a 22-month closing high of 17,701.13 on Wednesday, 6 January 2010 from a recent low of 17,343.82 on 30 December 2009.

The labour market in the United States is improving and the economy is close to the point when the unemployment rate will start to fall, a top US Federal Reserve official said on Thursday. James Bullard, president of the St. Louis Federal Reserve Bank, also said that US housing prices were stabilising, and that housing starts were also likely to steady and cease to be a drag on growth. Bullard, who votes on the US central bank's policy-setting Federal Open Market Committee (FOMC) this year, was speaking to an audience of university students in Shanghai.

Closer home, the finance ministry is reportedly in talks with other ministries for selling stakes in around 60 state-run firms in coming years, including miner Hindustan Copper. In November 2009, the Indian cabinet approved a proposal to sell at least 10% government holding in state-run firms and use the proceeds for social schemes until March 2012, to cut its fiscal deficit.

The food price index rose 18.22% in the year to 26 December 2009. While fuel price index was up 4.85 %, the primary articles price index jumped 14.39 % in the year to 26 December 2009, data released by the government today showed.

Commerce and industry minister Anand Sharma has reportedly urged against an immediate rollback of last year's stimulus measures, wading into a debate on the timing of the stimulus exit that has pitted ministries, policymakers and industry on different sides. The finance ministry, trying to manage the highest fiscal deficit in 16 years and galloping food price inflation, is keen to do away with the stimulus measures on the grounds that these have helped shepherd India's economy safely out of the worst global economic crisis since the Great Depression.

Finance secretary Ashok Chawla, on Wednesday said continuing stimulus measures wasn't good for the economy, arguing that 'too much of stimulus can be injurious to health' and clearly hinting that a rollback of the stimulus measures may be on the cards. However, Mr Sharma urged caution. Mr Sharma said while exports were on the recovery path, a 'full and sustained' recovery would happen only when demand picks up across the US, Europe and Japan.

The Indian industry on Tuesday urged the government to continue with the fiscal stimulus at least for six months, as withdrawing them could choke faster recovery of the economy.

The government has reportedly decided to come to the aid of select export sectors that are yet to recover from the global meltdown by offering new incentives and expanding the scope of existing packages. Exports broke a 13-month fall in November 2009, growing 18% to touch $ 13.2 billion, but a commerce department study found that sectors such as engineering, handicraft, textile , pharmaceuticals and leather are still under the weather.

Meanwhile, business activity among Indian services companies expanded at its fastest pace in 15 months in December 2009 and helped create more jobs, but the outlook for 2010 is wary, a survey released on Wednesday showed. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 57.41 in December, its highest since September 2008, after slowing to 55.20 in November. The index has been above 50, separates expansion from contraction

Data last month showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

In a move which could infuse more liquidity in the markets and make it more dynamic, the Securities and Exchange Board of India (Sebi) on Wednesday extended the tenure of contracts in securities lending and borrowing (SLB) to 12 months from one month. At the beginning, the tenure was of only seven days, which was later increased to 30 days.

European shares fell back from a closing 15-month high on Thursday, with banks taking most points off the index, and ahead of the Bank of England's decision on interest rates. The key benchmark indices in France, Germany and UK fell by between 0.03% to 1.06%.

The Bank of England is likely to keep interest rates on hold at a record low of 0.5 %, and maintain the quantitative easing programme at 200 billion pounds of asset purchases.

Most Asian stocks declined Thursday, with Chinese shares dropping sharply as a central bank move to tighten liquidity in the money markets raised fears interest rate increases could come sooner than expected. China's Shanghai Composite lost 1.9% to finish at 3192.78, extending losses after the People's Bank of China sold 60 billion yuan ($8.78 billion) worth of three-month bills at 1.3684%, increasing the yield on such bills for the first time since August 2009, from 1.3280%. The Shenzhen Composite index also dropped 1.9%, to 1,179.99.

On Wednesday, China's central bank said that it would pay particularly close attention to the property market in 2010 while managing inflationary expectations

In other Asian markets, the key benchmark in South Korea, Japan, Singapore, Hong Kong, Taiwan and Indonesia fell by between 0.59% to 1.28%.

Trading in US index futures indicated Dow could fall 34 points at the opening bell on Thursday, 7 January 2010.

US markets closed flat on Wednesday, 6 January 2010 ahead of the crucial jobs report on Friday, 8 January 2010. The Dow Jones Industrial Average was up 1.66 points, or less than 0.1%, to 10,573.68. The broader S&P 500 Index was up 0.62, or 0.1%, to 1,137.14. The Nasdaq Composite Index was down 7.62 points, or 0.3%, to 2,301.09.

The Federal Reserve released minutes from its last meeting yesterday which indicated that some members think more stimulus measures for the economy may be desirable. They modestly raised their projection for GDP growth for growth forecast upward for 2010 and 2011 and said they see lower core inflation in the next few years.

In key economic data, ADP Employment Services data showed the private sector lost 84,000 jobs in December. That was fewer than the 145,000 jobs lost in November, but did exceed the 73,000 expected by economists. And the December ISM service index improved to 50.1 from 48.7 that was registered in November.

The July fed-funds futures contract, at Wednesday's settlement, priced in a 36% chance for the Federal Open Market Committee (FOMC) to lift the Fed funds rate to 0.5% at the late June 2010 policy meeting. That's down from a 46% chance at Tuesday's settlement, a 58% chance at Monday's settlement, and a 78% chance after the New Year's Eve-shortened session last Thursday.

The Fed cut interest rates to near zero in December 2008 and created a host of emergency lending facilities to fight the worst recession in more than 70 years. It has pledged low rates for an extended period. Fed watchers have focused on clues to the timing of a possible tightening of monetary policy as the economy recovers. The FOMC maintained the "extended period" stance in its last statement on 15 December 2009.

Closer home, the BSE 30-share Sensex fell 85.41 points or 0.48% to settle 17,615.72. The Sensex fell 134.49 points at the day's low of 17,566.64 in mid-afternoon trade. It gained 32.21 points at the day's high of 17,733.34 in early trade.

The S&P CNX Nifty declined 18.70 points or 0.35% at 5263.10.

BSE clocked a turnover of Rs 6159 crore, lower than Rs 6784.89 crore on Wednesday, 6 January 2010.

The market breadth, indicating the overall health of the market was strong. On BSE, 1638 shares advanced as compared with 1237 that declined. A total of 94 shares remained unchanged.

The BSE Mid-Cap index fell 0.02%. The BSE Small-Cap index rose 0.67%. Both the indices outperformed the Sensex.

Among sectoral indices on the BSE, the BSE Oil & Gas index (up 1.24%), the BSE Consumer Durables index (up 1.11%), the BSE Metal index (up 0.07%), the BSE Power (up 0.17%), the Capital Goods index (up 0.20%), the BSE Bankex (up 0.42%), and the BSE PSU index (up 0.43%), outperformed the Sensex.

The BSE FMCG index (down 0.49%), the BSE Realty index (down 0.63%), the BSE Healthcare (down 0.95%), the BSE Auto index (down 1.72%), and the BSE IT index (up 2.22%), underperformed the Sensex.

Among the 30-member Sensex pack, 18 fell while rest held firm.

Index heavyweight Reliance Industries (RIL) rose 1.51% 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.

RIL, early this week, sold 2.58 crore treasury shares, created eight years ago following the merger of Reliance Petroleum with RIL, to state-owned Life Insurance Corporation, which is the largest institutional shareholder in the company with a 6% stake.

Software pivotals fell for the second day in a row on a firm rupee. India's second largest software services exporter Infosys fell 2.30% as its ADR fell 1.53% on Wednesday. India's third largest software services exporter Wipro fell 2.25% as its ADR fell 1.2% on Wednesday. India's largest software services exporter TCS fell 2.61%.

A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

The rupee extended its rally on Thursday afternoon soaring to new 15-month highs backed by large dollar sales by foreign banks, but buying of the US unit by importers and a weak sharemarket prevented a sharper rise. The partially convertible rupee was trading at 45.70/71 per dollar after hitting 45.55 earlier, its strongest since 23 September 2008 and above its previous close of 45.85/86.

Auto stocks fell on profit taking. India's largest motorcycle maker by sales Hero Honda Motors fell 2.51%. 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.

Bajaj Auto fell 1.72%. 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.

TVS Motors fell 0.81% falling for the third straight day. Sales rose 34% to 119,701 units in December 2009 over December 2008.

India's top truck maker by sales Tata Motors fell 3.37%. 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 Tuesday 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.

India's largest tractor marker by sales Mahindra & Mahindra (M&M) fell 2.14%. 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.

India's largest car maker by sales Maruti Suzuki India fell 0.60%. The company said on Thursday it had priced newly launched five-seater multipurpose car Eeco at 259,000 rupees ($5,640), 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 Tuesday 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.

Rate sensitive realty stocks also fell on profit taking. India's largest realty player by market capitalization DLF fell 1.12%. 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, Ackruti City, Unitech, Indiabulls Real Estate fell by between 0.77% to 1.41%.

Consumer durables stocks gained on hopes of good earnings on the back of higher sales in Christmas. Lloyd Electric, Blue Star, Titan Industries and Rajesh Exports rose by between 0.70% to 11.04%.

Non banking finance companies gained after Securities and Exchange Board of India said regulated finance companies no longer need to show 100% asset cover while selling unsecured debt instruments. SREI Infrastructure Finance, Shriram Transport Finance, Sundram Finance, Shriram City Union Finance rose by between 0.25% to 8.45%.

DB Corp lost 3.69% on profit booking after a decent debut on Wednesday, 6 January 2010.

Steel Strips Wheels was locked at 5% upper limit at Rs 117.40, extending gains for the seventh consecutive day, after the company secured an overseas contract for supplying spare wheels.

Cals Refineries reported a highest volume of 3.34 crore shares on the BSE. Kaashyap Technologies (2.62 crore shares), Alok Industries (1.07 crore shares), IFCI (1.02 crore shares), and Satyam Computer Services (93.17 lakh shares), were the other volume toppers on the BSE.

Aban Offshore clocked the highest turnover of Rs 167.97 crore on the BSE. Reliance Industries (Rs 164.35 crore), Essar Oil (Rs 136.02 crore), Tata Steel (Rs 120.43 crore), and Bombay Dyeing & Manufacturing Company (Rs 109.74 crore), were the other turnover toppers on the BSE.