Hindustan Unilever drop 4% in choppy market

The key benchmark indices recovered from the day's lows and closed flat after moving between the positive and negative terrain throughout the day. Higher European stocks helped a late recovery on the domestic bourses. But the market ended off the day's high as strong industrial production data for January 2010 reinforced expectations of a rate hike by the Reserve Bank of India. The Sensex and Nifty today struck their highest level in a month and a half. The BSE 30-share Sensex was down 1.34 points or 0.01%, off close to 75 points from the day's high and up close to 40 points from the day's low.

IT, realty and banking stocks fell. Index heavyweight Reliance Industries pared early gains. Shares of FMCG giant Hindustan Unilever fell for the second day in a row. The market breadth was weak.

The market witnessed bouts of intraday volatility. Stocks pared gains soon after hitting 1-1/2 month highs at the onset of the trading session. The market regained strength in morning trade. The market once again trimmed gains in mid-morning trade. It further trimmed gains to in early afternoon trade after the industrial production data. The market moved between positive and negative zone in early afternoon trade. The market cut losses after hitting a fresh intraday low in afternoon trade. The market hit a fresh intraday low in mid-afternoon trade. The market regained positive zone in late trade.

Finance minister Pranab Mukherjee said economic growth is not merely government expenditure driven and that he is confident of maintaining domestic savings rate at 36% of GDP in the year ending March 2011.

India will take gradual steps to full convertibility of the rupee but not in one go, Mukherjee told parliament earlier in the day. Fuller convertibility is expected to facilitate rapid growth through higher investment and improve efficiency in the financial sector through greater competition.

Industrial output rose a robust 16.7% in January 2010 from a year earlier, slightly stronger than market expectations, aided by stimulus measures that boosted domestic demand, data released by the government today showed. Manufacturing output jumped 17.9%. The government revised upwards industrial production growth for December 2009 to a record level of 17.6% from earlier 16.8%

Mukherjee said he hoped the growth momentum in industrial output would continue. India is well-set to go back to 8.5% growth in the next fiscal year, Deputy chairman of the Planning Commission Montek Singh Ahluwalia said on Friday. He also said he expects foreign fund inflows to continue to be good. India's economy could expand over 8.5% in the March quarter, the finance ministry's chief economic adviser Kaushik Basu said on Friday.

Food prices moderated slightly while fuel price inflation accelerated in late February adding pressure on the Reserve Bank of India (RBI) to raise rates at its April policy review. The wholesale price inflation (WPI) was at 8.56% in January, just above the Reserve Bank of India's (RBI) end-March projection of 8.5%.

The food price index rose 17.81% in the 12 months to 27 February 2010, marginally lower than an annual rise of 17.87% in the previous week. The recent government decision to raise fuel prices has also stoked inflation. The fuel price index rose 11.38% in the 12 months to 27 February 2010, shooting up from an annual rise of 9.59% in the previous week.

A rate hike before the next scheduled policy review in April 2010 is, however, unlikely after RBI deputy governor Subir Gokarn recently said it would be premature to take any mid-term policy action. Market men see a 25 basis points hike in the repo and reverse repo rate each by the Reserve Bank of India (RBI) at the April-2010 policy review. Higher interest rates may impact corporate and consumer confidence.

Meanwhile, policymakers including the deputy chairman of the planning commission have said earlier this week that food prices will moderate over the next few months. Basu said on Friday said the government needs to improve its food grain management system and modify the way it releases grain stocks

Meanwhile, Russian Prime Minister Vladimir Putin on Friday pledged to develop banking ties with India to boost co-operation between the two countries. Putin on Friday met President Pratibha Patil as he began his New Delhi visit with eye on boosting strategic and defense ties with India.

Coming back to stocks, equities have witnessed a good post-Budget rally driven by sustained buying by foreign funds since the presentation of the Union Budget 2010-2011 on 26 February 2010. As per data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 7815.98 crore this month, till 11 March 2010.

The stock market has applauded the Union Budget 2010-2011 due to its thrust on infrastructure development, government's pledge to reduce fiscal deficit over the next three years, a smaller-than-expected 2% hike in excise duties, and reduction in taxes for individuals which will boost disposable income. The Finance Minister has assumed a modest GDP of about 8% and inflation of about 4.5% for 2010-2011.

Investors will eye figures of advance tax payment by top Indian firms which will give an indication of fourth quarter March 2010 earnings. The fourth and the last installment of advance tax is due on 15 March 2010.

Going ahead, the key triggers for the stock market are structural reforms such as decontrol of petrol and diesel prices, targeting of food subsidies, and financial sector reforms such as increase in foreign direct investment in insurance sector.

Meanwhile, the follow-on public offer (FPO) of iron ore miner NMDC was fully bid. The issue closes today, 12 March 2010. The government is divesting 8.38% stake in NMDC through the FPO as a part of its aggressive divestment drive to raise funds in a bid to bring fiscal deficit down. The price band has been fixed between Rs 300 and 350.

The latest data from global fund tracker EPFR Global showed that inflows into Asia ex-Japan equity funds reached their highest level since November 2009 in the week ended 10 March 2010. China stock funds attracted $31 million in the week ended 10 March 2010, taking in funds for only the second week this year.

European shares rose on Friday, reversing falls from the previous session, with banks higher after talks on banking reform in the United States collapsed. The key benchmark indices in France, UK and Germany rose by between 0.31% to 0.64%.

Most Asian stock markets edged lower on Friday with investors worried about inflationary pressures in China. The key benchmark indices in China, Hong Kong, Indonesia, and Taiwan fell by between 0.02% to 1.24%. The key benchmark indices in Japan, Singapore and South Korea rose by between 0.26% to 0.81%.

Investors are wary China may start raising interest rates to keep a lid on mounting inflationary pressures. The data released Thursday showed that China's inflation rate jumped to 2.7% in February from 1.5% in January

Meanwhile, Japan's industrial output rose 2.7% in January, revised data showed on Friday, boosted by a sharp rise in production of cars and chemical products. The figure compared with an initial reading of a 2.5% rise and a 1.9% increase in December 2009, the trade ministry said.

Global investors are awaiting further insight into the state of the US economic recovery on Friday, 12 March 2010 when data on US retail sales and consumer sentiment figures will be out. The numbers are expected to indicate how big an appetite Americans have for spending.

US index futures reversed early losses. Trading in US index futures indicated that the Dow could rise 22 points at the opening bell on Friday, 12 March, 2010

On Wall Street on Thursday, 11 March 2010, stocks were confined to a narrow trading range for most of the session, but a late bounce in financials pushed the S&P 500 to a 17-month high above the 1,150 mark. The Dow Jones industrial average finished up 44.51 points or 0.4%, to 10,611.84. The S&P 500 index rose 4.63, or 0.4% to 1,150.24. It now stands at its highest level since 1 October 2008. The Nasdaq Composite index rose 9.51 points or 0.4% at 2,368.46.

Initial jobless claims in the US fell 6,000 last week to 462,000. Meanwhile, continuing claims totaled 4.56 million, which was greater than what was expected. The trade gap shrank 6.6% as oil imports dropped to their lowest level since February 1999. The trade balance for January came in with a 37.3 billion dollars deficit. In other data, and mortgage rates dropped for a second straight week, remaining below 5%.

The chances of a broad overhaul of US financial regulation dimmed on Thursday after bipartisan Senate talks collapsed, jeopardizing a top Obama administration priority

The Greek economy is set to shrink by more than expected this year, the government said on Wednesday, as it braced for nationwide strikes protesting its plans for bringing the country's budget deficit under control.

Close home, the BSE 30-share Sensex was down 1.34 points or 0.01% to 17,166.52. The barometer index jumped 76.58 points at the day's high of 17,244.54 at the onset of the trading session, which is its highest level since 21 January 2010. The Sensex fell 41.03 points at the day's low of 17,126.93 in mid-afternoon trade.

The S&P CNX Nifty was up 3.60 points or 0.07% to 5137. It hit a high of 5158.10 earlier in the day which is its highest level since 21 January 2010.

The market breadth turned weak. The breadth was strong at the onset of the trading session. On BSE, 1028 shares advanced as compared with 1809 that declined. A total of 91 shares remained unchanged.

Among the 30-member Sensex pack, 13 rose while the rest fell.

The BSE Mid-Cap index fell 0.23% and the BSE Small-Cap index fell 0.45%. Both the indices underperformed Sensex.

The BSE Metal index (up 0.63%), the BSE Oil & Gas index (up 0.41%), the BSE Auto index (up 0.02%), the BSE Teck index (up 0.02%), outperformed the Sensex.

The BSE Realty index (down 0.83%), the BSE Capital Goods index (down 0.62%),the BSE Power index (down 0.54%), the BSE Consumer Durables index (down 0.46%), the BSE PSU index (down 0.46%), the BSE HealthCare index (down 0.33%), the BSE FMCG index (down 0.27%), the BSE IT index (down 0.1%), the BSE Bankex (down 0.07%), underperformed the Sensex.

BSE clocked a turnover of Rs 4044 crore, lower than Rs 4410.92 crore on Thursday, 11 March 2010.

Index heavyweight Reliance Industries (RIL) rose 0.46% to Rs 1021.25, extending last two days' gains. But the stock was off the day's high of Rs 1032.60. As per reports, RIL is close to striking hydrocarbon at its Palar deepwater block in the Cauvery basin. In the Palar block, RIL is said to be testing a well. The hydrocarbon success would be known only after testing is completed.

Oil and Natural Gas Corporation was flat paring early gains triggered by reports Russia is considering inviting the state-run company to develop oil and gas fields in country.

IT stocks fell on profit taking. India's third largest software services exporter by sales Wipro fell 0.15%. India's second largest software services exporter by sales Infosys fell 0.44%.

But, India's largest software services exporter by sales Tata Consultancy Services (TCS) rose 0.65%, with the stock gaining for the straight third day. Girja Pande, TCS's Asia-Pacific chairman reportedly indicated that the company hopes to quadruple its market share in Asia outside India within five to seven years.

Banking stocks were mixed. India's largest private sector bank by net profit HDFC Bank fell 1.48%

India's largest bank by net profit and branch network State Bank of India (SBI) was flat. State Bank of India (SBI) chairman OP Bhatt said the bank is looking at tapping the retail bond market next year with a 10-year issue, although the initial issue size may be as small as Rs 50-100 crore. Meanwhile, a bill seeking to reduce Centre's shareholding in the SBI from 55% now to 51% and to allow the bank to raise more capital from the market through preference shares, was introduced in the Lok Sabha on Monday.

The amendment bill seeks to provide for enhancement of the capital of SBI by issue of preference shares, to enable it to raise resources from the market by public issue or preferential allotment or private placement. The bill also aims to provide for flexibility in the management of the bank

India's largest private sector bank by net profit ICICI Bank rose 0.59% gaining for the second straight day.

Realty shares reversed early gains as the Budget proposed to impose service tax on the realty sector both on commercial rentals as well as on sale of under-construction housing units. The service tax would come to be about 3.5% of the cost of the apartment that includes the value of the land and also the cost of construction, realty body Credai said recently. Unitech, Indiabulls Real Estate, DLF, Phoenix Mills, HDIL City fell by between 0.27% to 1.36%.

Realty major DLF recently hinted that properties would turn dearer as developers would have to pass on the service tax burden to end-users.

Some metal stocks edged higher on strong domestic demand. Hindustan Zinc, JSW Steel, National Aluminum Company, Hindalco Industries, Sterlite Industries rose by between 0.71% to 3.25%.

Infrastructure stocks fell on profit taking after recent gains triggered by the government's thrust on the infrastructure sector in the latest Budget. The Finance Minister provided Rs 1.73 lakh crore for infrastructure development in 2010-2011, which accounts for over 46% of the total plan expenditure for the year. Gammon India, Valecha Engineering, Jaiprakash Associates, Valecha Engineering, Nagarjuna Construction Company, Larsen & Toubro and Bharat Heavy Electricals fell by between 0.33% to 1.85%.

India's largest mobile services provider by sales Bharti Airtel rose 1.77% on reports Singtel may help with the funding for Bharti Airtel's $9 billion acquisition of Zain's African assets. SingTel owns 32% stake in Bharti Airtel.

But India's second largest mobile services provider by sales Reliance Communications fell 2.05%.

Auto stocks were mixed. India's largest truck maker by sales Tata Motors fell 1.22% reversing early gains. The stock had lost 3.24% on Tuesday after Germany's Daimler AG offloaded its entire stake in Tata Motors in bulk deals. Daimler AG sold its entire about 2.56 crore shares at an average price of Rs 751.67 in Tata Motors through various bulk deals on Tuesday, 9 March 2010.

Tata Sons, the holding entity for Tata Group firms, and Citigroup have acquired a total of 86.5 lakh shares of Tata Motors from Germany's Daimler AG. Tata Sons bought 40 lakh Tata Motors shares at Rs 750 each, while Citi bought 46.5 lakh shares at Rs 752.41 each

India's largest tractor maker by sales Mahindra & Mahindra (M&M) rose 1.14%. Mahindra & Mahindra is reportedly in talks with the Sonalika group to pick up a stake in the unlisted firm's unit which makes sports utility vehicles.

India's largest car maker by sales Maruti Suzuki India fell 0.18%, falling for the third straight day triggered by fears of rise in competition after rival firm Ford on Tuesday entered the small car market with 'Figo'. Maruti Suzuki India, on Thursday said that Japanese auto giant Nissan has placed orders for 35,000 units of its small car A- Star for 2010-11 to sell it in the European market. Nissan sources the A-Star from Maruti's Manesar facility and sells it in the European market as 'Pixo'.

India's largest bike maker by sales Hero Honda Motors rose 0.39% reversing early fall. Hero Honda has shortlisted Karnataka as one of the states for setting up its fourth manufacturing plant. Hero Honda Motors has reportedly proposed an investment of Rs 2,000 crore for the upcoming plant.

Consumer durables stocks fell on profit taking after recent gains triggered on hopes rise in disposable income following widening of tax slabs in the Union Budget 2010-11 may boost sales. Titan Industries, Asian Star Company, Videocon Industries and Rajesh Exports rose by between 0.29% to 2.23%.

India's largest drug maker by sales Ranbaxy Laboratories rose 0.66% after the company said on Friday it is planning to achieve $3 billion in consolidated turnover by 2012 as part of its medium-term business plan. Among other healthcare stocks, Pfizer, Cipla, Dr Reddy's Laboratories and Novartis India rose by between 0.3% to 5.52%.

India's largest FMCG maker by sales Hindustan Unilever fell 4.02%, extending Thursday's 4.21% losses after the company's competitor Procter & Gamble raised the weight of its 'Tide Naturals' detergent powder by 25%, effectively offering consumers lower pricing.

Among other FMCG stocks, Tata Tea, Marico and United Spirits fell by between 0.27% to 1.11%.

Cals Refineries clocked the highest volume of 2.31 crore shares on BSE. Hindalco Industries (1.1 crore shares), Birla Power Solutions (0.95 crore shares), Sujana Metal Products (0.81 crore shares) and Shree Renuka Sugars (0.56 crore shares) were the other volume toppers in that order.

Hindalco Industries clocked the highest turnover of Rs 181.90 crore on BSE. Man Infrastructure (Rs 168.27 crore), Jubilant Food Organosys (Rs 106.52 crore), Relaince Industries (Rs 95.27 crore) and Shree Renuka Sugars (Rs 86.97 crore) were the other turnover toppers in that order.