RIL leads decline

The key benchmark indices lost ground as profit taking emerged after recent strong gains. The BSE 30-share Sensex fell 50.06 points or 0.29%, off close to 80 points from the day's high and up close to 20 points from the day's low. European markets reversed early gains. US index futures were trading lower.

The market breadth was weak in contrast to a positive breadth earlier in the day. Auto and banking stocks saw mixed trend. Metal stocks slipped after commodity prices declined on the London Metal Exchange on Monday, 8 March 2010. IT stocks extended Monday's gains triggered by strong US job data. Index heavyweight Reliance Industries (RIL) declined in volatile trade. Tata Motors declined more than 3% on huge volume after Germany's Daimler AG today sold all of its 5.34% stake in the auto firm.

The market moved in a narrow range in the first two hours or so of trade. The market recovered from lower level in afternoon trade after junior finance minister Namo Narain Meena said the government will continue with economic reforms to strengthen the economy. But the intraday recovered proved short-lived. The market once again slipped into the red in mid-afternoon trade. Sustained selling pressure kept the market depressed in late trade.

India VIX, a volatility index based on the S&P CNX Nifty index option prices, rose 0.34% to 20.80. The index has witnessed a steep fall in the last few trading sessions after the government tabled the Union Budget for 2010-2011 in the parliament on 26 February 2010. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days. Typically, volatility surges ahead of a major event such as the Budget. It falls after the event.

On the political front, the Rajya Sabha on Tuesday put the historic Women's Reservation Bill that reserves 33% of legislative seats in the Lok Sabha and state assemblies for women to vote. In a dramatic sequence of events after the house reconvened at 15:00 IST, Chairman Hamid Ansari – despite protests from the suspended RJD and SP MPs – carried out a voice vote seeking consent for the adoption of the motion for voting on the bill. After the motion was adopted, the Chairman put the bill to vote.

However, as it is a Constitution Amendment (108th) Bill, it can be only cleared after four rounds of voting in its favour. A Constitution amendment needs a two-thirds majority in voting requiring the support of 155 MPs in Rajya Sabha for its passage. The bill has clear backing of at least 165 MPs in the House with an effective strength of 233.

Earlier, the errant SP, RJD and LJP MPs were marshalled out of the House as Chairman Hamid Ansari called for a vote on the Bill. Before that Ansari suspended seven MPs belonging to SP, RJD and LJP for the remaining part of the Budget session for their unruly behaviour in the House over the Bill.

Earlier in the morning, Janata Dal-United's Sharad Yadav, Rashtriya Janata Dal (RJD) chief Lalu Prasad and Samajwadi Party (SP) leader Mulayam Singh Yadav, who are opposing the Women's Reservation Bill, met Prime Minister Manmohan Singh and informed the PM of their differences towards the bill. The Women's Reservation Bill, which was blocked in the Rajya Sabha on Monday, seeks to reserve a third of the seats in parliament and state legislatures for women.

In overseas markets, European stocks reversed early gains to trade lower. Key benchmark indices in UK, Germany and France were down by between 0.52% to 0.64%.

Investors were cautious ahead of a meeting of Greek Prime Minister George Papandreou with US President Barack Obama and Treasury Secretary Timothy later in the global day. Papandreou has said he is seeking support from the Obama administration to rein in the type of market speculation he blames for driving up Greece's borrowing costs, while traders are also watching whether the Greek prime minister says anything new about his nation's debt troubles.

Meanwhile, the Portugal government launched its own budget cuts to shore up its public finances. The plan includes slashing the budget shortfall to 2.8% of gross domestic product in 2013 from 9.3% of GDP last year.

Most Asian stocks were trading higher on Tuesday, reversing initial decline. The key benchmark indices in Singapore, Hong Kong, South Korea, Taiwan, China, and Indonesia, were up by between 0.05% to 1.17%. However, Japan's Nikkei 225 index ended 0.17% lower

US markets ended slightly lower on Monday, 8 March 2010. American International Group Inc inked a deal to sell its unit American Life Insurance Company, better known as Alico, to MetLife Inc for about $15.5 billion. The Dow Jones Industrial Average shed 11.79 points, or 0.11%, to 10,554.41. The Standard & Poor's 500 Index dipped 0.14 point, or 0.01%, to 1,138.56. But, the Nasdaq Composite Index gained 5.39 points, or 0.23%, to 2,331.74.

Trading in US index futures indicated that the Dow could fall 32 points at the opening bell on Tuesday, 9 March 2010.

Closer home, Rajan Bharti Mittal, the newly elected president of industry body FICCI said on Monday there's no room for hardening of interest rates and the Reserve Bank of India should maintain status quo on the rates to allow the industry to make fresh investments. He added that fresh investment announcement have begun across sectors and further increase in interest rates will only hamper economic growth.

The government will announce the industrial output data for the month of January 2010 on Friday, 12 March 2010. Industrial output grew 16.8% in December 2009.

Meanwhile, the fourth and the last installment of advance tax by India Inc due on 15 March 2010 will give a broad indication of fourth quarter earnings.

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.

The government said on Friday it will seek parliamentary approval to spend an extra Rs 31780 crore for the fiscal year to end-March 2010, which it plans to fund through savings.

There is no risk that the government will borrow more than planned to fund supplementary spending, Revenue Secretary Sunil Mitra said on Friday. Of the additional spending, Rs 12000 crore would be spent on oil subsidy, Rs 8000 crore on fertiliser subsidy and Rs 2459 crore on food subsidy, among others.

Prime Minister Manmohan Singh said on Friday the economy would grow by at least 8% in the year through March 2011. Asia's third largest economy would expand 7.2-7.5% in 2009-10, he told parliament. Singh said prospects for the winter-sown crop are 'very encouraging'. He also said the government must pay good prices to farmers to ensure higher farm production. The prime minister said the government will take all practical measures to bring down food prices.

He said the government will continue commitment to pubic and private investment in agriculture. The prime minster said there is need to find ways and means to stabilise the sugar economy.

A good harvest is likely to bring down food inflation, which accelerated to nearly 18% in late February. The government, facing mounting criticism for rising food prices, is struggling to meet conflicting aims of controlling food inflation and trying to please farmers by paying them attractive prices.

Food prices will be keenly watched in coming weeks for the second and third round impacts of the recent fuel price rise. Market men see a 25 basis points hike in the repo and reverse repo rates each by the RBI at the April 2010 policy review.

Prime Minister Manmohan Singh had earlier ruled out rolling back a price hike in fuel prices despite pressure from his main allies, saying populist policies would hurt the economy in the long-term. Petrol prices rose about 6% and diesel prices by 7.75% after the government increased factory-gate taxes and import duties on the fuels as part of last week's 2010-11 union budget 2010-11, which stressed fiscal prudence to cut a wide deficit

Reserve Bank of India (RBI) Governor D Subbarao on Monday, 8 March 2010, said inflation should moderate in the coming months. He said the central bank will ensure that interest rate levels do not have a negative impact on the competitiveness of the economy. Should India need to manage inflationary expectations, the central bank could turn to its traditional mix of policy tools including use of both liquidity and cash reserve requirements, he said.

Subbarao said the government's plans to reduce the fiscal deficit this year and in 2011 would help to manage inflationary expectations and facilitate demand for private credit. The government's borrowing program is likely to proceed smoothly over the next financial year, he said. The government has set its gross market borrowing target for 2010/11 at a record Rs 4.57 lakh crore, up by 1.3% percent from the previous year, a move that has pushed bond prices lower as investors have anticipated a flood of fresh debt supply. Asked if he anticipated a sharp rise in levels of yields in 10-year government bonds, he said that yields had risen slightly this year but would be managed over the coming 12 months.

Finance minister Pranab Mukherjee's budgetary proposals last week offered a progressive cut in fiscal deficit over the next three fiscal years, changed personal tax rates lifting disposable incomes in the hand of individuals and reduced surcharge on corporate tax for domestic companies to 7.5% from 10%.

The Finance Minister in his budget speech on Friday, 26 February 2010 said the government aims to introduce the Goods and Services Tax (GST) and implement the direct tax code from 1 April 2011.

The fiscal deficit is pegged at 5.5% of GDP for 2010-2011, lower than an estimated 6.8% for the current fiscal year. The finance minister said the government also aimed to reduce the deficit further to 4.8% of GDP in the year starting 1 April 2011, and to 4.1% in the year from 1 April 2012. He said there is a need to review stimulus and move towards fiscal consolidation and review public spending.

A thrust on the infrastructure sector augurs well from a long-term growth perspective. The Finance Minister has 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.

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.

Finance Minister Pranab Mukherjee on Wednesday, 3 March 2010 said India's economic recovery is still being driven by public spending and is not yet broad-based, further clouding the debate on the timing of rate hikes by the central bank.

The BSE 30-share Sensex fell 50.06 points or 0.29% to 17,052.54,. The index rose 28.23 points at the day's high of 17,130.83 in mid-afternoon trade. The Sensex lost 71.39 points at the day's low of 17,031.21 in late trade.

The S&P CNX Nifty fell 22.50 points or 0.44% to 5101.50. Nifty March 2010 futures were at 5,093, at a discount of 8.50 points over spot closing of 5,101.50. Turnover in NSE's futures & options (F&O) segment was Rs 52,434.16 crore, lower than Rs 59,633.67 crore on Monday, 8 March 2010.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1826 shares declined as compared with 1084 that advanced. A total of 60 shares remained unchanged.

The total turnover on BSE amounted to Rs 7532 crore, higher than Rs 5112 crore on Monday, 8 March 2010. The turnover was boosted by a huge block deal in Tata Motors in opening trade.

Among the 30-member Sensex pack, 19 declined while the rest gained.

The BSE Mid-Cap index fell 0.72% and the BSE Small-Cap index fell 0.71%. Both the indices underperformed the Sensex.

The BSE IT index (up 0.85%), the BSE Teck index (up 0.41%), the BSE Consumer Durables index (up 0.08%), the BSE FMCG index (down 0.09%), the BSE Bankex (down 0.15%), outperformed the Sensex.

The BSE Metal index (down 1.56%), the BSE PSU index (down 1.43%), the BSE Oil & Gas index (don 1.25%), the BSE Realty index (down 1.09%), the BSE Auto index (down 0.9%), the BSE Power index (down 0.85%), the BSE Capital goods index (down 0.84%), the BSE HealthCare index (down 0.44%), underperformed the Sensex.

Auto stocks saw mixed trend. India's largest truck maker by sales Tata Motors slumped 3.24%. Germany's Daimler AG said Tuesday it sold all of its 5.34% of the ordinary shares of Tata Motors to various groups of investors in bulk deals. Daimler will receive a cash inflow of approximately 300 million euros ($408 million) from the sale.

India's largest tractor maker by sales Mahindra & Mahindra rose 0.09%. India's largest bike maker by sales Hero Honda Motors fell 2.03% to Rs 1874.70. The stock declined on profit booking after striking an all-time high of Rs 1,921 on 8 March 2010.

India's largest car maker by sales Maruti Suzuki India gained 1.52%. As per reports, Suzuki Motor Corporation has raised its stake in Maruti Suzuki to 55%, triggering speculation about the Japanese firm's intentions for its Indian subsidiary. Suzuki raised its stake in Maruti by 0.8% through secondary market purchases recently and is set to increase its stake further, reports indicated.

Index heavyweight Reliance Industries (RIL) declined 1.49% to Rs 990.20. As per reports, global petrochemicals major LyondellBasell has reportedly rejected a multi-billion dollar takeover offer from Indian giant RIL, preferring its own restructuring plan to exit bankruptcy. RIL had reportedly made a $12.5 billion bid to acquire controlling stake in the global major and later raised the bid to over $14 billion.

India's largest bank by net profit and branch network State Bank of India (SBI) dropped 1.28%. 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

Other banking shares rose. India's largest private sector bank by net profit ICICI Bank rose 0.22%. India's second largest private sector bank by net profit HDFC Bank gained 1.75%.

Metal stocks slipped after LMEX, a gauge of six metals traded on the London Metal Exchange, declined 0.49% on Monday, 8 March 2010.

Tata Steel, Steel Authority of India, Hindalco Industries, Hindustan Zinc, Sesa Goa and Sterlite Industries, JSW Steel fell by between 0.69% to 2.56%.

NMDC tumbled 6.23% to Rs 375.65 after the Empowered Group of Ministers (EGoM) on Monday pegged the price band for the follow-on public offer (FPO) of the company at Rs 300-350 a share, at a discount of 12.6% to 25.11% to Monday's closing price of Rs 400.60 on BSE. The government will offload 8.38% stake in NMDC through the FPO which remains open for bidding between 10 and 12 March 2010.

IT stocks extended Monday's gains triggered by upbeat US jobs data. US is the biggest market for Indian IT firms. India's largest software services exporter by sales Tata Consultancy Services gained 1.12%.

India's third largest software services exporter by sales Wipro rose 0.47% after the company secured an order from Financial Intelligence Unit, a unit of ministry of finance to develop an information technology network to track all irregular financial transactions. The company announced the new order win after market hours on Monday, 8 March 2010. India's second largest software services exporter by sales Infosys was up 0.92%

Economic data released on 7 March 2010 showed US employers cut a net total of 36,000 jobs in February 2010, after jobs fell by 26,000 in January 2010. That was short of the expected 68,000 jobs lost, according to a consensus of economists. Also the unemployment rate, generated by a separate survey, held steady at 9.7%, versus forecasts for a rise to 9.8%.

Realty shares declined on profit taking after the recent upmove. The Finance Minister while presenting the Union Budget 2010-11 on 26 February 2010 said pending projects will be allowed to be completed within a period of five years instead of four years for claiming a deduction on profits. The norms for built-up area of shops and other commercial establishments in housing projects is also proposed to be relaxed to enable basic facilities for their residents. Unitech, DLF, Indiabulls Real Estate and Phoenix Mills fell by between 0.66% to 4.3%.

Cals Refineries clocked the highest volume of 7.01 crore shares on BSE. Tata Motors (4.38 crore shares), Greenearth Resources (1.5 crore shares), Shree Ashtavinayak Cine Vision (1.4 crore shares) and Sanraa Media (0.85 crore shares) were the other volume toppers in that order.

Tata Motors clocked the highest turnover of Rs 337.69 crore on BSE. Jubilant Food Organosys (Rs 204.34 crore),ARSS Infra (Rs 121.30 crore), State Bank of India (Rs 91.05 crore) and ICICI Bank (Rs 84.09 crore) were the other turnover toppers in that order.