Market extends losses for the fifth day

The key benchmark indices declined for the fifth straight day as charges of fraud against US investment bank Goldman Sachs rattled global stocks. The BSE 30-share Sensex was provisionally down 191.66 points or 1.09%, up close to 125 points from the day's low and off close to 185 points from the day's high. All the sectoral indices on the BSE were in the red. The market breadth was weak.

Banking stocks recovered from initial losses on the eve of a monetary policy review by the Reserve Bank of India on Tuesday, 20 April 2010. Metal stocks fell on a decline in metal prices on the London Metal Exchange on Friday, 16 April 2010. Realty, FMCG and IT stocks, also fell.

Stocks were choppy. The market slumped in early trade on news the Securities and Exchange Commission (SEC) had filed civil-fraud charges against US investment bank Goldman Sachs. The market pared losses later. But, the intraday recovery proved short-lived. The market slumped to a fresh intraday low in mid-morning trade. The market extended losses in early afternoon trade. The market staged a strong rebound in afternoon trade after hitting a fresh intraday low. The market weakened again in mid-afternoon trade.

European shares fell on Monday, 19 April 2010, with banks extending Friday's declines when the US Securities and Exchange Commission said it was charging Goldman Sachs with fraud. Key benchmark indices in UK, France and Germany declined by 0.4% to 0.57%.

Asian stocks fell on Monday dragging the MSCI Asia Pacific index down by the most in two months on concern a US suit against Goldman Sachs Group Inc. signals increasing regulatory scrutiny on financial companies. The key benchmark indices in Hong Kong, Japan, South Korea, Singapore, Indonesia and Taiwan fell by between 1.33% to 3.17%.

Property and banking stocks led losses in Chinese equities on reports the government has asked banks to stop loans for third-home purchases in its latest measure to cool property prices. The Shanghai Composite slumped 4.79%, its biggest percentage fall in a single trading session in 2010.

Trading in US index futures indicated that the Dow could fall 55 points at the opening bell on Monday, 19 April 2010.

US stocks snapped six-day winning streak with a sell-off on Friday 16 April 2010 after Goldman Sachs was charged with fraud by US regulators and corporate earnings fell short of heightened expectations. The Dow Jones industrial average was down 125.91 points, or 1.13%, at 11,018.66. The Standard & Poor's 500 Index was down 19.54 points, or 1.61%, at 1,192.13. The Nasdaq Composite Index was down 34.43 points, or 1.37%, at 2,481.26.

Goldman Sachs stock fell nearly 13% on Friday after the Securities and Exchange Commission alleged it committed fraud in the structuring and marketing of a debt product tied to subprime mortgages, which cost investors more than $1 billion. However, the financial services giant said the charges were completely unfounded in law and fact.

Meanwhile, US Treasury Secretary Timothy Geithner on Sunday expressed confidence that lawmakers will pass a financial reform overhaul plan.

Closer home, fourth quarter earnings of India Inc are major near term trigger for the market. This is because the Q4 March 2010 results and management commentary on outlook could result in revision in earnings estimates of India Inc by analysts for the year ending March 2011 (FY 2011). IT heavyweight Tata Consultancy Services and motorbike maker Hero Honda Motors will announce their fourth quarter result today.

Expectations of good fourth quarter result by India Inc and heavy foreign fund inflows boosted the domestic bourses in recent weeks with the key benchmark indices surging to their highest level in more than 25 months on 7 April 2010. The market witnessed a correction later.

The combined net profit of a total of 59 companies declined 11.1% to Rs 2492 crore on 28% rise in net sales to Rs 23081 crore in the quarter ended March 2010 over the quarter ended March 2009.

Meanwhile, the Reserve Bank of India is seen raising key short term interest rates by 25 to 50 basis points at a policy review on Tuesday, 20 April 2010. The central bank is also expected to raise the cash reserve ratio to suck out excess liquidity from the banking system.

The latest data showed the wholesale prices rose 9.9% in March 2010 from a year earlier and a tad higher than February's annual rate of 9.89%. Rising inflation remains a key cause for concern. A sharp surge in interest rates may adversely impact private investment demand as well as the proposed large scale investment in the infrastructure sector.

The double-digit annual growth in industrial output for the fifth straight month in February 2010 underlined the strength of the economic recovery. Data on 12 April 2010, showed the industrial output rose 15.1% in February from a year earlier, less than a rise of 16.7% in January.

The RBI had raised the cash reserve ratio (CRR) for banks by a more-than-expected 75 basis points in January 2010 and followed it with a between-meeting surprise 25 basis point increase in the key repo and reverse repo rates in March 2010.

Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound. The June-September monsoon season is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. Agriculture secretary P K Basu said in a media interview on Monday, 5 April 2010, that early signs indicate normal monsoon rains this year. The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data.

A weakening El Nino is a positive sign for the monsoon, Ajit Tyagi, director general at the India Meteorological Department, had said on 18 March 2010.

Meanwhile, it remains to be seen if and to what extent the recent controversy with regard to unit linked insurance plans (Ulips) negatively impacts inflows into Ulips which are a major source of inflows into equities. Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities.

The stock market regulator Securities & Exchange Board of India (Sebi) has reportedly moved the Supreme Court and some high courts to guard against any ex parte decision after insurance regulator Insurance Regulatory and Development Authority of India (IRDA)'s decision to challenge Sebi's ban on unit-linked insurance products (Ulips). On 9 April 2010, Sebi had banned 14 life insurance companies from raising funds through Ulips without its approval.

IRDA, on the other hand, asked insurers to ignore the Sebi ban. On Tuesday, Sebi came out with a second order that exempted existing Ulips from the ban, but said its nod was must for issuing new Ulips issued after 9 April 2009.

According to IRDA, a total of 16.7 lakh Ulip policies, with a premium of Rs 44611 crore, were sold from 1 April 2009 to 28 February 2010. A total of 7.03 crore Ulip polices involving a total premium of Rs 90645 crore were in force in 2008-09.

The BSE 30-share Sensex was down 191.66 points or 1.09% to 17,399.52 as per provisional figures. The index fell 314.38 points at the day's low of 17,276.80 in afternoon trade. The Sensex fell 6.32 points at the day's high of 17,584.86 in early trade.

The S&P CNX Nifty was down 61 points or 1.16% to 5201.60, as per provisional figures.

The BSE Mid-Cap index fell 0.99% and the BSE Small-Cap index fell 1.48%.

BSE clocked turnover of Rs 3954 crore, lower than Rs 4476.66 crore on Friday, 16 April 2010.

The market breadth, indicating the overall health of the market was weak. On BSE, 1983 shares declined as compared with 908 that advanced. A total of 127 shares remained unchanged.

From the 30 share Sensex pack 26 stocks declined and the rest rose.

Metal stocks fell after LMEX, a gauge of six metals traded on the London Metal Exchange, slumped 2.1% on Friday, 16 April 2010. Steel Authority of India, Sterlite Industries, National Aluminum Company and Hindustan Zinc fell by between 0.72% to 2.92%.

India's largest private sector steel maker by sales Tata Steel fell 3.57%. The company said recently its sales for the fiscal year ended on 31 March 2010 rose 18% from a year ago to 6.17 million tonnes

Index heavyweight Reliance Industries (RIL) was down 2.09% to Rs 1060.70, with the scrip sliding for the third straight day. The stock came off the day's low of Rs 1052.20 in choppy trade. RIL on Friday 16 April 2010 said it will provide growth capital to logistics firm Deccan 360. The investment would be done through a wholly owned subsidiary. Deccan 360 is a cargo service headed by Captain Gopinath.

RIL on 9 April 2010 said the company will pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the US with Atlas Energy, becoming the latest foreign company to invest in shale plays that are expected to be very lucrative. The firm will pick up a 40% stake in Atlas's operations in the booming Marcellus Shale, a gas project that spans parts of Pennsylvania, West Virginia and New York in the United States and which, according to some geologists, could hold enough natural gas to satisfy US demand for a decade.

FMCG stocks fell on profit taking. ITC, United Spirits and Hindustan Unilever fell by between 0.42% to 1.76%

Realty stocks fell on fears the Reserve Bank of India (RBI) will raise provisioning requirements for real estate loans at its monetary policy review on 20 April 2010. Most of the property sales are driven by borrowed funds. Phoenix Mills, Ackruti City, Parsvnath Developers, Unitech, Anant Raj Industries, Indiabulls Real Estate, HDIL and DLF, fell by between 0.82% to 5.81%.

India's second largest software exporter by sales Infosys Technologies fell 1.22%, with the stock sliding for the second straight day after hitting a record high of Rs 2,823.80 on Thursday 15 April 2010. The stock had jumped 3.69% on Tuesday, 13 April 2010, after the IT bellwether projected a 16% to 18% growth in revenue in dollar terms at between at between $5.57 billion to $5.67 billion for the current year.

Among other IT pivotals, India's third largest software services exporter by sales Wipro fell 2.65%. India's largest software services exporter by sales Tata Consultancy Services fell 0.23%, reversing early gains ahead of its Q4 result today, 19 April 2010.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) was flat at Rs 1572. The stock came off the day's low of Rs 1550. The company recently received an order worth Rs 1,060 crore from Gujarat State Petroleum Corporation (GSPC) to build an offshore oil platform.

Bharti Airtel, India's largest mobile operator by sales, rose 0.8%. The company added 30 lakh mobile subscribers in March 2010, and took its total subscribers to 12.76 crore. India's second largest mobile operator by sales Reliance Communications fell 1.3%.

Banking stocks recovered from initial losses. India's largest bank by net profit and branch network State Bank of India fell 0.83% to Rs 2029.80, with the stock sliding for the third straight day. Nonetheless stock came off the day's low of Rs 2015. Chairman O.P. Bhatt said recently that the bank may raise its lending and deposit rates in a couple of months. The state-owned bank will wait for the Indian central bank's monetary policy action to take a final call on interest moves, Bhatt said.

Among other PSU banks, Bank of India and Punjab National Bank, fell by between 0.01% to 1.22%. But, Bank of Baroda rose 1.39%.

India's largest private sector bank by net profit ICICI Bank was flat at Rs 922. The stock came off the day's low of Rs 903.90. India's second largest private sector bank by net profit HDFC Bank was down 1.38%.

India's largest mortgage finance firm by total income Housing Development Finance Corporation (HDFC) rose 0.19% to Rs 2683. The stock came off the day's low of Rs 2620.55. The company, last week, launched a Dual Rate Product-2 (DRHL-2) in which home loan interest rates will be fixed rate at 8.25% annually up to 31 March 2011, 9% for the period between 1 April 2011 and 31 March 2012, and the applicable floating rate for the balance term. The offer is for loan application made before 30 April 2010 and at least part-disbursement taken before 30 June 2010.

The Reserve Bank of India said recently banks would determine their lending rates with reference to the base rate, effective 1 July 2010. To stabilise the system of base rate calculation, banks are allowed to change the benchmark and methodology anytime

Godrej Consumer Products rose 0.91% on reports the company is eyeing buyout of the Argentina-based hair colour products firm Issue Group Co.