Market extends losses for the fourth day

The key benchmark indices edged lower in volatile trade as an imminent hike in key short-term interest rates by the Reserve Bank of India (RBI) at a policy review next week weighed on investor sentiment. Stocks fell for the fourth straight trading session. The market breadth was weak. In global cues, European stocks were volatile and US index futures were off lows. Asian stocks edged lower.

The BSE 30-share Sensex shed 48.08 points or 0.27%, off close to 75 points from the day's high and up close to 60 points from the day's low. From a recent high of 17,933.14 on 9 April 2010, the Sensex has lost 341.96 points or 1.9% in the last four trading sessions.

Intraday volatility was immense in today's trade. Stocks cut losses soon after an initial slide caused by weak Asian stocks. The market weakened shortly with the Sensex hitting a fresh intraday low in early trade. The market bounced back from lower level in morning trade. The market slipped into the red once again after briefly regaining positive zone in mid-morning trade when it hit a fresh intraday high. The market moved in a range in early afternoon trade.

Weak opening of European markets kept domestic bourses depressed in afternoon trade. Stocks extended losses later. A sudden rebound saw the Sensex briefly regaining positive zone in mid-afternoon trade as the barometer index hit a fresh intraday high. The market again slipped into the red.

NSE's volatility index, India VIX, rose almost 1% to 21.78. The index had surged 7.15% on Thursday, 15 April 2010. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days. The index is calculated based on the S&P CNX Nifty options prices.

Reliance Industries (RIL) edged lower in volatile trade. Another index heavyweight ICICI Bank came off the day's high. Realty stocks fell on fears of interest rate hike by the Reserve Bank of India (RBI) next week. Auto, IT and telecom stocks also fell. Capital goods stocks were mixed. However, FMCG stocks gained on defensive buying as the Sensex fell for the fourth day in a row.

The 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).

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 45 companies declined 15.7% to Rs 2402 crore on 29.1% rise in net sales to Rs 22033 crore in the quarter ended March 2010 over the quarter ended March 2009.

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. Last month, the RBI raised the repo rate and the reverse repo rate by 25 basis points each.

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%. Finance Minister Pranab Mukherjee said price pressures would continue until June, when summer harvests and good rains should help cool prices.

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.

Meanwhile, double-digit annual growth in industrial output for the fifth straight month in February 2010 underlined the strength of the economic recovery. Data on Monday, 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.

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.

Losses for commodity-sector firms pulled the European stocks lower on Friday in volatile trade, as the dollar gained against major rivals. The key benchmark indices in UK and Germany were down by between 0.05% to 0.16%. France's CAC 40 rose 0.06%.

Asian stocks retreated from 22-month highs on Friday as fresh doubts about the US economic recovery and Greece's rescue package prompted profit taking. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.32% to 1.52%. Property and banking stocks led the decline in China after Beijing tightened policies toward the residential property market on Thursday.

Trading in US index futures indicated that the Dow could fall 10 points at the opening bell on Friday, 16 April 2010. US index futures pared early losses.

US stocks posted their sixth straight day of gains on Thursday as an encouraging profit forecast from United Parcel Service lifted transportation shares, though concerns about a rise in weekly jobless claims limited the market's advance. The Dow Jones Industrial Average rose 21.46 points or 0.19% to 11,144.57. The Nasdaq rose 10.83 points or 0.43% to 2515.69 and the S&P 500 rose 1.02 points or 0.08% to 1211.67.

Global trade will face lingering protectionism for up to two years, as the job market reels from the global financial crisis, World Trade Organization Director-General Pascal Lamy said on Thursday

Back home, Sebi has tightened disclosure norms for foreign institutional investors (FIIs) and sub-accounts with regard to the investment structure in India. The norms are applicable for new registrations from 7 April 2010. Existing FIIs and sub-accounts can provide the additional information by 30 September 2010.

These foreign investors will now have to disclose to the regulator whether they are a multi class vehicle (MCVs), segregated portfolio company (SPC) or a protected cell company (PCCs) and whether they maintain segregated or a common portfolio.

Meanwhile, a new rule released by the Department of Industrial Policy and Promotion (DIPP) has clarified that an individual foreign institutional investor (FII) will not be allowed to pick up more than 10% equity in an Indian company even if it is coming through the foreign direct investment route thus limiting their ability to acquire big stakes in companies.

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 fell 48.08 points or 0.27% to 17,591.18. The index fell 109.71 points at the day's low of 17,529.55 in early trade. The Sensex rose 24.73 points at the day's high of 17,663.99 in mid-afternoon trade.

The S&P CNX Nifty fell 11 points or 0.21% to 5256.60.

BSE clocked turnover of Rs 4087 crore, lower than Rs 4838.39 crore on Thursday, 15 April 2010.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1705 shares declined as compared with 1178 that advanced. A total of 124 shares remained unchanged. The breadth was positive in early trade.

Among the 30-member Sensex pack, 22 fell while rest rose.

The BSE Mid-Cap index fell 0.27%, matching the fall in the Sensex. The BSE Small-Cap index fell 0.19% and outperformed the Sensex.

Most sectoral indices on BSE declined. Consumer Durables index (up 1.89%), FMCG index (up 1.22%), Metal index (up 0.16%), Bankex (down 0.05%), Healthcare index (down 0.16%), outperformed the Sensex.

The Power index (down 0.71%), PSU index (down 0.62%), Capital Goods index (down 0.56%), BSE Oil & Gas index (down 0.55%), Auto index (down 0.51%), Teck index (down 0.48%), IT index (down 0.47%), Realty index (down 0.44%), underperformed the Sensex.

Index heavyweight Reliance Industries (RIL) fell 0.64% to Rs 1083.30, extending Thursday's near 3% losses. Nonetheless, the stock came off the day's low of Rs 1067.05. RIL today 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.

Capital goods pivotals fell. India's largest engineering and construction firm by sales Larsen & Toubro (L&T) ended flat after seeing intraday volatility. The stock hit a high of Rs 1580.20 and a low of Rs 1560.25. The company, last week, received an order worth Rs 1,060 crore from Gujarat State Petroleum Corporation (GSPC) to build an offshore oil platform.

India's top power equipment maker by sales Bharat Heavy Electricals (Bhel) lost 1.49%, with the scrip sliding for the second straight day. The stock had hit a 52-week high of Rs 2,585 on Monday, 12 April 2010.

Among other capital goods stocks, SKF India, BEML and Praj Industries fell by between 1.38% to 3.4%.

Bharti Airtel, India's largest mobile operator by sales, fell 0.16%. 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 0.91%.

FMCG stocks rose on expectation of good Q4 results. Dabur India, ITC, Godrej Consumer Products, Hindustan Unilever rose by between 0.53% to 4.86%

India's second largest software exporter by sales Infosys Technologies fell 0.56% on profit taking after hitting a record high of Rs 2,823.80 on Thursday 15 April 2010. The stock had surged in the past two trading sessions after the company issued a stronger revenue guidance in dollar terms for financial year ending March 2011 (FY 2011). 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 rose 0.23%. India's largest software services exporter by sales Tata Consultancy Services fell 0.69% on profit taking after a two-day rise.

Realty stocks fell on fears of interest rate hike by the Reserve Bank of India (RBI) at its monetary policy review meet scheduled on 20 April 2010. Most of the property sales are driven by borrowed funds. Ackruti City, Parsvnath Developers, Unitech, Anant Raj Industries, HDIL and DLF fell by between 1.41% to 2.44%.

Auto stocks fell on profit taking after recent strong gains triggered by expectations of strong Q4 results. Vehicle sales in India should grow 10-15% in the fiscal year to March 2011, an industry body said on Friday 9 April 2010. In 2009/10, a total of 1.23 crore vehicles were sold in the country, up 26.4% from the previous fiscal year, data from the Society of Indian Automobile Manufacturers (SIAM) showed.

India's top small car maker by sales, Maruti Suzuki India fell 0.23%, extending recent losses. The company recently raised prices of its vehicles across different models due to higher input costs and expenses from the introduction of the new Bharat Stage IV emission norms.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.51%. Mahindra & Mahindra said after trading hours that it is buying out Renault's stake in a joint venture that makes the Logan sedan. The Renault name and logo will continue to be used on the Logan till the end of calendar 2010, the company said in a statement.

India's leading bike maker by sales Hero Honda Motors fell 1.62%. The stock had lost 5.29% on Tuesday when the scrip turned ex-dividend for a special dividend Rs 80 per share.

India's second largest bike maker by sales Bajaj Auto fell 1.48%. Bajaj Auto today said it has raised its stake in KTM Power Sports AG, Europe's second largest motorcycle maker.

India's largest commercial vehicle maker by sales Tata Motors rose 1.15%, with the stock gaining for the second straight day after company said on Thursday its global vehicle sales rose 39% to 101,712 units in March 2010 over March 2009.This includes sales of UK-based Jaguar and land Rover brands that rose 43% to 23,538 vehicles in March 2010 over March 2009

Most carmakers increased vehicle prices from 1 April 2010 after 13 cities across the country switched over to Bharat Stage IV emission norms. Earlier in February 2010, following the 2% increase in excise duty on all non-oil products to 10% in the Budget, auto players had hiked prices of vehicles by up to Rs 70,000.

Automobile firms are seen reporting strong Q4 results on a healthy volume growth. However, the sector is witnessing a headwind of rising input costs. Recently, Maruti Suzuki raised car prices due to a surge in input costs and shift to new emission norms from 1 April 2010. M&M, too, hiked utility vehicles prices recently.

Healthcare stocks fell on profit taking. Cipla, Dr Reddy's Laboratories, Ranbaxy Laboratories and Pfizer, fell by between 0.07% to 1.62%.

Metal stocks also fell on profit taking. Sterlite Industries, National Aluminum Company, Hindalco Industries and Hindustan Zinc fell by between 0.4% to 1.05%.

India's largest private sector steel maker by sales Tata Steel rose 1.33%. 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.

Banking stocks were mixed. India's largest bank by net profit and branch network State Bank of India fell 0.36%, with the stock sliding for the second straight day. 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 Baroda, Bank of India and Punjab National Bank, rose by between 0.59% to 1.17%.

India's second largest private sector bank by net profit HDFC Bank was flat. Its ADR rose 0.6% on Thursday.

India's largest private sector bank by net profit ICICI Bank rose 0.39% to Rs 921.65 . The stock came off the day's high of Rs 935.80. The stock had corrected 6.07% to Rs 918.10 on 15 April 2010 from Rs 977.45 on 9 April 2010.

India's largest mortgage finance firm by total income Housing Development Finance Corporation (HDFC) fell 0.72%. The company said on Thursday it has 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 late last week 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

Airline stocks fell on reports state run oil marketing companies have raised jet fuel price by 3.2% following rise in global crude prices. The hike is effective from midnight of 15 April 2010. Jet Airways, Kingfisher Airlines and SpiceJet fell by between 1.88% to 2.7%.

Goenka Diamond clocked the highest volume of 3.03 crore shares on BSE. Cals Refineries (1.17 crore shares), Birla Power Solutions (0.83 crore shares), BAG Films (0.81 crore shares) and Unitech (0.69 crore shares) were the other volume toppers in that order.

Goenka Diamond clocked the highest turnover of Rs 387.84 crore on BSE. Orbit Corporation (Rs 152.94 crore), Solvay Pharma (Rs 122.25 crore), Tata Motors-DVR (Rs 99.75 crore) and ARSS Infra (Rs 96.87 crore) were the other turnover toppers in that order.