Sensex slides to two-week low

Profit booking in some large-cap stocks dragged the key indices to the lowest level in two weeks. The market fell for the third consecutive session as European stocks turned negative and US index futures edged lower. Front line stocks bore the major brunt of selling with mid and small-cap indices on BSE falling to a smaller extent.

The BSE 30-share Sensex fell 182.70 points or 1.03%, off close to 336 points from the day's high. Banking, capital goods and FMCG stocks declined. Index heavyweight Reliance Industries slipped more than 2%. But realty and healthcare stocks rose. The market breadth turned weak from strong breadth earlier in the day.

The market trimmed gains in morning trade after a strong start triggered by firm Asian equities. The market further pared gains in mid-morning trade. The market was range bound later. Profit booking in index heavyweights dragged the market in negative territory in afternoon trade. The market extended losses to hit fresh intraday lows in mid-afternoon trade. The market slumped in late trade.

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 the past few weeks with the key benchmark indices surging to their highest level in more than 25 months on 7 April 2010.

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. The stock market regulator Securities & Exchange (Sebi) has clarified that 14 private insurance companies will be required to take Sebi's prior approval for launch of new (Ulips). It has said that insurers can continue selling existing Ulip schemes which were in force as on 9 April 2010. Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities.

It may be recalled that the finance ministry had to intervene, early this week, to resolve a tussle between Sebi and insurance regulator Insurance Regulatory and Development Authority of India (Irda) on oversight of Ulips after Sebi late last week barred 14 insurance firms from selling Ulips without its approval. Soon after the Sebi order Irda directed the 14 insurers to ignore the Sebi order saying that the implementation of the Sebi directive will bring the insurance industry to a standstill which would not be in public interest and would be detrimental to the interests of the policyholders and prejudicial to the interests of the insurers.

Following intervention from the government the two regulators had, early this week, decided to maintain a status quo on unit linked insurance plans or Ulips, keeping in abeyance the orders issued by both recently. The government had also reportedly asked the two regulators to seek a legal mandate from a court on oversight of Ulips.

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.

Meanwhile, 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.

On the macro front, the latest data showed that inflation rose less-than-expected in March 2010. The wholesale price inflation (WPI) rose 9.9% in March 2010, a tad higher than a 9.89% rise in February 2010, the latest government data showed. The headline inflation for January 2010 was revised upwards to 9.44% from 8.56%

The government also announced that the primary articles price index rose 13.88% in the year to 3 April 2010. The fuel price index rose 12.43% and the food price index rose 17.22% in the year to 3 April 2010.

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 infrastructure sector. Investors have already priced a 25-basis point rate rise at the Reserve Bank of India's policy review on 20 April 2010. Last month, the RBI raised the repo rate and the reverse repo rate, at which it absorbs excess cash from the banking system, by 25 basis points each.

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.

European shares moved between positive and negative zone. The key indices in France and UK rose by 0.05% and 0.14% respectively. Germany's Dax was down 0.02%.

Meanwhile, ash clouds from Iceland's spewing volcano have disrupted air traffic across Northern Europe as airports including Europe's busiest terminal at Heathrow shut down and airlines canceled hundreds of flights.

Asian stocks rose on Thursday as China's economic growth accelerated and bellwether US tech and financial firms reported strong results, boosting appetite for riskier assets. The key benchmark indices in South Korea, Hong Kong, Indonesia, Japan and Taiwan were up by between 0.16% to 0.92%.

But China's Shanghai Composite fell 0.04% and Singapore's Straits Times fell 0.09%. The latest data showed that China's economic growth accelerated to the fastest pace in almost three years in the first quarter. Gross domestic product rose 11.9% in Q1 March 2010, data showed today. The data also showed that China's consumer prices rose a less-than-estimated 2.4% in March from a year earlier.

Trading in US index futures indicated that the Dow could fall 18 points at the opening bell on Thursday, 15 April 2010.

US stocks rallied for a fifth straight session to a new 18 month high on Wednesday, 14 April 2010, after some strong earnings from major industry players and encouraging consumer spending data. The S&P 500 crossed 1,200 for the first time since September 2008. Intel and JP Morgan were the key Dow gainers after both beat earnings expectations. The Dow Jones Industrial Average rose 103.69 points or 0.94% to 11,123.11. The Nasdaq rose 38.87 points or 1.58% to 2504.86 and the S&P 500 rose 13.35 points or 1.12% to 1210.65.

A moderate US economic recovery is likely to warrant very low interest rates for a long time, Federal Reserve Chairman Ben Bernanke said on Wednesday.

Back home, the BSE 30-share Sensex fell 182.70 points or 1.03% to 17,639.26. The index fell 202.94 points at the day's low of 17,619.02 in late trade. The Sensex rose 153.61 points at the day's high of 17,975.57 in early trade.

The Sensex has declined 293.88 points or 1.63% in three sessions from a recent high of 17,933.14 on 9 April 2010.

The S&P CNX Nifty was down 49.35 points or 0.93% to 5273.60.

BSE clocked turnover of 4815 crore, higher than Rs 4568.52 crore on Tuesday, 13 April 2010.

The BSE Mid-Cap index fell 0.21% and the BSE Small-Cap index fell 0.58%. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, turned weak. The breadth was strong earlier in the day. On BSE, 1,222 shares advanced as compared with 1,708 that declined. A total of 69 shares remained unchanged.

Most sectoral indices on BSE declined. The BSE Oil & Gas index (down 1.83%), Bankex (down 1.42%), Capital Goods index (down 1.40%) and FMCG index (down 1.15%), underperformed the Sensex,

Realty index (up 1.59%), Consumer Durables index (up 0.69%), Healthcare index (up 0.68%), IT index (up 0.40%), Teck index (up 0.20%), Auto index (down 0.25%), Metal index (down 0.27%), PSU index (down 0.62%) and Power index (down 0.69%), outperformed the Sensex.

Among the 30-member Sensex pack, 19 fell while rest rose.

Index heavyweight Reliance Industries (RIL) fell 2.72% to Rs 1090.25 on profit taking. The stock came off the day's high of Rs 1132.50. Global agency Standard & Poor's Ratings Services said on Tuesday that it had revised its outlook on Reliance Industries to stable from negative. The stable outlook reflects RIL's strong competitive position and S&P's expectation that the company will maintain its financial risk profile.

RIL on Friday, 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.

India's largest commercial vehicle maker by sales Tata Motors rose 0.14% 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

India's second largest software exporter by sales Infosys Technologies hit a record high of Rs 2,823.80 on BSE. The stock closed 0.69% higher at Rs 2,801.55, extending Tuesday's rally triggered by a strong 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 issued a stronger guidance in dollar terms, projecting a 16% to 18% growth in revenue at between at between $5.57 billion to $5.67 billion for the current year.

Realty stocks rose on renewed buying. Parsvnath Developers, Sobha Developers, Unitech, Phoenix Mills, Anant Raj Industries, Omaxe, Orbit Corporation, Ackruti City and DLF rose by 0.82% to 6.55%.

Healthcare stocks rose on expectations of good Q4 March 2010 results. Dr Reddy's Laboratories, Piramal Healthcare, Divi's Laboratories, Glaxosmithkline Pharmaceuticals, Lupin, Pfizer, Sun Pharmaceutical Industries and Glenmark Pharmaceuticals rose by 0.35% to 3.35%.

FMCG stocks fell on profit taking. United Spirtis, ITC, Tata Tea, Britannia Industries, and United Breweries fell by 0.25% to 3.93%

Capital goods pivotals also fell on profit taking. India's largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 1.87%, with the scrip sliding for the second straight day. 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 1.15%, reversing early gains. The stock had hit a 52-week high of Rs 2,585 on Monday, 12 April 2010.

Among other capital goods stocks, Havells India, Crompton Greaves, Bharat Electronics, Punj Lloyd, Alstom Projects Elecon Engineering Company, ABB, Siemens and Suzlon Energy, fell by 0.62% to 2.88%

Areva T&D rose 0.28% after company won orders worth Rs 63 crore.

Banking stocks fell on an impending rate hike by the central bank at its monetary policy review on 20 April 2010. India's largest private sector bank by net profit ICICI Bank fell 2.55%, with the stock sliding for the third straight day.

India's largest bank by net profit and branch network State Bank of India fell 1.84%. 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.

India's second largest private sector bank by net profit HDFC Bank rose 0.27%, with the stock gaining for the second straight day.

India's largest mortgage finance firm by total income Housing Development Finance Corporation fell 1.83%, with the scrip falling for the third straight day.

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

Firstsource Solutions jumped 2.87% on reports US private-equity firm Kohlberg Kravis Roberts & Company is looking to buy a controlling stake in the Mumbai-based business process outsourcing firm.

ARSS Infrastructure Projects clocked a highest turnover of Rs 325.18 crore on BSE. Reliance Industries (Rs 139.67 crore), Zee News (Rs 123.11 crore), Infosys Technologies (Rs 116.97 crore) and Unitech (Rs 94.98 crore), were the other turnover toppers on BSE.

Zee News reported a highest volume of 6.70 crore shares on BSE. Cals Refineries (3.88 crore shares), Unitech (1.17 crore shares), Birla Power Solutions (98.94 lakh shares) and BAG Films & Media (86.73 lakh shares), were the other volume toppers on BSE.