Bears on the prowl

The key benchmark indices tumbled to their lowest level in more than three months as world stocks slumped amid tensions in Korea as well as anxiety over global debt levels and sovereign default fears. The BSE 30-share Sensex plunged 447.07 points or 2.71%, up close to 60 points from the day's low and off close to 425 points from the day's high. The BSE Sensex regained the psychological 16,000 mark soon after falling below that mark in late trade.

Sustained selling by foreign funds weighed on investor sentiment. Foreign institutional investors (FIIs) have sold shares worth a net Rs 10903.41 crore so far this month, till 24 May 2010, according to data from the stock exchanges. They had bought stocks worth a net Rs 2667.35 crore last month. Domestic funds have bought stocks worth a net Rs 5210.89 crore so far this month, till 24 May 2010.

Today's decline on the domestic bourses was broad based. All the sectoral indices on BSE were in the red. The market breadth was weak.

The market opened on a weak note tracking lower Asian stocks. The market extended losses with the Sensex tumbling to its lowest level in 3 months in mid-morning trade. After a brief recovery, the market weakened again in early afternoon trade. The Sensex hit a fresh 3-month low in early afternoon trade. Weakness continued in afternoon trade as weak opening of European market further dampened the sentiment. The market extended losses in mid-afternoon trade. The Sensex regained the psychological 16,000 mark soon after falling below that level.

Index heavyweight Reliance Industries declined, reversing Monday's gains triggered by a truce between the two Ambani brothers - Mukesh and Anil on Sunday, 23 May 2010. Anil Dhirubai Ambani Group (ADAG) shares fell on profit taking after Monday's sharp surge.

NSE's volatility index India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, jumped 10.29% to 34.52. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

Rollover of positions in the derivatives segment from May 2010 series to June 2010 series ahead of the expiry of the near-month May 2010 contracts on Thursday, 27 May 2010, may cause volatility in the immediate short term.

Meanwhile, the Indian Depository Receipts (IDR) issue of British bank Standard Chartered PLC received a muted initial response. The issue received bids for 1.11 crore shares on the first day of the issue today, compared to 20.4 crore shares on offer. Standard Chartered has set the price band for the IDR at Rs 100-115 each. Retail investors will be allotted shares at 5% discount to the issue price. The issue closes on 28 May 2010. Ten IDRs will represent one underlying equity share of Standard Chartered PLC.

The British bank on Monday, 24 May 2010, announced issue of 3.6 crore shares to anchor investors at Rs 104 each. The anchor investors include all the top domestic mutual funds.

European shares were sharply lower on Tuesday on worries that the euro zone debt crisis could undermine global growth, while heightened geopolitical tensions on the Korean peninsula also weighed on sentiment. Key indices in UK, France and Germany fell by 2.59% to 3.46%.

Spain seized one of its savings banks over the weekend, and late Monday four Spanish savings banks unveiled a merger agreement that may give them access to a large government fund that's being used to shore up part of the country's struggling financial sector. The International Monetary Fund, after completing an annual review of Spain's economy, said that time is of the essence for the country to undertake deep structural reform as it said the country's outlook is weak and fragile.

Asian stocks fell sharply on Tuesday, extending an equity sell-off that sent Wall Street lower overnight. The key benchmark indices in China, Hong Kong, Japan, Indonesia, Singapore and Taiwan fell by between 1.90% to 3.66%.

South Korea's Kospi index fell 2.75% as tensions between North and South Korea intensified. North Korean leader Kim Jong II has ordered the country's military to get ready for war, according to news reports.

Trading in US index futures indicated that the Dow could slump 238 points at the opening bell on Tuesday, 25 May 2010.

US stocks slid on Monday as fresh signs of Europe's banking problems emerged. Concerns about Europe's banking system continued to weigh on markets, after the Bank of Spain took over a small savings bank, CajaSur, over the weekend, increasing anxiety among investors worried about debt problems spreading throughout financial markets. The Dow Jones Industrial Average dropped 126.82 points, or 1.24% to 10,066.57. The Standard & Poor's 500 Index slipped 14.04 points, or 1.29% to 1,073.65. The Nasdaq Composite Index fell 15.49 points, or 0.69% to 2,213.55.

Economic data showed sales of previously owned US homes rose to a five-month high in April as buyers rushed to close on contracts before a federal home buyer tax credit expired, although housing inventory also increased.

Back home, Prime Minister Manmohan Singh on Monday said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. In a news conference to mark the completion of one year of the ruling Congress led United Progressive Alliance government at the Centre, the prime minister said he expects inflation to moderate to 5-6% by December 2010. Singh expects 8.5% GDP growth in the year ending March 2011 (FY 2011).

The RBI expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand. The RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.

India's monsoon rains are on track to hit the country's southern coast on 30 May 2010, and the Laila cyclone in the Bay of Bengal would not derail the vital June-September rainfall, a weather office spokesman told a news agency last week. The India Meteorological Department (IMD) in late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

The south west monsoon 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. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season also holds key.

The latest data showed the food price inflation picked up for the second consecutive week in early May 2010. The food price index rose 16.49% in the year to 8 May 2010, a tad higher than the prior week's annual reading of 16.44% as fruit and vegetables prices climbed on the back of a heat wave. The fuel price index was steady at 12.33%, while the primary articles index was up 16.19% versus 16.76%

While the headline inflation declined to 9.59% in April 2010 from 9.9% rise in March 2010, the data for February 2010 was revised upwards to 10.06% from provisional figure of 9.89%, the latest government data showed. The RBI has forecast the headline inflation to ease to 5.5% at end-March 2011 on expectations of a normal monsoon.

Industrial output rose lower than expected 13.5% in March 2010. The growth was also slower than February's 15.1% expansion. Manufacturing sector output rose 14.3% in March 2010. Industrial output rose 10.4% in the 2009/10 fiscal year, faster than the 2.6% growth clocked in the previous fiscal year.

The fourth quarter corporate results have been decent. The combined net profit of a total of 2,402 companies rose 23.8% to Rs 61048 crore on 24.1% rise in sales to Rs 6,00,196 crore in the quarter ended March 2010 over the quarter ended March 2009.

The BSE 30-share Sensex fell 447.07 points or 2.71% to 16,022.48, its lowest closing level since 10 February 2010. The index declined 509.40 points at the day's low of 15,960.15 in late trade. The Sensex fell 24.98 points at the day's high of 16,444.57 in early trade.

The S&P CNX Nifty declined 137.20 points or 2.78% to 4,806.75, its lowest closing level since 15 February 2010. It hit a low of 4,786.45 in intraday trade.

The BSE Mid-Cap index fell 3%. The BSE Small-Cap index fell 3.43%. Both these indices underperformed the Sensex.

All the sectoral indices on BSE were in the red. BSE Metal index (down 5.1%), Consumer Durables index (down 4.45%), and Capital Goods index (down 3.09%), underperformed the Sensex. BSE Healthcare index (down 0.89%), Power index (down 2.36%), PSU index (down 2.39%), Realty index (down 2.46%), Auto index (down 2.53%), FMCG index (down 2.55%), IT index (down 2.55%), Oil & Gas index (down 2.58%), and banking sector index Bankex (down 2.62%) outperformed the Sensex.

The market breadth, indicating the overall health of the market was weak. On BSE, 2330 shares declined as compared to 488 shares that rose. A total of 60 shares were unchanged.

From the 30 Sensex stocks, 29 fell and only one rose.

BSE clocked turnover of Rs 3591 crore, lower than Rs 4072.22 crore on Monday, 24 May 2010.

Index heavyweight Reliance Industries (RIL) fell 3.39%. The two Ambani brothers - Mukesh and Anil took a step towards reconciliation in their long-running feud on Sunday, ending non-compete agreements. Both the groups said they aim to reach a conclusion soon for a gas supply agreement between Mukesh Ambani's RIL and younger brother Anil's Reliance Natural Resources (RNRL).

The scrapping of the non-compete agreement between the two groups means RIL can enter financial services, telecom and infrastructure sectors whereas the ADAG can enter petroleum and petrochemical businesses. Reliance Industries and the ADAG said they agreed to cancel all existing non-compete pacts the groups had signed in 2006 and entered into a new non-compete pact only for gas-based power generation.

The settlement came after the Supreme Court ruled in Mukesh Ambani's favour in a bitter public dispute over gas pricing. The court on 7 May 2010 ordered the brothers to renegotiate within six weeks a private natural gas supply contract between Reliance Industries and Reliance Natural Resources. The new contract must abide by a government price of $4.2 per million metric British thermal unit (mmBtu), compared with $2.34 per mmBtu the brothers agreed on in 2005 for a 17-year period.

Shares of Anil Dhirubhai Ambani group (ADAG) firms fell on profit taking after Monday's surge. Reliance Natural Resources fell 5.04% after surging 22.58% on Monday. Reliance Communications fell 6.32% after gaining 10.87% on Monday. Reliance Power fell 3.31% after jumping 7.66% on Monday. Reliance Infrastructure fell 1.97% after rising 6.23% on Monday. Reliance Capital declined 3.68% after gaining 4.8% on Monday.

Oil exploration firms fell as oil fell on Tuesday on growing concern that Europe's debt crisis would derail the global economic recovery, prompting investors to sell riskier assets in a flight to dollar safety. US crude for July delivery fell 3.43% to $ 67.80 a barrel in Asian electronic trading. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) declined 0.38%.

Cairn India lost 2.25%. But, India's second biggest oil and gas exploration firm by revenue, Oil India, rose 0.45%, reversing initial losses. Fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

Metal and mining stocks fell after copper prices fell in both Shanghai and London markets on Tuesday, rattled by fresh worries about the euro zone's debt crisis, set off by the Bank of Spain's takeover of a smaller lender over the weekend. National Aluminum Company, Sterlite Industries, Hindalco Industries, JSW Steel, Steel Authority of India, Sesa Goa fell by between 2.98% to 8.41%.

India's largest steel maker by sales Tata Steel fell 4.45% ahead of its Q4 result on Wednesday, 26 May 2010.

Auto shares extended recent sharp fall. India's top truck maker by sales Tata Motors fell 4.66%, with the stock falling for the eighth straight day. The company's global vehicles sales rose 53% to 77,732 units in April 2010 over April 2009. Global sales include that of Jaguar and Land Rover brands, which rose 61% to 17,909 vehicles. The figures were announced on 14 May 2010.

India's largest tractor maker by sales Mahindra & Mahindra fell 2.48%, with the stock falling for the second straight day.

India's largest small car maker by sales Maruti Suzuki India fell 1.54%, with the stock falling for the second straight day. Maruti's total sales rose almost 30% to 93,058 units in April 2010 over April 2009. Domestic sales rose 23.4% to 80,034 units. The data was unveiled on 1 May 2010.

Car sales in India rose an annual 39.5% to 143,976 cars in April 2010 over April 2009, data from the Society of Indian Automobile Manufacturers (SIAM) showed. Sales of trucks and buses, a barometer of economic activity, rose 64.5 % to 49,086 units in April 2010 over April 2009, SIAM said.

Bajaj Auto fell 1.58%, with the stock falling for the third straight day. The stock had hit a record high of Rs 2219.90 in intraday trade on 14 May 2010, boosted by strong Q4 results. Net profit surged 306% to Rs 528.65 crore in Q4 March 2010 over Q4 March 2009. The company announced the result during market hours on 12 May 2010.

India's largest motorbike maker by sales Hero Honda Motors fell 0.7%, reversing initial gains.

Realty stocks extended recent losses. Peninsula Land, DLF, Indiabulls Real Estate, Unitech, HDIL, Phoenix Mills, Omaxe fell by between 0.28% to 5.82%.

Bank stocks fell on weak American depository receipts on Monday, 24 May 2010. Private sector lender ICICI Bank fell 2.72% with the stock falling for the second straight day. Its ADR fell 2.67% on Monday, 24 May 2010. The stock had slumped 7.24% on Wednesday, 19 May 2010, amid concerns the bank is paying a high price for its proposed deal to buy small rival bank Bank of Rajasthan. Shares of Bank of Rajasthan fell 1.01% on profit taking after a solid surge over the past few days triggered by a favourable swap ratio for the merger.

The boards of ICICI Bank and Bank of Rajasthan (BoR), which met on Sunday, cleared the merger proposal between the two. Both banks have called for an extraordinary general meeting of shareholders on 21 June 2010 to approve the deal. The two private sector banks had on 18 May 2010 approved an exchange ratio of 25 shares of ICICI Bank for 118 shares of BoR.

India's biggest commercial bank in terms of branch network State Bank of India (SBI) fell 3.94%, with the stock falling for the second straight day. SBI expects its advances to grow by 22-23% in the current financial year. SBI's net profit declined 31.93% to Rs 1866.60 crore in Q4 March 2010 over Q4 March 2009. The bank announced the result on 14 May 2010.

India's second largest private sector bank by net profit HDFC Bank fell 1.11%, with the stock falling for the ninth straight day. Its ADR fell 2.12% on Monday, 24 May 2010.

India's largest mortgage lender by total income Housing Development Finance Corporation fell 2.11%, with the stock falling for the second straight day.

India's largest FMCG maker by sales Hindustan Unilever fell 0.6%. Net profit jumped 47% to Rs 581.20 crore in Q4 March 2010 over Q4 March 2009, boosted by exceptional gains. The company announced the result after market hours today.

Some consumer durables stocks fell on profit taking. Videocon Industries, Blue Star, Gitanjali Gems, Rajesh Exports, Titan Industries fell by between 1.57% to 12.99%.

India's largest engineering and construction firm by sales Larsen & Toubro fell 4.28%. At the time of announcing Q4 March 2010 results on 17 May 2010, L&T's management gave a guidance of 20% growth in revenue and 25% growth in new orders in the current financial year.

L&T's order inflow jumped 90% to Rs 23843 crore in Q4 March 2010 over Q4 March 2009. The company's order book as at 31 March 2010 stood at Rs 1,00,239 crore, which is 2.7 times its sales of Rs 36,996 crore for the year ended March 2010. Net profit rose 44% to Rs 1438.10 crore in Q4 March 2010 over Q4 March 2009. The company announced the result during market hours on 17 May 2010.

India's largest equipment maker by sales Bharat Heavy Electricals fell 1.66%. The company will announce its Q4 result on Wednesday, 26 May 2010.

Among other capital goods stocks, ABB, Thermax, Siemens, Crompton Greaves, Praj Industries, BEML fell by between 0.23% to 5.5%.

Diversified firm Grasim Industries fell 3%. Trading in Grasim becomes on ex-entitlement basis for demerger of cement business with effect from Wednesday, 26 May 2010 when Jindal Steel & Power replaces Grasim in the barometer index BSE Sensex.

IT stocks fell on growing concern that Europe's debt crisis would derail the global economic recovery. India's third largest software services exporter Wipro fell 2.18%. Its ADR fell 1.07% on Monday, 24 May 2010. India's second largest software services exporter Infosys fell 2.44%. Its ADR fell 1.29% on Monday, 24 May 2010. India's largest software services exporter TCS fell 2.67%, with the stock falling for the third straight day.

Cals Refineries clocked the highest volume of 2.83 crore shares on BSE. Alok Industries (1.59 crore shares), Reliance Natural Resources (94.35 lakh shares), NHPC (75.19 lakh shares) and Unitech (65.35 lakh shares) were the other volume toppers in that order.

Piramal HealthCare clocked the highest turnover of Rs 160.76 crore on BSE. Tata Steel (Rs155.52 crore), Reliance Industries (Rs 122.80 crore), State Bank of India (Rs 116.55 crore) and Aban Offshore (Rs 100.98 crore) were the other turnover toppers in that order