Bears tighten their grip

Germany's move to ban naked shorting of certain financial instruments, including shares of ten German financial companies rattled world stocks, with the domestic bourses following suit. Banking, IT, metal, FMCG, consumer durables and realty stocks declined. Index heavyweight Reliance Industries extended recent sharp losses. The market breadth was weak. All the sectoral indices on BSE were in the red.

The BSE 30-share Sensex hit its lowest level in 2-1/2 months. The Sensex fell 467.27 points or 2.77%, up close to 45 points from the day's low and off close to 395 points from the day's high. The S&P CNX Nifty fell below the psychological 5,000 level.

India's largest private sector bank by net profit ICICI Bank slumped close to 7% after an in-principle approval for the merger of Bank of Rajasthan with ICICI Bank. Shares of Bank of Rajasthan hit 20% upper circuit on a favourable swap ratio for the merger.

The Sensex has lost 1,561.53 points or 8.68% from a recent peak of 17,970.02 on 7 April 2010. It is down 6% in calendar 2010 so far, after climbing 81% in calendar 2009.

Back to today's trade and intraday volatility was high. The market recovered from lower after an initial slide triggered by weak Asian stocks. The market weakened again later. The market once again recovered from lower level in morning trade. The intraday recovery proved short lived. The Sensex hit a fresh intraday low in early afternoon trade. Bargain hunting in some pivotals helped key benchmark indices recover from lower level in choppy afternoon trade. A sell-off gripped the bourses in mid-afternoon trade as European stocks slumped after Germany sharpened financial regulation. The Sensex hit 2-1/2 month low later.

NSE's volatility index India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, jumped 20.72% to 32.04. 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.

Foreign funds are offloading Indian stocks. As per the provisional data from the stock exchanges, foreign institutional investors (FIIs) sold shares worth Rs 439.70 crore and domestic funds bought shares worth Rs 326.61 crore on Tuesday, 18 May 2010. FIIs have sold shares worth a net Rs 6326.62 crore this month, till 18 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 2509.05 crore so far this month, till 18 May 2010.

Worries over fiscal problems in southern Europe triggered outflow from China and India dedicated funds during the week ended 12 May 2010. As a result, Asia funds, excluding Japan, saw only $27 million inflows, their worst week in well over a year, as per data from global fund tracker EPFR Global.

European stocks slumped after Germany's move to ban some naked shorting and German Chancellor Angela Merkel said the euro was in danger. Key indices in UK, France and Germany fell by 2.13% to 2.5%.

Germany's financial-markets regulator on Tuesday banned naked short selling of certain euro-zone debt and other securities to curb excessive price movements it said could destabilize the financial system.

Meanwhile, European finance ministers on Tuesday approved new regulations aimed at reining in hedge funds, the latest sign of toughened oversight of powerful players in global financial markets. The European Union also plans to limit the amount of debt, or leverage, that foreign-based funds can use to amplify their trades and profits.

Asia shares dropped in volatile trade as investors nervously eyed the euro's plunge to a fresh multi-year low against the US dollar and assessed moves by German financial regulators to ban some types of short selling of euro-zone securities. The key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by between 0.27% to 3.69%.

Japan's industrial output rose 1.2% in March, revised data showed on Wednesday, confirming output remains on an uptrend on the back of solid exports to Asia.

US index futures slumped in volatile trade. Trading in US index futures indicated that the Dow could fall 68 points at the opening bell on Wednesday, 19 May 2010.

US stocks sank on Tuesday, driven lower as the strengthening of financial regulation from Wall Street to Frankfurt crushed bank stocks, adding to worries about the sustainability of the global economic recovery. The Dow Jones Industrial Average fell 114.88 points or 1.08% to 10,510.95. The Standard & Poor's 500 Index lost 16.14 points, or 1.42% to 1,120.80. The Nasdaq Composite Index shed 36.97 points, or 1.57% to 2,317.26.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 2,114 companies rose 24.6% to Rs 55,330 crore on 25.3% rise in sales to Rs 5,57,645 crore in the quarter ended March 2010 over the quarter ended March 2009.

On the macro front, 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.

The latest economic data showed 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.

A cyclone in Bay of Bengal is unlikely to impact the progress of India's monsoon rains, Ajit Tyagi, director general of the India Meteorological Department told a news agency on Tuesday. Cyclone Laila is moving across the Bay of Bengal towards east coast and is forecast to reach hurricane strength before making landfall in Andhra Pradesh on Thursday.

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 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 1010, 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.

The BSE 30-share Sensex fell 467.27 points or 2.77% to 16,408.49, its lowest closing since 25 February 2010. The Sensex fell 73.37 points at the day's high of 16802.39 in early trade. The index fell 502.44 points at the day's low of 16,373.32 in late trade.

The S&P CNX Nifty declined 146.55 points or 2.89% to 4,919.65 its lowest closing since 25 February 2010. The index hit a low of 4,908.15.

The BSE Mid-Cap index fell 2.55%. The BSE Small-Cap index fell 2.54%. Both the indices outperformed the Sensex.

All the sectoral indices on BSE declined. BSE Metal index (down 4.19%), Realty index (down 3.95%), banking sector index Bankex (down 3.85%), Auto index (down 3.44%), and FMCG index (down 2.79%), underperformed the Sensex. BSE IT index (down 1.53%), Capital Goods index (down 1.83%), PSU index (down 1.84%), Power index (down 1.94%), Consumer Durables index (down 1.98%), Healthcare index (down 2.01%), and Oil & Gas index (down 2.09%), outperformed the Sensex.

The market breadth, indicating the overall health of the market, was weak. On BSE, 2203 shares declined as compared to 650 shares that advanced. A total of 70 shares were unchanged.

From the 30 share Sensex pack, 27 stocks declined and the rest rose.

BSE clocked turnover of Rs 4532 crore, higher than Rs 4421.91 crore on Tuesday, 18 May 2010.

Index heavyweight Reliance Industries (RIL) fell 2.19%, extending recent losses. RIL has agreed with Russia's Sibur to set up a joint venture in India to make butyl rubber amid rising demand from the auto industry. As per the agreement, butyl rubber will be produced at RIL's integrated petrochemical site in Jamnagar.

The RIL stock had surged early this month, boosted by after a favourable ruling in the Supreme Court on gas dispute with Anil Ambani controlled Reliance Natural Resources (RNRL). The Supreme Court ordered the two firms to renegotiate a deal based on government policy on gas utilization.

Earlier, the Bombay High Court, in its order dated 15 June 2009 had directed that RNRL will get assured supply of 28 mmscmd of gas from RIL's Krishna-Godavari basin for 17 years at $2.34 per million British thermal units (mBtu). The gas price was 44.28% lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 mBtu.

India's largest drug maker by sales Ranbaxy Laboratories fell 5.87% after company said on Wednesday its European unit was recalling select batches of three products to add safety warnings under the regulations there. The company said there was no product quality concerns for the drugs, but did not name the products. Ranbaxy said the drugs were being recalled from Britain, Denmark and Ireland.

Auto shares fell on profit taking. India's top truck maker by sales Tata Motors fell 7.19%, with the stock falling for the fourth 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 small car maker by sales Maruti Suzuki India declined 0.98%. 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. India's largest tractor maker by sales Mahindra & Mahindra fell 5.92%.

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 2.15%. The stock had hit a record high of Rs 2219.90 in intraday trade on Friday, 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 result during market hours on Wednesday, 12 May 2010.

But, India's largest motorbike maker by sales Hero Honda Motors rose 0.59%, reversing early losses.

Interest rate sensitive banking shares declined tracking weak financial shares worldwide. India's second largest private sector bank by net profit HDFC Bank fell 1.67%, with the stock falling for the fifth straight day.

Private sector lender ICICI Bank tumbled 7.24% amid concerns the bank is paying a high price for its proposed deal to buy small rival bank Bank of Rajasthan. ICICI shares extended fall for the forth straight day.

The board of directors of ICICI Bank and Bank of Rajasthan have given an in-principle nod for the merger of the later with the former. The swap ratio for the merger is set at 25 shares of ICICI Bank for every 118 shares held in Bank of Rajasthan. Bank of Rajasthan shares hit 20% upper circuit at Rs 119.40, boosted by the favourable swap ratio for the merger.

India's biggest commercial bank in terms of branch network State Bank of India (SBI) fell 2.69%. 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 during market hours on Friday, 14 May 2010.

India's largest mortgage lender by total income Housing Development Finance Corporation fell 2.54% with the stock falling for the fourth straight day. The company's board on 3 May 2010 approved a 5-for-1 stock-split.

HDFC has reportedly extended concessional home loan scheme till 30 June 2010. Under the scheme, HDFC would offer a fixed interest rate of 8.25% up to March 2011, 9% for the next one year and a floating rate thereafter. The scheme was scheduled to end on 30 April 2010.

Metal and mining stocks fell as copper prices dropped in Asian trading on Wednesday. Hindustan Zinc, Jindal Steel & Power, Sterlite Industries, Tata Steel, Jindal Saw, Hindalco Industries, Steel Authority of India, Sesa Goa, National Aluminum Company fell by between 2.83% to 7.33%.

Consumer durables stocks fell on profit taking. Rajesh Exports, Blue Star, Titan Industries, Videocon Industries and Gitanjali Gems fell by between 0.21% to 3.76%.

FMCG stocks fell on profit taking. United Spirits, ITC, Hindustan Unilever and Marico fell by between 0.91% to 3.48%.

Oil exploration stocks fell as crude oil futures prices declined. Fall in crude oil prices would result in lower realizations from crude sales. Light, sweet crude oil futures for June delivery on the New York Mercantile Exchange settled 67 cents lower at $69.41 a barrel on Tuesday. Cairn India fell 3.86%. India's largest oil & gas exploration firm by sales ONGC fell 2.02%. India's second largest oil & gas exploration firm by sales Oil India declined 1.4%.

India's largest cellular services provider by sales Bharti Airtel fell 3.08% extending recent sharp fall triggered by telecom regulator Telecom Regulatory Authority of India (Trai)'s recommendation that telecom firms pay a one-time fee for holding radio-spectrum beyond 6.2 mega hertz (MHz) based on 3G prices.

Bharti Airtel said the telecoms regulator's proposals on allocation of second-generation (2G) spectrum are shocking, arbitrary and retrograde and are against all existing global norms for spectrum allocation. The company said it was confident that the Department of Telecommunications (DoT) and that the government will take a rational approach and summarily reject these arbitrary, impractical and perverse recommendations.

India's second largest listed cellular services provider by sales Reliance Communications (RCom) fell 5.66%. The stock hit a 52 week low of Rs 136 today. Consolidated net profit declined 22.99% to Rs 4655 crore in the year ended March 2010 over the year ended March 2009. The company announced the result on Saturday, 15 May 2010.

At the time of announcing the results, chairman Anil Ambani said RCom will be able to sustain profitable growth in the coming quarters despite a highly competitive environment.

India's largest thermal power producer by sales NTPC fell 1.69% extending recent losses as net profit declined 4.52% to Rs 2017.65 crore in Q4 March 2010 over Q4 March 2009. The company announced the result during market hours on Monday, 17 May 2010.

India's largest engineering and construction firm by sales Larsen & Toubro fell 1.3% on profit taking after last two days' post-result rally triggered by strong guidance for the current financial year. At the time of announcing Q4 March 2010 results on Monday, 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 Monday, 17 May 2010.

Among other capital goods stocks, Siemens, Bharat Heavy Electricals, BEML, ABB, Thermax and Punj Lloyd fell by between 1.26% to 5.47%.

It stocks fell on profit taking. India's second largest software services exporter Infosys fell 0.76%, reversing initial gains. India's third largest software services exporter Wipro fell 1.54%. India's largest software services exporter TCS fell 2.26% with the stock falling for the fourth straight day on reports the UK government will review outsourcing contracts, including agreements signed with TCS, in a bid to cut government spending.

Mandhana Industries settled at Rs 133.65 on BSE, a 2.81% premium over the initial public offer price of Rs 130. The stock debuted at Rs 132.70, a 2.10% premium over initial public offer (IPO) price.

Cals Refineries clocked the highest volume of 3.15 crore shares on BSE. Reliance Natural Resources (1.25 crore shares), Birla Power Solutions (1.24 crore shares), Mandhana Industries (1.08 crore shares) and Tarapur Transformers (91.62 lakh shares) were the other volume toppers in that order.

ICICI Bank clocked the highest turnover of Rs 197.98 crore on BSE. Piramal HealthCare (Rs 183.36 crore), Tata Steel (Rs 169.31 crore), Mandhana Industries (Rs 145.45 crore) and State Bank of India (Rs 125.57 crore) were the other turnover toppers in that order.