Realty, metal stocks lead 3.2% Sensex slide

The market tumbled last week on persistent concerns about the euro zone sovereign debt situation and tougher financial regulations in some developed markets. Investors feared that the euro zone's efforts to tackle its sovereign debt crisis will fall short, jeopardizing the global economic recovery.

Disappointing global economic data also contributed to the downdraft. The number of US workers filing new applications for unemployment benefits unexpectedly rose last week for the first time since early April. The index of leading economic indicators slipped last month for the first time since March 2009, while factory activity in the US mid-Atlantic region accelerated less than expected in May.

Back home, sustained selling by foreign funds weighed on investor sentiment. Foreign institutional investors (FIIs) have sold shares worth a net Rs 8367.76 crore so far this month, till 20 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 3286.54 crore so far this month, till 20 May 2010.

The fourth quarter corporate results have been decent. The combined net profit of a total of 2,219 companies rose 23.9% to Rs 56,175 crore on 24.4% rise in sales to Rs 5,67,643 crore in the quarter ended March 2010 over the quarter ended March 2009.

Meanwhile, 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 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 BSE Sensex fell 548.99 points or 3.23% to 16,445.61 in the week ended Friday, 21 May 2010. The S&P CNX Nifty fell 162.35 points or 3.2% to 4,931.15 in the week.

The BSE Mid-Cap index declined 3.65% and the BSE Small-Cap index declined 4.48% in the week. Both the indices underperformed the Sensex.

Trading for the week began on a weak note. The BSE 30-share Sensex fell 159.04 points or 0.94% to 16,835.56 on Monday, 17 May 2010, as concerns over the long-term health of the euro zone and weak US earnings dampened investor appetite for risk. The S&P CNX Nifty declined 33.60 points or 0.66% to 5059.90.

The key benchmark indices eked out small gains in choppy trading session on Tuesday, 18 May 2010, tracking higher European stocks and gains in US index futures. The BSE 30-share Sensex rose 40.20 points or 0.24% to 16,875.76. The S&P CNX Nifty rose 6.30 points or 0.12% to 5,066.20.

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 on Wednesday, 19 May 2010. The BSE 30-share Sensex fell 467.27 points or 2.77% to 16,408.49. The S&P CNX Nifty declined 146.55 points or 2.89% to 4,919.65.

The key benchmark indices rebounded on Thursday, 20 May 2010, after incurring heavy losses in the preceding trading sessions as oil major ONGC jumped. The BSE 30-share Sensex rose 111.19 points or 0.68% to 16,519.68. The S&P CNX Nifty rose 27.95 points or 0.57% to 4,947.60.

The key benchmark indices, on Friday, 21 May 2010, recovered after hitting their lowest level in nearly three months at the onset of the trading session as index heavyweight Reliance Industries (RIL) and banking rebounded. The BSE 30-share Sensex fell 74.07 points or 0.45% to 16,445.61. The S&P CNX Nifty fell 16.45 points or 0.33% to 4931.15.

Capital Goods index (up 1.20%), FMCG index (down 0.36%), PSU index (down 1.03%), Healthcare index (down 1.63%), Consumer Durables index (down 1.61%), Oil & Gas index (down 1.91%), outperformed the Sensex during the week.

Power index (down 3.41%), IT index (down 3.81%), Bankex index (down 4.17%), Auto index (down 5.05%), Metal index (down 6.49%), Realty index (down 8.82%), underperformed the Sensex.

In the Sensex pack, 24 shares declined last week, while the rest rose.

India's largest truck maker Tata Motors (down 12.93%), was the major Sensex loser last week, followed by realty major DLF (down 9.89%) and infrastructure developer Jaiprakash Associates (down 9.25%).

Copper maker Sterlite Industries fell 8.50%, tracking a steep decline in industrial metals on worries about the impact of Europe's debt crisis on global economy recovery. Copper price on the London Metal Exchange has almost lost 18% since hitting this year's high above $8,000 a tonne in early April 2010.

Meanwhile, investors also remain concerned that efforts by China to cool its economy including the central bank thrice raising banks' reserve requirement this year and clamping down on the property sector would choke demand for metals from Beijing.

India's largest private sector lender ICICI Bank fell 8.44% after the bank's board approved merging Bank of Rajasthan with itself. ICICI Bank has started a due diligence exercise on Bank of Rajasthan (BoR) from Tuesday, 18 May 2010. The swap ratio for the merger is set at 25 shares of ICICI Bank for every 118 shares held in BoR. The swap ratio is favourable to the shareholders of BoR. Bank of Rajasthan shares surged 80.84% to Rs 144.40 last week.

Diversified company Grasim Industries declined 7.49%. The Bombay Stock Exchange (BSE) has excluded Grasim Industries from the Sensex, BSE-100, BSE-200 and BSE-500 indices, effect from 26 May 2010 on account of demerger of the cement division.

Grasim's consolidated net profit rose 15.1% to Rs 654.48 crore on 10.4% increase in net sales to Rs 5385.62 crore in Q4 March 2010 over Q4 March 2009.

Index heavyweight Reliance Industries (RIL) fell 4.58%. The company said on Thursday, 20 May 2010, in view of the threat from cyclone Laila, the company has exercised caution and suspended all drilling operations in the East coast. All production operations on the FPSO (Floating Production Storage and Offloading) vessel operating in the KG D6 block were also suspended, RIL said.

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.

Telecom shares were in action last week as the auction of 3G spectrum ended on Wednesday, 19 May 2010.

Idea Cellular (down 8.60%), Reliance Communications (down 7.68%), Tata Teleservices (Maharashtra) (down 7.38%), declined. However, India's largest listed telecom operator Bharti Airtel rose 0.53%.

Bharti Airtel and Reliance Communications, each won 13 of the 22 telecom zones on offer while other major operators Vodafone Essar, Idea Cellular and Tata won a total of 9, 11 and 9 circles, respectively.

Idea paid Rs 5,765 crore for 11 circles, Bharti paid Rs 12,290 crore for 13 circles, RCom paid Rs 8,583 crore for 13 circles. Among the unlisted bidders, Vodafone paid Rs 11,617 crore for 9 circles, Aircel paid Rs 6,498 crore for 13 circles, Tata Teleservices paid Rs 5,864 crore for 8 circles and Sing Tel shelled out Rs 337 crore for 3 circles. Videocon and Etisalat did not get any 3G spectrum in any circle.

The successful bidders would be allocated the airwaves by the end of September 2010, after the spectrum is vacated by the Defense Department. The operators would have to pay the amount in the next 15 days.

India's largest engineering and construction company Larsen & Toubro (L&T) (up 5.13%), was the top gainer from the Sensex pack last week. The company expects 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.

L&T's net profit surged 44% to Rs 1438 crore on 28% rise in sales to Rs 13490 crore in Q4 March 2010 over Q4 March 2009. Net profit rose 26% to Rs 4376 crore on 11% increase in sales to Rs 36,996 crore in the year ended March 2010 over the year ended March 2009.

State-run oil explorer, ONGC rose 4.58%. The Cabinet on Wednesday, 19 May 2010, more than doubled the price of administered price mechanism gas to $4.2 per mbtu. Administered price mechanism (APM) gas is a term used for gas blocks awarded to state-run energy firms on nomination basis. The base price of APM gas supplied by state firms will rise to $4.2 per million British Thermal Units (mBtu), the same as the rate approved for Reliance Industries, bringing about near-uniformity in the cost of the fuel in India.

According to reports, ONGC may be able to save a revenue loss of Rs 5,000 crore in this year that will boost its bottom line proportionately. The company is schedule to announce its annual result for the year ended March 2010 on Friday, 28 May 2010. ONGC had lost Rs 4745 crore in the year ended March 2009 (FY 2009) on selling APM gas. The APM gas price was last revised in 2005 to 1.79 per mBtu.

State Bank of India (up 2.20%), ITC (up 1.25%) and Cipla (up 1.05%), were the other Sensex gainers.