Sensex sheds 3.25% in four days on euro zone debt worries

The key benchmark indices ended a choppy trading session lower as debt worries in the euro zone weighed on investors' sentiment. The barometer index BSE Sensex fell below the psychological 17,000 level after flirting with that level throughout the day. The Sensex shed 100.43 points or 0.59%, up close to 165 points from the day's low. FMCG and pharma stocks rose on defensive buying. But, realty, auto and IT stocks fell.

Banking stocks were mixed. Index heavyweight Reliance Industries edged lower. The market breadth was negative. European stocks turned positive and US index futures edged higher in volatile trade. The Sensex has lost 571.18 points or 3.25% in the past four trading sessions from a recent high of 17558.71 on 30 April 2010.

Volatility was high. The market cut losses after an initial slide triggered by weak global stocks. The market hit a fresh intraday low in morning trade. The market trimmed losses in mid-morning trade after hitting fresh intraday low. A steep slide took the Sensex to a fresh intraday low in early afternoon trade. Bargain hunting helped the key indices pare losses in afternoon trade. The intraday recovery gathered steam in mid-afternoon trade. But, the market weakened once again in late trade.

NSE's volatility index India VIX, a measure of traders' perception of near-term risks in the market based on options prices, rose 2.83% to 24.36. The volatility index rose for the fourth day in a row. 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.

Inflation based on food prices rose 16.04% in the year through 24 April 2010, slower than previous week's annual rise of 16.61%, the latest government data showed. Fuel prices inflation remained at elevated level. The fuel price index rose 12.69% in the year through 24 April 2010, same as a week ago. The primary articles index rose 13.93% in the year through 24 April 2010.

European shares reversed early losses on Thursday as the banking sector rebounded from earlier falls after strong results from BNP Paribas. The benchmark indices in UK, France and Germany were up by 0.2% to 0.58%.

European leaders warned on Wednesday that the euro zone debt crisis could spread beyond Greece, and Moody's Investors Service said Portugal could be next to have its debt downgraded.

A massive Greek bailout package announced on Sunday, 2 May 2010, failed to halt rising jitters about sovereign-debt problems along the euro zone's boundary. Euro-zone governments and the International Monetary Fund hoped that the $145.14 billion rescue package for Greece would soothe investors' nerves over high sovereign-debt levels in Spain, Italy, Portugal and Ireland. Instead, it had the opposite effect, with fears that Greece's debt woes could spread to other countries. Investors are also concerned that the three-year financial package will not fix Greece's longer-term funding problems. The Greek parliament votes later on Thursday on whether to accept the package, and other euro-zone nations needs to ratify it as well

The European Central Bank (ECB) on Thursday held interest rates at 1% as anticipated by the market. The press conference of ECB chief Jean-Claude Trichet in which he is likely to update on Europe's role in Greece's bailout will be closely watched.

Asian stocks slumped on Thursday on concern the Greek deficit crisis will spread through Europe and hurt the global economic recovery after Moody's Investors Service placed its credit rating for Portugal on a review for a possible downgrade. The key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan fell by between 0.72% to 3.27%. Miners led a steep slide in Chinese stocks as global commodity prices plunged. The Shanghai Composite index lost 4.11%.

US index futures were volatile. Trading in US index futures indicated that the Dow could rise 29 points at the opening bell on Thursday, 6 May 2010.

US stocks sagged on Wednesday as more signs emerged that the fallout from the Greek debt crisis could spread to bigger European economies. However, generally positive data on the US private sector job market and the economy's services sector cushioned the negative tone. The Dow Jones Industrial Average dropped 58.65 points, or 0.54% to 10,868.12. The Standard & Poor's 500 Index fell 7.73 points, or 0.66% to 1,165.87. The Nasdaq Composite Index lost 21.96 points, or 0.91% to 2,402.29.

Fed Chairman Ben Bernanke will speak today at the Chicago Fed's 46th annual conference on bank structure and competition. The US weekly jobless claims data and April sales reports from chain stores is also due today.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 1157 companies rose 29% to Rs 40690 crore on 30% rise in sales to Rs 374479 crore in the quarter ended March 2010 over the quarter ended March 2009.

Meanwhile, business at Indian service companies rebounded to a 21-month-high in April 2010 on new business and high input prices. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 62.1 in April, its highest since July 2008, and compared with 58.1 in March 2010.

A recent industry body report showed that business confidence in India improved on the back of economic recovery. The bi-annual Business Outlook Survey of the Confederation of Indian Industry (CII) showed that the Business Confidence Index (BCI) of the Indian industry increased by 1.5 points for the April-September 2010 period, compared to the past six months.

The Indian Meteorological department (IMD) expects normal rainfall in the June-September monsoon season this year. Rainfall is likely to be 98% of the long-term average, the IMD said on 23 April 2010. 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 holds key.

The Reserve Bank of India 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. A 25 basis points hike in the cash reserve ratio (CRR) with effective from 24 April 2010 will suck out excess liquidity of Rs 12500 crore from the banking system.

In its half-yearly World Economic Outlook, the International Monetary Fund (IMF) has pegged India's GDP growth at 8.75% in calendar 2010 and 8.5% in calendar 2011. According to the IMF, domestic demand in India will strengthen as the labour market improves, and investment is expected to be boosted by strong corporate profitability, rising business confidence and favourable financing conditions.

The BSE 30-share Sensex fell 100.43 points or 0.59% to 16,987.53. The index shed 0.49 points at the day's high of 17,080.47 in early trade. The Sensex lost 264.96 points at the day's low of 16,823.00 in early afternoon trade.

The S&P CNX Nifty declined 34.05 points or 0.66% to 5,090.85.

The BSE Mid-Cap index fell 0.5% and the BSE Small-Cap index fell 0.08%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE declined. BSE Capital Goods index (down 1%), Metal index (down 0.98%), IT index (down 0.91%), Power index (down 0.87%), Auto index (down 0.71%), and Realty index (down 0.65%), underperformed the Sensex. Healthcare index (up 1.4%), PSU index (up 0.64%), Bankex (down 0.11%), Oil & Gas index (down 0.30%), Consumer Durables Index (down 0.48%) and FMCG index (down 0.52%), outperformed the Sensex.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1473 shares declined as compared to 1370 shares that advanced. A total of 97 shares remained unchanged. The breadth swung between positive and negative zone during the day.

Among the 30-share Sensex pack, 21 declined while the rest gained.

BSE clocked turnover of Rs 4492 crore, lower than Rs 4760.41 crore on Wednesday, 5 May 2010.

Index heavyweight Reliance Industries (RIL) fell 0.96%. RIL said 28 April 2010 it had discovered oil in one of its exploration blocks in the Cambay basin on India's western coast, the block in which it holds 100% controlling interest. This is its fourth oil discovery in the region.

The Supreme Court is likely to pronounce a judgement on the gas dispute between Reliance Industries (RIL) and Reliance Natural Resources (RNRL) at 10:30 IST on Friday, 7 May 2010, according to television reports. The RIL-RNRL gas dispute has been heard by a three-member Supreme Court bench led by the Chief Justice of India. The tussle relates to supply of gas to Reliance Natural Resources (RNRL) from the D6 block in the Krishna-Godavari eastern offshore fields of Mukesh Ambani-led Reliance Industries (RIL).

The dispute landed in the Supreme Court after seeing many twists and turns in lower courts. The two sides - RIL and RNRL had approached Supreme Court challenging a decision by the Bombay High Court. 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.

Shares of oil exploration firms were mixed after crude-oil futures fell below $80 a barrel on Wednesday amid fears that Greece's debt crisis could spread. Fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms. Cairn India fell 2.32%. But, India's second largest oil exploration firm by sales Oil India rose 1.36%. India's largest oil exploration firm by sales ONGC rose 1.06%.

The sharp slide in crude oil prices, however, lifted PSU OMCs. HPCL (up 1.25%), BPCL (up 2.49%) and Indian Oil Corporation (up 2.44%), rose. Fall in crude oil prices will reduce under-recoveries of state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at controlled prices.

The finance ministry has reportedly decided to pay Rs 14,000 crore to state-owned oil marketing companies (OMCs) as part compensation for selling kerosene and cooking gas below cost in 2009-10.

Light, sweet crude for June delivery settled down $2.77, or 3.5%, at $79.97 a barrel on the New York Mercantile Exchange on Wednesday, its first close below $80 since 15 March 2010.

Realty stocks extended recent losses on fears the Reserve Bank of India may resort to further monetary tightening to counter soaring inflation. inflation. Ackruti City, DLF, Sobha Dvelopers, Indiabulls Real Estate and Unitech fell by between 0.58% to 2.47%.

Most metal and mining stocks fell on recent steep slide in metal prices on the London Metal Exchange. Sesa Goa, Jindal Saw, National Aluminium Company, Jindal Steel & Power, Sterlite Industries, Steel Authority of India, Hindustan Zinc fell by between 0.12% to 4.48%.

Some metal stocks, however, reversed initial losses. Tata Steel, Hindalco Industries, Jindal Saw rose by between 0.18% to 0.54%.

Interest rate sensitive banking shares were mixed. India's second largest private sector bank by net profit HDFC Bank fell 0.83%, with the stock falling for the fourth straight day.

India's largest private sector bank by net profit ICICI Bank fell 0.11% to Rs 902.70. The scrip was volatile. The stock hit a high of Rs 912.55 and a low of Rs 891.10. The Tayals, who control Bank of Rajasthan (BoR), have reportedly begun talks with large private sector banks including ICICI Bank for a possible merger.

India's biggest commercial bank in terms of branch network State Bank of India rose 1.07%, reversing initial losses.

Punjab National bank rose 0.05% reversing initial losses. Net profit rose 31.13% to Rs 1135.03 crore in Q4 March 2010 over Q4 March 2009. The state-run bank announced the result during market hours today.

India's largest mortgage lender by total income Housing Development Finance Corporation slipped 1.58%, with the stock falling for the second straight day. The company's board on 3 May 2010 approved a 5-for-1 stock-split.

Auto shares declined on fears the Reserve Bank of India may resort to further monetary tightening to counter soaring inflation. India's largest tractor maker by sales Mahindra & Mahindra fell 0.47%. The company's total vehicle sales rose 13% to 26,043 units in April 2010 over April 2009. The company announced the monthly sales data during trading hours on Monday, 3 May 2010.

India's largest small car maker by sales Maruti Suzuki India fell 0.23%. 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 top truck maker by sales Tata Motors fell 2.52%, with the stock falling for the second straight day. The stock had hit a 52-week high of Rs 882.20 on 3 May 2010. Total sales including exports of commercial and passenger vehicles jumped 52% to 57,202 vehicles in April 2010 over April 2009. Domestic sales rose 49% to 54,065 units. Exports rose 148.8% to 3,137 units.

Bajaj Auto declined 0.49%. But, India's largest motorbike maker by sales Hero Honda Motors rose 0.29%.

IT pivotals fell on lingering worries about sovereign debt issues in the euro zone. Europe is the second largest market for Indian IT firms. India's third largest software services exporter Wipro fell 1.66%. India's second largest software services exporter Infosys declined 1.03%. But, India's largest software services exporter TCS rose 0.11%, reversing early fall.

Some FMCG stocks rose on defensive buying. Hindustan Unilever, Marico and Dabur India rose by between 0.19% to 1.64%.

Pharma stocks also rose on defensive buying. Cipla, Ranbaxy Laboratories and Sun Pharmaceutical Industries rose by between 2.33% to 3.33%.

Dr Reddy's Laboratories rose 0.22% as net profit rose 62.1% to Rs 253.16 crore in Q4 March 2010 over Q4 March 2009. The company announced the result during market hours today.

Telecom stocks declined on concerns high costs for acquisition of third-generation mobile spectrum licenses would impact earnings. India's largest cellular services provider by sales Bharti Airtel fell 1.76%. India's second largest listed cellular services provider by sales Reliance Communications lost 1.94%.

Capital goods stocks fell on profit taking. BEML, Larsen & Toubro, Bharat Heavy Electricals, Praj Industries and ABB fell by between 0.09% to 3.99%.

India's largest dam builder by sales Jaiprakash Associates fell 0.04%, extending 4.67% decline on Wednesday. The initial public offer of its unit Jaypee Infratech got lukewarm response from investors and was subscribed 1.24 times. The bidding for the issue got over on Tuesday.

Cals Refineries clocked the highest volume of 2.09 crore shares on BSE. Bank of Rajasthan (1.51 crore shares), Suzlon Energy (1.50 crore shares), Birla Power Solutions (1.09 crore shares) and Filmcity Media (84.20 lakh shares) were the other volume toppers in that order.

Tata Steel clocked the highest turnover of Rs 150.37 crore on BSE. Sesa Goa (Rs 145.59 crore), Bank of Rajasthan (Rs 128.01 crore), Suzlon Energy (Rs 107.01 crore) and State Bank of India (Rs 106.45 crore) were the other turnover toppers in that order.