Market snaps four-day winning streak on weak global cues

The key benchmark indices suffered a severe setback in the second half of the trading session as slowdown in Chinese manufacturing growth pulled world stocks sharply lower. The BSE 30-share Sensex fell 372.60 points or 2.2%, up close to 250 points from the day's low and off close to 370 points from the day's high. A sharp intraday fall in the Sensex of over 600 points was due to some freak trades in the index heavyweight Reliance Industries (RIL) counter on BSE which were struck at about 12:50 IST.

The market snapped last four days' strong gains. From a recent low of 16,022.48 on 25 May 2010, the BSE Sensex had gained 922.15 points or 5.75% in four trading sessions to 16,944.63 on 31 May 2010. From a recent peak of 17,970.02 on 7 April 2010, the Sensex is down 1397.99 points or 7.77%. The Sensex has declined 892.78 oints or 5.11% in the calendar year 2010 so far after jumping 81% in calendar 2009.

Coming back to today's trade, the 50-unit S&P CNX Nifty fell below the psychological 5,000 mark. The market breadth was weak, in complete contrast to a strong breadth earlier in the day. IT stocks declined on fears the worsening Eurozone crisis would crimp outsourcing demand. Metal shares declined after downbeat Chinese economic data sparked concerns about demand for metals in the world's fastest growing economy. Infrastructure stocks declined on selling pressure. Banking stocks also fell. However, fertiliser stocks gained on optimism a normal monsoon will boost demand for fertilisers.

NSE's volatility index India VIX, reversed a recent steep slide. India VIX which is a gauge of traders' perception of near-term risks in the market based on options prices, jumped 9.16% to 29.08. 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.

The market edged lower in opening trade tracking weak Asian stocks. The Sensex hit a fresh intraday low in morning trade on profit taking after a four-day sharp surge. The market came off the lower level in mid-morning trade on strong macro economic data. The market weakened again with the Sensex hitting a fresh intraday low in early afternoon trade. The market slumped in mid-afternoon trade, tracking weak European shares. The market extended losses in late trade.

India's exports rose 36% to $16.9 billion in April 2010 over April 2009, the latest government data showed. Exports rose for the sixth consecutive month in May 2010 after registering a slide in 13 straight months. Iimports rose 43% to $27.3 billion in April 2010 over April 2009.

HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian firms, surged to a 27-month high of 59 in May 2010 from 57.2 in April 2010, bolstered by steady growth in output, new orders and employment. The rate of growth had slowed in March 2010 and April 2010

Meanwhile, the provisional winning price for a single pan-India wireless broadband (BWA) spectrum touched Rs 7221 crore on Monday, with Delhi and Mumbai circles crossing the Rs 1000-crore mark. With this the government will get at least Rs 21664 crore from the BWA, taking the total revenues from both 3G and BWA spectrum auctions to nearly Rs 90000 crore, much above the government expectation. The revenue bounty would help bring down fiscal deficit.

European shares fell on Tuesday, as slowing Chinese factory output fuelled pessimism over global economic recovery and banks slid after the European Central Bank said euro zone lenders face another wave of potential write-down. The key benchmark indices in France, Germany and UK fell by 1.77% to 2.41%.

Asian stock markets were lower Tuesday as Chinese manufacturing growth slowed. The key benchmark indices in Hong Kong, South Korea, Indonesia, China, Japan and Taiwan were down by between 0.66% to 2.59%.

Data released today showed Chinese manufacturing expanded at a slower pace in May 2010, suggesting that the Chinese government's steps to cool the economy could be having an effect. The official China Federation of Logistics and Purchasing purchasing managers index fell to 53.9 in May 2010 from 55.70 in April 2010, while HSBC Holdings PLC's PMI fell to 52.7 in May from a revised 55.2 in April.

Trading in US index futures showed that the Dow could fall 104 points at the opening bell on Tuesday, 1 June 2010. US markets were closed on Monday, 31 May 2010, for the Memorial Day holiday.

Global ratings firm Fitch Ratings on 28 May 2010 cut Spain's credit rating by one level to AA+ from AAA, saying the country's debt burden is likely to weigh on growth. Fitch cited an inflexible labor market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment. Spain is struggling to lower debt amid a fiscal crisis that prompted the European Union to forge an almost $1 trillion loan package for its weakest economies.

Spain's downgrade follows similar cuts in ratings of Greece and Portugal recently as those nations attempt to grapple with debt problems by implementing austerity measures.

Back home, India's economy grew at 8.6% in the March 2010 quarter driven by robust manufacturing sector on the back of government and consumer spending, data released by the government on Monday, 31 May 2010, showed. The growth was significantly higher than the revised 6.5% expansion in Q3 December 2009 and a 5.8% growth in Q4 March 2009. The manufacturing sector grew 16.3%, farm output rose 0.7%, mining sector expanded 14% and services increased by 8.4% in January-March 2010 quarter from a year earlier.

For the full year to March 2010, the economy expanded 7.4%, above a government forecast of 7.2%. Economic growth had slowed down to 6.7% in year ended March 2009.

The India Meteorological Department (IMD) on 31 May 2010 said that the monsoon has hit the southern coast. The weather office 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.

Six core infrastructure industries registered a 5.1% growth in April 2010 compared with 3.7% rise in April 2009. For the financial year ended March 2010, the core sector posted a growth 5.5% as against 3% in the same period last year.

Data released on 28 May 2010 showed food inflation rose 16.23% in the year through 15 May 2010, lower than previous week's annual rise of 16.49%. The fuel price inflation also slowed to 12.08% from the previous week's 12.33%. The primary articles index was up 15.90%, compared with the previous week's annual reading of 16.19%.

Prime Minister Manmohan Singh in late May 2010 said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. 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 Reserve Bank of India (RBI) on 26 May 2010, eased rules to boost liquidity at banks to avoid a cash crunch because of payments for corporate advance tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010. In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility.

Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.

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.

China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.

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.

The combined net profit of a total of 3,344 companies rose 14.2% to Rs 87,122 crore on 24.7% rise in sales to Rs 9,24,522 crore in the quarter ended March 2010 over the quarter ended March 2009.

The BSE 30-share Sensex fell 372.60 points or 2.2% to 16,572.03. The index fell 626.24 points at the day's low of 16,318.39 in afternoon trade due to some freak trades in index heavyweight Reliance Industries (RIL) counter. The Sensex declined 1.81 points at the day's high of 16,942.82 in early trade.

The S&P CNX Nifty declined 116.10 points or 2.28% to 4,970.20.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1804 shares declined as compared with 1007 that rose. A total of 87 remained unchanged. The breadth was strong earlier in the day.

The total turnover on BSE amounted to Rs 4242 crore, higher than Rs 3771 crore on Monday, 31 May 2010.

Among the 30-share Sensex pack, 27 declined while only 3 of them managed gains.

The BSE Mid-Cap index fell 1.33% and the BSE Small-Cap index fell 0.99%. Both the indices outperformed the Sensex.

All the sectoral indices on the BSE fell. BSE Metal index (down 3.86%), BSE Realty index (down 2.95%), Oil & Gas index (down 2.53%), Banking sector index Bankex (down 2.46%), underperformed the Sensex.

BSE Healthcare index (down 0.02%), FMCG index (down 0.63%), IT index (down 1.23%), Consumer Durables index (down 1.28%), Auto index (down 1.35%), Power index (down 1.63%), PSU index (down 1.68%), Capital Goods index (down 1.74%) outperformed the Sensex.

Index heavyweight Reliance Industries (RIL) shed 3.21% to Rs 1,011.55. A total of four deals were struck in the counter at about 12:50 IST on BSE at prices much lower than the ruling market price. One deal of 25,407 was struck at Rs 1,011 per share, another deal of 7,738 shares was executed at Rs 992.90 per share, a deal of 15,588 shares was executed at Rs 945 per share and yet another deal of 12,951 shares was executed at Rs 840.55 per share. Just before these four deals, RIL was changing hands at Rs 1028 level.

IT stocks declined on fears the worsening Eurozone debt crisis would crimp outsourcing demand. Europe is the second biggest market for Indian IT firms after the US. India's second largest software services exporter by sales Infosys fell 1.22%. India's largest software services exporter by sales TCS declined 0.43% and India's third largest software services exporter by sales Wipro slipped 1.53%.

Banking stocks declined as strong macro economic data reinforced expectations the Reserve Bank of India will hike interest rates at its next monetary policy review on 27 July 2010. India's largest private sector bank by net profit ICICI Bank declined 3.31%. India's second largest private sector bank by net profit HDFC Bank lost 1.48%. India's largest commercial bank in terms of branch network State Bank of India fell 2.57%. Among other PSU stocks, Bank of India, Bank of Baroda and Punjab National Bank fell by between 0.16% to 2.34%.

Metal shares declined as downbeat Chinese economic data sparked concerns about demand for metals. China is the world's largest consumer of copper and aluminum. Sterlite Industries, Hindalco Industries, Hindustan Zinc, Tata Steel, Jindal Steel & Power and Sesa Goa fell by between 3.03% to 5.19%.

India's largest small car maker by sales Maruti Suzuki India advanced 1.8% after total sales rose 27.90% to 1,02,175 units in May 2010 over May 2009. It was the top gainer from the Sensex pack. The company's domestic sales rose 27.2% to 90,041 units in May 2010 over May 2009. This is highest ever monthly domestic sales. Exports increased 33.5% to 12,134 units in May 2010 over May 2009.

India's largest vehicle maker, Tata Motors fell 3.84%. Total vehicle sales rose 41% to 56,779 units in May 2010 over May 2009. Domestic sales grew 38% to 52,801 units in May 2010 over May 2009.

Bajaj Auto fell 2.02% as sales declined 4.4% to 2,99,442 units in May 2010 over April 2010. The sales data was announced during market hours today.

Infrastructure stocks declined on selling pressure. India's largest dam builder by sales Jaiprakash Associates lost 6.04%, extending Monday's 1.54% fall. It was the top loser from the Sensex pack.

Larsen & Toubro, Nagarjuna Construction Company, Hindustan Construction Company and IVRCL Infrastructure fell by between 0.09% to 3.36%.

India's second largest listed cellular services provider by sales Reliance Communications declined 3.87% on reports South Africa's MTN Group may restart merger talks with the company. The company paid Rs 8,585.04 crore to the government on 31 May 2010 for 3G spectrum. It bagged 3G spectrum in 13 circles, including Delhi and Mumbai.

India's largest listed cellular services provider by sales Bharti Airtel fell 2.04%. The company paid Rs 12,295.46 crore to the government on 31 May 2010 for 3G spectrum in 13 circles.

India's third largest listed cellular services provider by sales Idea Cellular Services declined 2.87%. The company paid Rs 5768.59 crore to the government on 31 May 2010 for 3G spectrum in 11 circles.

Fertiliser stocks gained on optimism a normal monsoon will boost demand for fertilisers. Chambal Fertilisers, National Fertiliser, Coromandel International, Gujarat State Fertilisers, Deepak Fertilisers and Nagarjuna Fertiliser rose by between 0.96% to 6.42%.

Cals Refineries clocked the highest volume of 2.54 crore shares on BSE. Development Credi Bank (1.8 crore shares), IFCI (1.14 crore shares), Shree Ashtavinayak Cine Vision (1.08 crore shares) and Hindustan National Glass (75.46 lakh shares) were the other volume toppers in that order.

Hindustan National Glass clocked the highest turnover of Rs 177.49 crore on BSE. Tata Steel (Rs 174.29 crore), Reliance Industries (Rs 160.47 crore), Hindustan Copper (Rs 143.41 crore) and Educomp Solutions (Rs 123.90 crore) were the other turnover toppers in that order.