Market snaps seven-day rally; breadth weak

The key benchmark indices lost ground in the second half of the day's trading session after a firm start which pushed the market to 1-1/2 month high. Profit booking was a key culprit causing market to snap a seven-day rally. Weakness in shares of the Mukesh and Anil Ambani pack emerged after the Mukesh Ambani gave no details of reconciliation between the two brothers at Reliance Industries' (RIL) annual general meeting.



The market breadth was weak in contrast to a strong breadth earlier in the day. The BSE 30-share Sensex was down 45.87 points or 0.26%, off 151.17 points from the day's high and up 45.53 points from the day's low.

The market staged a strong rebound recently on a successful Spanish bond auction, heavy buying by foreign funds and robust advance tax figures reported by top corporates for Q1 June 2010. The Sensex has jumped 999.59 points or 6.01% in seven trading sessions from 17,616.69 on Thursday 17 June 2010 from 16,617.10 on 8 June 2010.

Coming back to today's trade, Reliance Communications reversed early gains, halting a four-day rally. ITC slipped in volatile trade after the company announced a liberal 1:1 bonus issue. Engineering & construction major Larsen & Toubro hit 52-week high. Select auto stocks gained on hopes a normal monsoon will boost rural sales. IT and banking stocks saw mixed trend.

The market was volatile. The Sensex scaled 1-1/2 month high at the onset of the trading session led by RIL which rose ahead of the company's AGM. The market lost ground later as RIL gave up initial gains after the AGM got over at about 12:00 IST. The market extended losses later.

NSE's volatility index, India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, declined 4.27% to 19.96. The index had tumbled 8.03% on Thursday, 17 June 2010. 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 today, 18 June 2010, bought shares worth a net Rs 779.31 crore, as per the provisional data from the stock exchanges. Domestic funds offloaded shares worth a net Rs 499.76 crore.

Foreign funds have bought equities worth a net Rs 4029.36 crore in seven trading sessions from 10 June 2010 to 18 June 2010, as per data from the stock exchanges. The net inflow totaled Rs 2940.67 crore in June 2010 so far (till 18 June 2010) compared to a massive outflow of Rs 12071.13 crore in May 2010.

Domestic funds, which had absorbed some of the heavy selling from foreign funds last month, offloaded stocks worth a net Rs 1451.67 crore this month so far. Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.

Emerging-market equity funds received the second-largest net inflows this year in the week to 16 June 2010, according to the latest data from global fund tracker EPFR Global. Emerging equities funds got $2.5 billion, while emerging bond funds received $659 million in the week ended 16 June 2010.

On the macro front, India's exports rose an annual 35% to $16.1 billion in May 2010, flattered by low year-ago numbers, trade secretary Rahul Khullar said on Friday. Imports for the month were at $27.4 billion

Reserve Bank of India Governor D Subbarao today said inflation is getting more generalised and demand-side pressures are building, but a calibrated exit from loose monetary policy remains the Reserve Bank's stance for now.

European stocks edged lower after a positive start. Key indices in France, UK and Germany were down by 0.14% and 0.43%.

A successful Spanish government bond auction on Thursday helped allay concerns over the creditworthiness of the Spanish government, providing some relief for investors still nervous about the euro zone debt crisis.

Asian stocks were mixed as concerns about the US economic recovery offset easing worries about Europe's debt crisis. The key benchmark indices in China, Singapore, Japan, and Taiwan were down 0.04% and 1.84% respectively. The key benchmark indices in Indonesia, South Korea, and Hong Kong were up by 0.02% to 1.03%.

US markets staged a late comeback on Thursday, to end with modest gains despite a much worse-than-expected reading on manufacturing activity in the Philadelphia area and a pickup in jobless claims. The Dow Jones Industrial Average rose 24.71 points, or 0.2%, to 10434.17. The S&P 500 added 1.43 points or 0.13% to 1,116.04 and the Nasdaq Composite rose 1.23 points or 0.05% to 2,307.16.

A release by Department of Labor on Thursday showed number of Americans filing first- time claims for unemployment benefits rose 12,000 to 472,000 in the week ending 12 June 2010. The Federal Reserve Bank of Philadelphia said that its manufacturing index dropped to 8 in June 2010 from 21.4 in the prior month.

Trading in US index futures indicated the Dow could fall 20 points at the opening bell on Friday, 18 June 2010.

Back home, the government after market hours on Tuesday, 15 June 2010 proposed to impose capital gains tax on all stock market transactions by Indians and overseas funds as a part of changes in tax laws. As per the second draft of the direct tax code (DTC) released on Tuesday, the securities transaction tax (STT) will stay and rates will be calibrated. In its first draft DTC unveiled last year, the government had proposed to scrap the securities transaction tax.

The DTC has proposed taxing gains from investments in the stock market and also equity-linked mutual fund units at the applicable rate of taxation. The DTC has also proposed some taxes on income of foreign funds, treating all incomes from their investments in the stock market in India as capital gains.

The revised discussion paper on DTC has proposed computation of minimum alternate tax (MAT) on book profits basis. The earlier code had proposed MAT on gross assets. The revised discussion paper also makes it clear that profit-linked deductions of units already operating in special economic zones would be protected for the unexpired period. The tax proposals, which will replace the existing direct tax laws introduced decades ago, are expected to come into force in the next financial year starting 1 April 2011.

Meanwhile, many Indian firms have reportedly paid higher advance tax in Q1 June 2010. Higher advance tax payment normally indicates higher profits for the period under review. Reliance Industries (RIL) has paid Rs 653 crore, an increase of 108%, while HPCL paid Rs 61 crore, a 307% increase. Bajaj Auto paid Rs 110 crore against Rs 50 crore last year.

Infosys Technologies, the country's second-largest software company, reported an advance tax payment of Rs 275 crore, compared to Rs 230 crore in the previous year. TCS paid Rs 128 crore in advance taxes in Q1 June 2010, up 142% from Rs 53 crore it paid in the April-June period last fiscal.

The country's top consumer goods company Hindustan Unilever paid Rs 75 crore, the same as last the last fiscal year. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year

The country's top pharmaceutical companies have also paid higher taxes, with GlaxoSmithkline Pharma paying Rs 42 crore against Rs 39 crore in the year-earlier period and Ranbaxy's payments rising to Rs 17.5 crore from Rs 15 crore.

The banking sector was a mixed bag during the quarter. The country's largest bank State Bank of India (SBI) paid Rs 860 crore against the Rs 1170 crore it paid a year before. Union Bank of India's advance tax payments rose to Rs 168 crore from Rs 104 crore, while ICICI Bank paid Rs 350 crore, the same as it paid in the last fiscal.

Housing finance major HDFC has paid advance tax of Rs 215 crore in Q1 June 2010 verses Rs 175 crore in Q1 June 2009. Private sector lender HDFC Bank has paid advance tax of Rs 315 crore in Q1 June 2010 versus Rs 250 crore in Q1 June 2009.

Bharat Heavy Electricals (Bhel) has paid Rs 400 crore verses Rs 320 crore, ITC has paid Rs 230 crore versus Rs 200 crore. ONGC has paid Rs 1093 crore, up 24.20% from Rs 880 crore paid during the corresponding period a year ago. L&T's advance tax has risen 18.2% to Rs 130 crore.

Mahindra and Mahindra paid Rs 63 crore, up 270.5%, and Tata Motors paid Rs 65 crore, more than double last year's outgo. Steel Authority of India (SAIL) paid Rs 362 crore against Rs 344 crore a year before, while Gas Authority of India paid Rs 280 crore against Rs 250 crore. Ambuja Cement's advance tax payment dipped marginally to Rs 65 crore from Rs 70 crore

Global rating agency Fitch, early this week, raised India's local currency rating outlook to stable from negative as the rating agency forecast a decline in government debt to GDP ratio to 80% by March 2011 from 83% at the end of March 2010. It also upgraded India's growth forecast to 8.5% in the year to March 2011 from earlier forecast of 7% growth.

Industrial output rose much faster than expected at 17.6% in April 2010 from a year earlier on strong consumer demand and government spending. March's annual growth rate was revised upwards to 13.9% from 13.5%. Manufacturing output rose 19.4% in April 2010. The industrial output rose 10.4% in the 2009/10 fiscal year (April-March), faster than the 2.6% clocked in the previous fiscal year.

Investors will also keep a close eye on the progress of the monsoon rains. Annual monsoon rains were 8% below normal in the week to 16 June 2010, the India Meteorological Department (IMD) said on 17 June 2010. As per IMD update on 17 June 2010, southwest monsoon has further advanced into some more parts of east Madhya Pradesh, Chhattisgarh and Orissa.

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. Monsoon rains had hit Kerala on 31 May 2010, a day ahead of schedule. The south-west monsoon usually covers the entire country by mid-July. 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 BSE 30-share Sensex was down 45.87 points or 0.26% to 17,570.82. The index advanced 105.30 points at the day's high of 17,721.99 in morning trade, its highest level since 27 April 2010. The Sensex lost 91.40 points at the day's low of 17,525.29 in mid-afternoon trade.

The S&P CNX Nifty was down 12.25 points or 0.23% to 5,262.60. Nifty struck a high of 5,302.30 in early trade, its highest level since 28 April 2010.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1784 shares declined as compared with 1019 that rose. A total of 96 shares remained unchanged. The breadth was strong earlier in the day.

The BSE Mid-Cap index fell 0.51% and the BSE Small-Cap index declined 0.50%. Both these indices underperformed the Sensex.

Sectoral indices displayed mixed trend. The BSE Capital Goods index rose the most, by 0.62%. The BSE Metal index declined the most, by 1.18%.

The total turnover on BSE amounted to Rs 4446 crore, lower than Rs 4577.70 crore on Wednesday, 16 June 2010.

Among the 30-member Sensex pack, 18 declined while the rest gained.

Shares of Mukesh Ambani and Anil Ambani-led firms were under selling pressure as Mukesh Ambani gave no details of reconciliation between the two brothers at Reliance Industries' (RIL) annual general meeting today, 18 June 2010. It may be recalled that the two Ambani brothers -- Mukesh and Anil last month ended an agreement that prevented them from competing on each others' turf.

India's second largest listed cellular services provider by sales Reliance Communications (RCom) lost 3.74% to Rs 184.20 on profit booking, halting a four-day rally. The stock came off sharply from day's high of Rs 196.45.

Reliance Natural Resources (down 8.03%), Reliance MediaWorks (down 7.77%), Reliance Capital (down 4.42%), Reliance Infrastructure (down 3.26%), and Reliance Power (down 3.98%) declined.

Index heavyweight Reliance Industries slipped 1.69% to Rs 1053.20, off the day's high of Rs 1089.90. RIL chairman Mukesh Ambani said today at the company's AGM that RIL is ready for a big surge forward. He also said that RIL looks forward to harmonious, constructive relationship with the Anil Dhirubhai Ambani (ADAG) group, adding that RIL will supply gas to ADAG group.

He also said the end of non-compete agreement with ADAG group has opened up unbounded opportunities in the power sector, which would be a growth engine for Reliance Industries. The company has plans for mega investments in the power sector and aims to bring project initiative to the sector. RIL will bid for ultra-mega power projects as part of its planned power foray.

He said RIL aims to build a significant position in the shale gas business and that RIL will commit capital to accelerate development of shale gas.

The RIL chairman said RIL will follow an "asset light" approach in telecom and collaborate with partners. RIL had recently announced its foray into the telecom sector by acquiring majority stake in Infotel Broadband Services, which emerged as the sole player to win a nationwide wireless broadband licence in an auction.

Reliance Retail, with 1,150 stores pan-India is equipped to be a national leader in the organized retail sector, he added.

India's largest listed cellular services provider by sales Bharti Airtel slipped 1.03% on profit booking. MTNL (down 0.39%), Idea Cellular Services (down 1.92%), and Shyam Telecom (down 3.14%), also declined from the telecom pack.

IT stocks saw mixed trend. India's largest software services exporter by sales TCS advanced 0.33% and India's second largest software services exporter by sales Infosys gained 0.49%. But, India's third largest software services exporter by sales Wipro declined 1.23%.

Some auto stocks gained on hopes a normal monsoon will boost rural sales. India's top bike maker by sales Hero Honda Motors jumped 2% to Rs 2024 and was the top gainer from the Sensex pack. India's second largest bike maker by sales Bajaj Auto rose 0.06%.

India's top tractor maker by sales Mahindra & Mahindra lost 2% at Rs 619 on late selling. The stock came off day's high of Rs 641. The company signed a pact with Arabia Holdings and Ras Al- Khaimah Transport Investments LLC to set up a joint venture company in UAE for manufacturing armoured vehicles. The company made this announcement after market hours on Thursday, 17 June 2010.

India's top truck maker by sales Tata Motors slipped 0.41%. India's largest small car maker by sales Maruti Suzuki India slipped 2.03%, on profit booking.

Banking shares were mixed. India's largest private sector bank by market capitalisation ICICI Bank fell 2.27%. The private sector bank on Thursday said there are baseless rumours circulating in the market through SMS and emails about a law suit filed against ICICI Bank in the US. The bank said it categorically denies any such law suit and said these are malicious and unfounded rumors. The bank has lodged a complaint with regulatory and law enforcement agencies, it said

India's largest private sector bank by market capitalisation HDFC Bank declined 0.12%

Bank of India rose 1.99% and Punjab National Bank was unchanged at Rs 1033 But, India's largest bank by net profit and branch network State Bank of India rose 0.84%. Bank of Baroda slipped 1.52%.

Reserve Bank of India on Wednesday announced a plan to buyback Rs 10000-crore of short-dated government securities to help ease tight liquidity conditions in the money market.

Metal stocks declined after LMEX, a gauge of six metals traded on the London Metal Exchange, lost 2.42% on Thursday, 17 June 2010.

India's largest non-ferrous metal producer by sales Sterlite Industries (India) lost 2.43% on profit booking after a four-day surge. The company after market hours on 11 June 2010 fixed 22 June 2010 as the record date for a 2-for-1 stock split and a liberal 1:1 bonus issue. It was the top loser from the Sensex pack.

Tata Steel (down 1.70%), Steel Authority of India (down 1.69%), Jindal Saw (down 2.31%), JSW Steel (down 1.04%), Hindustan Zinc (down 3.89%), Hindalco Industries (down 0.41%), National Aluminium Company (down 2.34%), edged lower.

India's largest engineering & construction firm by sales Larsen & Toubro (L&T) jumped 1.39% to Rs 1800 after striking a 52-week high of Rs 1816.70. L&T today said it has won new orders worth Rs 1440 crore in buildings & factories segment.

India's largest power equipment maker by sales Bharat Heavy Electricals gained 0.91% after the company paid advance tax of Rs 400 crore in Q1 June 2010, up 25% compared to Rs 320 crore it paid in Q1 June 2009.

Unity Infraprojects gained 7.32% after the company secured four orders aggregating Rs 412 crore from four different players for construction works. The company announced the fresh orders during trading hours today, 18 June 2010.

India's largest cigarette maker by sales ITC slipped 0.12% to Rs 293.50 on profit booking after the company's board at a meet held today approved a liberal 1:1 bonus issue. The stock came off after hitting a record high of Rs 299.70.

Interest rate sensitive realty stocks edged lower on fears of an interest rate hike by the Reserve Bank of India. India's largest real estate developer by sales DLF slipped 0.39%, halting a four-day 7.88% rally.

Indiabulls Real Estate (down 1.93%), Omaxe (down 2.17%), HDIL (down 2.05%), Ackruti City (down 2.14%) and Parsvnath Developers (down 1.34%), edged lower.

TTK Prestige tumbled 2.21% on turning ex-dividend for a dividend of Rs 10 per share.

Triton Valves gained 1.21% after the company fixed 6 July 2010 as the record date for a 2:1 bonus issue. The company announced the record date after market hours on Thursday, 17 June 2010. This is a maiden bonus issue from Triton Valves.

Reliance Natural Resources clocked the highest volume of 4.45 crore shares on BSE. Cals Refineries (1.59 crore shares), Sanraa Media (1.23 crore shares), Reliance Power (79.86 lakh shares) and Reliance Communications (76.62 lakh shares) were the other volume toppers in that order.

Reliance Industrial Infrastructure clocked the highest turnover of Rs 305.68 crore on BSE. Reliance Natural Resources (Rs 292.33 crore), Reliance Industries (Rs 230.27 crore), Reliance Communications (Rs 145.97 crore), and Reliance Power (Rs 140.61 crore) were the other turnover toppers in that order.