Telecom, metal shares lead decline

The key benchmark indices declined for the second straight day as European shares faltered. The BSE 30-share Sensex lost 163.97 points or 0.98%, off close to 280 points from the day's high and up about 55 points from the day's low. The 50-unit S&P CNX Nifty fell below the psychological 5,000 level. US index futures edged higher in volatile trade. Index heavyweight Reliance Industries (RIL) fell. Metal, banking and realty stocks declined. But, FMCG stocks were in green.

The Sensex has lost 500.59 points or 2.9% in the past two trading sessions after jumping 1,095.21 points or 6.83% in eight trading sessions to 17,117.69 on 4 June 2010, from recent low of 16,022.48 on 25 May 2010. The Sensex has lost 1,352.92 points or 7.5% from a recent peak of 17,970.02 on 7 April 2010. It has lost 4.85% in calendar 2010 so far after jumping 81% in 2009.

Euro zone debt worries caused massive outflow of foreign funds from India recently as investors shunned risk. Foreign funds sold shares worth a net Rs 832.21 crore in the first six trading sessions this month, as per data from the stock exchanges. Foreign institutional investors (FIIs) had dumped shares worth a net Rs 12071.14 crore in May 2010.

Domestic funds have absorbed part of the selling by FIIs. Domestic funds bought stocks worth a net Rs 166.75 crore in the first six days this month. Domestic funds bought stocks worth a net Rs 6361.17 crore in May 2010.

Coming back to today's trade, the market was choppy. The market recovered after an initial slide on firm Asian stocks. The market extended gains in morning trade. The market trimmed gains in mid-morning trade on profit taking. The key benchmark indices regained strength in early afternoon trade. The Sensex hit a fresh intraday high. The market came off the higher level later. A sell-off gripped the market in mid-afternoon trade. The market recovered from lower level after hitting a fresh intraday low.

NSE's volatility index, India VIX, rose 2.79% to 28.77. The index, which is a gauge of traders' perception of near-term risks in the market based on options prices, had jumped 13.23% to 27.99 on Monday, 7 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.

European shares turned negative, with banks surrendering early gains, with worries about the euro zone's debt crisis persisting. The key indices in the Germany, UK and France were down by 0.87% and 1.08%.

Commodity producers led Asian stocks higher on Tuesday after Federal Reserve Chairman Ben Bernanke said the US economic recovery is intact. The key benchmark indices in China, South Korea, Japan, Indonesia, Hong Kong rose by between 0.09% to 1.08%. The key benchmark indices in Taiwan and Singapore fell by between 0.08% to 0.19%.

US index futures edged higher in volatile trade. Trading in US index futures indicated that the Dow could rise 32 points at the opening bell on Tuesday, 8 June 2010.

US Stocks fell on Monday 7 June 2010, taking S&P 500 to its lowest close in seven months, as industrial and technology shares fell. The Dow Jones Industrial Average lost 115.48 points, or 1.16% to 9,816.49. The Standard & Poor's 500 Index slid 14.41 points, or 1.35% to 1,050.47. The Nasdaq Composite Index tumbled 45.27 points, or 2.04% to 2,173.90.

Back home, the Indian government on Monday deferred till next week a decision on raising fuel prices, the second time in a year it has tripped on pushing politically-sensitive reform measures that could help trim a budget deficit. The Congress-led government held off the decision after two powerful ministers from coalition parties stayed away from a ministerial panel meeting, signalling opposition to the move on fears of voter backlash ahead of local polls over the next year.

The panel was to review the possibility of freeing up petrol prices and cutting subsidies on diesel, kerosene and cooking gas which could help reduce the fiscal deficit from the projected 5.5% of 2010/11 GDP and free up revenues for other programmes.

On the monsoon front, the southwest monsoon rains have revived after being stalled by a cyclone last week. According to the India Meteorological Department (IMD), the monsoon has advanced to some parts of the central Arabian Sea, most parts of coastal Karnataka and some parts of south interior Karnataka. The monsoon is expected to advance further in the next couple of days.

The monsoon rains were 11% below normal in the week to 2 June 2010, the weather office said on Thursday, 3 June 2010. The June-September monsoon rains 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.

Last month, Australia's weather bureau said the El Nino weather pattern was over. El Nino is caused by an abnormal warming of the eastern Pacific Ocean and can play havoc with weather patterns across the Asia-Pacific region.

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.

Data last week showed business activity remained strong for India's vast services sector in May 2010, with a key gauge growing for a 13th consecutive month even as some momentum was lost over the previous month. The HSBC-Markit Business Activity Index stood at 58.2 in May 2010 from a 21-month high of 62.1 in April 2010. A reading above 50 indicates expansion. Services make up about 55% of India's $1.2 trillion economy.

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.

On a flip side, another data showed that the food articles index rose 16.55% in the year to 22 May 2010, accelerating from previous week's rise of 16.23%. The primary articles index, which also includes food articles, rose 16.89%, higher than previous week's 15.90% rise. The fuel price index increased to 14.14 % versus 12.08% rise in the previous week.

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 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. Meanwhile, a revenue bounty for the government from the sale of telecom spectrum would help bring down fiscal deficit in the current financial year.

Investors will eye the first installment of the corporate advance tax payment which will give some clue about Q1 June 2010 corporate results. The first installment of corporate advance tax falls due on 15 June. The combined net profit of a total of 3,589 companies rose 13.7% to Rs 87,226 crore on 24.70% rise in sales to Rs 9,27,456 crore in the quarter ended March 2010 over the quarter ended March 2009.

The BSE 30-share Sensex fell 163.97 points or 0.98% to 16,617.10. The Sensex jumped 114.66 points at the day's high of 16,895.73 in early afternoon trade. The Sensex fell 220.43 points at the day's low of 16,560.64 in late trade.

The S&P CNX Nifty declined 46.90 points or 0.93% to 4,987.10.

The BSE Mid-Cap index fell 0.55%. The BSE Small-Cap index fell 0.55%. Both these indices outperformed the Sensex.

Except BSE FMCG index all the other sectoral indices on BSE fell. BSE Realty index (down 2.57%), Metal index (down 2.19%), Oil & Gas index (down 1.38%), Teck index (down 1.37%), Banking sector index Bankex (down 1.19%) and Consumer Durables index (down 1.18%), underperformed the Sensex.

FMCG index (up 0.69%), BSE Healthcare index (down 0.25%), Power index (down 0.27%), Capital Goods index (down 0.36%), PSU index (down 0.66%), IT index (down 0.75%), Auto index (down 0.96%), outperformed the Sensex.

The market breadth, indicating the overall health of the market, turned weak. The breadth reversed course - it was strong earlier in the day. On BSE, 1688 shares declined as compared with 1134 that advanced. A total of 108 shares were unchanged.

From the 30 share Sensex pack, 23 fell and rest rose.

BSE clocked turnover of Rs 3449 crore, higher than Rs 2934.10 crore on Monday, 7 June 2010.

Index heavyweight Reliance Industries (RIL) fell 1.28% to Rs 996.45. The stock came off the day's high of Rs 1013.40. RIL may reportedly foray into nuclear energy after being freed from a non-compete agreement with the Anil Dhirubhai Ambani Group (ADAG) that barred it from investing in some businesses, including power. Recently, reports had also suggested that RIL may make its first big-ticket investment in coal-fired power plants.

India's second largest mobile services provider by sales Reliance Communications (RCom) fell 4.69% on profit taking after a recent sharp surge. The company's board on Sunday, 6 June 2010, gave an in-principle approval for induction of strategic/private equity investors into the company. The approval is for sale of up to 26% stake. The RCom stock had jumped 14% last week, with speculation rife that Abu Dhabi's Etisalat and South Africa's MTN could be potential partners. However, MTN had denied merger talks with the firm.

India's largest mobile telecom services provider by sales Bharti Airtel fell 3.77% after company announced that it has completed the acquisition of Zain Group's (Zain) mobile operations in 15 countries across Africa for an enterprise valuation of $10.7 billion.

India's largest cigarette maker by sales ITC rose 0.78%. The stock hit an all-time high of Rs 292.45 today. The board of the company will meet on 18 June 2010 to consider the bonus share issue. The company had last issued bonus shares in the ratio of 1:2 in 2005.

India's largest FMCG maker by sales Hindustan Unilever rose 0.26%, extending recent gains. The company said after market hours on Thursday, 3 June 2010, that its board of directors will meet on 11 June 2010 to consider buyback of shares.

Among other FMCG stocks, United Spirits, Nestle India and Dabur India rose by between 0.65% to 1.36%.

Metal stocks reversed initial gains. Jindal Steel & Power, Hindalco Industries, Hindustan Zinc, Steel Authority of India, Sterlite Industries, National Aluminum Company fell by between 0.2% to 5.81%.

India's largest steel maker by sales Tata Steel fell 2.19%, reversing early gains. The company announced before the market hours today that its subsidiary has raised stake in Canadian mining firm New Millennium Capital Corp (NML). The company now holds 27.4% outstanding shares of NML.

Some high beta realty stocks fell. HDIL, DLF, Indiabulls Real Estate, Unitech, Phoenix Mills, Peninsula Land, Parsvnath Developers fell by between 0.36% to 3.97%.

Banking stocks reversed initial gains. India's largest bank in terms of branch network State Bank of India fell 0.12%. Among other state-run banks, Bank of India fell 1.07% and Punjab National Bank was flat. Bank of Baroda fell 1.56%. The stock had hit record high of Rs 753.35 on Monday.

India's largest private sector bank by sales ICICI Bank fell 3%. Its ADR fell 3.06% on Monday, 7 June 2010. India's second largest private sector bank by sales HDFC Bank fell 1.05%. Its ADR fell 2.53% on Monday, 7 June 2010.

Bank credit to businesses and individuals has seen a pick-up of around Rs 5,600 crore while deposits with banks have fallen by nearly Rs 5,000 crore during the fortnight ended 21 May 2010.

Some capital goods stocks fell on profit taking. ABB, Larsen & Toubro, Praj Industries, Crompton Greaves, Punj Lloyd fell by between 0.6% to 1.43%.

IT stocks fell on disappointing US non-farms payroll data for May 2010. US is the biggest market for the Indian IT firms. India's second largest software services exporter by sales Infosys fell 0.65%, with the stock falling for the second straight day. Its ADR fell 2.15% on Monday, 7 June 2010. India's largest software services exporter by sales TCS fell 0.41%, with the stock falling for the second straight day.

India's third largest software services exporter by sales Wipro fell 1.35%. Its ADR fell 2.47% on Monday, 7 June 2010. The company announced during market hours on Monday that it has fixed 16 June 2010 as the record date for issue of bonus shares in the ratio of 2:3.

Cals Refineries clocked the highest volume of 1.19 crore shares on BSE. SpiceJet (1.09 crore shares), Rana Sugars (92.83 lakh shares), Reliance Communications (70.18 lakh shares) and Unitech (50.16 lakh shares) were the other volume toppers in that order.

Tata Steel clocked the highest turnover of Rs 132.63 crore on BSE. Reliance Communications (Rs 117.66 crore), State Bank of India (Rs 95.34 crore), Sesa Goa (Rs 93.60 crore) and Tata Motors (Rs 81.78 crore) were the other turnover toppers in that order.