Market declines for the second straight day

The key benchmark indices fell for the second straight day as investors resorted to profit taking ahead of the weekend. Asian and European stocks rose ahead of key US employment data due out later in the global day. The market breadth was even. Earlier in the day the breadth was strong. Banking, realty and metal stocks fell. Auto stocks were mixed.



Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Another index heavyweight Infosys also fell. The BSE 30-share Sensex lost 48.38 points or 0.28%, off close to 140 points from the day's high and up close to 35 points from the day's low.

The market edged higher in early trade as most of Asian stocks rose. The Sensex pared gains later after hitting fresh intraday high. The market slipped into the red in morning trade. The market recovered in early afternoon trade, soon after hitting a fresh intraday low. The market moved between positive and negative zone in afternoon trade. The market edged higher after moving in a narrow range in mid-afternoon trade. Stocks weakened in late trade.

Miners and automakers helped European shares climb from multi-week lows on Friday, although gains were limited ahead of key US jobs data. The key benchmark indices in France, Germany and UK rose by between 0.25% to 0.65%.

Asian stocks rose in choppy trade on Friday, as investors resorted to bargain hunting after several consecutive sessions of downward trading. But the mood was cautious after weak US economic data and signs of a slowdown in China. The key benchmark indices in Japan, China, Taiwan and Singapore rose by between 0.13% to 1.06%. But, the key benchmark indices in Hong Kong, South Korea and Indonesia fell by between 0.06% to 1.11%.

Economists expects US June 2010 non-farm payrolls to show a 110,000 decline in jobs, compared with a 431,000 rise in May 2010.

Trading in US index futures indicated a flat opening of US stocks on Friday, 2 July 2010. US index futures earlier swung between positive and negative zone.

US stocks fell on Thursday as manufacturing and labor market data heightened fears of a double-dip recession before Friday's key employment report. The Dow Jones Industrial Average dropped 41.49 points, or 0.42% to 9,732.53. The Standard & Poor's 500 Index shed 3.33 points, or 0.32% to 1,027.38. The Nasdaq Composite Index lost 7.88 points, or 0.37% to 2,101.36.

Thursday's data included the Institute for Supply Management's barometer of US manufacturing activity, which fell to its lowest level since December and pending home sales, which dropped a record 30% in May. Other data showed unemployment claims rose unexpectedly last week, heightening fears a labor market recovery was stalling.

Back home, a survey showed manufacturing growth cooled in June 2010 after a surge in activity the prior month, mainly due to slowing production and rapidly easing input price pressures. The HSBC Markit Purchasing Manager's Index, based on a survey of 500 Indian companies, slipped to 57.3 in June from 59 in May, which was the highest in more than two years. Despite an increase in workloads and outstanding business, manufacturers did not add new jobs to their payrolls in June, leaving the employment index stagnating.

Exports rose for the seventh straight month in May 2010, growing an annual 35% to $16.1 billion, the government said on Thursday. Imports rose 38.5% to $27.4 billion, widening the country's trade deficit to $11.3 billion.

Food price inflation eased to its lowest annual growth this year, dampened by a weakening base effect, while the fuel price rise was slightly lower than the previous week, government data on Thursday showed. Food price index rose 12.92% in the year to 19 June 2010, while the fuel price index climbed 12.9%, government data released on Thursday showed. The pace of increase in food prices slowed from the previous week's annual rise of 16.9%, while fuel price inflation eased from last week's annual rise of 13.18%. The primary articles index was up at 14.75%

But, the government's latest decision to raise fuel prices will stoke inflation, maintaining pressure on the Reserve Bank of India to tighten monetary policy. The government on 25 June 2010, raised petrol price by Rs 3.50 a litre, diesel price by Rs 2 litre, kerosene by Rs 3 litre and LPG by Rs 35 per cylinder.

The government has decided to decontrol petrol prices. The government will also eventually decontrol diesel prices, Oil Secretary S. Sundareshan said on 25 June 2010. The government will, however, continue to subsidize kerosene and LPG.

RBI Deputy Governor Subir Gokarn on Thursday said India's economic recovery has been strongly consolidated in the early part of 2010, but the central bank is also watching European developments in the context of its policy making.

Investors are closely watching the progress of the monsoon rains. The India Meteorological Department (IMD) on Thursday, 1 July 2010, forecast that there could be some improvement in the monsoon situation over north India next week. The IMD further announced that the northern limit of the monsoon, which had been remaining stationary since June 18, moved slightly northwards in north Madhya Pradesh covering Bhopal and its neighbourhood.

The monsoon was 16% below normal in June 2010. The situation was the worst in the central and the north-west parts of the country, with deficiencies of 26% and 18%. Uttar Pradesh had the maximum shortfall, with the western part of the state recording a deficiency of 82% and the eastern part 72%.

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 south-west monsoon usually covers the entire country by mid-July. Last week, the weather office said the rains were expected to be better than previously forecast. Monsoon rains are expected to be at 102% of the long-period average for the current monsoon season. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

On the corporate front, most Indian firms, including Reliance Industries, L&T, Tata Steel and Tata Motors, have paid higher advance tax in Q1 June 2010 over Q1 June 2009. Higher advance tax payment normally indicates higher profits for the period under review. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year.

The BSE 30-share Sensex fell 48.38 points or 0.28% at 17,460.95. The Sensex rose 89.61 points at the day's high of 17,598.94 in morning trade. The Sensex fell 82.55 points at the day's low of 17,426.78 at the fag end of the trading session.

The S&P CNX Nifty fell 14.30 points or 0.27% to 5,237.10.

The BSE Mid-Cap index was down 0.04%. The BSE Small-Cap index was up 0.25%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE declined. The BSE Capital Goods index (down 0.55%), BSE Metal index (down 0.5%), BSE Realty index (down 0.47%), BSE Oil & Gas index (down 0.45%), BSE Teck index (down 0.45%), BSE Auto index (down 0.44%), FMCG index (down 0.43%), BSE IT index (down 0.36%), Consumer Durables index (down 0.33%), underperformed the Sensex.

The banking sector index Bankex (up 0.19%), PSU index (unchanged), Power index (down 0.1%), and Healthcare index (down 0.13%) outperformed the Sensex.

The market breadth, indicating the strength of the broader market, was almost even. The breadth weakened from strong breadth earlier in the day. On BSE, 1450 shares advanced while 1447 shares declined. A total of 107 shares remained unchanged.

From the 30 share Sensex pack, 16 stocks fell and rest rose.

BSE clocked turnover of Rs 4521 crore, slightly higher than Rs 4512.93 crore on Thursday, 1 July 2010.

Index heavyweight Reliance Industries (RIL) fell 0.72% to Rs 1068.45. The stock hit a high of Rs 1083.70 and a low of Rs 1065.10. The stock had risen nearly 2% on Wednesday on reports the Mukesh Ambani group is close to signing an equal joint venture agreement with global private equity and hedge fund company, DE Shaw, to enter the financial services sector.

RIL announced early this week that it made seventh oil discovery in Cambay basin in Gujarat. RIL and Reliance Natural Resources (RNRL) on 25 June 2010, entered into a new gas supply agreement, as directed by the Supreme Court. The Supreme Court had ordered the two companies to renegotiate the Gas Supply Master Agreement, which was signed between the Ambani brothers as part of the business demerger in 2005.

Reliance Power rose 3.33%. Reliance Natural Resources fell 1.43%, after rising close to 4% earlier in the day. Reliance Power said after market hours today that a meeting of the board of directors of the company will be held on 4 July 2010, to consider merger of Reliance Natural Resources with the company.

Metal and mining stocks fell as LMEX, a gauge of six metals traded on the London Metal Exchange fell 2.83% on Thursday, 1 July 2010. National Aluminum Company, Sterlite Industries, Sesa Goa, Tata Steel, JSW Steel, Jindal Steel & Power, Hindustan Zinc fell by between 0.02% to 2.31%.

India's third largest IT exporter by sales Wipro rose 2.95% and was the top gainer from the Sensex pack. But, India's second largest IT exporter by sales Infosys fell 1.39% after its ADR fell 1.35% on Thursday, 1 July 2010. Infosys on Thursday said it will unveil Q1 June 2010 results on 13 July 2010.

Auto stocks were mixed. India's largest car maker by sales Maruti Suzuki India rose 0.64%. The stock had lost 2% on Thursday in weak market after company announced during market hours that its total vehicle sales rose 17.3% to 88,091 vehicles in June 2010 over June 2009.

India's largest tractor maker by sales Mahindra & Mahindra fell 2.19%, reversing initial gains after company reported an increase of 19.84% in auto sales to 27,562 units in June 2010 over June 2009. Despite the annual shutdown in the first week of June, the auto division posted strong growth rates, M&M said in a press release. Tractor sales declined 9% to 16,590 units in June 2010 over June 2009, as the company is facing supply constraints from component makers (casting and tyres).

India's largest commercial vehicle maker by sales Tata Motors rose 0.53%, as company's total sales jumped 49% to 67,730 in June 2010 over June 2009. Domestic sales rose 45% to 62,602 and exports jumped 138% to 5,128 in June 2010 over June 2009. The figures do not include the luxury Jaguar, Land Rover brands it makes in Britain.

The country's largest two-wheeler maker Hero Honda Motors fell 0.14%, reversing initial gains after company reported a 16.6% jump in its sales at 4,26,454 in June 2010 over June 2009.

High beta realty stocks reversed initial gains. Ackruti City, HDIL, DLF, Unitech, Phoenix Mills and Indiabulls Real Estate rose by between 0.25% to 1.25%.

Index heavyweight Larsen & Toubro fell 0.31%, reversing initial gains. The company announced during market hours on Wednesday that it has bagged orders worth Rs 1383 crore.

Among other capital goods stocks, Thermax, Bharat Heavy Electricals, Praj Industries, SKF India fell by between 0.45% to 1.66%.

Bank stocks were mixed. India's second largest private sector bank by operating income HDFC Bank rose 0.31% in volatile trade. HDFC Bank has set its base rate at 7.25%. India's largest private sector bank by market capitalisation ICICI Bank fell 0.15%, with the stock falling for the second straight day after it set its base rate for loans at 7.5% effective Thursday, 1 July 2010, as part of a new rule to set minimum lending rates.

Bu, India's biggest commercial bank in terms of branch network, State Bank of India, rose 0.15%. SBI announced during market hours on Tuesday it has fixed the base rate at 7.5% per annum with effect from 1 July 2010.

Among other PSU banks, Punjab National Bank rose 2.57%. But, Bank of India and Bank of Baroda fell by between 0.11% to 0.73%.

India's largest dedicated housing finance firm by revenue HDFC was flat.

The Reserve Bank of India introduced the new lending rate system, or the base rate, to ensure that larger borrowers do not bargain for cheaper rates from banks, distorting their asset liability management.

Bank credit grew an annual 19.1% in early June 2010, according to the RBI data, in tune with a rise in business and consumer confidence.

Consumer durables stocks fell on profit taking. Blue Star, Rajesh Exports, Videocon Industries, Titan Industries fell by between 0.36% to 1.14%.

FMCG stocks also fell on profit taking. ITC, Tata Tea, Hindutan Unilever and Marico fell by between 0.08% to 3.18%.

PSU OMCs extended recent strong gains triggered by the government's decision on late last week to decontrol petrol and diesel prices which will help reduce underrecoveries of PSU OMCs on fuel sales. BPCL, HPCL and Indian Oil Corporation (IOC) rose by between 0.45% to 1.12%.

India's second largest mobile services provider by sales Reliance Communications fell 0.62%, reversing initial gains. The company after market hours on Thursday announced the acquisition of one of India's largest cable service provider, Digicable, in a cashless, all-stock deal. Reliance will demerge its direct-to-home (DTH) and IPTV business, now under the Reliance BigTV brand and the domestic retail broadband business of Reliance Communications, into a new entity along with the newly acquired Digicable. The new entity will be called Reliance DigiCom and Digicable will be given a stake in this entity.

Cals Refineries clocked the highest volume of 3.14 crore shares on BSE. FCS Software (2.61 crore shares), Karuturi Global Solutions (1.94 crore shares), Reliance Natural Resources (1.75 crore shares) and IFCI (84.99 lakh shares) were the other volume toppers in that order.

Persistent Systems clocked the highest turnover of Rs 116.96 crore on BSE. Reliance Natural Resources (Rs 111.57 crore), Tata Steel (Rs 110.97 crore), Jubilant Organosys (Rs 101.50 crore) and Reliance Power (Rs 92.16 crore) were the other turnover toppers in that order.