Market drifts lower on weak global cues; bank stocks rise

The key benchmark indices edged lower as global stocks fell on weak economic data. The BSE 30-share Sensex fell 123.71 points or 0.69%, off close to 130 points from the day's high and up close to 30 points from the day's low. Realty, FMCG, capital goods and IT stocks fell. Index heavyweight Reliance Industries (RIL) gave up initial gains. The market breadth turned negative in contrast to a strong breadth earlier in the day.



Stocks were volatile. The market edged lower in early trade as Asian stocks fell. The market cut losses in morning trade as index heavyweight Reliance Industries (RIL) extended initial gains. The market moved in a narrow range in mid-morning trade. Trading remained range bound in early afternoon trade. Trading was volatile in afternoon trade as the key benchmark indices declined soon after hitting fresh intraday highs in early afternoon trade. The market hit a fresh intraday low in mid-afternoon trade. The market extended losses in late trade.

NSE's volatility index India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, rose 3.33% at 18.94. The index had plunged 6.1% to 18.33 on Thursday, 29 July 2010. The index had risen 1.56% to 19.52 on Wednesday, 28 July 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 continue to mop up Indian stocks. Foreign funds have bought shares worth a net Rs 8109.64 crore this month (till 29 July 2010), absorbing selling by domestic institutional investors. Domestic funds have sold shares worth a net Rs 6193.15 crore this month (till 29 July 2010), as per data from the stock exchanges.

Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010, absorbing selling by domestic funds in that month. Domestic funds had dumped shares worth a net Rs 4777.05 crore in June 2010.

Asia ex-Japan equity funds absorbed more than $1 billion in the week ended 28 July 2010, their biggest inflow in 14 weeks, according to data from global fund tracking firm EPFR Global. Indian equity funds posted an eighth consecutive week of inflows and China stock funds recorded the biggest weekly intake since mid-April, EPFR said.

The government is trying to persuade truckers not to go on strike from 6 August 2010 to press their demand for lower toll tax. Truckers lobby group, the All India Motor Transport Congress (AIMTC), has called for lower toll tax failing which it plans to take nearly 62 lakh trucks off roads from 6 August 2010, and halt movement of goods across the country.

Meanwhile, the issue of price rise rocked the Parliament for the fifth day on Friday, 30 July 2010, with an angry Opposition seeking to censure the government in both the Houses, delaying discussion of key economic reforms. The main opposition Bharatiya Janata Party (BJP) persisted with its demand the speaker immediately allow a special discussion on spiralling inflation, with rowdy lawmakers rushing forward from their seats to press their cause.

Virtually no business was transacted during the entire week, barring parliamentary approval to President's rule in Jharkhand and the government introducing certain bills, including one on resolving differences between regulators in the financial market.

On the corporate front, the combined net profit of a total of 1,066 companies fell 12.8% to Rs 46930 crore on 23.1% rise in sales to Rs 607640 crore in Q1 June 2010 over Q1 June 2009.

European shares declined on Friday, 30 July 2010, on concerns over US economic growth and downbeat comments from a Federal Reserve official. The key benchmark indices in UK, France and Germany were down by 0.38% to 0.6%.

Asian stocks fell on Friday, 30 July 2010, as higher-than-estimated unemployment in Japan and a poorer Macquarie Group earnings outlook overshadowed increased profit targets at Sony Corp. and Panasonic Corp. The key benchmark indices in China, Indonesia, Hong Kong, Singapore, Taiwan and South Korea were down by between 0.30% to 0.89%.

Japan's Nikkei Average fell 1.64% after the bureau reported the country's unemployment rate rose to a seven-month high of 5.3% in June from 5.2% a month earlier. In other economic news, Japanese factory output marked its biggest fall in more than a year in June and core consumer prices posted their 16th straight month of annual decline in June. The industrial output unexpectedly fell 1.5% in June, surprising markets that expected a 0.2% increase.

Trading in US index futures indicated that the Dow could slide 26 points at the opening bell on Friday, 30 July 2010.

US stocks sagged in volatile trading on Thursday, 29 July 2010, after weak outlooks from technology companies and downbeat comments from a Federal Reserve official gave investors little reason to buy. The Dow Jones Industrial Average dropped 30.72 points, or 0.29% to 10,467.16. The Standard & Poor's 500 Index dropped 4.59 points, or 0.41% to 1,101.54. The Nasdaq Composite Index dropped 12.87 points, or 0.57% to 2,251.69.

St. Louis Federal Reserve Bank President James Bullard said he is worried about the risks the United States could fall into a Japan-style quagmire of falling prices and investment. That pressured stocks before a late session rebound.

The Labor Department said initial claims for unemployment benefits dropped by 11,000 to 457,000. Friday's Commerce Department report on second-quarter gross domestic product will be another marker for the strength of the recovery. Economists are expecting growth to slow a bit to a 2.5% rate in the second quarter.

Back home, the revival of monsoon rains in the crucial sowing month of July 2010 augurs well for the Indian economy which is driven by strong domestic demand. The annual monsoon rains were 38% above normal in the week to 28 July 2010, bouncing back from a 17-percent deficit in the previous week, the weather office said on Thursday, 29 July 2010. Weekly rainfall was the highest in the current June-September season and much heavier than any week in the 2009 monsoon period, which delivered the lowest rainfall since 1972 and triggered a sustained rise in food prices.

Heavy, well-distributed showers in the past week helped total rainfall rise to normal during July, the most important month for planting rice, corn, soybean and cane. The Southwest monsoon was active over Andaman & Nicobar Islands, Vidarbha, Andhra Pradesh, Karnataka and Kerala during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Thursday, 29 July 2010. The weather office expects fairly widespread rainfall over west coast, northwest, east and northeast India in the near term.

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 weather office expects this year's monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

Water level in main reservoirs was at 27% of capacity in the week to 29 July 2010, up from 19% in the previous week. Reservoirs are important for hydropower, which accounts for a quarter of the nation's generation capacity. They also provide water to irrigate winter crops such as wheat and rapeseed.

The food inflation declined in the week ended 17 July 2010 falling to single digit levels for the first time in many months while inflation in the fuel group remained elevated. Inflation in the Primary Articles group also fell, the Government said on Thursday. According to the data released on Thursday by the Commerce & Industry Ministry, inflation in the Food Articles group stood at 9.67% in the week ended 17 July 2010 versus 12.47% in the previous week. Inflation in the Primary Articles group was at 14.5% as against 16.48% in the week ended 10 July 2010 while inflation in the Fuel & Power group rose to 14.29% from 14.27% in the preceding week.

The infrastructure sector output grew 3.4% in June from a year earlier, slower than the annual growth of 5% in May, government data showed on Wednesday. The infrastructure sector accounts for 26.7% of India's industrial output. The industrial output rose 11.5% in May from a year earlier, at its slowest pace in seven months.

The Reserve Bank of India (RBI) at its Q1 monetary policy on Tuesday, 27 July 2010, raised its key short term interest rates for the fourth time this year to curb surging inflation. The central bank also raised its economic growth and inflation forecasts.

The RBI raised GDP forecast to 8.5% for the year ending March 2011 (FY 2011), from 8% with an upside bias earlier. The central bank said the upward revision in growth forecast is primarily based on better industrial production and its favourable impact on the services sector and also giving due consideration to the global scenario.

The RBI also signaled its strong preference for tight liquidity, saying it would ensure that excess liquidity in the system doesn't dilute the effectiveness of policy-rate actions.

The RBI also raised the baseline projection for inflation based on wholesale price index for March 2011 to 6% from 5.5% indicated in the April 2010 policy statement, taking into account the emerging domestic and external scenario. The RBI said its outlook on inflation will partly be shaped by the distribution of monsoon rains and their impact, as the agricultural harvest will be crucial to easing currently high food prices in the country.

The central bank said consumer price inflation remains at elevated levels and demand-side pressures need to be contained. The central bank also said real policy rates are not consistent with strong economic growth.

The dominant concern that has shaped the monetary policy stance in this review is high inflation, RBI Governor D Subbarao said in a statement. Non-food inflation has risen, and demand-side pressures are clearly evident. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations, the RBI said.

The Reserve Bank of India said the economy could face a significant risk in the form of a slowdown in capital flows, at a time when the current account deficit is widening. In its first quarterly review of monetary policy, the Reserve Bank of India said that a potential slowdown in capital inflows could impact the current and trade deficit. The current deficit is already widening as imports continue to rise with the rebound in economic growth.

RBI has said that the risk of capital flows runs both ways. Given the present state of the global economy, central banks in advanced economies are likely to maintain accommodative monetary policies for an extended period. With the strong growth potential of emerging market economies, including India, this is likely to trigger large capital inflows. Large capital inflows above the absorptive capacity of the economy will pose a challenge for monetary and exchange rate management. This also has implications for asset prices. In this scenario, a widening current account deficit will help absorb a larger proportion of the inflows.

The BSE 30-share Sensex fell 123.71 points or 0.69% to 17,868.29. The Sensex rose 8.35 points at the day's high of 18,000.35 in early afternoon trade. The index lost 153.08 points at the day's low of 17,838.92 in late trade.

The S&P CNX Nifty fell 41.30 points or 0.76% to 5,367.60.

The BSE Mid-Cap index rose 0.35%. The Small-Cap index rose 0.2%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, turned negative in contrast to a strong breadth earlier in the day. On BSE, 1608 shares declined while 1339 shares rose. A total of 97 shares remained unchanged.

From 30 share Sensex pack 22 stocks fell and others rose.

BSE clocked turnover of Rs 4537 crore, lower than Rs 4609.60 crore on Thursday, 29 July 2010.

Index heavyweight Reliance Industries (RIL) fell 0.08% to Rs 1009.60, off the day's high of Rs 1,020.40. The stock extended last two days' slide triggered by worries about stagnant gas production. Gas production is likely to stagnate at 60 million standard cubic metres of gas a day for a while. Reliance Industries will be able to pump natural gas at full capacity from its deep-sea field during the year to March 2013, Oil Secretary S. Sundareshan said on Wednesday.

RIL's net profit jumped 32.3% to Rs 4851 crore on 86.7% increase in net turnover to Rs 58,228 crore in Q1 June 2010 over Q1 June 2009. The results were announced after trading hours on Tuesday 27 July 2010.

Some metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange rose 1.04% on Thursday, 29 July 2010. Hindustan Zinc, Tata Steel, Jindal Steel & Power, National Aluminum Company rose by between 0.127% to 2.13%.

But, Steel Authority of India fell 0.59%, with the stock falling for the second straight day after the company announced during market hours on Thursday said its net profit fell 11.55% to Rs 1176.65 crore in Q1 June 2010 over Q1 June 2009.

India's largest FMCG maker by sales Hindustan Unilever fell 2.11%. Net profit fell 1.84% to Rs 533.21 crore on 8.42% increase in total income to Rs 4918.34 crore in Q1 June 2010 over Q1 June 2009. The result was announced during market hours on Tuesday, 27 July 2010.

Cigarette maker ITC fell 0.36%. The scrip hit all-time high of Rs 311.70 today ahead of 4 August 2010 record date for 1:1 bonus issue.

India's largest engineering & construction firm by sales Larsen & Toubro (L&T) fell 1.23%, with the stock falling for the fifth day in a row. The company early this week said that order inflow jumped 63% to Rs 15626 crore in Q1 June 1010 over Q1 June 2009. L&T's profit after tax from normal operations rose 15% to Rs 666 crore on 6.5% growth in gross customer sales to Rs 7913 crore in Q1 June 2010 over Q1 June 2009. The result was announced during trading hours on Tuesday, 27 July 2010.

Larsen & Toubro has forecast 20% sales growth for the year ending March 2011 (FY 2011). The company has maintained its earlier forecast of 25% rise in new order inflows for FY 2011.

Among other capital goods stocks, Praj Industries, Bharat Heavy Electricals, ABB, Siemens, ABB fell by between 0.45% to 4.08%.

India's largest mobile services provider by sales Bharti Airtel fell 3.17% and was second top loser from the Sensex pack.

India's largest motorbike maker by sales Hero Honda Motors fell 2.95% as net profit declined 1.6% to Rs 491.69 crore on 12% growth in turnover to Rs 4296.61 crore in Q1 June 2010 over Q1 June 2009. The stock was the second top loser from the Sensex pack. The company announced the result after trading hours on Thursday, 29 July 2010.

Hero Honda said a sharp rise in commodity prices in the first half of the quarter and additional expenditure incurred on account of conversion to new emission norms negatively impacted profit margins in Q1 June 2010. Managing Director and CEO Pawan Munjal said the company is striving to meet continuously rising demand for its products. He added that the company is scaling up production at its existing plants to meet expected market demand.

Rate sensitive realty fell on worries higher interest rates will crimp property demand. Ackruti City, Unitech, Indiabulls Real Estate and Phoenix Mills fell by between 0.98% to 2.47 %.

Realty major DLF fell 2.59%, sliding for the second straight day. DLF's consolidated net profit rose 3.79% to Rs 411.03 crore in Q1 June 2010 over Q1 June 2009. DLF's boards has approved further issue equity shares by its wholly owned subsidiary, DLF Brands to a promoter group company. DLF Brands will cease to be a subsidiary of DLF after the issue.

IT pivotals fell on weak economic data in US, the biggest market for Indian IT firms. India's second largest software services exporter Infosys Technologies fell 1.6%. India's third largest software services exporter Wipro fell 1.22%. India's largest software services exporter TCS fell 1.04%, with the stock falling for the second straight day.

Most banking stocks rose after some banks raised their deposit rates after the central bank raised key short-term interest rates on Tuesday, 27 July 2010.

India's biggest commercial bank in terms of branch network, State Bank of India rose 1.24% to Rs 2,503.80. The stock today, 30 July 2010, scaled a record high of Rs 2,519.90. State Bank of India after market hours on Wednesday, 28 July 2010, announced the acquisition of its affiliate bank State Bank of Indore. The acquisition is effective from 26 August 2010.

Bank of Baroda rose 2.56%. It hit a record high of Rs 762.40 today.

India's largest private sector bank by market capitalisation ICICI Bank fell 2.38%.

India's largest dedicated housing finance firm by revenue HDFC rose 0.22%. HDFC has fixed 20 August 2010 record date for a 5-for-1 stock split.

India's second largest private sector bank by market capitalisation HDFC Bank rose 1.22%. The stock hit record high of Rs 2,134 today. HDFC Bank has decided to raise deposit rates for various maturities by 0.25% to 0.75%, with effect from 30 July 2010.

For deposits with maturity between 91 days and 6 months, the rate would be raised by 75 basis points to 5.25% from the existing 4.5%. For fixed deposit between 9 months and one year, the new rates would be higher by 50 basis points at 6.25% while for 1 year 16 days category it will be 7%, 25 basis points more than the existing rate of 6.75%.

National Thermal Power Corporation fell 0.43%. The unit 6 of 490 megawatts (MW) of National Capital Thermal Power Project, Dadri after synchronization on 16 July 2010, has been commissioned on 30 July 2010. With this, the total capacity of NTPC group exceeds 32,000 MW, NTPC said today, 30 July 2010. The installed capacity of NTPC group has become 32,194 MW, it added.

India's largest car maker by sales Maruti Suzuki rose 0.05%. The stock had slumped 12.31% in a single trading session on Monday, 26 July 2010, after net profit fell 20.2% to Rs 465.40 crore on 27% growth in net sales to Rs 8050.70 crore in Q1 June 2010 over Q1 June 2009. Maruti said the fall in net profit was due to higher commodity prices, increase in royalty and lower 'other income'. The company said income from exports to Europe declined due to weakening of the euro.

India's second largest bike maker by sales Bajaj Auto fell 0.24%. The stock hit a record high of Rs 2,734.95 on Thursday, 29 July 2010.

Mahindra & Mahindra rose 2.7% as revival of monsoon rains this month could boost tractor demand. The stock today hit a record high of Rs 664.70.

But, India's biggest commercial vehicles maker in terms of market share, Tata Motors, lost 2.26%.

Reliance Infrastructure fell 2.05% ahead of its Q1 result today, 30 July 2010.

Cals Refineries clocked the highest volume of 1.82 crore shares on BSE. SpiceJet (1.25 crore shares), Aster Silicates (1.2 crore shares), IFCI (98.39 lakh shares) and Emami Infrastructure (71.59 lakh shares) were the other volume toppers in that order.

Aster Silicates clocked the highest turnover of Rs 228.76 crore on BSE. IRB Infrastructure & Development (Rs 149.28 crore), State Bank of India (Rs 141.20 crore), ARSS Infrastructure (Rs 102.41 crore) and Reliance Industries (Rs 87.93 crore) were the other turnover toppers in that order.