Market snaps 4-day winning streak on profit booking

The key benchmark indices reversed gains after hitting 29-month highs at the onset of trading session as lower European stocks and a surge in inflation for April 2010 triggered profit taking. The BSE Sensex moved past the psychological 18,000 mark in early trade, but profit booking pulled it below that key level later. The Sensex fell 47.74 points or 0.27%, off close to 229 points from the day's high and up close to 41 points from the day's low.



Eight out of 13 sectoral indices on BSE declined. The market breadth turned negative in late trade, reversing a strong breadth earlier in the day. IT stocks fell. Capital goods and consumer durables shares bucked the weak market trend.

NSE's volatility index India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, reversed a four-day slide. The index jumped 5.02% to 20.07. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure ofthe market's expectation of volatility over the next 30 calendar days.

The market surged at the onset of the trading session on firm Asian stocks. The Sensex and the 50-unit Nifty scaled 29-month highs. The market pared gains in morning trade. It further trimmed gains in mid-morning trade. The market moved in a narrow range in early afternoon trade. The market came off the lower level in afternoon trade after hitting a fresh intraday low. The intraday recovery proved short-lived, with the Sensex moving into negative territory in late trade.

The latest data showed the headline inflation rose lower-than-expected 10.55% in June 2010. The rate of increase was higher than May's rise of 10.16%. Inflation for April 2010 was revised upwards to 11.23% from 9.59%.

Inflows into Indian stock funds rose to an 11-week high in the week ended 7 July 2010 as global investors responded to the arrival of monsoon rains, according global fund tracker EPFR Global said last week. Global emerging market stock funds attracted $518 million and those investing in Asia (ex-Japan) drew $124 million, with Taiwan funds enjoying their second-best week this year, EPFR said.

Foreign funds have bought Indian equities worth a net Rs 3454.29 crore this month so far, till 13 July 2010. Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010

Domestic funds have sold shares worth a net Rs 1157.03 crore this month so far, till 13 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.

Meanwhile, the stock market regulator Securities & Exchange Board of India (Sebi) has relaxed the exposure margin requirement for stock derivatives, based on the feedback received from market participants. After trading hours on 7 July 2010, Sebi issued a circular saying that the exposure margin would be higher of 5% or 1.5 times the standard deviation of the notional value of the gross open position in single stock futures and gross short open position in stock options in a particular underlying.

The revised exposure margin requirement would be effective from 15 July 2010. The exposure margin requirement was similar prior October 2008, after which Sebi increased the exposure margin requirement to higher of 10%, or 1.5 times the standard deviation, to promote market safety and safeguard investor interest.

The major near term trigger for the market is Q1 June 2010 results of India Inc. Advance tax collections for the first quarter of the current financial year point to a strong growth in corporate sector profits. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year. Corporate advance tax for the first quarter stood at Rs 26,876 crore, against Rs 20,456 crore in the year-ago period, a rise of 31.4%, the fastest since 2005.

Auto firms are seen reporting strong Q1 results on the back of healthy volume growth. However, margins could be under pressure due to higher input costs. Improved lending growth will spur bottom line growth of banks whereas healthy order book will drive earnings of capital goods and engineering giants L&T and Bharat Heavy Electricals (Bhel). Higher sales realisation would boost boom line of metal firms.

IT bellwether kickstarted the result season on Tuesday,13 July 2010, reporting lower-than-expected Q1 result.

European shares turned negative on Wednesday after gaining in the previous six straight sessions, with banks losing ground on concerns about stringent rules for the sector. The key benchmark indices in UK, France and Germany were down by 0.06% to 0.51%.

Asia's stock markets edged higher on Wednesday, 14 July 2010, as better-than-expected results from Intel injected life into Asian technology shares. The key benchmark indices in China, Indonesia, Singapore, Japan, Hong Kong, Taiwan and South Korea rose by between 0.66% to 2.71%.

Singapore's economy expanded at a 26% annual pace in the second quarter after a record surge the previous three months, spurring the nation's currency and adding to evidence of Asia's resilience to the European crisis. Singapore's growth for the first quarter was revised to 45.9%, the fastest since records began in 1975, the trade ministry said today.

Trading in US index futures indicated that the Dow could gain 38 points at the opening bell on Wednesday, 14 July 2010. US index futures pared initial strong gains.

US Stocks rallied for a sixth straight day on Tuesday, 13 July 2010, after Alcoa's stronger than expected quarterly results announced after market hours on Monday, 13 July 2010, heartened investors that had fled to the sidelines on jitters about the sustainability of the economic recovery. Intel Corp, too, reported results that beat expectations after trading hours on Tuesday, 14 July 2010.

The Dow Jones Industrial Average gained 146.75 points, or 1.44% to 10,363.02. The Standard & Poor's 500 Index rose 16.59 points, or 1.54% to 1,095.34. The Nasdaq Composite Index jumped 43.67 points or 1.99% to 2,242.03.

Closer home, industrial output in May 2010 rose at a slower-than-expected 11.5% from a year earlier, data showed on Monday, 12 July 2010. Manufacturing output rose an annual 12.3%, the statistics office said. Mining output was up 8.7% and power generation rose 6.4%. Production of capital goods rose 34.3% year-on-year after an annual rise of 72.8% in April 2010, while consumer durables output grew 23.7%, down from a 37% rise in the previous month April's industrial production growth was revised downwards to 16.5% from 17.6%.

The International Monetary Fund (IMF) on Thursday, 8 July 2010 raised its world output forecast for 2010, citing solid growth in the first half, especially in Asia, but warned of significant downside risks flowing from Europe. The IMF revised its 2010 world gross domestic product forecast to 4.6%, up from a previous forecast in April of 4.2%. The 2011 GDP forecast was unchanged at 4.3%.

The IMF raised India's growth forecast for 2010 to 9.5%, stating that favourable financing conditions and robust corporate profits will accelerate economic expansion. The IMF expects India's economy to grow 8.5% in 2011.

The Reserve Bank of India (RBI) on 2 July 2010, hiked the repo rate by 25 basis points to 5.5% from 5.25%, with immediate effect. It also hiked the reverse repo rate, at which it absorbs excess cash from the banking system, by an equal 25 basis points to 4% from 3.75%. The central bank said the latest rate hike is a part of the calibrated exit from the expansionary monetary policy.

Two-thirds of WPI inflation in May 2010 was contributed by non-food items, suggesting that inflation is now very much generalised and that demand-side pressures are evident, the central bank said in a statement. WPI inflation increased to 10.2% in May 2010, up from 9.6% in April 2010.

In its April 2010 policy review, the Reserve Bank projected real GDP growth for 2010-11 at 8% with an upside bias. More recent data suggest that the upside bias has largely materialized, the central bank on 2 July 2010. The growth projection will be reviewed in the first quarter review on 27 July 2010, RBI said.

Analysts expect a further 25 basis points hike in short term interest rates by the central bank at the policy review later this month.

Meanwhile, the revival of monsoon rains helped accelerate the planting of rice, oilseeds and cotton last week. The area under rice cultivation jumped 56% to 7.2 million hectares on 9 July 2010 while cotton planting rose by half, during the week, compared with the previous week, as monsoon rains were 2% above normal, ending a two-week dry spell since 18 June 2010. Rainfall was 16% below average in June 2010. The shortfall narrowed to 10% last week.

While total rainfall since 1 June 2010 is now 13% below normal, key crop areas such as rice-growing Punjab and Haryana and soybean-growing Madhya Pradesh have received adequate rains.

The Southwest monsoon was active over West Bengal, Bihar, West Uttar Pradesh, Haryana, Chandigarh & Delhi, Punjab and Vidarbha during past 24 hours, the India Meterological Department (IMD) said in its daily update on Tuesday, 13 July 2010. The IMD sees widespread rain/thundershowers in West Bengal & Sikkim, Bihar, Jharkhand and East Uttar Pradesh during next 48 hours and decrease thereafter. It expects fairly widespread rain/thundershowers in northeastern states, Lakshadweep, west coast, Andaman & Nicobar Islands and Orissa. Scattered rain/thundershowers would occur over Chhattisgarh, Madhya Pradesh and Vidarbha during next 24 hours and increase thereafter, the IMD said.

Scattered rain/thundershowers would occur over Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Punjab, Haryana, Chandigarh, Delhi and West Uttar Pradesh during next 24 hours and decrease thereafter, the weather office said on Tuesday. Scattered rain/thundershowers would occur over North Andhra Pradesh, Madhya Maharashtra and interior Karnataka. Over the next few days, fairly widespread rain/thundershowers would occur over central India and west coast, the IMD said.

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. 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.

The BSE 30-share Sensex fell 47.74 points or 0.27% at 17,938.16. The Sensex rose 181.32 points at the day's high of 18,167.22 in early trade, its highest level since 19 February 2008. The index fell 88.64 points at the day's low 17,897.26 in late trade.

The S&P CNX Nifty fell 14.50 points or 0.27% at 5,386.15. It hit a high of 5,453.45 in early trade, its highest since 6 February 2008.

The BSE Mid-Cap index underperformed the Sensex, falling 0.46%. The BSE Small-Cap index outpeformed the Sensex, falling 0.26%.

The market breadth, indicating the strength of the broader market, turned negative. That was in contrast to a strong breadth earlier in the day. On BSE, 1657 shares declined while 1261 shares advanced. A total of 125 shares remained unchanged.

BSE clocked turnover of Rs 4865 crore, higher than Rs 4369.86 crore on Tuesday, 13 July 2010.

The BSE Capital Goods index (up 1.13%), Consumer Durables index (up 0.62%), banking sector index Bankex (up 0.28%), Realty index (up 0.01%) and Power index (up 0.01%), outperformed the Sensex.

The BSE PSU index (down 0.28%), FMCG index (down 0.30%), Auto index (down 0.48%), Healthcare index (down 0.51%), Oil & Gas index (down 0.74%), Metal index (down 0.91%) and IT index (down 1.35%), underperformed the Sensex.

From the 30 share Sensex pack, 22 stocks fell and rest rose.

India's largest dedicated housing finance firm by revenue, HDFC rose 0.47%. The scrip hit 52 week high of Rs 3139 today before the announcement of Q1 June 2010 results. The results hit the market in late trade today. Net profit rose 22.95% to Rs 694.59 crore in Q1 June 2010 over Q1 June 2009. Income from operations rose 0.15% to Rs 2797.13 crore in Q1 June 2010 over Q1 June 2009.

Banking stocks were mixed. Among gainers in the banking sector, State Bank of India, HDFC Bank, Axis Bank, Bank of India and Bank of Baroda, rose by 0.14% to 1.50%. Karnataka Bank, IDBI Bank, IndusInd Bank, Yes Bank, Kotak Mahindra Bank and ICICI Bank fell by 0.86% to 1.94%.

IT bellwether Infosys fell 1.90%, extending Tuesday's 3.44% fall triggered by disappointing Q1 result. At the time of announcing the results, Infosys warned that the global economic environment continues to be uncertain, even though the company raised its full-year revenue and profit forecasts.

Infosys' consolidated net profit as per International Financial Reporting Standards (IRFS) declined 7% to Rs 1488 crore on 4.3% increase in revenue to Rs 6198 crore in Q1 June 2010 over Q4 March 2010. Operating profit declined 1.9% to Rs 1755 crore in Q1 June 2010 over Q4 March 2010. The operating profit margin (OPM) declined to 28.31% in Q1 June 2010 from 30.09% in Q4 March 2010. During the quarter, the company and its subsidiaries hired as many as 8,859 employees in total, but the net addition to its headcount was just 1,026.

Other IT stocks reversed initial gains. India's third largest IT exporter by sales Wipro fell 2.06%. India's largest IT exporter by sales TCS fell 0.03%. TCS will announce its Q1 result on Thursday, 15 July 2010.

Infotech Enterprises plunged 6.12% after consolidated net profit slumped 35.94% to Rs 32.89 crore in Q1 June 2010 over Q4 March 2010.

Metal stocks fell, reversing initial gains. JSW Steel, Sterlite Industries, Hindustan Zinc, Sesa Goa, Steel Authority of India, Hindalco Industries and Tata Steel fell by between 0.47% to 1.76%.

Index heavyweight Reliance Industries (RIL) fell 0.53% to Rs 1069.05. The stock came off the day's high of Rs 1085. As per reports RIL is close to finalising its third shale gas acquisition in the US. RIL is in active talks to acquire a 50% stake in a shale gas asset in North America, which is said to be the company's biggest shale gas deal so far.

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. RIL also recently announced its seventh oil discovery in Cambay basin in Gujarat

Auto stocks reversed initial gains. India's largest commercial vehicle maker by sales Tata Motors fell 0.51%, snapping last three days' gains. Tata Motors' 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.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) fell 2.44%. The 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).

Ashok Leyland fell 1.93%. The company reported an over two-fold jump in total commercial vehicle sales to 8,400 units in June 2010 compared to the same month last year.

India's largest car maker by sales Maruti Suzuki India fell 1.10%. The company's total vehicle sales rose 17.3% to 88,091 vehicles in June 2010 over June 2009. .

Bajaj Auto rose 1.42% after company said during market hours today that a meeting of the board of directors of the company will be held on 22 July 2010 to consider bonus issue of shares.

The country's largest two-wheeler maker Hero Honda Motors rose 0.77%. The company reported a 16.6% jump in its sales at 4,26,454 in June 2010 over June 2009.

India's largest engineering and construction firm by sales Larsen & Toubro rose 2.49% on reports the company has bagged the Rs 12,132 crore Hyderabad Metro Rail project. The stock today hit 52 week high of Rs 1,896.90. The company said during market hours today it has won an important offshore rig refurbishment contract from ONGC valued at Rs 376 crore.

Consumer durables stocks rose on sustained buying. Gitanjali Gems, Rajesh Exports Blue Star and Titan Industries rose by between 0.24% to 7.64%.

Tata Power Company rose 0.06%. Tata Power said during market hours today its 50.4 megawatts (MW) Khandke wind farm in Maharashtra was commissioned in December 2007 and has been operating well. The application for registration of the Khandke wind farm with United Nations Framework Convention on Climate Change (UNFCCC) as a Clean Development Mechanism (CDM) project with UNFCCC has now been approved, the company said. This is Tata Power's first CDM registered project. The Khandke project is expected to earn 85,000 Certified Emission Reductions (CERs) annually from UNFCCC.

BF Utilities reported a highest turnover of Rs 279.35 crore on BSE. State Bank of India (Rs 102.44 crore), Tata Steel (Rs 92.43 crore), Larsen & Toubro (Rs 91.02 crore) and DLF (Rs 82.03 crore), were the other turnover toppers on BSE.

Cals Refineries reported a highest volume of 9.33 crore shares. FCS Software (3.45 crore shares), Unitech (90.66 lakh shares), Reliance Natural Resources (RNRL) (86.29 lakh shares) and IFCI (63.95 lakh shares), were the other volume toppers on BSE.