Metal shares slide, PSU OMCs rally

Indian stocks swung between gains and losses almost every alternate day, last week, largely taking cues from volatile global equities. The Sensex declined in three out of the five trading sessions in the week ended 2 July 2010. Metal stocks fell on weak Chinese economic data whereas IT stocks fell on dismal US economic data. Bank stocks declined on rate hike worries.



The Sensex lost 113.58 points or 0.65% to 17,460.95 in the week ended 2 July 2010. The 50-unit S&P CNX Nifty lost 31.95 points or 0.6% to settle at 5,237.10.

Buying continued in small-cap and mid-cap stocks. The BSE Small-Cap index jumped 114.78 points or 1.28% to 9,103.98. The BSE Mid-Cap index rose 35.92 points or 0.51% at 7,118.43.

Auto firms reported decent to strong sales growth for June 2010. But, cement firms reported unimpressive dispatches figures for the month just gone by.

Infrastructure sector output grew 5% in May 2010 from a year earlier, lower than an upwardly revised annual growth of 5.4% in April, government data showed on 28 June 2010. The infrastructure sector accounts for 26.7% of the industrial output.

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 1 July 2010. 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 1 July 2010 showed. Food price index rose 12.92% in the year to 19 June 2010, while the fuel price index climbed 12.9%. 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%

The consumer price index (CPI) rose 13.91% in May from a year earlier, higher than April's annual rise of 13.33%, government data showed on 30 June 2010.

The key benchmark indices snapped two days' losses on Monday, 28 June 2010, on firm global stocks. The BSE 30-share Sensex rose 199.73 points or 1.14% at 17,774.26.

The market registered its third decline in four days on Tuesday, 29 June 2010, as Asian and European stocks and US index futures slumped. The BSE 30-share Sensex fell 240.17 points or 1.35% at 17,534.09.

The key benchmark indices jumped amid high volatility on Wednesday, 30 June 2010, as European banks sought a smaller amount of central bank loans at a three-month tender auction than markets had anticipated. The news helped ease liquidity-related fears about the health of euro zone financial sector. The BSE 30-share Sensex was up 166.81 points or 0.95% at 17,700.90.

Equities started the second quarter of the current financial year with losses on Thursday, 1 July 2010, as data showing easing manufacturing activity in Asia weighed on investor sentiment. The BSE 30-share Sensex fell 191.57 points or 1.08% at 17,509.33.

The market eased a bit on Friday, 2 July 2010, as investors resorted to profit taking ahead of the weekend. The BSE Sensex lost 48.38 points or 0.28% to 17,460.95.

World leaders agreed on Sunday, 27 June 2010, to take different paths for cutting budget deficits and making their banking systems safer. In a reversal from the unity of the past three crisis-era Group of 20 summits, the leaders left room to move at their own pace and adopt "differentiated and tailored" policies. The G20 rich and developing economies tried to balance their contrasting priorities by pledging to halve budget deficits by 2013 without stunting growth, and to clamp down on risky bank behavior without choking off lending.

Prime Minister Manmohan Singh on Sunday at the G20 meet warned of the risk of global double-dip recession if countries simultaneously cut government spending, recommending a nuanced approach for dealing with public debt. India, he said, would halve its fiscal deficit by 2013/14. Asia's third largest economy is projected to hit a deficit of 5.5% of GDP in the current fiscal year that ends in March 2011.

Capital inflows have not become a problem for the Indian economy as of now and the country does not face a situation that requires imposition of capital controls, Singh said on 29 June 2010.

The Insurance Regulatory and Development Authority (Irda) announced drastic changes to Unit Linked Insurance Plans (Ulips) on Monday, 28 June 2010, cutting agent commissions, increasing the lock-in period and making it a more risk-based product. The move follows a recent government ordinance on these popular insurance-investment plans, bringing them squarely under Irda's purview.

Metal stocks tumbled after the Conference Board corrected down its April 2010 gauge for the outlook of China's economy. Sterlite Industries lost 4.5% to Rs 160.65, Jindal Steel & Power lost 4.2% to Rs 615.55, Tata Steel shed 3.1% to Rs 474.80 and Hindalco Industries lost 3% to Rs 144.10. China is the world's largest consumer of copper and aluminum.

The leading economic indicator for China rose 0.3% in April 2010, less than the 1.7% gain reported on 15 June 2010, the Conference Board said. The previous release contained a calculation error for total floor space on which construction began, the research group said.

PSUs OMCs surged, boosted by the government's decision to decontrol petrol and diesel prices which will help reduce underrecoveries of PSU OMCs on fuel sales. HPCL jumped 18.5% to Rs 475.45, BPCL rose 7.2% to Rs 666.20 and Indian Oil Corporation rose 6.2% to Rs 401.05.

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.

Oil exploration major ONGC jumped 3.2% to Rs 1,305.05 as the latest fuel price hike will reduce its subsidy sharing burden.

Media shares jumped after the Telecom Regulatory Authority of India (Trai) recommended increasing foreign investment (FDI) limit to 74% in broadcast carriage services viz. DTH, IPTV, Mobile TV, HITS (Headend in the Sky), Teleport and multi-system operators (MSOs). Sun TV rose 4.4% to Rs 430.45 and Zee Entertainment Enterprises rose 0.67% to Rs 292.45.

In its recommendations sent to the Information and Broadcasting Ministry today, Trai has also suggested that FDI limit for local cable operators (LCOs) should be at 26%. On the FM radio front, Trai is in favour of a 26% FDI cap, up from the existing limit of 20%. There is no change in the 26% FDI cap for News & Current Affairs TV Channels. There will be no restriction on foreign investment for uplinking and downlinking of TV channels other than News & Current Affairs TV channels.

IT shares fell on weak economic data in the US, their biggest market. TCS lost 2.3% to Rs 743.50, Infosys shed 1.7% to Rs 2,729 and Wipro lost 1.1% to Rs 386.15

Auto shares were mixed. Car major Maruti Suzuki rose 0.8% to Rs 1,408.35. The company's total vehicle sales rose 17.3% to 88,091 vehicles in June 2010 over June 2009.

Commercial vehicles major Tata Motors lost 0.3% to Rs 767. The 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.

Utility vehicles major Mahindra & Mahindra lost 2% to Rs 602.30. 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).

Bank shares lost ground on rate hike worries. ICICI Bank, State Bank of India and HDFC Bank fell 1.55% to 2.03%.

HDFC Bank has set its base rate at 7.25%. ICICI Bank set the rate at 7.5%. State Bank of India also set its base rate at 7.5%. The Reserve Bank of India introduced the new lending rate system, or the base rate, effective 1 July 2010 to ensure that larger borrowers do not bargain for cheaper rates from banks, distorting their asset liability management.