RIL leads decline

The key benchmark indices edged lower in volatile trade as European stocks and US index futures declined. Index heavyweight Reliance Industries (RIL) fell after Q1 result as gas production is likely to stagnate at 60 million standard cubic metres of gas a day for the next 9-12 months. Two other index heavyweights -- ICICI Bank and Larsen & Toubro, too, edged lower. The BSE 30-share Sensex lost 120.24 points or 0.67%, off close to 180 points from the day's high and up close to 30 points from the day's low.



The Sensex fell below the psychological 18,000 mark. The market breadth, indicating the health of the market was weak in contrast to a strong breadth earlier in the day. Sun Pharmaceutical Industries gained after robust Q1 results. Realty, FMCG, banking and capital goods stocks fell. FMCG giant Hindustan Unilever (HUL) dropped after weak Q1 results which it reported during trading hours on Tuesday, 27 July 2010.

The market pared gains after a firm start triggered by higher Asian stocks. The market slipped into the red in morning trade. It was marginally higher in mid-morning trade. The market was a tad higher in early afternoon trade after moving between positive and negative terrain earlier. The market drifted lower in afternoon trade as index heavyweights RIL and ICICI Bank fell. The market extended losses in mid-afternoon trade. The market hit a fresh intraday low in late trade as European stocks turned negative from positive.

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 1.56% to 19.52. The index had declined 3.76% to 19.22 on Tuesday, 27 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.

The National Stock Exchange and the London Stock Exchange (LSE) have decided to explore joint business opportunities. As part of the plan, both exchanges plan to explore option if FTSE would licence FTSE 100 index to the National Stock Exchange and the Indian exchange licencing 50-share NSE index to the London exchange.

On the political front, the Congress-led United Progressive Alliance (UPA) government escaped facing a parliament vote on high prices on Wednesday, preventing possible dissent among allies, but opposition protests will continue to delay the passage of key bills. Parliament speaker Meira Kumar rejected opposition demand for a vote on whether the government had failed to tackle high prices, but said a discussion could be allowed on a June fuel price hike that has contributed to high inflation.

The government has said it will try to get parliament to ratify bills to simplify taxation, including a proposal to introduce a goods and services tax (GST), and another to cap private firms' liability in case of a nuclear accident.

European shares pulled back from early gains on Wednesday, snapping a six-session advance as auto stocks fell. The key benchmark indices in UK and Germany were down 0.4% to 0.54%. But, France's CAC 40 rose 0.28%.

Euro-zone banks tightened credit standards for loans to businesses and households in the second quarter, according to the European Central Bank's July bank lending survey published Wednesday. The degree of tightening in lending to both households and businesses exceeded banks' previous forecasts, the ECB said, with constraints in access to funding and liquidity management cited as the key factor behind tighter policies. Meanwhile, loan demand continued to recover in the second quarter, the ECB said.

Asian stocks rose on Wednesday, 28 July 2010, as sentiment turned upbeat on a batch of strong corporate earnings results. The key benchmark indices in China, Japan, Hong Kong, Indonesia Singapore, South Korea and Taiwan were up by between 0.2% to 2.70%.

US index futures reversed initial gains. Trading in US index futures indicated Dow could fall 6 points at the opening bell on Wednesday, 28 July 2010.

In US market action on Tuesday, the S&P snapped a three-day winning streak after mixed earnings reports and a fall in consumer confidence. The Dow Jones Industrial Average added 12.26 points, or 0.12% to 10,537.69. The Standard & Poor's 500 Index dipped 1.17 points, or 0.10% to 1,113.84. The Nasdaq Composite Index shed 8.18 points, or 0.36% to close at 2,288.25.

Economic data was mixed. Home prices rose in May, but labor-market worries took July consumer confidence to its lowest since February, hurt by worries about the job market, according to a report from the Conference Board, a private research group.

Closer home, 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.

Meanwhile, 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 5% below normal during the period from 1 June 2010 to 27 July 2010, improving rapidly from a deficit of 16% on 19 July 2010 as the rain-bearing monsoon winds ended a weak phase in the middle of the month.

Heavy showers, mainly in soybean-growing areas in the past week, have raised hopes of a strong harvest in the world's leading consumer of rice, cooking oils and sugar. As per reports, rainfall has been well distributed over major crop-growing regions of the country.

The Southwest monsoon was vigorous over Saurashtra & Kutch and active over Uttarakhand, Himachal Pradesh, East Rajasthan, West Madhya Pradesh, Konkan & Goa and South Interior Karnataka during past 24 hours, India Meteorological Department (IMD) said in its daily update on Tuesday, 27 July 2010. The weather office expects increase in rainfall activity over central and north Peninsular India this week.

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.

On the corporate front, the combined net profit of a total of 689 companies fell 11.1% to Rs 35485 crore on 24.8% rise in sales to Rs 462504 crore in Q1 June 2010 over Q1 June 2009.

The BSE 30-share Sensex shed 120.24 points or 0.67% to 17957.37. The Sensex rose 59.53 points at the day's high of 18,137.14 in early trade. The index lost 152.21 points at the day's low of 17,925.40 in late trade.

The S&P CNX Nifty was down 33.05 points or 0.61% to 5,397.55.

The BSE Mid-Cap index was down 0.21%. The Small-Cap index fell 0.16%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE declined. The BSE Oil & Gas index (down 1.92%), Realty index (down 1.29%), and Capital Goods index (down 0.86%), underperformed the Sensex. The BSE Auto index (up 0.66%), Healthcare index (up 0.3%), Metal index (up 0.12%), IT index (up 0.03%), FMCG index (down 0.03%), Consumer Durables index (down 0.04%), Power index (down 0.09%), PSU index (down 0.16%), and banking sector index Bankex (down 0.24%), outperformed the Sensex.

The market breadth, indicating the health of the market turned negative in contrast to strong breadth earlier in the day. On BSE, 1720 shares declined while 1209 shares rose. A total of 85 shares remained unchanged.

From the 30 share Sensex pack, 17 stocks fell and the rest rose.

BSE clocked turnover of Rs 4291 crore, higher than Rs 4085.78 crore on Tuesday, 27 July 2010.

Index heavyweight Reliance Industries (RIL) was the biggest loser from the Sensex pack. The stock fell 3.09% to Rs 1020.95, as gas production is likely to stagnate at 60 million standard cubic metres of gas a day for the next 9-12 months. RIL's net profit jumped 32.3% to Rs 4851 crore on 86.7% increase in net turnover to Rs 58228 crore in Q1 June 2010 over Q1 June 2009. The results were announced after trading hours on Tuesday 27 July 2010.

Banking stocks were mixed 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 (SBI) rose 1.47%, reversing initial losses. The bank raised $1 billion in overseas bond issue late last week.

India's second largest private sector bank by market capitalisation HDFC Bank rose 1.03%, with the stock gaining for the third straight day. 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%.

India's largest private sector bank by market capitalisation ICICI Bank fell 1.63%.

Private-sector lender Axis Bank fell 2.36%. Shikha Sharma, Mananging Director and CEO of Axis Bank said on Wednesday the bank will review deposit rates soon and credit growth in FY 2011 is likely to be around 20-21%. She also said deposit rates would rise before lending rates and the credit growth will moderate in the second quarter.

Rate sensitive realty stocks fell on worries higher interest rates could crimp property demand. Sobha Developers, HDIL, Indiabulls Real Estate and Unitech fell by between 1.18% to 2.6%.

Realty major DLF fell 2.39% ahead of its Q1 result today.

Sun Pharmaceutical Industries rose 2.04% as consolidated net profit surged 244.43% to Rs 564.32 crore in Q1 June 2010 over Q1 June 2009.

India's largest FMCG maker by sales Hindustan Unilever slipped 3.02%, with the stock falling for the second straight day, on weak Q1 results. It was the second top loser from the Sensex pack. 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.

Among other FMCG stocks, Britannia Industries, Nestle India and Dabur India fell by between 1.27% to 1.5%.

But, cigarette maker ITC rose 0.89%. The scrip hit all-time high of Rs 307.95 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 2.06%, reversing initial gains. The company during market hours on Tuesday 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.

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, SKF India, Thermax, Gammon India fell by between 0.05% to 2.2%.

IT pivotals extended recent gains. India's largest software services exporter TCS rose 0.63%, with the stock gaining for the third straight day. India's second largest software services exporter Infosys Technologies rose 0.29%. But, India's third largest software services exporter Wipro fell 0.6%, reversing initial gains.

Patni Computer Systems tumbled 6.39% after net profit declined 3.39% to Rs 153 crore on 0.21% slide in net sales to Rs 456.71 crore in Q2 June 2010 over Q1 March 2010.

Consumer durables stocks fell on profit taking. Videocon Industries, Titan Industries, Blue Star and Rajesh Exports fell by between 0.11% to 3.27%.

Most metal stocks rose on strong domestic demand. Hindustan Zinc, JSW Steel, Tata Steel, Hindalco Industries, Sterlite Industries, Sesa Goa, Steel Authority of India rose by between 0.06% to 1.32%.

LMEX, a gauge of six metals traded on the London Metal Exchange fell 1.07% on Tuesday, 27 July 2010.

India's largest tractor maker by sales Mahindra & Mahindra rose 0.66% after net profit rose 40.30% to Rs 562.39 crore on 21.43% increase in total income to Rs 5180.58 crore in Q1 June 2010 over Q1 June 2009.

The company said its board of directors today deliberated on the potential bid for Ssangyong Motors Company, South Korea. The company is awaiting some additional information and a decision will be taken on a date closer to the date of the final bid, M&M said.

India's largest motorbike maker by sales Hero Honda Motors fell 0.59%. The stock had tumbled over 7% on Monday on reports Honda Motor Company may sell 6% stake in the company. Honda's spokeswoman Natsuno Asanuma was quoted by the media as saying on Monday that Honda had no intention of selling any part of its 26% stake in Hero Honda.

India's largest car maker by sales Maruti Suzuki fell 0.45%, reversing initial gains. The stock had slumped 12.31% on Monday 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 rose 1.94%. The stock hit a record high of Rs 2,719.55 today, 28 July 2010.

Among other auto stocks, Tata Motors and Ashok Leyland rose by between 0.88% to 0.97%.

Aster Silicates settled at Rs 199.10 on BSE, a 68.73% premium over the initial public offer price of Rs 118. The stock debuted at Rs 127.70, a premium of 8.22% over the initial public offer price.

Aster Silicates clocked the highest volume of 3.64 crore shares on BSE. Cals Refineries (2.57 crore shares), FCS Software (1.47 crore shares), SpiceJet (1.15 crore shares) and Shree Ashtavinayak Cine Vision (1.08 crore shares) were the other volume toppers in that order.

Aster Silicates clocked the highest turnover of Rs 726.41 crore on BSE. Reliance Industries (Rs 267.09 crore), Aban Offshore (Rs 266.45 crore), ARSS Infra (Rs 177.17 crore) and TCS (Rs 115.90 crore) were the other turnover toppers in that order.