Sensex registers its fourth decline in five days

The key benchmark indices reversed the initial gains as European stocks fell and as US index futures tumbled. The BSE Sensex fell below the psychological 18,000 mark after crossing that level in early trade. The BSE shed 50.28 points or 0.28%, off close to 160 points from the day's high and up close to 30 points from the day's low. Auto and banking stocks reversed initial gains on rate hike worries. Healthcare stocks also fell. But, realty stocks gained. Index heavyweight Reliance Industries (RIL) turned negative.



The Sensex today registered its fourth decline in five trading sessions as investors awaited more first quarter corporate results and progress of the monsoon rains which have been erratic so far. The Sensex has lost 107.76 points or 0.6% from a recent peak of 17,985.90 on 13 July 2010.

The market jumped in early trade on firm Asian stocks which rose after US stocks settled higher on Monday, 19 July 2010. The market pared gains in morning trade. The market moved in a range till early afternoon trade. The market moved further off the highs in afternoon trade. It further trimmed gains in mid-afternoon trade. The market tumbled in late trade as European stocks fell and as US index futures tumbled.

NSE's volatility index India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, declined 1.59% to 20.38. The index had jumped 5.12% to 20.71 on Monday, 19 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.

Emerging markets were in high demand in mid July 2010, with bond fund inflows at a record, as investors chose dynamic developing economies over lagging advanced markets, global fund tracker EPFR Global said on Tuesday, 20 July 2010. India dedicated equity funds registered inflows of $114 million during the week ended 14 July 2010, which is a 13-week high.

European shares fell on Tuesday with banks lower, after Hungary sold less of its debt than expected, and ahead of results from Goldman Sachs before Wall Street opens. Hungary sold 35 billion forints worth of three-month bills, lower than its original offer of 45 billion, with bids aggregating 52.55 billion, the Government Debt Management Agency said. The key benchmark indices in UK, France and Germany were down by 0.51% to 1.17%.

Most Asian stocks rose on Tuesday as banks and resource companies got support from Wall Street's gains overnight. The key benchmark indices in Hong Kong, Indonesia, South Korea, China, Taiwan were up by 0.28% to 2.15%. But, Japan's Nikkei Average fell 1.15%.

East Asia's economic upturn is firmly on track and extraordinary fiscal and monetary stimulus should be gradually withdrawn, including by allowing currencies to strengthen, the Asian Development Bank said on Tuesday. The ADB noted a strong first quarter had lifted the region's economies above peak pre-crisis GDP levels. The ADB said headline inflation had increased across the region, but was still relatively low and manageable.

Trading in US index futures indicated that the Dow could slide 70 points at the opening bell on Tuesday, 20 July 2010.

US stocks rose on Monday, spurred by optimism ahead of earnings from key technology companies and after Dow component Boeing announced strong orders. The Dow Jones Industrial Average added 56.53 points, or 0.56% to 10,154.43. The Standard & Poor's 500 Index rose 6.37 points, or 0.60% to 1,071.25. The Nasdaq Composite Index gained 19.18 points, or 0.88% to 2,198.23.

On Monday, the National Association of Home Builders/Wells Fargo Housing Market index fell more than expected in July to its lowest level since April 2009 after a popular tax credit for homebuyers expired in April.

After trading hours in the US on Monday, 19 July 2010, International Business Machines Corp. reported 9% rise in second-quarter profit but sales missed Wall Street expectations.

Back home, a committee set up by the stock market regulator Securities & Exchange Board of India (Sebi) has recommended major changes in the existing law governing substantial acquisition of shares and takeovers. The committee headed by C. Achuthan has recommended an increase in the acquisition threshold for the initial trigger of an open offer from the current level of 15% to 25% of the voting capital of a listed company. While no change has been recommended in the annual creeping acquisition limit of 5%, the committee has recommended that creeping acquisition be permitted only to acquirers who already hold more than 25% of the voting capital, subject to the aggregate post-acquisition shareholding not exceeding the maximum permissible non-public shareholding.

The committee has recommended that an open offer should be made for all the shares of the target company to ensure equality of opportunity and fair treatment of all shareholders, big and small. The exception to this rule is the size of an open offer where the same is voluntary in nature. The current regulations mandate a minimum offer size of only 20%.

On the macro front, the latest data showed that the fuel price index rose 14.27% in the year to 3 July 2010 and the food price index climbed 12.81%. Fuel price inflation eased from the previous week's annual rise of 18.02% while the pace of food price inflation edged up marginally from last week's 12.63%. Food inflation edged up because of higher rice and wheat prices. The primary articles index was up 16.25% compared with the previous week's reading of 16.08%.

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%.

On the corporate front, the combined net profit of a total of 161 companies rose 35.2% to Rs 11294 crore on 17.5% rise in sales to Rs 66307 crore in Q1 June 2010 over Q1 June 2009.

The monsoon activity revived on Monday, 19 July 2010, with many parts of the country receiving good rains, raising the prospects of a strong harvest. The Southwest monsoon was active over Sub-Himalayan West Bengal & Sikkim, Bihar, Uttar Pradesh and Uttarakhand during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Monday, 19 July 2010.

The IMD expects fairly widespread rain/thundershowers over northeastern states and Sub-Himalayan West Bengal & Sikkim, western Himalayan region and indo Gangetic Plains, in the near term. It also expects widespread rain/thundershowers over the west coast. It expects scattered rainfall activity over central and adjoining east India during next 48 hours and increase thereafter. The IMD expects fairly widespread rainfall over central and east India, west coast, along foothills of Himalaya and northeastern states over the next few days.

Monsoon rains were 24% below normal in the week ended 14 July 2010. Out of 36 meteorological sub-divisions, rainfall was excess in 8, normal in 4, deficient in 19 and scanty in 5 sub-divisions during the week. Bihar, east Madhya Pradesh, Chhattisgarh, Vidarbha, Andhra Pradesh, Tamil Nadu and Sub- Himalayan West Bengal & Sikkim received good rainfall during the week. Weak monsoon rains in past week will not significantly hurt crop output in the country and the weather outlook is encouraging, Farm Minister Sharad Pawar said on 16 July 2010.

The cumulative seasonal rainfall for the country as a whole during this year's monsoon upto 15 July was 14% below the long period average (LPA). Out of 36 meteorological subdivisions, the rainfall has been excess over 6, normal over 16 and deficient in 14 sub-divisions.

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.

Coming back to stocks, foreign funds today, 20 July 2010, bought shares worth a net Rs 297.07 crore, as per the provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 104.26 crore.

Foreign have made substantial purchases of Indian stocks this month. Foreign funds have bought Indian equities worth a net Rs 5515.90 crore this month so far, till 20 July 2010, as per data from the stock exchanges. Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010.

Domestic funds have sold shares worth a net Rs 2724.44 crore this month so far, till 20 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.

The BSE 30-share Sensex fell 50.28 points or 0.28% to 17,878.14. The Sensex rose 111.75 points at the day's high of 18,040.17 in early trade. The index lost 80.35 points at the day's low 17,748.07 in late trade.

The S&P CNX Nifty fell 18.45 points or 0.34% to 5,368.

The BSE Mid-Cap index fell 0.3% and underperformed the Sensex. The BSE Small-Cap index fell 0.26% and outperformed the Sensex.

Most sectoral indices on BSE declined. The BSE Healthcare index (down 0.9%), Auto index (down 0.69%), banking sector index Bankex (down 0.43%), Oil & Gas index (down 0.37%), and PSU index (down 0.34%), underperformed the Sensex. The BSE Realty index (up 1.31%), Metal index (up 0.2%), Capital Goods index (up 0.04%), Power index (down 0.1%), FMCG index (down 0.2%), IT index (down 0.23%) and Consumer Durables index (down 0.23%), outperformed the Sensex.

The market breadth, indicating the strength of the broader market, turned negative in contrast to a strong breadth earlier in the day. On BSE, 1654 shares declined while 1284 shares rose. A total of 89 shares remained unchanged.

From the 30 share Sensex pack, 20 stocks fell and the rest rose.

BSE clocked turnover of Rs 3809 crore, higher than Rs 3728.19 crore on Monday, 19 July 2010.

Index heavyweight Reliance Industries (RIL) fell 0.32% to Rs 1052.90. The stock came off the day's high of Rs 1065.85. RIL may reportedly be able to establish more commercially-viable oil and gas finds in the country's largest gas field KG-D6 with the Cabinet allowing the company extra time for drilling wells.

The extension will help RIL complete evaluation works in at least three wells in the KG-D6 block where drilling was not authorised by the concerned regulator Directorate General of Hydrocarbon (DGH) after the company missed the deadline, reports suggest.

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.

Banking stocks fell on profit taking. India's biggest commercial bank in terms of branch network, State Bank of India (SBI) fell 0.31%. The government on Thursday, 15 July 2010, approved the merger of State Bank of Indore with State Bank of India (SBI).

SBI recently said it has signed a joint venture agreement with State General Reserve Fund (SGRF), Sultanate of Oman to set up a general purpose Private Equity Fund for investing in various assets in India. This is a part of sovereign level collaboration between the Government of India and the Government of Sultanate of Oman. The fund will have initial target corpus of $100 million and is proposed to be expanded in future up to a level of $1.5 billion.

Among other PSU stocks, Bank of Baroda and Punjab National Bank both fell 0.22% each. But, Bank of India rose 1.35%.

India's largest private sector bank by market capitalisation ICICI Bank fell 1.22%, reversing initial gains. The bank recently announced the pricing of an international bond offering of $500 million. The bank recently set its base rate for loans at 7.5%, effective 1 July 2010 as part of a new rule to set minimum lending rates.

Private sector banking major HDFC Bank fell 0.29% in volatile trade. Net profit rose 33.92% to Rs 811.72 crore in Q1 June 2010 over Q1 June 2009. The bank announced the results during market hours on Monday.

India's largest dedicated housing finance firm by revenue, HDFC fell 1.24%. 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. The results were announced on 14 July 2010.

Auto stocks fell on worries a recent fuel price hike and higher interest rates may crimp demand for vehicles. India's largest truck maker by sales, Tata Motors fell 1.57%. Tata Motors' global vehicles sales rose 46% to 91,608 units in June 2010 over June 2009. The figure includes its British luxury unit Jaguar Land Rover, whose sales rose 47% in the month to 20,189 units.

India's largest car maker by sales Maruti Suzuki India fell 0.15%. The company will announce Q1 results on Saturday, 24 July 2010.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) fell 0.88%. The company, last week, said its board of directors at its meeting held on 15 July 2010, was briefed about the company's potential bid for Ssangyong Motors Company, South Korea. A decision on the bid would be taken at the company's next board meeting to be held on 28 July 2010.

Bajaj Auto fell 0.2% ahead of Q1 results on Thursday, 22 July 2010. The board of Bajaj Auto will also consider issue of bonus shares along with the first quarter results.

The country's largest two-wheeler maker Hero Honda Motors fell 0.21% reversing initial gains. The company reported a 16.6% jump in its sales at 4,26,454 in June 2010 over June 2009.

Some healthcare stocks fell on profit taking. Dr Reddy's Laboratories, Cipla and Ranbaxy Laboratories fell by between 0.85% to 2.63%.

Interest rate sensitive realty stocks rose on speculation the government will soon announce a hike in foreign direct investment (FDI) in the real-estate sector. Anant Raj Industries, DLF, Sobha Developers, Unitech, HDIL, Ansal Properties, Sobha Developers rose by between 0.12% to 3.04%.

Jaiprakash Associates fell 1.74% and was the top loser from the Sensex pack.

Some FMCG stocks fell on profit taking. Hindustan Unilever, Dabur India, Nestle India, Marico and United Spirits fell by between 0.12% to 1.72%.

IT stocks rose on rupee's recent slide against the dollar. A weak rupee lifts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports. IT major TCS rose 0.39%, extending recent strong gains triggered by stronger-than-expected Q1 June 2010 results announced on Friday, 16 July 2010.

TCS' consolidated net profit as per US accounting standards declined 5.31% to Rs 1844.30 crore on 6.21% growth in revenue to Rs 8217.30 crore in Q1 June 2010 over Q4 March 2010. The company raised its hiring target by 10,000 to 40,000 for 2010-11, reflecting strong demand.

TCS chief executive officer and managing director N Chandrasekaran said Q1 June 2010 was a quarter of complete outperformance at TCS. He said TCS' balance growth in Q1 June 2010 was driven by disciplined execution and strong demand across markets and industry sectors. He said while the management is alert about changing macro dynamics in many markets, TCS' customer-centric business model is very relevant and helps TCS participate in the ongoing recovery.

TCS' chief financial officer and executive director S Mahalingam said TCS' investments in building an extensive front office presence in new markets is helping support and sustain higher growth.

India's third largest IT exporter by sales Wipro rose 0.93%. The company will announce its Q1 result on Friday, 23 July 2010.

IT bellwether Infosys fell 0.46%, reversing initial gains. The company announced disappointing Q1 result last week. At the time of announcing the results last week, 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.

Some consumer durables stocks rose on bargain hunting. Blue Star, Videocon Industries and Titan Industries rose by between 0.17% to 0.82%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.53%, with the stock gaining for the second straight day. The scrip today hit a 52 week high of Rs 1,913.50. L&T on Monday said L&T General Insurance Company, the general insurance arm of the firm, would commence operations soon. The company has received the necessary license from the regulatory authority for commencing general insurance business.

India's largest power equipment maker by sales Bharat Heavy Electricals was flat. The company has got an order worth Rs 2665 crore from Dainik Bhaskar Power for setting up a 1,200 megawatts thermal power plant in Chhattisgarh. The company will announce its Q1 result on Friday, 23 July 2010.

Cals Refineries clocked the highest volume of 2.76 crore shares on BSE. Sanraa Media (1.81 crore shares), FCS Software (1.5 crore shares), IFCI (97.74 lakh shares) and Development Credit Bank (81.05 lakh shares) were the other volume toppers in that order.

BF Utilities clocked the highest turnover of Rs 127.82 crore on BSE. Tata Steel (Rs 76.68 crore), Everonn Education Systems (Rs 75.05 crore), Sesa Goa (Rs 65.88 crore) and IFCI (Rs 58.50 crore) were the other turnover toppers in that order.