Bulls take a breather

Weak global stocks triggered profit taking on the domestic bourses as the key benchmark indices retracted from 2-1/2-year highs hit on Monday, 9 August 2010. But, Tata Motors bucked the weak trend as shares of the commercial vehicles major hit a record high after the company reported turnaround Q1 June 2010 consolidated results. The market breadth was negative in contrast to a strong breadth earlier in the day. The BSE 30-share Sensex lost 67.51 points or 0.37%, up close to 49 points from the day's low and off close to 73 points from the day's high.



Stocks were volatile. The market edged lower in early trade, tracking weak Asian stocks. The market came off the lower level in morning trade. The market moved in a narrow range in mid-morning trade. The market hit a fresh intraday low in early afternoon trade. The market extended losses in afternoon trade as Chinese stocks slumped. The market cut losses in mid-afternoon trade soon after hitting fresh intraday low in afternoon trade as index two heavyweights -- ICICI Bank and Larsen & Toubro rose.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 1.94% at 17.33. The index had lost 2.13% to 17 on Monday 9 August 2010. The index had lost 1.92% at 17.37 on Friday, 6 August 2010. The index had risen 3.93% to 17.71 on Thursday, 5 August 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 institutional investors (FIIs) continue to mop up Indian equities. As per provisional figures released by the stock exchanges, foreign funds today, 10 August 2010, bought shares worth Rs 599.33 crore. Domestic funds sold shares worth Rs 540.67 crore.

Foreign funds have bought equities worth a net Rs 3883.65 crore in the first seven trading days this month, till 10 August 2010, absorbing selling of Rs 1715.79 crore from domestic funds, as per data from the stock exchanges.

Foreign funds had bought shares worth a net Rs 8320.50 crore in July 2010, absorbing selling by domestic institutional investors. Domestic funds sold shares worth a net Rs 6323.13 crore in July 2010.

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.

The government has relaxed the requirement of a minimum 25% public shareholding for listed state-run firms. It may be recalled that the government in early June 2010 had announced changes in the Securities Contracts (Regulation) Rules 1957, so as to ensure that all listed companies maintain a minimum public float of 25%. Existing listed companies having less than 25% public holding have to reach the stipulated level by an annual addition of not less than 5% to public holding, the government had said at that time. The new rule had raised concerns there will be a deluge of share sales from government-owned firms to meet the minimum 25% public shareholding requirement.

As per the relaxed norms, listed state-owned companies that have less than 10% public stake will have to reach that threshold over a period of three years. The modified rules also give a breather to the private sector companies. While they will have to comply with the minimum 25% public float within three years, they now have flexibility in how the limit is reached i.e. the requirement of a minimum annual 5% increase has been scrapped.

Meanwhile, the country's busiest port, the Jawaharlal Nehru Port Trust, will reportedly restart operations on Thursday, 12 August 2010, after operations were suspended at the port following a weekend collision of two cargo ships off Mumbai's coast. The collision triggered an oil slick and stalled the delivery of 1.5 million barrels of crude oil for one of the biggest refiners.

Planning Commission deputy chairman Montek Singh Ahluwalia today, 10 August 2010, said the measures taken by the government and the Reserve Bank of India to tame inflation will show result in the second half of the fiscal year that ends in March 2011 (FY 2011). Ahluwalia said short-term policy calibration would depend on the evolving macroeconomic situation.

The benchmark ten-year bond yield was hovering at 7.84%, a tad higher than Monday's (9 August 2010) close of 7.81%

Most European turned positive after a weak start on bargain hunting. The key benchmark indices in France and Germany were up by 0.65% to 1.01%. However, UK's FTSE 100 was down 0.47%. European market had opened lower today, 10 August 2010, as mining stocks fell on weaker metal prices following a weaker-than-expected Chinese imports data.

Chinese stocks led decline in Asian stocks on Tuesday, 10 August 2010, as weaker-than-expected Chinese imports data for July 2010 raised concern that consumption on the mainland was slowing. The Shanghai Composite fell 2.89%. The key benchmark indices in Singapore, Taiwan, Indonesia, Japan, Hong Kong and South Korea were down by between 0.22% to 1.5%.

Data out from China showed a wider-than-expected trade surplus in July with a 38.1% hike in exports and a weaker-than-expected 22.7% rise in imports.

China's July crude oil imports were 19 million metric tonnes, or 4.5 million barrels a day, much lower than the record 22.27 million tonnes recorded in June and 3.1% off the 19.6 million tonnes from last July, according to data from the General Administration of Customs. China is the world's second-largest crude oil consumer after the US.

Meanwhile, the Bank of Japan today, 10 August 2010, voted unanimously to leave its policy interest rate unchanged, as widely expected. The Japanese central bank also kept its economic outlook unchanged. It also did not announce any new major monetary easing move. Japan's economy is showing further signs of a moderate recovery, induced by improvement in overseas economic conditions, the central bank said. But it added that the nation faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability. In the conduct of monetary policy, the bank will aim to maintain the extremely accommodative financial environment, it said.

Singapore said it expects economic growth to wane after a record second quarter as export demand from the US and Europe slows. Gross domestic product for April through June grew 18.8% from a year earlier, slightly less than the 19.3% growth initially announced last month, the Trade and Industry Ministry said Tuesday.

Trading in US index futures indicated that the Dow could fall 59 points at the opening bell on Tuesday, 10 August 2010.

US stocks rose on Monday, 9 August 2010, in the quietest session of the year on speculation that the Federal Reserve would signal potential steps to boost the sluggish economic recovery. It is expected the central bank could resume purchases of certain debt securities to lower interest rates to encourage borrowing. It could also halt payment of interest on banks' excess reserves to encourage lending.

The Dow Jones Industrial Average was up 45.19 points or 0.42% at 10,698.75. The Standard & Poor's 500 Index was up 6.15 points, or 0.55% at 1,127.79. The Nasdaq Composite Index was up 17.22 points or 0.75% at 2,305.69. The US Federal Reserve holds a regular policy meeting on interest rates today, 10 August 2010.

Back home, the combined net profit of a total of 2,424 Indian companies fell 8.8% to Rs 59955 crore on 20.9% rise in sales to Rs 744287 crore in Q1 June 2010 over Q1 June 2009.

The government will announce industrial output data for the month of June 2010 on 12 August 2010.

Analysts expect the Reserve Bank of India to raise interest rates by 25 basis points at a mid-quarter monetary policy review on 16 September 2010, to rein in inflation and inflation expectations. The latest data showed the food price index rose 9.53% in the year to 24 July 2010 while the fuel price index climbed 14.26%. Food inflation eased from the week-ago figure of 9.67% and fuel inflation also eased from the previous week's reading of 14.29%. The primary articles index rose 14.36%, compared with the week-ago reading of 14.5%.

The Reserve Bank of India (RBI) at its Q1 monetary policy on 27 July 2010 raised a key lending rate by 25 basis points to curb surging inflation. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations, the RBI said at that time. 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.

Most automobiles firms including Tata Motors, Maruti Suzuki, Hero Honda and Bajaj Auto have reported strong sales in the month just gone by.

Car sales in India rose an annual 38% in July 2010 to a record 1,58,764 unit, compared with 1,15,084 units a year ago, as per the latest data. Sales of trucks and buses, a barometer of economic activity, rose an annual 37% to 51,481 units in July 2010. Motorcycle sales in July 2010 rose to 7,10,621 units from 546,233 units a year earlier.

Meanwhile, a further improvement in monsoon rains has accelerated kharif planting. The total area brought under the crops is estimated to be higher than last year's level by good 8.4%, reports suggest. The overall rainfall in the whole country was 16% above normal in the week ended 4 August 2010.

The overall kharif prospects remain bullish as 85% of the country's total area has received normal or above normal rainfall, reports suggest. The area coverage is more than last year in the case of all crops, including rice, coarse cereals, pulses, oilseeds, sugarcane, cotton and jute, reports suggest. The crop stand is reported to be good and so far there has been no report of any major attack of disease or pests. Though white fly pest has appeared on cotton in some pockets of Punjab and Rajasthan, but the incidence is below the threshold level till now in most cases.

The improvement in rainfall has also resulted in a spectacular improvement in the water stock in reservoirs, reports suggest. The total water storage in the 81 major reservoirs stood at 52.09 billion cubic metres (BCM) as on 5 August 2010, against 28.65 BCM a fortnight ago. The present storage is a mere 6% short of normal, against 35% a fortnight ago, reports suggest. However, the water balance is still worrisome in reservoirs in the eastern region where the monsoon is yet to pick up full momentum.

The cumulative rainfall during the period from 1 June 2010 to 9 August 2010 was 2% below normal. Rainfall over the country as a whole for the second half (August to September) of the 2010 southwest monsoon season is likely to be normal, according to the India Meteorological Department (IMD). Quantitatively, rainfall for the country as a whole during the period August-September 2010 is likely to be 107% of long period average (LPA) with a model error of plus/minus 7%, according to the weather office.

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.

The Reserve Bank of India (RBI) at its Q1 monetary policy on 27 July 2010 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 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 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.

The 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 67.51 points or 0.37% to 18,219.99. The Sensex rose 5.90 points at the day's high of 18,293.40 in early trade. The index lost 116.73 points at the day's low of 18,170.77 in afternoon trade.

The S&P CNX Nifty declined 25.45 points or 0.46% to 5,460.70.

The BSE Mid-Cap index underperformed the Sensex, falling 0.51%. The Small-Cap index outperformed the Sensex, falling 0.35%.

The market breadth, indicating the health of the market, turned negative in contrast to strong breadth earlier in the day. On BSE, 1706 shares declined while 1283 shares advanced. A total of 98 shares remained unchanged.

BSE clocked turnover of Rs 5456 crore, higher than Rs 4920.92 crore on Monday, 9 August 2010.

The BSE Realty index (up 0.53%), Capital Goods index (up 0.14%), Auto index (up 0.10%), banking sector index Bankex (down 0.01%), Oil & Gas index (down 0.20%), FMCG index (down 0.31%), Power index (down 0.34%), outperformed the Sensex.

The BSE Metal index (down 0.72%), PSU index (down 0.75%), Consumer Durables index (down 0.78%), Healthcare index (down 0.79%), and IT index (down 1.42%), underperformed the Sensex.

From 30 share Sensex pack, 19 fell and the rest rose.

Index heavyweight Reliance Industries (RIL) fell 0.54% at Rs 988.25. The stock came off the day's high of Rs 1020. A unit of the firm, last week, signed definitive agreements to enter into a Marcellus Shale gas joint venture with United States-based Carrizo Oil & Gas Inc. RIL will pay a total $392 million, comprising $340 million of cash and $52 million of drilling carry obligations, the company said.

Under the deal, Reliance will acquire a 60% interest in Marcellus Shale acreage in Central and Northeast Pennsylvania that is currently held in an equal joint venture between Carrizo and an affiliate of Avista Capital Partners. Reliance will acquire all of Avista's stake and 20% of Carrizo's stake in the existing joint venture, the statement said.

Two index heavyweights -- ICICI Bank and Larsen & Toubro rose 0.88% and 0.91% respectively.

Jaiprakash Associates jumped 3.25% and was the second top gainer from the Sensex pack.

Commercial vehicle maker Tata Motors jumped 4.17% to Rs 957.30 after the company reported turnaround Q1 June 2010 results during trading hours today. The scrip hit a record high of Rs 967.30 today. The stock turned ex-dividend today, 10 August 2010, for a dividend of Rs 15 per share for year ended March 2010.

The company reported consolidated net profit of Rs 1988.73 crore in Q1 June 2010 compared to a net loss of Rs 328.78 crore in Q1 June 2009. Net revenue jumped 64.2% to Rs 27055.57 crore in Q1 June 2010 over Q1 June 2009.

Tata Motors said the Jaguar Land Rover business continued to show strong profitability, with increase in volumes coupled with significantly favorable currency movement in Q1 June 2010, reporting profit before tax of Great British Pounds (GBP) 233.82 million (Rs 1590.25 crore).

But, most other auto stocks fell on profit taking. India's second largest bike maker by sales Bajaj Auto fell 1.95%. The stock had hit a record high of Rs 2767.35 on Thursday, 5 August 2010. Bajaj Auto's total vehicle sales jumped 65% at 3.18 lakh units in July 2010 over July 2009.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.51%, reversing initial gains.

Maruti Suzuki, India's top car maker, fell 0.52% with the stock falling for the third straight day. Managing Director Shinzo Nakanishi said last week that the company is looking to advance its capacity expansion plans. Its second unit in Haryana is scheduled to come up by April 2012. Nakanishi said the company is working on ways to advance that to an earlier date.

Maruti, last week, launched a new version of its best selling car Alto. The new version, Alto-K10 is powered by 998cc K10B engine and is priced between Rs 3.03 - Rs 3.16 lakh (ex-showroom Delhi).

Maruti's total vehicle sales rose 29.2% to 1,00,857 units in July 2010 over July 2009. The company announced the sales figures during market hours on Monday, 2 August 2010. Maruti Suzuki India has raised prices across models by 1% to 1.5% due to a sharp increase in input costs. The price rise would range between Rs 2,000 to Rs 7,500. The company has decided to keep prices of its best selling model Alto unchanged.

But, India's largest motorbike maker by sales Hero Honda Motors rose 0.11%, with the stock gaining for the second straight day. The company reported a jump of 16.60% in sales at 4,27,686 units in July 2010 over July 2009. The company has recorded dispatches of more than four lakh units in a single month for the third consecutive time.

Metal stocks fell on weaker metal prices following a weaker-than-expected Chinese imports data. Jindal Steel & Power, Sterlite Industries, Steel Authority of India fell by between 0.57% to 2.40%.

India's largest steel maker by sales Tata Steel fell 0.20%, reversing initial gains ahead of its Q1 June 2010 consolidated results on Thursday, 12 August 2010.

Hindalco Industries fell 1.83%, reversing initial gains ahead of its subsidiary Novelis' Q1 result today.

LMEX, a gauge of six metals traded on the London Metal Exchange rose 0.87% on Monday, 9 August 2010.

IT stocks fell on recent weak economic data in the US, the biggest market for Indian IT firms. India's largest software services exporter TCS fell 1.56%, with the stock falling for the third straight day. The stock on Thursday, 5 August 2010, hit a record high of Rs 882. India's second largest software services exporter Infosys Technologies fell 1.41%, with the stock falling for the third straight day. India's third largest software services exporter Wipro fell 2.12%, with the stock falling for the second straight day.

Realty stocks reversed initial gains. Ansal Properties, Anant Raj Industries, Unitech, Peninsula Land, Ackruti City and Housing Development & Infrastructure fell by between 0.27% to 3.87%.

Consumer durables stocks fell on profit taking. Gitanjali Gems, Videocon Industries, Blue Star and Titan Industries fell by between 0.35% to 5.37%.

Andhra Sugars plunged 6.56% after net profit tumbled 60.4% to Rs 5.10 crore on 30.1% fall in net sales to Rs 103.48 crore in Q1 June 2010 over Q1 June 2009.

Hindustan Dorr-Oliver gained 2.05% after net profit rose 29.34% to Rs 16.62 crore on 39.84% increase in net sales to Rs 252.33 crore in Q1 June 2010 over Q1 June 2009.

Tata Motors clocked a highest turnover of Rs 485.01 crore on BSE. Midfield Industries (Rs 157.05 crore), Essar Shipping Ports & Logistics (Rs 126.61 crore), Aban Offshore (Rs 111.48 crore) and Reliance Industries (Rs 100.90 crore), were the other turnover toppers on BSE.

Cals Refineries reported a highest volume of 2.04 crore shares on BSE. Essar Shipping Ports & Logistics (1.01 crore shares), IFCI (99.51 lakh shares), Shree Ashtavinayak Cine Vision (88.78 lakh shares) and Midfield Industries (78.47 lakh shares), were the other volume toppers on BSE.