Tata Motors survives weak market after bumper Q1 result

Weak European stocks and a sharp decline in US index futures hit sentiment as Indian stocks declined for the second day in a row. World stocks fell as investors fretted about the pace and sustainability of the global economic recovery. The BSE 30-share Sensex lost 149.80 points or 0.82%, off close to 194 points from the day's high. The market breadth was weak in contrast to positive breadth earlier in the day.



Commercial vehicles major Tata Motors surged for the second day in a row after the company reported turnaround Q1 June 2010 results during trading hours on Tuesday, 10 August 2010. Although banking shares witnessed selling, shares of other financial services firms surged after the central bank said it intends to grant limited number of new bank licenses.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, rose 4.50% to 18.11. The index had risen 1.94% at 17.33 on Tuesday, 10 August 2010. 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.

The market edged higher at the onset of the trading session. Stocks lost ground later on weak Asian stocks and as US index futures fell. The Sensex cut losses in range bound in mid-morning trade. The market hit a fresh intraday low in early afternoon trade. The market came off the lower level later. The market hit a fresh intraday low in afternoon trade. It came off the lows later. The market slumped in late trade as European stocks declined and as US index futures tumbled.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said in an interview to a news agency on Tuesday, 10 August 2010, that one of the major factors that will soften inflationary pressure is the prospects for agricultural production, which at the moment look very good as monsoon rains are good at the moment. Montek Singh also said that the government does not want the current account deficit (CAD) to go above 3%. If Indian policy is seen as being investment friendly, if India is seen as doing something about its infrastructure, the world is quite happy to finance a CAD of 3% through a mix of equity and debt flows, Montek Singh said.

The government will be hoping for longer-term debt coming into India in big projects, he said.

Meanwhile, the Reserve Bank of India (RBI) today released a discussion paper on entry of new banks in the private sector. The central bank said it intends to grant limited number of new bank licences and invited comments on the minimum capital requirements as well as promoters shareholding in new banks. Existence of a larger number of banks would foster greater competition, and thereby reduce costs, and improve the quality of service, the RBI said in the discussion paper. More importantly, it would promote financial inclusion, and ultimately support inclusive economic growth, which is a key focus of public policy, the RBI said.

The RBI also initiated discussion on foreign shareholding in new banks, whether industrial and business houses could be allowed to set up banks and if finance companies should be allowed to convert into banks or set up a bank. Based on the feedback, comments, suggestions received on the possible approaches discussed in this discussion paper and detailed discussions with the stakeholders, the RBI will frame detailed guidelines for licensing of new banks and invite applications for setting up new banks.

There will be a minuscule impact on the economy due to the shutdown of India's busiest port following a collision between two cargo ships late last week, according to Moody's Analytics, a unit of global credit rating agency Moody's. The collision, which triggered an oil slick, has hit operations at the Mumbai port and the neighbouring Jawaharlal Nehru Port after about 300 containers fell into the shipping channel used by the ports. Mumbai's two ports account for around 40% of India's exports, so the total value of outbound shipments in August could be marginally lower, according to Moody's Analytics.

European shares declined after the US Federal Reserve's measures to put economic recovery in the world's biggest economy back on track failed to impress investors. The key benchmark indices in UK, France and Germany were down by 1.53% to 1.66%.

The Bank of England on Wednesday said Britain's economic recovery is likely to continue, but at a slower pace than the central bank had projected in May. The quarterly Inflation Report, which carries the rate-setting Monetary Policy Committee's detailed economic forecasts, said inflation is likely to be higher in the near term than was forecast in May, but projected that annual consumer price inflation was likely to fall below the 2% target in 2012.

Most Asian stocks dropped on Wednesday, 11 August 2010, as the US Federal Reserve's proposal to spur growth failed to ease investor concerns the world's biggest economy is weakening. The key benchmark indices in Singapore, Hong Kong, Taiwan, Indonesia, Japan and South Korea were down by between 0.71% to 2.70%.

But, China's Shanghai Composite rose 0.47% after the latest data indicated that the recent cooling of the Chinese economy may result in soft landing rather than hard landing. China's industrial output grew the least in 11 months in July as the government cracked down on real-estate speculation, curbed credit and closed factories to meet energy-efficiency targets. Production rose 13.4% from a year earlier, the statistics bureau said in Beijing today. Inflation quickened to 3.3%, the fastest in 21 months, boosted by a low year- earlier base for comparison and rising food costs. The spike in consumer inflation was caused by severe floods that affected many area of the country.

China's retail sales rose 17.9% year-on-year, slowing from June's 18.3% rise and below market expectation of a rise of more than 18%. Urban fixed-asset investment growth for the January-July 2010 period was up 24.9%, easing from the 25.5% growth reported last month for January-June 2010 period. Other data showed Chinese banks issued 533 billion yuan ($78 billion) in new loans during the month, down from the 603 billion yuan in June. Mortgage related lending, indicated by medium-to-long-term loans, fell to 126 billion yuan for the month, down from 142 billion in June and 192 billion in May.

Trading in US index futures indicated that the Dow could fall 123 points at the opening bell on Wednesday, 11 August 2010.

US stocks fell on Tuesday, 10 August 2010, but closed off their lows after the Federal Reserve said it would take new steps to counter a weak economic recovery. The Dow, which was down about 100 points before the Fed's announcement, briefly turned positive, though buying interest waned on the Fed's more pessimistic assessment of the economy.

The Fed's Open Market Committee said in a post-meeting statement on Tuesday that it would begin funneling proceeds from maturing mortgage bonds into longer-term government debt to keep borrowing costs low. The hope is that this will send long-term rates on debt and mortgages lower, stimulating lending to consumers and businesses. The US central bank also issued an assessment of the economy that was darker than a month earlier, saying the pace of the economic recovery will likely be more gradual than previously thought. The Fed also left benchmark overnight interest rates steady in a zero to 0.25% range, and renewed its pledge to keep them low for an extended period.

The Dow Jones Industrial Average was down 54.50 points or 0.51% at 10,644.25. The Standard & Poor's 500 Index was down 6.73 points, or 0.60% at 1,121.06. The Nasdaq Composite Index was down 28.52 points, or 1.24% at 2,277.17. US business productivity fell for the first time in 1-1/2 years in the second quarter and labor costs hardly rose, according to government data that underlined the halting pace of economic recovery.

Back home, the Reserve Bank of India on Tuesday extended the interest subsidy scheme of two percentage points on rupee export credit to additional sectors like leather and leather manufacturers, jute manufacturing, engineering goods and textiles. The subvention scheme will be available from 1 April 2010 to 31 March 2011, the Reserve Bank of India said in a notification.

Foreign institutional investors (FIIs) continue to mop up Indian equities. As per provisional figures released by the stock exchanges, foreign funds on Tuesday, 10 August 2010, bought shares worth Rs 599.33 crore. Domestic funds sold shares worth Rs 540.67 crore on that day.

Foreign funds 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 early this week 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.

On the corporate front, the combined net profit of a total of 2,549 Indian companies fell 9.5% to Rs 62,475 crore on 20.7% rise in sales to Rs 7,62,950 crore in Q1 June 2010 over Q1 June 2009.

The government will announce industrial output data for the month of June 2010 on Thursday, 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 yield on the most traded 8.13% 2022 bond declined to 7.93% from Tuesday's (10 August 2010) close of 8.04%

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 10 August 2010 was 4% 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 southwest monsoon activity was subdued over the country during the past 24 hours, the India Meteorological Department (IMD) said in its daily update on Tuesday, 10 August 2010. The weather office expects widespread rainfall with isolated heavy to very heavy fall over western Himalayan region and adjoining northern plains over the next few days. It also expects fairly widespread rainfall over central and east India in the near term.

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 BSE 30-share Sensex fell 149.80 points or 0.82% to 18,070.19. The Sensex rose 43.89 points at the day's high of 18,263.88 in early trade. The index lost 177.10 points at the day's low of 18,042.89 in late trade.

The S&P CNX Nifty declined 40.10 points or 0.73% to 5,420.60.

The BSE Mid-Cap index fell 0.50%. The Small-Cap index shed 0.46%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was weak in contrast to a positive breadth earlier in the day. On BSE, 1753 shares declined while 1202 shares advanced. A total of 104 shares remained unchanged.

BSE clocked turnover of Rs 5559 crore, higher than Rs 5485.12 crore on Tuesday, 10 August 2010.

The BSE Auto index (up 0.01%), Consumer Durables index (down 0.11%), Oil & Gas index (down 0.13%), PSU index (down 0.54%), Power index (down 0.62%), Metal index (down 0.73%), FMCG index (down 0.75%) and Capital Goods index (down 0.76%), outperformed the Sensex. The BSE IT index declined 0.82%, matching the Sensex's slide.

The BSE Healthcare index (down 0.93%), banking sector index Bankex (down 0.95%) and Realty index (down 1.81%), underperformed the Sensex.

From 30 share Sensex pack, 24 fell and the rest rose.

Index heavyweight Reliance Industries (RIL) fell 0.58% to Rs 982.55. The stock was volatile. It hit a high of Rs 994.90 and low of Rs 980.10. 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.

Commercial vehicle maker Tata Motors jumped 5.16% extending Tuesday's 4.17% jump after the company reported turnaround Q1 June 2010 results during trading hours on Tuesday, 10 August 2010. The stock today hit a record high of Rs 1,023.55.

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).

Realty stocks reversed initial gains on worries higher interest rates could dent property demand. Orbit Corporation, Unitech, Ansal Properties, Parsvnath Developers, Indiabulls Real Estate, Peninsula Land, Sobha Developers, DLF, Housing Development & Infrastructure and Omaxe fell by between 0.36% to 4.14%.

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 0.66%, with the stock falling for the fourth 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 0.77%, with the stock falling for the fourth straight day. India's third largest software services exporter Wipro fell 2.28%, with the stock falling for the third straight day.

India's largest engineering and construction firm by sales Larsen & Toubro fell 0.78%. The company announced during market hours on Thursday, 5 August 2010 it bagged orders worth Rs 1749 crore from the metallurgical sector.

Among other capital goods stocks, Siemens, Praj Industries, ABB, BEML, Punj Lloyd and Bharat Heavy Electricals fell by between 0.54% to 1.21%.

Banking stocks fell on rate hike worries. India's biggest commercial bank in terms of branch network, State Bank of India (SBI) fell 1.07%. The stock on Tuesday, 10 August 2010, scaled a record high of Rs 2,674.40, ahead of its Q1 result on 12 August 2010. The Lok Sabha on Monday, 2 August 2010, approved a bill that will allow the State Bank of India (SBI) to reduce government holding in the bank to 51% from 55% and raise funds from the capital markets.

India's largest private sector bank by market capitalisation ICICI Bank fell 1.82%. Net profit rose 17% to Rs 1026 crore in Q1 June 2010 over Q1 June 2009. Net interest income rose 0.3% to Rs 1991 crore. Non-interest income declined 19.6% to Rs 1,680 crore. Within non-interest income category, fee income rose 7.12% to Rs 1413 crore. The treasury income declined sharply to Rs 104 crore from Rs 714 crore in Q1 June 2009. Lease and other income surged to Rs 163 crore from Rs 57 crore in Q1 June 2009.

The ratio of low-cost current & savings accounts (CASA) deposits to total deposits surged to 42.1% at end June 2010 from 30.4% at end June 2009. The ratio of net non-performing assets declined to 1.62% at end June 2010 from 2.19% at end June 2010. The bank announced the result on 31 July 2010.

India's second largest private sector bank by market capitalisation HDFC Bank fell 0.59%. The stock had scaled a record high of Rs 2,140.90 on Monday, 2 August 2010. HDFC Bank raised 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 dedicated housing finance firm by revenue HDFC fell 2.39%, with the stock falling for the second straight day. HDFC has fixed 20 August 2010 record date for a 5-for-1 stock split.

India's largest mobile services provider by sales, Bharti Airtel fell 1.42% on weak Q1 June 2010 results. Bharti Airtel's consolidated net profit as per International Financial Reporting Standards (IFRS) declined 32.04% to Rs 1681.60 crore on 17.44% increase in net sales to Rs 12230.80 crore in Q1 June 2010 over Q1 June 2009. The Q1 June 2010 results included its new African operations, which were on its balance sheet for only 23 days in the quarter. Bharti had completed the acquisition of the business from Kuwaiti telecom group Zain for $9 billion in June 2010.

Meanwhile, the company today, 11 August 2010, announced the acquisition of Telecom Seychelles, a leading telecom operator of island nation Seychelles, for an enterprise value of $62 million. The company announced the latest African acquisition at the time announcing Q1 June 2010 results during trading hours today.

Shares of financial services firms surged after the central bank said it intends to grant limited number of new bank licences. SREI Infrastructure Finance, IFCI, Mahindra & Mahindra Financial Services and LIC Housing Finance rose by between 1% to 3.73%. Shares of Anil Dhirubhai Ambani group firm Reliance Capital rose 2.08%.

Alok Industries gained 1.25% after its wholly owned subsidiary in US -- Alok International Inc. formed a joint venture with US-based Next Creations to strengthen business opportunities in the US.

Riddhi Siddhi Gluco Biols fell 3.76% after the stock turned ex-dividend today, 11 August 2010, for a dividend of Rs 5 per share for the year ended March 2010.

Bharati Shipyard lost 4% after net profit declined 40.60% to Rs 22.12 crore on 9.38% rise in net sales to Rs 333.06 crore in Q1 June 2010 over Q1 June 2009.

Tata Motors reported a highest turnover of Rs 379.37 crore on BSE. Reliance Industries (Rs 143.48 crore), Tata Steel (Rs 139.44 crore), Midfield Industries (Rs 139.44 crore) and Raymond (Rs 120.42 crore), were the other turnover toppers on BSE.

Cals Refineries reported a highest volume of 1.94 crore shares on BSE. IFCI (1.50 crore shares), Karuturi Global (1.26 crore shares), Birla Power Solutions (1.11 crore shares) and Shree Ashtavinayak Cine Vision (89.69 lakh shares), were the other volume toppers on BSE.