Market slides for the second straight day; Sterlite slumps

The key benchmark indices fell for the second straight day as traders resorted to profit taking after this month's strong gains in share prices. Investors sold metal, realty, consumer durables and FMCG stocks. The Sensex fell below the psychological 20,000 mark, after moving above and below that level intraday. The 50-unit S&P CNX Nifty also fell below the psychological 6000 mark. Copper major Sterlite Industries tumbled 8.5% after the Madras High Court on Tuesday, 28 September 2010, ordered closure of Sterlite Industries' copper smelting plant at Tuticorin after noting that the company has failed to comply with environmental issues.



The market breadth was weak in contrast with a strong breadth earlier in the day. The BSE 30-share Sensex was down 148.52 points or 0.74%, off close to 280 points from the day's high and up close to 30 points from the day's low. Commercial vehicles maker Tata Motors, banking major State Bank of India and IT major Infosys hit a record highs today. European stocks and US index futures edged lower. Earlier in the global day, most Asian stocks closed higher.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, rose 4.47% to 22.16. The index had dropped 5.14% to 21.21 on Tuesday, 28 September 2010. The index had risen 2.99% to 22.36 on Monday, 27 September 2010.

Stocks were volatile as traders rolled over positions in the derivatives segment, from the near-month September 2010 series, to October 2010 series, ahead of the expiry of the near-month September 2010 derivatives contracts on Thursday, 30 September 2010. The market pared gains, soon after an initial surge triggered by firm Asian stocks. The market slipped into the red later. The market hit a fresh intraday low in mid-morning trade.

Weakness continued in early afternoon trade. The market hit a fresh intraday low in afternoon trade even as European stocks edged higher in early trade. The market extended looses in mid-afternoon trade as European stocks reversed initial gains. The market hit a fresh intraday low in late trade.

European stocks edged lower in volatile trade on Wednesday as banks lost ground with worries over economic recovery reappearing.. The key benchmark indices in UK and Germany were down by 0.01% to 0.27%. But, France's CAC 40 rose 0.1%

The European Commission's economic sentiment indicator for the 16-nation euro zone rose to 103.2 in September, up from 102.3 in August, the commission said Wednesday.

A new recapitalization plan for Anglo Irish Bank is expected to be announced in Ireland on Monday, according to a report in the Financial Times. The Irish Central Bank is expected to inject another euro 5 billion ($6.8 billion) into the bank, raising the total bail-out costs for the troubled institution to euro 30 billion. The news comes as financial markets endure a fresh bout of worries over Ireland's financial health. Earlier this week, Moody's cut the senior debt rating of the bank three notches to Baa3 from A3, saying it would keep the rating on review for a further possible downgrade.

Asian stocks hit a two-year high on Wednesday, 29 September 2010, after poor US data reinforced expectations the US Federal Reserve will take more action to help the struggling US economy. The key benchmark indices in Hong Kong, Indonesia, Singapore, Taiwan and South Korea rose by between 0.28% to 1.22%.

Japanese shares rose 0.67% on Wednesday, boosted by a better-than-expected result from the central bank's quarterly business-sentiment survey.

China's Shanghai Composite reversed initial gains falling 0.03%. Manufacturing accelerated in China for a second straight month in September 2010, adding to signs that the world's fastest-growing major economy is stabilizing after policy makers curbed lending in an effort to avert asset bubbles. A purchasing managers' index released today by HSBC Holdings Plc and Markit Economics rose to 52.9 from 51.9 in August.

Growth across Asia and the Pacific will be the fastest this year since 2007 as the region recovers strongly from the global crisis, but will moderate in 2011, the Asian Development Bank said on Tuesday, 28 September 2010. Developing Asia, a diverse group of 45 economies including China, India, Tajikistan, Samoa, and Indonesia, would grow 8.2% in 2010 and 7.3% in 2011, the ADB said in its update of its 2010 Asian Development Outlook. The 2010 growth forecast has been revised up from 7.5% in April and a forecast of 6.4% a year ago; the 2011 forecast is unchanged from April. Indian growth was expected to pick up slightly to 8.7% in 2011 from 8.5% this year, driven by domestic demand, company profits and favourable financing conditions, the ADB said.

Trading in US index futures indicated Dow could fall 10 points at the opening bell on Wednesday, 29 September 2010. US index futures swung between gains and losses earlier.

US consumer confidence fell to its lowest level in seven months in September 2010, underscoring lingering worries about the strength of the economic recovery. The Federal Reserve said last week it was prepared to put more money into the economy, if needed, to stimulate the recovery and avoid deflation.

Back home, the Lucknow bench of the Allahabad high court will on Thursday, 30 September 2010, deliver its verdict in the politically-sensitive Ayodhya case. This follows the Supreme Court's rejection on Tuesday, 28 September 2010, of a plea to defer the judgement. The three-member bench of the Lucknow bench will give its verdict on who owns the disputed piece of land, where once stood the Babri Masjid but is claimed to be the birth place of Lord Ram by Hindu groups.

The verdict to a more than six-decade-old litigation will mark an important point in the dispute, but is unlikely to bring down the curtains as aggrieved parties are likely to move the Supreme Court. The Centre does not anticipate turbulence over the verdict as it feels the Ayodhya issue may have outlived its potency.

Tuesday's crucial hearing in the Supreme Court assumed significance as the Sunni Central Waqf Board and Akhil Bharat Hindu Mahasabha, two opposite parties to the title suit, have ruled out the scope of reconciliation in their affidavits filed in the apex court.

Coming back to stocks, foreign funds continue to aggressively mop up Indian shares. Foreign institutional investors (FIIs) bought shares worth a net Rs 894.80 crore on Tuesday, 28 September 2010, on the top of a robust inflow of Rs 1,307.20 crore on Monday, 27 September 2010.

FII inflow in September 2010 totaled Rs 24,978.50 crore (till 28 September 2010). FIIs had bought equities worth Rs 11,687.50 crore in August 2010. FII inflow in the calendar year 2010 totaled Rs 84,360.20 crore (till 28 September 2010).

But, a section of the market is concerned that the large initial public offer (IPO) of state-run Coal India in mid-October 2010 would soak liquidity from the secondary equity markets. The government plans to raise about Rs 15000 crore to Rs 16000 crore from divestment of 10% stake in Coal India. The IPO is billed as the country's largest issue ever.

The BSE 30-share Sensex was down 148.52 points or 0.74% to 19,956.34. The Sensex fell 181.75 points at the day's low of 19,923.11 in late trade. The index rose 129.19 points at the day's high of 20,234.05 in early trade.

The S&P CNX Nifty was down 38.20 points or 0.63% at 5991.30.

The BSE Mid-Cap index fell 0.67%. The BSE Small-Cap index fell 0.48%. Both these indices outperformed the Sensex.

Most sectoral indices on BSE fell. The BSE Metal index (down 1.92%), FMCG index (down 1.42%), Consumer Durables index (down 1.16%), PSU index (down 0.92%), Realty index (down 0.89%), and Oil & Gas index (down 0.81%), underperformed the Sensex. The BSE IT index (up 0.24%), Auto index (up 0.08%), Healthcare index (up 0.02%), banking sector index Bankex (down 0.28%), Capital Goods index (down 0.45%), and Power index (down 0.53%), outperformed the Sensex.

The market breadth was weak in contrast with a strong breadth earlier in the day. On BSE, 1854 shares declined while 1144 shares advanced. A total of 89 shares remained unchanged.

From the 30 share Sensex pack, 22 fell and the rest rose.

BSE clocked turnover of Rs 4482 crore, lower than Rs 4847.48 crore on Tuesday, 28 September 2010.

Index heavyweight Reliance Industries (RIL) rose 0.08% to Rs 999.05. But, the stock came off the day's high of Rs 1008.65. Petroleum major BP and Reliance Industries (RIL) will reportedly set the ball rolling on divestment and joint venture opportunities between the two companies. BP Chairman Carl-Henric Svanberg and newly-appointed chief executive officer Robert Dudley will meet Mukesh Ambani early this month.

Copper maker Sterlite Industries slumped 8.5% after the Madras High Court on Tuesday, 28 September 2010, ordered closure of Sterlite Industries' copper smelting plant at Tuticorin after noting that the company has failed to comply with environmental issues.

Sterlite's Tuticorin operations include a smelter, refinery, phosphoric acid plant, sulphuric acid plant and copper rod plant. According to reports, Sterlite's copper division accounts for 9-10% of total profit after tax and the impact will depend on the outcome of the legal process.

In a statement, Sterlites Industries stated that the company is awaiting the full text of the order to decide on necessary recourse measures. The statement suggested that the Tuticorin smelter has been operating for more than 12 years and has been in compliance with necessary rules and regulations. It deploys ISA smelt process, which is considered globally as an environmentally advanced technology.

Among other metal stocks, Hindustan Zinc, Hindalco Industries, JSW Steel, Steel Authority of India, Jindal Steel & Power and National Aluminum Company fell by between 0.34% to 3.37%.

FMCG stocks fell on profit taking. Britannia Industries, ITC, Nestle India and Hindustan Unilever fell by between 0.1% to 2.66%.

Consumer durables stocks also fell on profit taking. Videocon Industries, Titan Industries, Blue Star, Rajesh Exports and Gitanjali Gems fell by between 0.57% to 2.44%.

Interest rate sensitive realty stocks fell on profit taking. Omaxe, Indiabulls Real Estate, HDIL, Ackruti City and Phoenix Mills fell by between 1.12% to 2.26%.

IT stocks edged higher in volatile trade. India's largest IT exporter by sales Tata Consultancy Services rose 0.08%. The company announced during market hours today that it won $50 million infrastructure management contract from AGL Energy, a leading renewable energy company in Australia.

India's second largest software services exporter by sales Infosys rose 0.42%. The stock hit record high of Rs 3075 today.

But, India's third largest software services exporter by sales Wipro fell 0.08%.

Auto stocks were mixed. Commercial vehicle maker Tata Motors rose 2.51% to Rs 1106.65. It hit a record high of Rs 1109.85 today. The stock was the major gainer from the Sensex pack.

India's leading bike maker by sales Hero Honda Motors rose 0.34%. Bajaj Auto rose 2.74%.

But, India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) fell 1.88%. India's top small car maker by sales Maruti Suzuki India fell 2.5%.

A recent Society of Indian Automobile Manufacturers data showed domestic automobile sales rose 25.24% to a record 12.63 lakh units in August 2010 in over August 2009, boosted by rising incomes, new models and lower borrowing costs. Exports climbed 28% to 191,033 units.

PSU OMCs fell on reports the government plans to limit its share of fuel subsidy payout to last year's levels despite higher losses suffered by OMCs this year, a move that could result in significant drop in profits for domestic oil companies. This would require oil marketing companies to absorb substantial portion of losses incurred in selling petro fuels below cost. The government had recently freed petrol prices but it still administers diesel, kerosene and LPG prices. HPCL, Indian Oil Corporation and BPCL fell by between 2.02% to 3.35%.

Banking stocks fell on profit taking. India's second largest private sector bank by net profit HDFC Bank fell 0.23%. India's largest private sector bank by net profit ICICI Bank fell 0.8%, with the stock falling for the second straight day.

But, India's largest commercial bank by net profit and branch network State Bank of India (SBI) rose 0.13% to Rs 3294.25, with the stock gaining for the third straight day. The stock hit a record high of Rs 3224 today.

India's largest dedicated housing finance firm by revenue HDFC fell 0.95%.

Indosolar settled at Rs 23.70 on BSE, a 18.28% discount to the initial public offer price of Rs 29. The stock debuted at Rs a 29.75, a 2.59% premium over the initial public offer (IPO) price.

Cals Refineries clocked the highest volume of 10.18 crore shares on BSE. Indosolar (8.28 crore shares), Birla Power Solutions (3.17 crore shares), Beckons Industries (1.38 crore shares) and Mahindra Satyam (1.25 crore shares) were the other volume toppers in that order.

Indosolar clocked the highest turnover of Rs 196.46 crore on BSE. LIC Housing Finance (Rs 151.08 crore), Mahindra Satyam (Rs 123.83 crore), Sterlite Industries (Rs 123.14 crore) and State Bank of India (Rs 111.18 crore) were the other turnover toppers in that order.