Gains in RIL, Infosys help Sensex trim losses in late trade

The key benchmark indices extended losses for the second straight day in a choppy trading session, as world stocks fell ahead of an influential non-farm payroll data in the US later in the global day. The BSE 30-share Sensex was down 65.06 points or 0.32% up close to 105 points from the day's low and off close to 160 points from the day's high. Strength in index heavyweights Reliance Industries (RIL) and Infosys, capped the decline.



Metal, consumer durables and auto stocks declined. The BSE mid-cap and small-cap indices reversed initial gains. The market breadth was weak, in contrast with a strong breadth earlier in the day.

Intraday volatility was high. The market moved between positive and negative terrain in early trade. The market lost ground later with the Sensex hitting a fresh intraday low. The market regained positive zone in morning trade. The market once again slipped into the red and was marginally lower in mid-morning trade. The market extended losses to hit a fresh intraday low in early afternoon trade. The market recovered from lower level in afternoon trade after hitting a fresh intraday low. The intraday recovery proved short-lived. The market weakened again in mid-afternoon trade. The market staged a strong intraday rebound in late trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was down 4.68% at 21.40. The index had risen 3.31% to 22.45 on Thursday, 7 October 2010, a day after it had lost 1.98% to 21.73 on Wednesday, 6 October 2010. The index had fallen 2.76% to 22.17 on Tuesday, 5 October 2010. It had risen 6.39% to 22.80 on Monday, 4 October 2010. The index had dropped 3.68% to 21.43 on Friday, 1 October 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 (NSE) and the Bombay Stock Exchange (BSE) have decided to implement 'pre-market call auctions' which is a special 15-minute trading window starting at 9:00 IST from 18 October 2010. The aim of this exercise is to enable better price discovery in the market at the opening bell.

The Reserve Bank of India (RBI) on Thursday, 7 October 2010, relaxed norms governing restructuring of loans given to corporates, granting promoters more time to repay their share of funds to the bank. "The promoters could be allowed to bring in 50% of their sacrifice, i.e. 50% of 15%, upfront and the balance within a period of one year," the RBI said in a notification. The RBI said besides cash payment, the promoter can also bring in contribution in the form of de-rating of equity, conversion of unsecured loan brought by the promoter into equity and interest free loans.

Finance Minister Pranab Mukherjee said on Thursday, 7 October 2010, that global tensions over currencies should be resolved through consensus-building negotiations. "With regard to currency valuation, my approach is that we should engage the countries in negotiation and try to build up a consensus through which the matter can be resolved," Mukherjee said in Washington on the sidelines of the IMF and World Bank meetings.

Foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $21.42 billion, above last year's $17.45 billion, as per data from the Securities & Exchange Board of India (Sebi). The Sebi data includes FII inflow through primary and secondary market route.

A sizable chuck of FII inflow this year is from India-focused exchange traded funds as well as long-only funds.

Emerging-market equity funds received net inflows of more than $6 billion in the week to 6 October 2010, the most since late 2007, according to the latest data from global fund tracker EPFR Global.

But, a section of the market is concerned that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 36000 crore from share sales over the next three to six months. This includes a large initial public offer (IPO) from Coal India this month. The government plans to raise about Rs 15000 crore to Rs 16000 crore from divestment of 10% stake in Coal India. The Coal India IPO is billed as the country's largest issue ever. The IPO of Coal India opens for bidding on 18 October 2010.

Reserve Bank of India deputy governor Subir Gokarn on Tuesday, 5 October 2010, said the central bank is considering measures to deal with an influx of foreign fund flows. The rupee hit a two-year high against the dollar on Thursday, 7 October 2010. A rising rupee is a bad news for exporters, particularly the labour-intensive segments such as textiles and leather. The government has recently extended sops to some of the labour intensive export sectors.

On Monday, 4 October 2010, Finance Minister Pranab Mukherjee said there was no need to intervene in the foreign exchange market or cap foreign portfolio inflows. "As long as the capital flows are in excess of the current account deficit the pressure to appreciate will continue and it could potentially disrupt," RBI's Gokarn said on Tuesday.

India requires sustained foreign investment to plug its widening current account deficit, which has been worsened by a yawning trade deficit.

Mukherjee said on Thursday, 7 October 2010, that huge surpluses in some countries and large deficits in others are "unsustainable" and should be addressed in multilateral discussions. He also called for an early conclusion to the stalled Doha Round of world trade talks.

The next major trigger for the stock market is Q2 September 2010 results. Brokerage earnings estimates will now roll over to FY 2012 (year ending March 2012). The Q2 September 2010 earnings season kick-starts next week.

Tier-I IT firms viz. Infosys, TCS, Wipro, and HCL Tech are seen reporting strong earnings growth in Q2 September 2010 as high volumes will boost operating margins. However, the IT sector faces headwind of a firm rupee in Q3 December 2010. The rupee hit a 2-year high against the dollar on Thursday, 7 October 2010. Higher volumes and price hike will aid earnings growth of most auto firms in Q2 September 2010 though analysts will closely eye operating profit margins and outlook on margins in the face of rising metal prices

Banks are seen reporting decent-to-strong earnings growth on the back of pick-up in credit offtake. Manufacturers of base metals are also seen reporting strong Q2 results on the back of higher metal prices. Increase in product prices will offset higher input costs for consumer staples firms in Q2 September 2010. But, cement firms will report dismal results due to a sharp fall in cement prices during the monsoon season.

On the macro front, the International Monetary Fund (IMF) on Wednesday, 6 October 2010, raised its India growth forecast for 2010. Indian economy will grow 9.7% in 2010, up from July forecast of 9.4%, the IMF said. IMF has forecast 8.4% growth for India in 2011. The world economy, led by emerging markets, is forecast to grow by 4.8% in 2010 and 4.2% in 2010 and a sharper global slowdown is unlikely, the IMF said.

Annual food inflation eased in late September 2010 on improved supplies, which could soothe the Reserve Bank of India's concerns high food prices could spill over to other parts of the economy. The food price index rose 16.24% while the fuel price index climbed 10.73% in the year to 25 September 2010, government data released on Thursday, 7 October 2010, showed. In the prior week, annual food and fuel inflation stood at 16.44% and 10.73% respectively.

The primary articles index was up 18.53% in the latest week compared with an annual rise of 18.31% in the previous week, both under a new series of data with a different base year of 2004-05, new components and weightings. The wholesale price index, the most widely watched gauge of prices in India, rose 8.5% in August 2010.

European markets edged lower on Friday, 8 October 2010, with investors reluctant to take big bets ahead of the US jobs report which could determine whether more stimulus measures will be introduced to spur the recovery. The key benchmark indices in UK, France and Germany fell by 0.21% to 0.78%.

Most Asian stocks fell on Friday, 8 October 2010, on caution ahead of the key US jobs report due later in the global day. The key benchmark indices in Taiwan, South Korea, Japan, Indonesia and Singapore fell by between 0.2% to 1.09%.

But, Chinese stocks rose sharply as they played catch-up on their first trading day after the Golden Week holiday. News Moody's Investors Service is reviewing China's government bond rating for a possible upgrade, also aided the rally in Chinese stocks. The Shanghai Composite index jumped 3.13%. Hong Kong's Hang Seng rose 0.26%.

Moody's Investors Service said Friday it is considering upgrading its A1 rating on Chinese government debt, citing the nation's growth outlook, the "determined and effective" stimulus program enacted during the global meltdown, and the "likely containment" of risks arising from the historic credit expansion in 2009. Moody's said it will conclude its review in three months. The ratings agency lifted its view on China's fiscal situation to positive from stable in November 2009 after assessing China's "resilient and strong" economic performance in the wake of the global crisis.

Trading in US index futures indicated that the Dow could fall 36 points at the opening bell on Friday, 8 October 2010. US index futures reversed initial gains.

Investors will pay close attention to the US non-farm payrolls data for September 2010 due later in the global day. The data is likely to show a 10,000 decline in jobs from August 2010, when jobs fell by 54,000

There has been growing speculation in the markets as to whether the Federal Reserve will choose to implement another round of quantitative easing at its November 2010 meeting in order to boost the sluggish recovery.

Meanwhile, finance ministers from the Group of seven are preparing to meet in Washington later in the global day, and traders expect some discussion on currency markets following recent sharp falls in the dollar and intervention by several countries to weaken their currencies.

The BSE 30-share Sensex lost 65.06 points or 0.32% to 20,250.26. The Sensex fell 169.58 points at the day's low of 20,145.74 in late trade. The index rose 93.87 points at the day's high of 20,409.19 in early trade.

The S&P CNX Nifty was down 16.85 points or 0.28% to 6,103.45.

The BSE Mid-Cap index fell 0.47% and underperformed the Sensex. The BSE Small-Cap index shed 0.28% and outperformed the Sensex. Both these indices reversed initial gains.

The market breadth was weak, in contrast with a strong breadth in early trade. On BSE, 1856 shares declined while 1117 shares rose. A total of 95 shares remained unchanged.

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

BSE clocked turnover of Rs 4799 crore, lower than Rs Rs 6724.58 crore on Thursday, 7 October 2010.

Index heavyweight Reliance Industries (RIL) edged higher in choppy trade. The stock was up 0.94%. RIL may reportedly be sitting on yet another gold mine -- its D4 block. RIL is the operator of the block with 85% stake. RIL's partner Niko Resources, which owns 15% in the block located on the east coast of India, has raised initial estimates of gas reserves in the D4 block.

Edward S Sampson, Chairman and CEO of Canada-based Niko Resources, told investors in a conference that it feels that reserves at the D4 block are twice the size of the D6 block and have prospectivity of up to an exceeding potential for 100TCF gas. RIL said that the appraisal process is presently being undertaken and, therefore, will not comment at this juncture.

Another index heavyweight Infosys rose 0.72%, ahead of its Q2 September 2010 results next week.

Reliance Communications, DLF, Cipla, Wipro and State Bank of India rose by between 0.73% to 1.74%.

Metal stocks fell as LMEX, a gauge of six metals traded on the London Metal Exchange fell 2.27% on Thursday, 7 October 2010. Hindustan Zinc, Sterlite Industries, Sesa Goa, Sterlite Industries, National Aluminum Company, Jindal Steel & Power, and JSW Steel fell by between 0.54% to 2.79%.

Tata Steel, the world's seventh-largest steelmaker, fell 3.48% extending Thursday's 4.2% slump. The company said sales from its Indian operations rose 14% to 1.66 million tonnes in Q2 September 2010 over Q2 September 2009. The growth was driven by the highest-ever quarterly sales of long products, primarily used in construction, the company said in a statement.

The Indian operations account for about a quarter of the group's total annual global capacity of about 30 million tonnes, which includes unit Corus, Europe's second-largest steelmaker. Tata Steel's crude steel production in India rose 5% to 1.73 million in Q2 September 2010 over Q2 September 2009.

Steel Authority of India (Sail), India's largest domestic producer of the alloy, fell 1.73%. The company's sales rose 2.9% to 3.17 million tonnes in Q2 September 2010 over Q2 September 2009. The growth came on the back of higher sales of long products such as wire rods, rounds and bars, and structurals, the state-run firm said in a statement. These products are mainly used in the construction sector. Sales of special steels and value-added products rose 10% in the quarter from a year ago.

But, Hindalco Industries rose 1.32% on reports the company's US unit -- Novelis Inc is in talks to buy BP Plc's 60% stake in its US joint venture, Logan Aluminium, for $600 million in an all-cash deal. It was the top gainer from the Sensex pack. The stock had hit a 52-week high of Rs 217 on Thursday, 7 October 2010.

Auto stocks fell on profit taking. Bajaj Auto fell 1.22%, with the stock falling for the second straight day. The stock hit all-time high of Rs 1,611.45 on Wednesday, 6 October 2010. Total sales rose 26% to 3,52,769 units in September 2010 over September 2009.

Commercial vehicles major Tata Motors fell 1.9%. The stock hit a record high of Rs 1155.75 on Friday, 1 October 2010. The company, early this week, said it has acquired 80% stake in Italian design and engineering firm Trilix SRL, for 1.85 million euros. The acquisition will help enhance the company's styling and design capabilities to global standards, Tata Motors said in a statement.

Tata Motors announced early this week said it has increased the total size of ordinary and 'A' ordinary shares placement to $750 million from a base amount of $525 million following strong investor response. The company said the size of the 'A' ordinary shares issue has been raised to $550 million from $400 million.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) fell 2.74%, with the stock falling for the third straight day. The stock had hit all time high of Rs 758.70 on Wednesday, 6 October 2010. The company said today that it has decided to issue a notice of early redemption on the outstanding foreign currency convertible bonds (FCCBs) aggregating $141.2 million. The bondholders will have the right to convert the FCCBs on or before 29 October 2010 and the balance outstanding FCCBs after the conversions, if any during this period, will be redeemed on 8 November 2010, M&M said in a statement.

The bondholders have in the last three months opted for conversion of FCCBs aggregating $48.30 million into equity shares/GDRs, M&M said. Each GDR represents one underlying equity share of the company.

M&M on Friday, 1 October 2010, it sold 35,177 vehicles in September 2010, nearly 24% more from a year earlier.

India's leading bike maker by sales Hero Honda Motors fell 0.42%. The sales rose 8.1% to 4.33 lakh units in September 2010 over September 2009.

But, India's top car maker, Maruti Suzuki rose 0.48%, reversing initial losses. Total vehicle sales rose 29.6% to 1,08,006 units in September 2010 over September 2009. This is a record monthly sale from the car major.

Car sales rose an annual 30.4% to 169,082 cars in September 2010, an industry body said on Friday. Society of Indian Automobile Manufacturers (SIAM) said sales of trucks and buses, a barometer of economic activity, rose 29.6% to 59,455 units in September 2010.

Consumer durables stocks fell on profit taking. Blue Star, Rajesh Exports, Titan Industries and Videocon Industries fell by between 0.64% to 4.56%.

Realty stocks fell on profit taking. Unitech, Ackruti City, Indiabulls Real Estate and HDIL fell by between 0.11% to 1.9%.

Healthcare stocks rose. Biocon, Ranbaxy Laboratories, Dr Reddy's Laboratories, Lupin and Cipla rose by between 0.46% to 2.5%.

Cement stocks fell on profit taking after a recent strong rally. ACC, UltraTech Cements, Ambuja Cements and India Cements rose by between 0.81% to 1.34%.

India's largest engineering and construction firm by sale Larsen & Toubro (L&T) rose 0.19% after company said during market hours today it has bagged new orders worth Rs 1585 crore in buildings & factories segments.

Bharat Heavy Electricals (BHEL) fell 0.9%. The company has bagged a Rs 3700 crore turnkey contract from Karnataka Power Corporation for setting up a 700 megawatt (MW) supercritical unit at Bellary Thermal Power Station in Karnataka.

India's top mobile phone operator Bharti Airtel fell 0.76%. The company said on Thursday it would partner with telecom gear makers Ericsson and Huawei to build and manage its mobile network in Bangladesh. Bharti did not give financial details of the agreements, but said in a statement Ericsson would manage majority of the company's network capacity in Bangladesh.

Last month, selected Ericsson, Nokia Siemens Networks and Huawei Technologies as its network equipment partners for third-generation (3G) mobile services in India.

Banking stocks fell on profit taking. India's largest private sector bank by net profit ICICI Bank fell 0.62%. ICICI Bank, recently, hiked base rate by 25 basis points to 7.75%. ICICI Bank has also increased interest rates on its special home loan scheme by 25 basis points. The scheme now offers loans at the rate of 8.5% for the first year and 9.5% for the second year. From the third year onwards, home loans will be priced at 175 basis over the base rate.

All banks have to review their base rate in the first week of October 2010 as RBI has mandated that the base rate has to be reviewed every quarter. The new benchmark rate came into effect from 1 July 2010, replacing the prime lending rate and banks have to price all new loans in reference with base rate.

India's second largest private sector bank by net profit HDFC Bank fell 1.18%, with the stock falling for the second straight day. HDFC Bank raised its key lending rate or the base rate by 25 basis points to 7.50% effective Tuesday, 5 October 2010. HDFC Bank had raised its rates on some deposits by up to 50 basis points effective 24 September 2010.

But, India's largest commercial bank by net profit and branch network State Bank of India (SBI) rose 0.88%. The stock hit a record high of Rs 3299 on Monday, 4 October 2010.

Electrosteel Steels clocked highest volume of 14.19 crore shares on BSE. Orient Green Power (2.54 crore shares), Cals Refineries (2.4 crore shares), IFCI (2.3 crore shares) and Kohinoor Brodcasting Corporation (2.02 crore shares) were the other volume toppers in that order.

VIP Industries clocked the highest turnover of Rs 270.78 crore on BSE. Ramky Infrastructure (Rs 236.99 crore), Tata Steel (Rs 209.98 crore), IFCI (Rs 168.37 crore) and Electrosteel Steels (Rs 159.64 crore) were the other turnover toppers in that order.