IT stocks lead 1.8% Sensex slide

Profit booking after a recent solid surge which had propelled the key benchmark indices to 33-months highs on Thursday, 14 October 2010, pulled the market sharply lower today, 15 October 2010. The BSE 30-share Sensex lost 372.59 points or 1.82% to 20,125.05, off 453.40 points from the day's high and up 34.87 points from the day's low. The Sensex had lost 0.92% on Thursday, 14 October 2010, retracing from 33-month high reached in early trade on that day.



Investors have resorted to profit taking ahead of a mega Rs 15000-crore initial public offer (IPO) of state-run Coal India next week. The Coal India IPO, billed as the country's largest issue ever, will soak liquidity from the secondary market. Latest data showing higher inflation in September 2010 also weighed on investor sentiment today, 15 October 2010.

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have decided to implement 'pre-market call auctions' which is a special 15-minute trading window starting at 9:00 IST from Monday, 18 October 2010. The aim of this exercise is to enable better price discovery in the market at the opening bell.

Coming back to today's trade, the market breadth was weak, in contrast with a strong breadth at the onset of the trading session. All the sectoral indices on the BSE suffered losses, with shares from IT, banking, and metal stocks worst hit. Index heavyweights Reliance Industries (RIL) and Bharti Airtel declined sharply in late trade. IT stocks tumbled after sector bellwether Infosys cautioned about the global economic environment at the time of announcing Q2 September 2010 results before trading hours today. Telecom pivotals and auto stocks drifted lower on profit booking. Select fertiliser stocks were in demand on optimism good rains this year will boost sales.

Infosys reported strong Q2 September 2010 results and the IT bellwether raised its earnings as well revenue forecast for the year ending March 2011, in both dollar and rupee terms at the time of announcing the second results. But, the Infosys stock tanked over 3% on profit booking, giving up initial gains that pushed the scrip to a record high. TCS, too, fell after hitting a record high in early trade.

The market edged lower amid a bout of volatility in early trade. The market came off the lower level after hitting the day's low in morning trade. The market moved in a narrow range later. The market slumped to a fresh intraday low in early afternoon trade. The market extended losses in afternoon trade. Weakness persisted in mid-afternoon trade. The market slumped to the day's low on heavy selling 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, jumped 9.95% to 22.65. The index had risen 2.9% at 20.60 on Thursday, 14 October 2010. The index had lost 2.39% to 20.02 on Wednesday, 13 October 2010. The index had declined 3.25% to 20.51 on Tuesday, 12 October 2010. The index had lost 0.93% to 21.20 on Monday, 11 October 2010. The index had lost 4.68% at 21.40 on Friday, 8 October 2010, a day after rising 3.31% to 22.45 on Thursday, 7 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.

Bond yields rose on higher inflation in September 2010. The yield on the most traded 8.13% 2,022 bond was hovering at 8.09%, compared with Thursday's (14 October 2010) close of 8.06%. The yield on the benchmark 10-year bond was hovering at 8.07%, compared with Thursday's (14 October 2010) close of 8.02%.

The wholesale-price index rose 8.62% in September 2010 from a year earlier, higher than the annual rise of 8.5% in August 2010, the latest government data showed. The annual reading for July 2010 was upwardly revised to 10.31%. The Reserve Bank of India (RBI) next reviews monetary policy on 2 November 2010.

A separate data showed the food inflation rose marginally to 16.37% for the week ended 2 October 2010, on the back of higher prices of cereals, fruits, select vegetables and milk. Food inflation was at 16.24% for the week ended 25 September 2010.

The near term focus of the market is on Q2 September 2010 results. Brokerage earnings estimates now rolling over to FY 2012 (year ending March 2012).

Tier-1 IT firms viz. TCS, Wipro, and HCL Technologies 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 today, 15 October 2010, hit a 2-year high against the dollar. 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.

European shares were trading mixed on Friday, 15 October 2010, with the technology sector supported by strong results from US peer Google and as oil majors gained as crude prices climbed towards $83 on the back of a weak dollar. The key benchmark indices in France and Germany were up 0.14% and 0.16% respectively. However, UK's FTSE 100 index was down 0.32%.

Most Asian markets edged lower on Friday, 15 October 2010, with banking stocks in Seoul and Sydney weighing on those markets. The key benchmark indices in Japan, Taiwan, Indonesia and Hong Kong were down by between 0.12% to 0.87%. However, key benchmark indices in China, South Korea, and Singapore were up by between 0.13% and 3.18%.

Some investors took cash off the table after Thursday's (14 October 2010) rally and ahead of Federal Reserve Chairman Bernanke's speech at a conference in Boston later in the global day. Markets will be watching closely for clues on the timing and extent of any further quantitative easing measures to kick start an ailing US economy.

Meanwhile, South Korea, which will in November 2010 chair a Group of 20 economies summit, today, 15 October 2010, warned that international tensions over foreign exchange policy could lead to increased trade protectionism. South Korea and China are sparring with each other in what may be seen as a currency war. Brazil, South Korea and Thailand have all announced measures to restrain surging overseas inflows. Singapore recently took steps to boost its currency to curb inflation.

Trading in US index futures indicated the Dow could fall 14 points at the opening bell on Friday, 15 October 2010. US index futures swung between gains and losses.

US stocks ended slightly lower on Thursday, 14 October 2010 as investors retreated from financials because of concerns over banks' foreclosure practices. The Dow Jones Industrial Average fell 1.51 points, or 0.01%, to 11094.6, snapping a four-session winning streak in a day of choppy trading. The Nasdaq Composite index shed 5.85 points, or 0.24%, to 2435.38 and the Standard & Poor's 500-stock index fell 4.29, or 0.36%, to 1173.81.

Back home, foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $23.36 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.

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 36,000 crore from share sales over the next three to six months. This includes a large initial public offer (IPO) from Coal India. The government plans to raise about Rs 15,000 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 Monday, 18 October 2010 and closes on Thursday, 21 October 2010.

The government has set Rs 225-245 per share price band for the Coal India IPO. Retail investors will get shares at 5% discount on the final issue price to be discovered through the book-building route. The Indian government is selling roughly 63.16 crore Coal India shares, or 10% of the company.

The Reserve Bank of India (RBI) governor D Subbarao today, 15 October 2010, said the RBI was watching the exchange rate situation and will intervene in the forex market if inflows are lumpy and volatile. India must manage capital inflows so that it can fund its current account deficit while at the same time not harming exports, Deputy Governor Subir Gokarn had said on Thursday 14 October 2010. The rupee today, 15 October 2010, strengthened past 44 per dollar, hitting a 25-1/2-month high.

"The Coal India IPO may add pressure on liquidity at least temporarily, so it is something that we will look at and if the circumstances warrant, we will think about responding," Gokarn said at the press conference.

Global emerging-market equity funds attracted more cash for a sixth straight week as overseas investors sought faster growth amid expectations the US Federal Reserve will add stimulus. Developing-nation stock funds took in $4.1 billion for the week ended 13 October 2010, more than half the $7.63 billion total investors put into equity funds, according to data from global fund tracker EPFR Global.

Customs, Central Excise and Service Tax revenue collections at all India level rose 44.4% to Rs 150686 crore during April-September 2010 as compared to corresponding period in previous year, data released on 13 October 2010 showed.

Industrial production rose at a much slower-than-expected 5.6% in August 2010 from a year earlier, sharply lower than the previous month's revised 15.2% growth, data showed on Tuesday, 12 October 2010. Manufacturing output rose an annual 5.9% in August 2010, lower than a 10.6% rise in August 2009. Industrial production growth for July 2010 was revised upwards to 15.2% from 13.8% earlier.

The BSE 30-share Sensex was down 372.59 points or 1.82% to 20,125.05. The index lost 407.46 points at the day's low of 20,090.18 in late trade. The Sensex rose 80.81 points at the day's high of 20,578.45 in early trade.

The S&P CNX Nifty was down 114.70 points or 1.86% to 6,062.65.

The market breadth, indicating the health of the market was weak, in contrast with a strong breadth at the onset of the trading session. On BSE, 2058 shares declined while 997 shares advanced. A total of 94 shares remained unchanged.

The total turnover on BSE amounted to Rs 5252 crore, lower than Rs 6746 crore on Thursday, 14 October 2010

The BSE Mid-Cap index fell 1.22% to 8,311.66 and the BSE Small-Cap index declined 0.74% to 10,629.65. Both these indices outperformed the Sensex.

Among sectoral action, the BSE IT index (down 3.25%), the BSE Teck (down 3.01%), and the BSE Auto index (down 2%), underperformed the Sensex.

The BSE Realty (down 0.96%), the BSE Power index (down 0.98%), and the BSE HealthCare index (down 1.13%), outperformed the Sensex.

Among the 30-share Sensex pack, 28 declined while only 2 of them managed gains. DLF (down 2.53%), and ACC (down 2.09%), were among the leading Sensex losers.

NTPC (up 0.27%), and Cipla (up 0.10%), edged higher from the Sensex pack.

IT stocks tumbled after sector bellwether Infosys cautioned about the global economic environment at the time of announcing Q2 September 2010 results before trading hours today. Infosys Technologies slipped 3.15% to Rs 3,083.80, halting three-day 3.67% gain, on profit booking. The stock retraced after striking a record high of Rs 3,249 today.

Infosys before market hours today reported strong Q2 September 2010 results. Consolidated net profit as per International Financial Reporting Standards (IFRS) jumped 16.7% to Rs 1737 crore on 12.1% growth in revenue to Rs 6947 crore in Q2 September 2010 over Q1 June 2010. The core operating profit margin (OPM) surged to 30.2% in Q2 September 2010 from 28.31% in Q1 June 2010.

Infosys has raised its earnings as well revenue forecast for the year ending March 2011 in both dollar and rupee terms. Infosys now expects a between 11.4% to 13.2% growth in earnings per American depository share (ADS) at between $2.54 to $2.58 for the year ending March 2011 (FY 2011) over the year ended March 2010 (FY 2010). The company expects a between 6.4% to 8.2% growth in EPS in rupee terms at between Rs 115.07 to Rs 117.07 for FY 2011.

As far as the top line is concerned, Infosys now expects a 24% to 25% growth on consolidated revenue in dollar terms at between $5.95 billion to $6 billion for FY 2011. The company expects 18.5% to 19.4% growth in revenue in rupee terms at between Rs 26951 crore to Rs 27165 crore for FY 2011.

But, Infosys officials cautioned about the global economic environment. Chief Financial Officer V. Balakrishnan said the continued global economic uncertainty, coupled with extreme currency volatility, is a concern for the IT industry. "Though the economic environment continues to be challenging, we have leveraged our client relationships, solutions and investments to grow faster in this quarter," S. Gopalakrishnan, the company's chief executive and managing director, said in the earnings statement.

At the time of announcing the second quarter results, the Infosys board declared interim dividend of Rs 10 per equity share and a special dividend of Rs 30 per share on 30th year of operations of the company.

India's third largest software services exporter by sales Wipro lost 4.13% to Rs 470.80. The company announces its Q2 September 2010 results on 22 October 2010. It was the top loser from the Sensex pack.

India's largest IT exporter by sales TCS declined 3.52% to Rs 951, after striking a record high of Rs 1010 in early trade. The company announces its Q2 September 2010 results on 21 October 2010.

Index heavyweight Reliance Industries (RIL) slipped 1.95% to Rs 1037.60 after oscillating in a band of Rs 1036 - 1067.50 during the day. RIL during market hours today said it has raised $1.5 billion in an issue of dollar bonds. A $1 billion, 10-year tranche of the issue was priced at 205 basis points over US Treasuries, while a $500 million 30-year bond was priced at 240 basis points above Treasuries, RIL said.

The proceeds from the issue by a unit called Reliance Holding USA Inc and guaranteed by the parent will be used in refinancing existing debt, business investments and general corporate purposes, RIL said.

Banking stocks fell for the second day in a row on profit taking. India's largest private sector bank by total income ICICI Bank fell 1.64% after its American depositary receipt declined 1.73% on the NYSE on Thursday, 14 October 2010. India's second largest private sector bank by total income HDFC Bank slipped 1.45%.

India's largest bank by branch network and net profit State Bank of India declined 2.73%.

India's largest truck maker by sales Tata Motors fell 2.29%. The company's global vehicle sales rose 19% to 86,996 units in September 2010 over September 2009.

Other auto stocks also drifted lower on profit booking. India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) fell 1.24% and India's top small car maker by sales, Maruti Suzuki India declined 3.13%.

India's leading bike maker by sales Hero Honda Motors shed 3.05% while India's second largest bike maker by sales Bajaj Auto fell 1.24%

Metal stocks fell on profit booking. Sterlite Industries (down 2.01%), Hindalco Industries (down 1.37%), National Aluminum Company (down 1.01%), Steel Authority of India (down 1.60%), Hindustan Zinc (down 0.24%), JSW Steel (down 1.79%), Tata Steel (down 2.63%), fell.

Telecom pivotals declined. India's largest cellular services provider by sales Bharti Airtel slipped 3.10% and India's second largest cellular services provider by sales Reliance Communications declined 2.52%.

Bedmutha Industries was the top traded counter on the BSE with turnover of Rs 298.13 crore followed by Orchid Chemicals (Rs 195.67 crore), Infosys (Rs 167.69 crore), Parentral Drugs (Rs 157.70 crore), and Raymond (Rs 106.16 crore), in that order.

Karuturi Global was the top traded counter on the BSE with volume of 2.84 crore shares followed by Cals Refineries (1.99 crore shares), Bedmutha Industries (1.48 crore shares), Jm Financials (1.13 crore shares), and Chambal Fertilisers & Chemicals (1.05 crore shares), in that order.

Select fertiliser stocks were in demand on optimism good rains this year will boost sales. Rashtriya Chemicals and Fertilisers (RCF) (up 4.29%), Chambal Fertiliser & Chemicals (up 3.34%), GNFC (up 0.55%) surged.

Havells India rose 0.97% to Rs 416.10 on reports it plans to bring brands from its international subsidiary Havells Sylvania to India early next year, with five new showrooms in major cities and a big advertising blitz.

Kernex Microsystems India was locked at the upper circuit of 5% after the company reported net profit of Rs 2.92 crore for Q2 September 2010 as against a net loss of Rs 3.25 crore in Q2 September 2009. The result was announced after trading hours on Thursday, 14 October 2010.

Su-Raj Diamonds & Jewellery gained 1.96% after the company's board allotted 50 lakh equity shares at Rs 70 per share to two foreign institutional investors, thus raising Rs 35 crore from the issue. The company made this announcement after market hours on Thursday, 14 October 2010.

EID Parry (India) rose 2.13%, after the company said its board will consider stock-split proposal on 25 October 2010 along with Q2 September 2010 result