Market seen extending two-day slide; Coal India IPO opens for bidding

The market is likely to weak start on subdued global cues. Most Asian markets were trading lower. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could slide 33 points at the opening bell. Investor response the initial public offering (IPO) of state-run Coal India, which opens for bidding today, will be closely watched. The IPO is India's biggest ever.



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

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 80000 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 IPO of Coal India opens for bidding today, 18 October 2010. The issue 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 near term focus of the market is on Q2 September 2010 quarterly earnings as brokerage update their earnings estimates to FY 2012 (year ending March 2012) taking into consideration the latest quarterly earning.

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. 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.

HDFC, Essar Oil, CRISIL, Bajaj Finserv among others will unveil their June - September 2010 quarter earnings today.

Most Asian markets were trading lower on Monday, 18 October 2010. The key benchmark indices in South Korea, Singapore, Taiwan, Indonesia and Hong Kong slipped by between 0.18% to 1.32%. But, the key benchmark indices in China and Japan were up 0.07% and 0.50% respectively.

US markets ended on a mixed note on Friday, 15 October 2010, with the Dow Jones Industrial Average edging lower, weighed by financials stocks. The Dow declined 31.79 points or 0.3% to 11,062.78. But, the S&P 500 index rose 2.38 points or 0.2% to 1176.19. The Nasdaq Composite index climbed 33.39 points or 1.37% to 2,468.77, with the index lifted by strong Google Inc. quarterly results.

Economic news was mixed during the day. Investors liked the fact that Ben Bernanke, chairman of the US Federal Reserve, addressed the issue of additional economic stimulus, raising the possibility that the central bank will attempt to put the economic recovery back on track. There are hopes that the Fed will embark on another round of quantitative easing, which involves pumping more money into the US economy by purchasing government bonds and taking other measures to encourage lending.

US retail sales rose 0.6% in September 2010, topping expectations. However, consumer sentiment as measured by the University of Michigan declined.

Back home, foreign funds have made heavy purchases of Indian stocks this year. 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.

Foreign funds sold shares worth a net Rs 112.75 crore on Friday, 15 October 2010, as per the provisional data from the stock exchanges. Domestic funds dumped shares worth a net Rs 1053.45 crore on that day.

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 on 15 October 2010. 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.

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.