Nifty falls below 6,000 as metal, realty shares slide

The key benchmark indices edged lower, registering their fourth decline in five days, as a strong response to the mega initial public offer of Coal India indicated diversion of funds from the secondary market to primary market. High volatility was the hallmark of the day's trading session. The BSE Sensex and the 50-unit S&P CNX Nifty settled below the psychological 20,000 and 6,000 levels respectively. Inflows into the secondary equity market might be hit in the short-term due to a strong response to the mega initial public offer of Coal India which was subscribed 10.39 times by 16:00 IST on day three today, 20 October 2010. The institutional portion of the Coal India IPO closes today, 20 October 2010, while retail investors have one more day to bid for the issue. The government plans to raise about Rs 15000 crore from divestment of 10% stake in Coal India.



In overseas markets, Chinese shares ended slightly higher in choppy trade after Tuesday's (19 October 2010) surprise quarter-point Chinese rate hike and on fears of more rate actions in China in coming months.

Closer home, the BSE 30-share Sensex lost 110.98 points or 0.56% to 19,872.15, off 171.67 points from the day's high and up 49.49 points from the day's low. The Sensex had lost nearly 1% on Tuesday, 19 October 2010.

The market breadth was weak, in contrast with a strong breadth in morning trade. Shares from metal pack were the worst hit on fall in base metal prices on the London Metal Exchange on Tuesday, 19 October 2010. Banking pivotals declined on profit taking, extending their recent slide. Interest rate sensitive realty stocks declined on rate hike fears. Telecom pivotals saw divergent trend. IT stocks outperformed the Sensex. Index heavyweights Reliance Industries and Infosys Technologies rose, while Bharti Airtel and ICICI Bank declined. Debutante Oberoi Realty attracted close to 9% premium on its debut today with the counter clocking huge volume.

Intraday volatility was immense. The market bounced back after a weak opening as most Asian stocks recovered from initial losses triggered by a surprise rate hike by China. But, the intraday recovered proved short-lived as the Sensex once again slipped into the red. Volatility continued as the market regained positive zone in morning trade. The market, once again slipped into the red later.

Fresh selling pulled the market to day's low in early afternoon trade. The market moved between positive and negative terrain after recovering sharply from the day's low in afternoon trade. Intraday volatility remained high as the key benchmark indices slipped into the red after a sharp rebound from lower that pushed the market to the day's high in mid-afternoon trade. A sell-off in late trade dragged market to the day's low.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 2.45% to 23.80. The index had risen 3.94% to 23.23 on Tuesday, 19 October 2010. The index had lost 1.32% to 22.35 on Monday, 18 October 2010. The index had jumped 9.95% to 22.65 on Friday, 15 October 2010. The index had risen 2.9% at 20.60 on Thursday, 14 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.

Investors are keenly watching Q2 September 2010. The initial batch of Q2 results announced so far have been good with net profit of 176 companies rising 31.7% on 20.8% rise in sales in the quarter ended September 2010 over the quarter ended September 2009.

Tier-1 IT firms 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.

European stocks edged higher on Wednesday, 20 October 2010, shrugging off China's unexpected interest rate hike. The key benchmark indices in France, Germany and UK were up by between 0.27% to 0.57%.

Asian markets were choppy after Tuesday's (19 October 2010) surprise quarter-point Chinese rate hike and on fears of more rate actions in China in coming months. In China, the Shanghai Composite index erased a near 2% loss earlier in the day to end 0.07% higher. But, the index came off the day's high. Hong Kong's Hang Seng index ended 0.87% lower.

Some other regional markets recovered somewhat, boosted by hopes that an appreciating yuan and a strong and growing Chinese economy would help Asian corporations that export to China. Japan's Nikkei Stock Average ended 1.65% lower, after falling more than 2%. The key benchmark indices in South Korea and Taiwan were up 0.71% and 0.97% respectively.

China's central bank on Tuesday, 19 October 2010 raised one-year lending and deposit rate by 25 basis points each, boosting borrowing costs for the first time since 2007. Policy makers are trying to curb lending and prevent an asset-price bubble in a country that surpassed Japan this year as the world's second-largest economy.

US stocks posted their biggest loss in two months on Tuesday, 19 October 2010, on fears banks might be on the hook for billions of dollars in souring mortgage bonds. The Dow Jones industrial average dropped 165.07 points, or 1.48%, to 10,978.62. The Standard & Poor's 500 Index lost 18.81 points, or 1.59%, to 1,165.90 and the Nasdaq Composite index fell 43.71 points, or 1.76%, to 2,436.95.

Trading in US index futures indicated that the Dow could gain 26 points at the opening bell on Wednesday, 20 October 2010.

Closer home, net direct tax collections rose by 19% to Rs 1,81,758 crore in April-September 2010 period compared to the same period last year. The Budget had estimated to collect Rs 4.30 lakh crore direct tax in the current fiscal ending March 2011.

As per the data released by the Central Board of Direct Taxes, corporate tax collections grew by 21.7% to Rs 1.22 lakh crore in April-September this year, from Rs 1 lakh crore in the corresponding six-month period a year ago. Personal income tax collection - including securities transaction tax, residual fringe benefit tax and banking cash transactions tax - rose by 13.8% to Rs 59,053 crore from Rs 51,897 crore. Collection from indirect tax, comprising of customs, central excise and service taxes, climbed more than 44% to Rs 1,50,686 crore in the first half of the current fiscal, compared to the year-ago period.

Coming back to stocks and market men are worried 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 equity and debt issue over the next three to six months. This includes a large initial public offer (IPO) from Coal India, which is currently open for bidding. In fact, the proposed fund raising exercise would be still higher if Indian Oil Corporation (IOC) hits the market with a follow-on public offer.

Divestment secretary Sumit Bose on Tuesday, 19 October 2010, said the government will start the process for appointing bankers for follow-on public offer of refiner Indian Oil Corporation (IOC) within a few weeks. As per media reports, IOC's follow-on public offer could total as much as Rs 19000 crore. Bose said the government is targeting shares sales for IOC and state-run explorer Oil and Natural Gas Corp in the March 2011 quarter.

Foreign funds have made heavy purchases of Indian equities this year. Net equity inflow in 2010 now stands at a record $23.77 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.

Bond yields rose as higher inflation in September 2010 has raised the chances of a rate hike at the central bank's next policy review on 2 November 2010. The yield on benchmark ten-year bonds surged to 8.14% from Tuesday's (19 October 2010) close of 8.08%. The yield on the most traded 8.13% 2022 bond was hovering at 8.12%, compared with Tuesday's (19 October 2010) close of 8.10%.

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, government data showed on Friday, 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.

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 Reserve Bank of India (RBI) governor D Subbarao said late last week that 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 late last week. The rupee hit a 25-1/2-month high above 44 per dollar on Friday, 15 October 2010.

"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 late last week.

The BSE 30-share Sensex declined 110.98 points or 0.56% to 19,872.15. The Sensex rose 60.69 points at the day's high of 20,043.82 in mid-afternoon trade. The index lost 160.47 points at the day's low of 19,822.66 in late trade.

The S&P CNX Nifty was down 45.20 points or 0.75% to 5,982.10. The Nifty oscillated between a high of 6,038.10 and a low of 5,966.75.

The market breadth, indicating the health of the market was weak, in contrast with a strong breadth in morning trade. On BSE, 1885 shares declined while 1125 shares rose. A total of 102 shares remained unchanged.

The BSE Mid-Cap index fell 0.03% to 8,289.27 and the BSE Small-Cap index slipped 0.54% to 10,582.04. Both these indices outperformed the Sensex

Most sectoral indices on BSE edged lower. The BSE Metal index (down 2.22%), the BSE Realty index (down 1.37%), and the BSE Consumer Durables index (down 1.11%), underperformed the Sensex. The BSE HealthCare (up 0.16%), the BSE Oil & Gas index (up 0.16%), and the BSE Capital Goods index (up 0.20%), outperformed the Sensex.

The total turnover on BSE amounted to Rs 4,137 crore, lower than Rs 4,878.02 crore on Tuesday, 19 October 2010.

Among the 30-share Sensex pack, 21 declined while the rest gained. HDFC (down 2.58%), Bharti Airtel (down 1.99%), and ITC (down 1.20%), edged lower from the Sensex pack.

Cipla (up 0.42%), and Jaiprakash Associates (up 0.12%), edged lower from the Sensex pack.

Metal stocks were gripped in selling pressure throughout the day weighed by a 2.08% slide in the LMEX, a gauge of six metals traded on the London Metal Exchange, on Tuesday, 19 October 2010.

India's largest non-ferrous metal firm by sales Sterlite Industries India lost 3.51% to Rs 170.30 and was the top loser from the Sensex pack. The Supreme Court on Monday, 18 October 2010, extended a stay on a lower court order asking Sterlite Industries to close its copper smelter in south India. The stay will continue till the second week of December 2010, allowing the unit to continue its operations.

Tata Steel (down 2.68%), Steel Authority of India (down 1.29%), Sesa Goa (down 2.87%), National Aluminium Company (down 1.06%), Hindalco Industries (down 1.43%), JSW Steel (down 1.98%), declined.

Index heavyweight Reliance Industries (RIL) rose 0.34% to Rs 1047.45 after trading in a band of Rs 1038 to Rs 1063.80 during the day.

RIL has reportedly indicated that it may actively bid for oil and gas exploration blocks, including nine new areas, being auctioned by the Government. Out of 34 blocks being offered under NELP-IX, 19 blocks are new areas -- seven are in deep sea, two in shallow waters and ten onland blocks. The rest 15 (one in deep water, five in shallow water and nine onland blocks) are recycled blocks.

India's largest oil exploration firm by sales Oil and Natural Gas Corporation (ONGC) slipped 0.33%. The government is targeting reportedly targeting disinvestment of part stake in ONGC in the March 2010 quarter.

India's largest engineering & construction firm by sales Larsen & Toubro rose 0.65%. The company recently won an order worth Rs 1449 crore from DB Power for balance of plant package

India's second largest private sector bank by net profit HDFC Bank slipped 1.17%. The bank's net profit rose 32.68% to Rs 912.14 crore on 14.37% rise in total income to Rs 5770.70 crore in Q2 September 2010 over Q2 September 2009. The private sector bank announced the results after trading hours on Tuesday, 19 October 2010.

India's largest bank by net profit and branch network State Bank of India slipped 0.86%. The bank informed BSE that it has revised the Benchmark Prime Lending Rate upwards by 25 basis points (bsp) from 12.25% per annum (p.a.) to 12.50% p.a. effective from 21 October 2010. The bank has also raised base rate by 10 bps from 7.50% p.a. to 7.60% p.a. effective from October 21, 2010.

India's largest private sector bank by net profit ICICI Bank shed 0.58% to Rs 1111.60, off day's high of Rs 1127.

Canara Bank surged 4.38% after net profit rose 10.69% to Rs 1007.88 crore on 8.47% rise in total income to Rs 6077.06 crore in Q2 September 2010 over Q2 September 2009. The state-run bank announced the Q2 result during market hours today, 20 October 2010.

Central Bank of India jumped 5% ahead of its Q2 result on 26 October 2010. IDBI Bank vaulted 4.27% ahead of its Q2 result on 28 October 2010.

India's largest power generation firm by capacity NTPC gained 0.47% on reports the company plans to set up two coal-based power plants totaling 3960 megawatt at an estimated cost of Rs 23,760 crore in Bangladesh.

IT stocks outperformed the Sensex. India's third largest software services exporter by sales Wipro slipped 0.25%. The company announces its Q2 September 2010 results on 22 October 2010.

India's largest IT exporter by sales TCS rose 0.03%. The company announces its Q2 September 2010 results on 21 October 2010.

India's second largest IT exporter by sales Infosys gained 0.32%, recovering from Tuesday's 3.04% slide.

Infosys before market hours on Friday, 15 October 2010, reported a 16.7% rise in consolidated net profit as per International Financial Reporting Standards (IFRS) 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 also raised its earnings as well revenue forecast for the year ending March 2011 in both dollar and rupee terms. But, the company's top management cautioned about the global economic environment.

HCL Technologies dropped 3.3% after company's consolidated net profit as per US accounting standards declined 1.6% to Rs 331.10 crore on 10% increase in revenue to Rs 3708.10 crore in Q1 September 2010 over Q4 June 2010. The company announced the Q1 result before market hours today.

India's second largest private sector power generation firm by capacity Tata Power Company jumped 1.17% to Rs 1390.50 and was the top gainer from the Sensex pack. The stock rose on bargain hunting after a four-day 4.09% slide.

Interest rate sensitive realty stocks declined on fears the Reserve Bank of India may hike key rates to curb rising inflation. This may impact property sales as most of the property deals are financed through borrowed funds.

DLF (down 1.44%), HDIL (down 0.46%), Sobha Developers (down 0.74%), Omaxe (down 2.87%), Orbit Corporation (down 2.21%), Unitech (down 4.25%), edged lower.

Debutante Oberoi Realty settled at Rs 282.95 on BSE, a premium of 8.83% over the initial public offer price of Rs 260. The stock debuted at Rs 280, a premium of 7.69% over its issue price. It hit a high of Rs 299 and a low of Rs 269.80 during the day.

Telecom pivotals saw divergent trend. India's largest cellular services provider by sales Bharti Airtel dropped 1.99%. As per recent data, the company added 2.04 million mobile users in September 2010 versus 2.03 million in August 2010.

India's largest cellular services provider by sales Reliance Communications (RCom) rose 0.03%. The company signed up 2 million mobile users in September 2010. RCom had 115.3 million users as of end-August 2010.

Oberoi Realty was the turnover topper on the BSE, with turnover of Rs 697.74 crore followed by Bedmutha Industries (Rs 124.38 crore), Tata Steel (Rs 107.29 crore), State Bank of India (Rs 102.93 crore), and Reliance Industries (Rs 92.14 crore), in that order.

Oberoi Realty was the top traded counter on the BSE with volume of 2.42 crore shares followed by Cals Refineries (2.32 crore shares), FCS Software (1.92 crore shares), Alok Industries (1.12 crore shares), and Karuturi Global (1.05 crore shares), in that order.

Piramal Healthcare rose 1.08% after company said its board of directors will consider various options of rewarding shareholders, including by way of a dividend or a buy-back of shares, at a meeting to be held on 22 October 2010. The company made this announcement after market hours on Tuesday, 19 October 2010.

Merck jumped 20% after the board of directors of the company declared an interim dividend of a massive Rs 95 per share for the year ending December 2010. The board declared the huge interim dividend during trading hours today, 20 October 2010.

Jet Airways India rose 0.43% after company said its domestic passenger traffic grew 37.1% and international traffic rose 36.4% in September 2010 over September 2009. The company made this announcement during market hours today.

CEAT fell 3.86% after net profit plunged 75.16% to Rs 15.27 crore on 22.1% rise in total income to Rs 842.61 crore in Q2 September 2010 over Q2 September 2009. The company declared its results during trading hours today, 20 October 2010.