Nifty settles below 6,000

The key benchmark indices fell for the third straight day in a highly volatile trading sessions as traders rolled over positions in the derivatives segment from the near-month October 2010 series to November 2010. The near-month October 2010 derivatives contracts expired today, 28 October 2010. The barometer index BSE Sensex below the psychological 20,000 and the 50-unit S&P CNX Nifty fell below the psychological 6000 mark. A trend reversal was witnessed shortly after the market scaled a fresh intraday high in mid-afternoon trade. Turnover on NSE's futures & options segment surged to a staggering over Rs 2.5 lakh crore.



The BSE 30-share Sensex lost 64.33 points or 0.32%, off close to 245 points from the day's high and up close to 70 points from the day's low. European stocks and US index futures were trading firm and most Asian markets ended higher.

From a recent high of 20,687.88 on 13 October 2010, the BSE Sensex has lost 746.84 points or 3.61% in last eleven trading sessions.

The market breadth was weak, compared with a strong breadth earlier in the day. Auto, banking and software pivotals saw mixed trend ahead of earnings from sector pivotals. Tata Motors struck a record high above Rs 1,200. Telecom pivotals saw divergent trend. Metal stocks declined on slide in the metal prices on the London Metal Exchange on Wednesday, 27 October 2010.

Intraday volatility was extremely high. The market slipped into the red in morning trade, reversing initial rally. The market regained positive zone later. The Sensex regained the psychological 20,000 mark after falling below that level in intraday trade. The market extended gains in mid-morning trade. Volatility continued as the key benchmark indices recovered after erasing all the intraday gains in early afternoon trade.

The market surged to fresh intraday high in afternoon trade as European stocks rose in early trade. The market extended gains in mid-afternoon trade. A sudden sell-off was witnessed in late trade as the Sensex fell below the psychological 20,000 level. The market came off lows at the fag end of the trading session.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was down 2.38% at 20.52. The index had risen 2.29% to 21.02 on Wednesday, 27 October 2010. The index had lost 3.79% to 20.55 on Tuesday, 26 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 focus of the market is currently on the second quarter September 2010 results. The results announced so far have been encouraging. The combined net profit of a total of 809 firms surged 58.7% to Rs 52261 crore on 18.4% growth in sales to Rs 330729 crore in Q2 September 2010 over Q2 September 2009.

The annual food inflation eased in mid-October 2010 as vegetable prices fell. The food price index in the year to 16 October 2010 rose 13.75%, compared with 15.53% rise in the previous week. The fuel price index for the same week rose 11.25% against an annual rise of 11.14% in the previous week. The primary articles price index was up 16.62%, compared with an annual rise of 18.05% a week earlier.

Reserve Bank of India deputy governor Subir Gokarn on Tuesday, 26 October 2010, called high food prices a structural problem and warned rising prices would put upward pressure on inflation and interest rates. Finance Minister Pranab Mukherjee on Tuesday said 4-5 percent inflation is "ideal" for India's economy, but admitted achieving that level might be difficult. The RBI is widely expected to raise its key lending rate by 25 basis points, the sixth such hike since March 2010, when it meets to review policy on 2 November 2010, as it looks to achieve its end-March 2011 projection of headline inflation at 6%.

The government has allowed duty-free import of rice and wheat and has released grains from its stocks to rein in food price rise.

The yield on the benchmark 10-year 7.8% bond was hovering at 8.14%, slightly higher than Wednesday's (27 October 2010) close of 8.13%. The yield on the most traded 8.13% 2,022 bond was hovering at 8.12%. The yield on the second most traded 7.99% 2017 bond was hovering at 8%.

European stocks were trading firm on Thursday, 28 October 2010, as investors digested a barrage of earnings reports from some of the continent's biggest firms. The key benchmark indices in France, Germany and UK rose by between 0.47% to 0.69%.

Asian stocks rose on Thursday as a rebound in the dollar paused after the greenback recovered all of its losses against major currencies this year and as a sell-off in commodities halted. The key benchmark indices in Hong Kong, Indonesia, Taiwan and Singapore were up by between 0.16% and 0.76%. But, the key benchmark indices in China, Japan and South Korea were down by between 0.09% and 0.22%.

The Bank of Japan's policy board decided Thursday to leave its key overnight call rate unchanged, as widely expected, offered details of its asset-buying program and moved forward its next policy meeting to 4-5 November 2010. The November meeting had previously been scheduled for on 15-16.

The Japanese central bank also announced details of the asset-buying program it unveiled at its last meeting earlier this month, when it also surprised markets by cutting the unsecured overnight call loan rate to a range of 0.0%-0.1%, from 0.1% previously. The Bank of Japan said it will buy corporate bonds rated BBB or higher, and commercial paper rated a2 or higher.

China's Cabinet said Wednesday it will take additional action to curb property prices and do what it can to foster stability in commodity prices. The State Council's statement came in the wake of a meeting chaired by Premier Wen Jiabao, and shows a renewed determination to rein in property prices. However, the language was consistent with the Cabinet's earlier-expressed views on the housing market and conforms to China's policy approach emphasizing the use of administrative measures to cool prices.

Moody's Investors Service said Thursday it raised the outlook on Thailand's Baa1 local- and foreign-currency government bond ratings to stable from negative. Moody's decision to change the outlook was prompted by the robust economic recovery and the stabilization of government finances despite continuing domestic political turmoil, the rating service said in a statement. In what it said was a related action, Moody's also raised the country's foreign-currency bond ceiling by one notch to A2, with a stable outlook, while the outlook for the Baa1 foreign-currency deposit ceiling was changed to stable from negative.

US stocks dropped on Wednesday, 27 October 2010, amid concerns that the Fed's plan to boost the economic recovery may not be large enough. The Dow Jones Industrial Average fell 43.18 points, or 0.39%, to 11126.28 and the Standard & Poor's 500 dropped 3.19 points, or 0.27%, to 1182.45. But, the Nasdaq Composite rose 5.97 points, or 0.24%, to 2503.26.

A Commerce Department report showed new home sales jumped 6.6% in September from August to a pace of 307,000 units. That beat economists forecast of a rise of just 4.2% to a pace of 300,000 units. Median prices rose 3.3% annually to $223,800. The weekly initial jobless claims data, due to be announced today, will be closely watched.

Trading in US index futures indicated that the Dow could gain 15 points at the opening bell on Thursday, 28 October 2010.

Back home, the Reserve Bank of India governor D Subbarao on Wednesday, 27 October 2010, said managing the exchange rate in the face of volatile flows contains a cost, and the challenge was to minimise that cost. Buying dollars adds liquidity to the banking system, which aggravates inflation. Sterilising resultant liquidity can push up interest rates, which in turn attracts further inflows, the Reserve Bank of India governor said.

Managing currency tensions will require a shared understanding on keeping exchange rates aligned to economic fundamentals, and an agreement that currency interventions should be resorted to not as an instrument of trade policy but only to manage disruptions to macroeconomic stability, Subbarao said. The Group of 20 advanced and emerging economies agreed, late last week, to move towards market-determined exchange rates and to pursue the full range of policies needed to reduce excessive external imbalances.

Subbarao said managing capital flows is not a problem that should be managed only by emerging market economies. In as much as lumpy and volatile flows are a spillover from policy choices of advanced economies, the burden of adjustment has to be shared, Subbarao said.

Finance Minister Pranab Mukherjee on Tuesday, 26 October 2010, said the government has no plan to put any cap on flow of funds from foreign institutional investors (FIIs), which have pumped in nearly $25 billion so far this year. He said a sharp increase in inflow of funds from FIIs has provided cushion in controlling current account deficit. "I am confident with the flow of FIIs and foreign exchange availability, I will be able to contain current account deficit at around 3% of the GDP," Mukherjee said. The Finance Minister admitted that inflows of foreign funds have put pressure on the Indian currency.

He added that said steps to mop-up liquidity in India, as part of inflation-fighting measures, must not affect economic growth. He said the economy is on the path to regaining the growth momentum seen before the global economic slowdown. The Reserve Bank of India has taken steps to moderate demand to levels which India's economy can support in the light of high inflation, Mukherjee said.

India's economy is seen growing by 8.5% to 9.7% in the 2010/11 fiscal year and monetary tightening should ensure the pace of recovery is not hit, the finance ministry said in a report released on Tuesday, 26 October 2010. The report also said measures to temporarily ease liquidity were consistent with the Reserve Bank of India's (RBI) policy stance of containing inflation and anchoring inflationary expectations. "It has to be ensured that monetary tightening does not adversely affect the pace of recovery at this stage," the Finance Ministry wrote in the report.

The government may lift controls on diesel pricing in a phased manner, instead of in one go, to cushion any blow on the poor, the oil ministry said in a report on Tuesday, 26 October 2010. "It is proposed that increase in prices of diesel will be staggered over time to minimise the overall impact on the poor and the vulnerable," the report said. It also said the government may intervene in the pricing of petrol and diesel in case of a sharp rise or volatility in global crude oil prices.

Foreign funds sold equities worth a net Rs 9.07 crore and domestic institutional investors sold shares worth Rs 518.30 crore on Wednesday, 27 October 2010, as per provisional data from the stock exchanges.

Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflow in 2010 now stands at a record $24.92 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.

Global emerging-market equity funds drew record inflows in the third week of October 2010 as investors sought growth in developing nations and the dollar weakened, according to global fund tracker EPFR Global. The funds took in $3.8 billion in the week ending 20 October 2010. Year-to-date inflows to global emerging-market equity funds exceed the record $44.2 billion for the whole of 2009.

Asia ex-Japan, Latin America and EMEA equity funds posted inflows ranging from $327 million to $981 million in the week ending 20 October 2010. Dedicated BRIC (Brazil, Russia, India and China) equity funds had their best week since February 2010, but were again eclipsed by Frontier equity funds, which pulled in $150 million, a 145-week high. Turkey equity funds saw inflows for the eighth week.

While global liquidity remains ample, a section of the market is 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. State-run Power Grid Corp, Steel Authority of India and Indian Oil Corp are some of the companies that are planning large share sales in coming months.

Currently, a large sum of money is blocked in the Coal India IPO, which was subscribed more than 15 times. Pressure on fund outflows will ease in late October 2010 or early November 2010 as Coal India begins to refund excess subscriptions received towards its initial public offering.

The BSE 30-share Sensex was down 64.33 points or 0.32% to 19,941.04. The Sensex lost 136.05 points at the day's low of 19,869.32 in late trade. The index rose 180.09 points at the day's high of 20,185.46

The S&P CNX Nifty was down 24.95 points or 0.41% to 5,987.70. Nifty had dropped to the day's low of 5,968.10 in late trade after striking day's high of 6,071.10 in mid-afternoon trade.

The market breadth, indicating the health of the market was weak, compared with a strong breadth earlier in the day. On BSE, 1815 shares declined compared with 1187 that advanced. A total of 90 shares remained unchanged.

The total turnover on BSE amounted to Rs 5319 crore, lower than Wednesday's Rs 5899 crore. Turnover in NSE's futures & options (F&O) segment surged to a staggering Rs 252504.79 crore from Rs 206567.50 crore on Wednesday, 27 October 2010, as traders rolled over positions from the near-month October 2010 series to November 2010 series.

Among the 30-share Sensex pack, 22 declined while the rest gained.

The BSE Mid-cap index fell 0.64% and the BSE Small-cap index was down 0.53%. Both these indices underperformed the Sensex.

Except the BSE Auto index, all the other sectoral indices on BSE fell. Auto index (up 0.25%), Teck index (down 0.13%) outperformed the Sensex.

Realty index (down 1.72%), Consumer Durables index (down 1.51%), Power index (down 1.08%), Metal index (down 0.85%), PSU index (down 0.75%), Healthcare index (down 0.68%), FMCG index (down 0.67%), banking sector index Bankex (down 0.61%), Capital Goods index (down 0.54%), Oil & Gas index (down 0.46%) and IT index (down 0.42%) underperformed the Sensex.

Index heavyweight Reliance Industries (RIL) slipped 0.88% to Rs 1083.05 in volatile trade oscillating between Rs 1078-1102 during the day. As per recent reports, RIL is expected to achieve peak output of 80 million standard cubic metres per day (mmscmd) from its KG-D6 block in about 12 months, bringing down the delay in its ramp-up by a year. Currently, natural gas production from the block is stagnant at 60 mmscmd. RIL unveils Q2 September 2010 results on Saturday, 30 October 2010.

Oil & Natural Gas Corporation (ONGC) rose 0.44%. The company announced after market hours today that its net profit rose 5.87% to Rs 5388.77 crore in Q2 September 2010 over Q2 September 2009.

Cairn India slipped 1.07% after consolidated net profit jumped 237.60% to Rs 1585.08 crore on 1069% surge in revenue to Rs 2686.40 crore in Q2 September 2010 over Q2 September 2009.

Telecom pivotals saw divergent trend. India's largest listed cellular services provider by sales Bharti Airtel surged 2.62% to Rs 330.45 on reports it is interested in buying the yet-to-be-launched Indian wireless broadband business of Qualcomm. It was the top gainer from the Sensex pack. Reportedly, Bharti Airtel is primarily interested in Qualcomm's airwaves and permits for Delhi, complementing the 3G frequencies it won in the circle earlier this year.

India's second largest listed cellular services provider by sales Reliance Communications slipped 1.45% to Rs 179.45, off day's high of Rs 185.45.

Auto, banking and software pivotals saw mixed trend. India's top small car maker by sales Maruti Suzuki India rose fell 0.12%, reversing initial gains. The company will announce its Q2 September 2010 results on Saturday, 30 October 2010.

India's biggest commercial vehicles maker by sales Tata Motors fell 0.31% to Rs 1190.50, retracing from a record high of Rs 1206.60 struck in intra-day trade today.

India's top bike maker by sales Hero Honda Motors advanced 2.2% ahead of its Q2 earnings on Friday, 29 October 2010.

India's largest tractor maker by sales Mahindra & Mahindra rose 0.56% to Rs 733.50, recovering from the day's low of Rs 721.50. The company announces its Q2 result on Friday, 29 October 2010.

India's largest IT exporter by sales Infosys Technologies slipped 0.32% and India's third largest IT exporter by sales Wipro declined 0.93%. India's largest IT exporter by sales Tata Consultancy Services (TCS) rose 0.24%.

India's largest private sector bank by net profit ICICI Bank fell 1.44%, ahead of its Q2 September 2010 results on 29 October 2010.

India's largest bank by net profit and branch network State Bank of India fell 0.5% reversing initial gains. The bank raised its Base Rate by 10 basis points to 7.60% per annum (pa) effective 21 October 2010.

India's second largest private sector bank by net profit HDFC Bank rose 0.74%. 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 19 October 2010.

Metal stocks declined as the LMEX, a gauge of six metals traded on the London Metal Exchange, slumped 2.59% on Wednesday, 27 October 2010. Sterlite Industries, Sesa Goa, Hindalco Industries, Hindustan Zinc and Tata Steel fell by between 0.28% to 2.26%.

Steel Authority of India fell 4.86% after net profit tumbled 34.47% to Rs 1090.01 crore on 5.77% increase in total income to Rs 11181.55 crore in Q2 September 2010 over Q2 September 2009. The result was announced during trading hours today, 28 October 2010.

Realty stocks fell on rate hike worried. DLF, Omaxe, Unitech and HDIL fell by between 0.07% to 2.65%.

FMCG stocks fell on profit taking. ITC, Hindustan Unilever and United Spirits fell by between 0.32% to 6.29%.

Capital goods stocks also fell on profit taking. Siemens, Larsen & Toubro, BHEL and ABB fell by between 0.15% to 2.16%.

Alok Industries clocked highest volume of 2.71 crore shares on BSE. Gyscoal Alloys (2.18 crore shares), Birla Power Solutions (1.97 crore shares), Cals Refineries (1.51 crore shares) and SEL Manufacturing Company (1.13 crore shares) were the other volume toppers in that order.

BS Transcomm clocked highest turnover of Rs 328.47 crore on BSE. Gyscoal Alloys (Rs 181.64 crore), ABG Shipyard (Rs 129.52 crore), Orchid Chemicals (Rs 100.39 crore) and IDBI Bank (Rs 98.56 crore) were the other turnover toppers in that order.