Realty, banking stocks lead 1% Sensex slide

The key benchmark indices fell for the second straight day as stocks declined across Asia on concerns that quantitative easing by the Federal Reserve might not be as large as expected. The market breadth was weak, in contrast with a strong breadth earlier in the day. The BSE 30-share Sensex lost 216.02 points or 1.07%, up close to 80 points from the day's low. The Sensex closed just a tad above the psychological 20,000 mark after falling below that level in intraday trade. The S&P CNX Nifty regained the psychological 6,000 mark after falling below that mark in mid-afternoon trade.



Interest rate sensitive banking and realty stocks fell. Capital goods and FMCG stocks also declined. Index heavyweight Reliance Industries (RIL) edged lower, reversing more than 1% gains in intraday trade.

Stocks were volatile as traders rolled over positions in the derivatives segment from the near-month October 2010 series to November 2010 series ahead of the expiry of the October 2010 contracts on Thursday, 28 October 2010. The market recovered from an early slide triggered by weak Asian stocks. But, the intraday recovery proved short-lived, with weak Asian stocks weighing on investor sentiment. The market once again came off lows in morning trade.

The market weakened again in early afternoon trade as the Sensex hit a fresh intraday low. Fresh selling pulled the market to the day's low in afternoon trade. The market extended losses to hit fresh intraday low in mid-afternoon trade. Volatility continued 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 up 2.29% at 21.02. 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.

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.

The Reserve Bank of India governor D Subbarao today, 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.

Foreign funds bought shares worth a net Rs 481.44 crore on Tuesday, 26 October 2010, as per the provisional data released by the stock exchanges. Net equity inflow in 2010 now stands at a record $24.89 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.

Europe stocks were down in volatile trade on Wednesday, 27 October 2010, with software group SAP AG and beer giant Heineken falling sharply, while Deutsche Bank bucked the negative trend. The key benchmark indices in UK and France were down by between 0.34% to 0.4%. But, Germany's DAX rose 0.12%.

Asian stocks fell on Wednesday, 27 October 2010, with Hong Kong shares sinking on news Beijing was imposing stricter import-payment measures to crack down on illegal capital flows. The Hang Seng Index lost 1.85% and the Shanghai Composite shed 1.46%. The key benchmark indices in Indonesia, South Korea, Singapore and Taiwan fell by between 0.51% to 1.21%. But, Japan's Nikkei Average rose 0.10%.

South Korea's economic growth was halved in the third quarter amid weakness in exports and manufacturing, according to data Wednesday from the nation's central bank. Real gross domestic product increased by 0.7% in the third quarter, compared to the previous quarter. GDP had seen quarter-on-quarter growth of 1.4% in the second quarter. Kim Choong-soo, governor of the Bank of Korea, said the nation may prepare measures to deal with problems from excessive capital inflows.

Trading in US index futures indicated that the Dow could fall 38 points at the opening bell on Wednesday, 27 October 2010. Several economic reports released Tuesday hinted at a strengthening US economy. The Conference Board said October 2010 consumer confidence rose to 50.2 from a revised 48.6 last month and edging past the average estimate from economists.

Investors have bet that the US central bank will enact a bond-buying program in early November 2010 in a bid to support the US economy. Buying bonds would drive interest rates and yields even lower, which makes stocks a more attractive investment. A latest Wall Street Journal report said the Fed is likely to unveil a Treasury bond purchase program of a few hundred billion dollars. While not exactly chump change, there has been escalating expectations the buying spree could total more than $1 trillion. The Federal Open Market Committee (FOMC) is scheduled to meet on 2-3 November 2010 to consider the US economy, interest rates and monetary policy.

Back home, Finance Minister Pranab Mukherjee on Tuesday, 26 October 2010, 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.

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 644 firms surged 67.3% to Rs 45684 crore on 19.2% growth in sales to Rs 271629 crore in Q2 September 2010 over Q2 September 2009.

The BSE 30-share Sensex was down 216.02 points or 1.07% to 20,005.37. The Sensex lost 297.68 points at the day's low of 19,923.71 in mid-afternoon trade. The index fell 0.81 points at the day's high of 20,220.58 in early trade.

The S&P CNX Nifty was down 69.35 points or 1.14% to 6,012.65. Nifty hit a low of 5,987.55 in mid-afternoon trade.

The market breadth was weak, in contrast with a strong breadth earlier in the day. On BSE, 1759 shares declined compared with 1219 shares that advanced. A total of 90 shares remained unchanged.

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

BSE clocked turnover of Rs 4439 crore, lower than Rs 4959.49 crore on Tuesday, 26 October 2010.

Index heavyweight Reliance Industries (RIL) fell 0.35% to Rs 1092.65. The stock came off the day's high of Rs 1110. RIL is reportedly 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.

NTPC fell 3.14% after company's net profit of NTPC declined 2.07% to Rs 2107.38 crore on 20.46% rise in net sales to Rs 12989.29 crore in Q2 September 2010 over Q2 September 2009. The stock was the top loser from the Sensex pack. The company announced the second quarter results after trading hours on Tuesday.

Reliance Communications (RCom) jumped 3.66% and was the top gainer form the Sensex pack. The stock surged in the last one hour of trade. But, shares of two other telecom majors fell. Bharti Airtel and Idea Cellular fell 2.14% and 3.16%, respectively.

Bank stocks fell on profit taking after strong gains over the past few months. India's largest private sector bank by net profit ICICI Bank fell 2.23%, with the stock falling for the second straight day. The bank announces Q2 result on Friday, 29 October 2010.

India's second largest private sector bank by net profit HDFC Bank fell 1.93%, with the stock falling for the fourth straight day. 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 on 19 October 2010.

India's largest bank by net profit and branch network State Bank of India rose 0.41% to Rs 3193.45. But, the stock came off the day's high of Rs 3214.95. SBI Life Insurance reported 87% growth in net profit to Rs 217 crore for six months ended September 2010 over six months ended September 2009. The total premium increased by 42% to Rs. 4830 crore. The new business premium surged 30% to Rs 3173 crores. SBI Life's Assets under Management grew by 57%, over the corresponding period last year to Rs 34406 crore as on 30 September 2010. The company continues to have the lowest expense to GWP (Gross Written Premium) ratio in industry of 7.76%.

SBI Life Insurance is a joint venture between State Bank of India (SBI) and BNP Paribas Assurance. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%.

High beta realty fell on concerns higher interest rates would crimp property demand. Indiabulls Real Estate, Omaxe, Lok Housing, HDIL, DLF, Unitech fell by 1.34% to 4.35%. Majority of the purchases of residential units are financed through bank/housing loans.

FMCG stocks fell on profit taking. ITC, United Spirits, Nestle India, Dabur India and Hindustan Unilever fell by between 0.56% to 2.19%.

Capital goods stocks also fell on profit taking. BEML, SKF India, Siemens, BHEL, Punj Lloyd and ABB fell by between 0.24% to 1.51%.

Some metal stocks rose in weak market. India's largest private sector aluminum maker by sales Hindalco Industries gained 0.67%.

India's largest private sector steel maker by sales Tata Steel rose 1.48%. The stock had lost 2.62% on Tuesday after the world's largest steelmaker ArcelorMittal forecast lower steel prices and weak demand in Q4 December 2010.

India's largest non-ferrous metals maker by sales Sterlite Industries gained 0.52%. Consolidated net profit rose 5.12% to Rs 1008.03 crore in Q2 September 2010 over Q2 September 2009. The results hit the market during trading hours on Tuesday, 26 October 2010.

Cement stocks fell on weak Q2 results. ACC, Ambuja Cements and Birla Corporation fell by between 0.45% to 2.16%.

Auto stocks were mixed. Car maker Maruti Suzuki India fell 2.44%, on profit taking after surging 3.59% on Tuesday, 26 October 2010. The company will announce its Q2 results on Saturday, 30 October 2010.

Commercial vehicle maker Tata Motors rose 0.21% to Rs 1,194.25. The stock hit record high of Rs 1201 today. Among other auto stocks, Hero Honda Motors fell 0.72%. The company announces Q2 result on Friday, 29 October 2010. M&M rose 1.63%. The company announces Q2 result on Friday, 29 October 2010.

Gyscoal Alloys clocked highest volume of 3.88 crore shares on BSE. BS Transcomm (2.29 crore shares), Cals Refineries (1.82 crore shares), Prestige Estates (1.55 crore shares) and Sanraa Media (1.07 crore shares) were the other volume toppers in that order.

BS Transcomm clocked highest turnover of Rs 868.12 crore on BSE. Gyscoal Alloys (Rs 316.47 crore), Prestige Estates (Rs 299.87 crore), Tata Steel (Rs 115.07 crore) and Reli