Sensex settles below 20,000

The key benchmark indices tumbled in late trade after a strong start, an exact opposite movement to that witnessed on Monday, 18 October 2010. Intraday volatility was high. European and Asian markets were mixed while US index futures were slightly higher. The barometer index BSE Sensex fell below the psychological 20,000 level. But, the 50-unit S&P CNX held the psychological 6,000 mark. The BSE Small-Cap and Mid-Cap indices rose, outperforming the Sensex.



Market men are worried that the mega Rs 15000-crore initial public offer of Coal India, which is currently open for bidding, will soak liquidity from the secondary market. Data late last week showing higher inflation in September 2010 also weighed on investor sentiment. A sudden sell-off was witnessed in mid-afternoon trade that followed a rally in afternoon trade. The BSE 30-share Sensex lost 185.76 points or 0.92% to 19,983.13, off 348.89 points from the day's high and up 59.17 points from the day's low.

The market breadth which was strong for most part of the day, turned negative in late trade. IT stocks declined in volatile trade, tracking weakness in tech stocks in Asia triggered by Apple's weaker-than-expected iPad sales. Banking stocks fell amid high intraday volatility. Index heavyweight Reliance Industries (RIL) lost close to 1%

Stocks were volatile. The market reversed initial strong gains. The market came off the highs after an intraday rebound in morning trade. Volatility continued later. The market surged near the day's high in afternoon trade. A sudden sell-off was witnessed in mid-afternoon trade that followed a rally in afternoon trade. The market extended losses in choppy 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 3.94% at 23.23. 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.

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 today, 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.

The initial public offer of state-run Coal India was subscribed 1.57 times by 16:00 IST on day two of the issue today, 19 October 2010. The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India.

Investors are keenly watching Q2 September 2010. The initial batch of Q2 September 2010 results has been strong. 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.

In overseas news, Brazil raised the so-called IOF financial transactions tax on local bond purchases by foreigners for the second time this month, to 6% from 4%. The latest measure to rein in capital inflows is with an intention to curb the currency's rally. It may be recalled that on 4 October 2010, Brazil had already doubled the tax from 2%.

European shares were trading mixed on Tuesday, 19 October 2010, with financials gaining ahead of results from Goldman Sachs. The key benchmark indices in France and UK were down 0.09% and 0.04%. But, Germany's DAX rose 0.13%.

Most Asian stocks rose on Tuesday with banking stocks in Sydney and Tokyo rising after a strong earnings report from Citigroup, but tech shares were struggling in Korea and Taiwan on Apple's weaker-than-expected iPad sales. The key benchmark indices in Japan, Singapore, China, Indonesia and Hong Kong were up by between 0.35% to 1.58%. But, the key benchmark indices in South Korea and Taiwan were down 0.97% and 0.18% respectively.

Chinese airline and nonferrous-metal stocks resumed their advance amid yuan-appreciation hopes and strong liquidity, after the Shanghai Composite snapped a seven-session winning streak in the previous session.

Data on China's third-quarter gross domestic product and consumer-level price inflation is due on Thursday, 21 October 2010.

The People's Bank of China lifted deposit and lending rates by a quarter point on Tuesday, according to the official Xinhua news agency. The surprise policy move brought the one-year yuan lending rate to 5.56% from 5.31% and the one-year deposit rate to 2.5% from 2.25%. The announcement was the first policy tightening since December 2007.

US stocks closed higher Monday as investors were encouraged by earnings from Citigroup and a measure of home-builder confidence that topped expectations. The Dow Jones Industrial Average rose 80.91 points, or 0.73%, to 11143.69, its highest close since 3 May 2010. The Nasdaq Composite added 11.89, or 0.48% to 2480.66, while the Standard & Poor's 500-stock index advanced 8.52, or 0.72%, to 1184.71.

The National Association of Home Builders (NAHB) said its housing-market index rose three points to 16 in October 2010, the first improvement in the index in five months. The index measures builder confidence for sales prospects of new, single-family homes. The NAHB report boosted expectations for data on housing starts and building permits due later in the global day today, 19 October 2010.

Trading in US index futures indicated that the Dow could rise 8 points at the opening bell on Tuesday, 19 October 2010. US index futures were off initial lows.

Back home, as per a survey by an industry body, the business confidence of India Inc. for the October-December 2010 quarter declined on concerns such as inflation and high interest rates. The Confederation of Indian Industry (CII) 74th Business Outlook Survey showed the industry lobby's business confidence index for October-December 2010 fell by 1.4 points to 66.2 as compared to an increase of 1.5 points during April-September 2010. The index reflects the expectation of Indian industry about the performance of companies, sectors and the economy. The survey found inflationary conditions, slackening consumer demand, cost and availability of labour and high interest rates as the top concerns.

Coming back to stocks, foreign funds have made heavy purchases of Indian equities this year. Net equity inflow in 2010 now stands at a record $23.69 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 edge lower in choppy trade. The yield on the benchmark 10-year bond was hovering at 8.08%, compared with Monday's (18 October 2010) close of 8.09%. The yield on most traded 8.13% 2,022 bond was hovering at 8.10%, lower than Monday's (18 October 2010) close 8.12%.

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 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.

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 Reserve Bank of India (RBI) governor D Subbarao on Friday, 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 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 was down 185.76 points or 0.92% to 19,983.13. The Sensex lost 244.93 points at the day's low of 19,923.96 in late trade. The index gained 163.13 points at the day's high of 20,332.02 in early trade.

The S&P CNX Nifty was down 48.65 points or 0.80% to 6,027.30. The Nifty hit a low of 6,008.15 in late trade.

The market breadth, indicating the health of the market, turned negative in late trade. The breadth was strong for most part of the day. On BSE, 1535 shares declined while 1497 shares advanced. A total of 85 shares remained unchanged.

The BSE Mid-Cap index rose 0.24% to 8,291.68 and the BSE Small-Cap index gained 0.24% to 10,638.96. Both these indices outperformed the Sensex

Most sectoral indices on BSE edged lower. The BSE IT index (down 2.22%), the BSE Realty index (down 1.75%), and the BSE Teck index (down 1.73%), underperformed the Sensex. The BSE HealthCare (up 1.06%), the BSE Auto index (up 0.28%), and the BSE FMCG index (up 0.06%), outperformed the Sensex.

The total turnover on BSE amounted to Rs 5257 crore, higher than Monday's Rs 4,578.92 crore.

Among the 30-share Sensex pack, 27 declined while only 3 of them managed gains. DLF (down 2.66%), NTPC (down 1.69%), and Reliance Infrastructure (down 1.36%), edged lower from the Sensex pack.

Cipla (up 1.58%), and ACC (up 0.70%), edged higher from the Sensex pack.

IT stocks declined in volatile trade tracking weakness in tech stocks in Asia triggered by Apple's weaker-than-expected iPad sales. India's second largest IT exporter by sales Infosys dropped 3.09% to Rs 3011 after oscillating in a wide band of Rs 3007-Rs 3110 during the day. It was the top loser from the Sensex pack.

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.

India's largest IT exporter by sales TCS lost 1.47% to Rs 965, off day's high of Rs 987. The company announces its Q2 September 2010 results on 21 October 2010.

India's third largest software services exporter by sales Wipro slipped 1.19% to Rs 462, retreating from day's high of Rs 475.80. The company announces its Q2 September 2010 results on 22 October 2010.

Index heavyweight Reliance Industries (RIL) slipped 0.82% to Rs 1040.25, after striking day's high of Rs 1068. 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.

Indian Oil Corporation (IOC) was down 0.49% while ONGC slipped 1.65%. The government will start the process for appointing bankers for a share sale in state-run refiner IOC within a few weeks, divestment secretary Sumit Bose said on Tuesday. The government is targeting shares sales for IOC and state-run explorer Oil and Natural Gas Corporation (ONGC) in the coming March quarter, he said.

Banking stocks were not able to sustain an intraday recovery. India's largest private sector bank by net profit ICICI Bank fell 0.09% to Rs 1115 after moving in a band of Rs 1110.20-Rs 1150.95

India's second largest private sector bank by net profit HDFC Bank fell 1.59% after striking day's high of Rs 2424. The bank's net profit rose 32.7% to Rs 912.10 crore on 14.37% growth in total income to Rs 5770.70 crore in Q2 September 2010 over Q2 September 2009. The result was announced after market hours today.

India's largest bank by net profit and branch network State Bank of India declined 1.49% to Rs 3120, after hitting a day's high of Rs 3203.

ING Vysya Bank jumped 8.31% after net profit surged 40.75% to Rs 75.26 crore on 20.5% rise in total income to Rs 832.05 crore in Q2 September 2010 over Q2 September 2009. The private sector bank declared its results after market hours on Monday, 18 October 2010.

Auto stocks, though down, outperformed the Sensex in anticipation of robust sales during the ongoing festive season that lasts till Diwali early next month. India's top small car maker by sales, Maruti Suzuki India fell 0.62%. The company announces its Q2 September 2010 earnings on 30 October 2010.

India's largest truck maker by sales Tata Motors slipped 0.32%. The company's global vehicle sales rose 19% to 86,996 units in September 2010 over September 2009.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) shed 0.31%.

India's leading bike maker by sales Hero Honda Motors rose 1.53% on recent reports of US private equity firms Carlyle, Kohlberg Kravis Roberts & Co and Warburg Pincus are in talks to acquire an effective 15-18% stake in the company. Hero Honda Motors is yet to clarify on this report.

Bajaj Auto slipped 1.13% on profit booking. The company's net profit jumped 69% to Rs 682 crore on 52% growth in turnover to Rs 4426 crore in Q2 September 2010 over Q2 September 2009. Bajaj Auto said EBITDA (earnings before interest, taxation, deprecation and amortization) margin improved to 20.7% in Q2 September 2010 from 20% in Q1 June 2010, on the back of a richer product mix and record sales volumes. The company said its operating margins continue to be the best in the industry.

Bajaj Auto further said the company is on track to achieve its target of sales of 4 million vehicles for the year ending March 2011 (FY 2011), with an EBITDA margin of 20%

India's largest engineering & construction firm by sales Larsen & Toubro fell 1.15% to Rs 1989.90. The company has secured an order worth Rs 1449 crore from DB Power for balance of plant package.

L&T during market hours on Monday, 18 October 2010 reported 19.59% rise in profit after tax from ordinary activities to Rs 694.14 crore on 17.72% rise in net sales to Rs 9260.77 crore in Q2 September 2010 over Q2 September 2009.

Zee Entertainment Enterprises jumped 1.44% after chief executive officer Punit Goenka said the company has sought permission to launch 6-7 new channels. The company, which currently has 32 channels, plans to launch a food, golf and regional language channels among others, Goenka said.

Biocon jumped 12.15% after the company entered into a $350-million strategic alliance with US drug-major Pfizer for marketing insulin products. Biocon announced the deal with the US drug major after market hours on Monday, 18 October 2010.

Natco Pharma lost 2.04%, after Celgene Corporation filed a lawsuit in the US against Natco's application to the US Food & Drug Administration to sell a generic version of its blood cancer drug Revlimid. The company confirmed the law suit during trading hours today, 19 October 2010.

Glenmark Pharmaceuticals rose 5.1% to Rs 310.20. The company will announce its Q2 result on 27 October 2010.

Camlin fell 5.46% after net profit fell 12.7% to Rs 0.89 crore on 11.1% rise in net sales to Rs 78.59 crore in Q2 September 2010 over Q2 September 2009. The company announced the Q2 result after market hours on Monday, 18 October 2010.

VTM jumped 20% after net profit galloped 790.4% to Rs 4.63 crore on 74.1% rise in net sales to Rs 30.64 crore in Q2 September 2010 over Q2 September 2009. The company declared its results after market hours on Monday, 18 October 2010.

SE Investments surged 4.99% after the company fixed 1 November 2010 as the record date for a 2-for-1 stock split. The company announced the record date during trading hours today, 19 October 2010.

Bedmutha Industries was the turnover topper on the BSE, with turnover of Rs 195.76 crore followed by Biocon (Rs 194.06 crore), Commercial Engineers & Body Builders Company (Rs 144.47 crore), State Bank of India (Rs 118.94 crore), and Infosys (Rs 96.44 crore), in that order.

Cals Refineries was the top traded counter on the BSE with volume of 2.68 crore shares followed by Karuturi Global (1.87 crore shares), Commercial Engineers & Body Builders Company (1.16 crore shares), Shree Ashtavinayak Cine Vision (1.15 crore shares), and JM Financial (1.11 crore shares), in that order.