Market drifts lower on profit taking; Sensex settles below 21000 mark

The key benchmark indices started the week, Monday 8 November 2010 on a subdued note as investors locked in profits after market scaled record closing highs on special one hour trading session to mark the beginning of Samvat year 2067 Friday, 5 November 2010. Weak European stocks and lower US index futures also dampened sentiment. Index heavyweight Reliance Industries edged higher in volatile trade. IT, banking and consumer durables stocks fell. Metal stocks reversed initial gains. But, sugar and cement stocks surged.



The BSE Sensex fell below the psychological 21000 mark after closing above that mark on Friday, 5 November 2010. The market breadth was negative. The BSE 30-share Sensex was down 152.58 points or 0.73%, off close to 220 points from the day's high and up close to 30 points from the day's low. Tata Motors, M&M, State Bank of India and Hindalco Industries hit record highs today.

The market was volatile. It reversed initial gains in early trade as investors locked on profits after market scaled record closing highs on special one hour muhurat trading session to mark the beginning of Samvat 2067 on Friday, 5 November 2010. It trimmed losses in morning trade. The market cut losses after weakening once again to hit fresh intraday lows in mid-morning trade. It remained weak in early afternoon trade. It recovered sharply after hitting fresh intraday lows in afternoon trade. After moving in a narrow range in mid-afternoon trade it slumped to hit fresh intraday lows in late trade.

European shares drifted lower on Monday, with investors taking profits and selling on technical grounds after a key index closed at its highest in more than six months in the previous session. The key benchmark indices in France and Germany fell by between 0.06% to 0.35%.

Industrial production in Germany unexpectedly declined 0.8% in September, the German economics ministry reported Monday. But German exports surged 22.5% in September, according to official data released Monday, which showed Europe's largest economy is recovering quickly but still depends largely on foreign demand for its industrial products. The Federal Statistics Office said exports rose to euro86.9 billion ($122.4 billion) from euro70.9 billion in September 2009. Imports were up 18% on the year to euro70.1 billion.

Asian shares rose in volatile trade on Monday supported by better-than-expected U.S. jobs data Friday. The key benchmark indices in Indonesia, China, South Korea, Indonesia, Hong Kong, Japan and Singapore rose by between 0.18% to 1.85%. But, Taiwan's Taiwan Weighted fell 0.22%.

U.S. October nonfarm payroll data reported Friday was better than expected as the economy added 151,000 jobs, compared with an expected rise of 70,000 jobs, while the unemployment rate was unchanged at 9.6% as expected.

US index futures were volatile. Trading in US index futures indicated that the Dow could fall 30 points at the opening bell on Monday, 8 November 2010.

Back home, Indian Prime Minister Manmohan Singh on Monday said he had agreed with U.S. President Barack Obama that protectionism was detrimental for both countries. Singh also welcomed the lifting of some U.S. curbs on exports of sensitive technology to India and said the two countries would cooperate in the space, defence and nuclear sectors. Prime Minister Manmohan Singh on Monday said India was not in the business of stealing jobs from the United States. India and the United States have agreed to cooperate on energy projects including shale gas and clean energy, The prime minister was speaking at a joint press conference with visiting U.S. president Barack Obama. Obama's visit to Mumbai and New Delhi, the first legs of a 10-day Asian tour, has been hailed as moving the United States closer to India at a time when Washington is trying to revive a weak economy and gather support to pressure China on its currency.

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 1970 firms surged 38.8% to Rs 81201 crore on 18.4% growth in sales to Rs 590553 crore in Q2 September 2010 over Q2 September 2009.

In macro news, the food inflation eased for a third week in late October 2010, the latest government data showed. The food price index in the year to 23 October rose 12.85% compared with 13.75% rise in the previous week, as the prices of vegetables and pulses fell. Fuel inflation for the same period was at 10.67%, slowing from 11.25% the prior week. The primary articles price index was up 15.43%, compared with an annual rise of 16.62% a week earlier. Food makes up a little over 14% of the wholesale price index (WPI) while fuel contributes about 15%.

India's services sector expanded last month at a faster rate than in September 2010, bringing an end to a 3-month decline in the key business activity index, a survey showed on Wednesday, 3 November 2010. The manufacturing sector expanded in October 2010 at a much faster pace than in September 2010, supported by strong output and a sharp rise in new business, a purchasing managers' index (PMI) showed on Monday, 1 November 2010.

The Reserve Bank of India (RBI) at its second quarterly monetary policy review on Tuesday, 2 November 2010, hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said.

Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflows in 2010 now stands at a record $26.75 billion, above last year's $17.45 billion.

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.

The follow-on public offer of state-run Power Grid Corporation opens for bidding on Tuesday, 9 November 2010. The issue closes on Thursday 11 November 2010 for the qualified institutional bidders and on Friday 12 November 2010 for all other bidders. Follow-on offer price band is fixed between Rs 85 to Rs 90 per Share, and 5% discount will be available to Retail investors and eligible employees at the issue price on allotment. Shares of PowerGrid fell 3.58% today.

Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said.

The BSE 30-share Sensex was down 152.58 points or 0.73% to 20,852.38. The Sensex rose 70.75 points at the day's high of 21075.71 in early trade. The index fell 182.59 points at the day's low of 20822.37 in late trade.

The S&P CNX Nifty was down 39.25 points or 0.62% to 6,273.20. The Nifty hit a high of 6,335.90.

The BSE Mid-Cap index fell 0.08%. The BSE Small-Cap index rose 0.08%. Both the indices outperformed the Sensex.

The BSE clocked turnover of Rs 5137 crore.

The market breadth, indicating the health of the market was negative. On BSE, 1552 shares fell while 1460 shares advanced. A total of 71 shares remained unchanged.

From the 30 share Sensex pack 21 fell and rest rose.

Index heavyweight Reliance Industries (RIL) rose 0.46% to Rs 1112. The stock hit high of Rs 1119.25 and low of Rs 1100. RIL's net profit rose 27.80% to Rs 4923.00 crore on 22.69% rise in net sales to Rs 57479.00 crore in Q2 September 2010 over Q2 September 2009. Its gross refining margin (GRM) for quarter was at US$7.9 per barrel as against $ 6 per barrel in the corresponding period of the previous year.

Software stocks fell on profit taking. India's third largest software services exporter by sales Wipro fell 1.4%. India's largest software services exporter by sales TCS fell 0.85%. India's second largest software services exporter by sales Infosys declined 1.82%.

Bank stocks fell on profit taking. India's largest bank by branch network and net profit State Bank of India fell 1.92%. The bank announced after market hours today that its net profit rose 0.45% to Rs 2501.37 crore in Q2 September 2010 over Q2 September 2009. The stock hit record high of Rs 3,515 today. India's second largest private sector bank by net profit HDFC Bank fell 2.24%.

India's largest private sector bank by net profit ICICI Bank declined 1.11%. The stock on 5 November 2010, scaled a 52-week high of Rs 1,277.

Metal stocks reversed initial gains. Copper maker Hindalco Industries fell 0.88%. The stock hit a record high of Rs 239.35 today. National Aluminum Company, Jindal Steel & Power, Steel Authority of India and Hindustan Zinc rose by between 0.36% to 0.94%. But, Tata Steel and Sterlite Industries rose 1.46% and 2.62% respectively.

Consumer durables stocks fell on profit taking. Videocon Industries, Titan Industries, Gitanjali Gems and Blue Star fell by between 0.5% to 2.95%.

Shares of sugar millers jumped on firm international prices and hopes delay in domestic crushing will lead to supply constraints. Shree Renuka Sugars, Bajaj Hindustan, Balrampur Chini and Dhampur Sugars rose by between 4.83% to 9.11%.

Cement stocks surged on expectations of strong demand. Ultratech Cements, Jaiprakash Associates, ACC and Ambuja Cements rose by between 1% to 7.73%.

Auto stocks fell on profit taking. India's largest tractor maker by sales Mahindra & Mahindra fell 1.81%. The stock hit record high of Rs 797 today. The company's auto sales rose 34% to 34,495 units in October 2010 as against 25,670 units during October 2009.

Bajaj Auto fell 0.74%. The company reported 32% surge in total sales to a 3.7 lakh units in October 2010 over October 2009. The company clocked record motorcycle and commercial vehicle sales in the recently concluded month.

India's top small car maker by sales Maruti Suzuki India fell 1.66%. The company's total sales rose 39.2% to 1.18 lakh vehicles in October 2010 over October 2009.

India's largest bike maker by sales Hero Honda Motors fell 1.35%. The company reported its highest ever monthly sales at 5,05,553 units in October 2010, registering a jump of 42.75% over the same month last year

But, India's biggest commercial India's biggest commercial vehicles maker by sales Tata Motors rose 1.8%. The stock hit record high of Rs 1277.90 today. Total sales rose 21.26% to 64,757 units during October 2010 compared to 53,404 units in the same month last year. The company unveils its Q2 September 2010 results on 9 November 2010.

Shares in Coal India dropped more than 5.49% after a spectacular debut last week as investors locked in gains. The stock had jumped close to 40% on its debut last week.

Realty stocks reversed initial losses. DLF, HDIL, Indiabulls Real Estate and Unitech rose by between 0.39% to 1.08%.

State-run oil marketing companies fell as international crude oil prices hit a 2-year high. HPCL (down 3.81%), BPCL (down 2.73%) and Indian Oil Corporation (down 2.56%), declined. Nymex crude for December delivery was up 28 cents at $87.13 a barrel, the highest close since October 2008, on the back of a stronger-than-expected U.S. jobs report that restored confidence in the world's top oil consumer. Higher crude oil prices will increase under-recoveries of public sector oil marketing companies (PSU OMCs) on domestic sale of diesel, kerosene and LPG at controlled prices. The Centre in June this year deregulated petrol prices. Pricing of diesel, kerosene and LPG remain under the government control.

Capital goods stocks fell on profit taking. SKF India, BHEL, Larsen & Toubro and Thermax fell by between 0.06% to 2.48%.

Cals Refineries clocked highest volume of 3.44 crore shares on BSE. Coal India (1.61 crore shares), Shree Ashtavinayak Cine Vision (1.2 crore shares) and Alok Industries (1.19 crore shares) were the other volume toppers in that order.

Coal India clocked the highest turnover of Rs 525.14 crore on BSE. Jubilant Food Organosys (Rs 1505.59 crore), Delta Corp (Rs 144.91 crore), State Bank of India (Rs 139.10 crore) and Zee Entertainment (Rs 87.37 crore) were the other turnover toppers in that order.