Realty, financials lead decline; breadth weak

The key benchmark indices hit their lowest level in more than two months as the bursting of a bribery scandal by the Central Bureau of Investigation on Wednesday, 24 November 2010, involving officials of some top PSU banks and finance firms hurt sentiment for the second day in a row. Wild intraday swing in share prices was the order of the day as traders rolled over positions in the derivatives segment from the near-month November 2010 series to December 2010 series. The November 2010 futures & options (F&O) contracts expired today, 25 November 2010. The BSE 30-share Sensex lost 141.69 points or 0.73%, off close to 310 points from the day's high and up close to 60 points from the day's low.



European stocks traded mostly higher as a strong finish from Wall Street overnight boosted by jobless data helped provide some further momentum. Asian markets ended higher while US index futures were trading slightly lower.

Closer home, the market breadth was weak after alternately moving between positive and negative territory earlier in the day. Banking, financial, realty, construction, metal and PSU stocks declined. IT stocks rose on improved economic data in US. Shares of Power Grid Corporation of India were almost unchanged at Rs 97 on massive volume of about 7 crore shares after shares allotted in the recently concluded follow on public offer were admitted to trading from today.

Intraday volatility was high ahead of the expiry of the near month derivatives contracts. The market opened on a firm note, tracking gains in Asian stocks. The market hit a fresh intraday high in morning trade, recovering from an intraday low hit in early trade. The market pared gains later. The Sensex regained strength in mid-morning trade. The market once again pared gains later.

The market came off lows in early afternoon trade. The Sensex slipped into the red for a brief period in afternoon trade to hit fresh intraday low. The market weakened further later as the Sensex hit a fresh intraday low. Immense volatility was witnessed in mid-afternoon trade as the Sensex regained positive. The market slumped to a two-month low in late trade. Stocks recouped some of the lost ground 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, plunged 12.36% to 21.63. The index had risen 6.10% to 24.68 on Wednesday, 24 November 2010. The index had jumped 16.71% to 23.26 on Tuesday, 23 November 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 Thursday asked all banks, financial institutions and insurance firms to look into their exposures to firms named by the Central Bureau of Investigation in a loans bribery scandal. A ministry statement quoted Pranab Mukherjee as calling on regulatory and other institutions to further improve safeguards.

Chiefs of some of the top rung public sector banks and financial institutions were arrested by the Central Bureau of Investigation (CBI) on Wednesday, 24 November 2010, for allegedly sanctioning loans in return for bribes. The CBI has arrested the Chief Executive Officer of LIC Housing Finance, Secretary (Investment), LIC based in Mumbai, a General Manager, Bank of India based in Mumbai, a director (Chartered Accountant) of Central Bank of India based in New Delhi, a DGM of Punjab National Bank base in New Delhi. The CBI also arrested Rajesh Sharma, chief investment officer of Money Matters group, which is at the centre of the scandal.

The CBI said in a statement that it has busted a racket wherein a private financial services company, its CMD and other associates were allegedly bribing senior officials of public sector banks and financial institutions for facilitating large scale corporate loans. They were also gathering confidential business information from financial institutions, the CBI statement said.

Officers of top management and middle management of various public sector banks and financial institutions viz. Bank of India, Central Bank of India, Punjab National Bank, LIC and LIC Housing Finance were receiving illegal gratifications from the private financial services company who were acting as mediators and facilitators for corporate loans and other facilities from financial institutions, the CBI said. Searches were conducted at various locations in Mumbai, Delhi, Chennai, Jaipur, Kolkata and Jalandhar, which have resulted in seizure of incriminating documents, the CBI said in a statement.

"It is an insignificant amount ... it is individual personal greed, it is not systematic failure," R. Gopalan, secretary financial services, government of India, told a news channel late on Wednesday. Junior finance minister Namo Narain Meena today, 25 November 2010, said that a loans bribery scandal that has led to several arrests is not a widespread scam and will not hit markets or the banking sector. State-run Life Insurance Corporation of India's chairman was quoting by the media as saying that the firm is looking into the need to tighten internal operational systems in response to arrest of its housing unit chief on charges of accepting bribes.

On the macro front, the food price index rose 10.15% and the fuel price index climbed 10.57% in the year to 13 November 2010, government data released on Thursday showed. In the prior week, annual food and fuel inflation stood at 10.30% and 10.57%, respectively. The primary articles price index was up 13.38% in the latest week compared with an annual rise of 13.30% a week earlier.

European markets rose on Thursday, 25 November 2010, as a strong finish from Wall Street overnight helped provide some further momentum. The key benchmark indices in UK and Germany were up 0.21% and 0.35%. But, France's CAC 40 fell 0.2%.

Asian markets edged higher on Thursday, 25 November 2010, on improved US employment and consumer sentiment and on higher commodity prices. The key benchmark indices in Singapore, China, Japan, Hong Kong, Indonesia, Taiwan rose between 0.13% to 1.34%.

South Korea's Seoul Composite index rose 0.09% in volatile trade. North Korea warned Thursday it would launch more attacks on South Korea if its southern neighbor makes more "reckless military provocations," according to several reports citing a statement by the North Korean military. The statement, carried by North Korean state media, said Pyongyang "will wage second and even third rounds of attacks without any hesitation, if warmongers in South Korea make reckless military provocations again," according to a translation quoted by a news agency.

Meanwhile, South Korea's Yonhap news agency said North Korea has refused a proposal to hold military-to-military talks with South Korea in the wake of Tuesday's artillery attack that left two civilians and two South Korean marines dead. The proposal came Wednesday from the US-led United Nations Command in South Korea.

US stocks surged on Wednesday, 24 November 2010 as the latest economic data painted an improving picture of the economy. The Dow Jones Industrial Average soared 150.91 points, or 1.37%, to 11,187.28. The Standard & Poor's 500-stock index gained 17.62 points, or 1.49%, to 1198.35 and the Nasdaq Composite added 48.17 points, or 1.93%, to 2543.12.

The University of Michigan consumer sentiment index rose to 71.6 in November, up from 67.7 in the prior month, topping expectations. Initial jobless claims count fell 34,000 week-over-week to a two-year low of 407,000, which is less than the 442,000 initial claims that had been widely expected. Continuing claims set their own two-year low at 4.18 million, down from 4.32 million in the prior week.

Trading in US index futures indicated the Dow could slide 21 points at the opening bell on Friday, 26 November 2010. The US financial markets are closed for the Thanksgiving Day holiday on Thursday, 25 November 2010 while they are only open for a half day on Friday, 26 November 2010.

Back home, year-end profit taking may continue to weigh on the the domestic bourses in the near term. A number of stocks have clocked decent to strong gains this year. Funds based in US and Europe follow calendar year as their accounting year. The market has lost ground soon after hitting a record closing high early this month.

The BSE 30-share Sensex was down 141.69 points or 0.73% to 19,318.16, its lowest closing level since 13 September 2010. The index lost 202.48 points at the day's low of 19,257.37 in late trade. The Sensex rose 168.42 points at the day's high of 19,628.27 in morning trade.

The S&P CNX Nifty was down 66 points or 1.13% at 5,799.75, its lowest closing level since 14 September 2010. The Nifty hit a low of 5,780.35 in late trade.

The BSE Mid-Cap index fell 1.89% and the BSE Small-Cap index fell 1.87%. Both these indices underperformed the Sensex.

Most of the sectoral indices on BSE fell. BSE Realty index (down 5.4%), Capital Goods index (down 2.88%), PSU index (down 2.65%), Metal index (down 2.43%), Power index (down 1.87%), Oil & Gas index (down 1.57%), BSE Bankex (down 1.42%), FMCG index (down 1.24%), Healthcare index (down 1.11%), Consumer Durables index (down 1.02%), underperformed the Sensex.

The BSE IT index (up 1.23%) and Auto index (down 0.6%) outperformed the Sensex.

The market breadth, indicating the health of the market, was weak. On BSE, 2245 shares declined while 736 shares gained. A total of 78 shares remained unchanged. The breadth moved between positive and negative zone earlier in the day.

The total turnover on BSE amounted to Rs 5599 crore, higher than Wednesday's turnover of Rs 4426 crore.

Among 30-member Sensex pack, 23 declined and the rest rose.

Index heavyweight Reliance Industries (RIL) fell 1.39% to Rs 980.30, off day's low of Rs 976 and off the day's high of Rs 1003. RIL and NTPC may reportedly settle their five-year-old legal battle over a contract to supply natural gas from RIL's field in the Krishna-Godavari basin to the state-owned power utility. Shares of the state-run power generation firm NTPC slipped 0.76%.

The RIL-NTPC dispute dates back to 2005 when NTPC dragged RIL to the Bombay High Court, complaining that RIL was not honouring a contract to sell 12 million standard cubic metres a day (mmscmd) of gas to its Kawas and Gandhar expansion projects in Gujarat for 17 years at $2.34 per unit.

Metal stocks edged lower on selling pressure. Steel Authority of India, Jindal Steel & Power, Sesa Goa, Sterlite Industries, National Aluminum Company, Hindustan Zinc, Hindalco Industries and Tata Steel fell by between 1.12% to 5.04%.

LMEX, a gauge of six metals traders on the London Metal Exchange Index, rose 1.44% on Wednesday, 24 November 2010, after three days of losses.

India second largest bike maker by sales Bajaj Auto rose 0.9% to Rs 1627.95. The stock today hit a record high of Rs 1664.50 on recent reports the company plans to increase its dealership network and upgrade its service centres by next festive season.

But, most other auto stocks fell. M&M, Maruti Suzuki India and Tata Motors fell by between 0.38% to 2.7%.

Realty stocks extended Wednesday's losses on fears fresh sanctions of loans may take a hit after the outbreak of the scam involving sanctioning of loans in return for bribes. Sale of property is largely driven by financed funds. India's largest realty player by sales DLF lost 4.13%.

Among other realty stocks, HDIL, Omaxe, Indiabulls Real Estate and Unitech fell by between 1.17% to 9.69%.

Frontline banking and financial stocks were mixed after an across-the-board slide on Wednesday following the outbreak of the loan scam. India's largest mortgage financier by total income HDFC gained 1.17%. The stock had slipped 2.51% on Wednesday.

India's largest private sector bank by net profit ICICI Bank fell 0.7%. India's second largest private sector bank by net profit HDFC Bank rose 1.17%. India's largest bank by net profit and branch network State Bank of India fell 0.98%.

Shares of LIC Housing Finance fell 0.98% to Rs 1058.10, staging a solid intra-day recovery from day's low of Rs 945.50. LIC Housing Finance Company after trading hours on Wednesday, 24 November 2010, clarified that it had adhered to all rules while approving loans. LIC Housing Finance said loans to builders constitute 11.34% of the total loan portfolio of the company as on 31 October 2010 with gross non-performing assets (NPAs) from this portfolio at 0.08%.

The company further said that it would like to assure its investors, customers and business associates that all necessary steps would be taken to ensure that interests of various stakeholders are fully protected.

Shares of state-run banks who had executives arrested linked to the loan scam, remained under pressure. Punjab National Bank (PNB) (down 6.38%) and Bank of India (down 5.85%), declined.

Software stocks rose on buoyant jobs data in US, the prime market for Indian software firms. India's second largest software firm by sales Infosys Technologies surged 2.09% and was the top gainer from the Sensex pack. India's largest software firm by sales TCS jumped 1.32%. But, India's third largest software firm by sales Wipro fell 0.06% to Rs 408.85, off day's high of Rs 421.

Shares of Power Grid Corporation of India were down 0.36% to Rs 96.60 on massive volume of 6.93 crore shares after shares allotted in the recently concluded follow on public offer (FPO) were admitted to trading from today. The issue price was at Rs 90 per share while for retail investors and employees it was at Rs 85.50.

Shares of oil marketing companies fell after crude oil prices surged more than 3% on the New York Mercantile Exchange, on Wednesday, 24 November 2010. Hindustan Petroleum Corporation (HPCL) (down 4.7%) and Bharat Petroleum Corporation (BPCL) (down 3.68%) and Indian Oil Corporation (IOC) (down 5.98%) edged lower. Higher crude oil prices will increase under-recoveries of state-run oil firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Light, sweet crude oil surged $3.2% or 2.61%, to $83.86 a barrel on the New York Mercantile Exchange on Wednesday, 24 November 2010 on optimism about the US economic recovery.

Capital goods stocks fell on profit taking. Siemens, BEML, Punj Lloyd, Larsen & Toubro, ABB and Bhel fell by between 1.9% to 6.23%

Power Grid Corporation of India clocked highest volume of 6.93 crore shares on BSE. Cals Refineries (1.33 crore shares), Karuturi Global (1 crore shares), LIC Housing Finance (82.92 lakh shares) and Shree Ashtavinayak Cine Vision (66.48 lakh shares) were the other volume toppers in that order.

LIC Housing Finance clocked highest turnover of Rs 877.39 crore on BSE. Power Grid Corporation of India (Rs 669.74 crore), State Bank of India (Rs 254.23 crore), Tata Steel (Rs 93.99 crore) and Reliance Industries (Rs 86.88 crore) were the other turnover toppers in that order.