BSE Small-Cap index drops 3%

The key benchmark indices registered small losses in as the market took a breather after strong gains in the previous four trading sessions. Intraday volatility was high. A broad-based selling was witnessed in small-cap and mid-cap shares as the market sentiment turned weak after the stock market regulator Securities & Exchange Board of India (Sebi) on Thursday, 2 December 2010, barred founders and related entities of a total of four companies from trading on the stock exchanges as these firms had indulged in "fraudulent and unfair" trade practices".



The BSE 30-share Sensex was down 25.77 points or 0.13, up close to 90 points from the day's low and off close to 100 points from the day's high. From a 2-1/2-month closing low of 19,136.61 on 26 November 2010, the Sensex had jumped 856.09 points or 4.47% in four trading sessions to settle at 19,992.70 on Thursday, 2 December 2010. Banking, realty and metal stocks fell. But, IT stocks rose.

The BSE Sensex closed below the psychological 20,000 mark after alternatively moving above and below that mark throughout the day. The 50-unit S&P CNX Nifty closed a tad below the psychological 6,000 mark after alternatively moving above and below that mark throughout the day. The market breadth was weak, with some small-cap and mid-cap stocks suffering steep losses.

Stocks were volatile. The key benchmark indices swung between gains and losses at the onset of the trading session. The market edged higher to hit a fresh intraday high in morning trade. The key benchmark indices once gain slipped into the red in mid-morning trade after hitting a fresh intraday high. The Sensex moved between positive and negative terrain near the flat line in early afternoon trade. The market slipped to a fresh intraday low in afternoon trade. The market cut losses after hitting a fresh intraday low in mid-afternoon trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, lost 1.06% at 18.60. The index had lost 2.08% to 18.80 on Thursday, 2 December 2010. The index had lost 7.29% to 19.20 on Wednesday, 1 December 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 Securities and Exchange Board of India (Sebi) on Thursday barred founders and related entities of four firms from trading on the stock exchanges as these firms had indulged in "fraudulent and unfair" trade practices. The founders of Murli Industries, Ackruti City, Welspun Corp and Brushman India have been directed not to deal in any securities of their group companies, it said. Sebi also prohibited Sanjay Dangi and his group entities from dealing in any securities on charges of manipulation of share prices.

Sebi said that all four firms had raised funds through a qualified institutional placement or foreign currency convertible bonds during 2007-2009 and the Dangi group was observed to be trading substantially in the shares of these firms around the same period. Sebi also asked the stock exchanges to enable closing off any open positions in the futures and options segment and directed that these firms should not take any fresh positions.

The latest Sebi action comes close on the heels of the outbreak of a bribe-for-loan scandal last week and after last month's telecom scam. A bribe-for-loan scandal spooked the banking sector and the stock market late last month. Chiefs of some of the top rung public sector banks and financial institutions were arrested by the Central Bureau of Investigation (CBI) on 24 November 2010, for allegedly sanctioning loans in return for bribes. The CBI has reportedly sent notices to 21 medium-to-large sized Indian companies regarding the ongoing probe into a financial bribery scandal.

Finance Minister Pranab Mukherjee, last week, 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.

Planning Commission deputy chairman Montek Singh Ahluwalia said on Friday, 3 December 2010, that India needs to monitor capital inflows due to the global uncertainty. He also said that the current account deficit in the current fiscal year could be wider than the previous fiscal year.

Business activity in India's services sector surged to a four-month high in November 2010, driven by robust growth in new orders, a survey showed on Friday. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 60.1 in November from 56.2 in October. It was the best showing for the index since July, and the 19th straight month it has remained above the 50 mark that divides growth from contraction.

European shares were mostly lower in volatile trade on Friday, with the market awaiting direction from the US monthly non-farm payrolls report. The key benchmark indices in Germany and UK fell by between 0.02% to 0.06%. But, France's CAC 40 rose 0.45%.

As per the market buzz, the European Central Bank (ECB) has stepped up buying of stressed euro-zone government bonds. Meanwhile, rating agency Standard & Poor's said Thursday it may downgrade Greece's long-term debt if new European bailout rules prove onerous to private holders of the country's bonds. S&P said it will decide whether to downgrade Greece within three months, by which time the new debt-crisis rules will be clear. S&P issued a similar warning about Portugal this week.

Asian stocks pared gains after a firm start on Friday, 3 December 2010, and were trading mixed on caution ahead of the influential US non-farm payroll data due later in the global day. The key benchmark indices in Japan, Indonesia, South Korea and Taiwan were up by between 0.05% to 0.45%. China's Shanghai Composite fell 0.04% and Hong Kong's Hang Seng index dipped 0.55%, on lingering concerns about further tightening to cool inflation. Singapore's Straits Times index fell 0.8%.

China's purchasing managers index for the non-manufacturing sector fell to a nine-month low of 53.2 in November from 60.5 in October, the China Federation of Logistics and Purchasing (CFLP) said on Friday.

Trading in US index futures indicated a flat opening of US stocks on Friday, 3 December 2010. The latest data showed a gauge of US jobless benefits hit a new two-year low last week and pending home sales in the world's biggest economy unexpectedly rose in October 2010.

The US government will release the data on non-farm payroll later in the global day today, 3 December 2010. The non-farm payrolls number is forecast to increase by 144,000 in November from October, when it climbed by 151,000. The jobless rate, meanwhile, may stand unchanged at 9.6%, as per economists' expectations. A strong US jobs report may lead investors to expect that the Federal Reserve could scale back its latest quantitative easing measures.

Closer home, Chief Economic Adviser to the finance ministry, Kaushik Basu on Thursday, 2 December 2010, said the government will upwardly revise its economic growth forecast for the fiscal year that ends in March 2011. Basu also said he expected headline inflation in November, due for release on 14 December 2010 to ease further.

The latest data showed a continuation of the recent trend of easing of food inflation. The food price index rose 8.60% while the fuel price index climbed 9.99% in the year to 20 November 2010, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 10.15% and 10.57% respectively. The primary articles price index was up 12.72% in the latest week compared with an annual rise of 13.38% a week earlier.

India's merchandise exports rose 21.3% to $18 billion in October 2010 over October 2009, boosting hopes that the country may be able to reach the $200 billion target fixed for the current fiscal. Imports during the period grew by 6.8% to $ 27.68 billion, leaving a trade deficit of $9.72 billion, data released on 1 December 2010, showed.

India's manufacturing activity strengthened further in November 2010 and the strong growth momentum is showing up in rising inflation pressures, according to an HSBC survey released on Wednesday, 1 December 2010. The HSBC Manufacturing Purchasing Managers' Index rose to 58.4 in November from 57.2 in October, the survey said.

The Indian economy grew a robust 8.9% year-on-year in Q2 September 2010, maintaining the same pace of expansion as the previous quarter, boosted by farm output and manufacturing, government data released Tuesday, 30 November 2010 showed. The manufacturing sector grew an annual 9.8% and farm output grew an annual 4.4% in Q2 September 2010. The government revised upwards the Q1 June 2010 GDP growth to 8.9% from 8.8% earlier.

Finance Minister Pranab Mukherjee on Tuesday said GDP growth would be between 8.5% to 8.75% in the current fiscal that ends in March 2011 (FY 2011). Chairman of the Prime Minister's Economic Advisory Council C. Rangarajan said the economy is expected to grow 9% in the year to March 2012 (FY 2012). Rangarajan also said the government may reassess FY 2011 growth expectations and that it was "not impossible" to reach 9% growth in the financial year.

The output of key infrastructure industries surged by a robust 7% in October 2010, against a 3.9% growth recorded in the same month last year, helped by a strong showing by the electricity, crude oil and the finished steel sectors. The latest data for the six core sector showed a sharp rebound from the output in September 2010, when growth in these sectors had slipped to 2.7%.

The next major trigger for the equity market is the advance tax payment of corporates for the third installment, which falls due on 15 December 2010. The advance tax figures will provide a cue on Q3 December 2010 corporate earnings.

But, year-end profit taking may cap upside on the domestic bourses in the near term. Funds based in US and Europe follow calendar year as their accounting year.

The BSE 30-share Sensex was down 25.77 points or 0.13% to 19,992.89. The Sensex rose 75.11 points at the day's high of 20,067.81 in morning trade. The index fell 115.58 points at the day's low of 19,877.12 in mid-afternoon trade.

The S&P CNX Nifty was down 18.90 points or 0.31% at 5992.80. The Nifty hit a high of 6,025.40 and low of 5,964.25.

The market breadth, indicating the health of the market, was weak. On BSE, 2,389 shares fell while 689 shares rose. A total of 63 shares remained unchanged. The breadth alternatively swung between positive and negative zone in early trade.

Among the 30-member Sensex pack, 17 fell while the rest rose.

BSE clocked turnover of Rs 3958 crore, lower than Rs 4440.70 crore on Thursday, 2 December 2010.

The BSE Mid-Cap index fell 2.03% and the BSE Small-Cap index fell 3%. Both these indices underperformed the Sensex.

Most of the sectoral indices on BSE fell. BSE Realty index (down 4.29%), Consumer Durables index (down 3.63%), Metal index (down 1.25%), banking sector index Bankex (down 0.9%), Power index (down 0.74%), PSU index (down 0.56%), Oil & Gas index (down 0.34%) and Healthcare index (down 0.17%) underperformed the Sensex.

BSE IT index (up 0.66%), Auto index (up 0.3%), Teck index (up 0.29%), FMCG index (up 0.16%) and Capital Goods index (down 0.15%) outperformed the Sensex.

Index heavyweight Reliance Industries (RIL) was down 0.31% to Rs 1006.40. The stock hit high of Rs 1022.50 and low of Rs 998.25. As per recent reports, the natural gas production from RIL's East Coast block has dropped by about 15% to about 45-46 million standard cubic metres per day (mscmd) from 53-54 mscmd. The production from D-1 and D-3 gas fields in the KG-D6 block has dropped due to reservoir complexities.

Software stocks rose on a slew of recent better-than-expected US economic data. US is the key market for Indian IT firms. India's largest software company by sales TCS rose 0.33%, with the stock gaining for the second straight day. The company announced during market hours today that Uttar Pradesh selsected company for its State Data Center project.

India's second largest software company by sales Infosys rose 0.89%, with the stock gaining for the third straight day. India's third largest software company by sales Wipro rose 0.68%, with the stock gaining for the second straight day.

India's largest bike maker by sales Hero Honda Motors gained 2.47% on bargain hunting after sliding 7.27% on Thursday on reports the Hero Group has agreed to increase royalty payments made to Japanese automaker Honda Motor Co. to 8% of overall annual sales in return for a technology makeover and a stake sale. It was the top gainer from the Sensex pack.

Hero Honda Motors would reportedly make the increased payments until 2014, when the present technology sharing agreement will lapse and be renegotiated. Negotiations are at an advanced stage and a final decision will be made in the next few days, reports suggest.

Other auto stocks were mixed. India's top small car maker by sales Maruti Suzuki India fell 0.58%, reversing initial gains. Total sales rose 28.20% to 1.12 lakh vehicles in November 2010 over November 2009. The figures were announced during trading hours on Wednesday, 1 December 2010.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 1.19%. The stock had jumped 4.53% on Wednesday, 1 December 2010, boosted by strong sales in November 2010.

India's largest truck maker by sales Tata Motors fell 0.42%. The company's total vehicle sales rose 1% to 54,622 units in November 2010 over November 2009. The figures were announced during market hours on Wednesday, 1 December 2010.

Bajaj Auto rose 1.93%. The company's total sales rose 8% to 2,99,231 units in November 2010 over November 2009. The figures were announced during trading hours on Thursday, 2 December 2010.

Ackruti City slumped 19.99% after the Securities and Exchange Board of India (Sebi) on Thursday barred founders and related entities from trading on the stock exchanges as it had indulged in "fraudulent and unfair" trade practices.

Among other realty stocks Parsvnath Developers, Anant Raj Industries, HDIL, Indiabulls Real Estate, DLF and Unitech fell by between 2.36% to 8.08%.

Banking stocks fell on profit taking. The Reserve Bank of India (RBI) Governor Duvvuri Subbarao said on Friday there was a strong case to review and recast banking legislation. He also said that banks need to increase their deposit rates and reduce lending rates to accelerate the savings, investment rate and boost a double-digit growth.

India's largest private sector bank in terms of operating income ICICI Bank fell 0.69% to Rs 1181.95. The stock came off the day's low of Rs 1168.15. The private sector bank has recently withdrawn a special housing loan scheme. The schemes have been under the Reserve Bank of India's scrutiny on concerns about asset quality in the housing loan sector. India's second largest private sector bank by net profit HDFC Bank was flat.

India's largest bank by net profit and branch network State Bank of India fell 0.85%. The bank is planning to launch a rights issue in January-March, Chairman O.P. Bhatt said today. Among other PSU stocks, Bank of Baroda and Bank of India fell by between 0.84% to 2.4%. But, Punjab National Bank rose 0.21%.

The government on Wednesday, 1 December 2010, approved additional capital infusion of Rs 6000 crore in 10 public sector banks with an objective to raise its holding to a minimum 58% in all state-run banks.

India's top mortgage lender by total income Housing Development Finance Corporation fell 0.85%. The company on Wednesday, 1 December 2010, said it would not extend a special housing loan scheme that was available until Tuesday, 30 November 2010.

Metal shares fell on profit taking. Tata Steel, Hindalco Industries, Hindustan Zinc, Bhushan Steel, Sterlite Industries, JSW Steel and Steel Authority of India fell by between 0.16% to 5.84%.

LMEX, a gauge of six metals traded on the London Metal Exchange rose 1.61% on Thursday, 2 December 2010.

Welspun Corp slumped 26.84% after the Securities and Exchange Board of India (Sebi) on Thursday barred founders and related entities from trading on the stock exchanges as the firm had indulged in "fraudulent and unfair" trade practices.

India's largest cigarette maker by sales ITC rose 0.41%, reversing initial losses triggered by reports the company has halted production over a health ministry order that every pack that cigarette maker sell should carry a stark image of mouth cancer as a deterrent to smokers. The stock came off the day's low of Rs 164.70.

Telecom pivotals fell on profit taking. India's largest listed cellular services provider by sales Bharti Airtel fell 0.17%. India's second largest listed cellular services provider by sales Reliance Communications lost 1.62%, snapping three-day gains, on profit booking. Idea Cellular fell 1.13%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 0.45%, reversing initial losses after the company said during market hours today that it won a Rs 716-crore order in United Arab Emirates.

Cals Refineries clocked the highest volume of 2.15 crore shares on BSE. Karuturi Global (2.09 crore shares), Resurgence Mines (1.41 crore shares), Delta Corp (1.01 crore shares) and Power Grid Corporation of India (98.53 lakh shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 142.55 crore on BSE. Welspun Corp (Rs 137.23 crore), Delta Corp (Rs 107.06 crore), Tata Motors (98.71 crore) and Power Grid Corporation of India (Rs 98.48 crore) were the other turnover toppers in that order.