Market ends slightly lower on thin volumes

The key benchmark ended a choppy trading session lower as macroeconomic worries arising from a high global crude oil prices weighed on investor sentiment. Low volumes caused intraday volatility in share prices. Healthcare and IT sector shares gained while consumer durables, metals and realty sector shares fell the most. Nine out of 13 sectoral indices on BSE declined. The BSE Sensex closed below the psychological 20,000 mark, after flirting with that level in intraday trade. The 50-unit S&P CNX Nifty closed below the psychological 6,000 mark, after flirting with that level in intraday trade.



The market breadth was negative. The BSE 30-share Sensex fell 32.92 points or 0.16%, up close to 44 points from the day's low and off close to 93 points from the day's high. Index heavyweight Reliance Industries (RIL) edged higher. Sugar stocks surged 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, remained at below 20% level, at 19.03%. 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.

Foreign institutional investors (FIIs) sold shares worth a net Rs 23.70 crore on Wednesday, 22 December 2010 as against an inflow of Rs 224.60 crore on Tuesday, 21 December 2010. FII outflow in December 2010 totaled Rs 1259.50 crore this month (till 22 December 2010). FIIs had bought equities worth Rs 18293.10 crore in November 2010.

FII inflow in the calendar year 2010 totaled Rs 129956.90 crore so far (till 22 December 2010). In dollar terms the net equity inflow in 2010 stands at $28.63 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.

The combined advance tax payment by top 100 corporate taxpayers rose 18.7% to Rs 27,531 crore in Q3 December 2010 over Q3 December 2009, indicating better corporate performance in the third quarter this year. Advance tax is paid in four installments in June, September, December and March and is based on taxpayers' projected earnings, thus giving an indication of industry's performance in the months to come.

Macroeconomic worries caused by a surge in global crude oil to above $90 a barrel level weighed on the domestic bourses. Oil extended gains in Asian trading after settling above the $90 a barrel level for the first time in 26 months on Wednesday, 22 December 2010, as a third straight weekly drop in US crude inventories and cold weather on both sides of the Atlantic spurred pre-holiday buying.

Finance secretary Ashok Chawla on Wednesday, 22 December 2010, said the government is willing to bear a third of the losses incurred by fuel retailers due to selling auto and cooking fuel below cost. If global crude prices rise further, oil subsidies will increase, he said. At current price levels, the three PSU OMCs -- Indian Oil, Hindustan Petroleum and Bharat Petroleum are projected to lose Rs 68361 crore in the current fiscal year that ends in March 2011. Oil ministry expects at least half of the amount to be borne by the finance ministry. While the government deregulated petrol prices in June this year, state-owned firms continue to sell diesel, domestic LPG and kerosene below cost to keep inflation in check.

A ministerial panel may meet by end-December on diesel prices, Oil Secretary S. Sundareshan said on Tuesday, 21 December 2010. "The agenda of the meeting will be finalised a day before the meeting," Sundareshan told reporters. If the price of diesel is hiked, it will offset an expected decline in wholesale price inflation arising from a favourable base effect. Diesel is a key transportation fuel and any hike in diesel prices directly adds to inflationary pressure.

President Pratibha Patil today, 23 December 2010, said she is confident that the economy will grow at about 9% in the current fiscal year ending March 2011 and would be on a sustained growth path of about 9% to 10% in the fiscal year ending March 2012.

The government will take all required steps to tame food inflation, Cabinet Secretary K.M. Chandrashekhar said on Thursday, 23 December 2010. The food price index rose 12.13% while the fuel price index climbed 10.74% in the year to 11 December 2010, the latest government data showed. In the prior week, annual food and fuel inflation stood at 9.46% and 10.67% respectively. The primary articles price index was up 15.35% in the latest week compared with an annual rise of 13.25% a week earlier.

The Reserve Bank of India (RBI), last week, announced measures to ease liquidity crunch in the banking system while keeping the key policy rates unchanged after a mid-quarter policy review. The RBI reduced the statutory liquidity ratio (SLR) of scheduled commercial banks (SCBs) from 25% of net demand and time liabilities (NDTL) to 24%, with effect from 18 December 2010. The central bank also said it will conduct open market operation (OMO) auctions for purchase of government securities for an aggregate amount of Rs 48000 crore in the next one month. These two measures are expected to inject liquidity on an enduring basis of the order of Rs 48000 crore, the RBI said after the mid-quarter policy review.

The RBI said the underlying growth momentum of the Indian economy remains strong. Even as inflation has moderated, it remains significantly above the comfort level of the RBI, the RBI said in a statement. Moreover, risks to inflation remain on the upside, both from domestic demand and higher global commodity prices, the RBI said. There is, therefore, a need for continued vigilance on the inflation front against the build-up of demand side pressures. The RBI had earlier projected 5.5% inflation by March 2011.

A major challenge for the RBI in the recent period has been liquidity management. It is the RBI's endeavour to alleviate the liquidity pressure in a manner consistent with the monetary policy stance of containing inflation and anchoring inflationary expectations, the RBI statement said.

The RBI said its latest measures will release sizable primary liquidity into the system. These measures will reduce the liquidity deficit in the system close to the comfort zone of the Reserve Bank of India, it said. The liquidity easing measures will help stabilise interest rates in the overnight inter-bank market closer to the operative policy rate of the Reserve Bank of India, it said.

European stock markets were mostly higher on Thursday, but volatility is likely to be a theme again given thin volumes ahead of the Christmas holiday. The key benchmark indices in Germany and UK rose by 0.09% each. But, France's CAC 40 fell 0.20%.

Most Asian stocks declined as developers in China fell after the government stepped up scrutiny of real estate investments to curb rising housing property prices, countering gains among exporters and commodity producers. Trading was light ahead of Christmas holidays and with Japanese financial markets closed for the emperor's birthday. The key benchmark indices in China, Hong Kong, Indonesia, South Korea and Singapore fell by between 0.03% to 0.79%. But, Taiwan's Taiwan Weighted rose 0.43%.

Major US stock indices edged up to two-year highs on Wednesday, 22 December 2010, after a government report showed the country's gross domestic product rose at an annual rate of 2.6% between July and September, higher than its earlier estimate of 2.5%. Sales of previously owned US homes rose in November, offering another sign the economy was ending the year on a positive note.

Trading in US index futures indicated that the Dow could rise 5 point at opening of US stocks on Thursday, 23 December 2010.

The BSE 30-share Sensex shed 32.92 points or 0.16% to 19,982.88. The index fell 76.50 points at the day's low of 19,939.30 in early afternoon trade. The Sensex rose 60.28 points at the day's high of 20,076.08 in morning trade.

The S&P CNX Nifty fell 4.40 points or 0.07% to 5,980. The Nifty hit high of 6,006.45 in early trade.

The BSE Mid-Cap index underperformed the Sensex, falling 0.23%. The BSE Small-Cap index outperformed the Sensex, falling 0.13%.

The market breadth was negative, compared to a strong breadth earlier in the day. On BSE, 1479 shares fell while 1331 shares rose. A total of 178 shares remained unchanged.

BSE clocked turnover of Rs 2604 crore, lower than Rs 3839.73 crore on Wednesday, 22 December 2010.

Most sector indices on BSE declined. Power index (down 0.19%), PSU index (down 0.31%), FMCG index (down 0.49%), Auto index (down 0.83%), Capital Goods index (down 0.88%), Realty index (down 0.89%), Metal index (down 0.97%), Consumer Durables index (down 1.11%), underperformed the Sensex. The BSE Healthcare index (up 0.69%), IT index (up 0.27%), Teck index (up 0.18%), Banking sector index Bankex (up 0.06%) and Oil & Gas index (down 0.14%), outperformed the Sensex.

Among the 30-member Sensex pack, 20 fell while the rest rose.

Index heavyweight Reliance Industries (RIL) was up 0.10% to Rs 1058.15. The stock came off the day's low of Rs 1,050.20. RIL and Russian petrochemical company SIBUR recently entered into a joint venture for the production of butyl rubber in India. The estimated investment in the project will be $450 million with RIL holding a majority stake in the venture.

Meanwhile, RIL's advance tax payment reportedly surged 42.8% to Rs 1191 crore in Q3 December 2010 over Q3 December 2009.

Consumer durables stocks declined on profit taking. Rajesh Exports, Titan Industries, Videocon Industries, VIP Industries, Blue Star and Whirlpool of India down 0.21% to 2.65%

FMCG stocks, too, skidded on profit taking. United Breweries, Marico, Colgate Palmolive, Tata Global Beverages, United Spirits, Hindustan Unilever, Nestle India, Dabur India and ITC fell by 0.30% to 2.74%

Realty stocks reversed initial gains. Indiabulls Real Estate, Sobha Developers, Godrej Properties, DLF, Anant Raj Industries, Phoenix Mills, HDIL, Unitech, Ackruti City, Sunteck Realty and Parsvnath Developers fell by 0.10% to 2.35%.

Capital goods stocks fell on profit taking. Alstom Projects, Punj Lloyd, Usha Martin, Crompton Greaves, Larsen & Toubro, Reliance Industrial Infrastructure, Bharat Heavy Electricals, Siemens, Lakshmi Machine Works, Suzlon Energy, Thermax, Gammon India, BEML, BGR Energy and Bharat Electronics fell by 0.19% to 2.61%.

Auto stocks fell on worries a recent petrol price hike and a possible diesel price hike could dent demand for vehicles. Tata Motors skidded 1.23%.

Maruti Suzuki India and Bajaj Auto fell 0.48% and 0.09% respectively.

Mahindra & Mahindra lost 0.80%. The company on Tuesday, 21 December 2010 that it has launched its legendary off roader 'Thar' CRDe in India.

Two-wheeler major Hero Honda Motors declined 1.02%, with the stock declining for the third straight day after jumping 17.99% on Monday, 20 December 2010. Monday's solid rally in the stock was triggered by reports that royalty payment to Japan's Honda Motor is unlikely rise from the current level after the split of the joint venture. Currently, Hero Honda pays 2.6% of sales as royalty charges to Honda. Earlier unconfirmed reports had speculated that royalty payments could shoot up to 8% of sales after the split of the joint venture.

The Hero Group, on 16 December 2010, announced that it will buyout the entire 26% stake of its Japanese partner Honda Motor Company Group in Hero Honda Motors. Without disclosing the size of the deal, Hero Honda Motors stated that the decision to restructure the equity has been reached in a cordial and amicable manner.

Hero Honda will continue to produce and sell the existing models, while new models would be also launched. However, all future products will be rolled out under the new licensing agreement between Hero Group and Honda. Hero Honda brand name will also be changed over time.

Metal stocks fell as base metal prices drifted lower. Copper prices fell dragged down by a sluggish performance in Shanghai amid a liquidity drain towards the year-end and a bout of profit-taking after a recent strong rally. Hindalco Industries, Tata Steel, Bhushan Steel, Jindal Saw, National Aluminium Company, Welspun Corp, NMDC and Hindustan Zinc fell by 0.20% to 3.67%

Shares of Steel Authority of India fell 4.34% to Rs 186.45 on market talk the company may issue shares under its follow-on public offer at around Rs 165 each, much lesser than the current market price. The FPO is likely to hit the market in mid-January, reports suggested.

Ispat Industries ended flat at Rs 23.60 after Wednesday's 11.32% surge. JSW Steel fell 3.67%, with the stock falling for the second straight day. JSW Steel on Tuesday said it will acquire a controlling take in Ispat Industries. Ispat will issue 108.66 crore equity shares on preferential allotment basis to JSW Steel at Rs 19.85 per share for an aggregate amount of Rs 2157 crore.

JSW Steel's holding will be at 41.29% on completion of preferential allotment, with a scope for the stake to go up further based on outcome of a mandatory 20% open offer to Ispat shareholders as per the Sebi takeover norms. The existing promoters of Ispat Industries will hold 26% on completion of transaction. JSW will further refinance entire outstanding debt of Ispat.

Sugar stocks rose on firm international sugar prices. Bajaj Hindusthan, Shree Renuka Sugar, Triveni Engineering Industries, Balrampur Chini, Bajaj Hindustan Sugar and Simbhaoli Sugars rose by 1.60% to 4.10%.

A2Z Maintenance & Engineering Services settled at Rs 328.90 on BSE, a 17.77% discount to the initial public offer price of Rs 400. The stock debuted at Rs 390, a 2.5% discount to the initial public offer (IPO) price. The scrip hit a high of Rs 398.90 and low of Rs 318.65. The counter clocked volume of 2.14 crore shares.

A2Z Maintenance & Engineering Services clocked a highest turnover of Rs 738.55 crore. MOIL (Rs 114.17 crore), State Bank of India (Rs 89.30 crore), Jindal Poly Films (Rs 70.66 crore) and Tata Steel (Rs 69.78 crore), were the other turnover toppers on BSE in that order.

Pipavav Shipyard reported a highest volume of 49.46 lakh shares on BSE. IFCI (27.60 lakh shares), Shree Renuka Sugars (24.80 lakh shares), Suzlon Energy (22.08 lakh shares) and NHPC (17.97 lakh shares), were the other volume toppers on BSE in that order.