Market snaps three day gains; Nifty belw 6000

The key benchmark indices edged lower in a choppy trade on profit taking snapping three days gains. The indices had hit two-week highs in intraday trade today before reversing gains. The volumes were subdued as foreign fund activity remain sluggish towards the year end. Index pivotal Reliance Industries declined more than 1%. The market breadth was marginally positive weakening compared with strong breadth earlier in the day. Capital goods and consumer durables stocks fell. Banking stocks reversed initial gains.



Metal stocks rose. Auto stocks were mixed. The BSE 30-share Sensex was down 44.52 points or 0.22%, off close to 135 points from the day's high and up close to 85 points from the day's low. The BSE Sensex closed above the psychological 20000 mark after falling below that mark in mid-afternoon trade. But, S&P CNX Nifty closed below the psychological 6000 mark.

Stocks were volatile. The market came off highs after a firm opening. The market soon regained strength with the key benchmark indices -- the BSE Sensex and the 50-unit S&P CNX Nifty hitting 2-week highs. The market regained strength once again in mid-morning trade again after paring gains. The market recovered in early afternoon trade, soon after hitting a fresh intraday low. The market once again came off lows after hitting a fresh intraday low in afternoon trade. It reversed initial gains to hit fresh intraday lows in mid-afternoon trade. It pared losses 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, declined further after falling below 20% level on Tuesday, 21 December 2010. It was hovering at 19.49% in afternoon trade. 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.

As per provisional figures, foreign funds sold shares worth Rs 34.79 crore while domestic funds bought shares worth Rs 373.67 crore on Tuesday, 21 December 2010. Foreign funds have sold shares worth a net Rs 4066.38 crore so far this month, as per data from the stock exchanges. Domestic funds have bought shares worth a net Rs 1324.01 crore this month so far.

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.

The macro-economic worries arising from rise in global crude oil prices weighed on market sentiment. Crude-oil futures rose above $90 a barrel in Asia today, 22 December 2010, the first time crude has passed the threshold since 7 December 2010, after a report showed US inventories falling twice as fast asmarket expectations. A higher subsidy sharing burden could lead to fiscal slippage – if prices of petroleum products such as diesel, kerosene and LPG are not raised, it could increase the government's subsidy sharing burden. The pricing of diesel, LPG and kerosene remains under government control.

A ministerial panel may meet by end-December on diesel prices, Oil Secretary S. Sundareshan said on Tuesday, 21 December 2010. He said a scheduled ministerial panel meeting on Wednesday, 22 December 2010, has now been deferred. "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.

The headline inflation is not easing as fast as the RBI would like it to and upside risk remains, Subir Gokarn, a deputy governor at the Reserve Bank said on Wednesday.

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 commodityprices, 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 ReserveBank 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 stocks were flat on Wednesday, as investors are reluctant to take on new positions in the holiday-thinned markets. The key benchmark indices in France and Germany fell by between 0.03% to 0.09%. But, UK's FTSE rose 0.22%.

Most Asian shares rose on Wednesday, 22 December 2010, after a $6.3 billion banking deal sent Wall Street to new two-year high overnight. The key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan were up by between 0.05% to 0.37%. But, key benchmark indices in Indonesia, China and Japan fell by between 0.23% to 0.90%.

Japanese exports rose for the 12th-straight month in November, up 9.1% from a year earlier, but the outcome was below expectations for a 10.8% rise.

South Korea plans to conduct a massive live-fire drill as tensions with North Korea remain high, according to reports Wednesday. The exercises set for Thursday include fighter jets and artillery, along with the largest number of personnel ever used in a peacetime drill, according to reports. Korea's Yonhap news agency said a naval firing exercise will take place Wednesday through Friday, using both ships and anti-submarine helicopters. The move comes despite a slight calming of tensions after reports North Korea may allow inspections of its nuclear facilities by UN monitors.

US stocks rose on Tuesday, 21 December 2010, as a big banking deal raised hopes that more acquisitions could be on the way. Toronto-DominionBank said on Tuesday it agreed to buy Chrysler Financial, which is owned by Cerberus Capital Management L.P., for about $6.3 billion in cash. It said the purchase would launch it into the top five USbank-based auto lenders

Trading in US index futures indicated that the Dow could shed 2 points at the opening bell on Wednesday, 22 December 2010.

The BSE 30-share Sensex was down 44.52 points or 0.22% to 20015.80. The Sensex rose 90.93 points at the day's high of 20,151.25 in early trade, its highest level since 6 December 2010. The index lost 129.01 points at the day's low of 19,931.31 in mid-afternoon trade.

The S&P CNX Nifty was down 16.25 points or 0.27% to 5,984.40. The Nifty a hit a high of 6,023.80 in morning trade, its highest level since 6 December 2010.

The BSE Mid-Cap index rose 0.1% and the BSE Small-Cap index rose 0.3%. Both these indices outperformed the Sensex.

Sectoral indices were mixed. Oil & Gas index (down 0.71%), Capital Goods index (down 0.61%), Banking sector index Bankex (down 0.55%), Consumer Durables index (down 0.47%) and IT index (down 0.24%) underperformed the Sensex.

The BSE Metal index (up 0.65%), PSU index (up 0.27%), FMCG index (up 0.26%), Teck index (up 0.19%), Power index (up 0.05%), Realty index (up 0.02%), Auto index (down 0.15%) and Healthcare index (down 0.19%) and outperformed the Sensex.

The market breadth, indicating the overall health of the market, was marginally positive. The breadth weakened compared with strong breadth earlier in the day. On BSE, 1,526 shares rose while 1,437 shares declined. A total of 101 shares remained unchanged.

Among the 30-member Sensex pack, 15 rose while the rest fell.

BSE clocked turnover of Rs 3811 crore higher than Rs 3596.05 crore on Tuesday, 21 December 2010.

Index heavyweight Reliance Industries (RIL) was down 1.34%. RIL and Russian petrochemical company SIBUR have 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.

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

PSU OMCs gained on reports ministerial panel will meet end Decembet to decide on diesel price hike. The hike in diesel price will improve finances of PSU OMCs. BPCL, HPCL and Indian Oil Corporation rose by between 0.69% to 1.64%.

Capital goods stocks fell on profit taking. BEML, Larsen & Toubro, Praj Industries, Gammon India, Siemens and Thermax fell by between 0.14% to 2.35%.

Consumer durables stocks also fell on profit taking. Rajesh Exports, Titan Industries, Videocon Industries and Gitanjali Gems fell by between 0.28% to 3.38%.

Auto stocks were mixed. Mahindra & Mahindra rose 0.5%, with the stock gaining for the second straight day after company announced during market hours on Tuesday, 21 December 2010 that it has launched its legendary off roader Thar CRDe in India. Tata Motors rose 1.19%.

Two-wheeler major Hero Honda Motors fell 1.26%, with the stock declining for the second 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.

Maruti Suzuki India and Bajaj Auto fell 2.11% and 0.46% respectively.

Bank stocks reversed initial gains. India's second largest private sector bank by market capitalization HDFC Bank fell 1.51%.

India's largest private sector bank by market capitalisation ICICI Bank fell 0.65% after gaining 3.56% on Tuesday, 21 December 2010. The private sector bank's advance tax payment reportedly surged 49.5% to Rs 450 crore in Q3 December 2010 over Q3 December 2009.

India's largest bank by net profit and branch network State Bank of India (SBI) was flat. The bank's advance tax rose 4.8% to Rs 1850 crore in Q3 December 2010 over Q3 December 2009.

Some metal stocks rose after base metals prices rose sharply on the London Metals Exchange (LME) with copper hitting new record high on Tuesday, 21 December 2010. LMEX, a gauge of six metals traded on the London Metal Exchange, gained 1.74% on Tuesday, 21 December 2010. Hindustan Zinc, Sterlite Industries, Steel Authority of India, Hindalco Industries and Jindal Steel & Power advanced by between 0.08% to 1.91%.

Ispat Industries gained 11.32% after tumbling 15.03% on Tuesday. JSW Steel fell 0.75% after gaining 2.23% on Tuesday, 21 December 2010. 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. Further, JSW Steel will also make an open offer to the shareholders of Ispat Industries as per the Securities & Exchange Board of India (Sebi) takeover regulations.

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 the open offer. The existing promoters of Ispat Industries will hold 26% on completion of transaction. JSW will further refinance entire outstanding debt of Ispat.

High beta realty stocks rose on bargain hunting, recovering from recent losses triggered by worries that higher interest rates and higher property prices will dent demand for property. Peninsula Land, HDIL and DLF rose by between 0.05% to 3.17%.

Ispat Industries clocked highest volume of 3.62 crore shares on BSE. Cals Refineries (2.25 crore shares), City Union Bank (1.29 crore shares), MOIL (1.07 crore shares) and Birla Power Solutions (97.61 lakh shares) were the other volume toppers in that order.

MOIL clocked highest turnover of Rs 495.26 crore on BSE. State Bank of India (Rs 141.74 crore), Jindal Poly Films (Rs 110.51 crore), M&M Financial (Rs 106.25 crore) and Tata Steel (Rs 104 crore) were the other turnover toppers in that order.