Market snaps three-day winning streak ahead of RBI's policy review

The key benchmark indices drifted lower in choppy trade, snapping a three-day rally, as weak global stocks triggered profit taking. Concerns that a fuel price hike may stoke inflation pressures also weighed on investor sentiment. The BSE 30-share Sensex was down 151.42 points or 0.76%, up close to 80 points from the day's low and off close to 170 points from the day's high. European stocks and US index futures fell after Moody's Investor Service said it has put Spain's Aa1 rating on review for a possible downgrade.



Closer home, interest rate sensitive realty stocks fell on worries higher interest rates will dent demand for residential and commercial properties. Banking stocks also fell ahead of the mid-quarter monetary policy review from the central bank at 12:00 IST tomorrow, 16 December 2010. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Auto stocks fell as the latest petrol price hike could dent demand for vehicles. But, PSU OMCs rose as hike in petrol prices will improve finances of these companies. The market breadth was weak.

Intraday volatility was high. The market edged lower in early trade on weak Asian stocks. The market trimmed losses after hitting fresh intraday low in morning trade. Reports that top Indian firms have paid higher advance tax for the third installment of 15 December 2010, strong debut from state-run manganese producer MOIL and good investor response to the initial public offer of state-run Punjab and Sind Bank, triggered the intraday rebound.

The intraday recovery gathered further steam in mid-morning trade. A bout of volatility was witnessed as the key benchmark indices slipped into the red once again after recovering sharply to turn positive for a brief period in early afternoon. Volatility continued as the market hit a fresh intraday low in mid-afternoon trade. The market trimmed losses after hitting fresh intraday low 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, was down 0.19% at 21.42. The index had lost 4.92% to 21.46 on Tuesday, 14 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 stock market remains closed on Friday, 17 December 2010, on account of Moharum.

Shares of state-run manganese producer MOIL settled at Rs 466.50 on BSE, a 24.4% premium over the initial public offer price of Rs 375. The stock debuted at Rs 551, a 46.93% premium over the initial public offer (IPO) price. The stock clocked high volume of 3.15 crore shares.

Punjab and Sind Bank's Rs 480-crore initial public offer (IPO) was subscribed 27.44 times by 16:00 IST on the last day of the bidding for the IPO by institutional investors today, 15 December 2010. Bidding for the issue by all other category of investors ends on Thursday, 16 December 2010. The price band for the issue is Rs 113-120 a share.

The third installment of advance tax figures of India Inc has started trickling in. State Bank of India paid advance tax of Rs 1850 crore in Q3 December 2010 compared with Rs 1795 crore in Q3 December 2009. RIL paid Rs 1100 crore in Q3 December 2010 compared with Rs 830 crore in Q3 December 2009. TCS paid Rs 270 crore in Q3 December 2010 compared with Rs 177 crore in Q3 December 2009.

Hindalco Industries paid Rs 200 crore against Rs 148 crore. M&M paid Rs 236 crore versus Rs 195 crore. HDFC Bank paid Rs 750 crore vs Rs 400 crore, ICICI Bank paid Rs 450 crore versus Rs 301 crore, Tata Motors paid Rs 220 crore versus Rs 100 crore and Tata Power Company paid Rs 58 crore versus Rs 81 crore. Larsen & Toubro paid Rs 270 crore, unchanged from previous year.

Bajaj Auto paid Rs 370 crore in Q3 December 2010 compared with Rs 310 crore in Q3 December 2009. The tax outgo of HDFC saw a year-on year (y-o-y ) increase of 25% from Rs 320 crore to Rs 400 crore. FMCG major Hindustan Lever paid Rs 225 crore, marking a yo-y increase of Rs 45 crore, an increase of over 25%. Petroleum major HPCL recorded a lower tax outgo, Rs 29 crore against Rs 48 crore, a 39% decline. Punjab National Bank paid Rs 640 crore versus Rs 618 crore.

Alstom posted a 25% dip from Rs 16 crore to Rs 12 crore, Zee Entertainment Network Rs 30 crore from Rs 37 crore and Clariant Rs 18 crore compared to Rs 19 crore. Grindwell Nortonrecorded a 11% increase with a tax outgo of Rs 11 crore against Rs 9 crore while EntertainmentNetwork India paid Rs 1 crore against Rs 1.5 crore, marking a dip of 33%. Marico paid Rs 21 crore against Rs 18 crore.

The indirect tax receipts rose 42.3% on year to Rs 2.08 lakh crore during April-November, the federal finance ministry said in a statement on Wednesday. Revenue collection from customs increased an annual 67% to Rs 86840 crore, while excise tax receipts grew 34.4% on an annualised basis to Rs 81984 crore.

Meanwhile, Chinese Premier Wen Jiabao said on Wednesday China may give greater access to India's IT, pharmaceutical and agricultural industries. Chinese companies will sign more than $16 billion worth of deals, Wen, who is on a three-day visit to India, told business leaders at the India-China Business Cooperation Summit.

European stocks edged lower on Wednesday, 15 December 2010, after Moody's Investors Service put Spain's Aa1 local and foreign-currency government bond ratings on review for possible downgrade, putting pressure on the beleaguered euro. The key benchmark indices in France, Germany and UK fell by between 0.39% to 0.86%.

Moody's Investor Service said Wednesday it has put Spain's Aa1 rating on review for a possible downgrade, citing the country's vulnerability to funding stress given its high refinancing needs next year, as well as increased concerns over the ability of the Spanish government to restructure the economy.

Asian stocks declined in volatile trade on Wednesday, 15 December 2010, after Moody's Investor Service said it has put Spain's Aa1 rating on review for a possible downgrade. The key benchmark indices in China, Hong Kong, Indonesia and Singapore fell by between 0.54% to 1.95%. The key benchmark indices in South Korea and Taiwan rose 0.42% and 0.19% respectively.

Japan's Nikkei Average fell 0.07%. Business sentiment among Japanese manufacturers worsened for the first time in nearly two years in the last quarter of 2010, according to the Bank of Japan tankan survey released on Wednesday, but the pace of the decline wasn't as bad as economists had predicted.

US stocks edged higher on Tuesday, 14 December 2010, as retail sales rose for the fifth straight month and a survey showed that large companies intend to hire more workers. Retail sales jumped 0.8% in November, the Commerce Department said Tuesday.

The Federal Reserve in a policy statement after its last scheduled meeting of 2010, said the economic recovery was still too slow to bring down unemployment and reaffirmed its commitment to buy $600 million in government bonds.

Trading in US index futures indicated that the Dow could fall 45 points at the opening bell on Wednesday, 15 December 2010.

Back home, data announced on Friday, 10 December 2010, showed industrial output in October rose a faster-than-expected 10.8% from a year earlier, higher than the previous month's annual growth of 4.4%. Manufacturing output rose an annual 11.3% in October.

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 3 December 2010. Themanufacturing 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 1 December 2010.

Exports rose an annual 26.8% to $18.9 billion in November 2010, while imports for the month grew 11.2% on the year to $27.8 billion, as the provisional data released byTrade Secretary Rahul Khullar showed on Wednesday.

According to mid-year review, the economy may grow by 9% during the year ending March 2011 (FY 2011). Average headline inflation is seen at 8.98% for the year, it said. The report indicated that the country's fiscal deficit will not be more than 5.5% of its gross domestic product in FY 2011.

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 andmanufacturing, 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.

The wholesale price index (WPI) rose an annual 7.48% in November, in line with forecast, government data showed on Tuesday 14 December 2010. The figure was lower than the annual rise of 8.58% in October. The annual reading for September was upwardly revised to 8.93% from 8.62%.

The headline inflation is expected to ease to 6% by March 2011, Finance Minister Pranab Mukherjee said on Tuesday.

The Reserve Bank of India (RBI) undertakes a mid-quarter policy review on Thursday, 16 December 2010 at 12:00 IST. At a quarterly policy review early last month, the central bank had signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the ReserveBank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao had said in a monetary policy statement on 2 November 2010. "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 had added.

The BSE 30-share Sensex was down 151.42 points or 0.76% to 19,647.77. The Sensex rose 18.42 points at the day's high of 19,817.61 in early afternoon trade. The index lost 227.76 points at the day's low of 19,571.43 in late trade.

The S&P CNX Nifty was down 51.80 points or 0.87% to 5,892.30.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1971 shares fell while 963 shares rose. A total of 77 shares remained unchanged. The breadth swung between positive and negative zone earlier in the day.

The BSE Mid-Cap index fell 1.41% and the BSE Small-Cap index fell 1.54%. Both the indices underperformed the Sensex.

Most sectoral indices on BSE declined. The BSE Realty index (down 3.53%), banking sector index Bankex (down 3.18%), Consumer Durables index (down 2.38%), Healthcare index (down 1.44%), PSU index (down 1.21%), Metal index (down 1.11%), and Auto index (down 0.88%), underperformed the Sensex. The BSE FMCG index (down 0.75%), Power index (down 0.53%), Capital Goods index (down 0.47%), Oil & Gas index (down 0.09%), and IT index (up 1.53), outperformed the Sensex.

Among the 30-member Sensex pack, 22 fell while the rest rose.

BSE clocked turnover of Rs 3447 crore, higher than Rs 3325.64 crore on Tuesday, 14 December 2010.

Index heavyweight Reliance Industries (RIL) fell 0.07% to Rs 1051.90. The stock hit high of Rs 1062.50 and low of Rs 1036.30. As per reports, the company has paid advance tax Rs 1100 crore in Q3 December 2010 compared with Rs 830 crore in Q3 December 2009.

State-run oil marketing companies rose as they have decided to increase the price of petrol by around Rs 2.95 a litre to pass on the impact of rising crude prices, which touched $90 per barrel recently. BPCL, HPCL and Indian Oil Corporation rose by between 1.71% to 3.83%. Bharat Petroleum Corporation (BPCL) has increased the price by Rs 2.95 a litre, effective Tuesday, 14 December 2010 midnight, while the other two PSU OMCs -- Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation (HPCL), will follow suit later this week.

This will be the second-steepest increase in petrol prices in this calendar year and the sixth increase in this financial year so far. The fuel price hike would improve finances of PSU OMCs. Petrol prices have been already deregulated by the government.

Banking stocks fell ahead of the Reserve Bank of India's monetary policy on Thursday, 16 December 2010. India's largest bank by net profit and branch network State Bank of India (SBI) fell 3.46%. SBI, early this month, raised deposit rates by 50 to 150 basis points across various maturities with effect from 7 December 2010. Among all slabs, the sharpest hike was in the 46 to 90-day slab, where the bank would offer 5.50% as against 4% earlier. In case of deposits with a maturity of 181 days to less than one year, the bank is now offering 7.25% as against 6% earlier. The bank is offering offer 8.5% for 555-day and 1,000-day deposits.

India's largest private sector bank in terms of operating income ICICI Bank fell 3.65%, with the stock falling for the second straight day. The bank is reportedly raising funds from the overseas markets again. The bank is accessing the overseas market to mobilise $545 million through its US commercial paper (USCP) programme. In November, the bank had raised $1 billion through 10-year US dollars denominated bonds.