PSU OMCs buck weak market

The key benchmark indices extended losses for the second straight day as data showing selling by foreign funds on Tuesday, 7 December 2010, marred sentiment. A newspaper report that oil marketing companies are likely to hike fuel prices following rise in global crude oil prices, also stoked inflation concerns. Volatility was high in the second half of the trading session. European stocks edged lower in volatile trade. US index futures also slipped in volatile trade. Most Asian stocks fell.



The market breadth was weak. All the sectoral indices on BSE were in the red with shares from realty, consumer durables, metal, banking and auto pack leading the fall. Index heavyweight Reliance Industries (RIL) declined. But, PSU OMCs bucked the weak market trend on price hike report. The BSE 30-share Sensex lost 238.16 points or 1.19%, up close to 85 points from the day's low and off close to 180 points from the day's high.

Stocks extended losses after a weak start. The market came off lows in mid-morning trade after hitting a fresh intraday low after a survey showed strength in the domestic economy continued to underpin upbeat sentiment among Indian firms in the fourth quarter ending December 2010. The market weakened again in early afternoon trade when the Sensex was hovering nearing the day's low. The market hit a fresh intraday low in afternoon trade. The market trimmed losses in mid-afternoon trade after hitting a fresh intraday low. The market once again pared losses in late trade after hitting a fresh intraday low.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 6.19% at 20.43. The index had lost 0.67% to 19.24 on Tuesday, 7 December 2010, a day after it had risen 4.14% to 19.37 on Monday, 6 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.

Foreign funds were in selling mode in equities on Tuesday, 7 December 2010, data released by the Securities & Exchange Board of India (Sebi) showed. Foreign institutional investors (FIIs) dumped stocks worth a net Rs 419.70 crore on Tuesday, 7 December 2010, compared with an inflow of Rs 76.90 crore on Monday, 6 December 2010.

FII inflow in the calendar year 2010 totaled Rs 133516.20 crore (till 7 December 2010). In dollar terms, the net equity inflow in 2010 now stands at $29.41 billion, far above last year's $17.45 billion. The annual inflows are at record level this year.

The Central Bureau of Investigation (CBI) today, 8 December 2010, raided the residences of former telecom minister A Raja in Delhi and Tamil Nadu in connection with the 2G spectrum allocation scam. The raids are being carried out at the residences of four other telecom officials. Raja was forced to quit as telecom minister last month after a report by the Comptroller and Auditor General (CAG) found him guilty of undervaluing 2G spectrum and circumventing the rules to favour companies who did not meet the eligibility criteria for spectrum licences. The CAG report said that the exchequer had suffered a loss of Rs 1.76 lakh crore in the allocation of 2G spectrum.

On the macro front, the 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 by Trade Secretary Rahul Khullar showed on Wednesday.

A latest survey showed business sentiment at Asia's leading companies rebounded in the fourth quarter ending December 2010. The Reuters Asia Corporate Sentiment Index rose to 77 in the quarter from 69 in the third quarter, the second highest reading since Reuters began collecting data in June 2009. Strength in the domestic economy continued to underpin upbeat sentiment among Indian firms in the poll, which included outsourcing firm Infosys and State Bank of India (SBI). Six of eight Indian firms in the poll were positive about the outlook, with two very positive despite a spate of corruption scandals that have shaken the business community.

European bourses traded in a tight range on Wednesday as investors paused after sending stocks to multi-year highs in the previous session. The key benchmark indices in Germany and UK fell by between 0.15% to 0.27%. But, France's CAC 40 rose 0.19%. The Stoxx Europe 600 had attained its highest closing level in more than two years on Tuesday, 7 December 2010.

The latest data showed industrial production in Germany, Europe's biggest economy, increased strongly in October. The Economy Ministry said Wednesday production rose 2.9% compared with the previous month.

Late Tuesday, Ireland's 6 billion-euro austerity budget ($8 billion) cleared its first hurdle in parliament, which voted in favor of a hike in fuel taxes. There will be three more budget votes in coming days. The budget aims to reduce the debt-laden nation's soaring deficit.

Asian stock markets were mostly lower Wednesday, 8 December 2010 after a muted performance on Wall Street on Tuesday, 7 December 2010 while a weaker dollar boosted Japanese shares. The key benchmark indices in China, Hong Kong and Taiwan fell by between 0.01% to 1.43%. But, the key benchmark indices in Japan, Singapore and Indonesia rose by between 0.34% to 1.28%.

China will unveil its monthly statistics for November 2010, including the inflation data, two days ahead of its scheduled date of release, the National Bureau of Statistics of China said Wednesday. The data, which was originally to be reported on Monday, will now be released Saturday. The statistics bureau said the change was aimed at keeping the date of the monthly release consistent with previous months. The National Bureau of Statistics aims to release the data around the 11th of each month, according to reports. The data is being closely watched, in particular for the November 2010 consumer price index figure, after a Chinese media report this week said Beijing may raise interest rates around this weekend to tamp down inflationary pressures.

South Korea's Seoul Composite fell 0.35% on geopolitical tension. North Korea launched what appeared to be artillery drills within its territory Wednesday, according to media reports. Shells fired from the North Korean side landed in the country's own waters north of Baengnyeong island, Associated Press cited a South Korean military official as saying. The apparent drills came as US and South Korean military officials held talks over geopolitical tensions on the peninsula.

US index futures were volatile. Trading in US index futures indicated that the Dow could fall 26 points at the opening bell on Wednesday, 8 December 2010.

US stocks eked out a small gain on Tuesday, 7 December 2010, as investors' enthusiasm over a tax cut extension deal was short-circuited by rising bond yields and reports regulators were stepping up an insider-trading probe.

Back home, chief economic adviser to the finance ministry Kaushik Basu on Tuesday said the Reserve Bank of India (RBI) may intervene in the foreign exchange markets if the rise in the rupee is sharp and volatile. Large capital flows into India are not a matter of concern, according to a mid-year review of the Indian economy tabled by Finance Minister Pranab Mukherjee in parliament on Tuesday.

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 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.

The recent macro economic data has been strong. 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, 3 December 2010. 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.

The 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.

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 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, 2 December 2010 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.

The BSE 30-share Sensex was down 238.16 points or 1.19% to 19,696.48. The Sensex slumped 323.29 points at the day's low of 19,611.35 in late trade. The Sensex fell 59.13 points at the day's high of 19,875.51 in early trade.

The S&P CNX Nifty lost 72.85 points or 1.22% to 5,903.70.

Small-cap and mid-cap shares extended recent steep losses. The BSE Mid-Cap index fell 2.21% and the BSE Small-Cap index fell 3.22%. Both these indices underperformed the Sensex.

All the sectoral indices on BSE were in the red. BSE Oil & Gas index (down 0.4%), Healthcare index (down 0.58%), FMCG index (down 0.58%), Power index (down 0.79%), IT index (down 0.87%), Teck index (down 0.88%), Auto index (down 0.94%), Capital Goods index (down 1.1%) and PSU index (down 1.11%), outperformed the Sensex.

Consumer Durables index (down 2.98%), Realty index (down 2.51%), Banking sector index Bankex (down 2.03%) and Metal index (down 2.01%) underperformed the Sensex

The market breadth, indicating the overall health of the market, was weak. On BSE, 2378 shares fell while 585 shares rose. A total of 80 shares remained unchanged.

Among the 30-member Sensex pack, 28 fell and two rose.

BSE clocked turnover of Rs 3497 crore, lower than Rs 3639.50 crore on Tuesday, 7 December 2010.

Index heavyweight Reliance Industries (RIL) fell 1.11% to Rs 1019.10, reversing two-day 2.39% gains. As per recent reports the natural gas production from its 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, reports suggest.

Realty stocks fell as higher interest rates may affect demand for residential and commercial properties. Omaxe, Unitech, Ackruti City, DLF, Indiabulls Real Estate, and HDIL fell by between 0.88% to 3.06%.

Consumer durables stocks also fell on profit taking. Titan Industries, Rajesh Exports, Videocon Industries, Blue Star and Gitanjali Gems fell by between 1.53% to 6.47%.

Cement maker ACC rose 1.63% and was the top gainer from the Sensex pack.

Banking stocks fell for the third in a row on worries higher cost of funds will hit net interest margins. India's second largest private sector bank by net profit HDFC Bank slumped 3.07%, extending two-day 1.67% decline.

India's largest private sector bank in terms of operating income ICICI Bank fell 0.39%, extending three-day 6.70% fall. The bank has hiked its benchmark prime-lending rate and Floating Reference Rate (FRR) for consumer loans (including home loans) by 50 basis points with effect from 6 December 2010. It has also announced an increase in interest rates for various tenors of retail fixed deposits by 25-50 basis points with effect from 6 December 2010.

India's largest bank by net profit and branch network State Bank of India (SBI) fell 2.01%, extending four-day 7.71% slide. SBI during trading hours on Monday, 6 December 2010, said it has raised deposit rates by 50 to 150 basis points across various maturities with effect from Tuesday, 7 December 2010. Among all slabs, the sharpest hike is 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 will now offer 7.25% as against 6% earlier. The bank will offer 8.5% for 555-day and 1,000-day deposits.

India's top mortgage lender by total income, Housing Development Finance Corporation (HDFC), fell 2.42%. On Friday, 3 December 2010 HDFC, hiked its benchmark lending rate by a steep 75 basis points, making home loan dearer for both existing and new borrowers. With this revision, the retail prime lending rate (RPLR) goes up from 14.25% to 15%.

Auto stocks declined on worries a possible hike fuel hike may dent demand for vehicles. India's top small car maker by sales Maruti Suzuki India fell 1.04%. India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) fell 1.64%. The company, last week, announced strong sales in November 2010.

Bajaj Auto fell 2.25%. The company's total sales rose 8% to 2,99,231 units in November 2010 over November 2009. The figures were announced on Thursday, 2 December 2010.

Hero Honda Motors fell 1.62%, extending recent steep losses triggered by reports Honda Motor Co. has reached a basic agreement to dissolve its partnership in Hero Honda Motors. Honda will sell its entire stake in the motorcycle maker to the Hero Group's founding family -- the Munjals and investment funds by as early as March 2011, reports suggest.

An agreement whereby Honda provides technical to Hero Honda for development and production will not be renewed once the agreement ends in 2014, reports suggest. Honda and its Indian partner Hero Group will seek approval for the breakup from their respective boards of directors later this month, the report said. Honda will focus its resources on wholly owned subsidiary Honda Motorcycle & Scooter India (HMSI), reports suggest.

But, India's largest truck maker by sales Tata Motors rose 0.25% to Rs 1330. The stock came off the day's low of Rs 1296. The stock had struck a record high of Rs 1381.40 on Monday, 6 December 2010. Tata Motors reportedly plans to set up a commercial vehicles and bus building facility either in Thailand or Indonesia at a cost of about Rs 1000-1500 crore. Tata Motors' total vehicle sales rose 1% to 54,622 units in November 2010 over November 2009. The figures were announced on Wednesday, 1 December 2010.

Car sales in India rose an annual 20.8% in November 2010, an industry body said on Wednesday, driven largely by an expanding economy and a festive season that peaked in that month. Firms sold 161,497 cars in the month, data from the Society of Indian Automobile Manufacturers (SIAM) showed. Sales of trucks and buses, a key indicator of economic activity, rose 18.3% to 48,314 units in November, SIAM said.

Metal stocks declined on profit taking. Hindalco Industries, National Aluminum Company, Jindal Steel & Power, Steel Authority of India, Sterlite Industries, JSW Steel fell by between 0.39% to 2.84%.

Tata Steel fell 2.49%. The company early this week said it viewed its stake in Africa-focused Riversdale Mining as a strategic investment and will take appropriate action as per the situation. The world's No. 7 steelmaker was responding to global miner Rio Tinto's $3.5 billion bid approach for Riversdale on Monday. Tata Steel is one of the major shareholders in Riversdale, owning about 24% in the company. Other major shareholders include Brazilian steelmaker CSN and U.S. investment firm Passport Capital.

LMEX, a gauge of six metals traded on the London Metal Exchange rose 1.11% on Tuesday, 7 December 2010.

Telecom pivotals fell. India's largest listed cellular services provider by sales Bharti Airtel fell 0.37%. India's second largest listed cellular services provider by sales Reliance Communications fell 3.21%, with the stock falling for the fourth straight day.

Capital goods stocks edged lower. BEML, Bhel, Larsen & Toubro, Siemens and Praj Industries fell by between 0.3% to 2.34%.

Software stocks fell on worries over sovereign debt crisis in the euro zone. Europe is the second largest market for Indian IT firms. India's largest software company by sales TCS fell 0.84%, with the stock falling for the second straight day. The company announced during market hours on Friday, 3 December 2010 that the Uttar Pradesh state government has selected the company for its State Data Center project.

India's second largest software company by sales Infosys fell 1.05%, with the stock snapping last five days' gains. Infosys Technologies is reportedly looking for an acquisition in the legal process outsourcing business and will consider domestic firms with a strong client base or US firms with technologies in the business.

India's third largest IT exporter by sales Wipro fell 0.17%. As per reports the company has signed a contract with Vodafone Essar to build and manage its fixed line telecom service business. Wipro will provide a wide range of services, including network design, network build, integration with existing IT OSS/BSS applications and managed services of the setup over three years. In addition, Wipro will build an enterprise network operating centre (NOC) to manage the operations of Vodafone Essar's enterprise customers.

India's largest oil & gas exploration firm by sales Oil and Natural Gas Corporation (ONGC) rose 0.5% after the company said its board will meet on 16 December 2010 to consider bonus share issue, stock-split and payment of a special dividend ahead of a planned share sale. The board will consider issuing one bonus share for every one held and splitting one stock into two. The government has approved a 5% stake sale in ONGC that is expected to raise more than $3 billion. The issue may reportedly hit the markets in March 2011.

State-run oil marketing companies (PSU OMCs) rose on reports companies plan to raise prices of petrol and diesel by Rs 2 a litre after a week as crude touched a two-year high of $90 per barrel on Tuesday, 7 December 2010. HPCL rose 3.38%, BPCL gained 2.12% and Indian Oil Corporation rose 0.75%. Petrol prices have been already deregulated by the government. The hike in diesel prices will reduce under-recoveries of PSU OMCs as they sell diesel at government controlled prices.

State-run NTPC fell 0.42% on reports it is interested in buying 74% stake in the West Bengal government's 3,200 megawatt Katwa power project worth Rs 16000 crore.

Cals Refineries clocked the highest volume of 16.6 crore shares on BSE. Sanraa Media (4.14 crore shares), Karuturi Global (1.41 crore shares), K S Oils (87.15 lakh shares) and Resurgence Mines (83.69 lakh shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 285.96 crore on BSE. Uflex (Rs 96.21 crore), Tata Motors (Rs 94.66 crore), Tata Steel (Rs 80.50 crore) and Ruchi Soya Industries (Rs 75.08 crore) were the other turnover toppers in that order.