Small-cap, mid-cap stocks mauled

The key benchmark indices tumbled more than 2% in a broad based sell-off, underperforming mostly higher global stocks, as data showing heavy selling by foreign funds on Wednesday, 8 December 2010, dampened sentiments. The market extended last two days' losses. Index heavyweight Reliance Industries (RIL) slumped more than 3%. Investors dumped small-cap and mid-cap shares as media reports of possible price rigging in select stocks, coming close on the heels of a Sebi action last week against four firms on allegations of price manipulation, rattled investors.



The BSE 30-share Sensex was down 454.12 points or 2.31%, off close to 530 points from the day's high and up close to 80 points from the day's low. Banking, metal, realty, auto and consumer durables stocks led losses. The market breadth was extremely weak. European stocks rose even as Chinese stocks fell earlier in the global day on fears Beijing will soon move to tighten policy again.

Closer home, intraday volatility was high. The market slipped into the red after a firm start. The market recovered sharply to turn positive for a brief period after hitting a fresh intraday low in morning trade. The market moved in a narrow range in the negative terrain in mid-morning trade. The market extended losses to hit fresh intraday low in early afternoon trade. Immense volatility was witnessed in mid-afternoon trade as the key benchmark indices lost ground, soon after staging an intraday recovery. Volatility remained high in late trade as the market trimmed losses after tumbling to 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, jumped 10.62% to to 22.60. The index had jumped 6.19% to 20.43 on Wednesday, 8 December 2010. 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.

On Wednesday, 8 December 2010, a television channel said the Intelligence Bureau suspects insider trading in shares of Ruchi Soya, K S Oils and Karuturi Global. According to the report, a report on the Indian stock markets prepared by the Intelligence Bureau (IB) suspected that a market operator Vimal Rathod was accumulating shares of Ruchi Soya, KS Oils, Karuturi Global on behalf of investor C Shivasankaran. The IB has reportedly passed on the information to the Central Bureau of Investigation (CBI) and the market regulator, the Securities and Exchange Board of India (Sebi) for further action.

K S Oils today, 9 December 2010, denied media reports of involvement of the company and its executives in price manipulation. Shares of K S Oils were down 10.8% at Rs 30.55, off the day's low of Rs 28.55. The stock had tumbled 14.7% on Wednesday, 8 December 2010, after a television channel reported about the IB report.

Shares of Ruchi Soya were down 6.89% at Rs 83.15, off the day's low of Rs 79.65 after the company today, 9 December 2010, said the promoters have already denied reports of price manipulation. Ruchi Soya said promotes have not sold any shares in the current financial year, barring a nominal market sale of 12,255 shares representing 0.008% of the total promoters' stake. Shares of Ruchi Soya had tanked 27% on Wednesday.

Shares of Glodyne Technoserve remained locked at 20% lower circuit at Rs 645.65 on BSE even as the company today, 9 December 2010, clarified to BSE that the company follows strong corporate governance practice and that there has been no communication received by the company from Sebi or any stock exchanges. The company said it was issuing the clarification in response to reports in a section of the media about price movement of the company's shares. The stock had tumbled 17% on Wednesday, 8 December 2010.

IRB Infrastructure Developers rose 1.3% to Rs 193 after the company denied reports of involvement in rigging of its shares. The company issued the clarification during trading hours today, 9 December 2010. In its clarification to the stock exchanges denying reports of pricing rigging IRB Infrastructure Developers also said it had not received any official communication in this regard from the capital market regulator or exchanges or any other authorities. The IRB Infrastructure Developers stock had fallen 9.42% to settle at Rs 190.40 on Wednesday, 8 December 2010.

Capital market regulator the Securities & Exchange Board of India (Sebi), last week, penalised four companies including real estate developer Ackruti City, Murli Industries and Welspun Corp for colluding with stock brokers to rig their share prices. Late last month, the Central Bureau of Investigations unearthed a bribe-for-loan scandal, involving some officials from state-run banks and two other financial firms.

Foreign institutional investors (FIIs) dumped shares worth net Rs 1297.80 crore on Wednesday, 8 December 2010, much higher than an outflow of Rs 419.70 crore on Tuesday, 7 December 2010. The Sensex had lost 1.19% on Wednesday.

Foreign funds pressed sales of shares worth a net Rs 2209.35 crore during the first three trading sessions this week from Monday, 6 December 2010 to Wednesday, 8 December 2010, as per the data from the stock exchanges. The net outflow totaled Rs 727.88 crore so far this month, the stock exchanges data showed.

The food price index rose 8.69%, while the fuel price index climbed 9.99% in the year to 27 November 2010, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 8.60% and 9.99% respectively. The primary articles price index was up 12.66% in the latest week compared with an annual rise of 12.72% a week earlier.

The Reserve Bank of India is deeply conscious of the liquidity situation, Governor D Subbarao said on Thursday.

European shares hit a 26-month highs on Thursday on optimism the US tax cuts would boost consumption, with technology stocks boosted after ASML lifted its booking forecast. The key benchmark indices in France and UK rose by between 0.28% to 0.58%. But, Germany's DAX fell 0.1%, reversing initial gains.

Asian markets mostly advanced on Thursday, 9 December 2010, after an agreement in the US to extend tax breaks sent US shares moderately higher on Wednesday, 8 December 2010. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.23% to 1.70%.

The upswing in Asian stocks came after modest gains in the US stocks on Wednesday, 8 December 2010, where stocks fluctuated before turning positive late in the session. A compromise in Washington to extend tax cuts boosted shares and sent bond prices sharply lower, as some investors expect it to lead to economic growth.

But, China's Shanghai Composite index fell 1.32% on fears Beijing will soon move to tighten policy again. China early this week said it will release inflation data at the weekend instead of next week.

South Korea's central bank held rates on Thursday after raising them last month, signaling it may resume tightening early next year unless the euro zone debt crisis and tensions with North Korea get out of control. The Bank of Korea left the base rate on hold at 2.50%.

Trading in US index futures indicated that the Dow could gain 34 points at the opening bell on Thursday, 9 December 2010. The market's attention is set to turn to US initial jobless claims later on Thursday, before Chinese trade data for November comes out on Friday.

Back home, 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 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. Foreign funds have made record purchases of Indian stocks this year.

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 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 Reserve Bank of India (RBI) will revisit its growth projection for the economy at its third-quarter policy review on 25 January 2011, RBI governor Duvvuri Subbarao said on Wednesday. The RBI currently projects the economy to grow at 8.5% in the fiscal year ending March 2011. The central bank chief expressed discomfort with the current levels of inflation. "Inflation is coming down but still above the Reserve Bank's tolerance level; growth on the other hand has been encouraging," he said.

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.

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.

The BSE 30-share Sensex was down 454.12 points or 2.31% to 19,242.36. The Sensex slumped 535.61 points at the day's low of 19,160.87 in late trade. The Sensex rose 74.61 points at the day's high of 19,771.09 in early trade.

The S&P CNX Nifty was down 137.20 points or 2.32% to 5,766.50.

The BSE Mid-Cap index fell 4.48% and the BSE Small-Cap index shed 5.92%. Both these indices underperformed the Sensex.

The BSE Small-Cap index has plunged 2,498.87 points or 22.2% within a month from a high of 11,243.99 on 10 November 2010. The BSE Mid-Cap index has lost 1,470.63 points or 16.8% from a high of 8,730.30 on 10 November 2010.

Coming back to today's trade, barring the BSE IT index all the sectoral indices on BSE were in the red. Consumer Durables index (down 6.29%), Realty index (down 4.76%), Metal index (down 3.67%), Healthcare index (down 3.53%), Auto index (down 3.33%), Banking sector index Bankex (down 3.24%), Oil & Gas index (down 2.8%), Power index (down 2.56%) and PSU index (down 2.55%) underperformed the Sensex.

BSE IT index (up 0.03%), Teck index (down 0.82%), FMCG index (down 0.93%) and Capital Goods index (down 2.18%) and outperformed the Sensex.

The market breadth, indicating the overall health of the market, was extremely weak. On BSE, 2683 shares fell while 304 shares rose. A total of 59 shares remained unchanged.

Among the 30-member Sensex pack, 27 fell while the rest rose.

BSE clocked turnover of Rs 4554 crore, higher than Rs 3510.73 crore on Wednesday, 8 December 2010.

Index heavyweight Reliance Industries fell 3.41% to Rs 984.35, off day's high of Rs 1033. As per reports, the company is likely to increase crude imports from Latin America as it seeks better refining margins by processing heavier and cheaper grades of oil. Reliance Industries' plants are complex refineries that turn low-quality crude into gasoline and diesel for sale mainly outside of India.

Banking stocks fell for the fourth day 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 fell 1.82%, with the stock falling for the fourth straight day.

India's largest bank by net profit and branch network State Bank of India (SBI) fell 4.33%, with the stock falling for the sixth straight day. 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 largest private sector bank in terms of operating income ICICI Bank fell 4.41% with the stock falling for the fifth straight day. 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 top mortgage lender by total income, Housing Development Finance Corporation (HDFC), fell 1.85%, with the stock falling for the third straight day. 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%.

Metal stocks reversed initial gains. National Aluminum Company, Jindal Steel & Power, Hindustan Zinc, Hindalco Industries, Sterlite Industries and JSW Steel fell by between 1.71% to 6.86%.

India's largest steel maker by sales Tata Steel fell 3.1%, reversing initial gains. As per reports the company could team up with an Indian metals company or a miner to make a counter bid for Riversdale Mining, in response to Rio's $3.5 billion (about Rs 15,750 crore) bid for coal-rich Australian miner Riversdale. Tata Steel is gearing up for a battle to control the Australian-listed miner that owns large coal mines in Mozambique and has become a target for global mining majors such as Anglo-American and Rio Tinto. Tata Steel which owns 24% in Riversdale, is one of the larger shareholders in the Australian company, and may have to spend upward of $1 billion to raise its shareholding to a controlling 51%, reports said

LMEX, a gauge of six metals traded on the London Metal Exchange rose 1.5% on Wednesday, 8 December 2010

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 2.34% to 10.4%.

Auto stocks declined for the second straight day in a row on worries a possible hike fuel hike may dent demand for vehicles. India's top small car maker by sales Maruti Suzuki India fell 1.79%. India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) fell 3.43%. The company, last week, announced strong sales in November 2010.

Bajaj Auto fell 2.29%. 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.

Tata Motor fell 4.71%. As per reports, Tata Motors has told its vendors that it will raise production of Nano, hoping to build confidence after the small car sold only 509 units in November. Nano vendors, worried over falling sales and cut in production, have met the automobile major's top brass in Mumbai. The company said in a separate communication to dealers that it plans to introduce new financing packages to boost sales. Many dealers have refrained from picking up fresh stocks as they were trying to sell existing cars.

Bike maker Hero Honda Motors fell 0.4%, reversing initial gains. As per reports the company has hiked the prices of its models by 1.5% to 2.5% to offset the rising input costs. The price increase amounts to Rs 500 for entry segment models, while the company's high-end models Karizma and ZMR have the highest hike of Rs 1,500.

Consumer durables stocks fell on profit taking. Titan Industries, Rajesh Exports, Blue Star, Videocon Industries and Gitanjali Gems fell by between 3.09% to 20%.

India's largest cigarette maker by sales ITC rose 0.39% on reports company is eying an acquisition in its paperboards and specialty papers division to add capacity to its paper production. The multi-business conglomerate, which is in talks with several companies in the paper production segment, may clinch a deal in the next six to eight months.

Telecom pivotals declined. India's second largest listed cellular services provider by sales Reliance Communications slumped 5.66%, extending four-day 8.42% slide. The stock was the top loser from the Sensex pack.

India's largest listed cellular services provider by sales Bharti Airtel slipped 2.58%, with the stock falling for the second straight day.

Software stocks bucked weak market on hopes extension of tax cuts by President Obama may give boost to consumption in the US, the biggest market for Indian IT firms. India's second largest software company by sales Infosys gained 0.54%. 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 rose 0.67%. The company recently 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.

But, India's largest software company by sales TCS fell 0.61%, reversing initial gains. 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.

Capital goods stocks also fell on profit taking. Bhel, Larsen & Toubro, ABB and Punj Lloyd fell by between 0.47% to 4.45%.

K S Oils clocked highest volume of 1.98 crore shares on BSE. Resurgence Mines (1.66 crore shares), Alok Industries (1.23 crore shares), Sanraa Media (1.08 crore shares) and Ruchi Soya Industries (89.67 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 340.07 crore on BSE. Reliance Industries (Rs 109.12 crore), ICICI Bank (Rs 101.64 crore), Tata Steel (Rs 99.67 crore) and Tata Motors (Rs 82.55 crore) were the other turnover toppers in that order.