Market extends losses for the third day

Weakness persisted on the bourses for the third day in a row as data showing a surge in food inflation in late December 2010 rekindled fears of interest rate hike by the Reserve Bank of India (RBI). European markets were trading firm while Asian markets ended mixed. The BSE 30-share Sensex was down 116.36 points or 0.57%, up close to 80 points from the day's low and off close to 240 points from the day's high. From a seven-week closing high of 20,561.05 on 3 January 2011 the Sensex has lost 376.31 points or 1.83% in last three trading sessions. The market breadth was weak in contrast with a strong breadth in early trade.



IT pivotals gained on upbeat US economic data with software major Infosys Technologies striking record high. Auto stocks were under selling pressure with bike major Bajaj Auto declining for the fourth straight session. Metal pivotals saw mixed trend with aluminium major Hindalco striking fresh record high in late trade. Index heavyweight Reliance Industries (RIL) edged higher. Bank stocks extended recent steep losses on worries higher cost of funds would impact margins. Cement and fertilizer shares tumbled.

The market surged in early trade on positive global cues. The market soon pared gains. The market slipped into the red later. The market recovered from lower level after hitting a fresh intraday low in early afternoon trade. The market weakened again to fresh intraday low later. The market rebounded in mid-afternoon trade on firm European stocks.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, edged up to 18.20% from Wednesday's (5 January 2011) close of 17.88%. 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 92.40 crore on Wednesday, 5 January 2011, as against an inflow of Rs 779.30 crore on Tuesday, 4 January 2011.

FII inflow in January 2011 totaled Rs 1731.10 crore (till 5 January 2011). FIIs had bought equities worth Rs 2049.60 crore in December 2010. FII inflow in the calendar year 2010 totaled Rs 133266 crore. In dollar terms the net equity inflow in 2010 totaled $29.36 billion, compared to an inflow of $17.45 billion in 2009. The annual inflow in 2010 was at record level.

The latest data showed the food inflation accelerated to the highest level in more than a year in late December 2010. The food price index rose 18.32% and the fuel price index climbed 11.63% in the year to 25 December 2010. Annual food and fuel inflation stood at 14.44% and 11.63% respectively in the prior week. The primary articles price index was up 20.20% in the latest week, compared with an annual rise of 17.24% a week earlier.

Finance Minister Pranab Mukherjee on Thursday asked the state governments to remove supply chain bottlenecks at the earliest in the food sector to bring prices down quickly, even as food inflation accelerated to a one year high. Mukherjee also said a large part of the price rise is due to the widening gap between wholesale and retail prices in fruits, vegetables, milk and meat.

European shares edged higher on Thursday, 6 January 2011, following gains on Wall Street and a strong trading session in Japan. The key benchmark indices in UK, Germany and France were up by between 0.66% to 1.12%.

Asian stock markets were mixed on Thursday, 6 January 2011, though sentiment was supported by very strong US private-sector jobs data released on Wednesday, 5 January 2011. The key benchmark indices in Taiwan, Hong Kong, Japan and Singapore rose by between 0.12% to 1.44%. The key benchmark indices in China, South Korea and Indonesia fell by between 0.24% to 1.25%.

US stocks edged higher on Wednesday, 5 January 2011, on encouraging data from the labor market and service sector pointed to a firming economic recovery. The Dow Jones Industrial Average added 31.71 points, or 0.27%, at 11722.89, reclaiming the highs reached at the top of dot-com bubble on 14 January 2000. The Standard & Poor's 500-stock index ended higher by 6.36 points, or 0.5%, at 1276.56, while the Nasdaq Composite advanced 20.95 points, or 0.78%, to 2702.20.

The US Institute for Supply Management reported its strongest service-sector figures since August 2005. The index climbed in December 2010 to 57.1, up from 55 in November 2010. A reading above 50 indicates expansion. Meanwhile, data from payroll giant Automatic Data Processing showed that companies increased payrolls in December 2010 by the most since records began in 2001. Employment increased by 297,000, almost three times analysts' expectations.

Trading in US index futures indicated that the Dow could rise 33 points at the opening bell on Thursday, 6 January 2011.

Back home, corporate earnings for Q3 December 2010, which will start trickling in from the second week of January 2011, will set the direction for the market in the near term. Analysts see corporate profit margins to be under pressure in the coming months due to higher commodity prices, rising cost of debt, surging wages and increased competitive intensity across sectors. IT bellwether Infosys kickstarts the earnings reporting season on 13 January 2011.

The government on Wednesday, 5 January 2011, reportedly deferred its decision to free the prices of urea for now and bringing it under the Nutrient Based Subsidy (NBS) policy regime even as a panel of secretaries has been asked to work out a viable model for decontrolling the prices.

Union petroleum and natural gas minister Murli Deora on Wednesday, 5 January 2011, reportedly said that his ministry was not in favour of raising diesel and cooking gas prices despite a spurt in global prices of crude oil.

Growth in India's service sector eased in December 2010 from a four-month high the previous month, reflecting a slightly slower expansion in new business, a recent survey showed. The HSBC Markit Business Activity Index, based on a survey of around 400 firms, fell to 57.7 in December 2010 from 60.1 in November 2010 -- its strongest reading since July 2010. Both input and output prices rose in December 2010, with the growth in input costs accelerating to its highest levels since July 2010.

Exports in November 2010 rose an annual 26.5% to $18.9 billion, while imports for the month grew 11.2% on the year to $27.8 billion, government data released on Monday showed. India's trade deficit in November narrowed to $8.9 billion compared with $9.7 billion in October.

India's manufacturing activity continued to expand in December 2010, although the momentum from the prior month eased because of capacity constraints and a slowdown in new orders, a survey by HSBC showed early this week. The monthly purchasing managers' index eased to 56.7 from November's reading of 58.4, though it stayed well ahead of the threshold of 50, which separates expansion from contraction. "The PMI numbers show that the economy remains in high gear, but that this is becoming increasingly difficult to reconcile with a comfortable level of inflation," HSBC economists wrote in a statement. India's central bank, they wrote, may raise interest rates sooner rather than later to curb price increases.

The output of six key infrastructure sectors grew 2.3% in November 2010 from a year ago, the slowest pace in the last 21 months, raising the prospects of a drop in industrial growth for the month. The six core industries -- crude oil, petroleum refining, coal, electricity, cement and finished steel, have a combined weight of 26.7% in the index of industrial production and are considered an advance indicator of industrial activity. These sectors had grown an upwardly revised 8.6% in October 2010.

The BSE 30-share Sensex was down 116.36 points or 0.57% to 20,184.74. The Sensex rose 124.75 points at the day's high of 20,425.85 in early trade. The index lost 193.93 points at the day's low of 20,107.17 in mid-afternoon trade.

The S&P CNX Nifty was down 31.55 points or 0.52% at 6,048.25.

The BSE clocked turnover Rs 3555 crore, lower than Rs 4076.03 crore on Wednesday, 5 January 2011.

The market breadth, indicating the health of the market, was weak. On BSE, 1,928 shares declined while 997 shares advanced. A total of 92 shares remained unchanged. The market breadth was strong in morning trade.

Among the 30-member Sensex pack, 20 declined while the rest gained.

The BSE Mid-Cap index fell 1.18%. The BSE Small-Cap index declined 1.04%. Both these indices underperformed the Sensex.

Most sectoral indices on BSE declined. The BSE Realty index (down 2.41%), Capital Goods index (down 1.88%), Auto index (down 1.59%), Consumer Durables index (down 1.41%), banking sector index Bankex (down 1.14%), PSU index (down 1.06%), FMCG index (down 0.99%) and Metal index (down 0.72%) underperformed the Sensex.

The BSE IT index (up 0.47%), Teck index (up 0.37%), Power index (down 0.07%), Healthcare index (down 0.13%) and Oil & Gas index (down 0.15%), outperformed the Sensex

Auto stocks declined on worries higher interest rates and higher vehicle prices could dent demand for vehicles. India's second largest motorcycle maker by sales Bajaj Auto plunged 3.6%, extending a three-day 10.61% slide after total vehicle sales declined 7.69% to 2.76 lakh units and motorcycle sales declined 8.3% to 2.43 lakh units in December 2010 over November 2010. Total vehicle sales rose 10% and motorcycle sales rose 11% in December 2010 over December 2009. It was the top loser from the Sensex pack.

India's top bike maker by sales Hero Honda Motors declined 0.93%, with the stock falling for the fifth straight day. The company reported a 33% growth in sales at 5.01 lakh units for December 2010 over the same month in 2009. The company recorded a sales growth of 16.4% during the calendar year 2010 with cumulative sales of over 5 million units. During the October-December quarter of 2010, the company sold 14,28,030 units, registering a 29% growth over the same period in 2009.

India's top truck maker by sales Tata Motors declined 1.82%, with the stock falling for the third straight day. The company's total sales jumped 31% to 67,441 in December 2010 over December 2009. The company's domestic sales for December 2010 were 61,632 units, 28% growth over 48,173 units sold in December 2009.

India's largest tractor maker by sales Mahindra & Mahindra shed 0.15%, with the stock falling for the second straight day. The company reportedly plans to raise vehicle prices by an average 1% shortly to offset rising input costs. The increase will be across products. The company's auto sales rose 42% to 34,062 units in December 2010 over December 2009. Domestic auto sales rose 43% to 32,546 units while exports increased 22% to 1,516 units.

India's largest car maker by sales Maruti Suzuki India lost 2.99%, with the stock falling for the second straight day. The company's sales rose 17% to 99,225 units in December 2010 over December 2009.

Metal pivotals saw mixed trend. India's largest non-ferrous metals firm by capacity Sterlite Industries slumped 3.8% after the company's American depository receipts, or ADR fell 2.41% to $16.58 on the New York Stock Exchange on Wednesday, 5 January 2011.

National Aluminum Company, Steel Authority of India, Jindal Steel & Power and JSW Steel fell by between 0.25% to 4.21%.

India's largest private sector steel maker by sales Tata Steel gained 0.41% after New Millennium Capital Corp said it received environmental approval for its iron ore project with Tata Steel and the joint venture partners expect to begin production by the second quarter of 2012.

India's top private sector aluminium maker by sales Hindalco Industries rose 1.7% to Rs 250.75 after striking a record high of Rs 251.90 in intra-day trade today, 6 January 2011.

Index heavyweight Reliance Industries (RIL) rose 0.94% to Rs 1084 after gyrating between Rs 1089 - Rs 1073.35 during the day. British oil explorer Hardy Oil and Gas on Wednesday said it abandoned a well in its key D9 exploration licence in India after failing to find gas in commercial quantities. Hardy holds a 10% participating interest in the licence, which is operated by RIL and is located on the east coast of India.

India's largest oil exploration firm by sales ONGC declined 3.17% after the company's chairman RS Sharma said the company's profitability in Q3 December 2010 may be hit due to higher subsidy pay out to refiners and higher global crude oil prices.

India's second largest software services exporter by sales Infosys rose 0.24% to Rs 3475.85. The stock today, 6 January 2011, hit a record high of Rs 3492. Infosys unveils Q3 December 2010 results on 13 January 2011.

Other IT pivotals also edged higher on upbeat economic data in the US, the key market for Indian IT firms. India's largest software services exporter by sales TCS gained 1.39%. India's third largest software services exporter by sales Wipro was flat.

India's largest power generation firm by capacity NTPC gained 1.33% on reports the ministry of environment and forests (MoEF) has granted environmental clearance to the company's 1,320 megawatt phase II of Mouda power plant in Maharashtra.

Cement stocks declined after a global ratings firm forecast a negative to stable outlook for the cement sector in 2011, on continued cement overcapacity leading to pressure on prices. ACC, Jaiprakash Associates, UltraTech Cement and Ambuja Cements down by between 2.45% to 5.75%.

India's top private sector utility firm Reliance Infrastructure rose 0.33%. The company during market hours today, 6 January 2011, said a meeting of committee of directors (allotment) will be held on 7 January 2011 to consider allotment at a price of Rs 928.89 per share to AAA Project Ventures, being the promoter company, pursuant to exercise of options attached to warrants (issued on 9 July 2009).

FMCG stocks declined on profit taking. ITC, Hindustan Unilever, United Spirits and Dabur India shed by between 0.69% to 2.03%.

Realty stocks declined on worries higher interest rates and property prices could dent demand for residential and commercial properties. HDIL, Indiabulls Real Estate, Unitech and DLF dropped by between 0.46% to 5 %.

India's second largest private sector bank by net profit HDFC Bank gained 0.89%, on bargain hunting after a two-day 3.51% fall.

However, other banking stocks edged lower. India's largest private sector bank by net profit ICICI Bank shed 1.59%. India's largest bank by net profit and branch network State Bank of India slipped 2.67%.

Fertiliser shares declined after the government on Wednesday, 5 January 2011, deferred a decision to free the prices of urea. Chambal Fertiliser & Chemicals, Rashtriya Chemicals & Fertilisers, National Fertilizers, Nagarjuna Fertilisers & Chemicals, Tata Chemicals GSFC and GNFC shed by between 2.14% to 8.24%.

Urea is a commonly used fertiliser used by Indian farmers. The market price of urea is determined by the government and the difference between the cost of production and the market price is given as subsidy to urea manufacturers.

Telecom stocks were mixed after reports citing telecom minister Kapil Sibal indicated that the 3G issue is almost resolved and soon the new guidelines for its launch will be set. The statement comes after the Department of Telecom (DoT) had issued notices to a few telecom operators asking them to stop the 3G services till they adhered to security norms for legal interception.

India's largest listed cellular services provider by sales Bharti Airtel rose 0.96%. India's second largest listed cellular services provider by sales Reliance Communications fell 0.14%.

Cals Refineries clocked highest volume of 2.69 crore shares on BSE. Bellary Steels (82.56 lakh shares), Suzlon Energy (78.65 lakh shares), Ravikumar Distilleries (60.43 lakh shares) and Ispat Industries (53.39 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 258.82 crore on BSE. Jindal Steel & Power (Rs 187.23 crore), Larsen & Toubro (Rs 81.56 lakh shares), Adani Enterprises (Rs 79.31 crore) and Reliance Industries (Rs 74.22 crore) were the other turnover toppers in that order.