RIL, Infy slide in volatile market

Key benchmark indices edged lower in a choppy trade to hit six-week closing lows. The market sentiment was edgy due to recent heavy selling by foreign funds and on continued worries the central bank may hike interest rates to tame inflation. The BSE 30-share Sensex was down 27.78 points or 0.14%, up close to 190 points from the day's low and off close to 240 points from the day's high. The market breadth was weak, having swung between positive and negative zone throughout the day. European stocks rose. Most Asian stocks edged higher.



Battered banking stocks and select auto stocks staged a comeback on bargain hunting. But, IT stocks declined on profit taking ahead of sector bellwether Infosys' Q3 December 2010 earnings on Thursday, 13 January 2011. Index heavyweight Reliance Industries (RIL) slipped below the Rs 1,000 mark only to regain that level in late trade.

Intraday volatility was immense on the domestic bourses. The key benchmark indices surged in opening trade on bargain hunting after a five-day steep fall. Volatility struck bourses in morning trade as the key benchmark indices rebounded sharply from negative zone after an initial rally. The market erased almost all the intraday gains in early afternoon trade. The market regained strength in afternoon trade. Wild intraday swings were witnessed in the key benchmark indices in mid-afternoon trade. The market hit a 6-week low after a sudden sell-off in late trade. The market bounced back in the last half-an-hour of trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, eased after a recent sharp surge. The index declined to 22.33% from Monday's (10 January 2011) close of 23.16%. 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 1088.20 crore on Monday, 10 January 2011, on the top of an outflow of Rs 964.60 crore on Friday, 7 January 2011. FII outflow in January 2011 totaled Rs 535.50 crore this month (till 10 January 2011). FIIs had bought equities worth Rs 2049.60 crore in December 2010.

Emerging-market equity funds saw a big jump in inflows for the week ended 5 January 2011, according to fund tracker EPFR Global. For that week, flows to emerging-market equity funds totaled $3.38 billion. Flows into Asia ex-Japan equity funds hit 7-week highs. Korea equity funds had their best week in 8 months despite tension with North Korea.

The government will announce industrial output data for the month of November on Wednesday, 12 January 2011. Industrial output soared 10.8% in October 2010. 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 government will announce inflation data for the month of December 2010 on Friday, 14 January 2011. The benchmark wholesale-price inflation cooled to near a one-year low of 7.48% in November 2010.

Corporate earnings for Q3 December 2010, which will start trickling this week, will set the direction for the stock 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.

European markets edged higher on Tuesday, 11 January 2011 on hopes that US companies will report positive results this week as the earnings season begins. The key benchmark indices in UK, Germany and France were up by between 0.65% to 1.2%.

Portugal is due to auction 2014 and 2020 bonds on Wednesday and Spain is auctioning 2016 bonds Thursday, when Italy is due to auction 2026 bonds.

Most Asian stocks rose on speculation that Japan's bond purchases will ease Europe's fund-raising crisis. Japanese Finance Minister Yoshihiko Noda said it was appropriate for his nation to buy euro-zone government bonds to support Ireland. The key benchmark indices in Singapore, Hong Kong, Taiwan, South Korea and China rose between 0.36% to 1.29%. But, the key benchmark indices in Indonesia and Japan fell 0.67% and 0.29% respectively.

Trading in US index futures indicated that the Dow could rise 37 points at the opening bell on Tuesday, 11 January 2011.

US shares ended on a mixed note in a volatile trading session on Monday, 10 January 2011, amid renewed worries about eurozone debt and concerns Portugal may be the next country to need an international bailout. The Dow Jones Industrial Average fell 37.31 points or 0.32% to 11,637.45. The S&P 500 index dipped 1.75 points or 0.14% to 1269.75 and the Nasdaq Composite index rose 4.63 points or 0.17% to 2707.80.

Back home, the market sentiment has been weak off late as data showing a surge in food inflation in late December 2010 has rekindled fears of interest rate hike by the Reserve Bank of India (RBI) at a quarterly policy review on 25 January 2011. Food inflation accelerated to the highest level in more than a year in late December 2010.

The Reserve Bank of India (RBI) governor D Subbarao, last week, said that the status quo maintained by the central bank in the policy rates at the last policy review should be interpreted only as a comma and not a full stop, suggesting further monetary tightening at the upcoming policy review meet on 25 January 2011.

Finance Minister Pranab Mukherjee, last week, 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.

The trade deficit in December 2010 narrowed to $2.6 billion from $8.9 billion in November 2010, the lowest in the last three years, trade secretary Rahul Khullar said on Saturday, 8 January 2011.

Meanwhile as per reports, the proposed Goods and Service Tax (GST) will not be rolled out before April 2012, two years after its slated implementation date, due to continued parliamentary disruption. The implementation of GST has already been postponed twice due to resistance from opposition party-ruled states and fears over state governments losing financial autonomy.

Prime Minister Manmohan Singh said during the weekend that the economy is likely to grow between 9 and 10% from the next financial year that starts from 1 April 2011, after growing 8.5% in the current financial year.

India's exports for December 2010 have registered a growth of 36.4%, the highest in 33 months, raising hopes that the country's total exports for the current fiscal will cross the set target of $200 billion. Exports in December 2010 touched $22.5 billion, while imports contracted by 11.1% to $25.1 billion, leading to a trade deficit of $ 2.6 billion, the lowest in three years. The country's exports in the April to December 2010 period stood at $164.7 billion, registering a growth of 29.5 %.

The government, last week, deferred a 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, last week, said 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.

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 BSE 30-share Sensex was down 27.78 points or 0.14% to 19,196.34, its lowest closing level since 26 November 2010. The Sensex gained 207.44 points at the day's high of 19,431.56 in early trade. The index lost 220.52 points at the day's low of 19,003.60 in late trade.

The S&P CNX Nifty was down 8.75 points or 0.15% at 5,754.10, its lowest closing level since 26 November 2010. Nifty had slipped to an intra-day low of 5,698.20 in late trade.

The market breadth was weak, having swung between positive and negative zone throughout the day. On BSE, 1787 shares declined while 1121 shares gained. A total of 102 shares remained unchanged.

The BSE clocked turnover of Rs 3407 crore, lower than Rs 3516.59 crore on Monday, 10 January 2011.

The BSE Mid-Cap index fell 0.67% and BSE Small-Cap index declined 0.87%. Both the indices underperformed the Sensex.

Sectoral indices on BSE were mixed. The BSE Bankex (up 1.24%), PSU index (up 0.49%), Auto index (up 0.37%), Capital Goods index (up 0.22%), Metal index (up 0.12%), HealthCare index (up 0.05%), FMCG index (down 0.08%) and Consumer Durables index (down 0.09%), outperformed the Sensex.

The BSE Realty index (down 2.74%), IT index (down 1.6%), Teck index (down 1.27%), Oil & Gas index (down 0.85%) and Power index (down 0.35%) underperformed the Sensex.

Among the 30-member Sensex pack, 16 gained while the rest slipped.

Index heavyweight Reliance Industries (RIL) slipped 1.62% to Rs 1014.30 after gyrating between day's high and low of Rs 999.10 and Rs 1048.60. As per report, gas production from RIL's D6 block in Krishna-Godavari basin has dropped to 52-53 million metric standard cubic metres a day (mmscmd) from 60 mmscmd last October. RIL owns 90% in the D6 block, off the east coast, while Canada's Niko Resources holds the remainder.

India's largest software services exporter by sales Infosys lost 1.98% to Rs 3,329.25. The stock declined ahead of its Q3 December 2010 results on Thursday, 13 January 2011 after striking a record high of Rs 3,493.95 on 7 January 2011. Analysts expect sequential growth in revenue and net profit of the IT bellwether in Q3 December 2010, primarily driven by volume growth and operational efficiencies.

For the IT sector, the negative impact of a surge in the rupee against the dollar could be offset by a favourable cross-currency movement during the quarter. On average basis during the quarter, the rupee appreciated 3.3% verses the dollar. On the flip side, there could be seasonal weakness in terms of fewer working days on account of Diwali, Thanksgiving and Christmas holidays during the quarter.

Other software pivotals were mixed ahead of Infosys' earnings. India's largest software services exporter by sales TCS shed 2.58%. India's third largest software services exporter by sales Wipro rose 0.88% to Rs 468.35, off intra-day low of Rs 455.70.

Some metal and mining stocks staged a comeback on bargain hunting after a recent steep slide. India's largest private sector aluminium maker by sales Hindalco Industries surged 3.46% to Rs 230.50. The stock rose on bargain hunting after correcting 11.14% in the preceding two trading sessions.

Sterlite Industries (up 0.15%), Hindustan Zinc (up 3.19%), Nalco (up 1.08%), Sesa Goa (up 2.99%) gained. Tata Steel, Jindal Steel & Power, Steel Authority of India and JSW Steel fell by between 0.48% to 4.46%.

Banking stocks gained in choppy trade, reversing recent slide triggered by concerns higher deposits rates may impact banks' net interest margins, thereby hurting profitability. India's largest private sector bank by net profit ICICI Bank rose 0.88%, with the stock snapping last six days losses. India's largest bank by net profit and branch network State Bank of India advanced 2.51%, with the stock snapping last five days losses.

But, India's second largest private sector bank by net profit HDFC Bank declined 0.39%, with the stock falling for the third straight day.

Select auto stocks gained on bargain hunting, halting a recent decline triggered by worries that higher interest rates and rising vehicle prices may dent demand for vehicles. India's second largest motorcycle maker by sales Bajaj Auto advanced 3.42%, reversing a steep 18.04% slump in six prior trading days.

India's top bike maker by sales Hero Honda Motors rose 1.81%, ending a 9.40% decline in previous seven trading sessions. The Hero group, which had agreed to buy out its Japanese partner Honda's 26% stake in the two-wheeler joint venture Hero Honda, reportedly plans to enter the three-wheeler business, competing against market leader Bajaj Auto.

India's largest tractor maker by sales Mahindra & Mahindra rose 0.86%, ending five-day 7.35% slide.

The automobile industry is expected to grow 15 to 16% in 2011, Pawan Goenka, president of the industry body Society of Indian Automobile Manufacturers (SIAM) said on Tuesday, 11 January 2011.

India's top power equipment maker by sales Bharat Heavy Electricals rose 2.35% on reports the company has won a Rs 6,100 crore tender from a Rajasthan state utility.

Among other capital goods stocks, Larsen & Toubro, ABB and Praj Industries gained by between 0.17% to 5.58%.

Realty stocks declined on worries higher interest rates and property prices could dent demand for residential and commercial properties. Also reports of the income tax (I-T) raids at four premises of unlisted realty developer Lodha Group on Monday, 10 January 2011, on alleged misreporting of income dampened sentiment. Indiabulls Real Estate, DLF, HDIL and Unitech declined by between 0.17% to 6.49%.

Telecom stocks rose on fresh buying. Bharti Airtel, Reliance Communications and Idea Cellular gained by between 0.1% to 2.07%.

Cals Refineries clocked highest volume of 1.32 crore shares on BSE. Unitech (64.17 lakh shares), BAMPSL Securities (61.26 lakh shares), Ispat Industries (58.58 lakh shares) and Jupiter Bioscience (55.59 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 261.39 crore on BSE. Tata Steel (Rs 104.46 crore), Reliance Industries (Rs 81.99 lakh shares), ICICI Bank (Rs 80.21 lakh shares) and JSW Steel (Rs 77.60 lakh shares) were the other turnover toppers in that order.