Market loses ground as rally in crude oil stokes inflation worries

The key benchmark indices edged lower as investors shunned equities amid concerns about high oil prices and the ongoing spat on seat sharing between the Congress and its regional ally DMK. Nevertheless, the market came off the day's low after a steep intraday slide on market buzz the Congress and DMK may resolve differences over seat-sharing in assembly polls in Tamil Nadu and that a pact may be worked out by the two sides by this evening. Reports of likely good rains this year also aided the intraday recovery. The BSE 30-share Sensex was down 263.78 points or 1.43%, up 163.96 points from the day's low and off 138.98 points from the day's high. The S&P CNX Nifty fell below the psychological 5,500 mark.



The market had surged last week after Finance Minister Pranab Mukherjee refrained from raising excise duty in the Union Budget 2011-12 unveiled on Monday, 28 February 2011.

Coming back to today's trade, all the 13 sectoral indices on the BSE fell. The market breadth was weak. Index heavyweights -- Reliance Industries (RIL) and ICICI Bank cut intraday losses. Auto stocks declined on worries the government may hike fuel prices as crude oil prices surged to 29-month highs. Capital goods stocks fell on profit taking. Banking stocks were down across the board as the rally in crude oil prices fueled concerns over inflation. Metal stocks fell as metal prices declined on London Metal Exchange on Friday, 4 March 2011. Aviation firms declined on concerns jet fuel prices may rise further after crude oil surged to the highest level in 29 months.

The market tumbled in early trade on political worries and on high crude oil prices. The Sensex trimmed losses after hitting fresh intraday low in morning trade. The market extended initial losses to hit fresh intraday low in mid-morning trade. The market extended losses to hit fresh intraday lows in early afternoon trade. The market hit a fresh intraday low in afternoon trade. The market trimmed losses in mid-afternoon trade on reports the South West monsoon rains are likely to be normal in 2011. Stocks were choppy in late trade.

As per media reports, DMK and Congress have reopened channels of communication over seat sharing in assembly polls in Tamil Nadu. The alliance had reached a breaking point on Saturday, 5 March 2011, when a DMK high level committee decided to pull out its six ministers from the Congress-led UPA government at Centre.

The BSE 30-share Sensex was down 263.78 points or 1.43% to 18,222.67. The Sensex slumped 427.74 points at the day's low of 18,058.71 in afternoon trade. The index fell 124.80 points at the day's high of 18,361.65 in early trade.

The S&P CNX Nifty was down 75.60 points or 1.36% to 5,463.15

The market breadth, indicating the health of the market, was weak. On BSE, 1,962 shares declined while 893 shares advanced. A total of 104 shares remained unchanged.

The BSE Mid-Cap index fell 1.41% to 6,499.15 and outperformed the Sensex. The BSE Small-Cap index slipped 1.43% to 7,884.86, matching the Sensex's fall.

All the 13 sectoral indices on the BSE logged declines. The BSE Capital Goods index (down 2.36%), the BSE Auto index (down 2.55%), and the BSE Realty index (down 1.66%), underperformed the Sensex.

The BSE FMCG index (down 0.19%), the BSE Healthcare index (down 0.75%), and the BSE PSU index (down 0.75%), outperformed the Sensex.

BSE clocked turnover of Rs 2436 crore, lower than Rs 3165.97 crore on Friday, 4 March 2011.

From the 30-member Sensex pack, 25 fell and the rest rose. Wipro, Cipla and NTPC rose by between 0.45% to 1.22%.

Index heavyweight Reliance Industries (RIL) slipped 0.65% to Rs 975.35. The stock came off the day's low of Rs 964.10, as a sharp increase in global crude oil prices will improve refining margins.

Cairn India gained 2.02% as higher crude oil prices would result in higher realizations from crude sales for oil exploration firms such as Cairn India. Crude oil surged to the highest in 29 months on concerns supply disruptions may spread amid unrest in Libya while signs of US economic recovery stoked speculation fuel demand will rise. US crude oil futures for April 2011 delivery were up by $2.15 a barrel or 2.06% to $106.57 a barrel on the Asian electronic trade on Monday, 7 March 2011.

State-owned oil marketing companies revise jet fuel prices on the 1st and 16th of every month, based on the average international price in the preceding fortnight. Jet fuel constitutes more than 50% of operating cost for airliners.

Metal stocks fell as LMEX, a gauge of six metals traded on the London Metal Exchange declined 0.3% on Friday, 4 March 2011. Steel Authority of India, Jindal Steel & Power, Sterlite Industries, JSW Steel Hindalco Industries, Hindustan Zinc, JSW Steel and Tata Steel fell by between 0.24% to 3.61%.

Banking stocks fell as a rally in crude oil prices fueled concerns over inflation. The Reserve Bank of India is seen raising interest rates by 25 basis points at a mid-quarter monetary policy review on 17 March 2011. Axis Bank, HDFC Bank, State Bank of India, Punjab National Bank and Bank of India were down by between 1.16% to 3.49%.

India's largest private sector bank by market capitalisation ICICI Bank fell 0.82% to Rs 1008, off the day's low of Rs 992.

Bank of Baroda rose 1.17%, reversing initial losses after the state-run bank's board of directors approved an up to Rs 3280.90 crore on preferential basis to Government of India. The decision was taken on government's mandate to infuse capital in those public sector banks where Government of India's holding is less than 58%, by way of preferential allotment of equity in favour of Government of India. The preferential issue is priced at Rs Rs.902.14 each.

Bajaj Finserv tumbled 5.38% after the company clarified that it does not plan to sell shares to US-based Berkshire Hathaway group of companies.

India Infoline plunged 9.07% after the stock turned ex-dividend today, 7 March 2011, for an interim dividend of Rs 3 per share for the year ending March 2011.

Auto stocks declined on worries the government may hike fuel prices as crude oil prices surged to 29-month highs. Higher fuel prices and possibility of further increase in interest rates to tame inflation may dent demand for vehicles. India's top truck maker by sales Tata Motors lost 3.72%. India's largest tractor and utility vehicles maker by sales Mahindra & Mahindra (M&M) lost 2.69% and India's largest car maker by sales Maruti Suzuki India shed 3.86%.

India's largest bike maker by sales Hero Honda Motors fell 0.22% while India's second largest bike maker by sales Bajaj Auto declined 0.99%.

Auto stocks had surged over the past few days on higher sales in February 2011 and as the government kept excise duties on automobiles unchanged in Union Budget 2011-2012, contrary to market expectations of a 2% hike. The government's focus on the rural economy in the Budget may spur demand for two-wheelers and cars.

Capital goods stocks fell on profit taking. Thermax, Punj Lloyd, ABB, Crompton Greaves, BEML and Larsen & Toubro shed by between 0.42% to 4.64%.

Punj Lloyd lost 4.80% after the company said that projects in Libya constitute approximately 16.77% of revised order backlog of the firm.

Realty stocks declined on worries higher interest rates could dent demand for residential and commercial properties. DLF, Sunteck Realty, Indiabulls Real Estate and Unitech fell by between 0.19% to 3.56%. Most property deals are driven by loans.

DB Realty slumped 4.93%, after company's managing director Shahid Balwa, who is allegedly involved in 2G scam, resigned from the company. Balwa-promoted DB Reality had floated Swan Telecom that was the recipient of 2G licenses in 13 circles including Mumbai and Delhi. Former telecom minister A Raja allegedly helped Swan bag 2G licenses. Swan got the licenses for Rs 1537 crore but later sold 45% stake to the UAE telecom giant Etisalat for approximately Rs 4500 crore within months of bagging the spectrum.

India's second largest listed cellular services provider by sales Reliance Communications (RCom) lost 3.54% after credit rating firm ICRA placed RCom's LAA+ long-term rating assigned to the Rs 5000 crore non-convertible debenture programme and Rs 28116 crore long-term fund based/non-fund based limits under watch with negative implications. The rating action takes into consideration regulatory uncertainties and overall negative sentiments about the telecom sector in India, which in ICRA's opinion, may adversely affect the company's ability to deleverage its balance sheet, the ratings firm said.

Tata Power Company rose 0.97%, extending recent gains. Tata Powers plans to spend Rs 70000 crore ($15.5 billion) to increase capacity eightfold to 25,000 megawatt by 2017.

Aviation firms declined on concerns jet fuel prices may rise further after crude oil surged to the highest level in 29 months. SpiceJet (down 6.73%), Jet Airways (down 3.73%) and Kingfisher Airlines (down 2.87%), declined. State-owned oil marketing companies revise jet fuel prices on the 1st and 16th of every month, based on the average international price in the preceding fortnight. Jet fuel constitutes more than 50% of operating cost for airliners.

FMCG firm Marico spurted 4.62% and Nestle India rose 3.14% to Rs 3762.15 on defensive buying in a weak market.

Shakti Pumps (India) jumped 7.23% after the company said its board will meet on 11 March 2011 to consider issue of bonus shares. The company announced the board meet after market hours on Friday, 4 March 2011.

Insecticides (India) spurted 5.23% after the company today, 7 March 2011, entered into an agreement to acquire the brand 'MONOCIL' along with all exclusive rights from Nocil. Shares of Nocil surged 14.47%.

State Bank of India clocked highest turnover of Rs 121.49 crore on BSE. Coal India (Rs 84.79 crore), Tata Steel (Rs 82.16 crore), Larsen & Toubro (Rs 62.58 crore) and Reliance Industries (Rs 58.43 crore) were the other turnover toppers in that order.

Cals Refineries clocked highest volume of 1.10 crore shares on BSE. SpiceJet (58.59 lakh shares), Unitech (46.86 lakh shares), Bampsl Securities (42.83 lakh shares) and Shree Ashtavinayak Cine Vision (57.26 lakh shares) were the other volume toppers in that order.

High crude oil prices remain a cause for concern for India which imports majority of its crude oil requirements. US crude futures were up $2.15 a barrel or 2.06% to $106.57 a barrel. Oil futures climbed as fighting in Libya raged on, adding to concern popular unrest will spread to other, nearby oil-producing states. Over the weekend, heavy fighting continued in Libya, with pro-government forces battling protesters for control of key towns and ports.

Oil prices have seen big gains recently as unrest gripped the Middle East and North Africa, spreading from Tunisia to the surrounding areas, including Libya. There are concerns that a pro-democracy movement could spread to large-scale oil producer Saudi Arabia. Closer home, the Reserve Bank of India is expected to raise rates by 25 basis points at its mid-quarter policy review on 17 March 2011 as headline inflation remains high.

India dedicated equity funds attracted $50 million in net new cash in the week ended 2 March 2011, latest data from global fund tracker EPFR Global showed.

European equities were trading mixed on Monday. The key benchmark indices in Germany and France fell 0.09% and 0.29% respectively. UK's FTSE 100 rose 0.36%.

Moody's cut Greece's credit rating by three notches and kept it on review for further downgrades on Monday, citing significant risks to its fiscal restructuring program and the chance of a voluntary debt restructuring.

Select Asian stocks declined on Monday on worries rising crude oil prices may temper risk-taking and start eating into corporate profitability. The key benchmark indices in Hong Kong, Japan, South Korea and Taiwan fell by between 0.41% to 1.76%. The key benchmark indices in China, Singapore and Indonesia rose by between 0.17% to 1.86%.

US index futures were volatile and wiped out gains after reversing initial losses. Trading in US index futures indicated that the Dow could fall 3 points at the opening bell on Monday, 7 March 2011. Wall Street erased most of its weekly gains on Friday as fears of more geopolitical turmoil and higher oil prices threaten global economic recovery. The Labor Department said payrolls rose by 192,000 in February, and the unemployment rate unexpectedly dipped to 8.9% from 9%.

Back home, global rating firm Moody's today, 7 March 2011, said India's recent budget plan for fiscal 2012 is "credit positive" for the Indian government's current Baa3 rating with a stable outlook. The budget projects a deficit of 4.9% of GDP, excluding privatization revenues, down from the 5.3% estimated for fiscal 2011. "This will sustain a faster de-leveraging of government debt than originally forecast, and is credit positive for the Indian government," Moody's said.

Among the positive factors, Moody's cited a liberalization of domestic petroleum prices and one-off price increases in kerosene and liquefied petroleum gas which support the profitability of oil marketing companies, thereby limiting the need to lend to public-sector oil companies. "Nevertheless, high oil prices still pose a risk to the projected budget deficit given the absence of a full or much greater pass through of global oil prices to end users," the rating agency said.

The food price index rose 10.39% and the fuel price index climbed 12.56% in the year to 19 February 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 11.49% and 12.14%. The primary articles price index was up 14.85% compared with an annual rise of 15.77% a week earlier.

India's services sector expanded in February at its fastest pace in seven months, helped by a steady expansion of new business, even as input price pressures intensified, a survey showed on Thursday. The HSBC Markit Business Activity Index based on a survey of around 400 companies, rose to 60.2 in February 2011 from 58.1 in January 2011, staying above the 50 mark that separates growth from contraction for the 22nd consecutive month. The PMI'snew business sub-index, at 59.6, recorded its strongest growth since June as market conditions improved, and developed economies recovered. The degree of positive sentiment in the business expectations sub-index was the strongest in 16 months.

The manufacturing sector expanded at its fastest clip in three months in February 2011 as more new orders poured in, but input prices rose at a record pace, a survey showed on Tuesday, 1 March 2011. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 Indian companies, rose to 57.9 in February from 56.8 in January. This was the 23rd consecutive month the key index of manufacturing in Asia's third largest economy has been above the 50 mark that divides growth from contraction.