Sensex settles below 18,000 as RIL drops over 4%

The key benchmark indices edged lower, extending Thursday's decline, on rising political uncertainties and a spurt in crude oil prices. Notwithstanding a firm start, the barometer index had slipped below the psychological 18,000 mark in mid-morning trade. Intraday volatility was high. European equities, US index futures and Asian markets edged higher following a decision of the G-7 leaders to intervene in the currency markets to curb the yen's rise. The BSE 30-share Sensex was down 271.06 points or 1.49% to 17,878.81, off 380.8 points from the day's high. The index had declined 1.14% on Thursday on fears of further monetary tightening by the central bank to tame high inflation.



With India importing 70% of its oil requirements, surging oil prices - on escalating tensions in the Middle East - stoked concerns about faster inflation and higher interest rates. Also uncertainty prevailing on the crisis in the Middle East and North Africa region (MENA) and hardening of global commodity prices played the spoilsport.

Coming back to today's trade, the market breadth was weak. All the 13 sectoral indices on the BSE edged lower with shares from oil & gas pack leading decliners. Index heavyweight Reliance Industries dropped 4% on high volumes on reports the company's gas output from the Krishna Godavari basin may decline in fiscal year 2013. Metal stocks rose on firm prices on the London Metal Exchange on Thursday, 17 March 2011. Software stocks declined on worries the earthquake-stricken Japan's crisis is likely to slow down deals and hit plans to grow inorganically. Telecom pivotals edged lower in late trade.

The BSE 30-share Sensex was down 271.06 points or 1.49% to 17,878.81. The index lost 300.34 points at the day's low of 17,849.53 in late trade. The Sensex gained 109.74 points at the day's high of 18,259.61 in early trade.

The S&P CNX Nifty was down 72.95 points or 1.34% to 5,373.70 after gyrating between 5,483.05 and 5,366.40 during the day.

The market breadth, indicating the health of the market, was weak. On BSE, 1818 shares declined while 1079 shares advanced. A total of 107 shares remained unchanged. Breadth weakened after showing strength in opening trade.

The total turnover on BSE amounted to Rs 2856 crore, lower than Rs 3000 crore on Thursday, 17 March 2011.

The BSE Mid-Cap index slipped 0.43% and the BSE Small-Cap index declined 0.78%. Both these indices outperformed the Sensex.

All the 13-sectoral indices on the BSE logged declines. The BSE Oil & gas (down 2.67%), the BSE Auto (down 2.01%), and the BSE Realty (down 1.65%), underperformed the Sensex. The BSE Metal (down 0.12%), the BSE FMCG (down 0.55%), and the BSE PSU (down 0.61%), outperformed the Sensex.

Among the 30-member Sensex pack, 28 declined while only two of them managed gains. Tata Power (up 0.17%), and Tata Steel (up 0.04%), edged higher from the Sensex pack.

Index heavyweight Reliance Industries (RIL) dropped 4.02% to Rs 990, off day's high of Rs 1036 and low of Rs 987.20. The stock declined on high volume of 18.09 lakh shares on reports the company's gas output from the Krishna Godavari basin may decline in the year ending March 2013 (FY 2013).

As per reports, RIL's told the sector regulator that gas sales estimates from D1 and D3 fields in the Krishna Godavari (KG)-D6 basin could be as low as 38 million standard cubic meters of natural gas per day (mmscmd) in FY 2013.

However, RIL after market hours on Friday, 18 March 2011, clarified that figures in the report are purely provisional and indicative and are subject to variations based on actual operations in the future years.

Shares of state run oil marketing companies declined after crude oil prices rose in the Asian electronic trading on Friday, 18 March 2011. Indian Oil Corporation (IOC) (down 1.31%), Bharat Petroleum Corporation (BPCL) (down 2.55%) and Hindustan Petroleum Corporation (HPCL) (down 2.19%) edged lower.

Telecom pivotals edged lower in late trade. India's second largest listed cellular services provider by sales Reliance Communications (RCom) slipped 2.25%, halting four-day gains, on profit booking. The recent gains were triggered after the company said it got first tranche of Rs 3000 crore from China Development Bank underwritten facility of Rs 8700 crore. RCom last week said it will save over Rs 500 crore in annual interest cost after securing aggregate financing of Rs 8700 crore from the Chinese bank.

India's largest listed cellular operator by sales Bharti Airtel fell 0.41%. As per reports, the company signed up 3.2 million mobile users in February 2011, taking its total to about 159 million.

Power utility major Reliance Infrastructure lost 4.25% to Rs 625.05, ending two-day gains, on profit booking. The company on Thursday said it has secured a Rs 7200 crore (US$ 1.6 billion) EPC contract for the Samalkot power project. It was the top loser from the Sensex pack.

Software stocks declined on worries the earthquake-stricken Japan's crisis is likely to slow down deals and hit plans to grow inorganically. Japan is the second largest IT services market globally after the US.

India's second software services exporter Infosys Technologies fell 1.28%. India's largest software services exporter TCS shed 1.69% and India's third largest software services exporter Wipro slipped 1.09%.

India's largest carmaker by sales Maruti Suzuki India fell 1.65%, extending Thursday's over 4% slide, on concerns of a nuclear crisis in Japan. Maruti Suzuki has substantial imports of raw materials from its Japanese parent Suzuki Motor. Reports indicated the company had not hedged its yen exposure after 28 February 2011 as the management had expected the yen to depreciate against the US dollar.

National Aluminium Company (Nalco) gained 3.37% on reports it has reduced aluminium price by Rs 2,500 per tonne for the domestic market in sync with the declining international price.

VIP Industries declined 1.15% on profit booking after the stock rallied over 24% in the preceding four sessions.

Motherson Sumi Systems soared 6.45% to Rs 207.05. The stock hit a record high of Rs 222 in the intra day trade today, 18 March 2011.

Reliance Industries was the top traded counter on the BSE with turnover of Rs 180.94 crore followed by Tata Coffee (Rs 156.74 crore), Acropetal Technologies (Rs 135.80 crore), State Bank of India (Rs 98.59 crore) and Tata Steel (Rs 75.48 crore) were the other turnover toppers in that order.

Cals Refineries clocked highest volume of 4.45 crore shares on BSE. Acropetal Technologies (1.09 crore shares), Sanraa Media (56.18 lakh shares), Bampsl Securities (52.26 lakh shares) and Reliance Communications (42.96 lakh shares), were the other volume toppers in that order.

US crude futures were up $0.57 a barrel or 0.56% to $101.99 a barrel led by ongoing tensions in the oil-rich Gulf region and the impact from Japan's nuclear crisis.

European markets were trading higher on Friday, 18 March 2011, as investors welcome the G-7 industrialized nations' agreement to intervene in the currency markets to stem the yen's rise and support the Japanese economy. The key benchmark indices in UK, Germany and France were up by between 0.38% to 0.86%.

Asian markets edged higher on Friday as concern eased over nuclear radiation following last week's earthquake in Japan, and as the G-7 nations began intervening in the foreign-exchange market for the first time in more than a decade. The key benchmark indices in China, Hong Kong, South Korea, Indonesia and Taiwan were up by between 0.07% to 1.35%. Japan's Nikkei 225 index rose 2.72% as the nation stepped up efforts to restore power at a damaged nuclear power plant. Singapore's Straits Times fell 0.24%.

US stocks rebounded Thursday on signs that the US economy is improving helping investors put aside fears over Japan's nuclear crisis, if only temporarily. The Dow Jones industrial average gained 161.29 points, or 1.39%, to 11,774.59. The Standard & Poor's 500 Index was up 16. 84 points, or 1.34%, to 1,273.72 and the Nasdaq rose 19.23 points, or 0.73%, to 2,636.05.

In economic news, the Labor Department said on Thursday its Consumer Price Index rose 0.5% in February 2011, the largest gain since June 2009, after increasing 0.4% in January 2011. Core CPI excluding food and energy rose 0.2% after a similar rise in January. On the other hand, initial claims for unemployment benefits fell 16,000 to a seasonally adjusted 385,000 last week, in line with expectations, hinting at a strengthening in the labor market.

Trading in US index futures indicated that the Dow could rise 74 points at the opening bell on Friday, 18 March 2011.

Back home, as per provisional figures, foreign funds sold shares worth Rs 1128.61 crore and domestic funds bought shares worth Rs 432.07 crore on Thursday, 17 March 2011.

Political uncertainty following fresh allegations of corruption by the ruling government weighed on the sentiment. The opposition parties on Thursday called for the resignation of Prime Minister Manmohan Singh after a Wikileaks cable suggested the Congress party bought votes in parliament in 2008 to secure a civilian nuclear deal between India and the US, forcing adjournment of both Houses of Parliament.

Meanwhile, the Prime Minister Manmohan Singh on Friday, 18 March 2011m said he had no knowledge of vote buying to win a confidence vote in 2008 and doubted the veracity of the claims, a day after defying resignation calls over the issue.

The Reserve Bank of India (RBI) raised key interest rates at a mid-quarter policy review on Thursday, 17 March 2011 and the central bank said it will continue with its anti-inflationary stance. The central bank also warned that continuing uncertainty about energy and commodity prices may vitiate the investment climate, posing a threat to the current economic growth trajectory.

While the year-on-year non-food credit growth at 23% till February 2011 remains above the RBI's indicative projection of 20% for the year ending March 2011, the pace of credit expansion has moderated since December 2010, the RBI said in its mid-quarter policy review today. Monetary transmission is increasingly visible as banks continue to raise their lending rates, it added.

The RBI hiked the repo rate or the short term lending rate to 6.75% from 6.50% while the reverse repo rate or the short term borrowing rate was raised to 5.75% from 5.50% to tame high inflation. The RBI left the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) unchanged at 6% and 24%, respectively. It further said that the central bank would continue with its policy to contain rate of price rise. The hike in key policy rates is likely to make loans, including housing, auto and corporate loans, dearer.

The RBI lifted the wholesale price index-based inflation forecast to around 8% for end March 2011 from 7% earlier. Further upside risks to inflation have stemmed from high international crude prices, their impact on freely priced petroleum products, the increase in administered coal prices and pick-up in non-food manufactured product prices, the central bank said.

With regard to domestic economic growth outlook the RBI said continuing uncertainty about energy and commodity prices may vitiate the investment climate, posing a threat to the current growth trajectory. In particular, the weak performance of capital goods in the index of industrial production suggests that investment momentum may be slowing down.

India featured among the 'least favoured' investment destinations, according to a foreign fund manager's survey. Fund managers have reduced their allocations towards emerging markets, including India, for the fourth successive month to reach the lowest level in two years, the survey said.

Advance tax payments made by top 100 firms based in the country's financial capital --Mumbai reportedly rose by 25% in the Q4 March 2011 over Q4 March 2010, hinting robust earnings. Companies pay advance tax every quarter based on their projected income for the year. Higher advance tax collections reflect more income for firms indicating that companies' sales are growing to meet rising demand.

The Union Cabinet on Tuesday, 15 March 2011, approved a bill to usher in a national goods and services tax (GST), the final step in the country's most ambitious tax reform before introducing it in parliament. The GST will cut business costs and boost government tax revenue, but will likely miss its April 2012 deadline for implementation due to resistance from several states and the Bharatiya Janata Party.