Market hits one-week low on concerns over earnings growth

The key benchmark extended recent losses to settle at one-week lows on worries over corporate earnings growth. A rally in crude oil prices to 2-1/2-year highs also raised macroeconomic worries as Indian stocks defied higher world stocks. The BSE 30-share Sensex was down 139.73 points or 0.71%, off close to 245 points from the day's high and up close to 60 points from the day's low. The market breadth was weak.

Index heavyweight Reliance Industries (RIL) dropped. Realty stocks fell on profit taking after recent strong gains. Auto stocks also fell on profit taking. Bank shares dropped on worries high inflation and rising interest rates would hurt future profits. Metal stocks also fell. FMCG and capital goods stocks bucked weak market. PSU OMCs and airlines stocks fell on higher crude oil prices.



The market surged in early trade as data showing sustained buying by foreign funds and higher Asian stocks boosted sentiments. The market reversed initial gains to hit fresh intraday lows in morning trade as higher crude oil prices raised macroeconomic worries. The market trimmed losses after hitting fresh intraday low in mid-morning trade. It further extended recovery in early afternoon trade. Intraday recovery proved short-lived as the key benchmark retreated again in afternoon trade on worries over corporate earnings growth. The market extended losses to hit fresh intraday low in mid-afternoon trade. The market trimmed losses after hitting one-week low in late trade.

High global commodity prices will add to pressure on profit margins of Indian firms caused by rising salaries and higher interest rates. Prices of aluminum and copper are seen rising further as Japan rebuilds after last month's massive quake and tsunami.

India imports majority of its crude oil requirements and a surge in crude oil prices over the past few months has sparked inflation and interest rate worries. The Reserve Bank of India (RBI) is seen raising key short term policy rates by 25 basis points at its annual 2011-2012 monetary policy review on 3 May 2011. Copper rose to a one-month high in London today, 8 April 2011, on optimism global economic growth will sustain demand for industrial metals. Aluminum rose to the highest level since 2008.

High oil prices have also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were up $1.48 a barrel at $111.78 a barrel. The price rose $1.47, or 1.4% to $110.30 a barrel in New York on Thursday, 7 April 2011, the highest settlement price since 22 September 2008.

The International Monetary Fund on Thursday warned that the global economy was entering a period of scarcer oil that could drive prices up rapidly. In new analysis by the Washington-based global financial institution, the IMF said market tensions were increasing between growing demand for oil from fast-growing emerging market economies, like China, and production constraints due to maturing oil fields.

The BSE 30-share Sensex was down 139.73 points or 0.71% to 19,451.45, its lowest closing level since 1 April 2011. The Sensex fell 202.76 points at the day's low of 19,388.42 in late trade. The index gained 106.03 points at the day's high of 19,697.21 in early trade.

The S&P CNX Nifty was down 43.70 points or 0.74% to 5,842 it lowest closing level since 1 April 2011. Nifty hit low of 5,822 in late trade.

The BSE Mid-Cap index fell 1.25% and the BSE Small-Cap index declined 1.4%. Both these indices underperformed the Sensex.

The market breadth, indicating the health of the market, was weak. On BSE, 1943 shares declined while 1009 shares advanced. A total of 87 shares remained unchanged. The breadth was strong at the onset of the trading session.

Among the 30-member Sensex pack, 25 declined while the rest advanced.

Index heavyweight Reliance Industries (RIL) shed 1.53% to Rs 1024.25, off the day's high of Rs 1049.55. RIL, last week, bagged two blocks in the ninth round of oil and gas block auctions held by the government.

As per recent reports, RIL doubled fuel exports from its world's biggest refining complex last month as it boosted gasoline shipments to the US ahead of the driving season. The company, controlled by billionaire Mukesh Ambani, increased sales from its Jamnagar facility to at least 2 million metric tonnes from 8.5 lakh tonnes in February 2011.

State-run oil marketing companies fell as US crude oil prices rose to a fresh 2-1/2-year high. Indian Oil Corporation (down 0.86%), Hindustan Petroleum Corporation (down 3.27%) and Bharat Petroleum Corporation (down 2.02%), declined.

Higher crude oil prices will increase under-recoveries of state-run oil marketing companies on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Index heavyweight, Larsen & Toubro rose 0.51% to Rs 1675.65. The stock hit high of Rs 1693 and the low of Rs 1652. A panel set up by environment ministry has objected to the proposed site of Larsen & Toubro's $2.2 billion power plant in Orissa, citing concerns over the project's likely impact on water supply and the environment in the region.

India's largest power equipment maker by sales Bhel rose 0.18%. Bhel expects new order inflows to rise by 10% in the year ending March 2012 from Rs 60507 crore in the year ended March 2011 (FY 2011) . Bhel's order book registered a muted growth of 2.48% to Rs 60507 crore in FY 2011 over the year ended March 2010 (FY 2010).

FMCG stocks gained as revenue growth boosted by price hikes is seen lifting bottom line of FMCG firms in Q4 March 2011. Cigarette maker ITC rose 0.88% to Rs 184.10. The stock hit record high of Rs 185.90 today. Hindustan Unilever gained 0.11%.

High beta metal stocks fell on profit taking. Jindal Steel & Power, Sail, JSW Steel, Hindalco Industries, Jindal Saw and Nalco fell by between 0.66% to 2.99%.

India's largest non-ferrous metals and mining firm by capacity Sterlite Industries fell 0.2%, reversing initial gains, and Hindustan Zinc jumped 2.95%. Parent firm Vedanta Resources said Friday that it achieved record zinc production at its Indian unit Hindustan Zinc in Q4 March 2011 and record production of aluminum for the quarter. The group said refined zinc production was up 29% and aluminum production was up 7%, helped by new smelters becoming operational. Production of iron ore in the quarter dropped 21% due to the state-wide export ban in Karnataka, which has been in place since the end of July.

Sesa Goa fell 0.84%. The company's iron ore production declined 21% to 5.49 million tones in Q4 March 2011 over Q4 March 2010.

India's largest steel maker by sales Tata Steel fell 1.23%. The company said on Friday sales from its Indian operations rose 4% to 6.41 million tonnes in the year ended March 2011 (FY 2011) over the year ended March 2010 (FY 2010). Indian operations account for about a quarter of the group's total annual global capacity of about 30 million tonnes, which includes unit Corus, Europe's second-largest steelmaker. The company's crude steel production in India stood at 6.86 million tonnes for the FY 2011 up 4.4% over FY 2010, Tata Steel said.

Tata Steel has not changed its position regarding its stake in Riversdale Mining, Vice-Chairman B. Muthuraman said on Friday, as global miner Rio Tinto won control over Riversdale with a $4 billion offer. Tata Steel is the biggest shareholder with a 27% stake in Rivesdale.

Bank shares dropped on worries high inflation and rising interest rates would hurt future profits. India's largest state run bank by net profit and branch network State Bank of India (SBI) declined 1.05%. Pratip Chaudhuri has taken over as the new chairman of State Bank of India the state-run bank said late on Thursday. Chaudhuri, 57, has been working with State Bank for 37 years and takes over from O.P. Bhatt. Before taking up the top role, Chaudhuri was deputy managing director in the international banking division of thebank.

India's largest private sector bank by net profit ICICI Bank fell 0.39%, reversing initial gains. India's second largest private sector bank by net profit HDFC Bank shed 0.12%, reversing initial gains.

The Reserve Bank of India today, 8 April 2011, extended its special liquidity easing steps. The central bank extended the second daily borrowing window until 6 May 2011 for banks to bridge their cash mismatches. It also said banks can avail liquidity to the extent of up to 1% of their net deposits and apply for a waiver if they fall short of the mandated bond-holding ratio due to this measure. Indian banks have to maintain 24% of the deposits in cash, gold or approved securities. These measures were to expire today.

The RBI's liquidity easing steps will be reviewed after the central bank takes a view on the recommendations submitted by a panel on revamping the monetary policy framework, it said.

Auto stocks fell across the board on profit taking after the recent strong gains. India's top small car maker by sales Maruti Suzuki declined 1.95%, with the stock falling for the third straight day. The company announced after market hours on Wednesday, 6 April 2011, that it would recall 13,157diesel engine cars. The company said it would inspect the 'connecting rod bolt' for units of its Swift and Ritz model diesel cars with engines manufactured between 13 November 2010 and 4 December 2010.

Maruti Suzuki increased the prices of its products by 0.2% to 2.4% from 4 April 2011, depending on the models to offset rising costs of key inputs viz. steel, aluminum, copper and natural rubber.

India's second largest bike maker by sales Bajaj Auto fell 1.72%. The company's total vehicle sales increased 12% to 3.07 lakh units in March 2011 over March 2010. The company announced its March 2011 sales figures on Monday, 4 April 2011.

India's largest truck maker by sales Tata Motors declined 2.84%. The company had hiked prices of some car models by Rs 7,000 to Rs 36,000 from 1 April 2011.

India's top tractor and utility vehicles maker by sales Mahindra & Mahindra shed 0.63%. The company has reportedly raised prices on most of its models by 1.5% to 2% recently to offset higher commodity prices.

India's largest bike maker by sales Hero Honda Motors skidded 1.84%, snapping last thirteen days' gain. Hero Honda's total sales rose 24.4% to 5.15 lakh units in March 2011 over March 2010. The monthly sales in March 2011 were record monthly sales.

Realty stocks fell on profit taking after the recent strong gains. DLF, Ackruti City, Indiabulls Real Estate, HDIL and Unitech shed by between 2.16% to 5.23%.

India's largest listed cellular services provider by sales Bharti Airtel advanced 1.56%. The company reportedly launched third generation (3G) services in Hyderabad on Tuesday, 5 April 2011. It has 3G licences in 13 circles.

Cement stocks declined as cement firms are seen reporting weak Q4 results due to lower realizations and higher cost of imported coal. ACC, UltraTech Cement, Ambuja Cements and Jaiprakash Associates fell by between 0.96% to 3.77%. Though the performance of cement firms is seen weak on year-on-year basis, the performance would be better on sequential basis on the back of hike in cement prices in Q4 March 2011.

IT pivotals dropped as a firm rupee could dent guidance on software exports in future quarters. The rupee rose on Friday propelled by sharp gains in the euro and robust inflows. The partially convertible rupee was at 44.07/08 per dollar compared with 44.20/21 at close on Thursday. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

India's largest software services exporter TCS fell 0.38%, with the stock falling for the third straight day. India's third largest software services exporter Wipro declined 1.34%.

India's second largest software services exporter Infosys Technologies fell 0.63%, with the stock falling for the third straight day. The market has been abuzz with talks Infosys, an IT sector bellwether, will give encouraging guidance for the year ending March 2012 (FY 2012) given underlying strong demand for offshore outsourcing. Infosys unveils Q4 and year ended March 2011 results on 15 April 2011 when it will also give annual guidance for FY 2012.

Airline stocks fell as higher crude oil prices raised concerns about higher operating costs. Jet fuel prices are linked to crude oil prices. Jet fuel constitutes 50% of the operating cost for airliners. Kingfisher Airlines, SpiceJet and Jet Airways declined by between 3.54% to 3.78%.

Cals Refineries clocked highest volume of 10.13 crore shares on BSE. Shilpi Cable (3.84 crore shares), Suzlon Energy (1.28 crore shares), Resurgence Mines (94.10 lakh shares) and HFCL (84.74 lakh shares) were the other volume toppers in that order.

Shilpi Cable clocked highest turnover of Rs 183.25 crore on BSE. State Bank of India (Rs 84.26 crore), Suzlon Energy (Rs 70.63 crore), Zandu Realty (Rs 64.41 crore) and Larsen & Toubro (Rs 53.94 crore) were the other turnover toppers in that order.

Shilpi Cable Technologies settled at Rs 47.60 on BSE, a discount of 31% to the initial public offer price of Rs 69. The stock debuted at Rs 78.35, a premium of 13.55% to the initial public offer (IPO) price.

Indian stocks had witnessed a strong rally recently on revival of inflow from foreign funds. The near term major trigger for the market is Q4 March 2011 results which will start trickling in from about mid-April 2011. Investors will scrutinize post-result management commentary to gauge outlook on earnings at a time when rising salaries, raw materials prices and interest rates are pressurizing profit margins of India Inc.

On the macro front, good monsoon this year could help ease food inflation and boost rural income. Recent reports indicate that India will receive good rains during the July-September monsoon season this year. The India Meteorological Department (IMD) is expected to come out with its long term forecast of the summer monsoon rainfall season by the end of this month.

A combination of inflationary pressures, slower external demand, and tighter fiscal and monetary policies is expected to curb India's growth this year, the Asian Development Bank said in a recent report. India's gross domestic product is now expected to expand by 8.2% in 2011, down from an estimated rate of 8.6% in 2010, ADB said. Agricultural output, strong private consumption and exports all supported growth in 2010, it said. However, it expects growth to bounce back to 8.8% in 2012 "as investment and overall economic activity pick up and as planned reforms move forward."

On the political front, the first phase of assembly polls took place in Assam on Monday, 4 April 2011 in 62 of the 126 assembly constituencies. The second and concluding phase of elections will be held on 11 April 2011 in the remaining 64 constituencies. Assam elections will be followed by elections in Tamil Nadu, Puducherry, West Bengal and Kerala in two months between April and May. While Assam will have two-phased poll, Tamil Nadu, Kerala and Puducherry in one phase and West Bengal in six phases ending on 10 May 2011. The vote count is scheduled for 13 May 2011 for elections held in all the five states.

European markets rose on Friday, cheered by a rally in Japanese stocks overnight and a surge in precious-metal prices. The key benchmark indices in UK, Germany and France were up by between 0.58% to 0.89%.

Most Asian stocks advanced on Friday, 8 April 2011, on speculation damage from yesterday's 7.1 magnitude aftershock in Japan was limited and engineering companies seen benefiting from efforts to rebuild the country. The key benchmark indices in China, Indonesia, South Korea, Hong Kong, Japan and Singapore rose by between 0.27% to 1.85%. Taiwan's Taiwan Weighted fell 0.08%.

The Bank of Japan said Thursday it will offer 1 trillion yen in one-year loans at 0.1% to financial firms with branches in areas affected by the massive 11 March 2011 earthquake, to facilitate the smooth flow of cash in the region.

US market slipped on Thursday after a major aftershock in Japan reignited fears about its nuclear power crisis, but greater faith in the US economy's steady path held losses in check. New US claims for jobless benefits fell last week and retailers racked up much stronger-than-expected sales in March, signs that the US economy is on its growth path.

Trading in US index futures indicated that the Dow could gain 44 points at the opening bell on Friday, 8 April 2011.

A slew of major US economic data due next week such as March 2011 retail sales and consumer price index may strengthen expectations that the US will end its $600 billion bond-purchase program in June 2011.

Bank of England left interest rates on hold, as expected, and European Central Bank hiked key lending rate to 1.25% from 1% on Thursday.