Market snaps 3-week rally

Profit booking applied breaks to the rally in the equity market that lasted for three preceding weeks. With crude prices and inflation at high levels, bulls had hoped on corporate earnings for gains in the short-term. But there was little reason for optimism after Infosys' disappointing earnings growth forecast for the year ending March 2012. It was a truncated trading week -- the stock market was closed on Tuesday, 12 April 2011 and Thursday, 14 April 2011 for public holiday.



The BSE 30-share Sensex fell 64.63 points or 0.33% to 19,386.82 in the week ended Friday, 15 April 2011. The S&P CNX Nifty fell 17.45 points or 0.29% to 5,824.55. The BSE Mid-Cap index rose 0.50% and the BSE Small-Cap index rose 0.41%. Both these indices outperformed the Sensex.

The wholesale price index (WPI) rose 8.98% in March 2011, higher than 8.31% rise in February 2011 and also ahead of market expectations. The WPI inflation for January 2011 was revised upwards to 9.35% from 8.23%.

A surge in crude oil prices over the past few months has already 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. Besides worries about high interest rates, rising raw material costs is also expected to take a bite out of corporate profits.

India imports majority of its crude oil requirements and high oil prices have raised concerns about widening current account deficit. 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 down 7 cents or 0.06% at 108.04 a barrel.

Industrial production rose 3.6% in February 2011, lower than market expectations of a 4.8% growth, data released by the government on Monday showed. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 3.5% in February 2011. January's industrial output annual growth rate was revised upwards to 3.9% from 3.7%.

Trading for the week began on a weak note. The key benchmark indices fell for the fourth day in a row on Monday, 11 April 2011, to settle at their lowest level in almost two weeks as world stocks declined and after the latest data showed slower-than-expected growth in industrial output in the month of February 2011. Concerns over corporate earnings growth and macroeconomic worries arising from high crude oil prices also weighed on the domestic bourses. The BSE 30-share Sensex was down 188.91 points or 0.97% to 19,262.54. The S&P CNX Nifty was down 56.30 points or 0.96% to 5,785.70.

Bargain hunting after a four-day decline helped Indian stocks log smart gains on Wednesday, 13 April 2011, in what was a global rally in equities. A slide in crude oil prices from 2-1/2-year peak helped ease macroeconomic worries, aiding strong gains in Indian shares. The BSE 30-share Sensex was up 434.32 points or 2.25% to 19,696.86, its highest closing level since 4 April 2011. The S&P CNX Nifty was up 125.80 points or 2.17% to 5,911.15.

Data showing acceleration in headline inflation in March 2011 and IT bellwether Infosys' disappointing earnings growth forecast for the year ending March 2012 (FY 2012) pulled the market lower on Friday, 15 April 2011. The BSE 30-share Sensex fell 310.04 points or 1.57% to 19,386.82. The S&P CNX Nifty fell 86.95 points or 1.47% to 5,824.55.

India's second largest IT company by sales Infosys slumped 7.38% to Rs 2,988.80 last week. It was the top Sensex loser. The stock tumbled as the company's earnings growth forecast for the year ending March 2012 (FY 2012) as also the Q4 March 2011 result disappointed the street.

Infosys has projected 8% to 10% growth in earnings per American Depositary Share (ADS) as per International Financial Reporting Standards at $2.83 to $2.88 for the year ending March 2012 (FY 2012) over the year ended March 2011 (FY 2011). The projected growth in earnings is much lower than the projected revenue growth for the current year -- Infosys has projected 18% to 20% growth in revenue at $7.13 billion to $7.25 billion for the year ending March 2012 (FY 2012) over the year ended March 2011 (FY 2011).

India's largest real estate company by market capitalisation DLF was the second biggest Sensex loser. The stock declined 5.55% to Rs 245.05 as high beta stocks fell last week on profit taking. DLF had outperformed the market over the past one month till 13 April 2011, rising 11.57% compared with the Sensex's return of 8.38%.

Steelmaker Jindal Steel & Power was the third biggest Sensex loser. The stock declined 3.84% to Rs 672.95. Wipro (down 3.41%), Reliance Communications (down 1.78%), Sterlite Industries (down 1.75%), Tata Motors (down 1.59%) and ONGC (down 0.87%), were the other major Sensex losers.

Index heavyweight Reliance Industries (RIL) declined 0.57% to Rs 1018.40. The company will announce its Q4 result on Thursday, 21 April 2011. RIL, after market hours on Wednesday, 13 April 2011, said it has started work on large polyester projects in India to consolidate its position as the world's largest integrated polyester producer. RIL said it has planned its capacity expansion in phases over the next few years including a 2.30 million metric tonne at Dahej, Gujarat, with an ability to increase the capacity by another 1.15 million tonne at a later stage. The expansion also includes a 3.95 lakh tonne of polyester filament yarn and 1.4 lakh tonne polyester texturized yarn at Silvassa.

India's largest bike maker by sales Hero Honda Motors jumped 10.06% to Rs 1830.85. It was top Sensex gainer last week. The stock rallied after the company announced a liberal interim dividend of Rs 70 per share for the year ended March 2011. Hero Honda Motors has fixed 21 April 2011 as the record date for interim dividend.

Infrastructure developer Jaiprakash Associates flared up 4.87% to Rs 99.10 after executive chairman Manoj Gaur was quoted by the media as saying that the company aims to maintain a growth rate of 40% and aims to scale down debt significantly in the year ending March 2012 (FY 2012). Jaiprakash Associates was the second biggest Sensex gainer.

India's largest ciggarette maker by sales ITC moved up 3.97% to Rs 191.40 on expectation of good Q4 result. It was the third biggest Sensex gainer.

India's largest listed telecom operator by sales Bharti Airtel rose 2.79% to Rs 372.15 on reports the company had reached 2 million customers on its third-generation or 3G mobile network.

Anil Dhirubhai Ambani-controlled Reliance Infrastructure climbed 1.36% to Rs 686.95 after the company commenced its up to Rs 1000-crore share buyback offer on 11 April 2011. The company said it bought back 2 lakh shares at an average price of Rs 682.21 on the first day of the commencement of the buyback programme.

Reliance Infrastructure said during trading hours on 11 April 2011, that the buyback is mainly aimed at reducing short-term volatility in the firm's share price as well as discourage speculative activity in its stock. The buy-back worth up to Rs 1000 crore would be funded from investments made by the company in liquid and marketable securities.