RIL, Wipro lead decline

The key benchmark indices edged lower in choppy trade, extending last two days' losses, as higher crude oil prices stoked macroeconomic worries. Wild intraday swings were witnessed during the last two hours or so of trade as traders rollover positions in the futures & options (F&O) segment ahead of the expiry of the near-month April 2011 derivatives contracts tomorrow, 28 April 2011. The market breadth was negative. Index heavyweight Reliance Industries (RIL) extended recent losses on reports the government is considering imposing penalty for the company falling short of targeted gas production at its D6 block.



IT major Wipro dropped in choppy trade after the company said proposed wage hike would impact operating margins. The BSE 30-share Sensex was down 96.66 points or 0.49%, off close to 180 points from the day's high and up close to 40 points from the day's low. Banking stocks fell after the Reserve Bank of India (RBI) on Tuesday imposed penalties on 19 banks for not complying with its instructions on derivatives. Interest rate sensitive realty stocks fell on worries higher interest rates could dent demand for residential and commercial property. Capital goods stocks also declined.

Intraday volatility was high. The market pared gains after a firm start triggered by higher Asian shares. The market regained strength after a bout of initial volatility. The market regained positive zone soon after slipping into the red to hit fresh intraday low in mid-morning trade. The market hit a fresh intraday low after moving between the positive and negative terrain in early afternoon trade. The market hit fresh intraday low in afternoon trade as RIL extended losses. The market recovered from lower level later only to once again see a steep slide in mid-afternoon trade. Wild intraday swings continued later.

A sharp surge in global crude oil prices over the past few months has raised macroeconomic worries. 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 up 38 cents or 0.34% at 112.59 a barrel.

The BSE 30-share Sensex was down 96.66 points or 0.49% to 19,448.69. The Sensex fell 132.56 points at the day's low of 19,412.79 in mid-afternoon trade. The index gained 88.28 points at the day's high of 19,633.33 in early trade.

The S&P CNX Nifty was down 34.50 points or 0.59% to 5,833.90.

The BSE Mid-Cap index fell 0.01%. The BSE Small-Cap index was flat. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 3228 crore, higher than Rs 3114.10 crore on Tuesday, 26 April 2011.

The market breadth, indicating the health of the market, was negative. On BSE, 1561 shares declined while 1317 shares advanced. A total of 108 shares remained unchanged. The breadth was strong earlier in the day.

Among the 30-member Sensex pack, 23 declined while the rest advanced.

India's third largest IT exporter by sales Wipro fell 2.86% and was the top loser from the Sensex pack after the company said proposed wage hike would impact operating margins. The stock was volatile. The scrip hit a low of Rs 444.90 and a high of Rs 454.90 so far. Wipro expects revenues from IT services business to register a between 1.27% fall to a growth of 0.7% at between $1.394 billion to $1.422 billion in Q1 June 2011 over Q4 March 2011.

The company announced before the market hours today, 27 April 2011, that consolidated net profit as per International Financial Reporting standards (IFRS) rose 14% to Rs 1375 crore on 18% rise in total revenues to Rs 8302 crore in Q4 March 2011 over Q4 March 2010.

Azim Premji, Chairman of Wipro, commenting on the results said, "We have made good progress in creating a leaner, simpler and more customer centric organization structure. We believe our business strategy along with the new structure will deliver industry leading growth". Suresh Senapaty, Executive Director & Chief Financial Officer of Wipro, said, "The business environment is positive and we are focusing on growth by directing investments on momentum verticals. We have announced wage hikes effective 1 June 2011, which would have an impact on the operating margins."

Senapaty said Wipro is chasing about 25 deals of over $50 million each. Senapaty said he expects the rupee to be volatile in the next three to six months and that Wipro had currency hedges of $1.6 billion as of end-March 2011.

T K Kurien, Executive Director & Chief Executive Officer, IT Business, Wipro said, "Our journey of building the new Wipro is based on the foundation of customer focus, domain and technology leadership directed towards the customer needs and providing enriching career opportunities for our employees."

The company said after market hours today that subsequent to the court's approval Wipro Yardley Consumer Care a subsidiary Company of Wipro stands amalgamated with Wipro.

India's largest IT exporter by sales TCS fell 0.6%, with the stock falling for the second straight day on concerns about profit margins. At the time of announcing Q4 March 2011 results last week, TCS management said wage hikes and currency volatility are the main threats to profit margins. TCS plans to increase wages by 12% to 14% for India-based staff. The company plans to raise wages by 2% to 4% in major overseas markets and 2% to 14% in emerging markets. TCS said the demand environment continues to be vibrant.

India's second largest software services exporter and index heavyweight Infosys rose 0.52% on bargain hunting. The stock had been under selling pressure recently after company's disappointing earnings growth forecast for the year ending March 2012 (FY 2012).

Index heavyweight Reliance Industries (RIL) extended recent losses on reports the government is considering imposing penalty for the company falling short of targeted gas production at its D6 block. The stock lost 1.56%.

The company said recently that it is drawing up a plan to raise gas production from its D6 deepwater block in the Krishna Godavari basin in the Bay of Bengal, off India's east coast. RIL said the reservoirs in the block are more complicated than previously expected and continuous and significant efforts are underway for understanding these reservoirs. RIL said it is trying to "identify well locations for incremental production and sustenance."

Gas output from the block touched a peak of 60 million metric standard cubic meters a day last year. Production has now fallen to 50 MMSCMD as against a target of 69.8 MMSCMD, S.K. Srivastava, head of India's upstream regulator, said last week. He also said that Reliance hasn't given any "satisfactory response" on the matter.

Integrated development plan for all other discoveries in KG-D6 is being conceptualized to augment production in the most capital efficient manner, RIL said on 25 April 2011. The company said it is studying various options such as "recompletion of wells and compression" to increase gas production.

Shares of public sector oil marketing companies rose on recent reports state-run oil marketing firms may hike petrol prices in mid May 2011 when the state polls end. BPCL (up 0.77%), HPCL (up 0.98%) and Indian Oil Corporation (IOC) (up 1.91%), rose. According to reports, state-run oil marketing companies (PSU OMCs) could hike petrol prices by up to Rs 3 per litre and the hike could be announced on 15 May 2011 during the fortnightly review of prices. A hike in petrol prices will boost the finances of state-run firms since crude oil prices have soared to above $110 per barrel in the international market.

Some FMCG stocks rose on expectations of pick up in rural demand following forecast of normal rains this year. Rural sector accounts for a large chunk of revenues for FMCG firms. Marico, United Spirits, ITC and Nestle India rose by between 0.82% to 1.21%.

Dabur India fell 2.35% on muted bottom line growth in Q4 March 2011. Consolidated net profit rose 8.54% to Rs 147.04 crore on 29.98% rise in total income to Rs 1115.62 crore in Q4 March 2011 over Q4 March 2010. The result hit the market during trading hours today.

Some consumer durables stocks rose on hopes of increased consumption demand from rural India after forecast of normal monsoon this year. Blue Star and Titan Industries rose by between 0.54% to 1.81%.

Capital goods stocks fell on profit taking. BEML, Bhel, Usha Martin and Siemens by between 0.39% to 2.3%.

Tata Power Company fell 0.99%. The company said during market hours today that it has commissioned a 3 megawatt (MW) solar power plant in Maharashtra.

Banking stocks fell after the Reserve Bank of India (RBI) on Tuesday imposed penalties on 19 banks for not complying with its instructions on derivatives. The banks include: State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, HSBC, Barclays Bank, Deutsche Bank and Standard Chartered Bank. The penalties, which ranged from Rs 10-15 lakh each, were imposed for violating instructions such as failure to carry out due diligence in regard to suitability of products and selling derivative products to users not having risk management policies.

India's largest state run bank by net profit and branch network State Bank of India (SBI) fell 0.82% on profit taking. The stock had risen during the past three trading sessions on expectations of higher interest margins after the bank withdrew a special home loan scheme that offered borrowers a lower fixed rate for the initial tenure of the mortgage. SBI on 20 April 2011 announced withdrawal of special home loan schemes, or teaser rates, with effect from 1 May 2011 amid concerns expressed by the Reserve Bank of India. SBI Easy Home Loan and SBI Advantage Home Loan (teaser rate products) will be replaced by floating interest rate schemes on par with other commercial banks.

Under the teaser home loan scheme, SBI was offering lower rate of interest of 8-8.5% for the first three years. But, the scheme invited severe criticism from RBI, which had said the scheme could impact the asset quality of SBI's home loan portfolio. SBI on 19 April 2011 said that it is raising benchmark prime lending rate and base rate by 25 basis points (bps) each to 13.25% per annum and 8.5% per annum respectively, effective from 25 April 2011.

India's largest private sector bank by net profit ICICI Bank fell 1.22%. The bank will announce Q4 result on 28 April 2011.

India's second largest private sector bank by net profit HDFC Bank declined 0.21%, with the stock falling for the third straight day. Net profit rose 33.23% to Rs 1114.71 crore on 34.38% rise in total income to Rs 6724.31 crore in Q4 March 2010 over Q4 March 2010. The board of directors of the bank also approved a 5-for-1 stock-split while approving the results. The result and stock-split announcements were made on Monday, 18 April 2011.

Axis Bank's fell 0.96%, with the stock falling for the third straight day on a sequential decline in interest margin. Axis Bank's net interest margin slipped to 3.44% in Q4 March 2011 from 3.81% in Q3 December 2010 due to sharp spike in the cost of funds. Net profit rose 33.37% to Rs 1020.11 crore on 48.31% rise in total income to Rs 5817.06 crore in Q4 March 2011 over Q4 March 2010. The Q4 result was announced on Friday, 22 April 2011.

Interest rate sensitive realty stocks fell on worries higher interest rates could dent demand for residential and commercial property. HDIL, Anant Raj Industries, Sunteck Realty, Indiabulls Real Estate, DLF and Unitech shed by between 1.2% to 5.44%. Purchases of both residential and commercial property are largely driven by finance.

Ambuja Cements fell 4.22% after net profit declined 11.84% to Rs 407.48 crore on 10.90% rise in net sales to Rs 2207.05 crore in Q1 March 2011 over Q1 March 2010. With a steep increase in energy cost driven by increase in coal costs, higher freight costs and higher expectation inflation, profit margins are expected to be under pressure going ahead, Ambuja Cements said. Thanks to the executed and ongoing capex investment, Ambuja Cements continues to work on higher productivity and improved operational efficiency, thereby partly mitigating this pressure, the company said. Revival of cement demand and improvement in price realization to absorb additional cost burden are critical going ahead, the company said.

Auto stocks were mixed. India's largest bike maker by sales Hero Honda Motors fell 1.7%, reversing initial gains. The company announces Q4 result on 4 May 2011.

India's largest car maker by sales Maruti Suzuki India gained 1.1% after Chief Executive Shinzo Nakanishi said on Monday at the time of announcing Q4 results that Maruti Suzuki will make efforts to protect and increase margins going forward. Net profit fell 8.4% to Rs 2288.60 crore on 24.60% increase in total income, net of excise, to Rs 37522.40 crore in the year ended March 2011 (FY 2011) over the year ended March 2010. The company announced the FY 2011 results during trading hours on Monday, 25 April 2011. The company said adverse currency movement (particularly on exports), higher commodity prices and new model launches impacted the company's profits in the year ended March 2011.

India's largest tractor maker by sales M&M rose 1.61% after the company launched its sedan Verito, erstwhile Logan, with Mahindra badge.

Tata Motors fell 1.08%, reversing initial gains. The company has reportedly cut production in April 2011 of its sports-utility vehicles and cars--besides the Nano--by 15%-20% over March 2011. The production cut is normal balancing in production, reports said.

India's second largest bike maker by sales Bajaj Auto fell 0.67%. The company announces Q4 result on 18 May 2011.

Metal stocks fell on profit taking. Hindalco Industries, Sterlite Industries, Tata Steel, Nalco, Jindal Saw, Jindal Steel & Power, JSW Steel, Sail and Hindustan Zinc fell by between 0.26% to 2%.

Birla Cotsyn clocked highest volume of 1.55 crore shares on BSE. HFCL (1.4 crore shares), Birla Power Solutions (97.24 lakh shares), Bafna Spinning Mills (74.91 lakh shares) and Cals Refineries (70.33 lakh shares) were the other volume toppers in that order.

ONGC clocked highest turnover of Rs 117.16 crore on BSE. Raymond (Rs 107.05 crore), Reliance Industries (Rs 106.99 crore), State Bank of India (Rs 97.95 crore) and Amrutanjan Healthcare (Rs 82.71 crore) were the other turnover toppers in that order.

Volatility may remain high on the bourses tomorrow as traders rollover positions in the futures & options (F&O) segment ahead of the expiry of the near-month April 2011 contracts on that day.

The results announced so far have been good. The combined net profit of a total of 261 companies rose 24% to Rs 25557 crore on 28.7% rise in sales to Rs 211597 crore in Q4 March 2011 over Q4 March 2010.

A good news on the macro front is that the India Meteorological Department (IMD) has predicted the southwest monsoon 2011 to be 98% (normal) of the long period average (LPA) with a model error of plus/minus 5%. IMD has indicated that there is very low probability for the season rainfall to be deficient (below 90% of LPA) or excess (above 110% of LPA). The IMD released its initial forecast for the June to September monsoon on Tuesday 19 April 2011. The forecast is made in two stages in April and in June. The forecast for the season as a whole (June-September) is issued in the first stage.

Normal monsoon this year could help ease food inflation and boost rural income. The quantity and geographical spread of rainfall during the monsoon season is crucial for India's agriculture sector as the country lacks irrigation facilities on more than half of its farm land. The South Asia Climate Outlook Forum predicted that South Asia is likely to receive normal monsoon rains in 2011. It said the La Nina weather phenomenon, which aids monsoon in the region, would continue until June.

Nine of 14 economists polled by Capital Market expect 25 basis points (bsp) hike in key short-term interest rates and 5 expect 50 basis points hike in short-term rates on 3 May 2011 when the Reserve Bank of India (RBI) undertakes its annual 2011-2012 monetary policy review. A cumulative hike of 75-100 bsp in short-term rates is expected during the financial year ending March 2012 (FY 2012). Economists expect inflation based on the wholesale price index (WPI) to slide to a median 7.8% in FY 2012 from 9.4% in the year ended March 2011 (FY 2011). The poll shows that economists expect inflation to remain high in the first half of the year and slide in the second half of the year.

European stocks edged higher on Wednesday, with corporate results driving shares of Ericsson and Renault SA higher and Associated British Foods PLC and Barclays PLC lower. The key benchmark indices in France UK and Germany were up by between 0.23% to 0.84%.

Britain's economy grew by half a percent in the first quarter, according to official statistics, reversing a drop of the same size in the previous three months.

Most Asian stocks rose after a report that showed US consumer confidence increased, boosting the outlook for Asian exporters. The key benchmark indices in Indonesia, Singapore, Japan, South Korean and Taiwan rose by between 0.02% to 1.39%.

Property shares pulled Chinese stock lower following reports the central government may soon unveil a new round of tightening measures to cool down the sector. The Shanghai Composite Index ended 0.46% lower at 2,925.40, its lowest closing level since 21 March 2011. Hong Kong' Hang Seng was down 0.48%.

Standard and Poor's on Wednesday lowered the outlook for Japan's sovereign rating to negative. The rating agency affirmed its long-term rating on Japan at AA minus. "Standard and Poor's expects costs related to the March 11, 2011, earthquake, tsunami, and nuclear power plant disaster will increase Japan's fiscal deficits above prior estimates by a cumulative 3.7% of GDP through 2013," the rating agency said in a statement. "We revised the outlook on the long-term rating on Japan to negative to reflect the potential for a downgrade if fiscal deterioration materially exceeds these estimates in the absence of greater fiscal consolidation" it said.

A fresh batch of corporate results pushed US stocks to their best levels since June 2008 on Tuesday, renewing optimism that profit growth will remain resilient enough to keep equities on the rise. US consumer confidence rose in April as inflation expectations eased somewhat and consumers felt better about the short-term outlook, according to a report from the Conference Board, a private-sector group. The data helped ease concerns that the recent rise in oil prices have started to hit shoppers.

Trading of US index futures indicated that the Dow could gain 36 points at the opening bell on Wednesday, 27 April 2011.

Investors will parse the US Federal Reserve's policy statement and every word Fed Chairman Ben Bernanke says in a news conference that follows a two-day meeting of the Fed on interest rates on Tuesday-Wednesday (26-27 April 2011). Global markets will react favorably to some indication that the Fed feels inflation is under control, and recent spikes are only temporary. Any signs of worry about rising prices will telegraph a faster end to the ultra-low rate policy.

Another reason why the Fed policy is in focus is because the US central bank's Treasury-buying program -- its second round of quantitative easing, or QE2, is scheduled to end in June 2011. Strategas Research Partners recently noted that the Fed has purchased 70% of Treasury debt since November 2010.