Sensex, Nifty hit 9-week lows as world stocks slide

The key benchmark indices hit 9-week lows, with a setback in world stocks caused by euro zone debt worries hitting sentiment. The BSE 30-share Sensex was down 332.76 points or 1.82%, up about 20 points from the day's low and off close to 275 points from the day's high. The Sensex hit near 9-week low below the psychological 18,000 mark after moving above and below that mark in intraday trade. The 50-unit S&P CNX Nifty hit 9-week low below 5,400 level. The market breadth was weak. Bharat Heavy Electricals (Bhel) slumped on worries of pricing of the proposed follow-on-public offer at a discount to the ruling market price.



Index heavyweight Reliance Industries (RIL) fell in volatile trade. Cigarette major ITC rose on strong Q4 results unveiled during market hours on Friday. PSU OMCs were mixed after farm minister Sharad Pawar reportedly said on Monday that a ministerial panel to look into raising prices of diesel and kitchen fuels may meet this week. Interest rate sensitive realty stocks declined on worries higher interest rates could dent demand for residential and commercial property. Interest rate sensitive banking shares declined on worries rising interest rates would shrink profit margins. Metal stocks fell on data showing weakening growth in China's manufacturing sector.

The market skidded in early trade on weak Asian stocks. The market came off lows in morning trade. The market weakened again shortly. The Sensex once again came off lows later. The market once again weakened in mid-morning trade. The market extended losses to hit fresh intraday low in early afternoon trade. A sell-off in afternoon trade dragged the market to fresh intraday lows. Weakness continued in late trade.

The BSE 30-share Sensex was down 332.76 points or 1.82% to 17,993.33, its lowest closing level since 22 March 2011. The Sensex shed 355.07 points at the day's low of 17,971.02 in afternoon trade. The index fell 57.03 points at the day's high of 18,269.06 in early trade.

The S&P CNX Nifty was down 99.80 points or 1.82% to 5,386.55, its lowest closing level since 21 March 2011. The Nifty hit a low of 5,373 in intraday trade.

The market breadth, indicating the health of the market, was weak. On BSE, 1986 shares declined while 808 shares advanced. A total of 108 shares remained unchanged.

BSE clocked turnover of Rs 2012 crore, lower than Rs 2776.46 crore on Friday, 20 May 2011.

From the 30 share Sensex pack, 29 stocks fell and only one stock rose.

Shares of companies whose executives were charged in 2G scam declined after the Delhi High Court on Monday reportedly rejected bail to five company executives. Reliance Communications, DB Corp and Unitech slumped by between 2.27% to 7.76%. Sanjay Chandra, the managing director of Telenor's India partner Unitech, Vinod Goenka, chairman of Etisalat's India partner DB Group, and three executives from Reliance ADA Group have been held in jail since 20 April 2011, after a lower court had denied them bail. These five executives are among 14 individuals and three companies charged by the CBI of involvement in rigging the grant of telecoms licences in 2007-08.

India's largest power equipment maker by sales Bharat Heavy Electricals (Bhel) slumped 6.69% and was the top loser from the Sensex pack on worries of pricing of the proposed follow-on public offer (FPO) at a discount to the ruling market price. The company's board today approved disinvestment of 5% of the paid up equity capital of the company out of Government of India's shareholding, with reservation of 10% of the issue for employees, subject to the approval of the Government of India. Usually, a large follow-on public offer from a state-run firm is priced at a discount to the ruling market price to attract investors. Government of India holds 67.72% stake in Bhel (as at end March 2011).

Bhel's board of directors also recommended a 5-for-1 stock split at the time of announcement of Q4 March 2011 results during trading hours today. Bhel's net profit jumped 46.5% to Rs 2798.04 crore on 32.17% growth in net sales/income from operations to Rs 17921.43 crore in Q4 March 2011 over Q4 March 2010. Net profit rose 39.4% to Rs 6011.20 crore on 26.4% growth in net sales/income from operations to Rs 41578.80 crore in the year ended March 2011 (FY 2011) over the year ended March 2010 (FY 2010).

India's largest engineering and construction firm by sales Larsen & Toubro fell 2.36% on profit taking. The stock had surged late last week on the back of a healthy order book position at the firm. L&T said at the time of announcing Q4 March 2011 results on Thursday, 19 May 2011, that it is well positioned to sustain the revenue growth momentum in the medium term given its excellent execution capabilities, presence in diverse sectors of the economy, a healthy order book and leadership position in most of the sectors where it operates.

As on 31 March 2011, the company's order book stood at Rs 130217 crore, which is almost 3 times its net sales of Rs 43495.93 crore for the year ended March 2011, giving strong revenue visibility. The company's order inflow rose 27% in Q4 March 2011. The company said the completion of the several expansion projects underway will strengthen its position of pre-eminence in its various businesses. The company also said that intense competition and spiraling input costs may exert some pressure on the operating margin going forward.

Index heavyweight Reliance Industries (RIL) lost 1.45% to Rs 908, after gyrating between the day's high of Rs 921 and the day's low of Rs 903.80. RIL's fuel exports reportedly rose 25% in the first half of May 2011 from a month earlier as it shipped more gasoline to the US and demand for jet fuel grew. RIL exported at least 1 million metric tons of fuel products from its Jamnagar, Gujarat facility in the first half of May 2011 from 800,000 tons in the first half of April 2011.

Separately, RIL is reportedly in talks with banks to arrange as much as $1.5 billion in dollar-denominated loans to replace debt maturing in about two years that has higher interest costs.

ONGC fell 2.39%. ONGC Videsh (OVL), the overseas oil and gas exploration arm of ONGC, on Friday, 20 May 2011, reported 29% growth in consolidated net profit to Rs 2691 crore on 21% increase in gross revenue to Rs 18683 crore in the year ended March 2011 (FY 2011) over the year ended March 2010 (FY 2010). The company attributed the strong finance performance to increase in production and higher international price of oil. OVL, the wholly-owned subsidiary of ONGC, achieved highest ever production of oil and gas with a total of 9.448 million barrels of oil equivalents (MMBOE) in FY 2011.

OVL is presently having participation in 33 projects in 14 countries, out of which 10 are producing projects. ONGC Videsh said it continues to pursue its objective of acquiring oil and gas equity abroad for energy security of the country. Recently the company has signed agreements with KazMunaiGas for the acquisition of 25% participating interest in Satpyev exploration block in the highly prospective Caspian region. The production of the company would get further boost in 2013 from the existing portfolio of assets with the likely start of gas production from Blocks A1 and A3, Myanmar where the company holds 17% participating interest and oil production from Carabobo project, Venezuela where the company holds 11% participating interest.

Speaking on the occasion, Shri A K Hazarika, Chairman, ONGC Group of companies complimented OVL and stated that the company is on path of sustained growth with a robust, balanced portfolio of assets and envisioned to supplement the organic growth through acquisition of additional properties overseas.

Shares of PSU OMCs were mixed after farm minister Sharad Pawar reportedly said on Monday that a ministerial panel to look into raising prices of diesel and kitchen fuels may meet this week. PSU OMCs had hiked petrol prices recently by a steep Rs 5 per liter. Indian Oil Corporation and BPCL fell by between 0.15% to 0.36%. HPCL rose 1.45%.

Last June, the government allowed state-run oil firms to fix the price of petrol but continued to control the prices of diesel, kerosene and cooking gas to protect the poor and try to tame stubbornly high inflation.

GAIL (India) rose 1.65%, on hopes the firm's subsidy sharing burden will reduce in case the government hikes diesel and cooking fuel prices. GAIL (India) and other state-run upstream companies provide a subsidy through discounts on oil and gas purchases to oil marketing companies.

The GAIL (India) stock shrugged off weak Q4 results. Net profit fell 14.02% to Rs 783.07 crore on 34.34% rise in total income to Rs 8961.41 crore in Q4 March 2011 over Q4 March 2010. The result was announced during trading hours today. GAIL (India) provided Rs 901.71 crore as subsidy sharing burden for Q4 March 2011, much higher than Rs 338.41 crore in Q4 March 2010. The company provided Rs 2111.24 crore as subsidy sharing burden for the year ended March 2011 (FY 2011), much higher than Rs 1326.73 crore for the year ended March 2010.

Interest rate sensitive realty stocks declined on worries higher interest rates could dent demand for residential and commercial property. Orbit Corporation, Housing Development and Infrastructure (HDIL), Indiabulls Real Estate, Ackruti City, Sobha Developers, Anant Raj Industries and DLF fell by between 0.96% to 4.19%.

Interest rate sensitive banking shares declined on worries rising interest rates would shrink profit margins. India's second largest private sector bank by net profit HDFC Bank lost 2.23%. The bank raised its base rate by 55 basis points (bps) to 9.25% per annum and prime lending rate (PLR) by 50 bps to 17.75% effective 12 May 2011.

India's largest private sector bank by net profit ICICI Bank shed 3.61%. The bank announced on Friday, 20 May 2011, that it has successfully priced issue of 5.5 year $1 billion international bond offering. The bonds carry a coupon rate of 4.75%.

India's largest commercial bank by branch network State Bank of India (SBI) dropped 2.98%. The SBI shares tumbled recently on weak Q4 results. Net profit slumped 98.88% to Rs 20.88 crore on 18.07% rise in total income to Rs 26536.84 crore in Q4 March 2011 over Q4 March 2010. The result was announced on 17 May 2011.

SBI's net profit declined sharply as provisions for non-performing assets jumped 49.2% to Rs 3263.91 crore in Q4 March 2011 over Q4 March 2010. A sharp surge in tax provision to Rs 1901.85 crore from Rs 977.88 crore in Q4 March 2010 pulled down the profit to a measly figure in Q4 March 2011.

The Reserve Bank of India (RBI), last week, said it has decided to discontinue the second liquidity adjustment facility for banks held every fortnight effective from 20 May 2011. The RBI allows banks to meet their cash shortfall by borrowing or parking surplus money with it through two windows on every reporting Friday. The move to discontinue the second liquidity adjustment facility comes after the RBI introduced the marginal standing facility (MSF), where banks can borrow from it at 8.25%. The MSF rate is one percentage point higher than the RBI's key lending rate.

Cigarette maker ITC rose 2.29% on the back of good Q4 earnings and was the top gainer from the pack. Net profit rose 24.63% to Rs 1281.48 crore on 16.53% rise in total income to Rs 6062.15 crore in Q4 March 2011 over Q4 March 2010. The stock had declined 1.82% on profit taking on Friday after the firm announced the Q4 results during trading hours on that day.

At the time of announcing the results, ITC said while market conditions are tough in the cigarettes business, ITC is confident of leveraging its internationally bench-marked product quality, the resilience of its brands and the superiority of its competitive strategies to consolidate its leadership position in the cigarettes industry in India.

Metal stocks fell on data showing weakening growth in China's manufacturing sector. HSBC's preliminary China purchasing managers' index fell to a 10-month low of 51.1 in May 2011, from a final reading of 51.8 in April 2011, signaling a slowdown in the economy. A reading above 50 indicates an expansion, and one below shows a contraction. A slowdown in China's growth could reduce demand for resources. China is the world's largest consumer of copper and aluminum.

Sterlite Industries, Sail, Hindustan Zinc, Jindal Steel & Power, JSW Steel, Hindalco Industries and Nalco fell by between 0.21% to 3.29%. LMEX, a gauge of six metals traded on the London Metal Exchange, gained 0.75% on Friday, 20 May 2011.

India's largest steel maker by sales Tata Steel fell 3.3%. The company said after market hours on Friday that it has proposed a restructuring of its long products business in Europe to target high value markets and introduce greater flexibility into its costs and operations. To support this strategy, Tata Steel plans to invest 400 million pounds over a five-year period.

The company said its long products business has continued to make losses over the last two years. As a consequence the business has proposed a plan to further reduce costs, focus on products that create value and improve its ability to respond quickly to demand fluctuations. This strategy includes a proposal to close or mothball parts of the Scunthorpe plant and puts at risk 1,200 jobs at Scunthorpe and 300 jobs at its Teesside sites, Tata Steel said in a release.

IT stocks fell on euro zone debt worries. Europe is the second biggest market for the Indian IT firms after the US. India's third largest software exporter Wipro shed 1.16% on reports company has come under tax surveillance for onshore contracts, infamously called body shopping. Tax authorities have not yet made a claim on Wipro, but have sent the company a 'scrutiny notice' seeking details of services provided to clients for the assessment year 2008-09, reports suggest.

Onshore development refers to the practice of IT companies sending their staff to work in overseas markets, including the US and Europe. Under such arrangements, the foreign company pays the Indian firm for the services of each professional while the domestic company pays a daily allowance over and above the salary paid to them. Software firms currently pay no tax on this income, claiming deduction under Section 10A of the Income Tax Act.

Other IT pivotals also declined. India's largest software services exporter TCS fell 1.05%. India's second largest software services exporter Infosys declined 0.52%

Auto shares declined on fears rising fuel prices and interest rates may dampen demand for vehicles. India's largest car maker by sales Maruti Suzuki India declined 1.41%.

India's second largest bike maker by sales Bajaj Auto fell 2.1%, with the stock snapping last two days' gains. Net profit surged 164.89% to Rs 1400.39 crore on 23.54% rise in total income to Rs 4199.97 crore in Q4 March 2011 over Q4 March 2010. The result was announced last week.

Huge extraordinary (EO) income boosted Bajaj Auto's net profit in Q4 March 2011. Bajaj Auto said that in Q4 March 2011 sales tax deferral incentive/loan to the extent eligible under Rule 84 of the Maharashtra Value Added Tax Rules, 2005, has been prepaid at a discounted value of Rs 368 crore, thereby resulting in a surplus of Rs 827 crore. Meanwhile, considering the longer gestation period and initial losses made in PT. Bajaj Auto Indonesia, the company has written of an impairment amount of Rs 102 crore as a diminution in the value of investment in Q4 March 2011.

India's largest truck maker by sales Tata Motors skidded 3.36%, with the stock snapping last two days' gains. The company's global sales rose 12% to 87,114 units in April 2011 over April 2010 on good demand for both commercial and passenger vehicles. The company unveils its year ended March 2011 result on 26 May 2011.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) fell 0.52%, with the stock snapping last two days' gains. The company unveils its year ended March 2011 result on 30 May 2011.

India's top bike maker by sales Hero Honda Motors declined 1.1%.

Ashok Leyland fell 2.44% on profit taking after last two days' surge triggered by strong Q4 results. Net profit rose 33.93% to Rs 298.22 crore on 30.3% rise in total income to Rs 3832.64 crore in Q4 March 2011 over Q4 March 2010.

Sanghvi Forging and Engineering settled at Rs 111.75 on BSE, a 31.47% premium over the initial public offer price of Rs 85. Sanghvi Forging and Engineering debuted at Rs 85, at par to its initial public offering price.

Sanghvi Forging & Engineering clocked highest volume of 3.5 crore shares on BSE. Cals Refineries (1.68 crore shares), Resurgence Mines (70.84 lakh shares), Mahindra Satyam (49.38 lakh shares) and Paramount Printpackaging (41.60 lakh shares) were the other volume toppers in that order.

Sanghvi Forging & Engineering clocked highest turnover of Rs 391.99 crore on BSE. Bhel (Rs 133.60 crore), State Bank of India (Rs 110.53 crore), Divi's Laboratories (Rs 47.10 crore) and Tata Steel (Rs 44.85 crore) were the other turnover toppers in that order.

The market is likely to be volatile this week as derivatives contracts for May 2011 series expire on Thursday, 26 May 2011.

Emerging market equity funds registered outflow of $1.64 billion in the week ended 18 May 2011, according to latest data from global fund tracker EPFR Global. India-dedicated funds had net outflow of $52 million.

The Q4 March 2011 results announced so far have been a mixed bag. The combined net profit of a total of 2337 companies rose 16.9% to Rs 70409 crore on 22.9% rise in sales to Rs 739604 crore in Q4 March 2011 over Q4 March 2010.

Meanwhile, the Congress party-led coalition on Sunday promised to push a key land reform bill in the July session of parliament, trying to regain the initiative after months of corruption scandals and protests over prices. The government proposes to make it easier to acquire land to set up factories, mines, roads and power plants, resolving one of the biggest barriers for sustained double-digit growth while striving to give poor, rural land owners a better deal. The coalition met on Sunday to release a self-appraisal document of its past year in office, trumpeting its record on economic growth and social welfare schemes while reiterating a promise of tougher measures to clamp down on corruption.

European stocks fell sharply on Monday after a downgrade of Greek's debt ratings by Fitch on Friday and a weekend downgrade of the outlook for Italy's rating by Standard & Poor's. The key benchmark indices in UK, Germany and France were down by between 1.6% to 1.88%.

Asian stocks dropped on Monday as Fitch Ratings cut Greece's credit rating and Standard & Poor's said Italy's rating was at risk, deepening concern over Europe's sovereign debt crisis. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 1.01% to 2.90%.

Standard & Poor's cut its rating outlook for Italy to negative from stable, citing weak growth prospects and increased risks it would fail to slash its debt mountain. Meanwhile, Fitch cut Greece's credit rating by three notches on Friday, pushing the country deeper into junk territory, and warned that any kind of debt restructuring would amount to default.

Trading in US index futures indicated that the Dow could fall 115 points at the opening bell on Monday, 23 May 2011.