Market recoups almost the entire initial losses

Key benchmark indices cut almost entire initial losses triggered by weakness in Asian equities. The BSE Sensex was down 5.44 points or 0.03%, up 87.53 points from the day's low. The market breadth was strong. Index heavyweight Reliance Industries (RIL) was marginally lower. Pharma majors Cipla and Lupin gained on reports Japan's largest pharmaceutical firm, Takeda, has begun talks with these two companies for purchasing of their pharma businesses.

The market may remain volatile in the near term as traders rollover positions in the derivatives segment from the near-month August 2011 series to September 2011 series. The August 2011 derivatives contracts expire on Thursday, 25 August 2011.



At 09:27 IST, the BSE Sensex was down 5.44 points or 0.03% to 16,493.03. The Sensex lost 92.97 points at the day's low of 16,405.50 in early trade. The index rose 0.16 points at the day's high of 16,498.63 in early trade.

The S&P CNX Nifty was down 4.60 points or 0.09% to 4,944.30.

The market breadth, indicating the overall health of the market, was strong. On BSE, 900 shares rose and 360 shares declined. A total of 48 shares remained unchanged.

The total turnover on BSE amounted to Rs 157 crore by 09:25 IST

Among the 30-share Sensex pack, 23 declined while the rest gained. Tata Power Company (down 1.58%), Bhel (down 0.94%), and TCS (down 1.21%), edged lower from the Sensex pack.

Index heavyweight Reliance Industries (RIL) shed 0.31% to Rs 763.15. The stock had hit 52-week low of Rs 721.60 in intraday trade on Friday, 19 August 2011. RIL has received the government's formal approval to sell a 30% stake in 21 oil and gas production sharing contracts to BP PLC. "Following the approval, Reliance and BP will work together to conclude the deal expeditiously," RIL said in a statement recently.

The initial proposal was for RIL to sell the stake in 23 blocks to BP for $7.2 billion plus another $1.8 billion linked to exploration success. However, the government cleared only 21 blocks and RIL had said it would continue to seek approval for the remaining two blocks.

Coal India lost 1.37%, extending Tuesday's losses triggered by reports that labour unions of the company have demanded a 100% jump in employee salaries--a demand that would put the state-run entity under a severe strain. Coal India's annual employee cost stood at Rs 18201.45 crore for the year ended 31 March 2011 as per the company's consolidated financial statements. The major cost within the employee cost was salaries, wages and bonus at Rs 11706.42 crore. This amounted to 24.73% of the company's total expenditure of Rs 47332.08 crore.

Cipla gained 1.43% to Rs 286.45 and Lupin advanced 2.33% on reports reports Japan's largest pharmaceutical firm, Takeda, has begun talks with the company and Lupin for purchasing their pharma businesses. Shares of

India's largest small car maker by sales Maruti Suzuki India shed 1.1% as the stock turned ex-dividend today, 24 August 2011, for dividend of Rs 7.50 per share for the year ended March 2011.

India's largest bank by branch network and net profit State Bank of India (SBI) rose 0.31%. SBI Chairman Pratip Chaudhuri on Tuesday, 23 August 2011, said the bank expects to launch a rights issue in the second half of this financial year. He said the government is considering infusing additional capital into the lender. SBI is looking to bolster its capital base to keep up with its fast-growing loan portfolio and expects the government to invest Rs 5000 crore-Rs 9000 crore in the rights issue. Mr. Chaudhuri said the bank is well-capitalized for loan growth of 16%-19% in the current fiscal year ending March 2012.

SBI's plan to raise about Rs 20000 crore in fresh capital was submitted to the Indian government--its biggest stakeholder--in 2010, but it is yet to receive a decision

Foreign institutional investors (FIIs) have pressed heavy sales this month amid the ongoing credit crisis in the euro zone. The sustained selling by foreign funds is a cause for concern for India Inc. Foreign portfolio inflow acts as a catalyst to private corporate capital expenditure in India. FIIs sold shares worth a net Rs 100.34 crore on Tuesday, 23 August 2011, as per provisional data from the stock exchanges. FIIs have sold shares worth Rs 9843.16 crore this month, till 23 August 2011, as per data from the stock exchanges. There was a massive outflow of Rs 5279.30 crore in just three trading sessions between 5 August 2011 and 9 August 2011.

FIIs have sold shares worth a net Rs 14882.39 crore in calendar year 2011 so far, as per data from the stock exchanges. Domestic institutional investors have bought shares worth a net Rs 21478.25 crore this year so far.

As per a recent survey by a prominent investment bank, Corporate India will raise capital spending by tepid 10% in the year to March 2012 (FY 2012). Capital expenditure (capex) in FY 2012 will be concentrated on improving productivity rather than adding greenfield capacity, the investment bank said.

The Reserve Bank of India (RBI) said at first quarter 2011-2012 policy review late last month that that the uncertain global macro-economic environment poses a challenge for the Indian economy from the perspective of financing the current account deficit. In this context, the composition of capital flows remains a concern. In recent months, some shift in composition of capital flows towards foreign direct investment (FDI) has been observed, RBI said. This trend needs to be reinforced through policy actions to improve the quality of financing of the current account deficit, RBI said.

Meanwhile, Indian firms relying on European and US markets are worried about a likely economic slowdown in the US and Europe. Bilateral trade between India and the US stood at $36.5 billion in 2010.

Commerce Minister Anand Sharma, last week, said India's discussions with the European Union (EU) and Canada to form free-trade agreements are in advance stages. India aims to boost bilateral trade with Canada to C$15 billion (US$15.3 billion) a year by 2015 from about C$4.2 billion in 2010. With the 27-member EU, India had initiated discussions on the free-trade pact in 2007. The two sides originally hoped to conclude a wide-ranging deal by 2010 to boost trade to $237 billion annually by 2015. Their bilateral trade is currently worth about $92 billion.

Prime Minister Manmohan Singh, last week, said the government is aiming for 9% annual growth over a five-year period beginning 1 April 2012. "It will be prudent to have a growth target, which would ensure achievement of the objective of sustained inclusive growth at a level which will also take into account the capabilities of the economy to achieve higher growth," Mr. Singh said, after a meeting of the planning commission to finalize details of the 12th five-year plan. If the global economic situation improves, India's growth "can be 9.2% during the period," he added.

India sets five-year macroeconomic targets, and the planning commission's view is a part of planning for the next five-year period. The commission is chaired by the prime minister.

Reserve Bank of India (RBI) deputy governor Subir Gokarn on Tuesday, 23 August 2011, said that RBI continues to expect inflation to start falling by the months of November and December 2011 and is watching for signs of moderation in demand. Gokarn has said last week that the primary objective of monetary policy must be to keep inflation low and stable. The RBI is scheduled to undertake a mid-quarter policy review on 16 September 2011.

Food Minister K.V. Thomas, last week, said that the government plans to introduce a food security bill, which promises to give cheap food grains to 70% of the country's population, in the winter session of parliament. Thomas told reporters that the bill won't be introduced in the ongoing session of parliament, as earlier planned, because the "consultation process with state governments and different ministries is still on. "A ministerial panel had cleared the draft law last month.

Indian Meteorological Department (IMD) said on Thursday, 18 August 2011, that monsoon rains were 26% above normal in week to 17 August 2011, strengthening from a 14% above normal reading in the previous week. The June to September Southwest monsoon rains are crucial to crop production in 60% of the country that does not have adequate irrigation.

Total rainfall since the beginning of the season was 1% below normal until 17 August 2011, down from a deficit of 4% until last week. Good rains will help India achieve its target of increasing its food grains output to a record 245 million metric tonnes this crop year that started 1 July 2011. Good rains could help boost rural income and may help bring down food inflation. The rainfall has been normal in 65% of the country, while it has exceeded the normal in 23% and deficient in 12% until 17 August 2011.

The rainfall was excess to normal in oilseeds-growing western region, in the rice-growing eastern region as well as parts of the grain-bowl northern region and the north-western Rajasthan state. Plantings of key summer crops have been on the rise until 5 August, aided by favourable weather, including the main summer-sown rice crop. Rice acreage rose to 26.03 million hectares as against 24.47 million hectares during the same period last year.

Prime Minister Manmohan Singh on Tuesday, 23 August 2011, made an appeal to anti-corruption activist Anna Hazare to call off his fast. Singh has appointed senior Congress leader Pranab Mukherjee as negotiator for discussions with Team Anna. The government has reported agreed to bring the Prime Minister under the ambit of the Lokpal. Hazare, the 73-year-old Gandhian began his indefinite fast in police custody on 16 August 2011 demanding a strong Lokpal bill.

Asian stocks traded mostly lower on Wednesday, 24 August 2011, with Hong Kong shares clocking up notable losses, in part due to downbeat earnings from China Life Insurance Co. The key benchmark indices in China, Taiwan, Japan, Hong Kong, South Korea and Singapore were down by between 0.03% to 1.14%. Indonesia's Jakarta Composite rose 0.13%.

Moody's Investors Service cut its rating on Japan's government debt by one notch to Aa3 on Wednesday, 24 August 2011, blaming a build-up of debt since the 2009 global recession and revolving-door political leadership that has hampered effective economic strategies.

US stocks surged on Tuesday, 23 August 2011, after a business activity index slid in August 2011 but not by as much as a similar index released last week. In addition, global manufacturing surveys weren't bad as some had expected. The Dow Jones Industrial Average jumped 322.11 points, or 3%, to close at 11176.76. The Standard & Poor's 500-stock index rose 38.53 points, or 3.4%, to 1162.35 and the Nasdaq Composite rallied 100.68 points, or 4.3%, to 2446.06.

Investors are looking forward to Federal Reserve Chairman Ben Bernanke's speech at Jackson Hole on Friday, 26 August 2011, amid a debate and speculation over further monetary easing, and specifically, about any reference to the Fed's third round of quantitative easing, or QE3.

On Thursday, 25 August 2011, investors will scrutinize weekly US jobless claims data for signs of stabilization in the nation's labor market

Trading in US index futures indicated that the Dow could fall 85 points at the opening bell on Wednesday, 24 August 2011.