Market skids to 14-1/2-month low on selling by FIIs

Key benchmark indices fell in 3 out of 4 trading sessions in truncated week to hit 14-1/2-month lows weighed by sustained selling by foreign investors. Investors investing in India are worried that higher interest rates will restrict corporate profit growth. Commercial banks have raised lending rates over the past few days after the Reserve Bank of India (RBI) late last month raised its key lending rate by a steeper-than-expected 50 basis points at a policy review. Three top commercial banks, State Bank of India, ICICI Bank and HDFC Bank, last week, raised lending rates by half a percentage point. The sell-off in global equities on worries about the health of the world economy also dampened sentiment. The 50-unit S&P CNX Nifty fell below the psychological 5,000 mark.



Foreign institutional investors (FIIs) have sold shares worth Rs 8053.88 crore this month, till 18 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 13093.13 in calendar year 2011 so far, as per data from the stock exchanges. Domestic institutional investors have bought shares worth a net Rs 20608.77 this year so far.

The BSE Sensex slumped 697.96 points or 4.14% to 16,141.67 in the week ended Friday, 19 August 2011, its lowest closing level since 25 May 2010. The S&P CNX Nifty dropped 227.30 points or 4.48% to 4,845.65, its lowest closing level since 25 May 2010.

The BSE Mid-Cap index tanked 5.93% and the BSE Small-Cap index dropped 8.09%. Both these indices underperformed the Sensex.

Reliance Industries, Infosys, Wipro, ICICI Bank, State Bank of India (SBI), Hindalco, Sterlite Industries (India), Cipla, Tata Power, Tata Steel, Jindal Steel & Power, Tata Motors among others struck 52-week lows.

Trading for the week began on a weak note. The key benchmark indices fell for the third straight day to hit more than 14 month closing lows on Tuesday, 16 August 2011 as weak European stocks and lower US index futures weighed on the sentiment. The BSE Sensex lost 108.69 points or 0.65% to 16,730.94, its lowest closing level since 9 June 2010.

Bargain hunting after recent heavy losses in share prices helped the key benchmark indices edge higher on Wednesday, 17 August 2011. The BSE Sensex jumped 109.86 points or 0.66% to 16,840.80.

Sustained selling by foreign funds amid concerns that higher interest rates and global economic slowdown will restrict corporate profit growth sent Indian shares tumbling on Thursday, 18 August 2011. The BSE Sensex tumbled 371.61 points or 2.2% to settle at 16,469.79, its lowest closing level since 26 May 2010.

A fresh setback in world equities weighed on Indian shares for yet another day as the key benchmark indices reached 14-1/2-month closing lows on Friday, 19 August 2011. The BSE Sensex tumbled 328.12 points or 1.99% to 16,141.67.

From the 30 share Sensex pack, 27 fell and only three rose in the week.

Index heavyweight Reliance Industries (RIL) lost 3.89% to Rs 731.20. The stock hit 52-week low of Rs 721.60 on Friday, 19 August 2011. RIL, last week, said it 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.

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.

State-run Coal India gained 2.18%. The company's consolidated net profit rose 64.05% to Rs 4143.92 crore on 28.29% rise in total income to Rs 16057.97 crore in Q1 June 2011 over Q1 June 2010. The company announced Q1 results after market hours on Friday, 12 August 2011.

Coal India overtook Reliance Industries (RIL) as India's largest company in terms of market capitalization. Coal India produces and markets coal and coal products as well as provides related consulting services.

Auto stocks declined on concerns higher interest rates could crimp sales of automobiles. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.

India's largest tractor and utility vehicles maker by sales Mahindra & Mahindra (M&M) fell 2.86%. The company's consolidated net profit rose 6.7% to Rs 662.30 crore on 66.2% rise in gross revenue and other income to Rs 14256 crore in Q1 June 2011 over Q1 June 2010. The result was announced during trading hours on Wednesday, 17 August 2011.

Commenting on the results, Mahindra Group Executive Director and Chief Financial Officer Bharat Doshi said, "We are delighted to announce the consolidated financials of the Mahindra Group which in addition to the auto and farm businesses are a reflection of the robust growth of the various group companies in the IT, finance, real estate, hospitality and Systech sectors. Mahindra Satyam's significant growth in margins and profit and SsangYong Motor Company's improved sales volume is heartening to note; it is with great satisfaction that we see the integration of both these companies in the group."

India's largest small car maker by sales Maruti Suzuki India declined 6.77%. Recent reports indicated the company has cut production of most of its models, including the best selling Alto, by 5% due to slump in demand in the domestic market. Maruti on Wednesday, 17 August 2011, unveiled its much awaited sportier and stylish car, new Swift. The new Swift is priced in the range 4.22 lakh to 5.53 lakh for petrol variant and 5.17 lakh to 6.38 lakh in diesel variant.

Speaking at the launch of the new Swift, Shinzo Nakanishi, Managing Director and CEO, Maruti Suzuki on Wednesday said, "We have launched the new Swift at a time when there was significant demand for the ongoing model. In keeping with the Swift's iconic status, we had to ensure that the brand continues to offer the latest and the best in terms of features, design, performance and aspiration. I am confident that the new Swift will create new benchmarks with its improved fuel efficiency, stylish and sportier looks and high performance."

Maruti Chairman R.C. Bhargava on Friday, 19 August 2011, said that the company's management is in discussions with the local unit of Fiat SpA to source diesel engines for its cars.

India's largest commercial vehicle maker by sales Tata Motors dropped 10.95% to Rs 713.40. The stock hit 52-week low of Rs 703.25 on Friday, 19 August 2011. The company's global sales declined 6% to 85,392 units in July 2011 over July 2010. While sales of luxury sedans of Jaguar brand were down 23% to 4,372 units, Land Rover sales were up by 8% at 14,747 units in July 2011 over July 2010. Total passenger vehicles sales fell 24% to 38,154 units in July 2011 over July 2010. Commercial vehicles sales were up by 16% to 47,238 units.

The company at the fag end of the trading session on Tuesday, 16 August 2011, had informed the stock exchanges that a committee of directors vide its Circular Resolution dated 12 August 2011 approved 13 September 2011 as the record date for the purpose of sub-division of the Ordinary Shares and 'A' Ordinary Shares (collectively the shares) both having face value of Rs 10 into 5 shares having face value of Rs 2 each.

India's largest bike maker by sales Hero MotoCorp rose 5.44% and was the top gainer from the Sensex pack. The stock jumped on the back a brand revamp exercise carried out by the two-wheeler major. Hero MotoCorp recently unveiled a new brand after the two-wheeler major ended its long standing partnership with Japan's Honda Motor. Hero MotoCorp aims to increase annual revenue to $10 billion and two-wheeler sales to 10 million units a year in the next five to six years, as it expands in overseas markets and hopefully benefits from strong local demand. The company expects exports to contribute a tenth of its vehicle sales and revenue over the same period.

Hero MotoCorp said during market hours on Thursday, 18 August 2011, that its board of directors by way of passing a resolution by circulation on 17 August 2011, appointed Sunil Kant Munjal as the joint managing director of the company for a term of five years from 17 August 2011.

Software pivotals dropped on concerns that a likely economic slowdown in the US and Europe will hit technology spending by overseas clients. The US and Europe are the two biggest markets for Indian IT firms.

India's second largest software services exporter Infosys plunged 6.28% to Rs 2,225.40. The stock hit 52-week low of Rs 2,172.65 in intraday trade on Friday, 19 August 2011. Infosys Chief Operating officer S.D. Shibulal on Thursday, 18 August 2011, said the company is facing a challenging environment as the main outsourcing markets, the US and Europe, remain weighed by debt crisis and slowing economic growth. Shibulal said that, despite the weak economic environment, Infosys will continue to make investments in the short term for sustainable growth in the long term. Shibulal takes over as the new chief executive officer of Infosys on 21 August 2011.

India's third largest software services exporter Wipro declined 6.56% to Rs 320.50. The stock hit a 52-week low of Rs 310.20 on Friday, 19 August 2011. India's largest software services exporter TCS fell 2.25%.

Bank stocks extended recent steep losses triggered by fears that elevated interest rates would hurt borrowers' ability to repay loans and increase delinquencies. India's largest private sector bank by net profit ICICI Bank slumped 11.35% to Rs 833.15 and was the top loser from the Sensex pack. The stock hit a 52-week low of Rs 825 on Friday, 19 August 2011. The bank, last week, raised its base rate upwards by 50 basis points to 10%. The bank had also announced an increase of 0.5% in its benchmark prime lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans).

ICICI Bank on Thursday, 18 August 2011, said it will launch two new home loan products with interest rates fixed for one and two years--a reminder of the teaser loan schemes which became a banking sector trend in 2009-2010.

India's second largest private sector bank by net profit HDFC Bank shed 1.35%. The bank recently hiked its lending rates by half a percentage point, in line with the rate hikes by other top lenders after the central bank raised its policy rate by the same margin in late July 2011. HDFC Bank also raised interest rates on some deposits by between 25 basis points and 75 basis points.

India's largest bank by net profit and branch network State Bank of India lost 7% to Rs 2,039.90. The stock hit a 52-week low of Rs 2,026.10 on Friday, 19 August 2011. The bank's consolidated net profit fell 25.34% to Rs 2512.47 crore on 20.3% rise in total income to Rs 39454.89 crore in Q1 June 2011 over Q1 June 2010. The bank announced Q1 results on Saturday, 13 August 2011.

Metal stocks extended recent steep losses triggered by worries the global economic slowdown may crimp demand. India's largest aluminium maker by sales Hindalco Industries declined 7.66% to Rs 139.30. The stock hit a 52-week low of Rs 128.55 on Friday, 19 August 2011.

India's largest sponge iron maker by sales Jindal Steel & Power fell 7.56% to Rs 485.05. The stock hit a 52-week low of Rs 464 on Friday, 19 August 2011.

India's largest steel maker by sales Tata Steel declined 3.6% to Rs 459.20. The stock hit a 52-week low of Rs 450.25 on Friday, 19 August 2011. The company's consolidated net profit surged 192.91% to Rs 5346.55 crore on 35.33% rise in total income to Rs 36882.43 crore in Q1 June 2011 over Q1 June 2010.

Tata Steel's net profit zoomed due to 6445.71% jump in other income to Rs 3882.26 crore in Q1 June 2011 over Q1 June 2010. The other income includes profit of Rs 2879.29 crore on disposal of Tata Steel Global Mineral Holding's investment in Riversdale Mining. The other income also includes profit of Rs 511.01 crore on sale of part of investment in Tata Refractories. The other income also includes Rs 597.71 crore relating to arbitration with the Teeside Cast Products Consortium.

India's largest non-ferrous metals producer Sterlite Industries (India) declined 6.28% to Rs 125.35. The stock hit a 52-week low of Rs 121.35 on Friday, 19 August 2011.

Larsen & Toubro (down 5.98%), HDFC (down 4.66%), Jaiprakash Associates (down 3.95%), Tata Power Company (down 3.27%) edged lower.

India's largest real estate developer by sales DLF slumped 6.97% to Rs 186.90. The stock skidded as a hefty Rs 630-crore fine was imposed on the realty major by the competition regulator for abusing dominant market position. The stock had hit a 52-week low of Rs 173.40 on Wednesday, 17 August 2011.

India's largest listed cellular services provider by sales Bharti Airtel fell 1.49%. Junior finance minister Namo Narain Meena on Tuesday, 16 August 2011, said that Enforcement Directorate, a unit of the finance ministry, has begun a probe into suspected foreign exchange violations by Bharti Airtel. Meena also said that on that day that the stock market regulator--the Securities and Exchange Board of India--has received complaints over an alleged increase in share holding by its founders to 67.15% from 60.91% in the company between June 2007 and September 2008, without extending an open offer to public shareholders.

Meena also said on that day that the Central Board of Direct Taxes has received a reference containing allegations regarding improper accounting treatment of license fee and spectrum charges by the company. Bharti Airtel said in a statement on Tuesday, 16 August 2011, that it has always complied with all rules and regulations laid down by various agencies and the licensing authority, the Department of Telecommunications. "We will provide all relevant details to the concerned authorities as and when required and will offer full assistance to clarify any concern," the company said.