Sensex, Nifty at 14-month closing lows as FIIs press heavy sales

Data showing recent heavy selling by foreign institutional investors (FIIs) and growing fears of another recession in the US, the world's biggest economy, pushed Indian shares lower for the sixth day in a row. The barometer index BSE Sensex and the 50-unit S&P CNX Nifty reached 14-month closing lows. High intraday volatility was witnessed for the second day in a row. NSE's volatility index, India VIX, surged to 34.88% from its close of 28.78% on Monday, 8 August 2011.

The Nifty regained the psychological 5,000 level after falling below that mark at the onset of the trading session. The Sensex fell below the psychological 17,000 mark after regaining that level for a brief period in afternoon trade. The Sensex shed 132.27 points or 0.78%, up 425.91 points from the day's low and off 277.13 points from the day's high.



Foreign institutional investors (FIIs) sold shares worth net Rs 1109.70 crore on Monday, 8 August 2011, compared to an outflow of Rs 1609.60 crore on Friday, 5 August 2011, data released by the Securities & Exchange Board of India (Sebi) showed. FII outflow in August 2011 totaled Rs 4211.50 crore (till 8 August 2011). FIIs had bought shares worth a net Rs 8030.10 crore in July 2011. FII inflow in calendar 2011 totaled Rs 6489 crore (till 8 August 2011).

The Sensex has tumbled 2,013.38 points or 10.66% in eleven trading sessions from a recent high of 18,871.29 on 25 July 2011. The barometer index has lost 17.8% in calendar 2011.

Coming back to today's trade, the market breadth was weak. Index heavyweights, Reliance Industries and ICICI Bank, edged lower in volatile trade after striking 52-week lows. Tractor and utility vehicles major Mahindra & Mahindra (M&M) surged, with the stock gaining for the second day in a row after the company at the time of announcing Q1 June 2011 results during market hours on Monday, 8 August 2011, gave a positive outlook for the remaining part of the year.

Software pivotals extended recent steep losses as the US rating downgrade may lead to a slowdown in decision-making on technology spending by clients in the world's largest outsourcing market. The US is the biggest market for Indian IT firms. Metal stocks fell in volatile trade on worries the global economic slowdown may crimp demand. Banking stocks were mixed amid worries that higher lending rates will crimp loan growth.

Intraday volatility was quite high. The market came off lows soon after an initial steep slide triggered by a massive decline in US shares on Monday, 8 August 2011. The intraday recovery continued mid-morning trade. The recovery gathered steam in early afternoon trade as the Sensex moved into positive zone. Intense volatility in US pre-market trading and initial volatility in European shares triggered high volatility in Indian shares, which gave up gains in afternoon trade after a strong intraday rebound. Volatility continued in mid-afternoon trade. The market once again came off lows in late trade.

The BSE Sensex shed 132.27 points or 0.78% to settle at 16,857.91, its lowest closing level since 9 June 2010. The Sensex lost 558.18 points at the day's low of 16,432 in early trade, its lowest level since 1 June 2010. The index rose 144.86 points at the day's high of 17,135.04 in afternoon trade.

The S&P CNX Nifty was down 45.65 points or 0.89% to 5,072.85, its lowest closing level since 9 June 2010. The Nifty hit a low of 4,946.45 in intraday trade, its lowest level since 27 May 2010. The Nifty hit a high of 5,167 in intraday trade.

The market breadth, indicating the overall health of the market, was weak. On BSE, 2,040 shares declined while 879 shares gained. A total of 94 shares remained unchanged.

The BSE Mid-Cap index fell 1.27% and the BSE Small-Cap index dropped 2.05%. Both these indices underperformed the Sensex.

The total turnover on BSE amounted to Rs 3,398.30 crore, higher than Monday's Rs 2991 crore

Eleven out of 13 sectoral indices on BSE logged declines. The BSE IT index (down 3.47%), the BSE TecK index (down 2.74%), and the BSE Metal index (down 2.73%), underperformed the Sensex. The BSE FMCG index (up 1.36%), the BSE Auto index (up 0.48%), and the Bankex (down 0.31%), outperformed the Sensex.

Among the 30-share Sensex pack, 19 declined while the rest gained. ITC (up 2.98%), Jaiprakash Associates (up 2.74%), and HDFC (up 2.08%), edged higher from the Sensex pack. Cipla (down 3.72%), Sun Pharmaceuticals (down 2.99%), and Coal India (down 2.7%), edged lower from the Sensex pack.

Index heavyweight Reliance Industries (RIL) lost 1.65% to Rs 767.70, rebounding from a 52-week low of Rs 754.25 hit in intraday trade today, 9 August 2011. During market hours today, 9 August 2011, RIL 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.

The prized KG-D6 fields of RIL produced 31% less than previously projected natural gas output in the April-June 2011 quarter, the Oil Ministry said recently. The average gas production during April-June 2011 from KG-DWN-98/3 (KG-D6) block was 48.60 million metric standard cubic meters per day (mmscmd), less than the approved Field Development Plan (FDP) rate of 70.39 mmscmd, the ministry said.

Metal stocks dropped in choppy trade on worries the global economic slowdown may crimp demand. LMEX, a gauge of six metals traded on London Metal Exchange, fell 3.21% to $3,816 on Monday, 8 August 2011.

India's largest private sector steel maker by sales Tata Steel lost 4.77% to Rs 486.60 and was the top loser from the Sensex pack. The stock declined to a 52-week low of Rs 481.15 in intraday trade today, 9 August 2011. The company, last week, said it will invest 7 million pounds ($11.4 million) in its European unit to enhance welding and material handling capabilities of its mill in Hartlepool in the UK. "This investment will help us retain our position as a world-leading supplier of pipes and tubes," said Ramsay Ross, a director of Tata Steel's tubes business, said in a statement.

India's largest non-ferrous metal firm by capacity Sterlite Industries (India) fell 1.28% to Rs 135.05 after sliding to a 52-week low of Rs 130 in intraday trade today, 9 August 2011. The stock retreated from day's high of Rs 141.90.

India's largest private sector aluminium maker by sales Hindalco Industries dropped 1.58% to Rs 149.30, after falling to a 52-week low of Rs 143.65 in intraday trade today, 9 August 2011.

India's largest sponge iron steel maker by sales Jindal Steel & Power shed 0.13% to Rs 523.05 after declining to a 52-week low of Rs 501.20 in intraday trade today, 9 August 2011.

JSW Steel slipped 3.82%. During market hours today, 9 August 2011, the company said its crude steel production rose 15% to 5.99 lakh tonne in July 2011 over July 2010. The company, last week, denied the conclusions drawn in a report by the Lokayukta, Karnataka's anti-graft watchdog, against the company on procurement and transportation of iron ore in the state.

Sesa Goa declined 2.55%. On Saturday, 6 August 2011, the company said it has agreed to acquire 51% stake in Western Cluster, Liberia for a cash consideration of $90 million. With this acquisition, Sesa Goa will become a significant player in the upcoming West African Iron Ore hub, the company said.

Hindustan Zinc (down 1.58%), Steel Authority of India (down 0.18%), and National Aluminium Company (down 4.57%), were the other losers from the metal pack.

Software pivotals extended recent steep losses as the US rating downgrade may lead to a slowdown in decision-making on technology spending by clients in the world's largest outsourcing market. The US is the biggest market for Indian IT firms. India's largest software services exporter TCS slumped 4.28% to Rs 966.05. Nevertheless, the stock was off day's low of Rs 948. TCS and Singapore Management University (SMU) on Monday, 8 August 2011, announced establishment of TCS-SMU iCity Lab to be located at SMU. TCS made the announcement after trading hours on Monday.

India's third largest software services exporter Wipro fell 2.41% to Rs 350. The stock had hit a 52-week low of Rs 337.75 in intraday trade on Monday, 8 August 2011. Wipro's ADR plunged 8.26% to $10.11 on Monday.

India's second largest software services exporter Infosys was down 3.61% to Rs 2379, after falling to a 52-week low of Rs 2350 in intraday trade today, 9 August 2011. Infosys sees fears of another recession in the US. Infosys' ADR slumped 6.97% to $53.39 on Monday.

Tractor and utility vehicles major Mahindra & Mahindra (M&M) jumped 5.24% to Rs 700.90 and was the top gainer from the Sensex pack. The stock extended Monday's over 1.5% gain. M&M during market hours on Monday, 8 August 2011, reported 7.6% rise in net profit to Rs 604.90 crore on 28.8% increase in gross revenue & other income to Rs 7294.30 crore in Q1 June 2011 over Q1 June 2010. M&M said profit before tax (PBT) rose 12.9% to Rs 814.30 crore. M&M said there was a sharp increase in non-cash charge arising from amortization of ESOPs granted in earlier years, at Rs 26.50 crore in Q1 June 2011 from Rs 0.90 crore in Q1 June 2010. Excluding this charge, PBT growth was 16.5% in Q1 June 2011, M&M said.

M&M said despite a relentless increase in material costs the profit grew in the first quarter due to tight control on expenses and good volumes in both auto and tractor segments. Since prospects for agricultural and services sectors growth remain reasonably robust, the outlook for the company for the remaining part of the year remains positive but watchful, M&M said.

India's largest truck maker by sales Tata Motors lost 4.28% to Rs 796 after sliding to a 52-week low of Rs 785.65 in intraday trade today, 9 August 2011. Tata Motors' ADR tumbled 10.54% to $17.15 on Monday.

India's largest small car maker by sales Maruti Suzuki India rose 1.39%. India's second largest bike maker by sales Bajaj Auto surged 1.95%. India's largest bike maker by sales Hero MotoCorp shed 0.05%.

Banking stocks were mixed amid worries that higher lending rates will crimp loan growth. A number of commercial banks have raised lending rates recently after the central bank raised its key lending rate by a steeper-than-expected 50 basis points at a policy review on 26 July 2011.

India's largest commercial bank by branch network State Bank of India rose 0.82%. The bank reportedly expects to raise Rs 23000 crore through a rights issue to fund loan growth.

India's largest private sector bank by net profit HDFC Bank rose 1.51%, reversing intraday fall.

India's largest private sector bank by net profit ICICI Bank was down 1.47% to Rs 938.10 after falling to a 52-week low of Rs 912.65 in intraday trade today, 9 August 2011.

ABB rose 1%. During market hours today, 9 August 2011, the company reported 1.04% rise in net profit to Rs 38.70 crore on 17.03% rise in revenue to Rs 1693 crore in Q2 June 2011 over Q2 June 2010. The company's order inflow surged 45% to Rs 1791.80 crore in Q2 June 2011 over Q2 June 2010. ABB's order backlog stood at Rs 8415 crore as on 30 June 2011, which is 1.34 times its net sales of Rs 6287.12 crore for the year ended December 2010, giving strong revenue visibility.

ABB's board of directors approved a proposal of acquisition of 100% shares of Baldor Electric India, Pune (Baldor), from Baldor Holdings Inc., USA and Baldor Electric Switzerland AG, Switzerland, for a total consideration of Rs 35.70 crore. At the global level, the ABB Group acquired Baldor Electric Company, USA, in January 2011. Baldor Group is now integral part of ABB Group. Baldor provides sales and service assistance to its customers including support for the products viz., electric motors, power transmission products, drives, generators and other accessory products.

Reliance Power lost 6.86% to Rs 90.25 after sliding to a 52-week low of Rs 89.60 in intraday trade today, 9 August 2011.

Jaiprakash Associates gained 2.74% to Rs 61.85, rebounding from a 52-week low of Rs 57.10 in intraday trade today, 9 August 2011.

Cement shares advanced as cement dispatches are likely to pick up post monsoon due to acceleration in construction activities with current year being the last year of the eleventh five-year plan period. ACC (up 1.84%), UltraTech Cement (up 3.04%), India Cement (up 1%), Ambuja Cement (up 3.57%), Madras Cement (up 1.08%), Shree Cement (up 0.64%), gained.

Suzlon Energy clocked highest volume of 1.37 crore shares on BSE. SpiceJet (91.85 lakh shares), Sanraa Media (68.33 lakh shares), Cals Refineries (58 lakh shares) and Inventure Growth Securities (55.83 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 175.25 crore on BSE. Inventure Growth Securities (Rs 121.40 crore), Tata Steel (Rs 112.33 crore), Larsen & Toubro (Rs 91.82 crore) and Reliance Industries (Rs 90.45 crore) were the other turnover toppers in that order.

The Q1 June 2011 earnings season is drawing towards a close. Investors are focusing on the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs.

Tata Power and Rural Electrification Corporation unveil Q1 results on Wednesday, 10 August 2011. Tata Motors, Reliance Infrastructure, Reliance Power, Castrol India and Shipping Corporation of India unveil quarterly results on Thursday, 11 August 2011.

Tata Steel, Hindalco Industries, Coal India, National Aluminium Company, Jaiprakash Associates, Unitech and HPCL unveil Q1 results on Friday, 12 August 2011. State Bank of India, Aditya Birla Nuvo, Reliance Communications, Reliance Capital and Shipping Corporation of India unveil Q1 results on Saturday, 13 August 2011.

The government today, 9 August 2011, approved the extension of the term of Dr. D. Subbarao as the Governor of the Reserve Bank of India (RBI). Dr. Subbarao's term has been extended for a period of two years with effect from 5 September 2011 up to 4 September 2013. Commenting upon his re-appointment, Subbarao said, "I am happy that the government has reposed its confidence in me at this difficult juncture in the world economy. I look forward to working with a great team in the RBI to meet the many challenges ahead."

Thomas Mathew, joint secretary of capital markets today, 9 August 2011, said the country's stock markets are likely to remain volatile in the near term, tracking pan-Asian jitters following the US credit downgrade and local state-run companies should decide themselves when to step in to support the market. India's economic fundamentals remain strong and its share markets would attract strong overseas capital amid the global uncertainty, Mathew said. He doesn't expect any payment problems to plague Indian share markets after a recent steep slide.

The Reserve Bank of India (RBI) on Monday, 8 August 2011, said that the US rating downgrade has raised concerns of continuing turmoil in global financial markets as investors re-allocate portfolios in response to heightened risk perceptions stemming from the latest developments. As Friday's (5 August 2011) market behaviour demonstrated, India is not insulated from such developments, RBI said. It may, however, be noted that in the worst phase of the recent global financial crisis, the Indian economy grew by 6.8%, suggesting high resilience emerging from domestic factors, the RBI said in a statement.

While downside risks to growth may have increased in the wake of global developments, they are likely to have limited impact, RBI said. However, the policy and regulatory framework must anticipate and be prepared to respond to turbulent financial market conditions arising out of external developments, RBI said. In the immediate future, the RBI's priority is to ensure that adequate rupee and forex liquidity are maintained in domestic markets to prevent excessive volatility in interest rates and exchange rates.

Rupee liquidity is being provided through the Repo window of the Liquidity Adjustment Facility (LAF). As of now, the banking system does not face any liquidity pressures as evident from the low level of dependence on liquidity injections under the LAF, RBI said. In any case, the banking system currently has an adequate stock of Statutory Liquidity Ratio (SLR) securities, which are eligible for Repo transactions, RBI said. Further, the capacity of the LAF to inject liquidity has recently been augmented by the introduction of the Marginal Standing Facility (MSF), which allows banks to draw down SLR securities up to a further one per cent of their Net Demand and Time Liabilities (NDTL) in order to meet liquidity requirements. This will help stabilize the call rate within the LAF corridor, which is currently 7% to 9%, RBI said.

As regards forex liquidity, in anticipation of financial market turbulence related to the US debt ceiling impasse, the RBI recently made an assessment of the ability of the forex reserve portfolio to meet potential forex requirements in the event of significant capital outflows. This exercise indicated that there were sufficient liquid reserves to meet the demand for forex even in stress scenarios, RBI said.

RBI said it is closely monitoring all key indicators and will continuously assess the impact of global developments on rupee and forex liquidity and macroeconomic stability. "We will respond quickly and appropriately to the evolving situation, "RBI said.

Finance Minister Pranab Mukherjee on Monday, 8 August 2011, said the government will give an impetus to domestic growth drivers. "Our economic fundamentals are sound and we would also focus on encouraging greater domestic consumption and give impetus to the drivers of domestic growth," Mukherjee told reporters. He was reacting to questions on the impact of the US debt rating downgrade and the debt troubles in the euro zone on the Indian economy. Mukherjee also said that the government would fast-track economic reforms and that the Indian economy remains an attractive investment destination for foreign investors despite the global growth slowdown worries. Mukherjee on Tuesday, 9 August 2011, said the decline in global crude prices will help in managing India's inflation.

Chief economic adviser Kaushik Basu on Monday, 8 August 2011, said while India would be affected in the short term by a US economic slowdown, it had potential to benefit in the future. "We have a slew of instruments available with the finance ministry, the government and the Reserve Bank of India, and, should the need arise, the government and the central bank are in a position to step in," Basu told reporters on Monday. Basu expects India's brisk economic growth could be a magnet for global capital inflows, a thought shared by the finance minister.

Monsoon rains were 22% below normal in the week to 3 August 2011, recording marginal improvement from 23% below average showers in the previous week. Total rainfall since the beginning of the June-September monsoon season has been 6% below average. Rainfall has been normal or above in 73% of the country so far this season, while 27% of the country is facing a deficit. In some parts of eastern India such as Orissa, Bihar and Jharkhand, rainfall is below normal, but in the key rice-growing state of West Bengal rainfall is above normal. A rainfall deficit in the southern state of Andhra Pradesh, a top rice-producer, has largely been bridged.

In the northern grain bowl region of Punjab, the monsoon rain deficit is 26%. However, since most farmland in Punjab is irrigated, rice production may not be adversely affected in the state. But, low rainfall in the western regions is likely to adversely affect the output of groundnut, the second biggest summer-sown oilseed crop after soybean. In Gujarat, rainfall is 37% below average.

The Reserve Bank of India (RBI) raised its key lending rates by 50 basis points at a policy review on 26 July 2011, to tame high inflation. RBI had at time said that going forward, the monetary policy stance will depend on the evolving inflation trajectory, which, in turn, will be determined by trends in domestic growth and global commodity prices. A change in stance will be motivated by signs of a sustainable downturn in inflation, it had added.

European stock markets were off day's lows on Tuesday, 9 August 2011, in volatile trade. The key benchmark indices in UK and Germany were down 0.65% and 1.98%. France's CAC 40 rose 0.65%.

The amount of money commercial banks parked at the European Central Bank hit a 2011 record on Monday, 8 August 2011, European Central Bank data showed on Tuesday, 9 August 2011, reflecting the end of the ECB's reserve period Tuesday and also fears that Europe's sovereign debt crisis is deepening.

Asian shares skidded Tuesday after a massive sell-off in the US on Monday, 8 August 2011, undermined already-fragile confidence, although a number of indexes recovered from an initial steep slide triggered by a massive fall in US stocks on Monday, 8 August 2011. The key benchmark indices in Taiwan, South Korea, Indonesia, Hong Kong, China and Japan were down by between 0.03% to 5.66%.

The Hong Kong Monetary Authority Tuesday said the city's markets have ample liquidity and are able to withstand market volatility amid a decline in the local currency and stocks.

China today, 9 August 2011, said its July consumer price index inflation hit 6.5%, accelerating from a 6.4% year-on-year rise in June.

US stocks tumbled on Tuesday, dragging the benchmark indices to their biggest slump since December 2008, amid concern that a downgrade of the nation's credit rating by Standard & Poor's may worsen an economic slowdown. The Dow Jones Industrial Average tanked 5.55% or 634.76 points at 10809.85. The Nasdaq Composite fell 6.9% or 174.72 points at 2357.69 and the Standard & Poor's 500 declined 6.66% or 79.92 points at 1119.46.

Standard & Poor's on Friday, 5 August 2011, downgraded the US long-term debt rating to AA+ from AAA with a negative outlook, meaning it can be lowered again within two years.

US index futures surged amid intense volatility in pre-market US trading on Tuesday, 9 August 2011. Futures on the Dow Jones Industrial Average were up 147 points at last check after surging more than 300 points earlier. Dow futures had slumped more than 200 points initially.

Finance ministers and central bank governors at the Group of 20 industrialized and developing nations on Monday, 8 August 2011, said they were committed to take "all necessary initiatives in a coordinated way" to support financial stability and to foster stronger economic growth. Without detailing specifics, the G20 officials said they will remain in close contact and "cooperate as necessary" in the coming weeks to ensure stability and liquidity in the financial markets.

The Group of Seven developed nations had also said Sunday, 7 August 2011, that it was ready to respond as needed to take coordinated action, including to ensure liquidity and support financial market functioning and economic growth

All eyes are now on the US Federal Reserve's one-day policy meeting later in the global day today, 9 August 2011, with the market looking for any signals on the possibility of the Fed injecting any further monetary stimulus to help stem the current global growth confidence crisis. At their last meeting in June 2011, Fed officials decided to keep the central bank's balance sheet at a record to spur the slowing economy after completing $600 billion of bond purchases. The Fed has held its target for the short-term federal-funds rate inside a lowest-ever range of 0% to 0.25% since December 2008