Market at 2-week closing low on Greek default fears

Data showing dismal July 2011 industrial production growth, a setback in global stocks caused by worries the Greek government may default on its debts and reports that Moody's Investors Service may downgrade France's largest banks over their exposure to Greece, pulled Indian indices sharply lower for the second day in a row. The 50-unit S&P CNX Nifty fell below the psychological 5,000 level. The barometer index BSE Sensex and the Nifty hit 2-week closing low. The Sensex lost 365.23 points or 2.17%, off about 165 points from the day's high and up close to 110 points from the day's low. The market breadth was weak. All the thirteen sectoral indices on BSE were in the red.



The market fell for the second straight day today, 12 September 2011. From a 5-week closing high of 17,165.54 on Thursday, 8 September 2011, the Sensex has tumbled 663.80 points or 3.86% in the last two trading sessions.

Index heavyweights Reliance Industries declined. Shares of FMCG giant Hindustan Unilever hit record high on recent reports the company has raised prices of its coffee brand Bru. Metal stocks declined across the board on worries about global economic slowdown. Software stocks extended recent steep losses triggered by economic worries in US and Europe, the two biggest markets for the Indian IT firms. Interest rate sensitive realty stocks edged lower on worries that higher interest rates will dent demand for residential and commercial property. State Bank of India, Tata Power Company, GAIL (India) and NTPC hit 52 week lows today.

The market opened on a weak note as renewed fears over Europe's sovereign-debt crisis sent Asian shares tumbling. The market trimmed losses in morning trade after hitting fresh intraday lows. The market tumbled in mid-morning trade after the latest data showed a dismal 3.3% growth in industrial production in July 2011. The data hit the market at about 11:00 IST. The market extended losses in early afternoon trade as European shares opened on a weak note on fears of Greek default. The market trimmed losses in mid-afternoon trade. The market weakened once again in late trade.

Investors will keenly watch data on second quarter September 2011 corporate advance tax payment due on Thursday, 15 September 2011, which may provide cues on Q2 September 2011 results.

The BSE Sensex lost 365.23 points or 2.17% to settle at 16,501.74, its lowest closing level since 29 August 2011. The index tumbled 473.93 points at the day's low of 16,393.04 in afternoon trade. The index fell 198.72 points at the day's high of 16,668.25 in early trade.

The S&P CNX Nifty shed 112.65 points or 2.23% to settle at 4,946.80, its lowest closing level since 29 August 2011. The Nifty hit a low of 4,911.25 in intraday trade.

The BSE mid-Cap index fell 1.84% and the BSE Small-Cap index declined 1.86%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2254 crore, lower than Rs 3133.70 crore on Friday, 9 September 2011.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,941 shares fell and 876 shares rose. A total of 96 shares remained unchanged.

Among the 30-share Sensex pack, 27 fell and only three of them managed gains.

Index heavyweight Reliance Industries (RIL) lost 2.33% to Rs 805.85. The stock was volatile. The scrip hit high of Rs 822.80 and low of Rs 796.10. The company has denied inflating costs on its D6 gas field in the Krishna-Godavari (KG) basin. RIL clarified that audits by three independent experts had found that costs in the KG-D6 field were not inflated and the company had adhered to the PSC (Production Sharing Contract). With regard to Comptroller and Auditor General of India's (CAG) observation that an operator has an incentive to keep costs high, independent auditor Ernst & Young (E&Y) said any increase in capital expenditure is rather detrimental to both the contractor and the government. Consultant Daniel Johnston commented that the appraisal activities which RIL has carried out in relation to the various discoveries in the KG-D6 block are consistent with good international petroleum industry practices (GIPIP).

RIL said that the independent reports by E&Y, IPA and Daniel Johnston & Co. Inc. entirely validate RIL's stand in its responses to CAG. The independent nature of these studies conducted by globally reputed consultants has acknowledged RIL's commendable efforts in bringing to stream India's first deep water hydrocarbons production facility in record time, RIL said. The fact that energy major BP has entered into a strategic partnership with RIL in this block, further vindicates RIL's position, RIL said. With its newly established partnership with BP, RIL is confident of unlocking the full potential of KG-D6 and other blocks, thus bringing greater benefit to the nation, RIL said.

RIL issued the statement after trading hours on Friday, 9 September 2011, after CAG said in its final report submitted to the parliament on Thursday, 8 September 2011, that RIL initially estimated capital expenditure of D-1 and D-3 gas discovery at $2.4 billion, which it later revised to $8.8 billion. The CAG report also said that RIL started implementing the revised capex plans even before they were approved by the government. The report also found that RIL didn't relinquish some least-priority areas in the KG D6 block, which the government could have given to other companies for further exploration.

State-run oil marketing companies (PSU OMCs) gained as crude prices declined. HPCL, and Indian Oil Corporation rose by between 1.17% to 1.32%. BPCL fell 0.63%. Lower crude oil prices could reduce under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Offshore oil services providers declined on weak crude oil prices. Aban Offshore, Great Offshore, and Jindal Drilling shed by between 1.24% to 4.43%.

Shares of oil exploration firms fell along with crude oil prices. Cairn India (down 3.89%) and Oil India (down 0.36%) fell.

India's largest oil exploration firm by sales ONGC fell 0.29%, reversing initial gains. The company, early this month, filed prospectus for about Rs 11000-crore follow-on public offer with the Securities and Exchange Board of India. Lower crude oil prices would result in lower realizations from crude sales for oil exploration firms.

Shares of state-run gas transmission and distribution firm GAIL (India) fell 1.36% to Rs 409.05. The stock hit 52-week low of Rs 403 today.

Crude oil futures slid for a third day in New York as investors bet Europe's debt crisis will harm economic growth, tempering demand for raw materials. Crude for October delivery was down $1.09 a barrel or 1.27% at $86.15 a barrel.

Shares of pharma firm Cipla rose 1.41% in a weak market.

Auto stocks fell on worries higher interest rates could dent demand for vehicles. India's largest truck maker by sales Tata Motors shed 4.14%, extending Friday's 3.21% losses. The company said after market hours on Friday, 9 September 2011, that its group Chief Executive Office and Managing Director Carl-Peter Forster had resigned on Friday, 9 September 2011 with immediate effect. Forster's resignation, according to a Tata Motors' statement, was due to unavoidable personal circumstances. Forster, who earlier headed General Motors Co.'s Europe operations, joined Tata Motors in February 2010. His mandate at Tata Motors included managing its global operations, including Jaguar Land Rover (JLR), which was acquired in June 2008.

"I deeply regret that my personal circumstances make it difficult for me to continue to perform the challenging duties of managing the thriving global activities of the Tata Motors group with its main activities in India and the UK and increasingly in additional overseas markets," Forster said in a statement. Forster will, however, continue to be on the board as a non-executive member. Prakash Telang, Managing Director India Operations and Ralf Speth, Chief Executive Officer, Jaguar Land Rover, will represent their respective operations on the board.

India's largest small car maker by sales Maruti Suzuki India fell 3.14%. The management at Maruti Suzuki India won't accept any indiscipline in the company, Suzuki Motor Corp.'s chairman said on Friday, 9 September 2011, amid labor issues that have disrupted output at India's biggest car maker by sales. "Indiscipline is not tolerated...not in Japan, not in India. It is never in the interest of any company and its people," Osamu Suzuki told members of the Maruti Udyog Kamgar Union, the elected union at Maruti Suzuki, according to a company statement.

Maruti, early last week, halted production at its Manesar plant after it asked 950 workers belonging to a union not recognized by the company to sign a "good conduct bond" before they could enter the factory. The move came after it discovered "serious and deliberate" quality problems in cars made at the plant. The halt led to a production loss of about 2,400 cars. The company also suspended and dismissed 21 employees.

Maruti has employed 1,000 workers and supervisors to start production at its plants. Maruti on Friday, 9 September 2011, produced 250 cars from its Manesar plant, way lower than its usual target of about 1,000. Maruti's sales declined 13% to 91,442 vehicles in August 2011 over August 2010 hurt by disruption in production at Manesar plant caused by the labour unrest in end-August.

India's largest tractors and utility vehicles maker by sales Mahindra and Mahindra (M&M) dropped 1.12%. Mahindra & Mahindra, last week, introduced a new, costlier version of its Bolero SUV. The company expects to sell more than 1 lakh Bolero vehicles this fiscal year through March, compared with 83,112 last year. M&M's auto sales rose 30.38% to 37,684 units in August 2011 over August 2010. The maker of the Xylo, Scorpio and Bolero models exported 1,928 autos, up 18% on year.

India's largest two-wheeler maker by sales Hero MotoCorp shed 0.26% to Rs 2209.25 on profit taking. The stock had scaled a record high of Rs 2,231.70 in intraday trade on Friday, 9 September 2011. The company's sales rose 19% to 5.03 lakh units in August 2011 over August 2010.

India's second largest two wheeler maker by sales Bajaj Auto dropped 2.99% to Rs 1577.05 on profit taking. The stock had hit a record peak of Rs 1694.90 in intraday trade on 6 September 2011. The company's total sales rose 16% to a record 3.82 lakh units in August 2011 over August 2010. Motorcycle sales jumped 17% to a record 3.38 lakh units in August 2011 over August 2010.

Shares of south based two-wheeler and three-wheeler maker TVS Motor Company shed 1.73% on profit taking.

Anil Dhirubhai Ambani Group shares extended Friday's slide. Reliance Infrastructure, Reliance Communications, Reliance Capital, Reliance MediaWorks and Reliance Power shed by between 3.54% to 4.9%.

Tata Power Company fell 1.01% to Rs 991.35. The stock hit 52-week low of Rs 982.20 today.

NTPC fell 0.92% to Rs 161.90. The stock hit 52-week low of Rs 160.10 today.

Consumer durables stocks fell. Blue Star, Videocon Industries, Rajesh Exports, Gitanjali Gems and Titan Industries declined by between 0.04% to 5.51%.

Bank stocks skidded across the board on concerns elevated interest rates may restrict loan growth. India's largest private sector bank by net profit ICICI Bank fell 3.87%. India's second largest private sector bank by net profit HDFC Bank declined 0.88%.

India's largest bank by branch network and net profit State Bank of India (SBI) shed 4.39% to Rs 1869.15. The stock hit 52-week low of Rs 1861.30 today. The government is likely to take a call shortly on infusing capital into SBI. SBI requires Rs 20000 crore to fund its growth plans over the next two financial years.

Bank of India, Bank of Baroda and Punjab National Bank dropped by between 1.11% to 2.99%.

India's largest FMCG firm by sales Hindustan Unilever jumped 3.8% to Rs 345.90 and was the top gainer from the Sensex pack. The stock hit record high of Rs 348.40 today. Reportedly, the company has raised prices of coffee brand Bru in the wake of a sustained rise in cost of raw materials over last several quarters.

Metal stocks fell across the board on worries about global economic slowdown. Sterlite Industries, Hindustan Zinc, Jindal Steel & Power, Hindalco Industries, Bhushan Steel, JSW Steel, Tata Steel, and Sail shed by between 1.2% to 4.76%.

LMEX, a gauge of six metals traded on the London Metal Exchange, tumbled 3.07% on Friday, 9 September 2011.

National Aluminium Company fell 1.83% on reports the company has cut its daily aluminium output by about 6% due to insufficient power supply.

Software stocks extended recent steep losses triggered by economic worries in US and Europe, the two biggest markets for the Indian IT firms.

India's second largest software services exporter Infosys declined 3.23% to Rs 2197.75. Infosys executive co-chairman S. Gopalakrishnan on 8 September 2011 said clients are unlikely to cut their technology budgets for 2011, though they may end up cutting them for next year. He also warned that clients may hold back spending budgets earmarked for this year. Infosys had earlier said that it is witnessing delays in decision-making by clients.

India's largest software services exporter TCS fell 2.67%. TCS recently said that none of its ongoing projects, which are not so urgent in nature, are being cut and it hasn't seen specific delays in decision-making.

India's third largest software services exporter Wipro fell 4.56%. HCL Tech, iGate Patni and Tech Mahindra shed by between 1.54% to 4.71%.

The rupee weakened further to touch a 14-month low against the dollar on Monday, 12 September 2011, as the impact of Europe's deepening debt crisis on global growth triggered a flight from riskier assets. The partially convertible rupee hit a low of 47.1150--its weakest since 22 July 2010, and weaker than Friday's close of 46.56/57. A weak rupee boosts revenue of IT companies in rupee terms as the sector derives a lion's share of revenue from exports.

Interest rate sensitive realty stocks edged lower on worries that higher interest rates will dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance. DLF, HDIL, Indiabulls Real Estate, Phoenix Mills and Unitech dropped by between 0.66% to 6.63%.

Capital goods shares fell after the latest data showed that capital goods production shrank 15.2% in July 2011 from a year earlier, compared with a 38% expansion in June 2011. Larsen & Toubro, Praj Industries, ABB, Siemens, Thermax, Bhel and Punj Lloyd shed by between 0.73% to 5.69%.

Cals Refineries clocked highest volume of 7.6 crore shares on BSE. Pipavav Defence (1.79 crore shares), GTL (94.19 lakh shares), K S Oils (75.05 lakh shares) and Shree Ashtavinayak Cine Vision (67.02 lakh shares) were the other volume toppers in that order.

Pipavav Defence clocked highest turnover of Rs 163.67 crore on BSE. SBI (Rs 150.86 crore), GTL (Rs 67.86 crore), RIL (Rs 63.45 crore) and Delta Corp (Rs 61.27 crore) were the other turnover toppers in that order.

Industrial production grew 3.3% in July 2011 from a year earlier, much below market expectations, hurt by a sharp fall in capital goods output. The reading was sharply lower than the 8.8% industrial output growth recorded in June 2011, government data showed on Monday, 12 September 2011. July capital goods output shrank 15.2% from a year earlier, compared with a 38% expansion in June. Manufacturing output, which has a 75.5% weight in the index, rose 2.3% year on year in July, compared with a 10% rise in June. Mining output grew 2.8%, compared with a revised 1.1% contraction in June.

Prolonged rainfall in the latter part of the season has helped ease concerns that this year's monsoon might drop below the long-term average after a brief lull in July, when the country usually receives a third of its monsoon rains. The monsoon was 3% above average till 7 September 2011, as per the latest data from Indian Meteorological Department (IMD). Most parts of the country received average to above-average rainfall this year, but the season was marked by both lulls and periods of intense rainfall in western and eastern regions.

While overall rainfall plays a key part in determining farm output, the timing and distribution of rains are also important to ensure a good crop. The unusual pattern of this year's rains may delay harvesting, affecting the yield from key summer-sown crops such as rice, oilseeds, sugarcane and cotton. Rice acreage as of 2 September 2011 was up 12% from last year at 35.75 million hectares.

A good monsoon season can typically boost rural farm incomes and have an impact on the wider economy through increased spending on consumer goods as well as reduced prices of food items. But food prices may not necessarily fall if delayed and excess rains in some regions affect crop yields.

Annual inflation in the Food Articles group fell to 9.55% in the week ended 27 August 2011, from 10.05% in the previous week, the latest data showed. It was at 14.76% in the corresponding period of last year. However, inflation in the Primary Articles group climbed to 13.34% in the week under review, from 12.93% in the week ended 20 August 2011. It was at 15.24% in the year-ago period. Inflation in the Fuel & Power group was at 12.55% in the week ended 27 August, unchanged from the previous week, the latest data showed. It was at 12.61% in the comparable week of the previous year.

The Reserve Bank of India (RBI) has said that a change in anti-inflationary monetary stance will be motivated by signs of a sustainable downturn in inflation. Headline inflation data on 14 September 2011 for August 2011 will provide cues on the central bank's likely policy stance at its mid-quarter monetary policy review on 16 September 2011. The Reserve Bank of India has raised its key policy rate 11 times in the past 18 month to tame high inflation.

Inflation based on wholesale prices is forecast at 9.6% for August 2011, higher than a reading of 9.22% in July 2011, as per the median estimate of 13 economists polled by Capital Market. The data is due on Wednesday, 14 September 2011. Eleven out of twelve economists polled by Capital Market expect a 25 basis points (bps) hike in repo rate, the key short-term policy interest, from the Reserve Bank of India at its mid-quarter policy review on 16 September 2011.

Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released last week. The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.

The report was upbeat about India's ability to weather a global economic downturn. "While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors," the report said. It noted that India's foreign currency reserves equal four times its foreign debt obligations.

A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, "Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio," the report said.

Planning Commission deputy chairman Montek Singh Ahluwalia today, 12 September 2011, said at a conference that private funding has to make up half of the infrastructure investment of $1 trillion planned for in the five years during 2007-2012. Prime Minister Manmohan Singh said at the conference that to overcome the fund crunch for infrastructure projects, the government has proposed to set up a $11 billion fund to help finance infrastructure projects. "We have also constituted a high-level committee to suggest measures necessary for financing our ambitious program in infrastructure development," Mr. Singh said.

India's merchandise exports grew 44.2% in August 2011 from a year earlier, totaling $24.3 billion, sharply slowing from the previous month's pace, Commerce Secretary Rahul Khullar said on Friday, 9 September 2011. Imports in the just-ended month rose 41.8% from a year earlier to $38.4 billion, which widened the trade deficit to $14.1 billion from $11.1 billion in July.

European shares tumbled on Monday, 12 September 2011, amid growing fears of a Greek default and on reports that Moody's Investors Service may downgrade France's largest banks over their exposure to Greece. The key benchmark indices in UK, Germany and France were down by between 2.22% to 4.74%.

Asian stocks plunged on Monday, 12 September 2011, with some shares hitting multiyear lows, after renewed fears over Europe's sovereign-debt crisis led to steep selling in US and European markets at the end of last week. The key benchmark indices in Hong Kong, Indonesia, Japan, and Singapore fell by between 2.56% to 4.21%. South Korean, Taiwanese and mainland Chinese markets were closed for holidays.

China's trade surplus fell sharply in August as exports pulled back from a record high and imports jumped, indicating the world's second-largest economy is feeling the pinch from weaker global growth while domestic demand remains resilient.

Today's slide in global stocks came after the Dow Jones Industrial and the S&P 500 each dropped 2.7% on Friday, 9 September 2011 and the Stoxx Europe 600 index fell 2.6%. Among developments hitting shares Friday in Western markets was the resignation of European Central Bank (ECB) board member Juergen Stark, a proponent of higher interest rates, whose departure was seen by some as signs of a policy dispute at the ECB.

Group of Seven finance chiefs pledged on Friday to make a coordinated response to a slowdown in the global economy but offered few specifics and differed in emphasis on Europe's debt crisis.

The Federal Open Market Committee (FOMC) is scheduled to undertake a two-day policy review on US interest rates on 20 and 21 September 2011.

Trading in US index futures indicated that the Dow could fall 182 points at the opening bell on Monday, 12 September 2011.