Sensex, Nifty settle at 4-week lows

Key benchmark indices slipped for the third straight day amid high intraday volatility to reach 4-week closing lows as fears of weak Q2 September 2011 results and data showing heavy selling by foreign funds hit sentiment adversely. The Sensex lost 199.09 points or 1.22%, off close to 205 points from the day's high up about 110 from the day's low. The market breadth was weak. The Sensex had slumped 4.1% on Thursday, 22 September 2011.



IT stocks dropped in choppy trade. FMCG stocks rose as good monsoon may boost rural demand. Index heavyweight Reliance Industries fell 2%. Interest rate sensitive banking stocks fell in volatile trade on fears that elevated interest rates would hurt borrowers' ability to repay loans and increase delinquencies. Auto stocks fell in volatile trade on worries higher interest rates and the latest petrol price hike may adversely impact sales of cars and two-wheelers during the festive season. Metal stocks extended Thursday's losses as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 6.43% on Thursday, 22 September 2011.

The market sentiment was weak on recent reports that nearly a quarter of top 100 companies have paid lower advance tax in Q2 September 2011, reflecting the slowdown in growth and pressure on margins because of rising input costs and higher interest rates. Data showing heavy selling by foreign funds on Thursday, 22 September 2011, also weighed on sentiment. Foreign institutional investors (FIIs) dumped shares worth Rs 1305.55 crore on Thursday, 22 September 2011, as per provisional data from the stock exchanges.

The market skidded to hit 3-1/2-week low in early trade on lower Asian shares. The market trimmed losses in morning trade after a promise from the G-20 to work together to solve Europe's debt problems. Volatility ruled the roost as the key benchmark indices weakened once again to hit fresh 3-1/2-week lows in mid-morning trade. Intraday volatility continued as key benchmark indices recovered after hitting fresh intraday lows in mid-morning trade. The Sensex recovered from 4-week low.

Volatility was the order of the day as the key benchmark indices weakened shortly after staging intraday rebound in early afternoon trade. Intraday volatility continued as key benchmark indices turned positive for a brief period in mid-afternoon trade. The market weakened once again in late trade.

The advance tax payment by top 100 companies rose a modest 9.9% in Q2 September 2011 from a year ago against 19% growth in Q1 June 2011, suggesting corporate profit growth is likely to be muted in the second quarter. Among the big companies that have paid lower advance tax, indicating a drop in profits, include State Bank of India (SBI), Maruti Suzuki and state-run Neyveli Lignite Corporation. SBI's advance tax payment declined 14.2% to Rs 1650 crore in Q2 September 2011. Maruti's tax payment fell 55.8% to Rs 120 crore. Neyveli Lignite tax payment plunged 50.1% to Rs 66 crore. But, Reliance Industries' (RIL) advance tax payment jumped 37.6% to Rs 1800 crore, hinting at good Q2 results from the diversified firm.

Meanwhile, Indian government's decision to defer the mega Rs 11000 crore follow-on public offer (FPO) of ONGC has helped ease concerns of the large issue sucking secondary market liquidity. As per the original plan, the FPO was scheduled to open for bidding on 20 September 2011.

The BSE Sensex shed 199.09 points or 1.22% to settle at 16,162.05, its lowest closing level since 26 August 2011. The index rose 7.26 points at the day's high of 16,368.41 in mid-afternoon trade. The index fell 308.68 points at the day's low of 16,052.47 in mid-morning trade.

The S&P CNX Nifty shed 55.90 points or 1.148% to settle at 4,867.75, its lowest closing level since 26 August 2011. The index hit low of 4,829.60 in intraday trade.

The BSE Mid-Cap index fell 0.84% and the BSE Small-Cap index declined 1.13%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2635 crore, lower than Rs 2818.81 crore on Thursday, 22 September 2011.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,832 shares fell and 973 shares rose. A total of 107 shares remained unchanged.

Among the 30-share Sensex pack, 19 fell and the rest rose. Tata Power Company, Cipla, Sun Pharmaceutical Industries, Bharti Airtel, NTPC and Jaiprakash Associates rose by between 0.45% to 2.09%.

Index heavyweight Reliance Industries (RIL) fell 2% to Rs 770.75. The stock was volatile. The stock hit a high of Rs 792 and a low of Rs 765. The stock had plunged 6.16% on Thursday. The Comptroller and Auditor General of India has reportedly begun examining the books of Reliance Industries (RIL) to see whether there was any loss to the exchequer at the company's D6 block in the Krishna-Godavari basin in 2008-09 and 2009-10. RIL had recently denied inflating costs on its D6 gas field in the Krishna-Godavari (KG) basin. RIL made the clarification 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.

Meanwhile, RIL is reportedly undertaking a comprehensive review of its oil and gas strategy in view of its ordeals with regulators and auditors, which may compel the explorer to drill abroad in partnership with global major BP instead of bidding for new blocks in the country.

RIL's advance tax payment rose 37.6% to Rs 1800 crore in Q2 September 2011 over Q2 September 2010, hinting at good Q2 results from the diversified firm.

RIL, owner of the world's biggest refining complex, early this week said it is planning to take Maintenance and Inspection (M&I) shutdown of Light Cycle Oil hydrocracker (LCOHC) and Vacuum Gas Oil hydtrotreating unit (VGOHT) of SEZ refinery at Jamnagar refinery complex from 19 to 23 September 2011 respectively. These maintenance shutdowns will be for a period of approximately 4 weeks, RIL said. The routine shutdown of these units is being planned for the first time since commissioning. Both the refineries at Jamnagar complex are planned to operate at maximum crude processing capacity i.e. 1.3 million barrels per day during this period. All other major processing units at the complex are also planned to operate at normal capacity, RIL said.

Interest rate sensitive banking stocks fell in volatile trade on fears that elevated interest rates would hurt borrowers' ability to repay loans and increase delinquencies. India's second largest private sector bank by net profit HDFC Bank fell 3.1% to Rs 457.65. The stock hit a high of Rs 470 and a low of Rs 453.70. The stock had lost 4.28% on Thursday.

India's largest private sector bank by net profit ICICI Bank fell 2.19% to Rs 844.65. The stock a high of Rs 866 and a low of Rs 840.50. The stock had lost 4.2% on Thursday. ICICI Bank and US based Oppenheimer Holdings Inc. have agreed to form a non-financial partnership to tap business opportunities in the two countries, the companies said Wednesday. ICICI Securities and Oppenheimer & Co. Inc. have formed a strategic alliance covering a wide range of securities activities including equity and debt capital markets services, advisory services, private equity transactions, and wealth management, the companies said in a press statement.

ICICI Securities had recently announced a similar pact with the UK-based financial advisory group Collins Stewart Hawkpoint PLC to promote joint access to each others' core markets.

India's largest bank by branch network and net profit State Bank of India (SBI) rose 1.03% to Rs 1955.50, off the day's low of Rs 1890.60. The stock had lost 3.55% on Thursday. The bank is seen posting weak Q2 results as its advance tax payment declined 14.2% to Rs 1650 crore in Q2 September 2011 over Q2 September 2010. SBI on Thursday, 22 September 2011, said it has increased the size of its Medium Term Note (MTN) Programme from $5 billion to $10 billion. The offering circular (OC) under the said MTN Programme has been updated on 19 September 2011 with the audited financial data of the bank as on 31 March 2011 and filed with Singapore Exchange.

Metal stocks extended Thursday's losses as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 6.43% on Thursday, 22 September 2011. Nalco, Hindustan Zinc, JSW Steel, Sail, Jindal Steel & Power, Tata Steel, and Hindalco Industries fell by between 0.13% to 3.77%.

Sterlite Industries fell 1.88% to Rs 122.70. The stock hit 52-week low of Rs 117.80 today.

IT stocks fell in volatile trade on concerns about economic slowdown in Europe and US--the two main outsourcing markets for Indian IT firms. India's second largest software services exporter Infosys fell 0.57%. The company is reportedly close to acquiring the health care business of Thomson Reuters in a $700-750 million deal. If the deal goes through, it will be the largest acquisition by Infosys. Thomson Reuters' health care business provides data, analytics and performance benchmarking solutions and services to companies, government agencies and health care professionals.

India's largest software services exporter TCS declined 0.38%. Tata Consultancy Services (TCS) said after market hours on Wednesday that TCS BaNCS Core Banking Release 12 has been launched at the annual flagship event for Banking and Capital Markets in Toronto. The company early this week said Deutsche Bank has selected the company as a strategic partner for its production management transformation initiative within their capital market business unit.

India's largest software services exporter Wipro shed 0.81%. Wipro recently entered into a strategic alliance with Saab AB to develop and market protective software for the Swedish major's Land Electronic Defence System (LEDS). LEDS provides protection to light and medium combat vehicles and main battle tanks against rocket-propelled grenades, anti-tank missiles, mortars and artillery shells.

HCL Technologies rose 1.4%, recovering from Thursday's 5.7% losses. The company announced before market hours on Thursday the opening of a new state-of-the-art Global Delivery Center in Redmond, Washington. The initial investment of $4 million will create more than 400 jobs in the Seattle area over the next two years. The new center will support HCL's continued global expansion and increased focus on business innovation in software product development, test engineering and business critical platform development.

HCL had announced during market hours on Wednesday that it has signed a strategic 5-year Application Support Transformation deal with Deutsche Bank's Capital Markets arm. HCL Tech had early this week announced the setting up a software delivery center in Dublin.

Some FMCG stocks rose as good monsoon may boost rural demand. Marico, Nestle India and ITC gained by between 0.31% to 1.24%.

Auto stocks fell in volatile trade on worries higher interest rates and the latest petrol price hike may adversely impact sales of cars and two-wheelers during the festive season. The timing of the latest petrol price hike has been bad for auto firms. The festive season started early this month and it will last until Diwali, the festival of lights, at the end of October 2011. Sales normally pick up during the festive season every year.

M&M fell 0.82% to Rs 776.30. The stock hit a high of Rs 787 and a low of Rs 770.65.

Maruti Suzuki India, India's largest car maker by sales fell 0.08% to Rs 1086.55. The stock hit a high of Rs 1105.95 and a low of Rs 1049. The company may report weak Q2 results as Maruti's advance tax payment fell 55.8% to Rs 120 crore in Q2 September 2011 over Q2 September 2010.

Maruti Suzuki India on Thursday added 200 workers at its Manesar, Haryana factory, increasing the total workforce to more than 1,300 at the unit. The fresh hiring comes as labor unrest continues at the facility. The unrest forced the auto maker to also start producing the Swift hatchback at its Gurgaon plant, also in Haryana, earlier this month to raise output and cut the waiting period for the car. Maruti, which introduced an upgraded version of the Swift in August, has orders for about 90,000 units of the car with a waiting period that has extended to more than four months due to the labor issues at Manesar.

Maruti intends to further increase staff at Manesar in the coming days. Maruti halted operations at the plant on 29 August 2011 after it asked 950 workers to sign a "good conduct bond" before they could enter the factory. The move came after Maruti said it discovered "serious and deliberate" quality problems in cars made at the plant. It also suspended or dismissed 21 employees. Several workers have yet to sign the bond, leading the auto maker to hire new workers.

Tata Motors fell 4.81% to Rs 147.40. The stock hit a high of Rs 151.75 and a low of Rs 146. The stock had tumbled 5.96% on Thursday. As per reports, Tata Motors has cut production of most of its car models, including the Nano minicar, this month due to sluggish demand. India's largest auto maker by sales will likely make about 12,000 cars this month. The September 2011 production figure will be 33% lower than the 17,821 cars it produced a year earlier, reports suggest.

Shares of offshore oil services providers fell as a decline in crude oil prices raised concerns that oil firms may go slow on expansion of exploration and production activities. Aban Offshore, Great Offshore, SEAMEC, Jindal Drilling and Dolphin Offshore shed by between 0.54% to 3.3%.

Oil exploration stocks declined as lower crude oil prices will result in lower realizations from crude sales. Cairn India declined 2.75%. Oil India declined 0.19%. ONGC was flat.

PSU OMCs were mixed as lower crude oil prices may reduce under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. However, weak rupee will negate the impact of lower crude oil prices for PSU OMCs as the crude oil that that refineries process is either imported or priced on import-parity. Indian Oil Corporation rose 0.95%. But, HPCL and BPCL fell by between 0.41% and 0.71%.

PSU OMCs raised petrol prices by Rs 3.14 to Rs 3.32 a litre on 16 September 2011 to pass on the impact of a depreciating rupee, which has resulted in higher import cost. That was the ninth increase since petrol prices were decontrolled in June 2010. Meanwhile, aviation turbine fuel (ATF) prices were also hiked by 2.5% in line with firm global oil prices.

Crude oil plunged 6.3% or $5.41 to 80.51 a barrel on the New York Mercantile Exchange on Thursday, 22 September 2011, on concerns about slowing global economic growth and also as strong dollar pressured commodities.

The partially convertible rupee was at 49.44/46 per dollar, after hitting 50 in a one-off deal in early trade, its weakest since 14 May 2009. The rupee had closed at 49.57/58 on Thursday, 22 September 2011.

Larsen & Toubro fell 2.7% to Rs 1452.25. The stock hit 52-week low of Rs 1441.60 today.

Bhel fell 0.33% to Rs 1599.75. The stock hit 52-week low of Rs 1,575 today. The company has fixed 4 October 2011 record date for a 5-for-1 stock split.

Realty stocks extended recent losses on worries higher interest rates could dent demand for residential and commercial properties. Purchases of both residential and commercial property are largely driven by finance. HDIL, Indiabulls Real Estate and Unitech shed by between 1.8% to 3.04%. DLF was up 0.08%.

Delta Corp clocked highest volume of 65.31 lakh shares on BSE. K S Oils (58.87 lakh shares), Jaiprakash Associates (43.84 lakh shares), Shree Ashtavinayak Cine Vision (43.31 lakh shares) and Resurgence Mines (40.36 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 202.98 crore on BSE. RIL (Rs 156.44 crore), L&T (Rs 95.88 crore), Delta Corp (Rs 67.10 crore) and Tata Steel (Rs 59.58 crore) were the other turnover toppers in that order.

The Sensex has fallen 524.69 points or 3.14% in this month so far. The index has slumped 4,357.04 points or 21.24% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,956.58 points or 23.48%. From a 52-week low of 15,765.53 on 26 August 2011, the Sensex has risen 386.53 points or 2.45%.

Finance Minister Pranab Mukherjee early last week said central banks in emerging economies have been forced to raise interest rates repeatedly as they battle high inflation, exposing them to volatile capital flows. "An issue of immediate concern for emerging economies is managing large capital flows," he said. "Large and volatile capital flows to emerging markets can be destabilizing as they lead to high exchange rate volatility and in some cases make it incumbent to maintain high levels of foreign exchange reserves as an insurance against sudden and large-scale flight of international capital."

Food prices edged higher in the week ended 10 September 2011 as protein-rich foods kept becoming more expensive, offsetting a decline in vegetable and fruit prices and putting paid to hopes that inflationary pressures will ease anytime soon. The Reserve Bank of India (RBI) said at a monetary policy review last week that it is imperative to persist with the current anti-inflationary stance because a premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions. The RBI raised repo rate by 25 basis points on 16 September 2011.

In recent weeks, as a result of global risk aversion, the rupee has depreciated, which may have adverse implications for inflation, the RBI said. Most commodities imported by India, particularly oil, are denominated in dollars making these expensive for India. Volatility in the exchange rate is part of the game, deputy governor of the Reserve Bank of India Subir Gokarn said in a television interview after the rupee today, 23 September 2011, fell to its lowest in more than 28 months. If the central bank intervenes, it would only be to smoothen volatility, he said.

Going forward, the stance of the monetary will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments, RBI said in its 16 September policy statement. The overall tone of the RBI's latest policy was softer than the previous policy announcement which was extremely hawkish.

Corporate margins in Q1 June 2011 moderated across several sectors compared to levels in Q4 March 2011. However, barring a few sectors, significant pass-through of rising input costs is still visible, RBI said.

Shankar Acharya, a member of the Reserve Bank of India's monetary policy advisory panel, on Thursday, 22 September 2011, said the repo rate is "near the peak". He added that the central bank has to keep its short-term interest rate high as it solely battles stubborn inflation. The tight monetary policy is likely to stay until March-end before the inflation rate starts showing distinct signs of easing, Mr. Acharya said. A widening fiscal deficit would further stoke inflationary pressures, leaving little room for the RBI to ease its policy, Acharya added.

Though inflation will remain the RBI's prime concern, its next action will also depend on how the global economic woes shape out, Mr. Acharya said. "We are poised at the cusp of another very difficult period," Mr. Acharya said, adding that future RBI actions will take note of external risks in a big way, as past rate hikes have started hurting investments in the economy.

Finance Minister Pranab Mukherjee said at a conference in the US on Wednesday, 21 September 2011, that India's vibrant services sector, which makes up nearly 58% of GDP, could hold the economy from further slippage.

The government last week raised the limit of overseas borrowing for companies to $750 million from $500 million. Indian companies can also now raise loans up to $1 billion in Chinese yuan. The relaxation of overseas borrowing rules will help Indian companies tap cheaper cash abroad amid rising credit costs in the local market. US and European countries have near-zero interest rates in a bid to support weak economic growth.

The government last week cleared the ambitious $90-billion Delhi-Mumbai industrial corridor. The Delihi-Mumbai industrial corridor project will set up nine mega industrial zones of about 200-250 square kilometre (km) along with a 1,500 km high speed freight line connecting the two cities. It will include three ports and six airports, as well as a six-lane intersection-free expressway connecting the two cities and a 4,000 megawatts (MW) power plant and also set up seven new cities.

The public private partnership (PPP) approval committee approved projects worth Rs 18000 crore last week, that include a housing project for para-military forces and a road project among others.

A memorandum of understanding (MoU) was signed last week between India Infrastructure Finance Company (IIFCL), LIC and IDFC with respect to the Takeout Finance Scheme (TFS). Under the MoU, the project lender(s) will offer eligible infrastructure projects to IIFCL for availing takeout financing. Finance Minister Pranab Mukherjee said he expects this mechanism will help financing to the tune of Rs 30000 crore, adding this will facilitate banks to take more exposure in new projects, which in turn will help in bridging the gap in infrastructure financing.

Given the lackluster initial FII response to the government's sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on 12 September 2011, further relaxed the norms on FII investment in such bonds. The Finance Ministry said in a statement that FIIs can now invest in long-term infra bonds, subject a ceiling of $5 billion limit, which have an initial maturity of five years or more at the time of issue and residual maturity of one year at the time of first purchase by FIIs. These investments are subject to a lock-in period of one year. FIIs can trade amongst themselves in these bonds but cannot sell to domestic investors during the lock-in period of one year.

FIIs can also now invest, subject to a ceiling of $17 billion, in long-term infra bonds which have an initial maturity of five years or more at the time of issue and residual maturity of three years at the time of first purchase by FIIs. These investments are subject to a lock-in period of three years. During the three-year lock-in period, FIIs can trade amongst themselves but cannot sell to domestic investors. The Securities & Exchange Board of India (Sebi) is expected to issue notifications incorporating these changes in the scheme by 15 October 2011.

Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.

Planning Commission deputy chairman Montek Singh Ahluwalia on 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 2012-2017. 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.

Rains in India will start subsiding in the next two days, the weather department said Thursday, 22 September 2011, calming concerns of crop damage due to the monsoon lasting longer than usual. The monsoon usually starts subsiding in the first week of September, but the season has been prolonged by about two weeks this year. A late surge in rainfall has pushed this season's rains 4% above the 50-year average.

The intensity of the monsoon has now also eased over Madhya Pradesh, Karnataka and Andhra Pradesh. India is aiming for record foodgrain output of more than 245 million metric tonnes this crop year that began on July 1, as well as bumper cotton, sugarcane and other crops. 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.

European shares reversed initial gains on Friday, 23 September 2011, with Greek banks leading losers after downgrades by ratings firm Moody's Investors Service. Investors were jittery amid ongoing Group of 20, International Monetary Fund and World Bank annual meetings and a day after a sell-off in global stocks on Thursday. Key benchmark indices in UK, France and Germany were down by 1.42% to 2.66%.

Finance ministers and central bank governors of the Group of 20 major economies said on Thursday, 22 September 2011, that they would work in a coordinated fashion to put an end to the latest financial crisis engulfing Europe. The G-20 stressed they were unified behind strong actions in place to "maintain financial stability, restore confidence and support growth" in the euro zone. The communiqué said European officials pledged to "increase the flexibility" of European Financial Stability Facility (EFSF) bailout fund and to "maximize its impact" in order to prevent contagion.

The statement noted that European parliaments will work in the next few weeks to approve a July plan to expand the powers of the 440-billion-euro ($595 billion) EFSF to aid troubled banks.

G-20 officials had not planned to put out a statement but changed their minds after stock markets around the world tumbled on Thursday on concerns surrounding euro-zone sovereign debt and the health of the region's banks. The G-20 said it will take all necessary steps "to preserve the stability of banking systems and financial markets as required." "We will ensure that banks are adequately capitalized and have sufficient access to funding to deal with current risks," the statement said.

The G-20 communique also noted that in the US the Obama administration has put forward new plans to create jobs and trim the US deficit. It said that Japan was tackling the aftermath of the earthquake with an eye on medium-term deficits. The statement also pressed China to allow its currency greater flexibility.

Meanwhile, Moody's Investors Service today, 23 September 2011, downgraded the ratings of eight Greek banks by two notches each citing a struggling domestic economy and declining deposits among reasons for the move, which was expected by markets. Moody's said the outlooks for all the ratings remained negative. The downgrade concluded a review begun on 25 July 2011.

Asian stocks today, 23 September 2011, extended Thursday's (22 September 2011) heavy losses, as investors fretted about the possibility of lower global growth. Key benchmark indices in China, Hong Kong, Taiwan, Singapore and South Korea shed by between 0.41% to 5.73%. Indonesia's Jakarta Composite rose 1.7% in volatile trade after Thursday's steep losses. Japan's markets were closed for a holiday.

Data on Thursday showed a slowdown in China's manufacturing sector. HSBC's preliminary China Manufacturing Purchasing Managers' index, or flash PMI, fell to a two-month low of 49.4 in September, easing from 49.9 in August, the bank said Thursday, 22 September 2011.

US index futures reversed intraday gains. Trading in US index futures indicated that the Dow could fall 74 points at the opening bell on Friday, 23 September 2011. Major US indices suffered their hardest single-day hit in five weeks on Thursday, sending the Dow Jones Industrial Average to a 3.5% drop.

The Federal Reserve said at the end of a two-day policy meeting on 21 September 2011 that there are significant downside risks to the US economic outlook and also noted strain in global financial markets.