Market slumps as FIIs step up selling

Key benchmark indices fell for the fourth straight week on heavy selling by foreign funds. Concerns over slowing growth, weak corporate earnings and a faltering rupee affected investor sentiment adversely. Fears of a global economic slowdown also weighed on Indian stocks amid gloomy data from China and the United States. The market fell in three out of five trading sessions in the week just gone by.

The BSE Sensex tumbled 676.08 points or 4.13% to settle at 15,695.43 in the week ended Friday, 25 November 2011, its lowest closing level since 3 November 2009. The S&P CNX Nifty lost 195.75 points or 3.99% to 4,710.05.



The BSE Mid-Cap index fell 1.82% and the BSE Small-Cap index declined 2.15%. Both these indices outperformed the Sensex.

Foreign institutional investors (FIIs) sold shares worth a massive Rs 1636.08 crore in a single trading session on Thursday, 24 November 2011, as per the provisional data from the stock exchanges. Their outflow totaled Rs 6483.66 crore in eight trading session from 15 to 24 November 2011, as per data from the stock exchanges.

Corporate earnings have been weak. The combined net profit of a total of 3,876 companies declined 36.1% to Rs 67423 crore on 20.5% growth in sales to Rs 1142482 crore in Q2 September 2011 over Q2 September 2010.

Trading for the week began on a weak note. Key benchmark indices skidded for the eighth straight day to hit 6-1/2-week lows on Monday 21 November 2011 as European and US debt problems pulled world stocks lower. The BSE Sensex tumbled 425.41 points or 2.6% to settle at 15,946.10, its lowest closing level since 5 October 2011.

Key benchmark indices snapped an eight-session losing streak on Tuesday, 22 November 2011 as bargain hunting emerged after a recent steep slide in share prices. The BSE Sensex jumped 119.32 points or 0.75% to settle at 16,065.42, its highest closing level since 18 October 2011.

Key benchmark indices fell for the 9th time in the past ten trading sessions to reach 2-year closing lows on Wednesday, 23 November 2011 as data showing heavy selling by foreign funds recently hit sentiment adversely. The BSE Sensex tumbled 365.45 points or 2.27% to settle at 15,699.97, its lowest closing level since 3 November 2009.

Key benchmark indices edged higher in choppy trade on Thursday, 24 November 2011 after the latest data showed that food inflation eased in the year through 12 November 2011. The BSE Sensex jumped 158.52 points or 1.01% to settle at 15,858.49, its highest closing level since 22 November 2011.

Key benchmark indices edged lower in volatile trade on Friday, 25 November 2011 as data showing heavy selling by foreign funds recently and euro-zone debt worries hurt sentiment adversely. The BSE Sensex fell 163.06 points or 1.03% to 15,695.43.

From the 30 share Sensex pack, 25 stocks declined and only five of them rose during the week.

Index heavyweight Reliance Industries (RIL) declined 6.69%. Recent reports indicated the government has refused to recognize six discoveries made by the company in its D-6 block saying the claims were not backed by prescribed tests and dealing a blow to the company's plan to boost sagging production by developing new fields in the block. Oil Secretary G.C. Chaturvedi had on Tuesday, 22 November 2011, said that the oil ministry may decide within a month on taking action against RIL for falling natural gas production at the D6 block in the Krishna-Godavari basin, off the country's east coast.

RIL last week said that it has formed an equal joint venture with BP by the name India Gas Solutions, which will focus on global sourcing and marketing of natural gas in India. The joint venture will also develop infrastructure to accelerate transportation and marketing of natural gas within the country. India Gas Solutions will be funded with equal equity from BP and RIL.

Coal India jumped 3.52% and was the top gainer from the Sensex pack.

Most interest rate sensitive auto stocks fell on concerns that 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 maker by sales Mahindra & Mahindra (M&M) slipped 4.27%. India's largest motorcycle maker by sales Hero MotoCorp lost 6.18%. India's largest motorcycle maker by sales Bajaj Auto shed 3.03%. India's largest small car maker by sales Maruti Suzuki India gained 0.99%.

India's largest truck maker by sales Tata Motors rose 0.88%. Tata Motors on Monday, 21 November 2011, introduced a new version of the Nano minicar, which it said is more powerful and fuel efficient than the previous model. India's largest commercial vehicle maker by sales said it will continue to sell the Nano at the same price. The Nano, sold in three variants, is priced between Rs 1.4 lakh and Rs 1.96 lakh at showrooms in New Delhi. Tata Motors said the new version of the Nano will have a fuel efficiency of 25.4 kilometers per liter, compared with 23.6 kilometers per liter of the previous variant. The new Nano is powered by a 624 cubic centimeter gasoline engine that will deliver 38 horsepower, compared with 35 horsepower in the previous variant.

India's largest power equipment maker by sales Bhel fell 2.21% to Rs 269.85. The stock hit a 52-week low of Rs 246.20 in intraday trade on Thursday, 24 November 2011.

India's largest engineering and construction firm by order book L&T gained 1.83% to Rs 1265.80. The stock hit 52-week low of Rs 1175 in intraday trade on Thursday, 24 November 2011.

Cipla rose 0.7%. Net profit rose 17.47% to Rs 308.97 crore on 9.8% growth in income from operations to Rs 1804.28 crore in Q2 September 2011 over Q2 September 2010.

Bank stocks fell on concerns of rising defaults in a slowing economy. India's largest private sector bank by net profit ICICI Bank fell 6.59% to Rs 719.40. The stock hit a 52-week low of Rs 710.50 in intraday trade on Wednesday, 23 November 2011. India's second largest private sector bank by net profit HDFC Bank dropped 5.72%.

India's largest bank by net profit and branch network State Bank of India (SBI) declined 2.02% to Rs 1690.70. The stock hit a 52-week low of Rs 1629.10 in intraday trade on Thursday, 24 November 2011.

Metal shares declined on weak economic data from China, the world's largest consumer of aluminum and copper. Jindal Steel & Power tumbled 8.98% and was the top loser from the Sensex pack. Hindalco Industries shed 8.16% to Rs 113.60. The stock hit 52-week low of Rs 113 on Friday, 25 November 2011.

India's largest non-ferrous metals maker by capacity Sterlite Industries India shed 7.53% to Rs 100.05. The stock hit a 52-week low of Rs 99.15 on Friday, 25 November 2011.

India's largest steel maker by sales Tata Steel lost 4.69% to Rs 374.10. The stock hit a 52-week low of Rs 367.20 in intraday trade on Thursday, 24 November 2011.

IT stocks declined on euro-zone debt worries. Europe is the second biggest outsourcing market for Indian software exporters after the US. India's second largest software services exporter by revenue Infosys shed 5.07%. The company's chief financial officer V. Balakrishnan said in an interview to a news agency on Monday, 21 November 2011, that the company may miss the upper end of its sales targets for Q3 December 2011 and also for the year ending March 2012 (FY 2012) as the worsening global economic situation has made large contracts hard to come by. Balakrishnan said though the upper end of the forecast is at risk, the sales growth will still be in that range.

At the time of announcing Q2 September 2011 results early last month, Infosys had forecast 3.2% to 5.3% growth in revenue at $1.802 to $1.84 billion in Q3 December 2011 over Q2 September 2011. The company had projected 17.1% to 19.1% growth in revenue at $7.08 billion to $7.20 billion for the year ending March 2012 (FY 2012) over the year ending March 2011 (FY 2011).

In rupee terms, Infosys had forecast 8.97% to 11.2% growth in revenue at Rs 8826 crore to Rs 9012 crore in Q3 December 2011 over Q2 September 2011. The company had projected 21.8% to 24% growth in revenue at Rs 33501 crore to Rs 34088 crore in FY 2012 over FY 2011.

India's third largest software services exporter Wipro slipped 1.32%.

India's largest software services exporter TCS declined 2.31%. Tata group holding firm, Tata Sons, on Wednesday, 23 November 2011, named Cyrus Pallonji Mistry as the successor to Tata Group Chairman Ratan Tata.

Bharti Airtel fell 5.72%. After market hours on Tuesday, 22 November 2011, Bhart Airtel said that Akhil Gupta, a non-executive director, sold 65,500 shares for Rs 2.61 crore on 18 November 2011. Mr. Gupta is also the deputy group chief executive and managing director of Bharti Enterprises, the parent company of Bharti Airtel. Mr. Gupta now holds 24.8 lakh Bharti Airtel shares along with his wife.

Also, Manoj Kohli, chief executive of Bharti Airtel's international business and the company's joint managing director, sold 50,000 shares for Rs 1.99 crore on 18 November 2011. Mr. Kohli now owns 2.53 lakh shares in Bharti Airtel, the company said.

Tata Power Company (down 5.39%), ITC (down 4.9%), HDFC (down 4.69%), Hindustan Unilever (down 4%), NTPC (down 3.59%), ONGC (down 2.85%), Jaiprakash Associates (down 2.41%), Sun Pharmaceutical Industries (down 1.33%) and DLF (down 0.2%) edged lower.

Shares of organized retailers surged after the Union Cabinet on Thursday, 24 November 2011, cleared a proposal to allow 51% foreign direct investment (FDI) in multi-brand retail and increase in FDI in single brand retail to 100% from current 51%. Pantaloon Retail India (up 18.05%), Shoppers Stop (up 11.24%), and Trent (up 2.47%), surged.

Currently, India allows 51% FDI in single brand retail and 100% FDI in cash and carry format of the business. The move to liberalize FDI norm in retails signals that the Indian government, after years of prevaricating over allowing greater foreign investment in several sectors, is now serious about attracting overseas funds. Foreign direct investment in India dropped 28% to $29.4 billion in the year ended 31 March 2011 as the country's economic forecast clouded. Further opening the retail market--and the message that sends about the government's willingness to introduce reforms--might help kick-start the economy and shore up faltering investor sentiment.