Sensex, Nifty settle at 2-year lows as FIIs step up selling

Key benchmark indices fell for the 9th time in the past ten trading sessions to reach 2-year closing lows as data showing heavy selling by foreign funds recently hit sentiment adversely. The barometer index, BSE Sensex, fell below the psychological 16,000, a day after regaining that level on Tuesday, 22 November 2011. The Sensex tumbled 365.45 points or 2.27%, up 221.28 points from the day's low and off 269.63 points from the day's high. The market breadth was weak. Also deteriorating sentiment junior finance minister S.S. Palanimanickam said the government has no proposal to lower the securities transaction tax for capital market transactions.

The Sensex has lost 2,005.04 points or 11.32% this month so far. The Sensex has slumped 4,809.12 points or 23.44% in calendar 2011. From a 52-week high of 20,664.80 on 3 January 2011, the Sensex has lost 4,964.83 points or 24.02%.



Coming back to today's trade, Tata Power, NTPC, L&T and Bhel hit 52-week lows. Bank stocks declined on fears of rising defaults in a slowing economy, with ICICI Bank and State Bank of India (SBI) hitting 52-week lows. Metal shares fell on weak economic data from China, with Sterlite Industries, and Hindalco Industries hitting 52-week lows. IT stocks fell on debt crisis in euro zone and on weak economic data in the US. Telecom stocks fell on reports that a panel of the Department of Telecom (DoT) examining telecom regulator Trai's recommendations has endorsed Trai's proposal to impose a one-time fee on incumbent GSM operators on all their 'excess' spectrum.

Data showing heavy selling by foreign institutional investors (FIIs) recently weighed on sentiment. FIIs sold shares worth Rs 952.68 crore on Tuesday, 22 November 2011, as per the provisional data from the stock exchanges. Their outflow totaled Rs 3661.17 crore in six trading session from 15 to 22 November 2011, as per data from the stock exchanges.

Junior finance minister S.S. Palanimanickam said the government has no proposal to lower the securities transaction tax (STT). There has been a speculation that the government will reduce STT in Union Budget 2012-2013 in a bid to revive sagging volumes on the bourses. Palanimanickam said in a written reply to Rajya Sabha that the securities transaction tax receipts had declined by around 18% to Rs 2960 crore during the first six months in the current fiscal year from a year ago period.

The market opened on a weak note as stocks fell across Asian on weak Chinese manufacturing data. The market came off lows later. The intraday recovery proved short-lived. The Sensex hit a fresh intraday low in morning trade. Weakness persisted in mid-morning trade. A sell-off gripped the market in early afternoon trade, with the Sensex and the 50-unit S&P CNX Nifty hitting their lowest level in more than 2 years. A bout of volatility was witnessed in mid-afternoon trade as key benchmark indices traded off two-year lows. Volatility continued in late trade.

The market is likely to remain volatile tomorrow, 24 November 2011, as traders roll over positions in futures & options (F&O) segment from the near-month November 2011 series to December 2011 series. The near-month November 2011 F&O contracts expire tomorrow, 24 November 2011.

The BSE Sensex tumbled 365.45 points or 2.27% to settle at 15,699.97, its lowest closing level since 3 November 2009. The Sensex lost 586.73 points at the day's low of 15,478.69 in early afternoon trade. The index fell 95.82 points at the day's high of 15,969.60 in early trade.

The S&P CNX Nifty slumped 105.90 points or 2.20% to settle at 4,706.45, its lowest closing level since 3 November 2009. The Nifty hit a low of 4,640.95 and a high of 4,779.50 in intraday trade.

The BSE Mid-Cap index fell 2.05% and the BSE Small-Cap index declined 1.72%. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 2004 crore, higher than Rs 1973.95 crore clocked on Tuesday, 22 November 2011.

The market breadth, indicating the overall health of the market, was weak. On BSE, 2,062 shares declined and 766 shares rose. A total of 99 shares were unchanged.

Among the 30-member Sensex pack, 29 declined while only one of them managed gains.

Index heavyweight Reliance Industries (RIL) lost 2.68% to Rs 773.75 on reports 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. However, the stock came off the day's low of Rs 755.30. 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.

Telecom stocks fell on reports that a panel of the Department of Telecom (DoT) examining telecom regulator Trai's recommendations has endorsed Trai's proposal to impose a one-time fee on incumbent GSM operators on all their 'excess' spectrum. Idea Cellular (down 4.42%), and MTNL (down 4.83%), declined.

The DoT panel has reportedly rejected Trai's proposal for liberal M&A rules to make consolidation easier in the 14-player ultra-competitive Indian telecom market. Earlier this month, Trai recommended that mobile phone companies could merge their operations if the combined market share of the new entity is less than 60%, a substantial increase over the current 40% ceiling. Trai had also proposed that in the case of M&As, there should be no spectrum caps and the combined entity be allowed to hold up to 25% of the total available airwaves in that region.

The telecom department panel has also said that India must move to a uniform revenue share for mobile phone companies at 8% of their annual sales. This is despite the Trai reiterating that it stands by its earlier recommendation that revenue share be reduced gradually over the next three years to 6% allowing the industry to save about 6,500 crore in levies by 2014.

India's largest listed cellular services provider by market capitalization Bharti Airtel lost 3.7%. 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.

Bharti Airtel on Friday, 18 November 2011, said it will start selling Apple Inc.'s latest iPhone 4S on 25 November 2011. The smartphone from the Cupertino, California-based company is priced at $867 for the 16GB version. India, with 865.71 million wireless users at the end of August, is the world's second-largest telecoms market after China.

Bank stocks declined on fears of rising defaults in a slowing economy. India's second largest private sector bank by net profit HDFC Bank slumped 3.85%

India's largest private sector bank by net profit ICICI Bank shed 2.53% to Rs 726.95, after sliding to a 52-week low of Rs 710.50 in intraday trade today, 23 November 2011.

India's largest bank by net profit and branch network State Bank of India (SBI) declined 2.03% to Rs 1654.30, after falling to a 52-week low of Rs 1629.25 in intraday trade today, 23 November 2011.

IT stocks fell on debt crisis in euro zone and on weak economic data in the US. US and Europe are the two biggest outsourcing markets for the Indian IT firms. India's second largest software services exporter by revenue Infosys declined 2.67%. 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 declined 3.17% while India's largest software services exporter TCS dropped 2.04%.

Metal shares declined on weak economic data from China, the world's largest consumer of aluminum and copper. India's largest non-ferrous metals maker by sales Sterlite Industries India fell 0.67% to Rs 104.15. The stock hit a 52-week low of Rs 101.25 in intraday trade today, 23 November 2011.

India's largest steel maker by sales Tata Steel slipped 2.21% to Rs 382.50. The stock hit a low of Rs 378.20 in intraday trade today, 23 November 2011, matching a 52-week hit in intraday trade on Monday, 21 November 2011.

India's largest private sector aluminium maker by sales Hindalco Industries lost 1.89% to Rs 119.50 after declining to a 52-week low of Rs 117.30 in intraday trade today, 23 November 2011.

Among other metal stocks, Hindustan Zinc, Nalco, JSW Steel, Sail, and Jindal Steel & Power dropped by between 2.16% to 4.19%.

Private sector power generation major Tata Power slumped 2.61% to Rs 91.30 after diving to a 52-week low of Rs 90.55 in intraday trade today, 23 November 2011.

India's largest engineering and construction firm by order book L&T shed 2.85% to Rs 1191.35, after sliding to a 52-week low of Rs 1186 in intraday trade today, 23 November 2011.

India's largest power equipment maker by sales Bhel lost 3.58% to Rs 255.70. The stock hit a 52-week low of Rs 252.65 in intraday trade today, 23 November 2011.

India's largest dam builder Jaiprakash Associates fell 5.05% to Rs 60.20. The stock extended recent sharp losses on weak Q2 operating performance. From the recent high of Rs 79.25 on 4 November 2011, the stock fell 20% in ten trading sessions to Rs 63.40 on 22 November 2011. Net profit rose 11% to Rs 128.65 crore on 2% growth in net sales to Rs 3132.41 crore in Q2 September 2011 over Q2 September 2010. A sharp surge in other income and decline in tax rate to 42% from 60% boosted bottom line. The core operating profit margin declined 80 basis points to 23.9%, mainly due to increase in employee costs.

Realty stocks extended recent steep losses triggered by weak Q2 results from top realty firms. Orbit Corporation, DLF, HDIL and Indiabulls Real Estate dropped by between 1.12% to 5.72%.

Pharma major Sun Pharmaceutical Industries fell 0.86% on profit taking. Consolidated net profit rose 19% to Rs 597.74 crore on 42% growth in net sales/income form operations to Rs 1894.60 crore in Q2 September 2011 over Q2 September 2010. The company announced the results on 13 November 2011.

Cipla fell 0.71% on profit taking. The stock surged recently triggered by good Q2 results. 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.

Oil exploration stocks fell after crude oil prices declined. Cairn India (down 1.96%), Oil India (down 2.72%) and ONGC (down 2.3%) edged lower. Lower crude oil prices will result in lower realization from crude sales for oil exploration firms.

Crude futures were down 1.89% at $96.19 a barrel in the Asian trade today, 23 November 2011. Oil fell as investors speculated that fuel demand may falter amid signs of slowing global economic growth in Asia and debt crises in the US and Europe.

Auto stocks fell on concerns that higher interest rates could crimp sales of automobiles. India's largest truck maker by sales Tata Motors slipped 2.38%. 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 small car maker by sales Maruti Suzuki India shed 0.99%. India's largest tractor maker by sales Mahindra & Mahindra (M&M) declined 1.98%. India's largest motorcycle maker by sales Hero MotoCorp slipped 0.77%. India's second largest motorcycle maker by sales Bajaj Auto was flat.

India's largest power generation firm by capacity NTPC rose 0.58% to Rs 156.65. The stock recovered after falling to a 52-week low of Rs 152 in intraday trade today, 23 November 2011.

Siemens dived 2.69%. After market hours on Tuesday, 22 November 2011 the company reported 2% rise in net profit to Rs 845.40 crore on 28% growth in sales to Rs 11941.90 crore in year ended September 2011 (FY 2011) over the year ended September 2010 (FY 2010). Net profit fell 29% to Rs 178.10 crore on 19% growth in sales to Rs 3558.60 crore in Q4 September 2011 over Q4 September 2010. The fall in net profit was primarily due to exchange loss of Rs 158.60 crore in Q4 September 2011, Siemens said in a statement.

Both new orders and order backlog during the year were stable at Rs 12288.60 crore and Rs 13921.30 crore, respectively, Siemens said.

Commenting on the results, Dr. Armin Bruck, Managing Director, Siemens said, "In spite of difficult economic conditions in the country, our new orders and order backlog remained steady, and the overall financial results for the year compares positively against 2009-10 when we booked large orders in the fossil and transmission divisions. Our focus is on sustainable growth, innovation and environmental solutions. The goal is to expand our manufacturing presence in India. Along with leveraging our strong presence in the high-end technology segment, we will also build on our SMART base-level strategy, expand manufacturing capacities, upgrade our factories and attract talent as an employer of choice".

Select shares surged, reversing intraday losses after the Supreme Court on Wednesday granted bail to five executives charged in the multi-billion dollar 2G spectrum licensing scandal that has rocked the government and businesses in Asia's third-largest economy. D B Realty, Unitech and RCom surged, reversing initial losses, after the Supreme Court today, 23 November 2011, granted bail to five corporate executives charged in the multi-billion dollar 2G spectrum licensing scandal that has rocked the government and businesses in Asia's third-largest economy. Reliance Communications (RCom) (up 0.64%), Unitech (up 4.48%), and DB Realty (up 20%), edged higher.

Sanjay Chandra, the managing director of Telenor's India partner Unitech; Vinod Goenka, chairman of Etisalat's India partner DB Group; and three executives from billionaire Anil Ambani's group have been held in jail since April, following rejection of their bail pleas in lower courts. They are among 14 individuals and three companies charged in alleged rigging of a 2007/08 grant of lucrative telecoms licences that a state auditor said cost the government up to $39 billion in revenue.

Cals Refineries clocked highest volume of 1.2 crore shares on BSE. Unitech (1.03 crore shares), Pipavav Defence (85.03 lakh shares), Suzlon Energy (78.21 lakh shares) and Shree Renuka Sugars (55.19 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 127.92 crore on BSE. RIL (Rs 79.24 crore), L&T (Rs 60.68 crore), Tata Steel (Rs 55.37 crore) and ICICI Bank (Rs 54.94 crore) were the other turnover toppers in that order.

Corporate earnings have been weak. The combined net profit of a total of 3,838 companies declined 36.1% to Rs 67544 crore on 20.5% growth in sales to Rs 1141180 crore in Q2 September 2011 over Q2 September 2010.

Over the past few weeks, the government has taken some steps to encourage foreign investment. It raised the amount of government bonds that foreigners can hold and the amount of corporate debt they can hold by $5 billion each, to $15 billion and $20 billion respectively. The Union Cabinet also recently approved a pension overhaul that is expected to have a provision added allowing foreign pension-management companies to hold up to 26% of Indian joint ventures, from zero today.

The Reserve Bank of India (RBI) on Tuesday, 22 November 2011, eased rules for overseas investors in infrastructure debt funds, allowing foreign buyers to purchase bonds issued by such funds. Foreign investors can now buy either local or foreign currency bonds issued by infrastructure debt funds, provided they hold them for three years, the Reserve Bank of India said in a statement. Under broad guidelines for infrastructure funds issued in June this year, a fund may be set up either as a trust or a company. Overseas investors were previously allowed to invest in infrastructure debt funds that were set up as a trust.

The central bank also said that foreign investors other than non-resident Indians can't collectively invest more than $10 billion in such funds. The limit of $10 billion is within the $25 billion cap on overseas investment in infrastructure sector bonds, or infrastructure finance firms.

The RBI today, 23 November 2011, eased rules on currency swap hedges by companies, removing a cap on the net supply of foreign currency a bank can add to the market as a result of such swaps. The move will help banks sell more currency swaps to companies with overseas debt, to help them cope with the volatile currency market.

The Winter Session of Parliament had got off to a stormy start on Tuesday, 22 November 2011, with opposition in the Lok Sabha raising a variety of issues and the Left parties protesting against price rise and giving an adjournment motion on the issue. Among key financial Bills pending before Parliament in the current winter session is the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, which will provide the regulatory authority statutory powers, including that to take punitive action on violations. The interim PFRDA authority, at present, is not backed by a statutory mandate.

Among other bills, the Judicial Standards and Accountability Bill is the cornerstone of the judicial reforms much touted by the government. Its intent is to bring about disclosure of assets for all high court and Supreme Court judges and lay down a 'code of conduct'. Thereby, judges can be probed over corruption allegations as that would be a violation of their code of conduct.

Among other important Bills lined up is the National Advisory Council-backed National Food Security Bill. Issues such as the extent of coverage of such food security, the amount of subsidy and the role of the PDS in such a system will be the aspects likely to be debated. The sports ministry-led National Sports Development Bill and the Nuclear Regulatory Authority Bill are among the 23 new Bills listed for introduction.

The Reserve Bank of India (RBI) recently announced its first government bond buyback under its open-market-operations program this year, in a move aimed at easing liquidity in the cash-strapped banking system. The central bank said late on Tuesday, 22 November 2011, that the buyback operations will include the old 10-year benchmark bond, the 7.80% 2021. The other papers in the buyback on Thursday are: 7.99% 2017 bond, 7.83% 2018 bond and the 8.13% 2022 bond.

Monetary policy has a limited role in curbing food price pressures in India but such action may still be warranted if high food inflation persists, the central bank governor said Tuesday, 22 November 2011. "A lasting solution to food price pressures lies in a supply response that raises agricultural production and productivity, improves supply chain management and sets the right incentive framework for both producers and consumers," D Subbarao said, according to a copy of his speech at a conference released by the Reserve Bank of India.

Subbarao said that the supply measures taken to meet the growing demand for protein-rich foods have been inadequate. Food prices have been hovering at their highest levels in several months due to sustained demand from the growing middle class that is increasingly consuming more of high-protein diets like milk, fish and meats, offsetting price decline in other commodities.

RBI announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably.

Emerging markets such as India must take measures to boost long-term foreign direct investment to blunt volatility in exchange rates, and any capital control measures must be selective and temporary, a senior executive of the Asian Development Bank said on 14 November 2011. While capital flows and exchange rates are likely to be volatile in the short-term amid ongoing euro-zone debt concerns, India must focus on improving its investment climate by providing better infrastructure, putting in place a coherent manufacturing policy and developing financial markets, Managing Director General Rajat M. Nag said on the sidelines of the India Economic Summit.

European stocks fell in choppy trade as weak China manufacturing report stirred global-growth worries, while investors also eyed a move by the International Monetary Fund to beef up its lending tools. Key benchmark indices in UK, Germany and France were down by between 0.08% to 0.74%. The IMF overnight launched a new credit line aimed at preventing further contagion of the crisis in the euro zone

A Belgian newspaper reported that the planned rescue deal for troubled Belgian-Franco financial institution Dexia SA could be on the verge of collapse because the Belgians will have trouble financing their share of the deal. A renegotiation could involve France taking on a larger portion of the financing, which observers said could threaten the country's AAA rating.

Moody's Investor Services warned on Monday, 21 November 2011, that rising French borrowing costs and an uncertain outlook posed an ongoing threat for the country's AAA credit rating. French government bond yields ticked higher on Monday.

Asian shares dropped on Wednesday, 23 November 2011, after a disappointing manufacturing survey from China and a weaker-than-expected estimate of US economic growth. Key benchmark indices in Singapore, Hong Kong, Indonesia, South Korea, China and Taiwan were down by between 0.73% to 2.77%. Japan's stock markets were closed for a holiday.

HSBC's preliminary China manufacturing survey fell to a 32-month low in November 2011, with the reading signaling the sector is now contracting. The Purchasing Managers Index printed at 48 on a 100 point scale, reversing from a mildly expansionary reading of 51 in October. The index provides a non-government view on how China's economy is faring.

HSBC economist Hongbin Qu said the data implied that industrial production will moderate to annualized growth rates of 11% to 12% in the coming months amid cooling domestic and external demand. However, he said there was little in the data to suggest a major contraction was underway in China.

Trading in US index futures indicated that the Dow could slide 114 points at the opening bell on Wednesday, 23 November 2011. US stocks declined on Tuesday after the Commerce Department cut its estimate of third-quarter gross domestic product growth to 2% from an earlier reading of 2.5%. The Dow Jones Industrial Average fell 53.59 points, or 0.46%, to 11493.72. The Standard & Poor's 500-stock index declined 4.94 points, or 0.41%, to 1188.04 and the Nasdaq Composite lost 1.86 points, or 0.07%, to 2521.28.

Minutes out on Tuesday, 22 November 2011, from the Federal Reserve Open Market Committee meeting held on 2 November 2011, at which the central bank held interest rates unchanged and decided to continue its "Twist" program, showed that one member argued for further bond purchases.

Fitch Ratings said late on Monday, 21 November 2011, that it would conclude a review of US sovereign credit ratings by the end of November, in light of the congressional super committee's failure to reach a bipartisan deal to cut the federal debt. Fitch cited its previous statement in August that "failure by the super committee to reach agreement would likely result in a negative rating action -- most likely a revision of the rating outlook to negative, which would indicate a greater than 50% chance of a downgrade over a two-year horizon." It said a one-notch downgrade was possible but "less likely."

S&P reaffirmed it will keep its US rating at AA+ after stripping the government of its top AAA grade on 5 August 2011. Moody's retained its AAA rating on US with a negative outlook.