Market snaps 3-day rally

Key benchmark indices snapped a three-day rally in a volatile trading session today (5 December 2011) as investors booked profit. Trading volumes were light as market remains closed on Tuesday, 6 December 2011, on account of Moharum. The BSE Sensex fell 41.50 points or 0.25%, up about 114 points from the day's low and off close to 58 points from the day's high. The market breadth was positive.

Index heavyweight Reliance Industries (RIL) trimmed losses in volatile trade. FMCG stocks declined. Metal stocks dropped on weak economic data in China, the world's largest consumer of copper and aluminum. Capital goods stocks gained. IT stocks were mixed after a strong economic data in US. Shares in Indian retailers fell after reports the government had paused on plans to open up the country's $450 billion retail sector to foreign supermarkets.



The market trimmed losses after a subdued start. It weakened to hit fresh intraday low in morning trade. It was hovering near the intraday lows in mid-morning trade. It pared losses after hitting fresh intraday low in early afternoon trade. Key benchmark indices sharply pared losses in afternoon trade. It trimmed losses after weakening once again in mid-afternoon trade.

The BSE Sensex fell 41.50 points or 0.25% to 16,805.33. The index rose 16.27 points at the day's high of 16,863.10 in afternoon trade. The index declined 155.62 points at the day's low of 16,691.21 in early afternoon trade.

The S&P CNX Nifty fell 11 points or 0.22% to 5,039.15. The Nifty hit a high of 5,055.40 and a low of 5002.55 in intraday trade.

The BSE Mid-Cap index fell 0.05%. The BSE Small-Cap index rose 0.09%. Both the indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,353 shares rose and 1,337 shares fell. A total of 152 shares were unchanged.

BSE clocked turnover of Rs 1,815 crore lower than Rs 2,271.36 crore on Friday, 2 December 2011.

From the 30-member Sensex pack, 17 shares declined and the rest rose.

Index heavyweight Reliance Industries (RIL) fell 0.43% to Rs 807.35, up from the day's low of Rs 798.50. The company said last week that it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company's entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks.

RIL said all the investments in the exploration, development and production of hydrocarbons from KG-D6 were made by RIL and its foreign partners at their own risk, and not by the Government of India (GoI). RIL and its partners are entitled under the production sharing contract (PSC) with the GoI to recover their full costs from the revenues generated by production from the block, RIL said in a statement.

The investment made in KG-D6 production facilities has been only partly recovered and the return on the investment so far is less than the cost of the capital, RIL said. The PSC contains no provision which entitles the GoI to restrict the costs recovered by the company by reference to factors such as the level of production or the extent to which field facilities are utilised, RIL said. RIL said it has initiated arbitration proceedings against the GoI in a bid to finally resolve the cost recovery issue so as not to hinder future investments in this block.

IT stocks were mixed after a strong economic data in US. US is the largest outsourcing market for the Indian firms. India's second largest software services exporter by revenue Infosys rose 0.12%. India's largest software services exporter TCS gained 0.34%, with the stock gaining for the sixth straight day. Tata group holding firm, Tata Sons, recently named Cyrus Pallonji Mistry as the successor to Tata Group Chairman Ratan Tata.

Tech Mahindra (up 2.84%), MphasiS (up 2.81%), Rolta India (up 2.02%) and iGate Patni (up 0.21%), edged higher. India's third largest software services exporter Wipro, however, declined 0.90%.

Shares in organised retailers tumbled on reports the government had paused on plans to open up the country's $450 billion retail sector to foreign supermarkets. Pantaloon Retail India, Koutons Retail India, V2 Retail, Provogue (India), Store One Retail and Trent declined by 3.28% to 12.86%. The government paused its plans to open up the sector due to strong opposition from both inside and outside the ruling coalition.

FMCG stocks declined in a weak market. Godrej Consumer Products, Tata Global Beverages, ITC, Hindustan Unilever and Nestle India fell by 0.34% to 1.97%.

Metal stocks dropped on weak economic data in China, the world's largest consumer of copper and aluminum. India's largest steel maker by sales Tata Steel fell 1.73% after company said Friday it is temporarily shutting down its hot strip steel mill at the Llanwern site in South Wales due to poor U.K. steel demand and a deteriorating European economic outlook. The steelmaker said "the facility is expected to remain mothballed until the U.K. economy and steel demand justify a restart." In the meantime customers will be supplied with material from Tata Steel's other hot strip mill in South Wales at Port Talbot, where production costs are lower.

This marks the second time that Tata Steel, Europe's second-largest steelmaker by production capacity, has mothballed the Llanwern hot strip mill since the onset of the financial crisis in 2008. The facility was also shut in January 2009 for nine months as a result of poor market conditions. Tata Steel will cut 115 roles at the site, including those held by fixed-term contract employees, agency workers and contractors, and said it will enter a 30-day consultation process with workers and contractors affected by the closure. The steelmaker said that the temporary closure wasn't connected to the effects of European Union environmental legislation. The steelmaker already closed a blast furnace in Scunthorpe in the U.K.

Among other metal stocks, JSW Steel, Sail, Sterlite Industries, NMDC, Nalco, Jindal Steel & Power, Bhushan Steel and Coal India declined by 0.55% to 3.92%.

Capital goods stocks bucked weak market. Pipavav Defence and Offshore Engineering Company, Crompton Greaves, ABB, Bhel, Praj Industries, Usha Martin, Thermax, Punj Lloyd, BEML, Havells India, Larsen & Toubro, BGR Energy Systems and Lakshmi Machine Works rose by 0.04% to 3.47%.

UltraTech Cement rose 1.01% after the largest Indian cement producer said shipments rose 16.3% to 3.09 million tonnes in November 2011 over November 2010.

Maharaja Shree Umaid Mills reported a highest turnover of Rs 126.31 crore on BSE. State Bank of India (Rs 123.58 crore), Pantaloon Retail (India) (Rs 47.38 crore), ICICI Bank (Rs 44.64 crore) and Tata Motors (Rs 40.40 crore), were the turnover toppers in that order on BSE.

Cals Refineries reported a highest volume of 69.80 lakh shares on BSE. IFCI (51.66 lakh shares), Suzlon Energy (46.29 lakh shares), Indiabulls Real Estate (37.67 lakh shares) and Resurgere Mines & Minerals India (36.56 lakh shares), were the volume toppers in that order on BSE.

The Indian government's recent steps to boost investment are a credit positive as they could increase foreign investment and improve the business climate, Moody's Investors Service said in a report Monday. Recent government steps to draw more funds into the country include a proposal to allow majority foreign ownership in the retail sector and steps to reduce regulatory hurdles for national manufacturing zones, Moody's noted. Other recent measures include the easing of rules on foreign investment in infrastructure debt funds and modernizing of corporate investment laws.

The pace of reforms from the UPA-II will be closely watched as both the houses of Parliament were adjourned till Wednesday, 7 December 2011 with Monday, 5 December 2011 and Tuesday, 6 December 2011 being holidays. The deadlock in Parliament over foreign direct investment (FDI) and several other issues continued for the ninth day on Friday, 2 December 2011. The adjournment came after Opposition and certain UPA allies created a ruckus in both houses over FDI in retail. The Winter Session began on 22 November 2011 and is slated to conclude on 22 December 2011.

A government statement in parliament has dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam, last week, 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 Indian economy expanded at a substantially lower rate in the second quarter of the current fiscal year as a series of rate increases by the RBI and a global slowdown hurt local demand. India's economy grew 6.9% in Q2 September 2011, in line with expectations, after expanding by 7.7% in the first quarter, government data showed on 30 November 2011. The manufacturing sector grew an annual 2.7% during the July-September quarter while farm output rose an annual 3.2% the data showed. India's GDP growth in the first six months of FY12 stood at 7.3% versus 8.6% in the corresponding period of the last financial year, the CSO data showed on 30 November 2011.

The output of the eight infrastructure industries dropped to an over six-year low of 0.1% in October, data released on 30 November 2011 showed, suggesting further slowdown in already wobbly industrial growth. The eight infrastructure industries together have a 38% weight in the index of industrial production (IIP), which makes the infrastructure index a good leading indicator of industrial production.

India's manufacturing sector expansion slowed in November as factory output grew at its slowest pace in nearly three years although export demand should provide some cheer for factories, a survey showed on 1 December 2011. The HSBC Markit India Manufacturing PMI fell to 51.0 from 52.0 in October, but has stayed above the 50 mark that divides growth from contraction for 32 months. The PMI was 50.4 in September.

On the flip side, India's services sector expanded in November for the first time in two months as new business accelerated despite persistent inflationary pressures, a survey showed on Monday. The seasonally adjusted HSBC Markit Business Activity Index -- based on a survey of around 400 firms -- stood at 53.2 in November, above the 50-mark that separates growth from contraction. It had fallen to 49.1 in October after contracting for the first time in more than two years in September to 49.8. Despite tight monetary conditions, the sub-index for new business accelerated to 52.3 in November from 51.0 in October, driving the turnaround in the service sector.

India's merchandise exports in October rose by 10.8% to $19.87 billion, while imports during the same month climbed by 22% to $39.51 billion, data released by the Government showed on 1 December 2011. As a result, the trade deficit for October 2011 stood at $19.64 billion versus $14.53 billion in the corresponding month a year earlier.

Food inflation tumbled in the third week of November but fuel inflation increased marginally, data released by the Government showed on Thursday, 1 December 2011. Food inflation declined to 8% in the week ended November 19 from 9.01% in the preceding week, the Commerce & Industry Ministry said. Food inflation stood at 9.03% in the corresponding week last year. Inflation in the Primary Articles group fell to 7.74% in the week under review, from 9.08% in the week ended November 12, according to the Commerce Ministry statement. It was at 14.32% in the year-ago period. Inflation in the Fuel & Power group stood at 15.53% in the week ended November 19 versus 15.49% in the previous week, the Government data showed. It was at 10.07% in the comparable week of the previous year.

The Reserve Bank of India (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. RBI unveils mid-quarter monetary policy review on 16 December 2011.

European stocks rose on Monday, adding to last week's 8.5% jump, on growing hopes of a sweeping solution to the euro zone debt crisis as French President Nicolas Sarkozy and German Chancellor Angela Merkel meet ahead of a key summit. Key benchmark indices in France, Germany and UK rose by between 0.41% to 1.11%.

Italian Prime Minister Mario Monti announced 30 billion euros of austerity and growth measures yesterday. The premier will present the package, which includes a tax on luxury goods, resurrects a property levy on first homes, and forces many workers to delay retirement, to both houses of parliament today. German Chancellor Angela Merkel meets French President Nicolas Sarkozy today to advance a plan for stricter enforcement of the region's deficit rules that will be presented to European leaders at a summit on December 8.

Markit's Eurozone Composite Purchasing Managers Index, which measures changes in business activity across the euro zone, showed the euro zone's private sector economy contracting for the third month in a row in November. While rising slightly to 47.0 from 46.5 in October, the PMI was still far below the 50 mark that divides growth from contraction and the latest figure was trimmed from a preliminary reading of 47.2

Asian stocks were mixed on Monday after Italy took steps to resolve its debt problems before European Union leaders meet this week to tackle the region's crisis. Key benchmark indices in China, Singapore and Taiwan were down by between 0.26% to 1.16%. Key benchmark indices in Hong Kong, South Korea, Japan and Indonesia rose by between 0.03% to 0.73%.

The HSBC Purchasing Managers' Index for China's services sector fell to 52.5 from 54.1 in November, signalling its slowest rate of growth in three months, according to reports The reports stated that the fall in the HSBC gauge is sharp given that October's reading was 54.1 -- the strongest growth in four months. China's official PMI for its non-manufacturing sector fell to 49.7 in November from 57.7 in October, says report.

Trading in US index futures indicated that the Dow could gain 97 points at the opening bell on Monday, 5 December 2011. US stocks ended flat on Friday but capped the best week for Wall Street bulls in almost three years after data showed the U.S. unemployment rate dropped to a 2-1/2 year low. U.S. companies stepped up hiring and the jobless rate dropped to 8.6% from 9% further evidence the recovery was gaining momentum.