BSE Small-Cap, Mid-Cap indices nudge higher

Key benchmark indices registered small losses during the special 1-1/2-hour trading session held today, 7 January 2012. The barometer index, BSE Sensex, was down 18.93 points or 0.12%, off close to 50 points from the day's high and up close to 15 points from the day's low. The market breadth, indicating the overall health of the market was strong. BSE Small-Cap and Mid-Cap indices edged higher.

PSU stocks surged. Shares of organised retailers jumped for the second straight day after Industry Secretary, P.K. Chaudhary said on Friday, 6 January 2012, that the government is soon expected to issue the notification allowing 100% foreign direct investment in single brand retail. Capital goods stocks rose on bargain hunting after a steep decline last month. IT stocks rose on strong economic data in the US, the biggest outsourcing market for the Indian IT firms. Realty major DLF rose on bargain hunting after recent steep slide.



FMCG stocks fell on profit taking after recent gains. Jaiprakash Associates hit 52-week low after Securities and Exchange Board of India (Sebi) fined top executives of the company for insider trading in the company's stock in 2008. Bank stocks declined on worries of rising defaults in a slowing economy. Airline stocks rose on reports the Civil Aviation Ministry is likely to drop its opposition to higher investment by foreign airlines in the sector and agree to let them hold up to 49% in domestic carriers.

The market regained positive terrain after slipping into the red briefly after a positive start. The market once again moved into negative zone later. The Sensex alternately moved between gains and losses in early afternoon trade.

The special 1-1/2-hour trading session was held today, 7 January 2012, to enable the National Stock Exchange to upgrade the capacity of its futures and options trading system hardware and software. Trades done on today, 7 January 2012, will be settled on Tuesday, 10 January 10, 2012, as a separate settlement.

The BSE Sensex lost 18.93 points or 0.12% to settle at 15,848.80, its lowest closing level since 2 January 2012. The index rose 32.57 points at the day's high of 15,900.30 in early trade. The index fell 32.44 points at the day's low of 15,835.29 in late trade.

The S&P CNX Nifty lost 7.20 points or 0.15% to settle at 4,746.90, its lowest closing level since 2 January 2012. The index hit a high of 4,759.40 and a low of 4,743.05 in intraday trade.

The BSE Mid-Cap index rose 0.73% and the BSE Small-Cap index rose 1%. Both these indices outperformed the Sensex.

BSE clocked a turnover of Rs 363 crore.

The market breadth, indicating the overall health of the market was strong. On BSE, 1,573 shares rose and 670 shares fell. A total of 74 shares were unchanged.

Among the 30-member Sensex pack, 17 fell while rest of them rose.

PSU stocks surged. Rashtriya Chemical & Fertilisers, MMTC, State Trading Corporation of India, Dredging Corporation of India, Shipping Corporation of India, NMDC and Engineers India surged by between 4.71% to 19.93%.

Index heavyweight RIL declined 0.31% after gaining 2.52% on Friday. RIL on Wednesday, 4 January 2012, said it has scheduled a planned maintenance turnaround of one of the crude distillation unit of its SEZ Refinery at Jamnagar complex for a period of approximately three weeks starting mid February 2012. This maintenance turnaround is planned for the first time after its commissioning during the Financial Year 2008-09, RIL said. This opportunity would also be utilised to take up productivity improvement related jobs in other secondary processing units as necessary, RIL said. During this period, other three crude distillation units at Jamnagar refining complex are expected to sustain normal operations, RIL added.

RIL had announced early this week that it is divesting a part of the interest in ETV channels in favour of TV18 Broadcast, a Network18 Group firm. RIL said that as a part of the deal with TV18 Broadcast, Infotel Broad Band Services (Infotel), a subsidiary of RIL, has entered into a Memorandum of Understanding with TV18 Broadcast and Network18 Media and Investments for preferential access to all content of the latter for distribution through the 4G Broadband Network being set up by RIL.

RIL has reportedly stated that natural gas output from its eastern offshore KG-D6 fields has dipped below 39 million cubic meters a day as it shut five wells because of high water ingress. Reports stated that the natural gas production from the Dhirubhai-1 and 3 gas fields and the MA oilfield in Block KG-DWN-98/3, or KG-D6, in the Krishna-Godavari Basin of the Bay of Bengal was 38.43 mmcmd in the week ended 25 December 2011. The output comprised 31.58 mmcmd from the D1 and D3 gas fields and 6.85 mmcmd from the MA oilfield, reports said. The KG-D6 production is lower than 61.5-mmscmd rate achieved in March, 2010, says report. The report also stated that of the 18 wells drilled, completed and put on production in the D1 and D3 fields, five wells- A2, A10, B1, B2 and B13, were kept closed due to high water cut/sanding issues.

Metal stocks edged lower. Sail, Tata Steel, Jindal Steel & Power, Hindalco Industries and Sterlite Industries dropped by between 0.06% to 0.84%.

Jaiprakash Associates fell 2.35% to Rs 51.90 after Securities and Exchange Board of India (Sebi) fined top executives of the company for insider trading in the company's stock in 2008. The stock hit a 52-week low of Rs 51.20 today. The stock market regulator has imposed a penalty of Rs 10 lakh each on Manoj Gaur, chairman of Jaiprakash Associates, his wife Urvashi, and brother Sameer Gaur, as well as some top executives of the company. The penalty is to be deposited within 45 days of the order, Sebi said.

The regulator has alleged that these individuals had taken advantage of their position by trading shares of Jaiprakash Associates while they were in possession of unpublished price sensitive information (UPSI). Sebi had investigated all trades in the stock from September 29, 2008, to October 27, 2008. But Manoj Gaur in a statement issued late Friday evening denied any wrongdoing. "The findings in the Order are completely erroneous and contrary to factual position. It is unfortunate that despite adequate representation to the Adjudicating Officer, frivolous inferences have been drawn. Aggrieved by the Order, we are in the process of challenging the same before the Securities Appellate Tribunal," Gaur said.

Shares of organised retailers jumped for the second straight day after Industry Secretary, P.K. Chaudhary on Friday, 6 January 2012, said that the government is soon expected to issue the notification allowing 100% foreign direct investment in single brand retail. Trent, Pantaloon Retail, Shoppers Stop, Store One Retail, Provogue India, V2 Retail, Brandhouse Retail and Koutons Retail rose by between 2.24% to 19.95%.

The Union Cabinet late last year decided to allow 100% foreign investment in single-brand retail, removing an earlier 51% cap. The government, however, had succumbed to political pressure and reversed a decision to allow 51% FDI in the multi-brand retail segment, and said a further decision would only be taken after political consensus. The government is in talks with farmers and small traders over the issue of FDI in multi-brand retail and consultations with these stakeholders are likely to be completed by the month end, Mr. Chaudhary said on Friday.

Capital goods stocks rose on bargain hunting after a steep decline last month. ABB, Usha Martin, Punj Lloyd, L&T, Bhel and Thermax rose by between 0.03% to 4.1%.

Praj Industries rose 0.13% after the company said it has acquired a majority stake in Neela Systems, which has business interest in water treatment and modular process systems, for about Rs 64 crore.

IT stocks rose on strong economic data in the US, the biggest outsourcing market for the Indian IT firms. India's third largest software services exporter by revenues Wipro rose 0.37%. India's largest software services exporter by revenues Tata Consultancy Services (TCS) gained 0.18%. The company unveils Q3 results on 17 January 2012.

India's second largest software services exporter by revenue Infosys gained 0.35%. The company announces Q3 December 2011 results on 12 January 2012.

Realty major DLF rose 1.06% on bargain hunting after a recent steep slide triggered by reports that the Supreme Court has stayed the Punjab and Haryana High Court's judgment that directed the DLF to demolish structures at its upcoming Cyber City project in Gurgaon township and return around 20 acre of prime estate to villagers.

Credit rating agency CRISIL recently downgraded short-term and long-term debt rating of DLF on an assessment that debt levels of the company may continue to remain high due to a delay in disposal of non-core assets and weakness in operating cash flows due to the weak macro economic environment.

DLF, however, said that the company is firmly committed to its target of raising Rs 6000-7000 crore from divestment of non-strategic assets over 3 years starting from 2011-12 to help prune debt. DLF said it expects that its operating cash flow will strength following the launch of new projects in Mullapur, Panchkula, Lucknow, Jalandhar, Chennai, Bangalore, Hyderabad and Gurgaon over the next 3-4 months.

FMCG stocks fell on profit taking after recent gains. Marico, ITC and Nestle India shed by between 0.3% to 0.72%. But, Hindustan Unilever rose 0.5%.

Bank stocks declined on worries of rising defaults in a slowing economy. India's largest private sector bank by branch network ICICI Bank declined 1.09%. ICICI Bank has raised the interest rate for NRE deposits. ICICI Bank is now offering up to 9.25% on non-resident external (NRE) deposits.

India's second largest private sector bank by branch network HDFC Bank fell 0.55%. The bank raised interest rates on non-resident savings deposits to 9% from 3.82% from Friday, 23 December 2011, taking advantage of recent deregulation to attract dollars.

India's largest commercial bank by net profit and branch network State Bank of India (SBI) declined 0.77%. The bank early this week said it has cancelled the negotiations for establishing a joint venture entity with Visa Inc and Elavon Inc for conducting the merchant acquiring business. In terms of the bank's earlier letter dated 4 May 2010, a joint venture was proposed between SBI Payment Services, the wholly owned subsidiary of SBI and Visa Inc and Elavon Inc.

The government will infuse Rs 5000 crore ($942 million) to Rs 6000 crore ($1.13 billion) in State Bank of India by the end of the current fiscal year in March, the bank's chairman Pratip Chaudhuri said on Thursday. After the capital infusion, the government's share [in the bank] will increase to 64%, Chaudhuri told media reporters. The government currently owns 59% of India's largest lender by assets. Mr. Chaudhuri also said that the bank may raise further capital next fiscal year through a follow-on share sale or a private sale of shares to institutional investors.

In its draft guidelines on Basel III capital regulation norms for banks unveiled recently, the RBI has suggested that Common Equity Tier 1 (CET1) capital must be at least 5.5% of risk-weighted assets (RWAs). Tier 1 capital must be at least 7% of RWAs and total capital must be at least 9% of RWAs, according to the draft guidelines. RBI has suggested capital conservation buffer in the form of Common Equity of 2.5% of RWAs.

The RBI said the implementation period of minimum capital requirements and deductions from Common Equity will begin from January 1, 2013 and be fully implemented as on March 31, 2017. Capital conservation buffer requirement is proposed to be implemented between March 31, 2014 and March 31, 2017. Instruments which no longer qualify as regulatory capital instruments will be phased-out during the period beginning from January 1, 2013 to March 31, 2022.

For OTC derivatives, in addition to the capital charge for counterparty default risk under Current Exposure Method, banks will be required to compute an additional credit value adjustments (CVA) risk capital charge. The parallel run for the leverage ratio will be from January 1, 2013 to January 1, 2017, during which banks would be expected to strive to operate at a minimum Tier 1 leverage ratio of 5%. The leverage ratio requirement will be finalized taking into account the final proposal of the Basel Committee.

Airline stocks rose on reports the Civil Aviation Ministry is likely to drop its opposition to higher investment by foreign airlines in the sector and agree to let them hold up to 49% in domestic carriers. Jet Airways and SpiceJet rose by between 3.83% to 5.18%.

Kingfisher Airlines rose 1.29%. The Directorate General of Civil Aviation has reportedly directed the private carrier to come back with a detailed plan of financial recovery and for resolving safety issues by Monday, 9 January 2012. Meanwhile, State Bank of India (SBI) has reportedly classified Kingfisher Airlines' debt as a non-performing asset. SBI reportedly has an exposure of Rs 1500 crore to the airline. SBI has reportedly given 90 days to Kingfisher to get its account back on track.

Foreign institutional investors (FIIs) bought shares worth Rs 10.44 crore on Friday, 6 January 2012, as per provisional data from the stock exchanges. FII inflow totaled Rs 786.22 crore in four trading sessions on 3 to 6 January 2012, as per provisional data from the stock exchanges. Earlier, FIIs had offloaded shares worth a net Rs 1287.84 crore in three trading sessions from 29 December 2011 to 2 January 2012.

The next major trigger for the market is Q3 December 2011 corporate earnings, which will start tricking from the second week of January 2012. The focus will be on guidance from the company managements on outlook for the remaining part of the year and for the next year. Analysts expect weak Q3 December 2011 results due to lower volume growth in a slowing economy, higher raw material costs and higher interest charges.

IT bellwether Infosys and housing finance major HDFC report Q3 results on 12 January 2012. TCS and HCL Tech unveil quarterly results on 17 January 2012. HDFC Bank and Bajaj Auto unveil Q3 results on 19 January 2012. Axis Bank unveils Q3 results on 20 January 2012. JSW Steel reports its Q3 standalone results on 20 January 2012.

Asian Paints and Zee Entertainment Enterprises unveil Q3 results on 21 January 2012. Kotak Mahindra Bank announces Q3 results on 23 January 2012. Biotech major Biocon unveils Q3 results on 24 January 2012. Dabur India unveils Q3 results on 31 January 2012. Mahindra & Mahindra unveils Q3 results on 7 February 2012. India Cements announces Q3 results on 6 February 2012.

The Reserve Bank of India (RBI) on Thursday, 5 January 2011, raised the annual limit of foreign currency convertible bonds (FCCBs) for companies to $750 million under the automatic route from $500 million earlier. The increase in the ceiling for FCCBs under automatic route will not only help Indian corporates across all segments access higher quantum of overseas funds but also encourage greater inflow of foreign exchange. Corporates in specified service sectors like hotels, hospitals and software, can raise FCCBs up to $200 million subject to the condition that the proceeds would not be used for acquisition of land. It also said henceforth ECBs of up to $20 million or equivalent in a financial year will have a minimum average maturity of three years, while for ECBs of $20-750 million the average maturity would be of five years.

Starting off the New Year on a liberalisation note, the government on Sunday, 1 January 2012, announced its decision to allow Qualified Foreign Investors (QFIs) to directly invest in the Indian equity market from 15 January 2012. A QFI is an individual, group or association resident in a foreign country that is compliant with Financial Action Task Force (FATF) standards. QFIs include pension funds which normally tend to stay invested for a longer period of time. QFIs do not include FIIs/sub accounts. In August last year, the government allowed foreign investors to directly invest up to $13 billion in equity and debt schemes of mutual funds.

Qualified foreign investors, or QFIs, will now be able to invest individually up to 5% of the capital of the Indian company. Cumulatively, QFIs can invest up to 10% of the capital of the company being invested in. These limits are over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India, a government statement said.

Food inflation plunged into the negative territory in the fourth week of December mainly due to base effect, data released by the Government showed on Thursday, 5 January 2011. Fuel inflation edged up though. Food inflation shrank by 3.36% in the week ended December 24, after rising by 0.42% in the preceding week. Inflation in the Primary Articles group fell to 0.1% in the week under review, from 2.7% in the week ended December 17. Inflation in the Fuel & Power group stood at 14.60% in the week ended December 24, versus 14.37% in the previous week.

The RBI is likely to begin easing monetary policy to address concerns about economic growth, Governor D Subbarao said in an interview to a foreign electronic media house, reiterating comments made by the RBI when it kept rates unchanged on 16 December 2011. At its mid-quarterly monetary policy review meet on 16 December 2011, the RBI left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI had said in a statement on 16 December 2011. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI had said.

RBI had said inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces. RBI also said that the rupee remains under stress. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

Credit rating agency Moody's Investors Service on 14 December 2011 said that the sharp decline in the value of the Indian rupee against the dollar over the past few months is generally exerting only a moderate impact on rated Indian companies. Risks for companies holding large amounts of dollar denominated debt are also manageable in the near term, given that debt maturities are limited for this time frame, Moody's said in a new report. This means Indian companies rated by Moody's do not have a significant dollar outflow at a time when the Indian rupee is losing ground.

India may face the risk of stagflation if the government doesn't take urgent steps to tame inflation and stimulate growth, a parliamentary panel on finance warned on 22 December 2011. The Standing Committee on Finance blamed the Reserve Bank of India's 13 interest-rate increases over the past 21 months for stalling economic growth. "Measures taken by the government and the RBI so far have squarely failed to rescue the economy from unabated inflation. Instead, monetary measures initiated for this purpose have only resulted in worsening the condition of the economy further," the report said.

The budget for 2012/13 ending March will be presented after elections scheduled in five states, Finance Minister Pranab Mukherjee said on Monday, 2 January 2012. State elections are scheduled between the end of January and early March. The annual budget is usually presented on the last working day of February. The Election Commission on 24 December 2011 announced the dates for the assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Manipur and Goa. Uttar Pradesh will have polling on February 4, 8, 11, 15, 19, 23 and 28, while Uttarakhand and Punjab will go to polls on January 30. Manipur will have polls on January 28 and Goa on March 3.

US stocks mostly declined on Friday, 7 January 2012, as investors measured further evidence of an improving labor market against Europe's troubles, illustrated by the euro's decline. The Bureau of Labor Statistics reported that the economy added a net 200,000 nonfarm payrolls in December, better than forecasts for a 150,000 gain. The jobless rate in the US fell to 8.5%, nearly a three-year low.

In Europe, Italy's borrowing costs surged, with the yield on the country's 10-year note currently at 7.09%, a level generally viewed as unsustainable. Both Ireland and Portugal had to resort to financial rescues once their borrowing costs exceeded 7%.

French President Nicolas Sarkozy will meet German Chancellor Angela Merkel in Berlin on 9 January 2012 for talks that are likely to centre on new rules to enforce budget discipline across the European Union (EU). The two leaders are anxious to flesh out a plan agreed at a December 2011 summit by all EU members except Britain for a new treaty to forge closer fiscal integration, as Europe battles to stem a sovereign debt crisis in the euro zone.

Finance ministers from the EU's 27 members will meet on 23 January 2012 before their leaders hold a summit a week later. They will be under intense pressure to find a definitive solution to the crisis which threatens the very survival of the single currency, 10 years after it came into circulation.

European confidence in the economic outlook fell to the lowest in more than two years and unemployment remained at a 13-year high as the euro area's leaders struggled to contain a worsening fiscal crisis. An index of executive and consumer sentiment in the 17- nation euro area fell to 93.3 in December from a revised 93.8 in the previous month, the European Commission in Brussels said on Friday. The unemployment rate held at 10.3% in November, a separate report showed.

A rating downgrade on Friday left Hungary's debt rated "junk" across the board, underscoring investors' doubts about the government's willingness to change its controversial policies in return for aid to stave off a financial crisis. Fitch Ratings said it was downgrading Hungarian sovereign debt by one notch to BB+ with a negative outlook, putting the country's bonds in the higher risk category and suggesting the investment climate was not going to get any better. Fellow credit rating agencies Moody's and Standard & Poor's already rate Hungary below investment grade.

On Monday, 9 January 2012, all eyes will focus on China, which will tentatively release its latest economic growth, inflation and trade balance figures. Also on Monday, US consumer credit figures will come out, while in Europe traders will keep an eye on Swiss unemployment rates and French consumer spending figures. The UK, meanwhile, will release manufacturing and industrial output figures while in Canada, housing starts and building permits will be released.