Market slides to one-week low on weak global cues

Weakness in global equity markets pulled Indian stocks lower today, 30 January 2012. The barometer index, BSE Sensex, snapped a 6-day rally to end below the psychological 17,000 mark. The Sensex lost 370.68 points or 2.15%, off about 275 points from the day's high and up close to 35 points from the day's low. The Sensex and the 50-unit S&P CNX Nifty reached one-week closing lows. The market breadth was weak. All the 13 sectoral indices on BSE declined.

The market had surged recently. The Sensex had jumped 782.51 points or 4.75% in six trading sessions to settle at 17,233.98 on Friday, 27 January 2012, from a recent low of 16,451.47 on 18 January 2012. The Sensex has jumped 1408.38 points or 9.11% so far in this month. From a 52-week high of 19,811.14 on 6 April 2011, the Sensex has lost 2947.84 points or 14.88%. From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1727.44 points or 11.41%.



Index heavyweights Reliance Industries (RIL) dropped almost 3%. Power equipment major Bharat Heavy Electricals (Bhel) slumped over 10% as the company's operating profit margin (OPM) declined sharply in Q3 December 2011. Bank stocks dropped on worries of rising defaults in a slowing economy. Oriental Bank of Commerce slipped after weak Q3 results. State-run Punjab National Bank declined ahead of a board meeting to consider preferential allotment of shares to Government of India. Realty stocks dropped for the second straight day. Telecom stocks slumped. Metal stocks declined as metal prices dropped on the London Metal Exchange.

The market edged lower in early trade on weak Asian shares. The market trimmed losses after hitting fresh intraday low in morning trade. The market extended intraday losses to hit fresh intraday low in mid-morning trade. The market hit its lowest level in nearly one week in early afternoon trade. Key benchmark indices weakened once again after trimming losses after hitting fresh intraday lows in afternoon trade as European stocks fell in early trade there. The market hit fresh intraday low in late trade.

The BSE Sensex fell 370.68 points or 2.15% to settle at 16,863.30, its lowest closing level since 23 January 2012. The index fell 405.65 points at the day's low of 16,828.33 in late trade. The index declined 95.94 points at the day's high of 17,138.04 in early trade.

The S&P CNX Nifty fell 117.40 points or 2.26% to settle at 5,087.30, its lowest closing level since 23 January 2012. The index hit a low of 5,076.70 in intraday trade. The index hit a high of 5,166.15 in intraday trade.

The BSE Mid-Cap index fell 1.96% and the BSE Small-Cap index fell 1.82% at 6,373.59. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,820 shares fell and 997 shares rose. A total of 98 shares were unchanged.

BSE clocked turnover of Rs 2466 crore, lower than Rs 2756.86 crore on Friday, 27 January 2012.

Among the 30-member Sensex pack, 25 fell while the rest gained. Sun Pharmaceuticals Industries (up 1.34%), Bajaj Auto (up 0.48%), Jindal Steel & Power (up 0.41%), Hero MotoCorp (up 0.13%) and TCS (up 0.06%), edged higher from the Sensex pack.

Index heavyweight Reliance Industries (RIL) fell 2.71% to Rs 795.45 on profit taking after recent rally triggered by the company announcing share buyback schedule. RIL early last week said that its share buyback programme will begin on 1 February 2012 and close on 19 January 2013. Its controlling shareholders, who own 44.7% of the equity, will not participate in the offer. RIL has said that it will buyback up to 12 crore shares at a maximum price of Rs 870 and payable in cash upto an aggregate amount not exceeding Rs 10440 crore from the open market through stock exchanges.

RIL's net profit fell 13.6% to Rs 4440 crore on 40.2% growth in turnover to Rs 87480 crore in Q3 December 2011 over Q3 December 2010. RIL announced the results after trading hours on 20 January 2012.

India's largest software services exporter by revenue TCS rose 0.06%, with the stock gaining for the fourth straight day. The company announced during trading hours today that Diligenta, its UK based subsidiary has successfully completed a multi-year, multi-million dollar transformation project at Phoenix Group, the UK's largest specialist consolidator of closed life funds.

TCS reported 21.8% growth consolidated net profit to Rs 2803 crore on 13.5% growth in revenue to Rs 13204 crore in Q3 December 2011 over Q2 September 2011. The result was announced on 17 January 2012.

The company's management at a post-result conference call said that out of a total of 130 discretionary projects that the company is pursuing, 50% are facing delays in decision making even as there are no project cancellations so far. The management also said that out of a total of 120 top clients surveyed, two-thirds have flat or marginally increased budgets and remaining one-thirds has reduced budgets. The company said the pipeline is intact but discretionary spend may lag ramp up in volumes in Q4 March 2012.

India's second largest software services exporter by revenue Infosys fell 0.54%, with the stock snapping four-day gains. The company has given a muted guidance for Q4 March 2012. The company has projected a marginal 1.25% growth in non-annualised earnings per American Depositary Share at $0.81 in Q4 March 2012 over Q3 December 2011. The company has projected a flat to 0.22% growth in consolidated revenue in dollar terms at $1.806 billion to $1.81 billion in Q4 March 2012 over Q3 December 2011.

India's third largest software services exporter by revenues Wipro fell 1.96%. Wipro reported 12% growth in consolidated net profit to Rs 1456.40 crore on 10% growth in sales to Rs 9997.20 crore in Q3 December 2011 over Q2 September 2011. Wipro expects revenues from IT services business to grow 1% to 3% at $1.52 billion to $1.55 billion in Q4 March 2012 over Q3 December 2011. The company announced the 3rd quarter results on 20 January 2012.

Among IT shares, Mahindra Satyam (down 4.01%), Rolta India (down 3.68%), MphasiS (down 2.5%), Tech Mahindra (down 1.56%), Oracle Financial Services Software (down 1.43%), iGATE Patni (down 1.16%) and HCL Technologies (down 0.68%), edged lower.

Power generation major NTPC fell 1.01% after the company announced after market hours on Friday, 27 January 2012, that net profit fell 10.16% to Rs 2130.39 crore on 14.68% rise in total income to Rs 16245.42 crore in Q3 December 2011 over Q3 December 2010. NTPC said it has signed a Joint Venture Agreement with Bangladesh Power Development Board (BPDP) with the objective of setting up and implementing 1,320 megawatts (MW) coal based power plant in Bangladesh to cater to the growing power requirements of Bangladesh. This project will be developed through a 50:50 joint venture company between NTPC and BPDP on build, own and operate basis.

Power equipment major Bharat Heavy Electricals (Bhel) slumped 10.41% as the company's operating profit margin (OPM) declined sharply in Q3 December 2011. The stock was the top loser from the Sensex pack. The company announced after market hours on Friday that net profit rose 2.09% to Rs 1432.61 crore on 19.21% growth in total income to Rs 10939.10 crore in Q3 December 2011 over Q3 December 2010. The OPM tumbled by 360 basis points (bps) to 19.4% from 23% in Q3 December 2010.

Bhel's order backlog stood at Rs 146500 crore as on 31 December 2011. The company said order backlog was reduced to the extent of Rs 5847 crore in Q3 December 2011 as the company has seen one order cancelled during the quarter and few other small orders underwent change in scope. There is no such thing as slow moving orders in the order backlog, the company's management said in a post-result conference call with analyst. Bhel said provision (contractual obligation, LD and bad and doubtful debts) for the quarter has gone up to the extent of Rs 218 crore.

Among other capital goods stocks, BGR Energy Systems (down 8.12%), Suzlon Energy (down 7.71%), Crompton Greaves (down 7.62%), Alstom Projects (down 5.82%), Punj Lloyd (down 5.6%), Praj Industries (down 4.35%), Areva T&D (down 3.5%), Bharat Electronics (down 2.88%), Thermax (down 2.53%), BEML (down 2.33%), Siemens (down 1.98%), Lakshmi Machine Works (down 1.64%), Usha Martin (down 1.23%) and SKF India (down 1.09%), edged lower.

India's largest engineering and construction firm by sales, L&T, fell 5.37% on profit taking after a recent sharp surge triggered by good Q3 results. The company's recurring profit after tax (PAT) rose 22% to Rs 992 crore on 23% growth in gross revenue to Rs 14155 crore in Q3 December 2011 over Q3 December 2010. The company said that order inflow rose 28% to Rs 17129 crore in Q3 December 2011 over Q3 December 2010. The company's order book stood at Rs 145768 crore as on 31 December 2011. The company announced the 3rd quarter results early last week.

Metal stocks declined as metal prices dropped on the London Metal Exchange. Nalco (down 6.47%), Sterlite Industries (down 5.99%), Hindalco Industries (down 4.81%), Sail (down 4.76%), NMDC (down 4.68%), Bhushan Steel (down 2.86%), Coal India (down 1.41%) and Hindustan Zinc (down 0.19%), edged lower.

Tata Steel fell 3.55% on profit taking after a recent sharp surge. The stock had risen 3.09% on Friday, 27 January 2012, after the company announced a recovery plan for its European tube business. In light of weak European demand for its tube products, Tata Steel on Wednesday, 25 January 2012, proposed a recovery plan for its tubes business that may result in 200 job losses at four sites in the UK and the Netherlands. The plan will focus on efficiency improvements and cost reductions with the aim of enabling the business to withstand the current weak economic conditions and restore the division back to profitability, the company said. The company said it would seek to minimize the impact of the recovery plan on its employees. "Our goal is to secure a sustainable tubes business which will not only weather the current economic storm, but can prosper in the future," said Remco Blaauw, managing director of Tata Steel's European tube business

Sesa Goa fell 4.65% after jumping 6.85% on Friday. The company's consolidated net profit fell 35.1% to Rs 691.52 crore on 16.4% rise in net sales to Rs 2604.28 crore in Q3 December 2011 over Q3 December 2010. The company announced Q3 results after market hours on Wednesday, 25 January 2012.

Sesa Goa said expansion of pig iron capacity to 625 ktpa and the associated expansion of metallurgical coke capacity to 560 ktpa are nearing completion for commissioning in current quarter, marginally behind expected timelines on account of construction delays.

Lloyds Steel Industries jumped 19.24% to Rs 12.21 after the company scheduled a board meeting on 1 February 2012 to consider issue of equity shares on preferential basis.

Telecom stocks dropped across the board. Tata Teleservices (Maharashtra) (down 5.47%), Bharti Airtel (down 4.54%), MTNL (down 4.46%), Idea Cellular (down 4.08%) and Reliance Communications (down 3.27%), edged lower.

Realty stocks dropped for the second straight day. Indiabulls Real Estate (down 6.07%), HDIL (down 5.14%), Anant Raj Industries (down 5.02%), Unitech (down 4.68%), Prestige Estates (down 3.66%), DLF (down 3.07%), Godrej Properties (down 3.05%), Oberoi Realty (down 2.72%), Peninsula Land (down 1.59%), Parsvnath Developers (down 1.51%), D B Realty (down 0.89%), Sunteck Realty (down 0.29%) and Sobha Developers (down 0.27%), edged lower.

Bank stocks dropped on worries of rising defaults in a slowing economy. India's largest private sector bank by branch network ICICI Bank fell 4.07%. The bank unveils Q3 results tomorrow, 31 January 2012.

India's second largest bank by net profit HDFC Bank shed 0.94%. HDFC Bank reported 31.4% growth in net profit to Rs 1429.70 crore on 35.6% increase in total income to Rs 8622.64 crore in Q3 December 2011 over Q3 December 2010. The result was announced on 19 January 2012.

HDFC Bank said its core CASA deposit ratio, adjusted for one-off current account balance of about Rs 4000 crore, was at 47.7% of total deposits as on 31 December 2011. The private sector bank said its asset quality remains healthy. The bank's capital adequacy ratio (CAR) remained strong at 16.3% as on 31 December 2011, against the regulatory minimum of 9%. The bank's Tier-I CAR was 11.2% as on 31 December 2011.

India's largest commercial bank by net profit and branch network State Bank of India (SBI) declined 2.54%.

Axis Bank fell 4.83% on profit taking after recent strong gains. Net profit rose 23.66% to Rs 1102.27 crore on 44.54% increase in total income to Rs 7206.77 crore in Q3 December 2011 over Q3 December 2010. The result was announced during trading hours on 20 January 2012.

Canara Bank fell 1.94%, with the stock extending Friday's 3.23% losses triggered by weak Q3 results. Net profit fell 20.82% to Rs 875.56 crore on 33.31% increase in total income to Rs 8591.15 crore in Q3 December 2011 over Q3 December 2010. The result was announced during trading hours on Friday, 27 January 2012.

Indian Bank fell 2.09%. The bank announced during market hours today that net profit rose 7.04% to Rs 525.92 crore on 32.74% rise in total income to Rs 3505.25 crore in Q3 December 2011 over Q3 December 2010.

Oriental Bank of Commerce fell 3.10% after net profit declined 13.23% to Rs 354.22 crore on 37.61% increase in total income to Rs 4491.76 crore in Q3 December 2011 over Q3 December 2010. The result was announced during trading hours today, 30 January 2012.

Punjab National Bank fell 1.59%. A board meeting of the bank will be held today, 30 January 2012, to consider issue of equity shares on preferential basis to Government of India. The government currently holds 58% stake in Punjab National Bank.

At its third quarter policy review on 24 January 2012, RBI scaled down non-food bank credit growth projection to 16% for 2011-12 from 18% earlier. RBI said that non-food bank credit growth moderated from 21.3% at end-March 2011 to 15.7% by end-December 2011. Credit deceleration was particularly sharp for public sector banks, with growth moderating from 21% to about 15% during the same period, RBI said.

LIC Housing Finance fell 2.23% to Rs 246.05 in choppy trade on profit taking after good Q3 results. The stock hit a high of Rs 264.30 in intraday trade, which is a 52-week high for the counter. Net profit jumped 43.18% to Rs 305.69 crore on 17.58% increase in total income to Rs 1592.53 crore in Q3 December 2011 over Q3 December 2010. The result was announced during trading hours today, 30 January 2012.

State Bank of India clocked a highest turnover of Rs 95.51 crore on BSE. Bhel (Rs 86.83 crore), Reliance Capital (Rs 73.93 crore), Jubilant FoodWorks (Rs 67.56 crore) and JSW Steel (Rs 62.09 crore), were the other turnover toppers on BSE in that order.

Cals Refineries reported a highest volume of 1.32 crore shares on BSE. Suzlon Energy (89.64 lakh shares), GVK Power & Infrastructure (73.45 lakh shares), Lanco Infratech (72.68 lakh shares) and IFCI (69.19 lakh shares), were the other volume toppers on BSE in that order.

Foreign institutional investors (FIIs) have made heavy purchases of Indian stocks this month. FIIs bought shares worth Rs 1240.16 crore on Friday, 27 January 2012, as per provisional data from the stock exchanges. FII inflow totaled Rs 3188.45 crore in three trading sessions from 24 to 27 January 2012, as per provisional data from the stock exchanges. FIIs have bought shares worth a net Rs 9018.10 this month so far, as per provisional data from the stock exchanges.

Investors' focus is currently on Q3 results. ICICI Bank, Punjab National Bank, IDBI Bank, Dabur India, TVS Motor, NMDC and Siemens unveil quarterly results tomorrow, 31 January 2012. Mahindra Satyam unveils Q3 results on Wednesday, 1 February 2012. Marico, RCF and Corporation Bank announce Q3 results on Thursday, 2 February 2012. Dr. Reddy's Laboratories, Power Finance Corporation, Hindustan Copper and HPCL report Q3 results on Friday, 3 February 2012. Hindustan Unilever, National Aluminium Company and India Cements announce Q3 results on 6 February 2012.

Mahindra & Mahindra and GMR Infrastructure unveil Q3 results on 7 February 2012. ONGC and Power Grid Corporation of India unveil Q3 results on 8 February 2012. Tata Steel, Hindalco, ACC and Ambuja Cements unveil quarterly results on 9 February 2012. Tata Power, BPCL, Britannia Industries and Sun TV Network unveil Q3 results on 10 February 2012. JSW Steel announces consolidated Q3 results on 10 February 2012. The company has already announced its stand-alone results. Aditya Birla Nuvo and Ashok Leyland announce Q3 results on 11 February 2012. Steel Authority of India (Sail) unveils Q3 results on 13 February 2012. Tata Motors, Shipping Corporation of India announces Q3 results on 14 February 2012.

The Reserve Bank of India (RBI), last week, took liquidity easing measures by cutting the cash reserve ratio (CRR) requirement for banks by 50 basis points to 5.5% from 6% at Third Quarter Review of Monetary Policy 2011-12. The central bank said that as a result of the reduction in the CRR by 50 basis points, around Rs 32000 crore of primary liquidity will be injected into the banking system. The central bank said the large structural deficit in the system presents a strong case for injecting permanent primary liquidity into the system.

The RBI kept its key lending rate viz. the repo rate unchanged at 8.5%. RBI has cut the baseline projection of GDP growth for 2011-12 to 7% from 7.6%. The growth-inflation balance of the monetary policy stance has now shifted to support growth, while at the same time ensuring that inflationary pressures remain contained, the central bank said.

The reduction in CRR can be viewed as a reinforcement of the guidance that future rate actions will be towards lowering interest rates, RBI said. However, the timing and magnitude of future rate actions is contingent on a number of factors, RBI said. In the absence of credible fiscal consolidation, the Reserve Bank of India will be constrained from lowering the policy rate in response to decelerating private consumption and investment spending, it said. The forthcoming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way, the RBI said.

The budget for 2012/13 ending March will be presented after elections scheduled in five states, Finance Minister Pranab Mukherjee said on 2 January 2012. State elections are scheduled between the end of January and early March 2012. The annual budget is usually presented on the last working day of February.

An estimated 82% of the electorate on Saturday, 28 January 2012, exercised their franchise in Manipur assembly elections which was marred by militant violence that claimed seven lives, including that of an ultra. Polling for assembly elections in Uttarakhand and Punjab takes place today, 30 January 2012. Seven-phase polling for assembly elections in Uttar Pradesh begins on Saturday, 4 February 2012.

European stocks edged lower on Monday as investors continued to wait for the resolution of a deal on the restructuring of Greek debt and ahead of the European Union summit in Brussels. Key benchmark indices in France, Germany and UK were down 0.66% to 1.01%.

European Union leaders gather in Brussels later in the global day today for their first summit of 2012 to put the finishing touches on a German- led deficit-control treaty and endorse the statutes of a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said January 28 they expect to complete a deal in coming days after bondholders signaled they would accept European government demands for a bigger cut in their debt holdings.

Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain on Friday, indicating there was a 1-in-2 chance of further cuts in the next two years. In a statement, the ratings agency said the affected countries were vulnerable in the near-term to monetary and financial shocks. Fitch cut Italy's rating to A-minus from A-plus; Spain to A from AA-minus; Belgium to AA from AA-plus; Slovenia to A from AA-minus and Cyprus to BBB-minus from BBB, leaving the small island nation just one notch above junk status. Ireland's rating of BBB-plus was affirmed. All of the ratings were given negative outlooks. Fitch said it had weighed up a worsening economic outlook in much of the euro zone against the European Central Bank's December move to flood the banking sector with cheap three-year money and austerity efforts by governments to curb their debts.

Asian stocks dropped for the first time in four days on Monday, 30 January 2012, before a meeting of Europe's leaders to discuss the euro-zone sovereign-debt crisis. Chinese shares slid on the first day of trading after the Lunar New Year holiday. Key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea and Singapore shed by between 0.54% to 1.79%. Taiwan's Taiwan Weighted rose 2.40%.

China's government debt is under control and remains at safe levels, Chinese Premier Wen Jiabao said in comments released on Monday, 30 January 2012, even as the National Audit Office highlighted potential risks for financial sectors this year.

Trading in US index futures indicated that the Dow could fall 74 points at the opening bell on Monday, 30 January 2012. US stocks ended mostly lower on Friday after a reading on domestic economic growth fell short of expectations. The nation's gross domestic product, the value of all goods and services produced, expanded at an annual rate of 2.8% from October to December. Though the data showed the US economy expanded at the fastest pace since the second quarter of 2010, the reading fell short of the expected 3% rate.