Market snaps three-day winning streak

Key benchmark indices edged lower in choppy trade on caution ahead of a key meeting between Greece and its creditors today, 18 January 2012. The market snapped a three-day winning streak. The market breadth was weak. The barometer index, BSE Sensex,was down 14.58 points or 0.09%, off close to 65 points from the day's high and up about equal points from the day's low. Index heavyweight Reliance Industries (RIL) surged nearly 5% after the company said its board will consider and approve on 20 January 2012 a proposal for buyback of the company's equity shares.

The Sensex had risen 428.54 points or 2.67% in three trading sessions to 5-1/2-week closing high of 16,466.05 on Tuesday, 18 January 2012, from a recent low of 16,037.51 on 12 January 2012. The barometer index has jumped 996.55 points or 6.44% so far in this month. From a 52-week high of 19,811.14 on 6 April 2011, the Sensex has lost 3,359.67 points or 16.95%. From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1,315.61 points or 8.69%.



Coming back to today's trade, Tata Steel slumped over 4% on the ongoing euro-zone debt worries. IT pivotals declined as the rupee hovered at 2-month high against the dollar. TCS lost over 2.5% after 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. ONGC advanced more than 2% after the firm said it is in early talks on a possible tie-up with ConocoPhillips. Auto and banking stocks were mixed. Tyre shares were down across the board.

The Sensex and Nifty slipped into the red soon after hitting their highest level in almost 6 weeks at the onset of the trading session. The Sensex regained positive zone later as most Asian stocks rose. The market pared gains after hitting fresh intraday high in mid-morning trade. The market slipped into the red after a sudden slide in mid-morning trade. Volatility ruled the roost as key benchmark indices slipped into the red once again after recovering sharply to move into the positive terrain after hitting fresh intraday lows in early afternoon trade. Volatility continued as key benchmark indices hit fresh intraday lows in mid-afternoon trade.

The BSE Sensex shed 14.58 points or 0.09% to settle at 16,451.47, its lowest closing level since 16 January 2012. The index gained 51.91 points at the day's high of 16,517.96 in mid-morning trade, its highest level since 8 December 2011. The index fell 81.57 points at the day's low of 16,384.48 in mid-afternoon trade.

The S&P CNX Nifty shed 11.50 points or 0.23% to settle at 4,955.80, its lowest closing level since 16 January 2012. The index hit a high of 4,980.65 in intraday trade, its highest level since 8 December 2011. The index hit a low of 4,931.05 in intraday trade.

The BSE Mid-Cap index fell 1.16% and the BSE Small-Cap index shed 1%. Both these indices underperformed the Sensex.

The total turnover on BSE amounted to Rs 2475 crore, lower than Rs 2684.37 crore clocked on Tuesday, 17 January 2012.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,718 shares declined and 1,088 shares advanced. A total of 108 shares were unchanged. The breadth was positive earlier in the day.

Among the 30-member Sensex pack, 18 declined while the rest gained.

Index heavyweight Reliance Industries (RIL) surged 4.94% to Rs 776.90 after the company said its board will consider and approve on 20 January 2012 a proposal for buyback of the company's equity shares. The announcement was made before trading hours today, 18 January 2012. The stock rose on high volumes. On BSE, 16 lakh shares changed hands in the counter compared with average daily volume of 8.06 lakh shares in the past one quarter.

India's largest oil exploration firm by sales ONGC advanced 2.39% after the state-run oil exploration giant said it is in early talks on a possible tie-up with ConocoPhillips, US' third-largest energy company and the fifth-largest refiner in the world. ONGC is looking for partners with the technology to drill and produce from deepwater fields after Petroleo Brasileiro SA and Statoil ASA pulled out from a gas block in 2010.

Essar Oil tumbled 11.53% after the company said that the Supreme Court has set aside the judgment of the Gujarat High Court by which Essar Oil was entitled to avail of Sales Tax Deferment Scheme i.e. to pay Sales Tax to the Gujarat State Government in deferred installments. The company has availed of approximately Rs 6300 crore of Sales Tax benefit as of December 2011 which was to be paid in deferred installments, Essar Oil said. The company said it "expects" to appeal against the Supreme Court decision.

Essar Oil also said that it is in discussions with its lenders to exit a debt restructuring program, and that it hasn't defaulted on any loan repayments.

PSU OMCs were mixed. BPCL (up 2.09%) and Indian Oil Corporation (up 1%) rose. HPCL declined 0.85%.

India continues to purchase crude oil from Iran even as the US and European Union push through efforts to ban or discourage oil exports from the Middle-Eastern nation over its alleged nuclear weapons program, Oil Minister Jaipal Reddy today, 18 January 2012. India gets about three-fourths of the crude it requires through imports, and Iran is its second-largest supplier after Saudi Arabia.

Metal stocks declined on profit booking after Tuesday's rally triggered by strong Chinese economic data. China is the world's largest consumer of copper and aluminum. Sail, Nalco, JSW Steel, Hindustan Zinc, Hindalco Industries and Sterlite Industries India shed by between 0.78% to 4.81%.

NMDC slipped 3.29%. After market hours on Tuesday, 17 January 2012, the company announced the conclusion of acquisition of a 50% equity stake in Perth-based Australian iron ore, gold and base metals exploration company Legacy Iron Ore for a consideration of A$18.89 million. NMDC will fund the acquisition through internal accruals.

Legacy is primarily an iron ore exploration company that is based in Western Australia, and is developing the Mt Bevan Iron Ore Project, which has the potential to develop into one of the largest resources of iron ore in the Central Yilgarn region in Western Australia. Legacy is also developing an advanced gold exploration project at Mt Celia, at the South Laverton Project, and holds other prospective areas including Robertson Range for iron and manganese, Hamersley for iron, and East Kimberley for gold. Legacy is earning a 60% interest in the Mt Bevan Project from Hawthorn Resources, by committing A$3.5 million to exploration and completion of Pre-Feasibility studies before October 2012.

India's largest private sector steel maker by sales Tata Steel lost 4.05% on the ongoing euro-zone debt worries. European operations constitute almost 65% of Tata Steel's sales. The stock was the top loser from the Sensex pack

India's largest sponge iron steel maker by sales Jindal Steel & Power was down 0.25% ahead of its Q3 December 2011 results today, 18 January 2012.

Coal India dropped 3.22% on reports the company is not expected to raise prices after it finalises a wage increase agreement with its workers later this month. Coal India had last week said it will sign a five-year agreement with workers' unions to increase wages by 25%, adding about Rs 4000 crore to its annual wage bill.

India's largest software services exporter by revenue TCS lost 2.62% to Rs 1075.35 after 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.

After market hours on Tuesday, 17 January 2012, 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.

TCS added 40 new clients in Q3 December 2011. The company said the number of $100-million clients has risen to 14 from 12. There was a gross addition of 18,907 employees and a net addition of 11,981 employees in Q3 December 2011. The company said the attrition rate has fallen to 12.8%.

TCS said growth in Q3 came across markets. Among mature markets, Europe led the growth story with 18.1% growth sequentially, followed by the US (13.3%) and UK (9.5%). In the growth markets, Latin America showed significant momentum with 18.6% growth sequentially followed by India (14.8%) and Asia-Pacific (15.7%). All industry sectors have shown strong growth with all sectors growing at more than double digits sequentially except telecom, TCS said.

In terms of services, TCS' full services capabilities continue to be leveraged by customers with new service lines like Enterprise Solutions, Assurance and Infrastructure Services, Global Consulting growing at a fast, double-digit rate, TCS said.

Commenting on Q3 results, TCS CEO and MD, N Chandrasekaran said: "Our customer-centric approach in the market and execution rigor on the ground enabled TCS to post a strong financial performance in this quarter. Growth has been broad-based with all markets and all industries contributing substantially. While technology budgets are still being set for next fiscal, there is little doubt that technology is a key resource to help global businesses optimize their operations and fuel growth in the current economic climate. In this environment TCS is partnering with clients to achieve their objectives using our integrated portfolio of solutions".

S. Mahalingam, Chief Financial Officer, TCS, said: "We continue to focus on managing our operations optimally in the face of increased external volatility. We have increased our operating margins significantly by taking the benefits of growth, exchange movements and by keeping a strong focus on cost management. The level of currency and market volatility has only risen in the past three months and we are adapting our strategies accordingly".

Other IT pivotals declined as the rupee hovered at 2-month high against the dollar. A firm rupee adversely impacts the operating profit margin of IT firms as the sector derives a lion's share of revenue from exports. India's third largest software services exporter by revenues Wipro lost 2.7%. The company unveils Q3 December 2011 results on 20 January 2012.

India's second largest software services exporter by revenue Infosys fell 1.87%. 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. The IT major issued its outlook for the quarter ending March 2012 at the time of announcing Q3 December 2011 results last week.

HCL Technologies shed 1.7%. Before trading hours on Tuesday, 17 January 2012, the company said consolidated net profit as per US accounting standards jumped 15.3% to Rs 572.70 crore on 12.8% growth in revenue to Rs 5245.20 crore in Q2 December 2011 over Q1 September 2011.

Auto stocks were mixed. India's largest small car maker by sales Maruti Suzuki India shed 1.12% on profit after Tuesday's 10.48% rally triggered by reports that the company has raised prices of most of its vehicle models to offset the impact of higher input costs and a weak rupee. The company has raised prices by between Rs 2,400 and Rs 17,000. The company, however, hasn't raised prices of its mid-sized sedan Dzire.

Maruti on Friday, 6 January 2012, unveiled India's first compact multi purpose vehicle Ertiga at the auto expo. Ertiga's compact dimensions make it easy to park ad maneuver, Maruti said. Maruti had on Thursday, 5 January 2012 unveiled XA Alpha -- a concept for a compact sports utility vehicle (SUV).

India's largest truck maker by sales Tata Motors shed 1.61%, reversing four-day 6.18% gain. Tata Motors' global sales rose 33% to 99,853 units in December 2011 over December 2010. Its UK-based Jaguar Land Rover unit sold 30,981 vehicles in December, up 45% from a year earlier. Sales of Jaguar sedans grew 9% to 4,726 autos while those of Land Rover sport-utility vehicles surged 54% to 26,255 units. Tata Motors said it sold 48,099 trucks and buses globally in December, up 28% from a year earlier.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) lost 2.84%. The stock had gained 2.48% on Tuesday after reports indicated the company will reopen bookings for its latest sport-utility vehicle, XUV500, from 25 January 2012 to meet higher demand. M&M in September introduced the XUV500 and received 8,000 bookings within 10 days, prompting it to stop taking fresh orders as it was working on monthly output of 2,000 units.

Bike makers gained ahead of their Q3 results tomorrow, 19 January 2012. India's second largest two-wheeler maker by sales Bajaj Auto rose 0.16% in volatile trade. The firm recently unveiled an ultra-low-cost car, its first foray into the four-wheel market. The compact "RE60" boasts of high fuel efficiency and low carbon dioxide emissions, but the firm did not release a price tag.

India's largest two-wheeler maker by sales Hero MotoCorp gained 1.67%. Hero MotoCorp expects double-digit percentage growth in sales for the fiscal year starting in April, Managing Director Pawan Munjal said at recently concluded New Delhi Auto Expo. The company on Friday, 6 January 2012 unveiled its first concept hybrid scooter.

Bank pivotals were mixed. India's largest private sector bank by branch network ICICI Bank shed 2.07%. The bank unveils Q3 results on 31 January 2012.

India's largest bank by net profit and branch network State Bank of India (SBI) rose 1.13%. SBI has received Finance Ministry's approval for a capital infusion of Rs 6000 crore to Rs 8000 crore, a television channel reported on Monday, 16 January 2012, citing the bank's chairman. The capital infusion will be made by 31 March 2012, Pratip Chaudhuri was reported as saying.

India's second largest private sector bank by branch network HDFC Bank gained 2.79%. The bank unveils Q3 December 2011 results tomorrow, 19 January 2012.

Global ratings firm Standard and Poor's on Friday, 13 January 2012, said that the Reserve Bank of India's guidelines on Basel III norms, if implemented, could strengthen the capital and credit profiles of banks in the country. The draft guidelines, which the RBI recently announced, may negatively affect the credit growth of a few banks. But overall, the guidelines--if implemented--will benefit Indian banks' stand-alone credit profiles, S&P said.

The Reserve Bank of India (RBI) on Friday, 13 January 2012, issued guidelines that seek to limit variable pay and stop guaranteed bonuses to senior staff of private sector banks. Variable pay, either in the form of cash or stock-linked instruments, shouldn't exceed 70% of the fixed pay in a year, the Reserve Bank of India said in a press release. Under the guidelines, stock options plans to employees won't be counted as part of variable pay. In cases where the variable pay is in excess of 50% of the fixed pay, 40%-60% of the variable pay must be deferred for at least three years, it said.

The RBI has barred banks from offering guaranteed bonuses, which it said were "not consistent with sound risk management or the pay-for-performance principles." Foreign banks operating in India will have to declare that their executive compensation conforms with the Financial Stability Board principles, RBI said.

Tyre shares were down across the board. JK Tyre & Industries, Apollo Tyres, CEAT, Dunlop India and MRF fell by between 1.33% to 5.7%.

Reliance Communications fell 0.28% after Tuesday's 2.78% advance. During market hours on Tuesday, 17 January 2012, the company said it has tied up refinancing for redemption of outstanding foreign currency convertible bonds (FCCBs) of $1.182 billion, equivalent to Rs 6125 crore. The refinancing is being funded by ICBC, CDB and Exim and other banks. RCom will benefit from extended Loan Maturity of seven years and attractive interest cost of about 5%, the company said. The loan proceeds would be used for refinancing the entire redemption amount of FCCBs which are due for redemption on 1 March 2012. This is the largest refinancing in the history of FCCBs by any Indian corporate, the company added.

Reliance Infrastructure gained 3.19%. The company's board has approved a scheme of arrangement for merger of Reliance Energy, Reliance Energy Generation, Reliance Goa and Samalkot Power, Reliance Infraventures and Reliance Property Developers as also demerger of the container business undertaking of Reliance Infrastructure Engineers with the company ('the Scheme') under sections 391 to 394 of the Companies Act, 1956, with the Appointed Date as January 01, 2012, subject to obtaining the requisite approvals including that of the Bombay High Court. As per the Scheme, no shares are proposed to be issued as the Transferor Companies and the Demerged Company are wholly owned subsidiaries of the Company.

Separately, Reliance Infrastructure said that it has contributed Rs 267.05 crore and Rs 232.75 crore to the extent of its shareholding in its two joint venture companies in New Delhi, viz, BSES Rajdhani Power and BSES Yamuna Power, respectively, as advance against share application money pending allotment of equity shares.

Some organised retailers rose. Pantaloon Retail, Shoppers Stop, Store One Retail, V2 Retail, and Brandhouse Retail rose by between 0.12% to 4.94%. The Government on 10 January 2012 notified 100% foreign direct investment (FDI) in single brand retail, opening decks for setting up shop by global retail chains like Ikea, Louis Vuitton, Cartier, Armani, Rolex, Adidas and Gucci to have full ownership of their India operations. The move frees up the 51% limit that had been in place and proved to be a dampener on plans by such companies to enter India.

However, the notification comes with some riders to protect the interests of the small and medium scale units in the country. The notification states that in respect of proposals involving FDI beyond 51%, the mandatory sourcing of at least 30% would have to be done from the domestic small and cottage industries, which have a maximum investment in plant and machinery of $1 million (about Rs 5 crore).

Realty stocks were mixed. Unitech, DLF, and Godrej Properties gained by between 0.52% to 3.68%. Indiabulls Real Estate, HDIL and D B Realty shed by between 0.63% to 5.44%.

Aviation stocks rallied for second straight day on reports that the ministry of civil aviation will move a cabinet note to consider allowing up to 49% investment by foreign carriers in local airlines. The decision came following the meeting of civil aviation minister Ajit Singh with the finance minister Pranab Mukherjee on Tuesday, 17 January 2012. Kingfisher Airlines (up 0.6%), Jet Airways (India) (up 4.96%), and SpiceJet (up 2.46%), edged higher.

Indian law currently allows up to 49% foreign direct investment (FDI) in airlines, including by financial investors but overseas carriers are barred from investing in the sector. The move to consider allowing foreign carriers invest in their Indian peers comes at a time when local airlines are bearing the brunt of rising costs, expensive jet fuel, a weaker rupee and high interest payments on their debt.

Sterling Biotech clocked highest volume of 3.51 crore shares on BSE. Vikas Wsp (87,78 lakh shares), SpiceJet (83.77 lakh shares), Essar Oil (79.72 lakh shares) and Cals Refineries (66.47 lakh shares) were the other volume toppers in that order.

RIL clocked highest turnover of Rs 124.36 crore on BSE. SBI (Rs 105.20 crore), Tata Steel (Rs 77.52 crore), TCS (Rs 75.97 crorE) and Cals Refineries (Rs 66.76 crore) were the other turnover toppers in that order.

Foreign institutional investors (FIIs) bought shares worth Rs 1025.75 crore on Tuesday, 17 January 2012, as per provisional data from the stock exchanges. FII inflow totaled Rs 2939.37 crore in six trading sessions from 10 to 17 January 2012, as per provisional data from the stock exchanges.

Investors' focus is currently on Q3 results. Analysts expect weak Q3 December 2011 results due to lower volume growth in a slowing economy, higher raw material costs and higher interest charges. The focus will be on guidance from the company managements on outlook for the remaining part of the year and for the next year.

HDFC Bank, Hero MotoCorp and Bajaj Auto unveil Q3 results on 19 January 2012. Reliance Industries, Wipro, ITC, Axis Bank, Jet Airways (India) and Hindustan Zinc unveil Q3 results on 20 January 2012. JSW Steel reports its Q3 standalone results on 20 January 2012. UltraTech Cement, Asian Paints, Zee Entertainment Enterprises and Godrej Consumer Products unveil Q3 results on 21 January 2012. L&T, Maruti Suzuki India, Sterlite Industries (India), Idea Cellular, GAIL (India) and Kotak Mahindra Bank unveil Q3 results on 23 January 2012.

Cairn India, Grasim and Biocon unveil Q3 results on 24 January 2012. Bank of Baroda, Sesa Goa, Union Bank of India, Rural Electrification Corporation, Indian Hotels and Tata Communications unveil Q3 results on 25 January 2012. Bharat Heavy Electricals (Bhel), NTPC, Bank of India and Canara Bank unveil Q3 results on 27 January 2012. LIC Housing Finance and NMDC unveil Q3 results on 30 January 2012.

ICICI Bank, Punjab National Bank, Dabur India and Siemens unveil quarterly results on 31 January 2012. ONGC and Marico announce Q3 results on 2 February 2012. Dr. Reddy's Laboratories reports Q3 results on 3 February 2012. India Cements announces Q3 results on 6 February 2012. Mahindra & Mahindra unveils Q3 results on 7 February 2012. Hindalco unveils Q3 results on 9 February 2012. Tata Power and BPCL unveil Q3 results on 10 February 2012. Aditya Birla Nuvo and Ashok Leyland announce Q3 results on 11 February 2012. Shipping Corporation of India announces Q3 results on 14 February 2012.

Stronger-than-expected growth in industrial production in November 2011 has raised doubts about the timing and pace at which the Reserve Bank of India would likely ease its monetary policy. Industrial output rose 5.9% in November 2011, compared with a revised contraction of 4.74% in October 2011, data released by the government on Thursday, 12 January 2012, showed. Manufacturing output, which constitutes about 76% of the industrial production, grew an annual 6.6% in November 2011. Industrial production had contracted in October 2011, snapping consistent growth for the preceding 29 months in a row.

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.

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. 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.

European stocks reversed initial losses. Key benchmark indices in UK, Germany and France were up by between 0.12% to 0.56%.

Later Wednesday, the Greek government is slated to resume talks with its bond holders, represented by the Institute of International Finance, to discuss a voluntary write-down on Greece's sovereign debt. The New York Times reported ahead of the meeting that Greece Prime Minister Lucas Papademos would consider raising legislation to force a private-sector haircut on the debt if a deal can't be reached voluntarily. Negotiations collapsed last Friday over the interest rate on new bonds to be offered by Greece.

Asian stocks were mixed ahead of a key meeting between Greece and its creditors later in the global day. Key benchmark indices in, Hong Kong, Indonesia, Taiwan and Japan were up by between 0.17% to 0.99%. Key benchmark indices in Singapore, China and South Korea were down by between 0.02% to 1.39%

Data released on Tuesday showed that China's fourth-quarter gross domestic product rose 8.9% from the year-ago period, topping estimates. Monthly data also showed better-than-expected retail sales and industrial production in December.

Moody's Investors Service has upgraded the Government of Indonesia's foreign and local currency bond ratings to Baa3 from Ba1. Indonesia's cyclical resilience to large external shocks points to sustainably high trend growth over the medium term. A more favorable assessment of Indonesia's economic strength is underpinned by gains in investment spending, improved prospects for infrastructure development following key policy reforms, and a well-managed financial system, it said.

Trading in US index futures indicated that the Dow could gain 51 points at the opening bell on Wednesday, 18 January 2012.

The World Bank warned developing countries on Wednesday to prepare for the "real" risk that an escalation in the euro area debt crisis could tip the world into a slump on a par with the global downturn in 2008/09. In a report sharply cutting its world economic growth expectations, the World Bank said Europe was probably already in recession. If the euro area debt crisis deepened, global economic forecasts would be significantly lower. The World Bank predicted world economic growth of 2.5% in 2012 and 3.1% in 2013, well below the 3.6% growth for each year projected in June.