Sensex drops for the second day in a row; Nifty flat

Weakness in European shares weighed on domestic bourses during the second half of the trading sessions. The barometer index, BSE Sensex, edged slightly lower. The Sensex dropped for the second day in a row. The 50-unit S&P CNX Nifty ended almost unchanged for the day. The Sensex fell 25.56 points or 0.16%, off close to 123 points from the day's high and up about 48 points from the day's low. The market breath was positive. Index heavyweight Reliance Industries (RIL) fell over 2%.

Capital goods stocks extended recent gains triggered by bargain hunting after a steep sell-off last month. FMCG stocks fell on profit taking after recent gains. Auto stocks rose as India Auto Expo 2012 began in New Delhi today, 5 January 2012. Realty major DLF fell over 4% on reports of an unfavourable court order on a major project. Metal stocks reversed initial gains as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 2.17% on Wednesday, 4 January 2012.



The Sensex has jumped 402.16 points or 2.6% this month so far. From a 52-week high of 20,664.80 on 3 January 2011, the Sensex has lost 4807.72 points or 23.27%. From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 721.22 points or 4.76%.

Coming back to today's trade, the market edged higher in early trade as most Asian stocks rose. The market trimmed gains after hitting a fresh intraday high in morning trade. Key benchmark indices regained strength after trimming gains after hitting fresh intraday highs in morning trade. The market strengthened further and was hovering near intraday high in early afternoon trade. A bout of volatility was witnessed as key benchmark indices once again trimmed gains after regaining strength in afternoon trade.

Intraday volatility continued as key benchmark indices regained positive terrain soon after slipping into the red to hit fresh intraday lows in mid-afternoon trade. The market trimmed losses after hitting fresh intraday low in late trade.

The BSE Sensex lost 25.56 points or 0.16% to settle at 15,857.08, its lowest closing level since 2 January 2012. The index rose 97.53 points at the day's high of 15,980.17 in morning trade. The index fell 73.33 points at the day's low of 15,809.31 in late trade.

The S&P CNX Nifty gained 0.30 points or 0.01% to settle at 4,749.95, its highest closing level since 3 January 2012. The index hit a high of 4,779.80 and a low of 4,730.15 in intraday trade.

The BSE Mid-Cap index fell 0.01% while the BSE Small-Cap index rose 0.21%. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,443 shares rose and 1,236 shares fell. A total of 156 shares were unchanged.

BSE clocked turnover of Rs 1941 crore, lower than Rs 2183.70 crore on Wednesday, 4 January 2012.

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

Index heavyweight Reliance Industries (RIL) fell 2.34% at Rs 699.25, off the day's high of Rs 724.85. 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.

Most bank stocks rose on recent comments by Reserve Bank of India's (RBI) Governor D Subbarao that RBI is likely to begin easing monetary policy to address concerns about economic growth. India's largest private sector bank by branch network ICICI Bank gained 0.57%. 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.

Among other banks, Punjab National Bank (up 4.31%), Yes Bank (up 2.70%), IndusInd Bank (up 2.64%), Axis Bank (up 2.57%), IDBI Bank (up 1.45%) and Kotak Mahindra Bank (up 1.26%), edged higher.

India's second largest private sector bank by branch network HDFC Bank fell 0.16%. 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) fell 0.20%. 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.

SBI expects the government to inject capital "any time", although it is yet to get a formal commitment on the amount, SBI's chief financial officer Diwakar Gupta said in a recent interview to a news agency. Gupta said the government will ensure the bank has 8% tier I capital adequacy by March-end. At the end of September, it stood at 7.47%.

Banks are announcing sharp hikes in deposit rates for the Indian diaspora following a the Reserve Bank of India's (RBI) move to deregulate interest rates on NRE deposits recently to attract more dollars into the economy in its bid to arrest steep fall in the rupee value.

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.

Infrastructure Development Finance Company (IDFC) jumped 3.13% after the infrastructure lender said on Wednesday it will launch the second installment of its tax-saving infrastructure bonds on 11 January 2012 to raise up to Rs 4400 crore. The issue will be open for subscription until February 25, IDFC said in a regulatory filing. The second installment is part of the lender's plan to garner up to Rs 5000 crore by selling tax-saving infrastructure bonds in the retail market this fiscal year through March.

Metal stocks reversed initial gains as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 2.17% on Wednesday, 4 January 2012. Coal India (down 1.75%), Sail (down 1.59%), Hindalco Industries (down 1.56%), Hindistan Zinc (down 1.09%), NMDC (down 0.99%), Sterlite Industries (down 0.95%), Sesa Goa (down 0.81%), Nalco (down 0.64%), JSW Steel (down 0.56%), Tata Steel (down 0.37%) and Bhushan Steel (down 0.12%), edged lower.

ACC rose 1.26% after company during market hours today said its cement dispatches rose 8.85% to 2.09 million tonnes in December 2011 over December 2010.

Among other cement stocks, Jaiprakash Associates (up 2.77%), Ambuja Cements (up 2.43%), Prism Cement (up 2.07%), Madras Cement (up 1.47%) and UltraTech Cement (up 0.56%), edged higher.

Capital goods stocks extended recent gains triggered by bargain hunting after a steep sell-off last month. Usha Martin (up 2.01%), Crompton Greaves (up 0.81%), Thermax (up 0.80%), Lakshmi Machine Works (up 0.58%), Pipavav Defence (up 0.38%) and Bhel (up 0.31%), edged higher.

L&T rose 1.73% with the stock extending a three-day winning streak triggered after an announcement of new orders. L&T early this week said its construction division bagged new orders worth over Rs 2056 crore across various business segments in December 2011. The Water and Affluent Treatment business has won two major orders totaling Rs. Rs 1262 crore. The Building and Factories segment has bagged a new order valued at Rs. 388 crore while the Rail Infrastructure segment has won orders aggregating to Rs. 406 crore.

DLF fell 4.06% extending Wednesday's 2.25% losses 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.

Among other realty stocks, D B Realty (down 3.11%), HDIL (down 3.09%), Oberoi Realty (down 0.87%), Unitech (down 0.75%) and Sobha Developers (down 0.15%), edged lower.

Auto stocks rose as India Auto Expo 2012 began in New Delhi today, 5 January 2012. Mahindra & Mahindra (M&M) rose 1.83% on bargain hunting after recent losses. M&M's total automobile sales jumped 26% to 42,761 units in December 2011 over December 2010. M&M's president for automotive and farm equipment Pawan Goenka today, 5 January 2012, said that the company plans to start assembling SsangYong vehicles in China, Brazil and Russia in the next two years.

M&M last year picked up a 70.03% stake in South Korean auto maker SsangYong Motor Co. for 522.5 billion Korean won. It is slated to launch SsangYong's sport-utility vehicle Rexton in India in the second half of 2012 and the Korando C SUV in 2013.

Ashok Leyland rose 1.27%. The company reported sales of 9,088 units for December 2011 including 1,099 units of the recently launched LCV for cargo transportation -- Dost. Adjusting for Dost which was launched in October 2011, sales came in at 7,989 units, up 6% year-on-year.

Tata Motors rose 0.55%, extending recent strong gains triggered by strong sales in the month just gone by. The company's total sales of commercial and passenger vehicles jumped 22% to 82,278 units in December 2011 over December 2010. The domestic sales of the vehicles in both categories for the month stood at 76,663 cars, a 24% jump compared to 61,685 in December 2010, the company said in a statement. However, exports declined 3% to 5,615 units compared to 5,809 in December 2010.

Maruti Suzuki India declined 1.66%. The company announced during market hours today that it has unveiled XA Alpha -- a concept for a compact sports utility vehicle (SUV). Together with Ertiga to be unveiled on 6 January 2012, the XA Alpha signals Maruti Suzuki's plans to expand into the utility vehicles space, it said.

Maruti's total vehicle sales fell 7.1% to 92,161 units in December 2011 over December 2010. Domestic sales dropped 13.4% to 77,475 units. Exports surged by 50.5% to 14,686 units.

Fiat India Automobiles said early this week that it expects to conclude shortly discussions with Maruti Suzuki India for the supply of diesel engines for cars, a step that will allow the local unit of Suzuki Motor Corp. cut the waiting period on its Swift model. Maruti currently sources all its diesel engines from Suzuki Powertrain, a joint venture between Maruti and Suzuki. These engines are made using Fiat's technology.

Two-wheeler makers rose on bargain hunting after recent losses. Bajaj Auto rose 2.70%. The firm unveiled an ultra-low-cost car early this week, 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.

Shares of Bajaj Auto had tumbled recently on reported comments by a company official that the company does not expect to meet its vehicle sales target for this financial year through March. The company's total sales rose 10% to 3.05 lakh units in December 2011 over December 2010. Motorcycle sales rose 8% to 2.63 lakh units and commercial vehicle sales rose 27% to 41,991 units. Exports jumped 25% to 1.19 lakh units. The company announced the monthly sales data early this week.

India's largest two-wheeler maker Hero MotoCorp rose 2.33% on reports the company will soon unveil a new petrol-electric hybrid scooter, which would deliver a fuel efficiency of 100 kilometre per litre. Meanwhile, the company on Wednesday launched two motorcycle models and one scooter model. The company will start retail sales of the 110-cubic-centimeter scooter model Maestro later this month, while that of the 110cc motorcycle model Passion X Pro and 125cc motorcycle Ignitor will happen in the remainder of the year, Chief Executive Pawan Munjal said at the launch.

However, TVS Motor Company fell 0.42%. The stock had been under selling pressure recently after the company said its total sales declined 0.79% to 1.70 lakh units in December 2011 over December 2010.

FMCG stocks fell on profit taking after recent gains. United Spirits (down 5.69%), Tata Global Beverages (down 2.42%), Britannia Industries (down 1.47%), Dabur India (down 1.04%), Hindustan Unilever (down 0.77%) and Nestle India (down 0.46%), edged lower.

MMTC clocked a highest turnover of Rs 112.81 crore on BSE. Reliance Industries (Rs 90.49 crore), State Bank of India (Rs 85.97 crore), DLF (Rs 74.15 crore) and L&T (Rs 61.07 crore), were the other turnover toppers on BSE in that order.

Cals Refineries reported a highest volume of 1.21 crore shares on BSE. Dazzel Confindive (67.20 lakh shares), Suzlon Energy (55.04 lakh shares), DLF (40.96 lakh shares) and Jaiprakash Associates (32.63 lakh shares), were the other volume toppers on BSE in that order.

Foreign institutional investors (FIIs) bought shares worth Rs 138.97 crore on Wednesday, 4 January 2012, as per provisional data from the stock exchanges. FII inflow totaled Rs 394.36 crore in two trading sessions on 3 and 4 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.

A special trading session will be held on Saturday, 7 January 2012, as the National Stock Exchange is upgrading the capacity of its futures and options trading system hardware and software. Trading will take place from 11:15 IST to 12:45 IST on that day. Trades done on Saturday, January 07, 2012, will be settled on Tuesday, 10 January 10, 2012, as a separate settlement, NSE said in a circular.

Market regulator Securities & Exchange Board of India (Sebi) has allowed auctioning of securities through stock exchanges and introduced a new method for institutional placement of stocks. As per the auctioning route, a special window can be used by promoter stakeholders to sell at least 1% of the paid-up capital of a company. This will be similar to the block-deal mechanism for secondary stock market transactions, but with lesser restrictions. Under the institutional placement programme (IPP), shares can be sold only to qualified institutional buyers.

Exchanges will provide a separate window for the offer for sale of shares which will co-exist with the normal trading hours. But, promoter or promoter group of companies will not be allowed to bid for the shares. Sebi also said the auction method can be only used by promoters of top 100 companies based on average market capitalisation for sale of their stakes. The regulator said the IPP method can be used to increase public holding by 10% and could be offered to only qualified institutional buyers with 25% being reserved for mutual funds and insurance companies. Issuers will have to announce an indicative floor price or price band at least one day before the opening of the offer.

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.

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. HCL Tech unveils Q2 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. Asian Paints unveils Q3 results on 21 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.

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.

European shares dropped on Thursday, 5 January 2012, on fresh worries about the health of European banks. Key benchmark indices in UK, France, and Germany fell by between 0.70% to 1.19%. Banks posted especially steep losses after Spain's economy minister told the Financial Times that Spanish banks will have to set aside as much as 50 billion euros ($65 billion), which amounts to 4% of Spain's GDP, in extra provisions on bad property assets.

Investors digested the results of a French government bond auction that saw a rise in 10-year yields. Bond auctions are closely watched as the markets try to gauge the ability of euro-zone nations, including France, Spain and Italy, to fund themselves. Meanwhile, concerns remain about France's ability to retain its prized triple-A credit rating.

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.

Asian stocks were mixed on Thursday. Key benchmark indices in Hong Kong, Singapore, and Taiwan rose by between 0.07% to 0.68%. Key benchmark indices in China, Indonesia, Japan and South Korea fell by between 0.03% to 0.97%.

Trading in US index futures indicated that the Dow could fall 81 points at the opening bell on Thursday, 5 January 2012. US stocks fared better than European peers, ending nearly flat on Wednesday after data showed new US factory goods orders rose solidly in November while business capital spending cooled.