Sensex sheds 1.5% in broad-based decline

The key benchmark indices hit 4-1/2-month closing lows, sliding for the third straight day, as data showing heavy selling by foreign funds on Thursday, 27 January 2011, and fears of more rate hikes from the Reserve Bank of India to tame inflation, weighed on the sentiment. The BSE 30-share Sensex was down 288.46 points or 1.54%, off close to 340 points from the day's high and up close to 160 points from the day's low. The market breadth was weak.



The 50-unit S&P CNX Nifty regained 5,500 level after falling below that mark in intraday trade. Index heavyweight Reliance Industries (RIL) lost 3%. Another index heavyweight ICICI Bank recovered in late trade. Interest rate sensitive realty and auto stocks slumped on concern rising interest rates might hurt demand. Consumer durables and metal stocks also declined. ONGC bucked the weak trend ahead of Q3 results. The company after trading hours reported sharp surge in third quarter bottom line.

Volatility was high right from the onset of the trading session as the market slipped into the red after a positive start. The market instantly moved into the green again. The market soon lost ground. The market weakened once again after recovering sharply from 4-1/2-month lows in morning trade. The market slumped to hit fresh 4-1/2-month low in mid-morning trade. The market weakened once again after recovering from 4-1/2-month lows in early afternoon trade. The market extended losses in afternoon trade. The market hit a fresh 4-1/2-month low in mid-afternoon trade. The market staged a sharp rebound from lower level in late trade.

Foreign institutional investors (FIIs) dumped shares worth a net Rs 1397.40 crore on Thursday, 27 January 2011, as against an inflow of Rs 428.30 crore on Tuesday, 25 January 2011. The stock market was closed on Wednesday, 26 January 2011, on account of Republic Day. FII outflow in January 2011 totaled Rs 4220.80 crore (till 27 January 2011). FIIs had bought equities worth Rs 2049.60 crore in December 2010.

The results announced so far showed that the combined net profit of a total of 683 companies rose 20.1% to Rs 49158 crore on 20.2% rise in sales to Rs 415367 crore in Q3 December 2010 over Q3 December 2009.

European equities were mixed on Friday ahead of US gross domestic product data that is expected to set short-term market direction. The key benchmark indices in France and Germany rose by between 0.11% to 0.2%. UK's FTSE 100 declined 0.67%.

Japanese shares led decline in most of the Asian stocks on Friday, 28 January 2011, after Standard & Poor's on Thursday cut Japan's credit rating. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore and South Korea fell by between 0.34% to 1.13%. The key benchmark indices in China and Taiwan rose 0.14% and 0.47% respectively.

Standard & Poor's on Thursday cut Japan's long-term sovereign credit rating to AA minus from AA, and reaffirmed the short-term ratings at A-1 plus. It said in a statement that it "expects Japan's fiscal deficits to remain high in the next few years, which will further reduce the government's already weak fiscal flexibility." It said its outlook on the long-term rating is stable, reflecting its view that "Japan's strong external balance sheet and monetary flexibility partially offset the pressures stemming from the fiscal side.

Trading in US index futures indicated flat opening of US markets on Friday, 28 January 2011. Strong corporate earnings took US stocks to a 29-month closing high for a second day on Thursday. Weekly initial jobless claims surged to the highest level since late October while factory orders fell unexpectedly in December, the latest US government data showed. Moody's warned that it might turn negative on the US rating outlook if the deficit continued to swell.

Back home, the food price index rose 15.57% and the fuel price index climbed 10.87% in the year to 15 January 2011, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 15.52% and 11.53%. The primary articles price index was up 17.26% in the latest week, compared with an annual rise of 17.03% a week earlier.

RBI deputy governor Subir Gokarn on Thursday, 27 January 2011, said the bond yield curve was reflecting the inflation expectations and there was no need to revisit the statutory liquidity ratio. The effect of policy actions taken by the Reserve Bank of India in the past is yet to be fully seen, he said. But, RBI Governor D Subbarao said demand side pressures were abating due to monetary policy actions.

To control surging inflation, the Reserve Bank of India (RBI) at its quarterly policy review on Tuesday, 25 January 2011, raised repo rate by 25 basis points to 6.5% and the reverse repo rate by 25 basis points to 5.5%. Repo rate is the rate at which the RBI lends money to banks. Reverse repo is the rate at which RBI borrowsfunds from banks. The central bank held the cash reserve ratio steady at 6%.

"As high food inflation persists, the prospect of it spilling over to the general inflation process is rapidly becoming a reality," ReserveBank of India (RBI) Governor Subbarao said in the policy document released on Tuesday, 25 January 2011. The RBI lifted its headline inflation projection for March 2011 to 7% from 5.5% previously. Thecentral bank said inflation is likely to resume its moderating trend in the first quarter of 2011-12. The RBI stuck with its 8.5% GDP growth forecast for the current fiscal year, but with an upside bias.

The combined risks from inflation, the high current account deficit (CAD) and fiscal situation contribute to an increase in uncertainty about economic stability that consumers and investors will have to deal with, RBI said. To the extent that this deters consumption and investment decisions, growth may be impacted. While slower growth may contribute to some dampening of inflation and a narrowing of the CAD, it can also have significant impact on capital inflows, asset prices and fiscal consolidation, thereby aggravating some of the risks that have already been identified, it said.

Capital flows, which so far have been broadly sufficient to finance the CAD, may be adversely affected, the RBI said. Faster than expected global recovery may enhance the attractiveness of investment opportunities in advanced economies, which may impact capital flows to India. This may increase the vulnerability of India's external sector. Hence, the composition of capital inflows needs to shift towards longer-term commitments such as foreign direct investment (FDI), the RBI said.

The BSE 30-share Sensex was down 288.46 points or 1.54% to 18,395.97, its lowest closing level since 3 September 2010. The index lost 448.98 points at the day's low of 18,235.45 in late trade. The index gained 38.69 points at the day's high of 18723.12 at the onset of the trading session.

The S&P CNX Nifty was down 92.15 points or 1.64% at 5,512.15, its lowest level since 3 September 2010. The Nifty hit low of 5,459.55 in late trade, its lowest level since 1 September 2010.

The BSE Mid-Cap index fell 2.66% and the BSE Small-Cap index slumped 3.59%. Both these indices underperformed the Sensex.

All the thirteen sectoral indices on BSE declined. The BSE Realty index (down 4.96%), Consumer Durables index (down 3.91%), Auto index (down 3.56%), Capital Goods index (down 3.06%), Power index (down 2.47%), Metal index (down 2.3%), and Oil & Gas index (down 1.69%), underperformed the Sensex. The BSE Healthcare index (down 1.46%), PSU index (down 1.32%), banking sector index Bankex (down 1.11%), IT index (down 0.96%), and FMCG index (down 0.37%), outperformed the Sensex.

The market breadth, indicating the health of the market, was weak. On BSE, 2,386 shares declined while 506 shares advanced. A total of 117 shares remained unchanged.

Among the 30-member Sensex pack, 22 declined while the rest rose.

BSE clocked turnover of Rs 3886 crore, higher than Rs 3313.90 crore on Thursday, 27 January 2011.

Index heavyweight Reliance Industries (RIL) lost 3.02% to Rs 914.50, off the day's low of Rs 903.10. RIL said during market hours on Thursday, 27 January 2011, it along with IL&FS will develop a model economic township at Jhajjar, Haryana.

The RIL stock has fallen recently on concerns about slow ramp up in gas production from the KG-D6 field. Gross natural gas production from RIL KG-D6 block, off India's east coast, declined 5.7% to 55.8 million metric standard cubic metres per day (mmscmd) in Q3 December 2010 from Q2 September 2010, as the company continues to struggle to find solution to problems related to the reservoir.

RIL's net profit rose 28.14% to Rs 5136 crore on 5.15% rise in net turnover to Rs 59789 crore in Q3 December 2010 over Q3 December 2009. Higher refining and petrochemicals margins boosted the performance. RIL's gross refining margin (GRM) improved to $9 per barrel in Q3 December 2010 from $5.9 per barrel in Q3 December 2009. The GRM was also higher compared to $7.6 per barrel in Q2 September 2010. The result was announced after trading hours on Friday, 21 January 2011.

India's largest oil exploration firm by sales ONGC gained 1.89% on reports the company has struck shale gas reserves in its maiden well in West Bengal. The stock was the top gainer from the Sensex pack. This is the first time shale gas has been discovered in sedimentary shale gas rocks outside the US and Canada, ONGC said.

ONGC announced after market hours today that net profit jumped 131.96% to Rs 7083.23 crore on 38.75% rise in total income to Rs 21473.41 crore in Q3 December 2010 over Q3 December 2009.

Banking stocks recovered from the day's lows. HDFC Bank rose 0.3% as net profit rose 32.91% to Rs 1087.83 crore on 28.9% rise in operating income to Rs 6357.78 crore in Q3 December 2010 over Q3 December 2009. The result was announced after trading hours on Thursday, 27 January 2011.

India's largest private sector bank by net profit ICICI Bank was flat at Rs 1017.05, off the day's low of Rs 993.25.

India's largest bank by net profit and branch network State Bank of India fell 1.32% to Rs 2618.55, off the day's low of Rs 2591.20.

Metal stocks fell on profit taking. Sterlite Industries, Tata Steel, Hindalco Industries, Steel Authority of India, Jindal Steel & Power and Hindustan Zinc fell by between 0.19% to 4.27%.

JSW Steel lost 7.03% after consolidated net profit fell 32.11% to Rs 291.72 crore on 24.4% increase in net sales to Rs 5964.81 crore in Q3 December 2010 over Q3 December 2009.

Auto shares declined across the board on worries higher interest rates and increase in vehicle prices could dent demand for vehicles, whose sales are mostly driven by borrowed funds. India's largest tractor maker by sales Mahindra & Mahindra slumped 4.93%.

Tata Motors, Maruti Suzuki India, Hero Honda Motors, and Bajaj Auto declined by between 2.52% to 4.07%.

Interest rate sensitive realty stocks declined for the third straight day on concerns higher interest and higher property prices may dent demand for residential units. DLF, Indiabulls Real Estate, Unitech and HDIL fell by between 3.3% to 10.06%.

Consumer durables stocks extended recent losses. Titan Industries, Rajesh Exports, Videocon Industries and Gitanjali Gems fell by between 1.13% to 4.66%.

Blue Star slumped 11.61% after net profit declined 47.19% to Rs 22.36 crore on 3.52% rise in net sales to Rs 606.83 crore in Q3 December 2010 over Q3 December 2009.

IT stocks outperformed the market as the rupee weakened on Friday in tandem with shaky stocks and dwindling inflows. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

India's third largest IT exporter by sales Wipro fell 0.32%, extending recent steep slide triggered by resignations of joint-CEOs of its information technology business. The resignations were announced at the time of announcing third quarter results before market hours on Friday, 21 January 2011.

Wipro's net profit as per International Financial Reporting Standards rose 10% to Rs 1319 crore on 12% increase in total revenue to Rs 7829 crore in Q3 December 2010 over Q3 December 2009.

India's second largest software services exporter Infosys fell 0.68%. Consolidated net profit rose 2.5% to Rs 1,780 crore on 2.3% rise in revenues to Rs 7106 crore in Q3 December 2010 over Q2 September 2010 as per International Financial Reporting Standards. The result was announced before market hours on 13 January 2011.

India's largest software services exporter TCS fell 1.38%. The stock hit a record high of Rs 1221 on Monday, 24 January 2011. On a consolidated basis, net profit rose 9.25% to Rs 2369.83 crore on 5.35% increase in total income to Rs 9857.56 crore in Q3 December 2010 over Q2 September 2010. The result was announced after trading hours on 17 January 2011.

FMCG heavyweights ITC and Hindustan Unilever rose 0.3% and 0.54%, respectively on defensive buying in a weak market.

India's largest engineering and construction firm by sales Larsen & Toubro fell 2.65%, on reports company may sell stake in its infotech subsidiary after failing to turn it into a bigger business. According to reports, the firm is talking to merchant bankers about a sale mandate and has also held discussions with a bank representing a potential bidder last week.

Among other capital goods stocks, BEML, Thermax, ABB, Siemens and Bhel declined by between 1.17% to 5.72%. Jaiprakash associates declined 3.53% ahead of the Q3 result today.

Cipla ended almost unchanged for the day after the company denied media reports that suggested the founders of the firm were in talks to sell their stake to a global pharma firm. A newspaper report had suggested that the promoters of the company are in negotiations to sell their stake to a global pharma firm.

Shipping stocks fell after the Baltic Dry Index, which tracks rates to ship dry commodities, dropped 3.89% to 1,186 in London on Thursday, 27 January 2011. Mercator Lines, Great Eastern Shipping Company and Shipping Corporation of India declined by between 1.01% to 4.89%.

Sanraa Media clocked highest volume of 2.65 crore shares on BSE. Shree Ashtavinayak Cine Vision (2.16 crore shares), Cals Refineries (1.96 crore shares), Midvalley Enterprises (1.04 crore shares) and Indiabulls Power (1.02 crore shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 207.14 crore on BSE. Reliance Industries (Rs 182.88 crore), Titan Industries (Rs 99.37 crore), ICICI Bank (Rs 85.46 crore) and Tata Steel (Rs 77.47 crore) were the other turnover toppers in that order.