Market extends losses for the second straight day

The key benchmark indices fell for the second straight day as global stocks fell on continued unrest in Libya. US index futures gained. The BSE 30-share Sensex was down 117.83 points or 0.64%, off close to 200 points from the day's high and up close to 30 points from the day's low. The market breadth, indicating the health of the market, was negative.



Index heavyweight Reliance Industries (RIL) edged higher. PSU OMCs and airline stocks fell for the second day in a row on higher crude oil prices. Reliance Infrastructure (R-Infra) jumped 12% and was the top gainer from the Sensex pack. Other Reliance Anil Dhirubhai Ambani (ADA) group shares were also in demand. Hero Honda jumped more than 5%. Banking, realty, consumer durables and IT stocks declined.

The key benchmark indices came off lows in early trade after select Asian markets turned positive. The market extended gains in morning trade. The market came off highs in mid-morning trade. The key benchmark indices were in negative zone after oscillating between positive and negative terrain near the flat in early afternoon trade. The market pared gains after regaining positive terrain in afternoon trade. The market once again pared gains after hitting fresh intraday high in mid-afternoon trade. The market once again slipped into the red later. The Sensex hit a fresh intraday low in late trade.

Exports in the current fiscal year to March 2011 are seen at $225 billion, Trade Minister Anand Sharma said on Wednesday.

As per media reports, an empowered panel of ministers will meet shortly to decide if fuel prices should be raised and by how much as global crude oil price surged to multi-year high. US crude traded near the highest close in more than two years as Libya's violent uprising threatened to disrupt exports from Africa's third-biggest supplier and spread to crude-producing nations in the Middle East. Crude for April delivery was at $95.83 a barrel, up 41 cents, or 0.43%.

The near term market trend will be dictated by the expectations and announcements made in the Railway Budget and Union Budget 2011-12 scheduled on 25 and 28 February 2011, respectively.

Stocks may remain volatile in the near term ahead of the expiry of the near-month February 2011 derivatives contracts on Thursday, 24 February 2011.

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations.

Pawan Kumar Bansal, the minister of parliamentary affairs, last week, said the government will introduce a legislation on goods and service tax (GST) in the Budget session of parliament. The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

Railway Budget will be announced on Friday, 25 February 2011. The Economic Survey will be tabled in the parliament on the same day after the Railway Budget

European shares edged lower on Wednesday, adding to this week's losses, on concern that unrest in oil-rich Libya could further spread in the region, sparking worries about global growth. The key benchmark indices in Germany and UK shed by between 0.37% to 0.47%. France's CAC 40 rose 0.09%.

Bank of England (BoE) chief economist Spencer Dale joined Andrew Sentance and Martin Weale in voting for higher rates in February, suggesting the BoE is moving closer to tightening policy in the face of rising inflation. Minutes to the Monetary Policy Committee's February 9-10 meeting also suggested that some of those opposed to a rate hike this month would consider one if the economy shows signs of picking up after an unexpected fall in output at the end of 2010.

Asian stocks fell on Wednesday on mounting concern that instability in the Middle East and North Africa may derail a global recovery. The key benchmark indices in Japan, Hong Kong, South Korea, Singapore and Taiwan fell by between 0.42% to 1.67%. The key benchmark indices in Indonesia and China rose 0.67% and 0.25% respectively.

US stock markets plummeted Tuesday in its biggest drop of the year as escalating tensions in the Middle East and North Africa sent oil prices soaring. The Dow Jones Industrial Average tumbled 178.46 points, or 1.4%, to 12212.79, its biggest point and percent drop since 16 November 2010. The Standard & Poor's 500-stock index fell 27.57 points, or 2.1%, to 1315.44 and the Nasdaq Composite sank 77.53 points, or 2.7% to 2756.42.

Libyan leader Muammar al-Gaddafi publicly defied protesters seeking to end his rule, vowing to remain in the country "until the end" in a televised speech that showed his determination to cling to power Tuesday, as reinforcements of loyal armed military units tightened their hold around the capital.

The waves of protests first hit Tunisia and Egypt, overthrowing long-time rulers, and then opponents of leader Col. Moammar Gadhafi clashed violently with his security forces in Libya.

Trading in US index futures indicated that the Dow could gain 41 points at the opening bell on Wednesday, 23 February 2011.

Back home, marketmen expect the government to continue thrust on development spending in the Union Budget 2011-12 to be unveiled on 28 February 2011. The capital goods sector expects the government to selectively raise import barriers for capital equipment, especially power equipment to facilitate domestic players. For the auto sector, marketmen expect the government to keep excise duty rate unchanged in the Budget. In the previous budget, the excise duty was increased by 2%.

The IT industry expects extension of the sunset clause on tax exemption for software technology parks under Section 10 A/10 B which is due to expire in March 2011. For the metal sector, marketmen expect hike in import duty on HR coil from 5% to 10% in the Budget to encourage the growth of domestic steel industry. The metal industry also expects a continued thrust on infrastructure spending in the Budget.

Banking and financial sector anticipates that the government might reduce the tenure limit for tax exempt deposits from five years to three years in the Budget. Market men also expect government subsidy/concessions on interest rates to be provided on lending to State Electricity Boards (SEBs) given their weak financial health. Another expectation is that of a hike in limit of refinancing from India Infrastructure Finance Company (IIFCL) to commercial bank loans for public-private partnership (PPP) projects in critical sectors from the current Rs 6000 crore.

The cement sector has sought a uniform rate of excise duty on cement as compared to differential rate of excise duty on cement sold above or below maximum retail price (MRP) of Rs 190 per 50 kilogram bag. The FMCG sector anticipates a continued thrust and higher allocations to social and developmental programs.

The media sector expects a relaxation of foreign direct investment (FDI) norms i.e. an increase in FDI limits from currently 49% in direct to home (DTH) and cable, 26% in news broadcasting & print media and 20% in radio sector.

The World Bank has projected Indian economy to grow by 8.6% in the financial year ending March 2011 and 9% in the year ending March 2012, the same pegged by the Prime Minister's Economic Advisory Council.

The Prime Minister Manmohan Singh said in parliament on Tuesday that the country cannot afford to stall parliament and said he is committed to root out corruption. He said government will set up a Joint Parliamentary Committee (JPC) to probe 2G telecom scam. The 2G scam, which may have cost the exchequer up to $39 billion in lost revenue, has led to the sacking and arrest of a former minister. The Central Bureau of Investigation raided a television channel owned by the family that runs the DMK last week in connection with allegations that it had been paid $47 million by firms which had benefited from the 2G mobile licence sale. The Budget session of parliament began on Monday, 21 February 2011, with President Pratibha Patil's speech and will last until 21 April 2011.

The BSE 30-share Sensex was down 117.83 points or 0.64% to 18,178.33. The index rose 81.32 points at the day's high of 18,377.48 in mid-afternoon trade. The Sensex fell 146.15 points at the day's low of 18,150.01 in late trade.

The S&P CNX Nifty was down 31.85 points or 0.58% to 5,437.35.

The market breadth, indicating the health of the market, turned negative negative compared with positive breadth earlier in the day. On BSE, 1638 shares declined while 1215 shares advanced. A total of 115 shares remained unchanged.

Among the 30-member Sensex pack, 19 declined while the rest rose.

BSE clocked turnover of Rs 3125 crore, lower than Rs 3276.23 crore on Tuesday, 22 February 2011.

The BSE Mid-Cap index underperformed the Sensex, falling 0.67%. The BSE Small-Cap index outperformed the Sensex, falling 0.31%.

The BSE Oil & Gas index (up 0.53%), Auto index (up 0.47%), Power index (down 0.04%), Metal index (down 0.29%), Capital goods index (down 0.43%) and FMCG index (down 0.45%), outperformed the Sensex.

Bankex index (down 1.75%), IT index (down 1.5%), Realty index (down 1.27%), TECk index (down 1.27%), Consumer Durables index (down 1.25%), Healthcare index (down 1.05%) and PSU index (down 0.69%) underperformed the Sensex.

Index heavyweight Reliance Industries (RIL) rose 1.15% to Rs 996.35, extending Tuesday's 3% gains triggered by a deal with BP announced after market hours on Monday, 21 February 2011. But, stock came off the day's high of Rs 1003.85 today. British Petroleum (BP) will take 30% stake in 23 oil and gas blocks of RIL. RIL would also be entitled to future performance payments of up to $1.8 billion based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to $20 billion.

Banking stocks declined on worries rising interest rates could slow credit offtake. India's largest bank by net profit and branch network State Bank of India lost 3.84%. India's largest private sector bank by net profit ICICI Bank shed 1.91% and India's second largest bank by net profit HDFC Bank fell 1.36%.

Interest rate sensitive realty stocks declined on worries higher in interest rates could impact property demand. Property sales are mostly driven by borrowed funds. DLF, HDIL, DB Realty, Indiabulls Real Estate and Sunteck Realty declined by between 0.06% to 3.29%.

Consumer durables stocks also edged lower. Rajesh Exports, Gitanjali Gems, Titan Industries and Blue Star shed by between 0.03% to 5.97%.

Software stocks declined on worries tax benefits under the Software Technology Parks of India (STPI) and export-oriented unit schemes may not be extended beyond March 2011. India's second largest software firm by sales Infosys Technologies lost 1.94%. India's largest software firm by sales TCS declined 0.84% and India's third largest software firm by sales Wipro fell 1.75%.

ONGC fell 0.46%, reversing initial gains after chairman A.K. Hazarika said on Wednesday the company may file the draft prospectus for its share sale this week. The government, which owns 74.14% of ONGC, plans to sell 5% in the offer.

PSU OMCs extended recent losses on firm crude oil prices. Higher crude oil prices will increase under-recoveries of state-run oil firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol. BPCL, Indian Oil Corporation and HPCL fell by between 0.39% to 1.39%.

Reliance Infrastructure (R-Infra) jumped 12.34% and was the top gainer from the Sensex pack. The stock rose on high volume of 53.77 lakh shares on BSE. The company becomes the first privately run urban-train service provider a airport rail-link in New Delhi managed by R-Infra starts operations today, 23 February 2011.

Other Reliance Anil Dhirubhai Ambani (ADA) group shares also rose. Reliance Power, Reliance Capital, Reliance Communications and Reliance MediaWorks were up by between 0.22% to 3.34%.

Bike maker Hero Honda Motors jumped 5.45% and was the second major gainer from the Sensex pack.

India's top small car maker by sales Maruti Suzuki rose 0.85% on reports the company will supply its latest compact car A-Star to Volkswagen AG. The car, which will undergo some modifications and design changes, will be sold in India and Asian markets under a new brand.

India's largest private sector aluminium maker by sales Hindalco Industries rose 0.07%. The company during market hours today said that it was forced to declare a lock-out at its Alupuram plant in Kerala due to protracted acts of indiscipline by workmen. Hindalco added that it does not expect any adverse impact on financials due to the lock-out.

Airline stocks fell on higher crude oil prices. Kingfisher Airlines, SpiceJet and Jet Airways fell by between 1.01% to 3.43%. Jet fuel prices are linked to the crude oil prices. Jet fuel forms 40% of operation cost of airliners.

India's biggest engineering & construction firm by sales Larsen & Toubro fell 0.42%. As per reports, the company is in talks with Electricite de France SA, the world's largest nuclear power operator, to supply nuclear equipment.

Cals Refineries clocked highest volume of 1.92 crore shares on BSE. Comfort Intech (78.54 lakh shares), Shree Ashtavinayak Cine Vision (75.65 lakh shares), Unitech (68.47 lakh shares) and Reliance Infrastructure (53.77 lakh shares) were the other volume toppers in that order.

Reliance Infrastructure clocked highest turnover of Rs 375.39 crore on BSE. State Bank of India (Rs 162.65 crore), Reliance Industrial Infrastructure (Rs 98.51 crore), Reliance Capital (Rs 92.74 crore) and Reliance Industries (Rs 81.57 crore) were the other turnover toppers in that order.