Market snaps three-day winning streak

Index heavyweight Reliance Industries' (RIL) lower-than-expected bottom line growth in Q4 March 2011 pulled the key benchmark indices marginally lower in volatile trade. The market today, 25 April 2011, snapped a three-day winning streak. The BSE 30-share Sensex was down 17.92 points or 0.09%, off close to 115 points from the day's high and up close to 50 points from the day's low. Sterlite Industries surged on strong Q4 result. Maruti Suzuki India moved higher after reporting sequential growth in net profit in Q4 March 2011.



The market breadth was negative, compared with positive breadth earlier in the day. Realty stocks fell on worries higher interest rates could dent demand for residential and commercial properties. IT stocks rose on better outlook for the sector. Fertiliser shares rose on forecast of normal monsoon this year.

The market nudged higher in early trade as most Asian stocks rose. The barometer index BSE Sensex pared gains after hitting its highest level in more than a week in morning trade. The market was marginally higher in mid-morning trade. The Sensex pared gains after regaining strength in early afternoon trade. The key benchmark indices were slightly higher in afternoon trade after swinging between gains and losses near the flat line in afternoon trade. The market held positive zone in mid-afternoon trade. The market slipped into the red in late trade.

The BSE 30-share Sensex was down 17.92 points or 0.09% at 19,584.31. The index gained 95.26 points at the day's high of 19,697.49 in morning trade, its highest level since 15 April 2011. The Sensex fell 70.89 points at the day's low of 19,531.34 in early trade.

The S&P CNX Nifty was down 10.20 points or 0.17% to 5,874.50. The Nifty hit high of 5,906.60 in morning trade.

BSE clocked turnover of Rs 2719 crore, lower than Rs 3636.83 crore on Thursday, 21 April 2011.

The BSE Mid-Cap index rose 0.09% and the BSE Small-Cap index gained 0.24%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was negative. On BSE, 1565 shares declined while 1351 shares advanced. A total of 91 shares remained unchanged. The breadth was positive earlier in the day.

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

Copper maker Sterlite Industries jumped 4.4% and was the top gainer from the Sensex pack after company announced during market hours today that consolidated net profit jumped 35.05% to Rs 1925 crore on 38.54% rise in total income to Rs 10781.51 crore in Q4 March 2011 over Q4 March 2010.

Jindal Steel & Power (JSPL) declined 0.76% on muted growth in Q4 bottom line. Consolidated net profit rose 3.97% to Rs 1001.70 crore on 22.12% rise in total income to Rs 3915.15 crore in Q4 March 2011 over Q4 March 2010. The Q4 result was announced after market hours on Thursday, 21 April 2011. JSPL said its power generation unit Jindal Power reported net profit of Rs 495.54 crore on turnover of Rs 827.99 crore in Q4 March 2011. Jindal Power achieved plant load factor of 100.84% in Q4 March 2011.

India's largest car maker by sales Maruti Suzuki India rose 1.53% as net profit rose 16.75% to Rs 659.90 crore on 6.12% rise in total income (net of excise) to Rs 10212.10 crore in Q4 March 2011 over Q3 December 2010. The result was announced during market hours today. Net profit fell 8.4% to Rs 2288.60 crore on 24.60% increase in total income, net of excise, to Rs 37522.40 crore in the year ended March 2011 over the year ended March 2010. Adverse currency movement (particularly on exports), higher commodity prices and new model launches impacted the company's profits in the year ended March 2011, Maruti said in a statement.

Maruti Suzuki will make efforts to protect and increase margins going forward, Maruti's Chief Executive Shinzo Nakanishi said on Monday at the time of announcing Q4 results.

Other auto stocks were mixed. India's largest bike maker by sales Hero Honda Motors fell 0.62%, reversing initial gains.

India's leading farm equipment maker by sales Mahindra & Mahindra (M&M) rose 0.2%, with the stock gaining for the third straight day on expectations that a good monsoon will increase demand for tractors. The company launched its 15 horsepower tractor, Yuvraj 215 in Pune on Tuesday, 19 April 2011.

India's largest truck maker by sales Tata Motors fell 0.08%, reversing initial gains. The company recently said its global vehicle sales rose 9% to 1.10 lakh units in March 2011 over March 2010. Global sales of commercial vehicles grew 19% to 56,814 in March, while sales of passenger vehicles were at 53,971 units, the company said in a statement. Jaguar and Land Rover (JLR) sales rose 2% to 24,101 units, driven by an 8% rise in Land Rover sales. Tata Motors bought the British luxury brand unit JLR from Ford Motor Co for $2.3 billion in 2008.

India's second largest bike maker by sales Bajaj Auto rose 0.73%. The company's total vehicle sales increased 12% to 3.07 lakh units in March 2011 over March 2010. The company announced its March 2011 sales figures on 4 April 2011.

Index heavyweight Reliance Industries (RIL) lost 2.97% and was the top loser from the Sensex pack after the company reported lower-than-expected numbers for Q4 March 2011. RIL reported a 14.14% rise in net profit to Rs 5376 crore on 26.47% rise in total income to Rs 73591 crore in Q4 March 2011 over Q4 March 2010. Net profit of RIL was below expectations due to gross refining margin (GRMs) being at $9.2 per barrel, lower than expected, for Q4 March 2011 due to impact of FCCU (fluidized catalytic cracking unit) shutdown for 46 days. The Q4 result was announced after market hours on Thursday, 21 April 2011

Meanwhile, RIL today, 25 April 2011, said it is drawing up a plan to raise gas production from its D6 deepwater block in the Krishna Godavari basin in the Bay of Bengal, off India's east coast. RIL said the reservoirs in the block are more complicated than previously expected and continuous and significant efforts are underway for understanding these reservoirs. RIL said it is trying to "identify well locations for incremental production and sustenance."

Gas output from the block touched a peak of 60 million metric standard cubic meters a day last year. Production has now fallen to 50 MMSCMD as against a target of 69.8 MMSCMD, S.K. Srivastava, head of India's upstream regulator, said last week. He also said that Reliance hasn't given any "satisfactory response" on the matter.

Integrated development plan for all other discoveries in KG-D6 is being conceptualized to augment production in the most capital efficient manner, RIL said today, 25 April 2011. The company said it is studying various options such as "recompletion of wells and compression" to increase gas production.

Shares of state-run oil marketing companies (PSU OMCs) fell as crude oil surged. HPCL (down 0.21%) and BPCL (down 0.02%) declined. Indian Oil Corporation rose 0.3%, reversing initial losses. Higher crude oil prices would increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Some consumer durables stocks rose on hopes of increased consumption demand from rural India after forecast of normal monsoon this year. Blue Star and Titan Industries rose by between 1.77% to 2.1%.

IT stocks rose on a better outlook for the IT sector. India's largest IT exporter by sales TCS rose 0.51% reversing initial losses, on strong Q4 results. Consolidated net profit rose 10.7% to Rs 2623 crore on 5.1% rise in revenue to Rs 10157 crore in Q4 March 2011 over Q3 December 2010. The result was announced during market hours on Thursday, 21 April 2011.

At the time of announcing Q4 March 2011 results, TCS management said wage hikes and currency volatility are the main threats to profit margins. TCS plans to increase wages by 12% to 14% for India-based staff. The company plans to raise wages by 2% to 4% in major overseas markets and 2% to 14% in emerging markets. TCS said the demand environment continues to be vibrant.

India's second largest software services exporter and index heavyweight Infosys rose 1.13%, with the stock gaining for the third straight day. The stock had been under selling pressure recently after company's disappointing earnings growth forecast for the year ending March 2012 (FY 2012).

India's third largest software services exporter Wipro gained 0.54%, reversing initial losses.

Realty stocks fell on worries higher interest rates could dent demand for residential and commercial properties. Purchases of both residential and commercial property are largely driven by finance. HDIL, Indiabulls Real Estate and DLF declined by between 1.59% to 2.87%.

Unitech fell 1.33% after company said a Unitech-appointed director will take over as chairman of Uninor, its Indian telecom joint venture with Norway's Telenor, in place of Sanjay Chandra. Last week, a court rejected bail applications of five executives, including Chandra, in relation to CBI charges against them in the telecoms licensing scandal.

Telenor said last week it had requested that Chandra step down from his post following the charges and had asked Unitech to name a replacement as long as the case was pending. Unitech said on Monday that Chandra has not resigned but had already requested the Uninor board to appoint an alternate director in his place to handle company affairs in the near term. The company also said it continued to believe in Chandra's innocence and believed his name will be cleared of all charges in due course.

Some capital goods stocks rose on renewed buying. Siemens, Praj Industries, Bhel and Larsen & Toubro gained by between 0.02% to 1.03%.

Some FMCG stocks rose for the third straight day on forecast of good monsoon rains this year. Rural sector accounts for a large chunk of revenues for FMCG firms. Hindustan Unilever, ITC, United Spirits and Marico advanced by between 0.03% to 0.7%.

Nestle India rose 2.37%, reversing initial losses after strong Q4 results. Net profit rose 26.68% to Rs 255.71 crore on 22.31% rise in net sales to Rs 1809.99 crore in Q1 March 2011 over Q1 March 2010. The result was announced after market hours on Thursday, 21 April 2011.

Bank stocks rose after the Reserve Bank of India (RBI) relaxed the provisioning norms for banks with retrospective effect from 30 September 2010, which in turn could help banks post higher profits. The RBI said, banks will have to maintain a provision coverage ratio of 70% of their gross bad loans only till 30 September 2010 after which they will have to follow just the standard capital provisioning requirement as per by the Basu committee. Under the present provisioning norms, banks have to maintain funds ranging from 10% for sub-standard assets to 100% for assets under 'loss category'.

India's largest state run bank by net profit and branch network State Bank of India (SBI) gained 2.06%, extending Thursday's 2.34% gains triggered by hopes of higher interest margins after the bank withdrew a special home loan scheme that offered borrowers a lower fixed rate for the initial tenure of the mortgage. SBI after trading hours on Wednesday, 20 April 2011 announced withdrawal of special home loan schemes, or teaser rates, with effect from 1 May 2011 amid concerns expressed by the Reserve Bank of India. SBI Easy Home Loan and SBI Advantage Home Loan (teaser rate products) will be replaced by floating interest rate schemes on par with other commercial banks.

Under the teaser home loan scheme, SBI was offering lower rate of interest of 8-8.5% for the first three years. But, the scheme invited severe criticism from RBI, which had said the scheme could impact the asset quality of SBI's home loan portfolio. The withdrawal of teaser rates comes within a month of the new chairman Pratip Chaudhuri taking charge at SBI.

SBI on Tuesday 19 April 2011 said that it is raising benchmark prime lending rate and base rate by 25 basis points (bps) each to 13.25% per annum and 8.5% per annum respectively, effective from 25 April 2011.

Among other PSU banking stocks, Union Bank of India, Canara Bank, Bank of Baroda, Bank of India an Punjab National Bank gained by between 0.6% to 2.21%.

But leading private banks fell. India's second largest private sector bank by net profit HDFC Bank fell 0.59%, reversing initial gains on profit taking. The stock had rallied recently on the back strong Q4 results and on announcement of 5-for-1 stock split. Net profit rose 33.23% to Rs 1114.71 crore on 34.38% rise in total income to Rs 6724.31 crore in Q4 March 2010 over Q4 March 2010. The board of directors of the bank also approved a 5-for-1 stock-split while approving the results. The result and stock-split announcements were made on Monday, 18 April 2011.

India's largest private sector bank by net profit ICICI Bank fell 0.37%, with the stock snapping last three days' gains. The bank will announce Q4 result on 28 April 2011.

Axis Bank's fell 4.99% as the the bank's net interest margin slipped to 3.44% in Q4 March 2011 from 3.81% in Q3 December 2010 due to sharp spike in the cost of funds. Net profit rose 33.37% to Rs 1020.11 crore on 48.31% rise in total income to Rs 5817.06 crore in Q4 March 2011 over Q4 March 2010. The Q4 result was announced on Friday, 22 April 2011.

Reliance Infrastructure fell 0.36%. The company said after market hours today that it bought back 1 lakh shares today under the buyback program. It added it so far bought back 8 lakh shares under the buyback program. The company has announced buyback of shares for an aggregate amount of upto Rs 1000 crore.

Fertiliser shares rose after forecast of normal monsoon this year. Chambal Fertiliser & Chemicals, GNFC, GSFC, Rashtriya Chemicals & Fertilisers and National Fertilizer rose by between 0.14% to 2.35%.

Volatility may remain high on the bourses in the near term as traders rollover positions in the futures & options (F&O) segment ahead of the expiry of the near-month April 2011 contracts on Thursday, 28 April 2011.

The near term major trigger for the market is Q4 March 2011 results of India Inc. Investors will scrutinize post-result management commentary to gauge outlook on earnings at a time when rising salaries, raw materials prices and interest rates are pressurizing profit margins of India Inc. High global commodity prices will add to pressure on profit margins of Indian firms.

The combined net profit of a total of 151 companies rose 23.7% to Rs 19881 crore on 26.8% rise in sales to Rs 173435 crore in Q4 March 2011 over Q4 March 2010.

Foreign institutional investors (FIIs) have resumed buying of Indian stocks after substantial recent selling. FIIs bought shares worth a net Rs 633.50 crore from the secondary equity markets on Thursday, 21 April 2011. FIIs bought shares worth a Rs 402.30 crore from the secondary equity markets on Wednesday, 20 April 2011. FIIs had bought shares worth a net Rs 1836 crore from the secondary equity markets on Tuesday, 19 April 2011.

The food price index rose 8.74% and the fuel price index climbed 13.05% in the year to 9 April 2011 government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 8.28% and 12.97% respectively. The primary articles price index was up 11.96% compared with an annual rise of 11.40% a week earlier.

India Meteorological Department (IMD) has predicted the southwest monsoon 2011 to be 98% (normal) of the long period average (LPA) with a model error of plus/minus 5%. IMD has indicated that there is very low probability for the season rainfall to be deficient (below 90% of LPA) or excess (above 110% of LPA). The IMD released its initial forecast for the June to September monsoon on Tuesday 19 April 2011. The forecast is made in two stages in April and in June. The forecast for the season as a whole (June-September) is issued in the first stage.

Normal monsoon this year could help ease food inflation and boost rural income. The quantity and geographical spread of rainfall during the monsoon season is crucial for India's agriculture sector as the country lacks irrigation facilities on more than half of its farm land. The South Asia Climate Outlook Forum predicted that South Asia is likely to receive normal monsoon rains in 2011. It said the La Nina weather phenomenon, which aids monsoon in the region, would continue until June.

With inflation remaining above its comfort level, the Reserve Bank of India (RBI) is seen raising key short term policy rates by 25 basis points at its annual 2011-2012 monetary policy review on 3 May 2011.

A sharp surge in global crude oil prices over the past few months has raised macroeconomic worries. India imports majority of its crude oil requirements and high oil prices had raised concerns about widening current account deficit. High oil prices had also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were up 46 cents or 0.41% at 112.75 a barrel.

Rising oil prices and anticipation that China might tighten monetary policy yet again to combat inflation kept Asian stock markets in check on Monday. The key benchmark indices in China, Singapore, Taiwan, Japan and Indonesia fell by between 0.11% to 1.51%. South Korea's Kospi rose 0.83%. The Hong Kong market was closed for a public holiday.

Shares in Indonesia were pressured by reports a series of strong earthquakes hit the Indonesian island of Sulawesi early on Monday, damaging houses and causing panic.

European markets remained shut on Monday, 25 April 2011, for the Easter holiday.

Trading of US index futures indicated that the Dow could gain 32 points at the opening bell on Monday, 25 April 2011.

US stocks posted their first positive week in three as more healthy earnings news lifted Wall Street on Thursday, though gains were limited with another 180 S&P names due to report this week. Factory activity in the US Mid-Atlantic region slowed sharply in April and the number of claims for unemployment insurance fell less than expected last week, implying the economy was struggling to regain momentum.

Investors will parse the US Federal Reserve's policy statement and every word Fed Chairman Ben Bernanke says in a news conference that follows a two-day meeting of the Fed on interest rates on Tuesday-Wednesday (26-27 April 2011). Global markets will react favorably to some indication that the Fed feels inflation is under control, and recent spikes are only temporary. Any signs of worry about rising prices will telegraph a faster end to the ultra-low rate policy.