Market recovers after sliding to eight-week low

The key benchmark indices dropped to eight-week low in first half of the week on sustained foreign fund selling and on fears high interest rates may impact corporate profitability. But, the market recovered during the later half on bargain hunting. Volatility was high as select index pivotals saw sharp reactions following unveiling their quarterly earnings. The market logged declines in three out of five trading sessions during the week ended Friday, 20 May 2011.



Foreign institutional investors' outflow in May 2011 totaled Rs 7612.70 crore till 19 May 2011. They had bought equities worth Rs 7213.30 crore in April 2011. Their outflow in the calendar year 2011 totaled Rs 2900.10 crore (till 19 May 2011). Mutual funds sold shares worth net Rs 359.80 crore in May 2011 (till 19 May 2011. They had sold equities worth a net Rs 463.70 crore in April 2011.

The BSE Sensex declined 205.19 points or 1.11% to 18,326.09 in the week ended Friday, 20 May 2011. The S&P CNX Nifty shed 58.40 points or 1.05% to 5486.35.

The BSE Mid-Cap index declined 2.12% and the BSE Small-Cap index shed 2.19%. Both these indices underperformed the Sensex.

Trading for the week began on a downbeat note with the market sliding on Monday, 16 May 2011, on negative global cues. The BSE 30-share Sensex was down 186.25 points or 1.01% to 18,345.03.

The key benchmark indices extended fall on Tuesday, 17 May 2011, weighed by dismal earnings from banking giant State Bank of India (SBI). The BSE 30-share Sensex was down 207.68 points or 1.13% to 18,137.35 and the S&P CNX Nifty was down 60.05 points or 1.09% to 5,438.95.

The key benchmark indices declined for the third straight day on Wednesday, 18 May 2011, to settle at eight-week lows on selling by foreign funds and rise in crude oil prices. The BSE 30-share Sensex was down 51.15 points or 0.28% to 18,086.20, its closing lowest level since 22 March 2011. The S&P CNX Nifty was down 18.35 points or 0.34% to 5,420.60, its lowest closing level since 22 March 2011.

Data showing easing of food inflation and higher European stocks helped the market snap three-day losses on Thursday, 19 May 2011. The BSE 30-share Sensex was up 55.20 points or 0.31% to 18,141.40 and the S&P CNX Nifty was up 7.50 points or 0.14% to 5,428.10.

The key benchmark indices extended gains for the second straight day as bargain hunting emerged after recent steep slide. Gains in European stocks also supported Indian stocks. The BSE 30-share Sensex was up 184.69 points or 1.02% to 18,326.09 and the S&P CNX Nifty was up 56.25 points or 1.04% to 5,484.35.

From the 30 share Sensex pack, 19 stocks declined while the rest of them gained in the week ended Friday, 20 May 2011.

Index heavyweight Reliance Industries (RIL) fell 2.87% to Rs 921.40 on reports the company may not be able to ramp up natural gas output from its eastern offshore D6 block for the next three years. Reports suggested that the wells cannot be drilled because of commercial and logistical reasons.

India's largest commercial bank by branch network State Bank of India (SBI) lost 12.34% to Rs 2322.05 and was the top weekly loser from the Sensex pack. The stock tumbled after net profit slumped 98.88% to Rs 20.88 crore on 18.07% rise in total income to Rs 26536.84 crore in Q4 March 2011 over Q4 March 2010. The result hit the market during trading hours on Tuesday, 17 May 2011.

SBI's net profit declined sharply as provisions for non-performing assets jumped 49.2% to Rs 3263.91 crore in Q4 March 2011 over Q4 March 2010. A sharp surge in tax provision to Rs 1901.85 crore from Rs 977.88 crore in Q4 March 2010 pulled down the profit to a measly figure in Q4 March 2011.

India's largest oil exploration firm by sales Oil and Natural Gas Corporation (ONGC) declined 10.06% on reports the government has hiked the contribution of upstream oil companies towards fuel subsidies for revenue losses suffered by oil retailers (PSU OMCs) on fuel sales to 38.7% from current 33.33%. The company's subsidy burden will aggregate Rs 24892 crore in the year ended March 2011 (FY 2011), reports suggest. ONGC chairman reportedly said on 20 May 2011 that additional subsidy burden may create some problem for company's proposed follow-on-public offer.

Cigarette maker ITC fell 1.95% on profit taking. During market hours on 20 May 2011, ITC reported a 24.63% rise in net profit to Rs 1281.48 crore on 16.53% rise in total income to Rs 6062.15 crore in Q4 March 2011 over Q4 March 2010.

India's largest private sector steel maker by sales Tata Steel declined 2.63%. After market hours on 20 May 2011, the company said it has proposed a restructuring of its long products business in Europe to target high value markets and introduce greater flexibility into its costs and operations. To support this strategy, Tata Steel plans to invest 400 million pounds over a five-year period.

Reliance Communications (down 7.71%), Reliance Infrastructure (down 6.96%), and Tata Motors (down 3.48%), edged lower from the Sensex pack.

India's largest engineering and construction firm by sales Larsen & Toubro surged 8.05% to Rs 1651.90 and was the top gainer from the Sensex pack. During trading hours on Thursday, 19 May 2011, L&T reported 17.25% rise in net profit to Rs 1686.21 crore on 12.74% increase in net sales to Rs 15078.39 crore in Q4 March 2011 over Q4 March 2010. L&T said it is well positioned to sustain the revenue growth momentum in the medium term given its excellent execution capabilities, presence in diverse sectors of the economy, a healthy order book and leadership position in most of the sectors where it operates.

India's largest thermal power generation firm Tata Power Company rose 0.52% after the company's board of directors approved a 10-for-1 stock split. After market hours on 19 May 2011, the company said that consolidated net profit after statutory appropriations declined 29.8% to Rs 661.54 crore on 4% growth in revenue to Rs 4985.84 crore in Q4 March 2011 over Q4 March 2011. The company attributed the decline in profit mainly to lower forex gains.

Cipla (up 2.92%), HDFC Bank (up 2.73%), and Bhel (up 2.10%), edged higher from the Sensex pack.

On the macro front, the wholesale price index (WPI) rose an annual 8.66% in April 2011, lower than the revised annual rise of 9.04% in March 2011, government data showed on Monday, 16 May 2011. The government revised upwards inflation rate for February 2011 to 9.54% from provisional rise of 8.31% reported earlier.

Revenue secretary Sunil Mitra on Wednesday, 18 May 2011, said the government has decided to end the Duty Entitlement Pass Book (DEPB) scheme -- a tax incentive scheme for exporters on 30 June 2011. With DEPB facility, exporters get credit for customs duty paid on inputs used in making export goods, while under another export scheme Duty Drawback, they receive duty-free scrips which can be used to pay import duties. DEPB scheme allows double benefit to exporters. It is based on the assumption that the exporter has used duty-paid imported inputs. Duty Drawback, on the other hand, neutralises levies paid on inputs.

The food price index rose 7.47% and the fuel price index climbed 12.11% in the year to 7 May 2011, government data showed on Thursday, 19 May 2011. In the previous week, annual food and fuel inflation stood at 7.70% and 12.25% respectively. The primary articles price index was up 10.94%, compared with an annual rise of 11.96% a week earlier.