Market reverses direction after positive start

The key benchmark indices reversed direction after registering gains at the onset of the week ended Friday, 10 June 2011, as world stocks fell. Caution prevailed as the Reserve Bank of India (RBI) is seen raising its key lending rate by 25 basis points at its mid-quarter monetary policy review on 16 June 2011 to tame inflation. Political worries also weighed on the market following reports the DMK may opt to withdraw ministers from the Cabinet after a high-level party meeting in Chennai on Friday, 10 June 2011.

The barometer index BSE Sensex lost 107.94 points or 0.59% to 18,268.54 in the week ended 10 June 2011. The 50-unit S&P CNX Nifty lost 30.95 points or 0.56% to 5,485.80. The BSE Small-Cap index rose 49.77 points or 0.6% to 8,288.46 and the BSE Mid-Cap index rose 2.14 points or 0.03% to 6,898.28. Both these indices outperformed the Sensex.

Trading for the week began on a positive note. The BSE Sensex rose 43.63 points or 0.24% to 18,420.11 on Monday, 6 June 2011, led by gains in index heavyweights Reliance Industries (RIL), L&T, Infosys and ICICI Bank.

The key benchmark indices extended gains for the second straight day to attain their highest closing levels in nearly one week on Tuesday, 7 June 2011, as gains in European shares and US index futures boosted sentiment. The BSE Sensex jumped 75.51 points or 0.41% to 18,495.62, its highest closing level since 1 June 2011.

The key benchmark indices edged lower on Wednesday, 8 June 2011, snapping gains in the preceding two trading sessions on weak global stocks, which fell after Federal Reserve chairman Ben Bernanke said US economic recovery was proving to be "uneven" and "frustratingly slow". The BSE Sensex lost 101.33 points or 0.55% to 18,394.29, its lowest closing level since 3 June 2011.

The key benchmark indices registered small losses in a lacklustre trading session on Thursday, 9 June 2011. The BSE Sensex lost 9.39 points or 0.05% to 18,384.90, its lowest closing level since 3 June 2011.

The key benchmark indices edged lower on Friday, 10 June 2011, on political worries following reports the DMK may opt to withdraw ministers from the Cabinet after a high-level party meeting later on that day. The Sensex shed 116.36 points or 0.63% to settle at 18,268.54, its lowest closing level since 30 May 2011.

Bike major Hero Honda tumbled 7.25% in the week to Rs 1,723.95 on reports the strike by workers of Maruti Suzuki India's plant in Manesar in Haryana could spread across the auto belt of Haryana. Shares of Maruti fell 0.31% to Rs 1,229.75. Nearly 2,000 workers at Maruti's factory at Manesar in Haryana began a strike early this month demanding recognition of their union, Maruti Suzuki Employees Union. Maruti currently has only one management-recognized union, Maruti Udyog Kamgar Union. Media reports on Friday, 10 June 2011, said the Haryana state government has ordered the workers to resume work at the unit.

Two-wheeler maker Bajaj Auto lost 3.3% to Rs 1,325.50 on concerns the firm's earnings will be impacted adversely if the government does not extend the Duty Entitlement Pass Book (DEPB) scheme beyond 30 June 2011. Under the DEPB scheme, the incidence of customs duty on import content of export products is neutralised and reimbursed to the exporters.

India's biggest state-run oil exploration firm by revenue, Oil and Natural Gas Corporation (ONGC) lost 4.6% to Rs 266.90 on reports an independent audit of its overseas subsidiary ONGC Videsh has slashed the estimated immediately recoverable or proven reserves of ONGC Videsh by one-third to 130 million tonnes.

Financials fell as the Reserve Bank of India (RBI) is seen raising its key lending rate by 25 basis points at its mid-quarter monetary policy review on 16 June 2011 to tame inflation. State Bank of India lost 3% to Rs 2,242.95, ICICI Bank shed 1.32% to Rs 1,034.95 and HDFC lost 1.33% to Rs 650.95.

IT bellwether Infosys rose 1.7% to Rs 2,861.60 after the company on Wednesday, 8 June 2011, announced the acquisition of the software solutions business of Gen-i as part of a partnership with the technology arm of Telecom Corp. of New Zealand to offer outsourcing services for their Australian clients. Under the deal, Infosys has offered positions to Gen-i's more than 110 employees and contractors, who will continue to be based in Auckland, Wellington and Christchurch.

Metal stocks fell as weak US economic data raised doubts about global economic recovery. Hindalco Industries shed 2.6% to Rs 184.45, Sterlite Industries shed 1.07% to Rs 166 and Tata Steel lost 0.75% to Rs 569.20.

Prime Minister Manmohan Singh approved a new manufacturing policy draft on Thursday, 9 June 2011, outlining proposals to ramp up the sector to power growth in Asia's third-largest economy, but noting the importance of environmental and labour welfare issues. The new policy aims to increase manufacturing as a percent of gross domestic product to 25% by 2025 from current 16% and create 100 million new jobs in a sector.

The government has increased the minimum support prices (MSP) for the kharif season by 8% to 19% to incentivise farmers and compensate them for higher input costs. The Committee on Economic Affairs (CCEA) on Thursday, 9 June 2011, raised the MSP of paddy by Rs 80 per quintal and those of pulses by Rs 200-Rs 400 per quintal. The higher MSP is expected to increase the acreage under paddy this summer in key states including West Bengal and Andhra Pradesh where below MSP price for producers is threatening to disincentivise sowing. The MSP for oilseeds was increased sharply to incentivise cultivation to reduce dependence on imports amid signs that global food prices will remain high through to 2012.