Market skids to 3-week low as RBI to continue with anti-inflationary stance

Key benchmark indices dropped to three-week lows as concerns over Greece's debt crisis rattled world stocks. Index heavyweight Reliance Industries (RIL) was near 52-week low. The BSE Sensex lost146.36 points or 0.81%, off close to 165 points from the day's high and up close to 30 points from the day's low. The Sensex fell below the psychological 18,000 mark. The market breadth was weak.

Interest rate sensitive realty, banking and auto stocks declined after the Reserve Bank of India (RBI) raised its key lending rate viz. the repo rate by 25 basis points to 7.5%, as expected, after a mid-quarter monetary policy review today, 16 June 2011, to tame inflation and said the monetary policy stance remains firmly anti-inflationary.



IT stocks fell on weak economic data in the US and on continuing sovereign debt crisis in Europe. US and Europe are the two key markets for Indian IT firms. Metal stocks fell as metal prices declined on the London Metal Exchange. Shares of Reliance Anil Dhirubhai Ambani (ADA) Group rose.

The market was volatile for the second day in a row. The market recovered after hitting 3-week low at the onset of the trading session. A bout of volatility was witnessed as the key benchmark indices weakened again after recovering from the day's lows to hit fresh intraday highs in morning trade. Intraday volatility continued as the market weakened once again after recovering from lower level to hit fresh intraday high in mid-morning trade.

The market moved in a tight range in the negative terrain in early afternoon trade after RBI's rate hike announcement at 12:00 IST. Immense volatility was witnessed as the key benchmark weakened once again after moving into positive zone for a brief period in afternoon trade. Intraday volatility continued as the market trimmed losses in mid-afternoon trade. The market once again trimmed losses after hitting fresh intraday lows in late trade.

The BSE Sensex shed 146.36 points or 0.81% to 17,985.88, its lowest closing level since 25 May 2011. The Sensex rose 22.86 at the day's high of 18,155.10 in afternoon trade. The index shed 173.30 points at the day's low of 17,958.94 in late trade.

The S&P CNX Nifty was down 50.75 points or 0.93% to 5,396.75, its lowest closing level since 25 May 2011. The Nifty hit low of 5,389.80 in intraday trade.

The BSE Mid-Cap index fell 0.71% and the BSE Small-Cap index declined 0.54%. Both these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was weak. On BSE, 1,749 shares declined while 1,091 shares advanced. A total of 104 shares remained unchanged.

Among the 30-member Sensex pack, 22 stocks fell while the rest of them rose.

BSE clocked turnover of Rs 2764 crore, higher than Rs 2676.87 crore on Wednesday, 15 June 2011.

Index heavyweight Reliance Industries (RIL) fell 1.42% to Rs 888. The stock hit a low of Rs 885.10 in intraday trade, close to its 52-week low of Rs 885 hit on 10 February 2011. RIL's advance tax payment reportedly jumped 38.46% to Rs 900 crore in Q1 June 2011 over Q1 June 2010.

State-run oil explorer Oil and Natural Gas Corporation (ONGC) rose 0.35% on reports the company is in talks with the Indian unit of BG Group and Italian oil major ENI to sell up to a 30% stake in an east coast block.

Shares of Reliance ADA Group edged higher on bargain buying. Reliance Communications, Reliance Infrastructure, Reliance Capital and Reliance MediaWorks, rose by between 0.16% to 2%. Reliance Power fell 0.26%.

Metal stocks declined as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 0.79% on Wednesday, 15 June 2011. Bhushan Steel, Tata Steel, JSW Steel, Hindustan Zinc, Sail, Jindal Steel & Power, and Sterlite Industries fell by between 0.77% to 2.39%.

IT stocks fell on weak economic data in the US and on continuing sovereign debt crisis in Europe. US and Europe are the two key markets for Indian IT firms. IT bellwether Infosys fell 1.18%, with the stock falling for the third straight day. In a re-structuring of the board at Infosys, V. Balakrishnan, chief financial officer, B.G. Srinivas, senior vice president and head, manufacturing, and Ashok Vemuri, senior vice president and head, banking and capital markets, have been appointed as executive directors. Ann Fudge, a non-executive director at Unilever, Novartis AG and General Electric Company has been appointed as additional independent director.

In April this year, Infosys had announced that its chief mentor N R Narayana Murthy will quit the position of company chairman on the day he turns 65 in August this year. He is being succeeded by K V Kamath who will take over as the chairman.

India's third largest software exporter Wipro fell 1.99%, extending Wednesday's nearly 3% slide. The company recently said that the Jammu and Kashmir state government has selected the company for automating its state power distribution department.

India's largest software services exporter TCS shed 2.4%. TCS' advance tax reportedly rose 87.5% to Rs 240 crore in Q1 June 2011 over Q1 June 2010. TCS on Wednesday said its unit iON will provide solutions to Hyderabad-based Razi Healthcare, which is rapidly expanding its network of primary healthcare clinics in Andhra Pradesh. iON provides solutions for small and medium businesses to help in scaling up business and enhance customer experience.

Interest rate sensitive banking stocks were mostly lower on continued worries that banks' profit margins will fall in rising interest rate scenario. India's second largest private sector bank by net profit HDFC Bank declined 1.24%, with the stock falling for the second straight day. The bank's advance tax reportedly rose 26.98% to Rs 400 crore in Q1 June 2011 over Q1 June 2010.

India's largest private sector bank by net profit ICICI Bank fell 0.44% in volatile trade. The bank's advance tax reportedly rose 11.42% to Rs 390 crore in Q1 June 2011 over Q1 June 2010.

India's largest commercial bank by branch network State Bank of India (SBI) rose 1.09% to Rs 2,205.75 as the bank's advance tax reportedly rose 29.41% to Rs 1100 crore in Q1 June 2011 over Q1 June 2010. The stock recovered from a 52-week low of Rs 2,161 hit today, 16 June 2011. Higher advance tax payment normally indicates higher profit for the period under review.

Pure-play mortgage lender HDFC rose 0.24% as the firm's advance tax reportedly rose 16.27% to Rs 250 crore in Q1 June 2011 over Q1 June 2010.

India's largest FMCG major by sales Hindustan Unilever rose 1.1% as the company's advance tax reportedly rose 33.33% to Rs 100 crore in Q1 June 2011 over Q1 June 2010.

Interest rate sensitive auto stocks declined as higher interest rates could dent demand for vehicles. Bajaj Auto fell 1.48%, with the stock falling for the second straight day. The company's advance tax reportedly rose 13.63% to Rs 125 crore in Q1 June 2011 over Q1 June 2010. India's biggest motorcycles maker by sales, Hero Honda Motors, shed 0.45%.

Tractor and utility vehicles maker Mahindra & Mahindra (M&M) declined 0.93%, with the stock falling for the second straight day. The company's advance tax reportedly rose 42.85% to Rs 90 crore in Q1 June 2011 over Q1 June 2010.

India's largest truck and bus maker, Tata Motors, declined 0.9% as company's advance tax reportedly fell 4.61% to Rs 62 crore in Q1 June 2011 over Q1 June 2010. The company's global vehicle sales rose 11% to 88,251 units in May 2011 over May 2010. Jaguar and Land Rover sales rose 17% to 22,296 units, driven by a 30% rise in Land Rover sales. The company announced the sales data during trading hours on Wednesday, 15 June 2011.

Car maker Maruti Suzuki India fell 1.74%, extending recent losses, as strike at the company's Manesar, Haryana unit continues. Nearly 2,000 employees at Maruti's plant at Manesar have been on strike since early this month, demanding recognition of the Maruti Suzuki Employees' Union. Management only recognizes the Maruti Udyog Kamgar Union. Maruti has fired 11 of its employees because of the strike, which the company has said is illegal. Maruti is losing Rs 40 crore a day in revenue because of the strike, with 1,200 vehicles a day in lost output.

Most interest rate sensitive realty stocks declined on worries higher interest rates could dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance. DLF, Unitech, Anant Raj Industries, Phoenix Mills and Orbit Corporation declined by between 0.03% to 4.4%.

Cement shares declined on reports the Serious Fraud Investigation Office, or SFIO, is investigating allegations of cartelisation against cement majors UltraTech Cement, Ambuja Cements and ACC. UltraTech Cement, Ambuja Cements and ACC fell by between 2.06% to 4.62%. The SFIO is acting under the directions of the ministry of corporate affairs, which is its nodal ministry. The investigation will examine the conduct of the cement companies over a 10-year period. UltraTech, Ambuja Cements and ACC together control a little over one-third of the country's total cement manufacturing capacity of 300 million tonnes.

Bharti Airtel declined 1.13% as the company's advance tax reportedly fell 5.55% to Rs 170 crore in Q1 June 2011 over Q1 June 2010.

NTPC declined 0.14%. The company's advance tax reportedly rose 28.57% to Rs 360 crore in Q1 June 2011 over Q1 June 2010.

Bharat Heavy Electricals rose 0.67% as company's the advance tax reportedly rose 20.9% to Rs 520 crore in Q1 June 2011 over Q1 June 2010.

Sanraa Media clocked highest volume of 92.46 lakh shares on BSE. VMS Industries (74.58 lakh shares), Cals Refineries (68.57 lakh shares), Lovable Lingerie (62.04 lakh shares) and Sun TV Network (44.80 lakh shares) were the other volume toppers in that order.

Lovable Lingerie clocked highest turnover of Rs 278.55 crore on BSE. State Bank of India (Rs 160.61 crore), Sun TV Network (Rs 160.49 crore), Reliance Industries (Rs 91.95 crore) and Aanjaneya Lifecare (Rs 63.61 crore) were the other turnover toppers in that order.

Companies from across the sectors paid up more in advance tax this quarter than the year-ago period, except cement companies which had a poor showing. Reliance Industries, which has been among the top five tax payers, paid Rs 900 crore, against Rs 650 crore in the same quarter last year. Among auto companies, barring the largest player Tata Motors, which saw its tax bill dipping a tad to Rs 62 crore from Rs 65 crore, all reported higher numbers. Bajaj Auto paid Rs 125 crore from Rs 110 crore, M&M paid nearly 50% more at Rs 90 crore from Rs 63 crore. Pure-play mortgage lender HDFC saw its tax bill rising to Rs 250 crore from Rs 215 crore in the reporting period. Aluminium major Hindalco's tax bill rose to Rs 80 crore against Rs 55 crore. So did the engineering behemoth L&T, which coughed up Rs 175 crore in advance taxes, up from Rs 130 crore. Similarly, consumer goods leader HUL, too, saw its tax bill jumping to Rs 100 crore from Rs 75 crore. Bharat Petroleum paid a little more than half of what it had paid last time at Rs 77 crore, against Rs 126 crore.

Cement players saw their tax outgo shrinking. ACC saw its tax bill declining to Rs 45 crore from Rs 50 crore, Ambuja too paid up less at Rs 50 crore (Rs 65 crore), while UltraTech bucked the trend with a sharp spike in its tax bill at Rs 37 crore against Rs 22 crore. State Bank of India (SBI) paid Rs 1,100 crore against Rs 850 crore in the year-ago period. While the largest private sector lender ICICI Bank paid Rs 390 crore against Rs 350 crore an year ago, the immediate competition HDFC Bank coughed up Rs 400 crore as compared to Rs 315 crore in the corresponding period an year ago. TCS saw its tax bill nearly doubling to Rs 240 crore in the reporting period from Rs 128 crore in the year-ago quarter.

While the Reserve Bank of India needs to continue with its anti-inflationary stance, the extent of policy action needs to balance the adverse movements in inflation with recent global developments and their likely impact on the domestic growth trajectory, the RBI said in its policy statement today, 16 June 2011. Based on the current and evolving growth and inflation scenario, the Reserve Bank of India will need to persist with its anti-inflationary stance of monetary policy, the central bank said. RBI said it will continue to maintain liquidity conditions such that neither surplus liquidity dilutes the monetary policy stance nor large deficit chokes off fund flows to productive sectors of the economy.

The food price index rose 8.96% and the fuel price index climbed 12.84% in the year to 4 June 2011, government data showed on Thursday. In the previous week, annual food and fuel inflation stood at 9.01% and 12.46% respectively. The primary articles price index was up 12.86% compared with an annual rise of 11.52% a week earlier

India's monsoon rains were 9.0% below normal in the week to 15 June 2011, the weather office said on Thursday, with rice and cotton growing regions in the south and east suffering the lowest rainfall. The monsoon, vital for farm output in India's trillion-dollar economy, hit the country's southern coast on 29 May 2011 this year, three days ahead of schedule. The Meteorological Department is expected to release its outlook for the rest of the monsoon season early next week.

European stock markets fell Thursday, with banks tumbling as worries of a Greek default intensified. The key benchmark indices in UK, France and Germany were down by 1.05% to 1.33%.

Greek Prime Minister George Papandreou reportedly said he will form a new government on Thursday and ask for a vote of confidence from parliament in order to push through austerity measures. Global markets are worried a political failure to get reforms approved will ultimately end in default for the country.

Asian stocks fell on Thursday as Greece's debt crisis deepened and fresh US data indicated its economic "soft patch" could drag on longer than expected. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 1.14% to 2%.

US index futures moved between the gains and losses. Trading in US index futures indicated that the Dow could fall 27 points at the opening bell on Thursday, 16 June 2011.

The Federal Reserve holds its next policy meeting on Tuesday, 21 June 2011 and Wednesday, 22 June 1011 and will issue its policy statement after the close of the meeting. The Federal Reserve's second round of quantitative easing or QE2, a temporary policy designed to increase the money supply, keep interest rates low and stimulate the economy, ends on 30 June 2011. A section of the market has been speculating about the possibility of a third quantitative easing program by the Fed after the current one expires in June 2011.