Market slides for the second straight day

The key benchmark indices registered small losses in a lacklustre trading session. The market fell for the second straight day today, 9 June 2011. Index heavyweights Reliance Industries (RIL) trimmed intraday gains. The BSE Sensex was down 9.39 points or 0.05%, up close to 60 points from the day's low and off close to 65 points from the day's high. The market breadth, indicating the overall health of the market, was negative. Some capital goods stocks rose on value buying. Consumer durables stocks also rose. Auto stocks fell on worries high interest rates and costlier fuel could dent demand for vehicles.



The market edged higher in early trade as inflation worries eased after the government reportedly deferred a decision on fuel price hike. The key benchmark indices slipped into the red to hit fresh intraday lows after extending initial gains to hit fresh intraday highs in morning trade. The market hit a fresh intraday low in mid-morning trade. The market extended losses to hit fresh intraday low in early afternoon trade. The key benchmark indices bounced back into positive terrain in afternoon trade led by positive opening of European shares and strength in US index futures. The market retained positive zone in mid-afternoon trade. The market once again slipped into the red later.

The BSE Sensex lost 9.39 points or 0.05% to 18,384.90, its lowest closing level since 3 June 2011. The Sensex rose 55.35 points at the day's high of 18,449.64 in morning trade. The index fell 67.28 points at the day's low of 18,327.01 in early afternoon trade.

The S&P CNX Nifty was down 5.80 points or 0.1% to 5,521.05, its lowest closing level since 3 June 2011. The Nifty hit a low of 5,502.05 in intraday trade.

The BSE Mid-Cap index fell 0.12% and underperformed the Sensex. The BSE Small-Cap index rose 0.08% and outperformed the Sensex.

BSE clocked turnover of Rs 2344 crore, lower than Rs 2602.06 crore on Wednesday, 8 June 2011.

The market breadth, indicating the health of the market, was negative. On BSE, 1424 shares declined while 1386 shares advanced. A total of 117 shares remained unchanged. The breadth was positive at the onset of the trading session.

Among the 30-member Sensex pack, 19 stocks fell while the rest of them rose.

Index heavyweight Reliance Industries (RIL) gained 0.71% to Rs 954.10. The stock hit high of Rs 957.80 and low of Rs 946.50. The stock had lost nearly 1% on Wednesday on reports an increase in natural gas output from the KG D6 block in the Krishna-Godavari (KG) basin, India's largest gas reservoir operated by Reliance Industries, may not be possible in the next 36 months. RIL chairman Mukesh Ambani had last week said that the BP-RIL partnership will jointly assess and address the technical issues in ramping up gas production from the KG D6 block once the government approves the BP-Reliance partnership.

State-run ONGC fell 1.8%. Earlier this week, some reports suggested that an independent audit of the company's overseas subsidiary ONGC Videsh had slashed its estimated immediately recoverable or "proven" reserve by one-third to 130 million tonnes.

PSU OMCs fell on reports the government has once again deferred a decision on raising prices of diesel, kerosene and cooking gas. BPCL, Indian Oil Corporation and HPCL lost 1.02% to 2.64%. It is the third time in two months that the government has sidestepped a decision on lifting the state-set prices, fearful of stoking inflation at a time when public anger is running high over high profile graft scandals.

Some capital goods stocks rose on value buying. Bhel and Larsen & Toubro Praj Industries, Thermax, and Crompton Greaves rose by between 0.36% to 1.42%.

NTPC rose 1.74% extending Wednesday's 1.04% gain, triggered by reports that it is among the 12 power firms that will receive coal for their newly commissioned power projects with combined capacity of 12,200 megawatts. The stock was the top gainer from the Sensex pack.

Auto stocks fell on worries high interest rates and costlier fuel could dent demand for vehicles. India's largest motorcycle maker by sales Hero Honda Motors fell 1.29%, extending Wednesday's 3.6% fall.

Bajaj Auto fell 0.2%, with the stock falling for the fourth straight day. The company's total sales rose 20% to 3.58 lakh units in May 2011 over May 2010. Exports rose 32% to 1.26 lakh units. Motorcycle sales rose 18% to 3.17 lakh units. Commercial vehicle sales rose 36% to 40,860 units. The company announced the monthly sales data on 2 June 2011.

Car major Maruti Suzuki India fell 0.72%, extending Wednesday's 1.18% slide, as the strike at its Manesar, Haryana plant entered the fifth day. Around 2,000 workers at the plant have been on strike since late last week resulting in a production loss of about 3,000 units and with the value of the loss estimated at about Rs 150 crore.

India's largest truck and bus maker, Tata Motors shed 0.75% on reports widening spread on the company's credit default swaps indicates worsening investor perception about the firm's ability to service its debt. It extended recent losses triggered by weak sales in May 2011.

Mahindra & Mahindra (M&M) rose 0.11% in volatile trade. The company's auto sales rose 20% to 34,323 units in May 2011 over May 2010. The figures were announced on 1 June 2011. Speaking on the May 2011 sales numbers, Rajesh Jejurikar, CEO, Automotive Division, M&M, said, "We are happy with the 20% growth that we have clocked in May 2011. All our brands have been doing well, with the recently launched Verito having sold 1,290 vehicles, almost three times last May".

Car sales in India rose 7% to 158,817 units in May 2011 over May 2010, their slowest pace of growth in two years, as higher fuel prices, interest rates and vehicle costs crimped demand in the world's second-fastest growing auto market. Sales of trucks and buses, a key pointer to economic activity, rose 16.16% to 56,314 units in May 2011 over May 2010.

Metal stocks were mixed as investors remained uncertain about the fate of the global economic recovery. Hindalco Industries, Tata Steel and Nalco Sterlite Industries, and JSW Steel fell by between 0.02% to 1.03%. Sail, Jindal Steel & Power, and Hindustan Zinc rose by between 0.04% to 1.84%. LMEX, a gauge of six metals traded on the London Metal Exchange, fell 0.7% on Wednesday, 8 June 2011.

IT stocks were mixed. India's second largest IT firm by sales Infosys Technologies fell 0.37%. Infosys 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.

India's largest software services exporter TCS rose 0.59%, with the stock gaining for the second straight day. The company last week said Ahli Brokerage QSC has selected the company's TCS BaNCS product to extend its brokerage footprint in the Middle East.

India's third largest software exporter Wipro fell 0.49%. The company, last week, said that the Jammu and Kashmir state government has selected the company for automating its state power distribution department.

Banking pivotals were mixed. India's largest private sector bank by net profit ICICI Bank fell 0.32%. India's second largest private sector bank by net profit HDFC Bank rose 0.24%. India's largest commercial bank by branch network State Bank of India (SBI) shed 1.31%.

Some interest rate sensitive realty stocks rose on bargain hunting. HDIL, Unitech, DLF, Phoenix Mills and Sunteck Realty rose by between 0.06% to 2.71%.

Airline stocks fell as higher crude oil prices raised concerns about higher operating costs. Jet fuel prices are linked to crude oil prices. Jet fuel constitutes 40% of the operating cost for airliners. Jet Airways, Kingfisher Airlines and SpiceJet declined by between 0.49% to 2.8%.

HFCL clocked highest volume of 1.49 crore shares on BSE. IDFC (70.79 lakh shares), Future Ventures (42.48 lakh shares), Sanraa Media (38.21 lakh shares) and Delta Corp (35.79 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 125.21 crore on BSE. Aanjaneya Lifecare (Rs 103.73 crore), IDFC (Rs 95.01 crore), Tata Motors (Rs 42.27 crore) and Tata Coffee ( Rs 41.57 crore) were the other turnover toppers in that order.

On the macro front, the government unveils industrial production data for April 2011 tomorrow, 10 June 2011. Economists expect 5.7% growth in industrial production in April 2011 according to a poll carried out by Capital Market. The industrial production data for April 2011 will be released with new 2004-05 as base year. The new series is based on 500 items many of which are new products that didn't exist in the production basket two decades ago. The industrial production had risen 7.3% in March 2011.

The government unveils data on headline inflation for May 2011 on Tuesday, 14 June 2011. Economists expect inflation at 8.7% in May 2011 according to a poll carried out by Capital Market, much above the Reserve Bank of India's (RBI) perceived comfort level of about 5%.

The 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. The latest data showed that the food price index rose 9.01% and the fuel price index climbed 12.46% in the year to 28 May 2011. In the previous week, annual food and fuel inflation stood at 8.06% and 12.54%, respectively. The primary articles price index was up 11.52% compared with an annual rise of 10.87% a week earlier.

Meanwhile, the government's dithering on fuel price hike has raised concerns about fiscal deficit. The government has budgeted a fuel subsidy bill of $5.2 billion for 2011/12, assuming oil prices below $100 per barrel. Oil prices are currently above $115 a barrel. An increase of $10 a barrel in oil prices raises fiscal deficit by around 0.2% of GDP.

The services sector expanded at its slowest pace in 20 months in May 2011 as soaring prices and interest rate hikes gnawed at new business growth and reduced the level of optimism, a survey showed last week. The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of over 400 Indian firms, slipped to 55 in May 2011 from 59.2 in April 2011, marking its twenty-fifth successive month above the 50 level that divides growth from contraction.

Growth in India's manufacturing sector eased slightly in May as the pace of new orders slowed, but factories' input and output prices continued to rise sharply. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 companies, edged down to 57.5 in May from 58.0 in April, weighed down by a slower expansion rate for new orders and a labour shortage, data showed last week.

European shares rose ahead of central bank meetings for the UK and the euro zone. The key benchmark indices in UK France and Germany were up by 0.04% to 0.27%.

Most Asian stocks fell on Thursday, 9 June 2011 as investors remained uncertain about the fate of the global economic recovery. The key benchmark indices in Taiwan, South Korea, Hong Kong, Indonesia, and China fell by between 0.07% to 1.71%. Singapore's Straits Times rose 0.01% and Japan's Nikkei Average rose 0.19%.

Trading in US index futures indicated that the Dow could gain 39 points at the opening bell on Thursday, 9 June 2011.

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.