Sensex, Nifty near two-week closing lows

The key benchmark indices reached their lowest closing level in nearly two weeks on political worries following reports the DMK may opt to withdraw ministers from the Cabinet after a high-level party meeting in Chennai today, 10 June 2011. 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. The BSE Sensex lost 116.36 points or 0.63%, up close to 85 points from the day's low and off close to 130 points from the day's high.



The market breadth, indicating the health of the market, was negative. Index heavyweights Reliance Industries (RIL) declined. Cement shares dropped due to onset of monsoon, when prices fall due to sluggish construction activity. Banking stocks 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. Realty stocks fell as higher interest rates could dent demand for residential and commercial property. Most auto stocks fell on worries high interest rates and costlier fuel could dent demand for vehicles. Metal stocks fell on concerns about global economic recovery.

The market slipped into the red after turning positive for a brief period after a subdued start. The Sensex trimmed losses after hitting fresh intraday low in morning trade. The key benchmark indices extended losses to hit fresh intraday lows in mid-morning trade after the latest data showed a slowdown in industrial production growth in April 2011. The market trimmed losses in early afternoon trade. The market was rangebound in afternoon trade. The market trimmed losses after hitting a two-week low in mid-afternoon trade.

The BSE Sensex lost 116.36 points or 0.63% to 18,268.54, its lowest level since 30 May 2011. The Sensex rose 14.12 points at the day's high of 18,399.02 in early trade. The index fell 202 points at the day's low of 18,182.90 in early afternoon trade.

The S&P CNX Nifty was down 36.45 points or 0.66% to 5,484.60, its lowest level since 30 May 2011. The Nifty hit a low of 5,457.45 in intraday trade.

The BSE Mid-Cap index fell 0.34% and the BSE Small-Cap index declined 0.46%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2624 crore, higher than Rs 2359.01 crore on Thursday, 9 June 2011.

The market breadth, indicating the health of the market, was weak. On BSE, 1659 shares declined while 1204 shares advanced. A total of 109 shares remained unchanged. The breadth was positive earlier in the day.

Among the 30-member Sensex pack, 25 stocks fell while the rest of them rose.

Index heavyweight Reliance Industries (RIL) fell 1.06%. As per recent 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.

Metal stocks fell on concerns about global economic recovery. Hindalco Industries, Tata Steel, Nalco, Sterlite Industries, Sail, Jindal Steel & Power, JSW Steel and Hindustan Zinc fell by between 0.03% to 1.59%. LMEX, a gauge of six metals traded on the London Metal Exchange, rose 0.43% on Thursday, 9 June 2011.

Cement shares dropped due to onset of the monsoon rains. ACC, Ambuja Cements, Jaipraakash Associates and UltraTech Cement declined by between 0.71% to 1.45%. Cement prices typically remain sluggish in monsoon due to fall in construction activity.

Cigarette maker ITC fell 1.69% as the stock turned ex-dividend today, 10 June 2011, for dividend of Rs 4.45 per share for the year ended March 2011. Among other FMCG stocks, United Spirits, Dabur India, Hindustan Unilever and Nestle India fell by between 0.13% to 1.02%.

Banking stocks 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. ICICI Bank, HDFC Bank and State Bank of India fell by between 0.07% to 1.06%.

Realty stocks fell as 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, Orbit Corporation and Phoenix Mills shed by between 0.31% to 2.15%.

Most auto stocks fell on worries high interest rates and costlier fuel could dent demand for vehicles. India's largest truck and bus maker, Tata Motors shed 0.09%, extending recent losses triggered by weak sales in May 2011.

Bajaj Auto fell 0.54%, with the stock falling for the fifth straight day 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.

Bajaj Auto'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.

Mahindra & Mahindra (M&M) declined 0.36%. 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 maker Maruti Suzuki India rose 1.03% to Rs 1229.75, reversing initial losses, on reports that the state government of Haryana has ordered workers at the company's Manesar factory to end their strike. 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. Maruti produces cars such as the Swift and A-Star hatchbacks as well as the mid-sized Swift Dzire and SX4 at Manesar.

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.

Bike maker Hero Honda Motors declined 1.23% on reports the strike by workers at Maruti's Manesar unit could spread to other companies in Haryana's Gurgaon-Manesar-Bawal belt. Hero Honda has two units in Haryana -- one in Gurgaon and another at Dharuhera.

State-run oil explorer ONGC rose 0.7% on bargain hunting after the stock fell 4.08% in the preceding two sessions to Rs 265.20 on 9 June 2011 from a recent high of Rs 276.50 on 7 June 2011. Shares of ONGC had fallen recently on reports 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.

IT stocks were mixed. India's second largest IT firm by sales Infosys Technologies was flat. 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 0.37%, with the stock gaining for the third 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 0.25%. The company, last week, said that the Jammu and Kashmir state government has selected the company for automating its state power distribution department.

Cals Refineries clocked highest volume of 2.89 crore shares on BSE. HFCL (78.62 lakh shares), Hindustan Construction Company (68.01 lakh shares), GVK Power & Infrastructure (57.70 lakh shares) and Avance Tech (53.58 lakh shares) were the other volume toppers in that order.

NESCO clocked highest turnover of Rs 219.60 crore on BSE. Lovable Lingerie (Rs 147.89 crore), State Bank of India (Rs 105.22 crore), Titan Industries (Rs 61.20 crore) and Hero Honda Motors (Rs 44.40 crore) were the other turnover toppers in that order.

On the macro front, industrial output grew 6.3% in April 2011 from a year earlier, according to a new index released by the government today, 10 June 2011. Industrial production had risen 7.3% in March 2011 according to the earlier index. The pace of growth under the new index is far quicker than the 3.65% increase in February 2011 and 3.95% rise in January 2011. The readings for January and February are based on the old index. The latest data under the new index also showed that manufacturing output rose 6.9% in April 2011 from a year earlier.

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.

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.

On the political front, DMK chief M Karunanidhi has called a top-level party meeting today, 10 June 2011, to decide on the party's alliance with the Congress. As per media reports, Karunanidhi may opt to withdraw ministers from the Cabinet and provide outside support to the Government -- a threat the DMK had held forth earlier but gone back on.

European stocks were trading lower on Friday, reversing gains from the previous session to mirror a weak session in Asian equities, as some worries about the pace of global growth continued to weigh on investor sentiment. Key benchmark indices in UK, Germany and France were down by 0.27% to 0.55%.

Most Asian shares fell on Friday on weaker-than-expected trade data from China. The key benchmark indices in Singapore, Taiwan, South Korea, Hong Kong, Indonesia and fell by between 0.49% to 1.81%. However, China's Shanghai Composite reversed early losses to rise 0.10%. Japan's Nikkei Average rose 0.5%.

China's growth in exports slowed in May 2011, while the rise in imports accelerated, according to data out Friday. Exports rose 19.4% from a year earlier, easing sharply from 29.9% in April 2011, the General Administration of Customs reported. Imports climbed 28.4%, faster than April's 21.8% and above expectations for a 22% gain. However, the trade surplus widened to $13.05 billion from April's $11.4 billion.

South Korea's central bank today, 10 June 2011, hiked its key policy rate by a quarter point to 3.25%. The bank had been on hold for two months.

Trading in US index futures indicated that the Dow could fall 39 points at the opening bell on Friday, 10 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.