Bhel slumps almost 5% on FPO pricing worries

Index heavyweight Reliance Industries (RIL) and state-run power equipment major Bharat Heavy Electricals (Bhel) led declined on the domestic bourses triggered by political worries caused by nine ruling Congress party MPs from Andhra Pradesh resigning on Monday, 4 July 2011, to press their demands for a separate state of Telangana, reducing the government's majority in parliament. The barometer index BSE Sensex hit its lowest level since 29 June 2011. The Sensex shed 69.92 points or 0.37%, up 50.51 points from the day's low and off 93.32 points from the day's high.

Index heavyweight RIL extended losses in late trade on reports government clearance for the $7.2 billion British Petroleum (BP) deal to acquire 30% stake in 23 oil and gas blocks of RIL may get delayed. Bhel lost nearly 5% on worries its follow-on public offer (FPO) will be priced at a discount to the ruling market price. HDFC Bank posted small gains after striking a record high while ICICI Bank was marginally lower, halting a nine-day winning streak.

Auto stocks were in demand on fresh buying. Realty stocks fell on worries higher interest rates could dent demand for residential and commercial properties. Cement stocks gained. The market breadth was positive, having swung between positive and negative zone in intraday trade.

The market edged lower in early trade on political worries. A bout of volatility was witnessed as the key benchmark indices weakened again after recovering from the day's lows in morning trade. Key benchmark indices once again cut intraday losses in mid-morning trade after the latest data showed improvement in the services sector in June 2011. The market was hovering near the day's low after moving in a narrow band in early afternoon trade. The market recovered after sliding to fresh intraday low in early afternoon trade. Volatility ruled the roost as the market recovered from lower level after hitting a fresh intraday low in mid-afternoon trade.

The BSE Sensex lost 69.92 points or 0.37% to settle at 18,744.56, its lowest closing level since 29 June 2011. The Sensex rose 23.40 points at the day's high of 18,837.88 in early trade. The index fell 120.43 points at the day's low of 18,694.05 in mid-afternoon trade.

The S&P CNX Nifty was down 18.40 points or 0.33% to 5,632.10, its lowest closing level since 1 July 2011. The Nifty hit a low of 5,612.30 in intraday trade.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,534 shares rose and 1,334 shares declined. A total of 122 shares remained unchanged. Earlier, the breadth gyrated between positive and negative during the day.

The BSE Mid-Cap index fell 0.09% and the BSE Small-Cap index rose 0.20%. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 2832 crore, lower than Monday's (4 July 2011) Rs 3004 crore.

Sectoral indices on BSE displayed mixed trend. The BSE Auto (up 0.88%), the BSE IT (up 0.37%), and the Bankex (up 0.33%), outperformed the Sensex. The BSE Oil & Gas (down 1.6%), the BSE FMCG (down 1.29%), and the BSE Realty (down 1.29%), underperformed the Sensex.

Among the 30-member Sensex pack, 18 stocks declined while the rest of them rose.

Index heavyweight Reliance Industries (RIL) lost 2.67% to Rs 845, after gyrating between Rs 844.10 and Rs 870. The stock fell on reports government clearance for the $7.2 billion British Petroleum (BP) deal to acquire 30% stake in 23 oil and gas blocks of RIL may get delayed as the oil ministry is likely to send the proposal for the approval of Cabinet Committee on Economic Affairs (CCEA).

The RIL stock had recovered slightly on Monday, 4 July 2011, after tumbling almost 4% on Friday, 1 July 2011. The slide in the stock on 1 July 2011 was triggered by reports the Central Bureau of Investigation (CBI) searched the house V.K. Sibal, the former chief of the Directorate General of Hydrocarbons, the upstream regulator, after the state auditor said in a report there may have been inflated costs for some of Reliance Industries' exploration activities. Sibal was the chief of the Directorate General of Hydrocarbons when the costs were approved.

As per recent reports, a draft report of the Comptroller and Auditor General of India (CAG) has questioned the decision of the oil ministry and its technical arm, the Director General of Hydrocarbons (DGH), to allow RIL to raise the development cost of RIL's KG-D6 field. RIL has already clarified that it has fully complied with the requirements in its production-sharing contract at all times in conducting petroleum operations.

RIL's advance tax payment reportedly jumped 38.46% to Rs 900 crore in Q1 June 2011 over Q1 June 2010. Higher advance tax payment normally indicates higher profit for the period under review.

Castrol India galloped 4.31% to Rs 576.80. The stock hit a record high of Rs 588.35 in intraday trade today, 5 July 2011.

India's largest electric equipment maker by sales Bharat Heavy Electricals (Bhel) lost 4.73% to Rs 1949 and was the top loser from the Sensex pack. The stock dropped on worries the company's follow-on public offer (FPO) will be priced at a discount to the ruling market price. A large FPO is normally priced at a discount to the ruling market price to attract investors to the issue. Reportedly the Union Cabinet is likely to approve disinvestment of 5% of the government's equity in the state-run power equipment company next week.

In May 2011, Bhel's board of directors had recommended divestment of 5% government stake. The government plans to raise Rs 40000 crore from disinvestment in the current financial year.

Auto stocks were in demand on fresh buying. India's largest tractor maker by sales Mahindra & Mahindra gained 2.59% to Rs 719.50 and was the top gainer from the Sensex pack. The company, last week, reported 29.11% jump in its total sales at 35,584 units in June 2011 over June 2010. Mahindra & Mahindra (M&M)'s domestic sales grew 28.69% to 33,772 units and exports surged 37.38% to 1,812 units in June 2011 over June 2010.

India's largest truck maker by sales Tata Motors rose 0.59%. The company's total sales declined 0.7% to 66,358 units in June 2011 over June 2010. The company unveiled the monthly sales data during trading hours on 1 July 2011.

India's largest car maker by sales Maruti Suzuki India rose 0.89%. The company's total vehicle sales dropped 8.8% to 80,298 units in June 2011 over June 2010. Domestic sales declined 3.8% to 70,020 units and exports sales plunged 32.7% to 10,278 units in June 2011 over June 2010.

Maruti said production was adversely impacted due labour strike at Manesar plant in June 2011. There was no production for 10.5 days due to the strike. Another reason for lower production was planned shutdown at its units. Maruti Suzuki India's Gurgaon facilities were closed for six days from 20 June 2011 to 25 June 2011 for maintenance purpose. The planned maintenance shutdown at Manesar facilities started from 27 June 2011 to 2 July 2011. The company announced the monthly sales data on 1 July 2011.

India's second largest motorcycle maker by sales Bajaj Auto rose 0.38%. The company's total sales rose 16% to 3.66 lakh units in June 2011 over June 2010. Bajaj Auto's motorcycle sales rose 14% to 3.22 lakh units and commercial vehicle sales jumped 34% to 43,830 units in June 2011 over June 2010. Exports rose 25% to 1.42 lakh units in June 2011 over June 2010. The company said premium bikes such as Pulsar and Discover contributed 66% of total motorcycle sales in June 2011. Bajaj Auto announced the monthly sales data during trading hours on Monday, 4 July 2011.

India's largest motorcycle maker by sales Hero Honda Motors rose 0.12%. The company reported 20.12% jump in sales at 5.12 lakh units in June 2011 over June 2010. "This is the first time the company has sold five lakh-plus units in each of the three months of a quarter. Sequentially, this is the fourth consecutive month of five lakh-plus sales for the company," Hero Honda said in a statement. For the April-June period of this fiscal, the company saw its highest-ever quarterly sales at 15,29,577 units compared to 12,34,039 units in the same period last financial year, up 23.95%.

Commercial vehicles maker Ashok Leyland rose 3.83% after the company's total vehicle sales surged 39.9% to 8,009 units in June 2011 over May 2011. The company unveiled the monthly sales figures during trading hours today, 5 July 2011.

Banking pivotals were mixed. India's largest commercial bank in terms of branch network, State Bank of India, rose 1.46%. India's second largest private sector bank by net profit HDFC Bank rose 0.38% to Rs 2542. The stock hit a high of Rs 2551, which is also a record high for the counter.

India's largest private sector bank by net profit ICICI Bank slipped 0.10% on profit booking after advancing 8.35% in prior nine trading sessions.

India's largest FMCG company by revenue Hindustan Unilever was down 0.67%. The company said during market hours today that a meeting of the company's shareholders will be held on 28 July 2011 to seek their approval for the transfer of certain assets, liabilities and properties of FMCG Exports Business Division of Hindustan Unilever (HUL) to Unilever India Exports, a 100% subsidiary of HUL.

India's second largest listed telecom operator by sales Reliance Communications fell 1.19% on profit booking after the stock rose 6.40% in the prior three trading sessions.

Idea Cellular lost 2.54%. The company said after trading hours that the High Court of Delhi pronounced its judgment on the merger of Spice Communications with Idea Cellular on Monday, 4 July 2011. The company said the merger sanctioned on 5 February 2010 now stands reaffirmed. While the court slapped a penalty of Rs 1 crore on Idea for suppression, the option to challenge the order is allowed. The company said it stands upright, has not suppressed anything at all, let alone willfully, and will appeal for what it believes is right.

Reliance Infrastructure (R-Infra) declined 0.95% on reports Reliance Sea Link One (RSOPL), an arm of Reliance Infrastructure (RInfra), which has bagged the Worli-Haji Ali sea link project in Mumbai, will have to pay a daily penalty of Rs 10 lakh for not complying with the provisions of a concession agreement with Maharashtra State Road Development Corporation (MSRDC).

According to the agreement, RSOPL was supposed to pay Rs 1634 crore to MSRDC to take over the existing Worli-Bandra stretch by 3 July 2011, before the construction on the Worli-Haji Ali link started. However, RSOPL has not yet made any payment MSRDC and thus is liable for the payment of a daily penalty of Rs 10 lakh, reports suggest. The Worli-Haji Ali link is an extension of the Bandra-Worli stretch, which was thrown open to the public in June 2009.

Cement stocks gained as cement dispatches are likely to pick up post monsoons due to acceleration in construction activities with current year being the last year of the eleventh five-year plan period. ACC (up 1.62%), UltraTech Cement (up 1.77%), India Cements (up 1.11%), Madras Cement (up 4.5%), gained. Ambuja Cement slipped 0.66% to Rs 128.70, recovering from day's low of Rs 127.25.

Realty stocks fell on worries higher interest rates could dent demand for residential and commercial properties. Purchases of both residential and commercial property are largely driven by finance. HDIL (down 1.62%), Unitech (down 1.63%), DLF (down 1.54%), Indiabulls Real Estate (down 1.86%), Orbit Corporation (down 0.45%), and D B Realty (down 0.85%), declined.

BF Utilities clocked highest turnover of Rs 154.05 crore on BSE. ICICI Bank (Rs 143.23 crore), State Bank of India (Rs 119.08 crore), Jubilant FoodWorks (Rs 74.22 crore) and VIP Industries (Rs 71.46 crore) were the other turnover toppers in that order.

Cals Refineries clocked highest volume of 2.35 crore shares on BSE. Redington India (57.40 lakh shares), Mahindra Satyam (55.70 lakh shares), Birla Power (46.52 lakh shares) and Birla Cotsyn (41.80 lakh shares) were the other volume toppers in that order.

The Reserve Bank of India said on Monday companies can refinance their overseas borrowing without seeking any specific approval from the bank. The ruling enables companies with outstanding debt to raise funds via fresh external commercial borrowings and foreign currency convertible bonds (FCCBs). Restructuring of FCCBs involving change in the existing conversion price is not permissible, the Reserve Bank of India said.

"Keeping in view the need to provide a window to facilitate refinancing of FCCBs by the Indian companies who may be facing difficulty in meeting the redemption obligations, the Reserve Bank of India, in consultation with the Government of India, has decided to allow the Indian companies to refinance/ restructure the outstanding FCCBs issued by them," the central bank said.

The market soon enters the crucial period of corporate earnings. Investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when firms are witnessing cost pressures amid rising interest rates and staff costs. A hike in transportation costs will add to cost pressure of India Inc. As per reports, freight rates have gone up by 8% to 9% on all routes across India following the recent hike in diesel prices.

Corporate earnings will begin with housing finance major HDFC unveiling its Q1 June 2011 results on Friday, 8 July 2011. IT bellwether Infosys unveils Q1 results on 12 July 2011. IT giant TCS unveils Q1 results on 14 July 2011. Dr Reddy's Lab announces Q1 results on 20 July 2011. Biocon unveils Q1 results on 21 July 2011. Private sector bank Axis Bank reports Q1 results on 22 July 2011.

The services sector picked up steam in June 2011, with activity rebounding from a 20-month-low in May 2011 as new orders rose sharply and costs climbed at a slower pace, a survey showed on Tuesday, 5 July 2011. The seasonally adjusted HSBC Markit Business Activity Index based on a survey of 400 firms, rose to 56.1 in June after hitting 55.0 in May, while expectations also soared. The services sector contributes nearly 60% to the overall economy.

Foreign direct investments in India more than doubled to $4.66 billion in May 2011 from $2.21 billion a year earlier, the latest government data showed. Foreign direct investments rose 77% in April-May 2011 to $7.79 billion. The recent trend of a dip in foreign direct investment inflows appears to have been reversed in the current financial year, where a significant upward trend in the FDI inflows is evident, the government said.

As per reports, capital expenditure projects worth a whopping Rs 8 lakh crore are expected to be completed in the year ending March 2012 (FY 2012). Many of these projects have rolled over from the previous year, reports added.

The manufacturing sector lost steam last month with marked declines in output indicating taut monetary conditions may be taking hold even as prices remained at elevated levels, a survey showed on Friday, 1 July 2011. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 companies, showed a sharp fall to 55.3 in June from 57.5 in May, its lowest level since September last year and the steepest monthly fall since November 2008.

Rainfall from the start of the monsoon season until 30 June 2011 was 182 millimeters, 11% above the long-term average. Rainfall in the month of July is considered crucial as sowing of a number of crops starts in June and good July rains determine the soil moisture and ensure proper development of the crops planted in June.

Reserve Bank of India (RBI) deputy governor Subir Gokarn today, 5 July 2011, said the RBI is trying to ensure the monetary policy measures it takes to cool persistent inflation are the best ones in the given macroeconomic situation. He said the RBI is now attaching increasing importance to corporate data points in the formulation of its policy.

Life came to a virtual standstill in all of the ten districts of Telangana in Andhra Pradesh on Tuesday with public transport, autos and train services staying off while shops and establishments, cinemas and shopping malls remained shut. In Hyderabad too, the bandh was near total with the streets wearing a deserted look and shops downing shutters, media reports said.

European stocks held in a tight range Tuesday as a possible Chinese interest-rate hike and a lack of direction from US kept investors on the sidelines, while profit warnings from PagesJaunes and CSM NV hit shares. The key benchmark indices in UK and Germany rose 0.20% and 0.24%. France's CAC 40 slipped 0.33%.

Standard & Poor's Ratings Services on Monday, 4 July 2011, said the Greek bailout plan was little more than a selective default. Meanwhile, the European Central Bank is expected to hike interest rates at a policy meeting on Thursday, 7 July 2011.

Asian shares were mixed in volatile trading on Tuesday, 5 July 2011, with investors still wary about Europe's sovereign-debt problems. The key benchmark indices in China, Japan, South Korea and Taiwan rose by between 0.07% to 0.77%. The key benchmark indices in Hong Kong, Indonesia and Singapore were down by between 0.10% to 0.75%.

Chinese media reported Tuesday that the country's central bank has raised expectations of an imminent interest-rate increase, with one newspaper saying a hike could come as soon as this weekend.

Trading in US index futures indicated that the Dow could gain 25 points at the opening bell on Tuesday, 5 July 2011. The key data due this week is US non-farm payrolls for June 2011 on Friday, 8 July 2011. The market expectation is that hiring doubled last month from May's lackluster initial reading of 54,000 non-farm jobs.