Sensex, Nifty at 2-1/2-week closing lows

Key benchmark indices extended losses for the third straight day to dive to 2-1/2-week closing lows as world stocks fell on growing fears about the spreading of the euro-zone debt crisis to large European economies such as Italy and Spain. Data showing slower-than-expected growth in industrial production in May 2011 and a downward revision in industrial production growth for April 2011 also hit sentiment. The BSE Sensex lost 309.77 points or 1.65%, up 85.2 points from the day's low and off 177.57 points from the day's high. The 50-unit S&P CNX Nifty regained 5,500 mark after falling below that level in intraday trade. The market breadth was weak.

The BSE Sensex has now lost 666.68 points or 3.49% in three trading sessions from a recent high of 19,078.30 on 7 July 2011.



Coming back to today's trade, all the 13-sectoral indices on BSE edged lower. Index heavyweight Reliance Industries (RIL) slipped in volatile trade. IT bellwether Infosys dropped after reporting a sequential fall in Q1 June 2011 consolidated net profit before trading hours today, 12 July 2011. Bank stocks fell in choppy trade as financials fell across Asia and Europe for the second day in a row on fears about the spread of Europe's debt crisis. Auto stocks fell on profit taking. Telecom pivotals also declined. Interest rate sensitive realty shares declined on fears high interest rates will hit property demand.

Mining and metal stocks extended their recent slide triggered by reports a panel of ministers has approved the draft Mining Bill, which calls for miners to give to local communities an amount equivalent to royalties so as to compensate people displaced by such projects. Sugar shares retreated after the Food Minister K V Thomas reportedly ruled out additional sugar exports to ensure sufficient supplies for meeting festival demands in the coming months.

Intraday volatility was high. The market staged a decent intraday recovery after hitting 2-week low at the onset of the trading session. The intraday recovery proved short-lived, with the market weakening again in morning trade. Volatility ruled the roost in mid-morning trade as the market reacted to disappointing industrial production growth data and reports of a Cabinet reshuffle by Prime Minister Manmohan Singh.

Volatility continued as the key benchmark indices weakened once again soon after striking fresh intraday highs in mid-morning trade. Key benchmark indices slumped to two-week lows in afternoon trade as European shares tumbled in opening trade. Weakness continued in mid-afternoon trade. The market remained volatile in late trade.

The BSE Sensex lost 309.77 points or 1.65% to settle at 18,411.62, its lowest closing level since 24 June 2011. The index lost 394.97 points at the day's low of 18,326.42 in afternoon trade. The Sensex fell 132.20 points at the day's high of 18,589.19 in mid-morning trade.

The S&P CNX Nifty was down 89.95 points or 1.6% to settle at 5,526.15, its lowest closing level since 24 June 2011 The Nifty hit a low of 5,496.95 in intraday trade.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1880 shares declined and 969 shares advanced. A total of 120 shares remained unchanged.

The BSE Mid-Cap index slipped 1.09% and the BSE Small-Cap index fell 0.94%. Both these indices outperformed the Sensex

The total turnover on BSE amounted to Rs 2835 crore, higher than Monday's Rs 2249.68 crore.

All the 13-sectoral indices on BSE posted losses. The BSE PSU (down 0.32%), the BSE FMCG (down 0.33%), and the BSE Oil & Gas (down 0.36%), outperformed the Sensex. The BSE Realty (down 2.68%), the BSE IT (down 2.74%), and the BSE TecK (down 2.41%), underperformed the Sensex.

Among the 30-member Sensex pack, 28 declined while only two of them managed gains.

HDFC (down 2.76%), Jaiprakash Associates (down 2.94%), and Larsen & Toubro (down 3.3%), declined.

Index heavyweight Reliance Industries (RIL) fell 0.61% to Rs 848 after gyrating between Rs 845.15 and Rs 857.25. Reportedly executives of RIL today held a meeting with Comptroller and Auditor General (CAG) officials on its showpiece KG-D6 gas fields during the Exit Conference the top auditor held as prelude to finalising its report.

India's largest oil exploration firm by net profit ONGC was up 0.36% to Rs 281.60 in volatile trade after oscillating between Rs 278.15 and Rs 283.70. The stock extended Monday's over 1% gain triggered by speculation the company's follow-on public offer (FPO) has been postponed.

Cairn India was down 0.92%. The company's parent Cairn Energy today announced that it has completed the sale of 19.19 crore shares or 10% stake in Cairn India to Vedanta for approximately $1.362 billion in cash. The sale of another 30% in Cairn India to Vedanta remains subject to necessary approvals from the Government of India, the company said. After the latest share sales, Cairn Energy holds 52.2% and the Vedanta Group holds 28.5% in Cairn India.

Essar Oil rose 0.27%. After market hours on Monday, 11 July 2011, the company reported a net profit of Rs 469 crore for Q1 June 2011, compared with net loss of Rs 70 crore for Q1 June 2010. Gross revenue rose 37% to Rs 16478 crore in Q1 June 2011 over Q1 June 2010. Quarterly current price gross refining margin (CP GRM) surged to $7.38 a barrel from $5.79 a barrel in Q June 2010. Essar Oil said it is increasing the focus on non-fuel retailing at its retail outlets.

Essar Oil's CEO and Managing Director Naresh Nayyar said that the company is quite close to completing the refining expansion project, which will enhance the refinery's complexity to 11.8, which in turn will have a strong positive impact on the refining margins.

The company is exploring the possibility of raising foreign currency loans to the extent of $1.5 billion in order to further optimize the finance cost. The company's net interest and finance charges declined sharply to Rs 96 crore from Rs 188 crore in Q June 2010.

Essar Oil has decided to seek re-validation of earlier approval of shareholders for passing an enabling resolution for the issue of further equity shares and/or convertible debentures and/or GDSs/ADRs/FCCBs by way of public and/or private offering in domestic/international market and/or qualified institutional placement for an amount not exceeding $2 billion.

IT bellwether Infosys lost 4.27% to Rs 2794.50 as consolidated net profit as per International Financial Reporting Standards fell 5.3% to Rs 1722 crore on 3.2% growth in revenue to Rs 7485 crore in Q1 June 2011 over Q4 March 2011. The stock was off the day's low of Rs 2749.35. The result was declared before market hours today, 12 July 2011.

Infosys has revised upwards its dollar earnings guidance for the year ending March 2012 (FY 2012) even as it has left its revenue guidance unchanged. The company now expects 10% to 11.5% growth in earnings per American Depositary Share (EPADS) at $2.88 to $2.92 in FY 2012 over the year ending March 2011 (FY 2011). As mentioned earlier, the company expects 18% to 20% growth in revenue at $7.13 billion to $7.25 billion in FY 2012 over FY 2011

Infosys has forecast an up to 1.49% growth in non-annualized EPADS at $0.67 to $0.68 for Q2 September 2011 from $0.67 in Q1 June 2011. The company has forecast 3.5% to 5.02% growth in revenue at between $1.73 billion to $1.755 billion in Q2 September 2011 over Q1 June 2011.

Infosys has revised its rupee EPS guidance for FY 2012 upwards. The company has projected 7.3% to 8.9% growth in EPS at between Rs 128.20 to Rs 130.08 in FY 2012 over FY 2011. The company has slightly revised upwards its revenue growth guidance for FY 2012. The company has projected 15.5% to 17.5% growth in revenue at between Rs 31777 crore and Rs 32311 crore in FY 2012 over FY 2011.

Infosys has forecast between a 1.65% decline to a 0.03% rise in non-annualized EPS at between Rs 29.64 to Rs 30.15 in Q2 September 2011 over Q1 June 2011. The company has forecast 2.85% to 4.34% growth in revenue at between Rs 7699 crore to Rs 7810 crore in Q2 September 2011 over Q1 June 2011.

Infosys' weak Q1 earnings weighed on other IT pivotals. India's third largest software services exporter Wipro slipped 1.87%. The firm declares its Q1 June 2011 results on 20 July 2011. India's largest software services exporter TCS declined 0.98%. The company unveils its Q1 June 2011 results on Thursday, 14 July 2011.

MphasiS tumbled 5.98% on reports Santander UK PLC is moving retail-banking-related call-center services, which had been outsourced to MphasiS, back to the UK following customer complaints. The move will be effective August 2011. Santander, a wholly owned unit of Spain's Banco Santander S.A, is reportedly one of MphasiS' largest clients. Santander had outsourced its call-center operations to MphasiS in 2003.

Aptech tumbled 5.75% on reports the company's board has shelved plans to list its China-based unit on the New York Stock Exchange for at least three years due to unfavourable market conditions. Aptech reportedly owns 22.4% stake in its China arm, BJB Career Education Company, which is the leading vocational training company of China in the field of information technology

Banking stocks fell in choppy trade as financials fell across Asia and Europe for the second day in a row on fears about the spread of Europe's debt crisis. India's largest private sector bank by net profit ICICI Bank fell 0.86%. ICICI Bank had raised its base rate by 25 basis points to 9.5% per annum with effect from 4 July 2011. The private sector bank also raised its benchmark prime lending rate (BPLR) and its floating reference rate (FRR) for consumer loans, including home loans. BPLR and FRR are used for determining interest rates on loans and advances sanctioned up to 30 June 2010.

India's largest commercial bank by branch network State Bank of India (SBI) dropped 1.5%. After market hours on Thursday, 7 July 2011, the bank informed that it has revised the base rate upwards by 25 basis points (bps) from 9.25% per annum to 9.50% per annum effective from 11 July 2011. The bank has revised the Benchmark Prime Lending Rate upwards by 25 bps from 14% to 14.25% effective from July 11, 2011. The bank has also revised upwards deposit rates on some maturities by up to 100 basis points.

India's second largest private sector bank by net profit HDFC Bank shed 1.92%. The bank on Monday reportedly increased the base rate by 25 basis points to 9.5% and benchmark prime lending rate to 18%. The new rates will be applicable from Tuesday, 12 July 2011. The bank has also increased it deposit rate for the one-year-16-days bucket by 75 basis points to 9.25% from 8.50%, reports added.

Bank of Baroda fell 0.95%. The state-run bank today announced a hike in interest rates on short duration fixed deposits. The bank has also raised its lending rates. It has raised base rate by 25 basis points to 10.25% and Benchmark Prime Lending Rate (BPLR) by 25 basis points to 14.50%.

Bank of India (down 0.93%), and Punjab National Bank (down 0.98%), declined.

SKS Microfinance spurted 8.31%, extending its rally for the fourth straight session triggered by the finance ministry, last week, releasing the draft of a bill aimed at developing and regulating microfinance institutions. The stock has surged 71.56% in just four trading sessions from a recent low of Rs 342.50 on 6 July 2011, after the release of the draft microfinance bill by the government after trading hours on 6 July 2011.

Auto stocks fell on profit taking after recent gains. India's largest truck maker by sales Tata Motors dropped 2.9%. 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 on 1 July 2011.

India's largest tractor maker by sales Mahindra & Mahindra fell 3.3%. The company, early this month, 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 car maker by sales Maruti Suzuki India slipped 1.23% on reports the company is once again headed for a confrontation with the rebel workers' body at its Manesar plant that witnessed a 13-day strike last month. According to reports, fresh trouble is brewing at Maruti Suzuki's Manesar plant as the rebel body--Maruti Suzuki Employees Union (MSEU)--has decided to boycott the union election slated for 16 July 2011.

India's largest bike maker by sales Hero Honda Motors fell 1.5%. The company, early this month, 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 had said in a statement recently.

India's second largest motorcycle maker by sales Bajaj Auto shed 2.03%. 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 4 July 2011.

Mining and metal stocks extended their recent slide triggered by reports a panel of ministers has approved the draft Mining Bill, which calls for miners to give to local communities an amount equivalent to royalties so as to compensate people displaced by such projects. Hindalco Industries (down 2.55%), Tata Steel (down 2.92%), National Aluminium Company (down 2.36%), Sterlite Industries (India) (down 0.85%), Sesa Goa (down 0.43%), Jindal Steel and Power (down 3.13%), and Steel Authority of India (down 1.44%), edged lower.

Coal India gained 2.2% on bargain hunting after a two-day 9.47% slump triggered by reports the draft Mining Bill requires coal miners to share 26% of their project's profits with local communities so as to compensate people affected by such projects.

According to the reports, the draft Mining Bill will now go to the Cabinet for approval. The bill requires parliamentary approval after passing by the Cabinet to become a law.

Telecom pivotals declined. India's largest listed cellular services provider by sales Bharti Airtel fell 1.05%. The company has given a 10-year contract to IBM whereby IBM will provide help-desk and other software-support services to Bharti's staff in 16 African countries.

India's second largest listed cellular services provider by sales Reliance Communications dropped 2.03%.

Interest rate sensitive realty shares declined on fears high interest rates will hit property demand. Orbit Corporation (down 3.92%), Housing Development & Infrastructure (HDIL) (down 5.89%), Indiabulls Real Estate (down 2.55%), Unitech (down 3.78%), Parsvnath Developers (down 1.76%), and DLF (down 4.1%), dropped.

Higher borrowing costs will make purchases of residential housing costlier for the buyer through the financing option. A number of commercial banks have raised lending rates recently.

Sugar shares retreated after the Food Minister K V Thomas reportedly ruled out additional sugar exports to ensure sufficient supplies for meeting festival demands in the coming months. Shree Renuka Sugars (down 5.24%), EID Parry (India) (down 1%), Barampur Chinni Mills (down 3.87%), Sakthi Sugars (down 3.19%), Bajaj Hindusthan (down 4.71%), Triveni Engineering & Industries (down 2.42%), Simbhaoli Sugars (down 1.23%) edged lower.

Emami jumped 3.51% on reports the company will invest Rs 65 crore to set up India's first ayush gram at Bhawali town of Uttarakhand, which the company hopes has the potential to become a major tourist attraction. According to reports, the ayush gram would include an ayurvedic hospital, a 3-star hotel, a tree house, a herbal garden, yoga and meditation centre, independent cottages, spa, and an ayurvedic museum.

Glenmark Pharmaceuticals gained 2.43%. During trading hours today, 12 July 2011, the company said it has received the second and final upfront payment of $25 million. The payment is a part of the GBR 500 deal signed by the company in May 2011. With this payment, Glenmark has now received the entire upfront payment of $50 million from Sanofi pertaining to the GBR 500 deal.

Rushil Decor was the top traded counter on BSE with turnover of Rs 269.92 crore followed by SKS Microfinance (Rs 207.91 crore), Infosys (Rs 187.17 crore), State Bank of India (Rs 83.96 crore), Coal India (Rs 77.66 crore), and BF Utilities (Rs 61.42 crore).

Cals Refineries clocked highest volume of 10.35 crore shares on BSE. Rushil Decor (1.77 crore shares), SpiceJet (90.81 lakh shares), Birla Pacific Medspa (75.05 lakh shares) and Lanco Infratech (37.20 lakh shares) were the other volume toppers in that order.

As the crucial corporate earnings season has begun, investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian 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.

IT giant TCS and two-wheeler major Bajaj Auto declare Q1 results on Thursday, 14 July 2011. HDFC Bank, Ashok Leyland and Crompton Greaves report Q1 results on 19 July 2011. Wipro, Dr Reddy's Lab and Exide Industries are set to announce Q1 results on 20 July 2011. Zee Entertainment Enterprises, JSW Energy, Biocon and Kotak Mahindra Bank unveil Q1 results on 21 July 2011. Private sector bank Axis Bank reports Q1 results on 22 July 2011.

Godrej Consumer Products reports Q1 earnings on 23 July 2011. Car major Maruti Suzuki, steel major JSW Steel and decorative paints major Asian Paints are set to unveil Q1 results on 26 July 2011. Infrastructure Development Finance Company (IDFC) unveils Q1 results on 27 July 2011. ICICI Bank and Power Finance Corporation unveil Q1 results on 29 July 2011. M&M announces Q1 results on 8 August 2011.

Industrial output in May 2011 rose a slower-than-expected 5.6% from a year earlier, government data showed on Tuesday. April's industrial output growth was revised downwards to 5.8% from 6.3%. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 5.6% in May 2011, compared with a revised 6.3% growth a month earlier.

Merchandise exports jumped 46.4% to $29.2 billion in June 2011 over June 2010, Commerce Secretary Rahul Khullar said on Friday. Imports in June rose 42.4% to $36.9 billion. The trade gap in June almost halved from a month earlier to $7.7 billion. It was at $15 billion in May.

The government has set a target of merchandise exports of $300 billion in the fiscal year through March 2012, after shipments topped the government's estimate and rose to a record high of $245.9 billion last year.

The annual monsoon covered the whole of India by 9 July 2011--a week earlier than the usual 15 July--but the total rainfall so far is 1% below normal, the weather department said on Sunday, 10 July 2011. The slight drop in rainfall is due mainly to a deficit of rains in Gujarat, Maharashtra and Andhra Pradesh. Gujarat is the country's largest cotton and groundnut producer, while Maharashtra is the top sugar producer and Andhra Pradesh is a key rice producer. Rainfall in Gujarat was 60% below normal at 96.2 millimeters, while that in Andhra Pradesh was about 15% below normal.

The country's oilseed sowing area until 8 July 2011 was 5.43 million hectares, down from 5.86 million hectares a year earlier. 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.

The finance ministry has urged other ministries to cut expenditure by trimming spending on conferences, overseas travel and purchase of new vehicles so as to help the government meet its budget deficit target. These measures are intended at promoting fiscal discipline without restricting the operational efficiency of the government, Expenditure Secretary Sumit Bose said in a memo. The finance ministry also said no cash from the central government will be transferred to states if the states fail to provide details about how the funds will be spent.

Meanwhile, Prime Minister Manmohan Singh today, 12 July 2011, reshuffled his Cabinet including Jairam Ramesh and Dinesh Trivedi in his core team. While Jairam Ramesh is the new minister for rural development, the railways has gone to Trinamool Congress (TC) leader Dinesh Trivedi. In the latest Cabinet reshuffle, Singh did not touch the big four ministries viz., finance, home, defense and external affairs but shifted M Veerappa Moily from Law to Corporate Affairs and brought Salman Khursheed in his place.

Beni Prasad Verma becomes a Cabinet Minister for Steel, a portfolio he earlier held as Minister of State with Independent charge. The other new faces in the Council of Ministers are Jayanthi Natarajan who gets Environment and Forests, Dibrugarh MP Paban Singh Ghatowar (DONER), Trinamool Congress leader Sudip Bandopadhyaya (Health and Family Welfare), Alwar MP Jitendra Singh (Home), Milind Deora (Communication and IT) and Rajiv Shukla (Parliamentary Affairs).

Ministers who have been dropped from the Cabinet are M S Gill (Statistics and Programme Implementation), B K Handique (DONER), Kantilal Bhuria (Tribal Affairs), Murli Deora (Corporate Affairs) and Dayanidhi Maran (Textiles). While Maran had resigned last week in the wake of his being named in the 2G scam, Deora had offered his resignation citing old age and had reportedly sought a berth for his son Milind.

European stock markets slumped on Tuesday on escalating fears that the euro-zone debt crisis is spreading to large economies such as Italy. The key benchmark indices in UK, France and Germany were down by 1.74% to 2.31%.

Following their meeting in Brussels, euro-zone finance ministers said late Monday they were prepared to adopt further measures that will improve the euro area's systemic capacity to resist contagion risk. But, they did not announce any specific measures. Worries have grown in recent days that political turmoil in Italy will hurt efforts to implement fiscal reforms in euro zone's third-largest economy.

Asian stocks tumbled on Tuesday, 12 July 2011, as fresh fears about the spread of Europe's debt crisis rattled investors, with financial stocks among the hardest hit. The key benchmark indices in Hong Kong, Japan, China, Indonesia, Singapore, South Korea and Taiwan were down by between 1.28% to 3.06%.

The Bank of Japan on Tuesday maintained its policy interest-rate range, as widely expected, and was more upbeat in its overall economic assessment. The policy board voted unanimously to keep its overnight call loan rate target in a range of zero to 0.1%. After its two-day meeting, the central bank said that Japan's economic activity is picking up with an easing of the supply side constraints caused by the earthquake disaster.

Trading in US index futures indicated that the Dow could fall 109 points at the opening bell on Tuesday, 12 July 2011. US stocks slumped on Monday as the next wave of the European sovereign-debt crisis threatened to engulf Italy and Spain, and prompted a surge in bond yields. The lack of resolution in the US debt-ceiling talks added to the uncertainty over the broader global economy.