Sensex, Nifty at one-week closing lows

A slide in European stocks pushed Indian shares to one-week lows as investors awaited first quarter corporate results, which begin later this week. The Sensex lost 17.59 points or 0.09%, up 44.37 points from the day's low and off 96.48 points from the day's high. The market breadth was positive. Most banking shares dropped as financials fell across Europe after Moody's Investor Service on Tuesday, 5 July 2011, downgraded Portugal's sovereign ratings. HDFC Bank bucked the trend, with the stock hitting a record high on expectations of strong Q1 results.

Index heavyweight Reliance Industries (RIL) rose in choppy trade, reversing Tuesday's over 2% slide. Some auto stocks extended recent gains triggered by expectations that sales will pick up in the second half of the year. IT pivotals fell as the rupee hit a two-month high against the dollar. Telecom pivotals saw divergent trend. Select metal stocks rose.



Shares of state-run oil marketing companies (PSU OMCs) and aviation firms declined as crude oil prices gained more than 2% on the New York Mercantile Exchange on Tuesday, 5 July 2011. Shares of tea plantation firms rose on reports the tea industry has demanded increase in the rate of subsidy under the Special Purpose Tea Fund from the existing 25% to 40%.

Data showing sustained buying by foreign funds over the past few days and intraday recovery in Asian shares helped Indian stocks drift higher in early trade. A bout of volatility was witnessed in morning trade as the key benchmark indices pared gains after striking intraday highs. The market once again slipped into the red to register fresh intraday low in mid-morning trade. The barometer index BSE Sensex hit one-week low. Weakness continued in afternoon trade. A bout of volatility was witnessed in mid-afternoon trade as the key benchmark indices recovered soon after hitting fresh intraday lows. The market alternately swung between gains and losses in late trade.

The BSE Sensex lost 17.59 points or 0.09% to settle at 18,726.97, its lowest closing level since 29 June 2011. The Sensex rose 78.89 points at the day's high of 18,823.45 in morning trade. The index fell 61.96 points at the day's low of 18,682.60 in mid-afternoon trade.

The S&P CNX Nifty shed 6.65 points or 0.12% to settle at 5,625.45, its lowest closing level since 29 June 2011

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,502 shares rose and 1,412 shares declined. A total of 104 shares remained unchanged. The breadth moved between positive and negative terrain in mid-afternoon trade.

The BSE Mid-Cap index rose 0.04% and the BSE Small-Cap index rose 0.23%. Both these indices outperformed the Sensex

The total turnover on BSE amounted to Rs 2662 crore, slightly lower than Tuesday's Rs 2674.27 crore.

Sectoral indices on BSE displayed mixed trend. The Bankex (down 0.93%), the BSE PSU (down 0.44%), and the BSE Healthcare (down 0.44%), underperformed the Sensex. The BSE Consumer Durables (up 1.39%), the BSE Capital Goods (up 0.51%), and the BSE Auto (up 0.37%), outperformed the Sensex.

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

Index heavyweight Reliance Industries (RIL) rose 0.74% to Rs 852.40, in volatile trade after gyrating between Rs 858.60 and Rs 841. The stock had declined over 2% on Tuesday, 5 July 2011, on reports that 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.

Shares of state-run oil marketing companies (PSU OMCs) fell as crude oil prices gained more than 2% on the New York Mercantile Exchange on Tuesday, 5 July 2011. Bharat Petroleum Corporation (BPCL) (down 1.37%), Hindustan Petroleum Corporation (HPCL) (down 0.42%) and Indian Oil Corporation (IOC) (down 0.68%) edged lower.

A rise in crude oil prices will increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government had freed pricing of petrol last year. Light, sweet crude oil gained $1.95 or 2.01%, to $96.89 a barrel on the New York Mercantile Exchange on Tuesday, 5 July 2011, bouncing back after a long holiday weekend, as commodities rose on demand optimism.

Aviation shares declined after crude oil prices edged higher on Tuesday, 5 July 2011. Jet Airways India (down 0.84%), Kingfisher Airlines (down 1.74%) and SpiceJet (down 2.14%), declined.

Aviation turbine fuel, or jet fuel constitutes more than 50% of operating cost for airliners. Prices of jet fuel are directly linked to crude oil prices.

IT pivotals fell as the rupee hit a two-month high against the dollar. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports. India's third largest software services exporter, Wipro, declined 1.05%. The firm declares its Q1 June 2011 results on 20 July 2011.

IT bellwether Infosys fell 0.08% ahead of its Q1 June 2011 earnings on Tuesday, 12 July 2011. Analysts expect Infosys to revise upwards its revenue and earnings growth forecast for the year ending March 2012 (FY 2012) in rupee terms, with the company seen beating its own guidance for Q1 June 2011 and due to higher pricing.

Salary hike and increase in tax rates due to the expiry of Software Technology Parks of India (STPI) tax benefits is seen pulling Infosys' net profit lower in Q1 June 2011 even as a good revenue growth is expected from the IT bellwether on the back of volume growth and uptick in pricing. A total of 7 brokerages expect a between 1.1% to 7.1% fall in Infosys' consolidated net profit as per International Financial Reporting Standards (IFRS) at between Rs 1689 crore to Rs 1797.20 crore in Q1 June 2011 over Q4 March 2011. Revenue is seen rising 2.6% to 4.15% at between Rs 7435 crore to Rs 7551.40 crore in Q1 June 2011 over Q4 March 2011.

India's largest software services exporter TCS was unchanged at Rs 1180.05. The company unveils its Q1 June 2011 results on 14 July 2011.

Most bank shares dropped as financials fell across Europe after Moody's Investor Service on Tuesday, 5 July 2011, downgraded Portugal's sovereign ratings. India's largest private sector bank by net profit ICICI Bank lost 2.08%. India's largest bank by net profit and branch network State Bank of India slipped 1.03%.

Punjab National Bank (down 0.80%), Bank of India (down 0.29%), and Bank of Baroda (down 0.06%), declined.

India's second largest private sector bank by net profit HDFC Bank rose 0.33% to Rs 2548.90, after striking a record high of Rs 2557 in intraday trade today. The bank is seen reporting a more than 30% growth in net profit in Q1 June 2011.

Some auto stocks extended recent gains triggered by expectations that sales will pick up in the second half of the year. India's largest truck maker by sales Tata Motors gained 1.51% to Rs 1032.35 and was the top gainer from the Sensex pack. 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.

Commercial vehicles maker Ashok Leyland rose 0.97% 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.

India's largest tractor maker by sales Mahindra & Mahindra fell 0.29%. 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 car maker by sales Maruti Suzuki India declined 0.38%. 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 0.68%. 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 lost 1.45%. 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%.

India's largest engineering and construction firm Larsen & Toubro gained 0.75% on reports the company expects to double overseas orders in three years with focus on the Gulf as rising oil prices and economic development spur investment in refineries and infrastructure there.

India's largest power electric equipment maker by sales Bharat Heavy Electricals (Bhel) shed 0.25% to Rs 1949 in volatile trade after oscillating between Rs 1978 and Rs 1946.10. The stock had tumbled more than 4% on Tuesday on worries the company's follow-on public offer (FPO) will be priced at a discount to the ruling market price. As per media reports, the Union Cabinet is likely to approve disinvestment of 5% government stake in the state-run power equipment company next week. A large FPO is normally priced at a discount to the ruling market price to attract investors to the issue.

Metal stocks were mixed. National Aluminium Company (up 0.53%), Tata Steel (up 0.08%), Sesa Goa (up 1.39%), and Hindalco Industries (up 0.96%) edged higher. Jindal Steel and Power (down 0.60%), Hindustan Zinc (down 0.80%), Steel Authority of India (down 0.95%), and Sterlite Industries (India) (down 1.10%) declined.

JSW Steel gained 1.79% after the company reported 9% growth in crude steel production to 17.10 lakh tonnes in Q1 June 2011 over Q1 June 2010. The company announced the production figures during trading hours today, 6 July 2011.

Telecom pivotals saw divergent trend. India's second largest listed cellular services provider by sales Reliance Communications dropped 2.76% to Rs 96.95, extending Tuesday's fall, and was the top loser from the Sensex pack.

India's largest listed cellular services provider by sales Bharti Airtel rose 0.54% to Rs 384 on 2.59 lakh shares and was the top gainer from the Sensex pack. The counter had witnessed high volume of 11.18 lakh shares on BSE on Tuesday with a deliverable volume of 90.6%. The stock's average daily traded volume was 6.1 lakh shares in the past quarter.

Shares of tea plantation firms rose on reports the tea industry has demanded increase in the rate of subsidy under the Special Purpose Tea Fund from the existing 25% to 40%. Mcleod Russel India (up 2.91%), Diana Tea Company (up 1.3%), Jay Shree Tea & Industries (up 1.44%), Goodricke Group (up 0.57%) and Harrisons Malayalam (up 0.07%), edged higher.

According to reports, the tea industry feels that the loss of revenue that planters need to bear during the gestation period post re-plantation of tea bushes should be somewhat compensated through this increased subsidy. The industry has also reportedly demanded to bring rejuvenation and infilling of tea bushes, both in plains and hills, within the ambit of Special Purpose Tea Fund (SPTF). Reports suggest that the Tea Association of India has already written to the Tea Board and has requested the government to incorporate the demands in the 12th five year plan, which will commence from next year. SPTF is a special corpus of the union ministry of commerce earmarked for replanting tea bushes across the country, which are more than 50 years old.

PVR rose 0.48% after the company purchased 40% equity share capital of PVR Pictures from JP Morgan Mauritius Holdings and India Advantage Fund, making PVR Pictures a wholly-owned subsidiary. PVR Pictures is the flagship film production and distribution arm of PVR Group. PVR made the announcement after trading hours on Tuesday, 5 July 2011.

VIP Industries clocked highest turnover of Rs 115.65 crore on BSE. Nesco (Rs 83.69 crore), BF Utilities (Rs 82.83 crore), Reliance Industries (Rs 82.60 crore) and Tata Coffee (Rs 76.70 crore) were the other turnover toppers in that order.

Birla Cotsyn clocked highest volume of 3.54 crore shares on BSE. Cals Refineries (1.33 crore shares), Birla Power (1.20 crore shares), GVK Power & Infrastructure (58.91 lakh shares) and IKF Technologies (48.54 lakh shares) were the other volume toppers in that order.

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. Ashok Leyland reports Q1 results on 19 July 2011. Wipro, Dr Reddy's Lab and Exide Industries are set to announce 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. Car major Maruti Suzuki unveils Q1 results on 26 July 2011. Infrastructure Development Finance Company (IDFC) unveils Q1 results on 27 July 2011.

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 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 on Tuesday, 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.

An Empowered Group of Ministers (EGoM) is reportedly scheduled to meet on 11 July 2011 to consider the crucial Food Security Bill and allow export of food grains.

European stocks dropped on Wednesday, 6 July 2011, highlighted by a sharp fall in Portuguese banks after Moody's Investors Service dropped the country's credit rating four notches to below investment-grade status. Key benchmark indices in France, Germany and UK were down by between 0.26% to 0.49%.

Fresh euro-zone debt concerns unfolded late Tuesday, when Moody's downgraded Portugal's long-term government bond ratings to speculative or "junk" grade. The agency cited growing risk that Portugal may need another round of official financing amid the growing likelihood it won't be able to get access to capital markets in the second half of 2013 and for some time afterward.

On Thursday, 7 July 2011, the European Central Bank's governing board is widely expected to approve a hike in interest rates of 0.25 percentage point.

Asian shares were mixed on Wednesday, 6 July 2011. The key benchmark indices in Japan, South Korea and Taiwan were up by between 0.44% and 1.10%. The key benchmark indices in China, Hong Kong, Indonesia and Singapore were down by between 0.21% to 1.01%.

Chinese central bank hiked lending and deposit rates by 25 basis points on Wednesday, 6 July 2011, marking the third such adjustments this year, coinciding with recent comments by senior Chinese leaders on the need to maintain price stability. The move, effective 7 July 2011, will bring the benchmark one-year lending rate to 6.56% and the one-year deposit rate to 3.5%. A hike from China had been predicted after the country's central bank said Monday that inflation pressures remain high, though the timing caught some investors by surprise after one report suggested the move would come this weekend.

Trading in US index futures indicated that the Dow could fall 43 points at the opening bell on Wednesday, 6 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.