Market closes at 25 month low

Key benchmark indices tumbled to hit their lowest level in more than two years led by a decline in capital goods stocks. The market fell for the third consecutive trading session. Index heavyweight Reliance Industries (RIL) dropped more than 3%. The barometer index, BSE Sensex, fell below the psychological 16,000 level, having alternately moved above and below that mark in intraday trade. Interest rate sensitive banking, auto and realty stocks declined after Reserve Bank of India (RBI) kept cash reserve ratio (CRR) and short-term lending rate steady after mid-quarter monetary policy review today.



The BSE Sensex was down 345.12 points or 2.18%, off close to 580 points from the day's high and up about 65 points from the day's low. The market breadth was weak. Capital goods stocks extended recent losses on worries new order flows will be hit adversely in a slowing economy, with L&T and Bhel hitting 52 week lows. IT stocks fell as rupee strengthened against the dollar after the Reserve Bank of India took steps to check the recent sharp slide in the local currency. ICICI Bank, Sterlite Industries and Tata Steel hit 52-week lows.

The Sensex has fallen 632.11 points or 3.92% so far this month. The Sensex has slumped 5,017.14 points or 24.46% in calendar 2011. From a 52-week high of 20,664.80 on 3 January 2011, the Sensex has lost 5,173.45 points or 25.03%.

Coming back to today's trade, the market opened on a firm note as Asian stocks rose. The Sensex trimmed gains after hitting fresh intraday high in morning trade. The barometer index, BSE Sensex, alternately moved above and below the psychological 16,000 level in mid-morning trade. A bout of volatility was witnessed in early afternoon trade as key benchmark indices regained strength after paring gains from intraday highs after the Reserve Bank of India (RBI) left its key lending rate unchanged. The RBI announced the decision at about 12:00 IST. The market regained strength in afternoon trade. Volatility was at the forefront as key benchmark indices gave almost all the intraday gains to hit fresh intraday low in mid-afternoon trade after hitting fresh intraday high in afternoon trade. The market slumped in late trade.

Data showing selling by foreign funds recently weighed on sentiment. Foreign institutional investors (FIIs) sold shares worth Rs 323.28 crore on Thursday, 15 December 2011, as per the provisional data from the stock exchanges. FII outflow totaled Rs 1701.09 crore in five trading sessions from 9 to 15 December 2011, as per provisional data from the stock exchanges. The recent outflow followed sustained inflow early this month.

The RBI on Friday left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. The central bank also refrained from cutting the cash reserve ratio (CRR) despite tight liquidity in the system. The repo rate has been left steady at 8.5% after increasing it 13 times since March 2010. The bank rate also remains static at 6%. The central bank kept its end-March 2012 inflation forecast unchanged at 7%.

While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI said in a statement. The guidance given in the second quarter review of the monetary policy was that, based on the projected inflation trajectory, further rate hikes might not be warranted. In view of the moderating growth momentum and higher downside risks to growth, this guidance is being reiterated, RBI said. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI said.

However, it must be emphasized that inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces, the central bank said in statement. Also, the rupee remains under stress, RBI said. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

RBI said there are currently no significant signs of stress in the money market. However, in view of the fact that borrowings from the LAF are persistently above the Reserve Bank of India's comfort zone, further open market operations (OMOs) will be conducted as and when seen to be appropriate, RBI said.

The BSE Sensex was down 345.12 points or 2.18% to 15,491.35, its lowest closing level since 3 November 2009. The index jumped 232.43 points at the day's high of 16,068.90 in mid-afternoon trade, its highest level since 14 December 2011. The index slumped 411.27 points at the day's low of 15,425.20 in late trade.

The S&P CNX Nifty was down 94.75 points or 2% to 4,651.60, its lowest closing level since 3 November 2009. The index hit a hit a high of 4,818.85 in intraday trade, its highest level since 14 December 2011. The Nifty hit a low of 4,628.20 in intraday trade.

The BSE Mid-Cap index fell 1.72% and the BSE Small-Cap index shed 1.6%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2177 crore, higher than Rs 2041.89 crore on Thursday, 15 December 2011.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,932 shares fell and 826 shares rose. A total of 120 shares were unchanged. The breadth was strong earlier in the day.

From the 30-member Sensex pack, 28 stocks fell and only two of them rose.

Index heavyweight Reliance Industries (RIL) fell 3.48% to Rs 723. The stock was volatile. The stock hit a high of Rs 761.25 and a low of Rs 719. The company's advance tax payment reportedly fell 15.79% to Rs 1002 crore in Q3 December 2011 over Q3 December 2010. Oil minister Jaipal Reddy said in a written reply in the lower house of parliament on Thursday, 15 December 2011, that the decline in gas output from RIL's east coast block is due to the company drilling fewer number of wells than promised and stoppage of production at six wells.

RIL late last month said that it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company's entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks. RIL said it has initiated arbitration proceedings against the Government of India (GoI) in a bid to finally resolve the cost recovery issue so as not to hinder future investments in this block.

RIL said its investment in KG-D6 production facilities has been only partly recovered and the return on the investment so far is less than the cost of the capital. The production sharing contract (PSC) with the Government of India (GoI) contains no provision which entitles the GoI to restrict the costs recovered by the company by reference to factors such as the level of production or the extent to which field facilities are utilised, RIL said.

Interest rate sensitive realty stocks declined after Reserve Bank of India (RBI) kept short term lending rates steady. Purchases of both residential and commercial property are largely driven by finance. DLF, HDIL, Unitech, and Indiabulls Real Estate fell by between 1.92% to 7.78%.

Capital goods stocks tumbled on worries new order flows will be hit adversely in a slowing economy. Engineering and construction major, L&T slumped 5.33% to Rs 1075.80. The stock hit a 52-week low of Rs 1063 today. The stock was the top loser from the Sensex pack.

Bhel fell 3.88% to Rs 240.45. The stock hit a 52-week low of Rs 238 today. The stock was the second biggest loser from the Sensex pack.

Among other capital goods stocks, BGR Energy Systems, Bharat Electronics, Suzlon Energy, Praj Industries, Havells India, ABB, and Punj Lloyd shed by between 1.18% to 10.06%.

Sterlite Industries fell 4.28% to Rs 89.40. The stock hit a 52-week low of Rs 88.40 today.

Tata Steel shed 2.72% to Rs 364.95. The stock hit a 52-week low of Rs 362.30 today.

Among other metal stocks, Jindal Saw, Sail, Bhushan Steel, JSW Steel, Hindalco Industries, and Jindal Steel & Power fell by between 0.16% to 5.14%.

IT stocks fell as rupee strengthened against the dollar after the Reserve Bank of India took steps to check the recent sharp slide in the local currency. India's third largest software services exporter by revenue Wipro fell 0.63%. India's second largest software services exporter by revenue Infosys was flat. India's largest software services exporter TCS declined 3.31%. TCS today, 16 December 2011, said it has evacuated nearly 1,600 staff from one of its training facilities in Chennai after a bomb scare at the center. The incident won't have any impact on business operations in Chennai, as the employees were mostly trainees, TCS said in a statement. Police and specialist teams have taken control of the facility and are investigating the incident, the company said.

A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. The rupee was at 52.73/75 per dollar, stronger than its previous close of 53.64/65 on Thursday. The rupee had touched a record low of 54.30 in intraday deals on Thursday.

Interest rate sensitive banking stocks fell after Reserve Bank of India (RBI) kept cash reserve ratio (CRR) and short-term lending rate steady after mid-quarter monetary policy review today. India's second largest private sector bank by net profit, HDFC Bank, declined 3.57%. The bank's advance tax reportedly rose 20% to Rs 900 crore in Q3 December 2011 over Q3 December 2010.

India's largest private sector bank by net profit, ICICI Bank fell 3.18% to Rs 676.05. The stock hit a 52-week low of Rs 667 today. The bank's advance tax reportedly remained flat at Rs 450 crore in Q3 December 2011.

India's largest bank by net profit and branch network State Bank of India (SBI) declined 3.67%. The bank's advance tax reportedly fell 6.48% to Rs 1730 crore in Q3 December 2011 over Q3 December 2010.

The RBI said that year-on-year non-food credit growth at 17.5% on 2 December 2011 was below its indicative projection of 18%.

Interest rate sensitive auto stocks reversed intraday gains as the Reserve Bank of India (RBI) kept short term lending rate steady. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.

India's largest passenger vehicle maker by sales Tata Motors fell 0.29%. The company's advance tax reportedly fell 93.27% to Rs 80 crore in Q3 December 2011 over Q3 December 2010. The company's global vehicle sales rose an annual 35% to 1,08,028 units in November 2011 over November 2010, the company said in a statement on Thursday, with its luxury Jaguar Land Rover unit reporting a 27% rise in sales to 29,183 units. Sales of Jaguar cars fell 5% to 5,315 units while those of Land Rover sport-utility vehicles gained 38% to 23,868 units. The company said it sold 49,724 trucks and buses globally in November, up 24% from a year earlier.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) declined 0.94%. The company's advance tax reportedly fell 4.34% to Rs 220 crore in Q3 December 2011 over Q3 December 2010. The company on Thursday, 15 December 2011, said it will raise prices of its vehicles by up to 3% in January 2012 to offset the effects of rising raw-material costs. The company's total auto sales jumped 52.7% to 40,722 units in November 2011 over November 2010.

India's largest car maker by sales Maruti Suzuki India fell 0.24%. The company's total sales fell 18.5% to 91,772 units in November 2011 over November 2010.

Ashok Leyland shed 3.14%. The company reported 53.36% jump in commercial vehicle sales at 7,878 units in November 2011 over November 2010.

India's largest motorcycle maker by sales Hero MotoCorp fell 1.76%. The company's advance tax reportedly rose 50% to Rs 180 crore in Q3 December 2011 over Q3 December 2010. The company's sales rose 27.4% to 536,772 units in November 2011 over November 2010.

India's second largest motorcycle maker by sales Bajaj Auto dropped 0.12%. The company's advance tax reportedly rose 21.62% to Rs 450 crore in Q3 December 2011 over Q3 December 2010. Bajaj Auto's total vehicle sales jumped 25% at 374,477 units in November 2011 over November 2010.

Car sales in India rose in November, the first monthly rise in five, an industry body said on Thursday, 8 December 2011, as the industry rebounded strongly from the biggest fall in over a decade the month before. Domestic passenger car sales increased by 7% to 1,71,131 units in November 2011, from 1,59,939 units in the same month last year. According to figures released by the Society of Indian Automobile Manufacturers (SIAM) on Thursday, motorcycle sales in the country grew by 22.67% to 8,69,070 units during the month from 7,08,476 units in the corresponding month last year. Total two-wheeler sales grew by 25.27% to 11,63,294 units last month from 9,28,660 units in November 2010, as per the data. Sales of commercial vehicles grew by 34.99% to 66,264 units in the month under review from 49,087 units in the year-ago period, SIAM said.

Coal India fell 3.2% after interim chairman of the state-run company Nirmal Chandra Jha on Thursday said the steep recent slide of the rupee against the dollar will lower the company's net profit for the year ending March 2013 (FY 2013) as the company spends about Rs 3000 crore annually to import mining equipment.

Aviation stocks reversed initial gains in a weak market. Public sector oil marketing companies cut jet fuel rates by 1.3% on Thursday, 15 December 2011, in step with softening in commodity's international rates. SpiceJet (down 0.58%), Jet Airways (India) (down 6.04%) and Kingfisher Airlines (down 4.6 %) edged lower. Jet fuel or aviation turbine fuel (ATF) typically makes up almost half of an airline's operating cost and the latest cut in prices will slightly ease burden on the cash-strapped airlines.

The price of ATF in Delhi was cut by Rs 833 per kilolitre (kl) or 1.3% to Rs 63,739 per kl with effect from midnight Thursday (15 December 2011). The three public sector oil marketing companies (PSU OMCs) -- BPCL, HPCL and Indian Oil Corporation -- revise jet fuel prices on the 1st and 16th of every month, based on the average international price in the preceding fortnight.

Cals Refineries clocked highest volume of 1.43 crore shares on BSE. Birla Cotsyn (88.61 lakh shares), Kwality Dairy (68.92 lakh shares), Birla Power Solutions (48.04 lakh shares) and Suzlon Energy (47.67 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 240.33 crore on BSE. L&T (Rs 82.49 crore), RIL (Rs 81.86 crore), ICICI Bank (Rs 75.28 crore) and Axis Bank (Rs 69.04 crore) were the other turnover toppers in that order.

As per reports, advance taxes for the third quarter from corporates headquartered in Mumbai have risen 10%. Cements and pharma companies have reported surge in advance tax payment for the third quarter. Advance taxes are collected in four installments -- 15% by 15 June; 40% by 15 September; 75% by 15 December and 100% by 15 March.

Credit rating agency Moody's Investors Service on Wednesday, 14 December 2011, said that the sharp decline in the value of the Indian rupee against the dollar is generally exerting only a moderate impact on rated Indian companies. Risks for companies holding large amounts of dollar denominated debt are also manageable in the near term, given that debt maturities are limited for this time frame, Moody's said in a new report. This means Indian companies rated by Moody's do not have a significant dollar outflow at a time when the Indian rupee is losing ground. Moody's latest assessment comes as the rupee continued its free fall against the dollar on Thursday, 15 December 2011, sinking to a new record low for the fourth straight day, as investors fled risk-sensitive currencies due to escalating concerns over Europe's sovereign debt crisis.

The Reserve Bank of India (RBI) took steps on Thursday to arrest the free-fall of the rupee after the local currency hit a new record low against the dollar for the fourth consecutive day. The new currency rules include reducing the net amount of US dollar-versus-rupee trade that authorized foreign-exchange dealers can hold on their books. Another measure of the bank's new rules would limit the amount of currency hedging by importers, who typically buy dollars.

A government statement in parliament last month dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam has said that the government has no proposal to lower the securities transaction tax (STT). There has been a speculation that the government will reduce STT in Union Budget 2012-2013 in a bid to revive sagging volumes on the bourses. Palanimanickam said in a written reply to Rajya Sabha that the securities transaction tax receipts had declined by around 18% to Rs 2960 crore during the first six months in the current fiscal year from a year ago period.

The government last week said that the Rs 40000-crore stakes sale target in state-run companies would be hard to achieve this fiscal year, while tax receipts would suffer from the impact of the global slowdown.

European stock edged higher on Friday after positive data in US on Thursday. Key benchmark indices in Germany, UK and France rose by between 0.02% to 0.9%.

Asian shares edged higher on Friday, 16 December 2011, as signs of strength in the US economy temporarily broke through gloom over the European debt crisis that had driven a sell-off in riskier assets over the past three days. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Taiwan, Singapore and South Korea rose by between 0.29% to 2.02%.

Trading in US index futures indicated that the Dow could gain 66 points at the opening bell on Friday, 16 December 2011. US stocks rose modestly on Thursday, after a fall in US unemployment, a stronger-than-expected rise in regional factory activity and better-than-forecast results from FedEx Corp painted an improving picture of the economy. Jobless claims in the US dropped to a three and a half year low last week.

Fitch Ratings, the third-biggest of the major credit rating agencies, has downgraded seven global banks based in Europe and the United States, citing "increased challenges" in the financial markets. Bank of America Corp., Goldman Sachs and Citigroup had their credit grades cut by Fitch. Barclays, Credit Suisse, Deutsche Bank and BNP Paribas also had their ratings lowered by Fitch.