Sensex, Nifty settle at one-week lows

Key benchmark indices tumbled today, 8 December 2011, after a newspaper report suggested that industrial output declined by 7% in October 2011, falling for the first time since June 2009. The 50-unit S&P CNX Nifty fell the psychological 5,000 mark. The barometer index, BSE Sensex, lost 388.82 points or 2.30%, up about 67 points from the day's low and off close to 360 points from the day's high. The Sensex and the Nifty settled at one-week lows. Index heavyweight Reliance Industries (RIL) fell nearly 4%. All the 13 sectoral indices on BSE were in the red. The market breadth was weak. Mid-cap and small-cap indices on BSE outperformed the Sensex.

The Sensex has risen 364.78 points or 2.26% this month so far. The Sensex has slumped 3,208.24 points or 16.29% in calendar 2011. From a 52-week high of 20,664.80 on 3 January 2011, the Sensex has lost 4176.56 points or 20.21%. From a 52-week low of 15,478.69 on 23 November 2011, the Sensex has risen 1,009.55 points or 6.52%.



Pharma stocks bucked the weak trend today, 8 December 2011, on defensive buying. Unitech, D B Realty and Reliance Anil Dhirubhai Ambani (ADA) Group stocks dropped on concerns about the possible fallout from the ongoing 2G case after a trial court today, 8 December 2011, allowed Janata Party chief Subramanian Swamy to become a witness in his complaint against home minister P Chidambaram in 2G case.

Metal stocks fell as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 0.63% on Wednesday, 7 December 2011. Capital goods stocks tumbled on reports that the capital goods sector led decline in industrial output in October 2011. Interest rate sensitive banking and realty stocks fell on profit taking after recent gains triggered by hopes that a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases next week.

The market trimmed losses after a weak opening. The initial recovery proved short-lived. The market weakened again to hit fresh intraday low in morning trade. The market slumped to hit its lowest levels in nearly one week in mid-morning trade. The market trimmed losses in early afternoon trade as food inflation eased further in late November 2011. The intraday recovery gathered steam in afternoon trade. Intraday volatility continued as key benchmark indices trimmed losses after weakening once again in mid-afternoon trade as European stocks rose in early trade. High volatility was witnessed in late trade.

The BSE Sensex lost 388.82 points or 2.3% to settle at 16,488.24, its lowest closing level since 1 December 2011. The index fell 455.51 points at the day's low of 16,421.55 in late trade, its lowest level since 30 November 2011. The index declined 29.24 points at the day's high of 16,847.82 in early trade.

The S&P CNX Nifty fell 118.95 points or 2.35% to settle at 4,943.65, its lowest closing level since 1 December 2011. The Nifty hit a low of 4,921.45 in intraday trade. The Nifty hit a high of 5,049.05 in intraday trade.

The BSE Mid-Cap index fell 1.77% and the BSE Small-Cap index fell 1.61%. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was weak. On BSE, 1,910 shares fell and 842 shares rose. A total of 116 shares were unchanged.

BSE clocked turnover of Rs 1981 crore, lower than Rs 3092.83 crore on Wednesday, 7 December 2011.

From the 30-member Sensex pack, 25 shares fell and rest of them rose. Jaiprakash Associates (down 5.41%), SBI (down 3.66%) and M&M (down 3.60%), edged lower from the Sensex pack.

Index heavyweight Reliance Industries (RIL) fell 3.71% to Rs 779.20. The company 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 all the investments in the exploration, development and production of hydrocarbons from KG-D6 were made by RIL and its foreign partners at their own risk, and not by the Government of India (GoI). RIL and its partners are entitled under the production sharing contract (PSC) with the GoI to recover their full costs from the revenues generated by production from the block, RIL said in a statement.

The investment made 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, RIL said. The PSC 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. RIL said it has initiated arbitration proceedings against the GoI in a bid to finally resolve the cost recovery issue so as not to hinder future investments in this block.

India's third largest software services exporter by revenue Wipro rose 2.35% to Rs 413.25. Wipro Technologies, the global information technology, consulting and outsourcing business of Wipro, has announced its plans to create a focused global unit called Business Operation Unit, which will enable Wipro to deliver differentiated value for clients with seamless, predictable execution. It will consolidate its business application services, global delivery, quality and IS teams under the newly formed Business Operation Unit.

Unitech, D B Realty and Reliance Anil Dhirubhai Ambani (ADA) Group stocks dropped on concerns about the possible fallout from the ongoing 2G case after a trial court today, 8 December 2011, allowed Janata Party chief Subramanian Swamy to become a witness in his complaint against home minister P Chidambaram in 2G case. Among the Reliance ADA group companies, Reliance Communications (down 5.79%), Reliance Capital (down 5.71%), Reliance Infrastructure (down 4.90%), Reliance Power (down 3.57%), Reliance MediaWorks (down 3.22%) and Reliance Broadcast Network (down 2.83%), edged lower. Unitech (down 5.37%) and D B Realty (down 5.06%), tumbled.

Special court's move to allow a plea against Home Minister P. Chidambaram has raised fresh fears about the outcome of the case for companies named by the CBI. Although the Reliance ADA officials who are co-accused in the 2G case have been granted bail by the courts, a special court's move today to allow a plea against Chidambaram has raised fresh fears about the outcome of the case for companies named by the CBI.

Interest rate sensitive banking stocks fell on profit taking after gaining recently on hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. India's largest private sector bank by net profit ICICI Bank dropped 3.07%. India's second largest private sector bank by net profit HDFC Bank fell 2.59%. India's largest bank by net profit and branch network State Bank of India (SBI) declined 3.66%.

Among other bank shares, Union Bank of India (down 4.38%), IDBI Bank (down 3.75%), Axis Bank (down 3.48%), Yes Bank (down 2.98%), Canara Bank (down 2.71%), IndusInd Bank (down 2.21%), Kotak Mahindra Bank (down 2.03%), Bank of India (down 1.82%), Bank of Baroda (down 1.61%) and Federal Bank (down 0.54%), edged lower.

Capital goods stocks tumbled on reports that the capital goods sector led decline in industrial output in October 2011. India's largest power equipments maker by sales Bhel tumbled 5.28%. Engineering and construction company major L&T slipped 5.11%.

Among other capital goods shares, BGR Energy Systems (down 6.22%), Punj Lloyd (down 5.61%), Alstom Projects (down 5.58%), ABB (down 4.28%), Praj Industries (down 3.96%), Suzlon Energy (down 3.78%), Crompton Greaves (down 3.64%), Lakshmi Machine Works (down 2.86%), Siemens (down 2.15%), BEML (down 1.53%), SKF India (down 1.31%), Areva T&D India (down 0.89%), Thermax (down 0.83%), Pipavav Defence (down 0.75%) and Bharat Electronics (down 0.05%), edged lower.

Interest rate sensitive realty stocks fell on profit taking after recent gains triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Purchases of both residential and commercial property are largely driven by finance.

Indiabulls Real Estate (down 6.98%), HDIL (down 5.98%), DLF (down 4%), Anant Raj Industries (down 3.87%), Peninsula Land (down 3.64%), Phoenix Mills (down 3.22%), Prestige Estates (down 3.12%), Oberoi Realty (down 2.76%), Sobha Developers (down 2.09%) and Sunteck Realty (down 0.42%), edged lower.

Metal stocks fell as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 0.63% on Wednesday, 7 December 2011. Sesa Goa (down 5.81%), Nalco (down 5.64%), Hindalco Industries (down 5.02%), Sterlite Industries (down 4.38%), NMDC (down 3.20%), Tata Steel (down 3.06%), JSW Steel (down 3.03%), Hindustan Zinc (down 1.28%), Jindal Steel & Power (down 1.20%) and Bhushan Steel (down 0.55%), edged lower.

Coal India lost 3.47% to Rs 313.20 after the company reportedly lowered its production target for the ongoing financial year ending March 2012 to at least 440 million tonnes from the estimate of 452 million tonnes in its annual plan.

Airline stocks tumbled in a weak market. Jet Airways, Kingfisher Airlines and SpiceJet shed by between 2.73% to 5.01%.

Pharma stocks bucked the weak trend. Piramal Healthcare (up 2.32%), Sun Pharmaceutical Industries (up 1.49%), Cipla (up 1.31%), Dr Reddy's Laboratories (up 0.96%) and Ipca Laboratories (up 0.94%), edged higher.

Cairn India fell 3.74% to Rs 310.30. British oil firm Cairn Energy Plc today said it has completed the sale of 30% stake in its Indian unit Cairn India to mining giant Vedanta. Sesa Goa, a unit of London-listed Vedanta Resources, had yesterday stated that it has raised its stake in Cairn India to 20% following the acquisition of additional shares, amounting to a 1.5% stake. Cairn Energy said it retains about 22% in Cairn India. Shares of Sesa Goa slumped 6.36%.

Infotech Enterprises declined 1.30% to Rs 124.95 after 0.36% equity changed hands in a bulk deal on the BSE today, 8 December 2011.

State Bank of India reported a highest turnover of Rs 135.78 crore on BSE. Reliance Industries (Rs 74.19 crore), ICICI Bank (Rs 57.84 crore), L&T (Rs 53.51 crore) and Bharat Forge (Rs 50.83 crore), were the other turnover toppers on BSE in that order.

Cals Refineries reported a highest volume of 84.15 lakh shares on BSE. Suzlon Energy (48.29 lakh shares), Reliance Communications (36.61 lakh shares), GVK Power & Infrastructure (36.43 lakh shares) and Dhanalakshmi Bank (34.01 lakh shares), were the other volume toppers on BSE in that order.

A government statement in parliament has dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam, last month, 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.

A newspaper report today, 8 December 2011, quoted an unnamed source as saying that industrial output declined by 7% in October 2011, dragged down by a fall in the capital goods sector. The last time the industrial production had reported a decline was way back in June 2009. "Initial estimates show that industrial production has shrunk by 7%. But with more data coming in, the decline may be around 5%," the newspaper quoted the source as saying. The government is due to officially announce the industrial production date for October 2011 on Monday, 12 December 2011.

Food inflation in India slid further in the fourth week of November, falling under the 7% mark, data released by the Government showed on Thursday. Fuel inflation remained steady. Food inflation declined to 6.6% in the week ended November 26 from 8% in the preceding week, the Commerce & Industry Ministry said today. Food inflation stood at 8.93% in the corresponding week last year. Inflation in the Primary Articles group fell to 6.92% in the week under review, from 7.74% in the week ended November 19, according to the Commerce Ministry statement. It was at 14.01% in the year-ago period. Inflation in the Fuel & Power group stood at 15.53% in the week ended November 26, unchanged compared to the previous week, the latest data showed. It was at 10.07% in the comparable week of the previous year.

Easing food inflation could nudge the central bank to reverse its tight monetary policy stance as economic growth is stuttering. Food inflation has been a key driver of headline inflation in India over the past few years.

Meanwhile, a trial court has allowed Janata Party chief Subramanian Swamy to become a witness in his complaint against home minister P Chidambaram in 2G case. The Court has asked Swamy to appear in the witness box on December 17 to make his statement. The special CBI court will then decide on Swamy's plea to examine witnesses to establish Chidambaram's alleged role in the second generation (2G) spectrum allocation scam.

The court had accepted Swamy's plea to examine two officials in the 2G case which he says will help him prove Union home minister P Chidambaram's alleged role in the scam. As part of the process of establishing Chidambaram's alleged role, Swamy had sought the court's permission to examine the two witnesses -- a joint director of the CBI and a joint secretary in the finance ministry. Swamy's demand is that Chidambaram be made a co-accused in the 2G case. Swamy says that decisions taken by then telecom minister A raja, who has been jailed over the 2G scam, were endorsed by Chidambaram and demands the CBI investigate Chidambaram's role in the scam.

The Indian economy expanded at a substantially lower rate in the second quarter of the current fiscal year as a series of rate increases by the RBI and a global slowdown hurt local demand. India's economy grew 6.9% in Q2 September 2011, in line with expectations, after expanding by 7.7% in the first quarter, government data showed on 30 November 2011. The manufacturing sector grew an annual 2.7% during the July-September quarter while farm output rose an annual 3.2% the data showed. India's GDP growth in the first six months of FY 2012 stood at 7.3% versus 8.6% in the corresponding period of the last financial year, the CSO data showed on 30 November 2011.

The output of the eight infrastructure industries dropped to an over six-year low of 0.1% in October 2011, data released on 30 November 2011 showed, suggesting further slowdown in already wobbly industrial growth. The eight infrastructure industries together have a 38% weight in the index of industrial production (IIP), which makes the infrastructure index a good leading indicator of industrial production.

India's manufacturing sector expansion slowed in November as factory output grew at its slowest pace in nearly three years although export demand should provide some cheer for factories, a survey showed on 1 December 2011. The HSBC Markit India Manufacturing PMI fell to 51 in November from 52 in October, but has stayed above the 50 mark that divides growth from contraction for 32 months. The PMI was 50.4 in September.

On the flip side, India's services sector expanded in November for the first time in two months as new business accelerated despite persistent inflationary pressures, a survey showed on Monday. The seasonally adjusted HSBC Markit Business Activity Index -- based on a survey of around 400 firms -- stood at 53.2 in November, above the 50-mark that separates growth from contraction. It had fallen to 49.1 in October after contracting for the first time in more than two years in September to 49.8. Despite tight monetary conditions, the sub-index for new business accelerated to 52.3 in November from 51 in October, driving the turnaround in the service sector.

India's merchandise exports in October rose by 10.8% to $19.87 billion, while imports during the same month climbed by 22% to $39.51 billion, data released by the government showed on 1 December 2011. As a result, the trade deficit for October 2011 stood at $19.64 billion versus $14.53 billion in the corresponding month a year earlier.

The Reserve Bank of India (RBI) announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably. RBI unveils mid-quarter monetary policy review on 16 December 2011.

European stocks were mixed on Thursday. These markets had risen early trade in anticipation of a rate cut by the European Central Bank and ahead of a key European Union summit to discuss and look for a solution to the euro-zone debt crisis. Key benchmark indices in France (down 0.42%) and Germany (down 0.04%). UK's FTSE 100 was up 0.08%.

Investors await results of meetings this week of the European Union and European Central Bank (ECB). European leaders are due to meet in Brussels on Thursday, 8 December 2011, for a two-day summit billed as crucial for the debt-stricken region. German Chancellor Angela Merkel and French President Nicolas Sarkozy have proposed broad treaty changes that would toughen fiscal rules and impose automatic sanctions on countries that violate budget limits.

Meanwhile, the ECB is likely to reduce its benchmark rate to 1% from 1.25% at a policy meeting later in the global day today, 8 December 2011. The ECB may also announce additional liquidity measures. The Bank of England (BoE) also meets today to review its monetary policy. The BoE is expected to leave its monetary policy unchanged.

Asian stocks dropped on Thursday ahead of a European summit on the region's sovereign debt crisis, and as economic data from Japan and Australia signaled the global economy is slowing. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.12% to 1.95%.

Japan's machinery orders unexpectedly fell for a second straight month in October. Australia's unemployment rate ticked up to 5.3% as employers unexpectedly reduced their payrolls in November.

South Korea's central bank on Thursday left its main policy rate steady to protect domestic growth amid growing concerns about the health of the US and European economies. The Bank of Korea kept its benchmark rate at 3.25% for a sixth month, it said in Seoul today. The rate has been on hold since the last rate increase in June. Bank Indonesia, too, maintained borrowing costs at 6%. Bank Indonesia said its decision reflected risks to growth.

Trading in US index futures indicated that the Dow could fall 36 points at the opening bell on Thursday, 8 December 2011. US stocks were little changed in choppy, light trading on Wednesday as investor reacted to reports from Europe ahead of that region's summit of leaders to discuss the 2-year old euro-zone sovereign debt crisis.