Market snaps five-day winning streak after S&P warning

Key benchmark indices snapped five-day winning streak after global rating agency Standard & Poor's warned that India could become the first BRIC nation to lose its investment-grade rating if the South Asian country doesn't revive its growth and push the pedal on reforms. The barometer index, BSE Sensex, was down 50.86 points or 0.3%, up close to 40 points from the day's low and off close to 225 points from the day's high. The market breadth was positive. The Sensex had risen 753.71 points or 4.72% in five trading sessions to settle at 4-1/2-week closing high of 16,718.87 on Friday, 8 June 2012, from a recent low of 15,965.16 on 1 June 2012. The Sensex has risen 449.48 points or 2.77% so far in this month (till 11 June 2012). The barometer index has gained 1,213.09 points or 7.84% in calendar 2012 so far (till 11 June 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1,532.15 points or 10.12%. From a 52-week high of 19,131.70 on 8 July 2011, the Sensex has lost 2,463.69 points or 12.87%. Coming back to today's trade, index heavyweight Reliance Industries (RIL) reversed initial gains. Pharma stocks declined across the board. Capital goods, realty and banking stocks reversed intraday gains. Diesel vehicle makers reversed initial gains as Oil Minister S. Jaipal Reddy on Friday, 8 June 2012, said his ministry has recommended that the tax on diesel vehicles should be raised. The market surged in early trade. The 50-unit S&P CNX Nifty hit five-week high. The Sensex hit its highest level in nearly five weeks. The market trimmed gains after hitting fresh intraday high in morning trade. The market regained strength in mid-morning trade. Firmness continued in early afternoon trade. The market pared gains in afternoon trade. A bout of volatility was witnessed as key benchmark indices regained strength in mid-afternoon trade. The market reversed intraday gains to hit fresh intraday low in late trade after global rating agency Standard & Poor's warned that India could become the first BRIC nation to lose its investment-grade rating if the South Asian country doesn't revive its growth and push the pedal on reforms. Setbacks or reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and therefore its credit quality, Joydeep Mukherji, S&P's credit analyst, stated in a report titled 'Will India Be the first BRIC Fallen Angel?' S&P currently rates India BBB-minus, just one notch above junk. The other three BRIC group of emerging nations--Brazil, Russia and China--are also rated investment-grade. S&P had in April this year cut the outlook on India's long-term credit rating to negative from stable and warned that the country could lose its investment-grade status if the government fails to bring its fiscal house in order. Data released on 31 May 2012 showed India's economic growth slowed to its weakest pace in nine years in the January-March quarter, when it expanded 5.3% from a year earlier. For the fiscal year ended March 31, the economy grew 6.5%, below the 6.9% expansion the government had projected. The BSE Sensex shed 50.86 points or 0.3% to settle at 16,668.01, its lowest closing level since 7 June 2012. The index fell 91.39 points at the day's low of 16,627.48 in late trade. The index jumped 174.94 points at the day's high of 16,893.81 in early trade, its highest level since 8 May 2012. The S&P CNX Nifty shed 14.25 points or 0.28% to settle at 5,054.10, its lowest closing level since 7 June 2012. The index hit a low of 5,040.70 in intraday trade. The index hit a high of 5,124.45 in intraday trade, its highest level since 7 May 2012. The BSE Mid-Cap index fell 0.2% and outperformed the Sensex. The BSE Small-Cap index rose 0.21% and outperformed the Sensex. BSE clocked turnover of Rs 1938 crore, lower than Rs 1970.93 crore on Friday, 8 June 2012. The market breadth, indicating the overall health of the market, was positive. On BSE, 1,447 shares rose and 1,260 shares fell. A total of 144 shares were unchanged. The breadth was much stronger earlier in the day. From 30-share Sensex pack, 19 stocks fell and the rest rose. Index heavyweight Reliance Industries (RIL) fell 1.08% to Rs 721.50, off the day's high of Rs 736.50. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in Mumbai last week that the company has cumulatively bought back a total of 2.7 crore shares under the share buyback programme, which is 22.5% of share buyback target. Ambani said the company's buyback programme represents highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future. Ambani said RIL will invest about Rs 1 lakh crore over the five years in expanding its business in India. Ambani said RIL is targeting to double its operating profit in about five years. Pharma stocks declined across the board. Sun Pharmaceutical Industries, Ranbaxy Laboratories and Cipla fell by between 0.72% to 2.25%. Shares of Dr Reddy's Laboratories shed 1.21% and DLF dropped 1.58%. Dr Reddy's Laboratories replaced realty major DLF in the benchmark 30-share Sensex with effect from today, 11 June 2012. Capital goods stocks reversed intraday gains. Engineering and construction major L&T shed 1.99%. The company announced during trading hours on Friday that L&T Shipbuilding -- a subsidiary of the company -- has bagged orders valued at Rs 483 crore for four specialized commercial vessels in Q1 June 2012. L&T announced during trading hours on Thursday, 7 June 2012, that L&T Construction has bagged new orders worth Rs 2410 crore across various businesses in Q1 June 2012. Among other capital goods stocks, Bhel, Thermax and ABB dropped by between 0.47% to 2.21%. Realty stocks also reversed intraday gains. D B Realty, Godrej Properties and Unitech fell by between 0.61% to 4.24%. Banks stocks reversed initial gains. India's largest commercial bank in terms of branch network State Bank of India dropped 0.71% to Rs 2164.55, off the day's high of Rs 2217.20. The state-run bank has cut its retail term deposit interest rates by 0.25% in tenors up to 240 days with effect from 8 June 2012. Among other PSU bank stocks, Bank of India, Bank of Baroda and Punjab National Bank declined by between 1.01% to 1.39%. India's largest private sector bank by net profit ICICI Bank shed 0.42% to Rs 825.50, off the day's high of Rs 848. India's second largest private sector bank by net profit HDFC Bank rose 0.23%, with the stock extending gains for the sixth straight day. The world's largest coal company by output Coal India rose 1.44% after Chairman S. Narsing Rao said in a media interview on Monday, 11 June 2012, that the company plans to import up to 30 million metric tons of coal this fiscal year as part of efforts to meet rising domestic demand and mitigate power shortages. The imports, are dependent on firm orders from customers, mostly in the power and cement sectors, Mr. Rao said. Mr. Rao said the company plans to lower its coal sales through electronic auctions by 3.9% on year to about 50 million tons in the year that began April 1, to comply with government directives to trim such lucrative sales over the next five years and make more coal available to the power sector. Diesel vehicle makers reversed initial gains after Oil Minister S. Jaipal Reddy on Friday, 8 June 2012, said his ministry has recommended that the tax on diesel vehicles should be raised. India's largest commercial vehicle maker by sales Tata Motors fell 1.4%. Tata Motors' total sales (including exports) of Tata commercial and passenger vehicles rose 4% to 64,347 vehicles in May 2012 over May 2011. The company's domestic sales of Tata commercial and passenger vehicles for May 2012 rose 6% to 60,128 units in May 2012 over May 2011. The company announced the monthly sales data early this month. India's largest utility vehicles maker Mahindra & Mahindra (M&M) dropped 1.13%. The company today announced that it has received an overwhelming 7,200 plus bookings for its cheetah-inspired XUV500 from customers within just 2 days of opening all India bookings for the vehicle. All India bookings for the XUV500 were opened from 8th June 2012. The XUV500 is now available at more than 100 dealerships across India, including those cities where it had been launched earlier. Speaking on the response to the XUV500, Pravin Shah, Chief Executive, Automotive Division, Mahindra & Mahindra said, "We would like to take this opportunity to offer our heartfelt thanks to our customers for the confidence they have shown in us. This overwhelming response in today's challenging market environment is a testimony to the popularity of the XUV500". Small-car major Maruti Suzuki India shed 1.36%. Maruti early this month said total sales declined 5% to 98,884 units in May 2012 over May 2011. Car sales in India rose an annual 2.8% to 1,63,229 units in May 2012, according to data from released by the Society of Indian Automobile Manufacturers (SIAM) on Monday. Sales of trucks and buses rose 9.1% in May to 62,025 vehicles. Motorcycle sales rose 7.2% to 887,634 vehicles. Ashok Leyland rose 1.18% after the company said it has supplied 100 Falcon buses to Ghana in an order worth $7.6 million. Ashok Leyland said the Falcon buses were inducted into the fleet of Metro Mass Transit, a transport company in which the Government of Ghana has 45% stake, for both inter and intra-city applications on 360 routes throughout Ghana. Shares of two-wheeler makers were mixed. India's second largest motorcycle maker by sales Bajaj Auto rose 1.85%. The company early last week said its total sales fell 2% to 3,52,219 units in May 2012 over May 2011, as exports to Sri Lanka were nil in May 2012 against a typical monthly average of 10,000 motorcycles and 3-wheelers each per month. The company expects recovery in Sri Lankan exports from July 2012 onwards. The company's exports rose 3% to 1,30,573 units in May 2012 over May 2011. Hero MotoCorp (HMCL) declined 1.36%. The board of directors of the company recently approved a proposal to merge Hero Investments (HIPL), the investment arm of the Hero Group, into HMCL. The shareholders of HIPL include the partnership firm Brijmohan Lall Om Prakash (BMOP) which holds 71.63%, and private equity (PE) investors BC India Private Investors (19.81%) and Lathe Investment (8.56%). BC India Private Investors is an affiliate of Bain Capital LLC, while Lathe Investment is a wholly-owned subsidiary of Government of Singapore Investment Corporation (GIC). Hero MotoCorp reported its best-ever monthly sales in May 2012, thus underlining the robust momentum the company has sustained since embarking on its solo journey. Marking its 10th consecutive month of over five lakh sales, Hero MotoCorp total sales rose 11.3% to 5,56,644 two-wheelers in May 2012 over May 2011. The company's sales in May this year surpassed its previous highest of 5,51,557, recorded only last month (April 2012). BPCL rose 1.22% and Videocon Industries jumped 3.21% after Anadarko Petroleum Corporation today, 11 June 2012, announced the Atum exploration well discovered another significant natural gas accumulation within the Offshore Area 1 of the Rovuma Basin. The Atum discovery well encountered more than 300 net feet (92 meters) of natural gas pay in two high-quality Oligocene fan systems. Preliminary data indicates this latest discovery is connected to the partnership's recent Golfinho discovery located approximately 10 miles (16.5 kilometers) to the northwest in the Offshore Area 1. Anadarko is the operator in the Offshore Area 1, with a 36.5% working interest. Co-owners include Mitsui E&P Mozambique Area 1, (20%), BPRL Ventures Mozambique B.V. (10%), Videocon Mozambique Rovuma 1 (10%) and Cove Energy Mozambique Rovuma Offshore, (8.5%). Empresa Nacional de Hidrocarbonetos, ep's 15% interest is carried through the exploration phase. Bharat PetroResources (BRPL) is a wholly-owned subsidiary of BPCL. Shares of most gas distribution firms rose. GAIL (India), Gujarat Gas Company, Gujarat State Petronet and Indraprastha Gas (IGL) rose by between 0.3% to 1.88%. Petronet LNG fell 0.74%. The Delhi High Court recently quashed the PNGRB's (Petroleum & Natural Gas Regulatory Board) tariff order served to Indraprastha Gas (IGL). In its order Delhi High court said that PNGRB is not empowered to fix/regulate maximum retail price at which gas is to be sold by entities like IGL to the consumers. The court also said that PNGRB is also not empowered to fix any component of Network Tariff/Compression Charge for an entity like IGL having its own distribution network. Bharti Airtel rose 0.23% on reports the company aims to raise the share of sales from the division that targets large companies and other telecommunication operators at a time when stiff competition is forcing it to offer discounted call rates to shore up the user base for its mobile-phone services business. IT pivotals were mixed. India's second-largest software exporter by revenue Infosys gained 0.32%. Infosys' Executive Co-chairman S. Gopalakrishnan last week said that the company has been witnessing delays by clients in deciding on their information-technology spending, but the company hasn't seen any contract cancellations. In the medium-to long-term, unless and until there is a certainty in the euro zone, it is not good for business, Gopalakrishnan said. When there is uncertainty, companies pull back on investments, even though they are doing well, he added. Overall, the environment continues to be uncertain, he added. India's largest IT company by revenue Tata Consultancy Services (TCS) rose 0.45%. India's third largest software services exporter by revenue, Wipro, fell 0.76%. Shares of power generation firms rose for the third straight day as Prime Minister Manmohan Singh on Wednesday, 6 June 2012, laid out ambitious infrastructure development plans for the current fiscal year which includes plans to add a record 18,000 megawatts (MW) of power capacity this year. NTPC, Tata Power Company, GVK Power & Infrastructure, Lanco Infratech, Adani Power, Torrent Power, and JSW Energy rose by between 0.11% to 13.83%. As per media reports, power projects using imported coal would soon be allowed to raise tariffs by up to Re 1 per unit to offset the effect of increase in fuel price due to additional taxes or changes in law by the governments of source countries. Metal stocks were mixed. Sesa Goa, Tata Steel, NMDC, JSW Steel, Hindustan Zinc, and Bhushan Steel fell by between 0.16% to 0.95%. Sail and Sterlite Industries rose by between 0.05% to 0.34%. Hindalco Industries rose 0.04%. The company will announce its audited consolidated results for the year ended 31 March 2012 on 27 June 2012. Jindal Steel & Power (JSPL) declined 1.93%. The company on Saturday, 9 June 2012, said it was making plans to scrap a $2.1 billion steel project in Bolivia, saying the Bolivian government had not met contract terms that include supply of natural gas for the project. The steel and power producer said it had served its "intent to terminate the contract" and the Bolivian government had 30 days to resolve the issues. "In case government of Bolivia comes out clean and informs as to how much gas it can actually supply and agrees to reconfigure plant capacity and investment and amend the contract, JSPL can consider staying back," a Jindal Steel statement said. Jindal Steel had signed a pact with the Bolivian government in 2007 to invest $2.1 billion in iron ore mining and steel making. The company said it was the single largest foreign investment in the country. According to the contract, Bolivia was to sign an agreement to supply 10 million cubic metres per day of natural gas, Jindal Steel said, adding the pact had not yet been signed. Also, the Bolivian government has so far not provided all the land required for the project, the company statement said. GVK Power & Infrastructure clocked highest volume of 1.42 crore shares on BSE. Lanco Infratech (1.05 crore shares), Suzlon Energy (61.08 lakh shares), Cals Refineries (50.92 lakh shares) and SpiceJet (48.27 lakh shares) were the other volume toppers in that order. SBI clocked highest turnover of Rs 130.88 crore on BSE. Nippo Batteries (Rs 57.19 crore), L&T (Rs 55.60 crore), Reliance Infrastructure (Rs 40.58 crore) and Reliance Capital (Rs 35.87 crore) were the other turnover toppers in that order. Finance Minister Pranab Mukherjee today, 11 June 2012, said the government hopes introduce a bill for a direct tax code (DTC) during the monsoon session of parliament. The monsoon session usually runs from July to August. The code, which will replace the existing Indian Income Tax Act 1961, intends to cut tax rates to bring more people and companies under the tax net, phase out profit-linked exemptions for companies and replace them with investment-linked incentives. Meanwhile, senior BJP leader Yashwant Sinha-headed Parliamentary Standing Committee on finance is soon likely to submit its report on the constitutional amendment proposed by the government to facilitate the goods and services tax (GST), brightening the prospects for the comprehensive reform of country's indirect taxes structure. The GST seeks to replace with a single levy indirect taxes such as central excise duty, services tax, and state taxes including value-added tax, entry tax and purchase tax. The government has tabled in the parliament constitutional changes necessary to roll out the tax despite many states still not backing this ambitious reform of the indirect tax regime that has been delayed by more than two years. The regime was to be rolled out from April 1, 2010. The government is expected to push this key reform in the current financial year as the IT backbone for the new tax is expected to be functional by October. The constitutional amendment bill tabled March last year will allow the centre to tax goods at the retail level and states to tax services. Under the current law, centre does not have the powers to tax retail sale of goods while states cannot impose a levy on services. The bill will have to be passed by the Parliament, and also at least 50% of state assemblies and legislatures, making it difficult for the centre to press ahead with this reform without adequate consensus. After the ratification of this amendment, the centre and states will also have to clear the GST legislation. Foreign institutional investors (FIIs) bought shares worth a net Rs 202.01 crore on Friday, 8 June 2012, as per provisional figures from the stock exchange. Prime Minister Manmohan Singh last week laid out ambitious infrastructure development plans for the current fiscal year, in an effort to counter criticism over a perceived policy paralysis that has led India into its worst slowdown in nearly a decade. Singh said that the government plans to award 9,500 kilometer (kms) of roads for construction this year and over 4,000 kms for maintenance under the new system. In Railways, the government plans to award work on the Elevated Rail Corridor in Mumbai, two new Loco manufacturing units and the public private partnership (PPP) stretch of the Dedicated Freight corridor, in addition to redeveloping 4 or 5 stations through PPP mode in the current year. In shipping, Singh said the government has set the challenging task of awarding work for two new major PPP Ports, the first in decades, in addition to capacity addition targets which are three times the targets for the last year. In civil aviation, work will be awarded in the current year on three new Greenfield airports in Navi Mumbai, Goa and Kannur and new international airports at Lucknow, Varanasi, Coimbatore, Trichy and Gaya, Singh said. Also, two new hubs will be developed in the country making India a destination as well as a transit point. In power, the government plans to add a record 18,000 megawatts (MW) of capacity this year, Singh said. Data on first installment of the advance tax payment due on Friday, 15 June 2012 could provide cues on Q1 June 2012 corporate earnings. Data on industrial production for April 2012 due at 11:00 IST tomorrow, 12 June 2012 and inflation for May 2012 due at 11:30 IST on Thursday, 14 June 2012 could provide cues on the central bank's likely policy stance at mid-quarter monetary policy review on 18 June 2012. Industrial production is seen rising 1.4% in April 2012 as per the median estimate of a poll of economists carried out by Capital Market. Industrial production registered a surprise 3.5% contraction in March 2012. The annual rate of inflation, based on monthly wholesale price index (WPI), is projected at 7.4% for May 2012, as per the median estimate of a poll of economists carried out by Capital Market. The annual rate of inflation, based on monthly wholesale price index (WPI), stood at 7.23% (provisional) for the month of April 2012. There are signs that the economies of two of the world's leading emerging powerhouses, India and China, are starting to falter, while Europe continues to be handicapped by its debt woes, the latest report from the OECD showed on Monday. The Paris-based economic think-tank said its composite leading indicator (CLI) for China, which provides a measure of future economic activity, slipped to 99.1 from 99.4 in April, falling further below its long-term average of 100. The CLI for India also showed signs of weakening, dropping to 98 from 98.2, again below the 100 average. "The assessment for China and India has changed significantly since last month. For both countries, the CLIs point towards economic activity below long-term trend," the Organisation for Economic Co-operation and Development said in its report. The overall CLI for the OECD area, covering 33 countries, inched up to 100.5 from 100.4 over the month, helped by fresh growth in activity in the United States, Japan and Russia. But the OECD said the pace of improvement in all three countries had decelerated in recent months, giving a tentative sign their growth may be about to slow. The euro area, meanwhile, remained stable at 99.6, as did France, while Italy inched down to 99.1 from 99.2, as ongoing debt troubles in Europe continued to keep economic growth below long-term trend. European shares surged on Monday after Spain, euro-zone's 4th biggest economy, on Saturday, 9 June 2012, said it will seek a bailout for its banks. Key benchmark indices in UK, France and Germany were up by 0.96% to 1.83%. Spain's Treasury said Monday that the government's plan to shore up the banks with a loan of up to euro 100 billion ($125 billion) will reinforce the overall solvency of the debt markets in the country. In a statement released via the Economics Ministry, the Treasury said it will continue to execute its funding program via its regular auction calendar. The Treasury said a "sound and duly capitalized banking system will reduce future contingent liabilities of the state and will therefore reinforce the sustainability of Spanish debt." Spain on Saturday, 9 June 2012, agreed to receive euro 100 billion ($125 billion) in financial aid for its struggling banking sector from the European Union. The loan will provide much needed capital to Spanish lenders -- which are struggling after the collapse of a real-estate bubble -- without stretching Madrid's own finances, which are also under pressure amid weak economic conditions. The request made Spain the fourth euro-zone country to require international assistance. Greek voters return to the polls on 17 June 2012 after the splintered results of a May 6 parliamentary election left no party able to put together a government. The poll could potentially decide whether the nation will remain in the euro zone. The strong showing for the French Left in the first round of Sunday's French parliamentary elections reinforces the European position of France's Socialist President François Hollande, threatening to downgrade German Chancellor Angela Merkel's hitherto pivotal role. This is likely to complicate further wrangling over the future of economic and monetary union (EMU) as a complex series of maneuvers gets under way to try to resolve near-intractable difficulties in Europe's array of under-performing economies. Asian stocks surged on Monday, 11 June 2012, after news of a plan to shore up Spanish banks, the source of much recent global financial anxiety. Key benchmark indices in China, Hong Kong, Japan, South Korea, Taiwan, Indonesia and Singapore rose by between 1.07% to 2.44%. Chinese data released over the weekend showed strong exports and imports growth but inflation cooling more rapidly than expected amid an economic slowdown. Trading in US index futures indicated that the Dow could gain 96 points at the opening bell on Monday, 11 June 2012. US stocks rose Friday, sealing their best week this year, on hope Europe would move to combat its economic crisis, including an anticipated recapitalization of Spanish banks. The Federal Open Market Committee holds its next policy meeting on June 19-20. The Organization of Petroleum Exporting Countries (OPEC), which supplies about 40% of the world's crude, may maintain its official daily production ceiling at 30 million barrels a day when the group meets in Vienna on Thursday, 14 June 2014.