Market drifts lower as euro-zone debt worries resurface

Key benchmark indices edged lower as global growth jitters, euro-zone debt worries and ongoing territorial dispute between China and Japan hit investor sentiment adversely. Both the BSE Sensex and the 50-unit S&P CNX Nifty reached their lowest closing level in almost one week. The barometer index, BSE Sensex, fell 62.24 points or 0.33%, up about 59 points from the day's low and off about 38 points from the day's high. Metal stocks fell as global growth jitters cast doubt on future demand for commodities. Tata Steel dropped on euro zone debt worries. BSE Small-Cap and Mid-Cap indices both edged higher. The market breadth was even. The Sensex has gained 1,202.61 points or 6.9% in this month so far (till 26 September 2012). The Sensex has jumped 3,177.25 points or 20.56% in calendar 2012 so far (till 26 September 2012). From a 52-week high of 18,866.87 on 21 September 2012, the Sensex has fallen 234.70 points or 1.24%. From a 52-week low of 15,135.86 on 20 December 201, the Sensex has risen 3,496.31 points or 23.10%. Cement shares rallied on hopes construction activity will pick up as the southwest monsoon started withdrawing from some parts of the country. Shares of all the three cement majors -- UltraTech Cement, ACC and Ambuja Cements -- hit record high. Index heavyweight and cigarette maker ITC edged higher. Another index heavyweight Reliance Industries (RIL) also moved higher. Apollo Hospitals Enterprise hit a record high. Pharma stocks rose on buzz that the government is set to ease foreign direct investment norms for the pharmaceutical sector. The market edged lower in early trade on weak Asian stocks. Key benchmark indices languished in red in morning trade. The market trimmed intraday losses to hit fresh intraday high in mid-morning trade. The Sensex traded off the day's low in early afternoon trade. The market trimmed losses hitting fresh intraday low in mid-afternoon trade. A bout of volatility was witnessed as the Sensex weakened once again after staging intraday recovery in late trade. The market may remain volatile tomorrow as traders roll over positions in the futures & options (F&O) segment from the near month September 2012 series to October 2012 series. The September 2012 F&O contracts expire tomorrow, 27 September 2012. The BSE Sensex shed 62.24 points or 0.33% to settle at 18,632.17, its lowest closing level since 20 September 2012. The index declined 121.23 points at the day's low of 18,573.18 in mid-afternoon trade. The index fell 23.93 points at the day's high of 18,670.48 in mid-morning trade. The S&P CNX Nifty shed 10.45 points or 0.18% to settle at 5,663.45, its lowest closing level since 20 September 2012. The index hit a low of 5,638.65 and high of 5,672.80 in intraday trade. The BSE Mid-Cap index rose 0.27% and the BSE Small-Cap index rose 0.65%. Both these indices outperformed the Sensex. The market breadth, indicating the overall health of the market, was even. On BSE, 1,446 shares rose and exactly equal number of shares fell. A total of 119 shares were unchanged. BSE clocked turnover of Rs 3107 crore, lower than Rs 3441.74 crore on Tuesday, 25 September 2012. From the 30-share Sensex pack, 19 stocks fell and rest of them rose. Index heavyweight Reliance Industries (RIL) gained 0.51% to Rs 844.10. The stock hit a high of Rs 849.50 and a low of Rs 833.60. RIL has purchased 3.9 crore shares and spent Rs 2794.73 crore (excluding brokerage, service tax, Securities Transaction Tax, Stamp Duty, Exchange Transaction Charges and Sebi fees) till 18 September 2012 under the company's ongoing share buyback program. RIL has set maximum buyback price of Rs 870 per share. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in June 2012 that the company's buyback program represents a 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. Index heavyweight and cigarette maker ITC rose 1.04% to Rs 263.20. The stock had scaled a record high of Rs 272.50 in intraday trade on 14 September 2012. Cement shares rallied on hopes construction activity will pick up as the southwest monsoon started withdrawing from some parts of the country. UltraTech Cement rose 2.17% to Rs 1,875.10. The stock hit a record high of Rs 1,891.90 in intraday trade today. ACC jumped 3.93% to Rs 1429.40. The stock hit a record high of Rs 1,435 in intraday trade today. Ambuja Cements jumped 3.90% to Rs 202.40. The stock hit a record high of Rs 203 in intraday trade today. Shree Cement advanced 1.37% to Rs 3,671.05. The stock hit record high of Rs 3,763.30 in intraday trade today. Among other cement stocks, J K Cements (up 11.07%), India Cements (up 7.63%), JK Lakshmi Cement (up 6.28%), Mangalam Cement (up 5.95%), Birla Corporation (up 5.67%), Prism Cement (up 3.83%), Kakatiya Cement (up 3.41%), Heidelberg Cement (up 2.46%), Saurashtra Cement (up 1.23%), Madras Cement (up 0.79%) and Dalmia Bharat Cement (up 0.51%), edged higher. Pharma stocks rose on buzz that the government is set to ease foreign direct investment norms for the pharmaceutical sector. Ipca Laboratories (up 5.21%), Wockhardt (up 3.16%), Cipla (up 2.66%), Aurobindo Pharma (up 1.78%), Strides Arcolab (up 1.35%), Cadila Healthcare (up 1.34%), Ranbaxy Laboratories (up 1.07%), Glenmark Pharmaceuticals (up 0.68%), GlaxoSmithKline Pharmaceuticals (up 0.37%), Lupin (up 0.34%), Biocon (up 0.22%) and Divi's Laboratories (up 0.11%), edged higher. Metal stocks fell as global growth jitters cast doubt on future demand for commodities. Hindalco Industries (down 2.22%), Sesa Goa (down 1.21%), Sterlite Industries (down 0.64%), Sail (down 0.61%), JSW Steel (down 0.55%), NMDC (down 0.5%), Bhushan Steel (down 0.4%) and Jindal Steel (down 0.22%), edged lower. India's largest steel maker by sales Tata Steel dropped 1.16% to Rs 396 on euro zone debt worries. European operations constitute almost 65% of Tata Steel's sales. Apollo Hospitals Enterprise rose 2.11% to Rs 715.35. The stock hit a record high of Rs 744 in intraday trade today. United Breweries fell 0.99% to Rs 701.10. The stock reversed direction after hitting a record high of Rs 727.50 in intraday trade today. The company today, 26 September 2012, said the shareholders of the company at a court convened meeting held on 24 September 2012 approved the Scheme of Amalgamation between Scottish and Newcastle India, United Breweries and their respective shareholders and creditors with requisite majority. United Spirits rose 0.86% to Rs 1,157.55. The stock hit 52-week high of Rs 1,188.20 in intraday trade today. The stock had surged nearly 9% on Tuesday after the company and Diageo plc issued a joint statement during trading hours, confirming that Diageo is in discussion with United Spirits and United Breweries (Holdings) for a possible transaction for Diageo plc to acquire an interest in United Spirits. There is no certainty that these discussions will lead to a transaction, the joint statement from United Spirits and Diageo said. Shares of organised retailers rose on renewed buying after the government last week notified the rules for allowing 51% foreign direct investment in multi-brand retail. Koutons Retail India (up 4.95%), Pantaloon Retail (India) (up 4.04%), Store One Retail (up 1.34%) and Trent (up 0.22%), edged higher. The permission for 51% FDI in multi-brand retail trading (MBRT) is subject to specified conditions. The policy provides that it would be the prerogative of the state governments to decide whether and where a multi-brand retailer, with FDI, is permitted to establish its sales outlets within the state. Therefore, implementation of the policy is not a mandatory requirement for all states, the government has said. Shares of aviation firms rose as crude oil dropped. Kingfisher Airlines (up 8.65%) and SpiceJet (up 5.77%), jumped. However, Jet Airways India (up 1.28%), edged lower. US crude was trading 81 cents lower at $90.56 per barrel today, 26 September 2012. State-run oil marketing companies--Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) revise jet fuel prices on the 1st and 16th of every month based on the average international crude price in the preceding fortnight. Jet fuel or aviation turbine fuel (ATF) typically makes up almost half of an airline's operating cost. Prices of jet fuel are directly linked to crude oil prices. United Spirits clocked a highest turnover of Rs 197.03 crore on BSE. State Bank of India (Rs 129.43 crore), Max India (Rs 106.89 crore), Pantaloon Retail India (Rs 101.44 crore) and United Breweries (Holdings) (Rs 92.70 crore), were the other turnover toppers on BSE in that order. Kingfisher Airlines reported highest volumes of 2.34 crore shares on BSE. SpiceJet (1.62 crore shares), Lanco Infratech (86.31 lakh shares), HDIL (75.02 lakh shares) and IFCI (72.77 lakh shares), were the other volume toppers on BSE in that order. Foreign institutional investors (FIIs) bought shares worth a net Rs 4543.70 crore from the secondary equity market on Tuesday, 25 September 2012, as per data from Securities & Exchange Board of India (Sebi). Tuesday's large FII inflow was due to a large bulk deal in Cairn India shares which was executed on NSE on that day. Earlier, FIIs bought shares worth a net Rs 1652.70 crore from the secondary equity market on Monday, 24 September 2012. FIIs had bought shares worth a net Rs 2466.70 crore from the secondary equity market on Friday, 21 September 2012 The Q2 September 2012 earnings season will begin around mid-October 2012. Investors and analysts will closely watch the management commentary that would accompany the results which could cause revision in their future earnings forecast of the company for the current year or the next year. Software major Infosys and private sector bank HDFC Bank unveil Q2 September 2012 results on 12 October 2012. HDFC announces Q2 resutls on 22 October 2012. On 1 October 2012, Markit Economics will release the HSBC India Manufacturing PMI for September 2012. Grid failures in the beginning of August and shrinking export orders saw manufacturing HSBC India Manufacturing falling to a nine-month low 52.8 points in August 2012 from 52.9 in July 2012. On 4 October 2012, Markit Economics will release HSBC India Services PMI and HSBC India Composite PMI for September 2012. The HSBC India Services PMI had risen to a six-month high of 55 in August 2012 from 54.2 in July 2012. Services, including government services like railway transport, make up nearly 60% of India's economic output. Trade ministers of India and South Africa expect bilateral trade between India and South Africa to reach about $15 billion this year, well ahead of the 2014 timeline for the target, with bilateral trade between the two countries having crossed $14 billion last year. India's Commerce, Industry and Textiles Minister Anand Sharma visited South Africa on 21-22 September 2012 for bilateral meetings with South African Trade Minister Rob Davies. Trade ministers of the two countries also took stock of the ongoing India-SACU negotiations on Preferential Trade Agreement, India's Ministry of Commerce & Industry said in a statement on 23 September 2012. Trade ministers of the two countries also noted the growing private investments on both sides. Indian companies had already invested over $8 billion in South Africa. On the political front, an unexpected resignation by Maharashtra Deputy Chief Minister Ajit Pawar on Tuesday, 25 September 2012, over allegations of corruption threw the Congress-Nationalist Congress Party (NCP) government in Maharashtra into a fresh crisis as the resignation of the powerful NCP leader in Maharashtra was followed by other NCP ministers in the Maharashtra state government also sending their resignations. NCP chief Sharad Pawar said that there is no threat to the state government in Maharashtra. Maharashtra Chief Minister Prithviraj Chavan has refused to accept Ajit Pawar's resignation right away. Chavan said that he will take a decision on the issue only after consultations with his ministers from both the Congress as well as the NCP. As per reports, NCP is expected to pass a resolution authorising its chief Sharad Pawar to decide the future course after Ajit Pawar resigned as the Deputy Chief Minister of Maharashtra. NCP also is a part of the Congress led UPA government at the Centre. NCP has 9 MPs in Lok Sabha. Ajit Pawar's resignation came just ahead of a white paper on irrigation to be tabled in the Maharashtra Assembly and the beginning of CAG audit into irrigation projects. A staggering Rs 70000 crore was spent on these projects over a decade with only a 0.01 per cent increase in irrigated area. Ajit Pawar had held the irrigation portfolio between 1999 and 2009 Meanwhile, Trinamool Congress (TMC) chief Mamata Banerjee has announced a strike on 1 October 2012 at Jantar Mantar against the recent government policy decisions hiking diesel prices and allowing 51 per cent foreign direct investment in retail. With the TMC's 19 MPs withdrawing support to UPA last week, the UPA has been reduced to a minority in the Lok Sabha. The TMC withdrew support from the UPA to register its protest against the reformist decisions like allowing 51% FDI in multi-brand retail, increasing the diesel price by Rs 5 per litre, and imposing a cap on the number of subsidized LPG cylinders per family at six. Prime Minister Dr. Manmohan Singh last week said that the time has come for hard decisions. Explaining the rationale for the government's recent measures viz. hike in diesel price, capping of subsidised LPG cylinders per household per year and allowing foreign direct investment in multi-brand retail trade, Dr. Singh said that rapid growth in the economy is necessary to raise the government's revenue for financing its programmes in education, health care, housing and rural employment. Dr. Singh said that India must avoid high fiscal deficit which could cause a loss of confidence in the economy. The government last week braved intense political opposition to notify the rules for allowing 51% foreign direct investment (FDI) in multi-brand retail. The government also notified the relaxed conditions for single brand retail as well as the norms for allowing 49% investment by foreign airlines in Indian carries and permitted greater foreign investment in some sections of the broadcasting sector. The finance ministry last week announced reduction in the tax rate on the interest paid to overseas lenders by local companies to 5% from 20%. The rate is applicable from July 2012 until June 2015. The tax reduction will encourage corporates to borrow more for funding expansion projects. Over the past few weeks, the Reserve Bank of India has eased curbs on overseas borrowing for companies in the manufacturing and infrastructure sectors to boost growth. The outlook for Rabi or winter crops has improved due to the annual monsoon rains' delayed withdrawal, which has provided crops with badly needed moisture after months of insufficient rainfall. The monsoon rains usually leave India by 1 September, but this year rainfall began to pick up in late August, after insufficient rain in preceding months forced four major agricultural states to declare a drought. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year. The Centre has advised state government to go for early sowing of Rabi crops, especially in rainfed areas to make use of the moisture available in the soil due to wide-spread rains in August and September. State-run India Meteorological Department (IMD) Monday, 24 September 2012, said that the southwest monsoon has started withdrawing. The Ministry of Agriculture on Monday, 24 September 2012, said as per the first advance estimates of production of Kharif crops, 117.18 million tonnes (MT) foodgrains is likely to be produced in the current season. These production estimates are higher than the average of the first advance estimates of the last five years (133 MT). Final estimates are generally 5 to 10% higher than the first estimates, the Ministry of Agriculture said in a statement. Even as compared to the average of final estimates (118.86 MT), the current estimates are lower by 1.68 million tonnes or about 1.4% despite deficient and late rains this year, it said. As per the first advance estimates, production of rice estimated at 85.59 million tones for the current season, though lower as compared to last year's record Kharif production, is higher than the average production of 83.17 million tonnes. The estimated production of Coarse Cereals, is however, lower than average production by 3.65 million tonnes mainly on account of loss in area coverage under Bajra and Maize in Gujarat, Haryana, Maharashtra, Karnataka and Rajasthan. The estimated production of Kharif Pulses is also lower than the average production by 0.45 million tonnes mainly due to shortfall in Moong and other Kharif Pulses. Though there is a significant increase in estimated production of soyabean, yet due to decline in the production of Groundnut, total production of Kharif Oilseeds estimated at 18.78 million tonnes for the current season, is lower than the average production by 0.61 million tonnes. The current year's production of sugarcane estimated at 335.33 million tonnes is higher by 10.22 million tonnes as compared to average production. The estimated production of Cotton at 33.40 million bales (of 170 kg each) has registered an increase of 5.32 million bales as compared to average cotton production of 28.08 million bales. Production of Jute is also estimated to be marginally higher than the average production, the Ministry of Agriculture said. The government has set food grain target for 2012-13 at 249.52 million tonnes. The Reserve Bank of India last week announced a reduction of 25 basis points in the cash reserve ratio (CRR) of scheduled banks to 4.5% of their net demand and time liabilities (NDTL) effective the fortnight beginning 22 September 2012 from current 4.75% after mid-quarter review of monetary policy. The reduction in CRR will inject around Rs 17000 crore of primary liquidity into the banking system, RBI said in a statement. The RBI kept its policy rate viz. the repo rate unchanged at 8%, stating that inflationary pressures, both at wholesale and retail levels, remain strong. As inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflation expectations, RBI said. Finance Minister P. Chidambaram on 17 September 2012 said the government will unveil more measures to narrow fiscal deficit and to boost economic growth, which may encourage the central bank to cut interest rates at its next monetary policy review on 30 October 2012. He didn't elaborate on what the measures could be. RBI is scheduled to undertake Second Quarter Review of Monetary Policy - 2012-13 on 30 October 2012. The Cabinet Committee on Political Affairs (CCPA) raised price of heavily subsidised diesel by Rs 5 per liter on 13 September 2012 to balance government's fiscal deficit situation. The CCPA also restricted the supply of subsidized LPG cylinders to each consumer to six cylinders (of 14.2 kg) per annum. European shares fell on Wednesday, 26 September 2012, as borrowing costs surged in Spain as concerns over Catalonia region's future as a Spanish region flared after the region of Catalonia announced a snap election which could lead to independence for Spain's most economically important region. Key benchmark indices in UK, France and Germany were down by 1.13% to 1.99%. The Spanish government is expected to announce the 2013 budget and an economic plan on Thursday, 27 September 2012, as investors continue to speculate over if and when it will announce a bailout. Spain must persuade its European partners that it can cut the budget shortfall by more than 60 billion euros by 2014. The Spanish government is expected to announce on Friday, 28 September 2012, the results of a review of its banking system, which will also include how much the European Stability Mechanism needs to recapitalize those banks. European Central Bank (ECB) executive board member Joerg Asmussen said in an interview published in a German newspaper on Wednesday, 26 September 2012, that ECB won't take part in any potential debt restructuring of Greece. The possibility of additional external financing needs can only be closed by the member states of the euro zone, said Asmussen, in translated comments of the interview. The ECB would not be able to take part in any restructuring because this would constitute state financing, which is forbidden, Asmussen said. Standard & Poor's on Tuesday slashed its economic growth forecast for the debt-laden eurozone for 2012 and 2013 amid no sign of improvement in the region's macro-economic indicators. The global debt rating agency said it now expects eurozone GDP to contract 0.8% this year, down from a 0.7% drop projected in July. S&P said that it expects GDP growth in the euro currency area to be flat in 2013 versus its earlier projection of 0.3% growth. Asian stocks fell on Wednesday, 26 September 2012, with sharp losses in Japan's Nikkei Average as many Japanese firms started to trade without rights to the latest dividend payouts, while global growth fears hit resource shares across the region. The ongoing territorial dispute between China and Japan also hurt investors sentiment adversely following reports Beijing has rejected Tokyo's invitation for talks at this week's United Nations General Assembly. Key benchmark indices in Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan dropped by between 0.55% to 2.03%. In mainland China, the Shanghai Composite Index briefly fell below the psychological 2,000 level for the first time in three years, on concern the deepening economic slowdown is hurting corporate profits in the world's second biggest economy. The Shanghai Composite dropped 1.2% to settle at 2,004.17 after slumping to as low as 1,999.48 in the last five minutes of trading. Senior diplomats from China and Japan failed to set up a meeting on Tuesday to ease tensions for claims over islets in the East China Sea, with Beijing rejecting Tokyo's invitation for talks at this week's United Nations General Assembly, the South China Morning Post reported on Wednesday, 26 September 2012. The Japanese government suggested talks in Beijing between Japanese Deputy Foreign Minister Chikao Kawai and his Chinese counterpart, Zhang Zhijun, to ease tensions between Asia's two biggest economies over disputed islands known as Diaoyu in China and Senkaku in Japan. China's central bank on Tuesday added a record 290 billion yuan ($46 billion) to the financial system using reverse repurchase agreements, seeking to address a cash squeeze ahead of the week-long Golden Week holiday running from September 30 to October 7. Markit Economics will release the HSBC China Manufacturing PMI for September 2012 on Saturday, 29 September 2012. The HSBC Flash China manufacturing purchasing managers' index (PMI) had showed activity stabilized in September after hitting a nine-month low in August, with the headline reading ticking up to 47.8 from 47.6 last month. But, it remained below 50 -- the value that separates contraction from expansion. Markit Economics will release the Markit/JMMA Japan Manufacturing purchasing managers' index (PMI) for September 2012 on Friday, 28 September 2012. Ratings agency Standard & Poor's on Wednesday, 26 September 2012, lowered the sovereign rating of the state of South Australia to AA from AA+, citing a deterioration in the regional government's budget. The downgrade will add to the cost of South Australia's debt servicing. The downgrade follows a similar move by Moody's Investors Service recently to lower the state's rating to AA1 from AAA. South Australia's budget published in June forecast state debt rising to 8.76 billion Australian dollars ($9.1 billion) in 2015-16 and a predicted deficit of A$867 million in 2012-13 -- the biggest in the state's history. Trading in US index futures indicated a flat opening of US stocks on Wednesday, 26 September 2012. US stocks fell on Tuesday as criticism from a non-voting Federal Reserve member about the central bank's latest round of monetary easing overshadowed solid economic data. Economic data from the Conference Board showed US consumer confidence jumped to its highest in seven months in September. Two separate reports showed home prices rose for another month in July, though the gains were not as strong as the previous month. San Francisco Fed President John Williams said on Monday he expected the central bank to expand its bond-buying program next year to more aggressively combat the unemployment rate, but Philadelphia Fed President Charles Plosser countered on Tuesday saying that the latest monetary stimulus will not do much to boost economic growth or lower unemployment. The US Commerce Department will release data on new home sales for August 2012 on Wednesday, 26 September 2012. Chicago Fed President Charles Evans will offer views Wednesday, 26 September 2012, on current economic issues. The US Labor Department will release data on weekly unemployment claims on Thursday, 27 September 2012. The Commerce Department will release durable-goods orders for August 2012 and the final reading of second-quarter gross domestic product (GDP) on Thursday, 27 September 2012. On the same day, the National Association of Realtors will release the pending home-sales index for August 2012. On Friday, 28 September 2012, the Labor Department will unveil data on personal income and consumer spending for August 2012. On the same day, the Institute of Supply Management will release Chicago PMI report on business activity for September 2012. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012. Investors are worried about US fiscal cliff. The "cliff" refers to the year-end deadline for the expiration of hundreds of billions of dollars worth of tax cuts and the triggering of $109 billion in across-the-board spending cuts. The non-partisan Congressional Budget Office has said the scenario could throw the country into recession. Congress created the hazardous deadline of 31 December 2012 in August 2O11 when it agreed to a deficit deal as a way out of a deadlock over raising the US debt ceiling.