Realty shares rise in choppy market as RBI cuts short-term rates

Key benchmark indices settled in the red in a day of high volatility triggered by volatility in index heavyweight Reliance Industries. Rate sensitive banking and auto stocks fell even as realty stocks gained after the central bank cut short-term interest rates. The BSE 30-share Sensex fell 81.39 points or 0.74%, up close to 135 points from the day's low and off close to 170 points from the day's high.

The barometer index fell below the psychological 11,000 mark after it breached that level in afternoon trade. The barometer index had fallen below the 11,000 level in choppy trade on Monday, 20 April 2009.

Volatility continued today. After an initial sharp slide caused by weak global stocks, the market soon cut losses. The recovery was short-lived as the market weakened in mid-morning trade despite rate cut by the RBI. The market recovered in early afternoon trade. It extended recovery to trade in green in afternoon trade as a rate cut by the Reserve Bank of India (RBI) and gains in European stocks bolstered sentiment. Some of the Asian markets moved into the green from red and US index futures rose further supporting recovery on the domestic bourses. The market once again slipped into the red in mid-afternoon trade.

The RBI today cut its key short-term rates by 25 basis points each to shore up faltering growth in the face of the global economic slowdown. The repo rate, at which the Reserve Bank of India (RBI) infuses cash into the banking system, will be cut to 4.75%, and the reverse repo rate, at which it absorbs excess cash from banks, will be reduced to 3.25%, effective immediately.

The Reserve Bank also repeated a call for banks to pass on its rate cuts to customers and said deposit rates should also fall. "There is scope for the overall interest rate structure to move down within the policy rate easing already effected by the Reserve bank," it said, adding its latest rate cut reinforced the case.

The central bank cut is growth estimate for the year ended March 2009 (FY 2009) to 6.5% to 6.7%, from 7% projected earlier. It has forecast growth of around 6% for the year ending March 2010 (FY 2010).

The fiscal and monetary stimulus measures initiated during 2008-09 coupled with lower commodity prices could cushion the downturn in the growth momentum during 2009-10 by stabilizing domestic economic activity to some extent, RBI said in a statement. However, any upturn in the growth momentum is unlikely in view of the projected contraction in global demand during 2009, particularly decline in trade, it added.

Strong rural demand, lagged impact of monetary and fiscal stimuli, softening of domestic input prices, investment demand from brown-field expansion projects and some restructuring initiatives are expected to have a positive impact on industrial production in the coming months, the RBI said.

While moderation in internal accruals has an adverse effect on corporate investment, decline in input prices and reduction in borrowing costs may have a favourable impact on profitability of the corporate sector going forward, the RBI said.

The central bank said that managing large government borrowing in FY 2010 in a non-disruptive manner would be a major challenge, and said it would used a mix of monetary and debt management tools to ensure this was done smoothly. Large borrowings also militate against the low interest rate environment that the RBI is trying to maintain to spur investment demand in keeping with the stance of monetary policy, the central bank said in its policy statement.

The RBI said wholesale-priced based inflation was expected to turn negative early in the current fiscal year, but this should not be interpreted as deflation for policy purposes. It projected WPI inflation would be around 4% at the end of FY 2010.

The RBI said a planned April 2009 review of the policy on foreign banks in India would now not go ahead until there was greater clarity regarding stability, recovery of the global financial system and better global coordination on regulation and supervision.

European shares fell by midday on Tuesday in choppy trade as declines in bank stocks offset gains in defensives led higher by record earnings from British retailer Tesco. Key bench mark indices in France, Germany and UK were down by between 1.16% to 1.62%.

On the economic front, annual consumer-price inflation in Britain slowed to 2.9% in March 2009 from a pace of 3.2% in February 2009, the Office for National Statistics reported Tuesday.

Sweden's central bank on Tuesday cut its key lending rate to 0.5% from 1%, in line with expectations.

Asian markets slumped as lower-than-expected profit at China Mobile and the prospect of rising bank losses curbed optimism the global economy is recovering. Key benchmark indices in Hong Kong, China, South Korea and Japan were down by between 0.85% and 2.95%. But key benchmark indices in Taiwan and Singapore were up by between 0.03% to 1.73%. Both these markets were earlier in the red.

Trading in US index futures indicated the Dow could gain 31 points at the opening bell today, 21 April 2009. The Dow futures reversed gains earlier in the day.

US markets corrected sharply on Monday after Bank of America increased reserves for future loan losses by 57% since the end of December 2008. The Dow Jones industrial average fell 289.60 points or 3.56%, Standard & Poor's 500 Index declined 37.21 points or 4.28% and Nasdaq Composite index declined 64.86 points or 3.88%.

There were also concerns about the stress tests being conducted on US banks, results of which are expected on 4 May 2009. The US Treasury Department is reportedly contemplating a series of incentives for private preferred investors and bond-holders to convince them to convert their stakes in banks to common shares as part of a strategy to improve the banks' capital.

Closer home, political uncertainty, with polling for India's 15th Lok Sabha underway, may lead to volatile swings on the bourses in the next few days. The month-long parliamentary elections that began on 16 April 2009 will conclude on 13 May 2009 with results due on 16 May 2009. Poll estimates point to a fractured mandate.

Meanwhile, a high-powered panel is reportedly thrashing out a mega economic stimulus package with a kitty of Rs 50,000 crore, which may be part of the first Budget of the next government at the centre to be presented before 25 June 2009. The government had earlier announced two fiscal packages in addition to the Indian central bank Reserve Bank of India (RBI)'s monetary interventions to boost the economy. The earlier fiscal measures also liberalised various rules and regulations to increase liquidity and give a boost to spending.

A good news for the economy is forecast of a near normal monsoon by the India Meteorological Department (IMD) on 17 April 2009. The IMD said rainfall in the June-September 2009 monsoon season was expected to be 96% of the long-term average. The outlook is among the nation's most widely watched indicator as monsoon rains are a major influence on output of key crops, economic activity and also affects sentiment in the country's financial markets.

Foreign funds are in buying mode after heavy sales of Indian stocks in the first two months of calendar 2009. Foreign institutional investors (FIIs) bought shares worth a net Rs 332.60 crore on Monday, 20 April 2009. FII inflow in April 2009 totaled Rs 4,609.70 crore (till 20 April 2009). FII outflow in calendar year 2009 totaled Rs 2062 crore (till 20 April 2009).

The BSE 30-share Sensex fell 81.39 points or 0.74% to 10,898.11. At the day's high of 11,068.82, the Sensex rose 89.32 points in afternoon trade. At the day's low of 10,764.08, the Sensex fell 215.42 points in early trade.

The S&P CNX Nifty was down 11.80 points or 0.35% to 3,365.30.

BSE clocked a turnover of Rs 5,089 crore, higher than Rs 4,749.97 crore on Monday, 20 April 2009.

Nifty April 2009 futures were at 3358, at a discount of 7.30 points as compared to the spot closing of 3365.30. Turnover in NSE's futures & options (F&O) segment surged to Rs 72749.77 crore from Rs 64896.29 crore on Monday, 20 April 2009.

The BSE Sensex is up 1,250.80 points or 12.96% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

Coming back to today's trade, the BSE Mid-Cap index fell 0.16%. The BSE Small-Cap index rose 0.42%. Both the indices outperformed the Sensex.

The BSE Realty index (up 2.27%), the BSE FMCG index (up 1.57%), the BSE Healthcare index (up 1.31%), the BSE TECk index (up 0.34%), the BSE Oil & Gas index (down 0.3%), the BSE PSU index (down 0.61%) outperfomed the Sensex.

The BSE Bankex (down 2.86%), the BSE Auto index (down 2.52%), the BSE Capital Goods index (down 2.39%), the BSE Metal index (down 1.8%), the BSE IT index (down 1.6%), the BSE Consumer Durables index (down 0.93%), the BSE Power index (down 0.74%) underperfomed the Sensex.

The market breadth, indicating the overall health of the market, was marginally negative, recovering from a weak breadth earlier in the day. On BSE, 1,232 stocks advanced as compared to 1,316 that declined. A total of 64 shares remained unchanged.

From the 30 share Sensex pack 18 stocks fell while rest gained.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) fell 0.45% to Rs 1,706. The stock was choppy. It hit a high of Rs 1,734 and a low of Rs 1,670. Reliance Industries has announced the suspension of its export oriented unit (EOU) status for its oil & gas refinery in Jamnagar as the company plans to operate as a non-EOU refinery with effect from 16th April 2009 to cater to the increasing demand of petroleum products in the country.

Oil exploration firms fell after crude oil prices dropped. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) declined 0.08% and Cairn India fell 1.52%. Oil for May delivery fell as much as 69 cents, or 1.5%, to $45.19 a barrel in electronic trading on the New York Mercantile Exchange. The fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

Crude oil fell for a second day as the prospect of rising bank losses curbed optimism the global economy is recovering

Oil price fall benefited PSU OMCs. HPCL and Indian Oil Corporation rose by between 0.25% to 0.58%. But BPCL fell 0.26%. Lower oil prices will reduce under-recoveries at the state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

Some FMCG stocks rose on forecast of a near normal monsoon this year. Marico, ITC, Hindustan Unilever, Colgate Palmolive rose by between 0.08% to 5.31%. FMCG firms derive a substantial revenue from rural markets.

Some metal shares declined as copper prices fell on the London Metal Exchange. Tata Steel, Sterlite Industries, JSW Steel, Hindustan Zinc and Ispat Industries fell by between 0.89% to 7.06%. Copper for three-month delivery was down $165, or 3.6%, to $4,425 a metric tonne on the London Metal Exchange. The contract slid as low as $4,378, the lowest intraday price in almost two weeks.

Rate sensitive auto stocks fell on profit taking after a recent sharp surge. India's largest tractor maker by sales Mahindra & Mahindra fell 2.45%. India's largest commercial vehicle maker by sales Tata Motors fell 5.18%. India's largest car maker by sales Maruti Suzuki India fell 5.38%. India's largest motorbike maker by sales Hero Honda Motors fell 2.11% ahead of its Q4 March 2009 result today.

Rate sensitive real estate shares rose on hopes lower rates will spur housing demand. DLF, Indiabulls Real Estate and Housing Development & Infrastructure rose by between 2.84% to 5.44%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

Banking stocks fell in choppy trade on fears of rising defaults in a slowing economy. India's largest private sector bank by net profit ICICI Bank was down 6.51%. Its American depository receipts (ADR) fell 7.14% overnight. ICICI Bank's advance tax payment remained unchanged at Rs 250 crore in Q4 March 2009 when compared to Q4 March 2008.

India's biggest dedicated housing finance firm by operating income HDFC was down 0.39%.

India's largest bank in terms of assets and branch network State Bank of India (SBI) was down 3.13%. SBI chairman O.P. Bhatt today said interest rate cuts by the Reserve Bank of India were a signal for commercial banks to lower their rates. He said a decision on whether SBI would lower rates would be taken after a meeting of the bank's asset-liability. SBI's advance tax payment jumped 27.64% to Rs 1810 crore in Q4 March 2009 over Q4 March 2008.

India's second largest private sector bank by operating income HDFC Bank rose 1.84%. Its American depository receipt (ADR) fell 5.93% on Monday. Its advance tax payment rose 10% to Rs 275 crore in Q4 March 2009 over Q4 March 2008.

Axis Bank fell 3.22% even as its net profit rose 60.88% to Rs 581.45 crore on 51.04% rise in total income to Rs 3884.73 crore in Q4 March 2009 over Q4 March 2008.

The yield on the 10-year benchmark bond was at 6.29%, off a trough of 6.19% after the policy announcement, which was its lowest since 16 February 2009. It had traded at 6.34% ahead of the policy announcement, and had ended at 6.39% on Monday. Bond yields and bond prices are inversely related.

It may be recalled that many banks had reported robust Q3 December 2008 results on the back of treasury gains as bond prices soared. Bond yields and bond prices are inversely related.

Outsourcing focussed IT firms fell on fears a weak global economy would cut the amount firms spent on technology. India's second largest software services exporter Infosys Technologies fell 2.07%. Its ADR fell 3.11% overnight.

India's largest software services exporter by sales TCS fell 1.55% as its consolidated net profit as per Indian GAAP fell 1.58% to Rs 1152.34 crore on 1.44% fall in consolidated sales to Rs 7171.77 crore in Q4 March 2009 over Q3 December 2008. The company's consolidated net profit was up 4.5% at Rs 5256.4 crore on 21.6% rise in consolidated net sales at Rs 27812.9 crore in financial year ended March 2009 over financial year ended March 2008.

The company declared a total dividend of Rs 14 per share for financial year ended March 2009 including Rs 5 as final dividend. It closed 28 large deals during the year, added 163 new customers, made 24,885 campus offers for 2009-10 and has a total of 143,761 employees on its rolls. It announced liberal 1:1 bonus issue

India's third largest software services exporter, Wipro rose 0.24%. Its American depository receipt (ADR) fell 5.43% on Monday, 20 April 2009. India's fifth largest IT firm by sales HCL Technologies rose 0.84%%.

Capital goods stocks fell on worries a slowing economy will crimp orders. Larsen & Toubro, Bharat Heavy Electricals, ABB, Crompton Greaves, Praj Industries, Thermax fell by between 0.48% to 8.62%.

Punj Lloyd fell 8.62% after its UK-based unit lost a contract dispute to Sabic UK Petrochemicals in an interim ruling.

HealthCare stocks fell on profit taking after a recent solid surge triggered by expectations of better Q4 March 2009 results following reports of higher advance tax payment by these firms. Ranbaxy Laboratories, Dr Reddy's Laboratories, Biocon, Pfizer, Piramal HealthCare fell by between 0.4% to 6.29%.

Cals Refineries clocked the highest volume of 2.62 crore shares on BSE. Unitech (1.99 crore shares), Suzlon Energy (1.7 crore shares), Reliance Natural Resources (1.56 crore shares) and Housing Development & Infrastructure (1.39 crore shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 283,43 crore on BSE. Reliance Capital (Rs 255.26 crore), Educomp Solutions (Rs 205.02 crore), ICICI Bank (Rs 202.83 crore) and Housing Development & Infrastructure (Rs 187.23 crore) were the other turnover toppers in that order.