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Wednesday, May 06, 2009

Sensex falls below 12,000 in choppy trade; Tata Steel tumbles


Political uncertainty pulled the market lower in a choppy trading session with the barometer index BSE Sensex falling below the psychological 12,000 mark. There was a sudden sell-off after the Sensex surged to a 6-month high in afternoon trade on the back of rally in Asian shares. The barometer index lost 178.33 points or 1.47%, off 319.35 points from the day's high and up 53.34 points from the day's low. Market breadth, indicating the overall health of the market, turned negative in late trade. The breadth was strong till afternoon trade.

Volatility was hallmark of the trading session. The market drifted lower in early trade amid concern the US banks are short of capital. The market cut losses later. It moved between positive and negative zone in early afternoon trade. The market surged in afternoon trade as Asian stocks rose. A sell-off gripped the bourses in mid-afternoon trade. The market cut losses in volatile late trade.

Political uncertainty weighed on the market with polling underway for India's 15th Lok Sabha. 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.

Polling for the fourth phase for 85 Lok Sabha seats will be held tomorrow, 7 May 2009. At the end of the fourth phase, elections would be completed to 457 of the 545-member Lok Sabha.

A recovery in the economy triggered a solid rally on the domestic bourses in the past few days. The rally was also a part of a sharp surge in global equities triggered by hopes the worst of the global economic recession may be over. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex jumped 3970.68 points or 48.65% to 12,131.08 on 5 May 2009. Foreign institutional investors (FIIs) were one of the key drivers of this rally. Their inflow in the calendar year 2009 totaled Rs 2,898.90 crore (till 5 May 2009).

Activity in Indian factories expanded for the first time in five months in April 2009 as a swelling orders pipeline pointed to a tentative recovery, a survey showed on Monday, 4 May 2009. The ABN AMRO Bank purchasing managers' index (PMI) based on a survey of 500 companies, rose to 53.3 in April 2009 from 49.5 in March 2009, climbing above the threshold of 50 that separates expansion from contraction. The latest reading is the highest in seven months and it has steadily risen after hitting a trough of 44.4 in December 2008.

Manufacturing makes up about 16% of India's gross domestic product. The boost in manufacturing index came from a surge in new orders. The new orders index rose to 54.9 in April 2009 from 49.5 in March 2009. Several research notes in the past few days have pointed to improvement in economic activity in the months ahead.

European markets were trading firm today, 6 May 2009 as losses in energy stocks were offset by gains in banks which shrugged off news that Bank of America needs $34 billion in fresh capital. Key benchmark indices in UK, Germany and France were up by between 0.07% and 0.80%.

A purchasing managers index of the British services industry rose to an eight-month high of 48.7 in April 2009 from 45.5 in March 2009. The reading, which beat economist estimates, nonetheless still signals that part of the UK economy is contracting, albeit at a reduced rate

Another data showed UK consumer confidence rose by eight points to 50 in April 2009, the largest single monthly rise in almost two years.

Asian stocks rose shrugging off concern that US banks are short of capital. Key benchmark indices in China, Hong Kong, Singapore and Taiwan were up by between 0.98% and 5.05%. South Korea's Seoul Composite was down 0.32%. Japan's market is closed for a holiday.

Asia Pacific countries will need to implement forceful monetary and fiscal policies through next year as insurance against downside economic risks and for the region to come out of recession more quickly, the International Monetary Fund today, 6 May 2009, said. "On the fiscal side, it will be important to sustain the stimulus injected in 2009 into next year, not least as an insurance policy against risks that have yet to reveal themselves," the IMF said in its latest Regional Economic Outlook for Asia and Pacific. At the same time, fiscal credibility must be preserved by signaling that fiscal stimulus packages are extraordinary and will be unwound once a recovery is firmly established.

"On the monetary side, many central banks still have scope to reduce policy rates, while some may need to support credit to the private sector through unconventional measures," the report said.

IMF called on the governments to take preemptive measures to shore up bank capital and improve bankruptcy procedures, warning that the collapse of global demand is likely to lead to a surge in corporate defaults that could spill over to the banking sector.

"Under the baseline scenario, losses are likely to be manageable, largely because Asian corporates entered the crisis in robust financial health," it said. "But if global demand plunges anew, the ranks of defaulters could grow to uncomfortably high levels, and Asia could become trapped in an adverse feedback loop in which the losses in the corporate and banking sectors imperil each other."

The IMF forecast the global economy won't recover before the middle of 2010, so a sustained economic recovery in the region will have to wait. The IMF forecast that the economy in the whole of Asia will grow 1.3% this year before expanding 4.3% in 2010, well below its potential and down from a growth of 5.1% in 2008.

Australian retail sales climbed in March 2009 at their fastest pace in four months, while the nation's trade surplus ballooned to its second-largest on record, according to data released Wednesday.

Trading in US index futures showed the Dow could fall 33 points at the opening bell on Wednesday, 6 May 2009. Bank of America may need to raise a further $34 billion in capital as a result of its US government stress test, reports suggest. The results of the US government's Supervisory Capital Assessment Program, otherwise known as the "stress test," imposed on 19 major US banks will be released Thursday, 7 May 2009.

US stocks edged lower on Tuesday, 5 May 2009 as cautious investors were worried about bank stress test results and as energy shares succumbed to the pressure on lower oil prices. The Dow Jones Industrial Average fell 16.09 points, or 0.19%, to 8,410.65. The Standard & Poor's 500 Index lost 3.44 points, or 0.38 per cent, to 903.80 and the Nasdaq Composite index dropped 9.44 points, or 0.54%, to 1,754.12.

Signs of life from the battered consumer and housing sectors raise hope that the severe recession in the US may be bottoming out and that growth could turn positive later this year, Federal Reserve Board Chairman Ben Bernanke said Tuesday. Businesses will likely need to restock shelves after letting their inventories fall sharply, Bernanke said in testimony on Capitol Hill. For their part, consumers appear to have adjusted to the downturn and have begun shopping again, and the spring selling season for homes seems to be attracting buyers for the first time in three years, he said.

In economic news the Institute for Supply Management's (ISM) report showed the service sector contracted at a slower pace in April 2009 than in March 2009. The April 2009 ISM service index came in at 43.7, better than expected, against 40.8 in March 2009, the highest level since October 2008.

The European Central Bank (ECB) is likely to increase efforts to shore up the slumping eurozone economy this week, cutting interest rates to a record low of 1% and embarking on further radical and aggressive measures when the ECB's Governing Council meets on Thursday, 7 May 2009. Economists forecast a further quarter-point cut in official eurozone interest rates to 1% - a level not reached since the euro's creation.

The BSE 30-share Sensex lost 178.33 points, or 1.47%, to 11,952.75. The Sensex opened 30.39 points lower at 12,100.69. The Sensex rose 140.96 points at the day's high of 12,272.04 in afternoon trade, its highest level since 6 October 2008. At the day's low of 11,899.40, the Sensex lost 231.68 points in late trade.

The S&P CNX Nifty shed 36.85 points, or 1.01%, to 3,625.05. Nifty May 2009 futures were at 3627.80, at a premium of 2.75 points as compared to the spot closing. Turnover in NSE's futures & options (F&O) segment surged to Rs 57,634.57 crore from Rs 52,712.16 crore on Tuesday, 5 May 2009.

The market breadth, indicating the overall health of the market, turned negative in late trade after remaining strong earlier in the day. On BSE, 1307 shares declined as compared with 1215 that rose. A total of 96 shares remained unchanged.

The BSE Mid-Cap index slipped 1.16% to 3,675.84 and the BSE Small-Cap index fell 0.23% to 4,153.01. Both these indices outperformed the Sensex.

BSE clocked a turnover of Rs 5,830 crore, slightly lower than Rs 5,831.59 crore on Tuesday, 5 May 2009.

All sectoral indices on BSE edged lower. The BSE TECk index (down 0.89%), the BSE Oil & Gas index (down 0.09%), BSE Consumer Durables index (down 0.33%), the BSE PSU index (down 0.32%), the BSE Capital Goods index (down 0.93%), the BSE Auto index (down 0.81%), the BSE Power index (down 0.02%), BSE Healthcare index (down 0.62%), outperformed the Sensex.

The BSE IT index (down 1.51%), the BSE FMCG index (down 1.97%), the BSE Realty index (down 3.74%), BSE Bankex (down 2.94%), and the BSE Metal index (down 2.79%), underperfomed the Sensex.

Among the 30-member Sensex pack, 19 slipped while the rest rose. Hindalco (up 1.61%), NTPC (up 1.44%), and Sun Pharma (up 0.37%), edged higher from the Sensex pack.

India's largest mortgage finance firm by total income HDFC tumbled 4.95% to Rs 1767, extending yesterday's 5.81% slide after the stock's rating was cut to hold from buy by Deutsche Bank, which said the shares were fairly valued.

Banking shares declined on profit taking after a sharp rally in the past few days. ICICI Bank (down 4.64%), HDFC Bank (down 0.93%), and State Bank of India (down 1.16%), edged lower.

India's largest private sector steel marker by sales Tata Steel lost 5.15% to Rs 271.40, off sharply from day's high of Rs 290, after global rating firm S&P said it has kept its 'BB' issue rating on the 3.67 billion British pound senior secured debt of Tata Steel UK on credit watch with negative implications.

Outsourcing focussed IT stocks fell on US government plans to scrap tax incentives that encourage American firms to ship jobs overseas. India's largest software services exporter by sales TCS lost 2.83% to Rs 632.05. The stock had lost 2.31% on Tuesday, 5 May 2009 on reports Chrysler, the bankrupt US automaker, plans to scale down its offshore outsourcing of information technology projects to vendors such as TCS in the near term, as America's third-largest automaker prepares to undergo a massive business transformation steered by the Obama administration and sell its assets to Italy's Fiat.

India's third largest software services exporter by sales Wipro fell 2.54% to Rs 359.05 despite a 2.73% rise in its ADR on Tuesday, 5 May 2009.

India's second largest software services exporter by sales Infosys slipped 0.91% to Rs 1568.50. Infosys' ADR slipped 1.04% on Tuesday, 5 May 2009

Analysts, however, feel that US government's plan to scrap tax incentives that encourages American firms to ship jobs overseas is unlikely to dent business for Indian outsourcers. US president Barack Obama on Monday, 4 May 2009, announced plans to reduce tax breaks for US-based multinationals shipping jobs to places like India. Instead, the tax incentives would now go to those creating jobs inside the US, in places like the Buffalo city, New York.

Currently, US businesses that invest overseas can take an immediate tax deduction for expenses supporting their overseas investments. They can also defer the payment of US taxes on the profits they make from such investments. But, now the Obama Administration wants to ensure that companies do not receive deductions for expenses supporting their offshore investments until they pay tax on their offshore profits. This is intended to disincentivise US companies from retaining profits abroad.

Infosys said the proposal, if implemented, was unlikely to reverse the outsourcing of a gamut of services by US firms to Indian companies. "The current proposal, as we understand, is to close corporate tax loopholes on US multinational corporations and crack down on their overseas tax havens," the company said in a statement. "We do not believe that it has anything to do with IT outsourcing done by US corporations.", Infosys said.

Core Projects & Technologies gained 2.80% to Rs 106.45 after net profit surged 47.61% to Rs 24.37 crore 13.21% rise in net sales to Rs 101.84 crore in Q4 March 2009 over Q3 December 2008. The company announced the results during trading hours today, 6 May 2009.

India's largest oil exploration firm by sales Oil and Natural Gas Corporation (ONGC) rose 0.11% to Rs 886.25, on higher crude oil prices. But the stock came off the day's high of Rs 919.90. Nymex crude moved past $54 a barrel a mark after the American Petroleum Institute said late yesterday, 5 May 2009, that crude stockpiles declined last week.

Meanwhile, as per reports, ONGC is looking for partners to bid for three oil fields in Iraq. Reports added ONGC Videsh, the overseas arm of ONGC, had held preliminary talks with Malaysia's Petronas, Russia's Gazprom, France's Total and the UK's BP.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) was almost unchanged at Rs 1877.15. Analysts expect strong growth in bottom line in coming quarters from sale of gas which it started pumping last month from its deep-sea field off the east coast. The stock swung wildly in range of Rs 1935.40 and Rs 1850.

Ratnagiri Gas & Power may sign an accord to buy gas from RIL at a board meeting this week, reports suggest.

Shares of oil marketing firms HPCL (down 1.70%), BPCL (down 1.89%), and IOC (down 1.42%) fell as oil rose. State-run oil marketing firms suffer revenue loss on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

Gujarat State Petronet soared 9.94% to Rs 47. As per reports, Reliance Industries is likely to sign an agreement with a group company of Royal Dutch Shell PLC (RDSA) to buy up to 4 million standard cubic meters per day of liquefied natural gas for two months. Further, Reliance may sign a separate agreement with Gujarat State Petronet to transport the gas from Shell's Hazira LNG terminal in Gujarat to its refineries at Jamnagar.

India's largest pharma company by sales Ranbaxy rose 0.68% to Rs 178.50, extending yesterday's 3.38% rise after the company said it has launched phase-III clinical trials for its Anti-Malaria drug Arterolanc Maleate Piperaquine phosphate in India, Bangladesh and Thailand. The company expects to complete the trial and apply for marketing authorisation by late calendar year 2010.

But India's third largest pharma company by sales Cipla fell 3.63% to Rs 227.25 despite receiving a tentative approval from US Food and Drug Administration (US FDA) for tenogovir disoproxil fumarate tablets in 300 miligram (mg).

Cadila Healthcare rose 5.07% to Rs 336.65 on receiving the US regulatory approval to market its drug Mycophenolate Mofetil, which is used to suppress immune system in organ transplant. The estimated sales in 2008 as per National Drug Code (NDC) for Mycophenolate Mofetil tablets was $648 million and for the capsule it was $316 million.

India's second largest cellular services provider by sales Reliance Communication slipped 0.44% to Rs 236, after striking day's high of Rs 249. Consolidated net profit as per Indian GAAP declined 3% to Rs 1454.31 crore on 10% growth in sales to Rs 5797.77 crore in Q4 March 2009 over Q4 March 2008. The company unveiled the results on Thursday, 30 April 2009

India's largest cellular services provider by sales Bharti Airtel rose 0.25% to Rs 754.10. On 5 May 2009, Bharti Airtel and Alcatel-Lucent formed a joint venture to manage Airtel's pan-India broadband and telephone services.

Tulip Telecom surged 27.60% to Rs 608.95. The company will declare the year ending March 2009 results by June 2009.

India's largest engineering and construction company by sales Larsen & Toubro shed 1.10% to Rs 968. The company recently said it expects strong order flow in the year ending March 2010.

India's largest dam builder by sales Jaiprakash Associates slumped 6.35% to Rs 138 and was the top loser from the Sensex pack. The stock slipped on profit booking after it gained 52.38% to Rs 147.35 in one month to 5 May 2009.

McNally Bharat Engineering Company rose 2.73% to Rs 64 on signing a pact for acquisition of engineering workshop and coal & mineral technology business of KHD Humboldt Wedag International GMBH. The company made this announcement during trading hours today, 6 May 2009.

India's top tractor maker by sales Mahindra & Mahindra rose 0.27% to Rs 535, recovering from the session's low of Rs 516.10. The company said after trading hours on Tuesday, 5 May 2009, workers at its plant in Nashik in Maharashtra began a strike which would temporarily affect production.

However, India's largest small car maker by sales Maruti Suzuki India was down 2.16% to Rs 811.50. The company on Tuesday, 5 May 2009 said it will launch its new hatchback 'Ritz' on 15 May 2009. "Ritz, which will be available in petrol and diesel variants, will be India's first Bharat Stage IV compliant car.

Auto ancillary shares rose on reports the government would consider various measures, including imposing anti-dumping duties, to protect the domestic auto component industry from cheap imports. Minda Industries (up 4.68%), Bharat Gears (up 5.54%), Pricol (up 2.37%), Sona Koyo Steering (up 0.32%), and Rico Auto (up 1.46%), gained.

Reliance Infrastructure was the turnover topper on the BSE clocking turnover of Rs 300.08 crore followed by ICICI Bank (Rs 288.95 crore), Reliance Industries (Rs 277.25 crore), Suzlon Energy (Rs 254.18 crore) and Reliance Capital (Rs 244.63 crore).

Suzlon Energy topped the volume chart on BSE clocking volume of 3.38 crore shares followed by Unitech (2.59 crore shares), Reliance Natural Resources (2.49 crore shares), IFCI (1.74 crore shares) and Ispat Industries (1.01 crore shares).

Kanoria Chemicals & Industries hit upper circuit of 20% at Rs 23.10 after net profit jumped 148.4% to Rs 7.60 crore in Q4 March 2009 over Q4 March 2008. The result was declared after market hours yesterday, 5 May 2009.

The Indian government will release the weekly wholesale price inflation data around midday on Friday, 8 May 2009, instead of Thursday, 7 May 2009, due to a holiday for elections in New Delhi on Thursday.