Market takes a breather after sharp rally

The key benchmark indices snapped last four days' gains, closing with small losses on profit taking. The BSE 30-share Sensex fell 58.16 points or 0.35%, off close to 240 points from the day's high and up close to 70 points from the day's low. Intraday volatility was high.

FMCG, capital goods, telecom and realty stocks fell. The market breadth was negative in contrast to a strong breadth earlier in the day. Index heavyweight Reliance Industries edged higher in volatile trade. But two other index heavyweights Infosys and Larsen & Toubro, fell.

Intraday volatility on the bourses was high. The market opened on a firm note on higher Asian stocks and overnight solid rally in US stocks. It trimmed gains in mid-morning trade on profit taking after a sharp surge over the past four days. The market regained strength after falling to an intraday low in mid-morning trade. However, the intraday rebound proved short lived. The market slipped into the red in early afternoon trade. The market cut losses after hitting a fresh intraday low in early afternoon trade.

The government today launched a discussion paper on the universal Goods and Services Tax (GST). The government had set a deadline of April 2010 for introducing GST but the finance minister said recently it could be delayed by a few months. The proposed GST which is to replace existing levies such as excise, service tax and value-added tax, could help lower the overall tax burden of industry.

Finance Minister Pranab Mukherjee today said the government will have to take corrective measures on stimulus in due course. He said there is a need of massive investment in agriculture and infrastructure to revive domestic demand. He further said there is a need to maintain high savings and investment rates. He also said the economy is in the process of recovery. The finance minster said there is a need of generating strong domestic demand until the robust recovery all over the world, particularly the developed world takes place

Mukherjee had on Sunday, 8 November 2009, said that the timing of the withdrawal of stimulus steps for India's economy will be decided when it becomes clear the economy is recovering, but there will be no fresh stimulus. Prime Minister Manmohan Singh on that day had said the government would take steps in the 2010/2011 fiscal year to wind down economic stimulus measures for Asia's third largest economy.

Mukherjee said he was not worried about the availability of food grains and the government will continue to import food items to meet any supply shortfall. He said the government is hopeful of more than 7% growth in the fiscal year ending March 2011 and 9% growth by 2012

The Prime Minister had said on Sunday day that the government would push through legislative changes, including in the insurance sector which foreign players are eyeing

The government, last week, mandated more sales of shares by state-run firms and changed the rules on how it can use the proceeds, as it seeks to boost revenues and rein in a widening budget deficit. The government said all profitable, listed state-run firms must have at least 10% of their shares in public hands, and unlisted firms that had a positive net worth, no accumulated losses and a net profit over the past three years should list.

The government plans to introduce in parliament by December 2009 bills proposing the raising of foreign stake limits in insurers to 49% from the present 26% and opening up the pension sector to private and foreign firms. It will also propose a law to cut its holding in top lender State Bank of India to 51%

The government will maintain its stimulus measures for the export sector, Trade Minister Anand Sharma said on Monday. He said it was not yet time to withdraw stimulus.

RBI deputy Governer Shyamal Gopinath today said India is actively confronted by an upturn in inflation. She added that withdrawal from the supportive monetary policy may diverge considerably between developed and emerging nations. Gopinath said the RBI will ensure there is adequate liquidity in the banking system

Last month, while announcing the monetary policy the Reserve Bank of India signalled an interest rate hike was imminent, citing inflationary pressures. It also started tightening some bank credit. The RBI sharply raised its inflation forecast for end-March 2010 to 6.5% with an upward bias, from 5 % earlier.

Gopinath said capital flows have resumed on economy's growth prospects. She said the costs and benefits need to be considered in managing the impact of foreign fund flows.

European Central Bank (ECB) President Jean-Claude Trichet on Monday said risks to both global growth and inflation were currently balanced. Trichet said global economic growth was a bit better than earlier expected, with emerging economies taking the lead. Among growing signs of economic recovery, some central banks - such as Norway and Australia - have already raised interest rates, while the ECB has signalled it will start rolling back some of its extra liquidity supplies.

Meanwhile, as part of its efforts to encourage small and medium-sized enterprises (SMEs) to go public, the Securities and Exchange Board of India (Sebi) on Monday exempted them from the usual eligibility norms applicable for initial public offerings (IPOs) and follow-on public offerings.

Sebi has also amended the Issue of Capital and Disclosure Requirements Regulations (ICDR) to allow pure auctions for qualified institutional investors (QIBs) in follow-on public offerings to begin with. The method may be later extended to initial public offerings. Under the new method, bidders will be free to bid at any price above the floor price. At present, allotments are made at the floor price. Retail investors, however, will be allotted shares at the floor price.

The board also decided that the issuer is free to place a cap either in terms of the number of shares or percentage to issued capital of the company so that a single bidder does not garner all the shares on offer, ensuring a wider distribution of shareholding.

European shares rose in a volatile trade extending four-session winning streak. The key benchmark indices in Germany, France and UK rose by between 0.04% to 0.25%.

Asian stocks rose on Tuesday, buoyed by Wall Street's gains as interest in risk-taking rose, with tech firms climbing and trading houses up after gains in oil, gold and other commodities. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.1% to 0.75%.

China is quite competent to grow by 8% in 2009, Ma Delun, a vice-governor with the People's Bank of China, said at a banking event in Mumbai on Tuesday. Earlier this month, the World Bank raised its forecasts for Chinese growth, saying gross domestic product will increase 8.4% this year and 8.7% in 2010 on the back of massive fiscal and monetary stimulus.

Moody's Investors Service raised the outlook on China's A1 rating to positive from stable on Monday, praising its economic performance in the past year during the global financial crisis. The agency said the country's strong credit fundamentals would resume its improving trend as the economy emerged from the effects of the global recession.

In a separate release, Moody's also said it was lifting the credit outlook on Hong Kong's Aa2 government bonds to positive from stable. Moody's said while Hong Kong has a separate credit rating from mainland China, it deserved a review because of increasing financial and economic ties with the fast-growing mainland economy. The boost in outlook comes even as Hong Kong has projected government deficits for the next two years.

Trading in US index futures indicated Dow could slide 9 points at the opening bell on Tuesday, 10 November 2009.

US stocks rallied on Monday, with the Dow Jones industrial average at a 13-month high, as the Group of 20's pledge to keep aid flowing to the world's economy boosted investors' appetite for risk. The Dow added 203.52 points, or 2%, to 10,226.94, a new 2009 high. The S&P 500 index rose 23.78 points, or 2.2%, to 1,093.08. The Nasdaq Composite Index rose 41.62 points, or 2%, to 2,154.06.

A survey of top forecasters released on Tuesday showed that top forecasters are growing more confident that the US economy has embarked on a sustainable recovery. The Blue Chip Economic Indicators newsletter for November 2009 found forecasters had raised their 2010 projections for US gross domestic product for a fourth straight month. However, they still expect the pace of growth to fall short of the typical post-recession bounce. The US economy should expand 2.7% next year, the newsletter said. That marked an upward revision from the 2.5% pace the survey panel had expected a month ago.

The Group of 20 finance ministers and central bankers pledged on Saturday, 7 November 2009, to prepare strategies to end emergency support for their economies, but to keep the aid flowing until recovery was assured. The world's biggest economies - the European Union, the United States and Japan - are either expected to or already have emerged from recession in the third quarter.

This has prompted a discussion on when to start cutting back on the trillions in public support pledged to cushion the worst economic downturn since World War Two to maintain credibility of fiscal policies with markets and consumers. Officials from the world's 20 biggest developed and emerging economies said at the end of talks in the small Scottish town of St. Andrews that while the economy has improved, recovery was still uneven and depended on policy support.

The United States sees China as a vital partner and competitor, but the two countries need to address economic imbalances or risk "enormous strains" on their relationship, President Barack Obama said on Monday. Three days before leaving on a nine-day trip to Asia, Obama said the world's two most powerful nations need to work together on the big issues facing the globe, and any competition between them has to be fair and friendly.

In an interview to a news agency Obama on Monday said he plans to raise the issue of the yuan currency with Chinese officials when he meets with them in Beijing next week. Obama said he was confident that both the United States and China can arrive at a broad set of policies that encourages trade that benefits both the countries

China has been angered by recent controls slapped by the US on some of its imports, and China's foreign ministry spokesman Qin Gang issued a new warning against barriers to commerce. He said the US needs to make positive efforts with China to resolve frictions and questions in trade, including acknowledging China's status as a full market economy and halting some protectionist measures.

The BSE 30-share Sensex fell 58.16 points or 0.35% to 16440.56. The Sensex rose 178.81 points at the day's high of 16677.53 in early trade. The Sensex fell 127.06 points at the day's low of 16371.66 in early afternoon trade.

The S&P CNX Nifty fell 16.70 points or 0.34% to 4881.70. Nifty November 2009 futures were at 4,872.15, at a discount of 9.55 points as compared to spot closing of 4,881.70. Turnover in NSE's futures & options (F&O) segment was Rs 81008.35 crore higher than Rs 73802.20 crore on Monday, 9 November 2009.

BSE clocked a turnover of Rs 5950 crore, higher than Rs 5014.39 crore on Monday, 9 November 2009.

The market breadth, indicating the overall health of the market turned negative. The breadth weakened from strong breadth in early trade. On BSE, 1287 shares advanced as compared with 1456 that declined. A total of 56 shares remained unchanged.

From the 30 share Sensex pack, 22 stocks fell and rest rose.

From a low of 15,404.94 on 3 November 2009, the Sensex had jumped 1,093.78 points or 7.1% in four trading sessions to 16498.72 on Monday, 9 November 2009. The Sensex is up 6793.25 points or 70.41% in calendar year 2009, as on 10 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8280.16 points or 101.46%, as on 10 November 2009.

Coming back to today's trade, the BSE Mid-Cap index fell 0.43% and the BSE Small-cap index fell 0.38%. Both the indices underperformed the Sensex.

The BSE PSU index (up 2.13%), the BSE Metal index (up 2.38%), the BSE Oil & Gas index (up 2.4%), the BSE Bankex (up 4.8%), the BSE FMCG index (up 2.17%), the BSE Auto index (up 1.58%), the BSE Healthcare index (up 1.27%), the BSE Consumer Durables index (up 2.44%), outperformed the Sensex.

The BSE Realty index (down 2.77%), the BSE Teck index (down 1.39%), the BSE IT index (down 0.73%), the BSE Capital Goods index (down 0.56%), the BSE Power index (down 0.45%), underperformed the Sensex.

Energy major Reliance Industries (RIL) gained 1.39% to Rs 2052.60 after company on Tuesday announced its first oil discovery in its exploration block in the Cambay Basin off Gujarat. The stock was volatile. It hit a high of Rs 2100 and a low of Rs 2007. Reliance holds 100% participating interest in the block. This block was awarded to Reliance under the fifth round of the New Exploration Licensing Policy.

RIL today said reports of a meeting between the billionaire Ambani brothers to settle a gas-pricing dispute were baseless. Reliance Industries, controlled by billionaire Mukesh Ambani, is embroiled in a high-profile legal battle over a deal to sell gas to Reliance Natural Resources, led by Ambani's estranged younger brother Anil, at below the price set by the government. RIL said in a statement the matter would be decided by the Supreme Court, which is currently hearing the case.

The RIL stock had jumped 3.46% on Monday on reports the firm is close to announcing a major overseas acquisition. The likely target is a part of the assets owned by troubled petrochemical major LyondellBasell, which is undergoing reorganisation under the protection of a US court, reports suggest.

The government on 27 October 2009 allocated additional 50 million cubic metres a day (mmscmd) of gas from Reliance Industries-operated east coast block D6. Power plants and refineries will get the bulk of Reliance Industries' gas from the Krishna-Godavari basin beyond the previously allotted 40 million metric standard cubic metres per day (mmscmd).

The empowered group of ministers (eGoM) also made some allotments for Reliance's petrochemical plants and refineries.

FMCG stocks fell on profit taking. Marico, ITC, Hindustan Unilever, REI Agro fell by between 0.15% to 2.33%.

Telecom stocks extended recent fall on worries the ongoing price war will result in a sharp fall in revenues and profits. Reliance Communications and Idea Cellular fell by between 1.48% to 2.9%.

Bharti Airtel fell 4.47% extending 3.88% fall on Monday after chairman Sunil Mittal told the media that the company is not actively seeking acquisitions, after its planned tie-up talks with South Africa's MTN collapsed recently

India's largest engineering and construction firm by sales Larsen & Toubro fell 0.36%. The company announced on Monday it won on orders worth Rs 1635 crore.

Among other capital goods stocks, Bharat Heavy Electricals, ABB, Thermax, BEML fell by between 1.19% to 2.95%.

Rate sensitive realty shares fell after the RBI, last week, raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% in its monetary policy review meet on 27 October 2009. Sobha Developers, Omaxe, Unitech, DLF and Indiabulls Real Estate fell by between 0.44% to 4.8%.

The latest RBI move will result in increase in borrowing costs for realty firms which depend heavily on borrowing. In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said in its quarterly policy review.

Some PSU stocks rose after Prime Minister Manmohan Singh on 5 November 2009, approved divestment in public sector companies to raise funds for social welfare. Hindustan Copper, State Trading Corporation, MMTC, Hindustan Copper, Power Finance Corporation rose by between 0.02% to 8.69%.

IT stocks fell on recent strong gains in rupee against the dollar. India's second largest software company by sales Infosys fell 0.71% even as its ADR rose 2.78% on Monday. The back-office arm of Infosys Technologies is looking at acquiring firms in Europe and in the United States of $50 million to $100 million, a top official said on Monday. Infosys BPO would also hire 1,200 people in the current financial year, the unit's chief executive, Amitabh Chaudhry, told reporters on the sidelines of the World Economic Forum.

Infosys said on 5 November 2009 its chairman's wife sold company shares worth $92 million for setting up a venture capital fund. Sudha Murthy, wife of Infosys co-founder and chief mentor N.R. Narayana Murthy, sold 20 lakh shares, or about 22% of her total holding, on the Bombay Stock Exchange on 5 November 2009, the company said in a filing. Last month, Narayana Murthy, who co-founded Infosys with six other software engineers in 1981 with $250, had sold a total of 800,000 shares worth $37 million to set up a venture capital fund which he plans to set up in India. The company said the Murthys have confirmed they did not plan to raise further capital for the fund.

India's third largest software company by sales Wipro fell 1.57% even as its ADR rose 4.05% on Monday. Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on Tuesday The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

India's largest software company by sales Tata Consultancy Services (TCS) fell 0.28%. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

The Indian rupee lost ground after strengthening to a new three-week high against the dollar on Tuesday. The partially convertible rupee was at 46.49/51 per dollar, weaker than its close of 46.46/47 on Monday. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports.

Banking shares rose on hopes of financial sector reforms. India's largest private sector bank by net profit ICICI Bank rose 0.66% as its ADR rose 8.86% on Monday, 9 November 2009. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's largest bank by net profit State Bank of India (SBI) rose 2.14% after gaining 5.19% on Monday. State Bank of India said on Monday it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced after market hours on Friday 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

But, India's second largest private sector bank by net profit HDFC Bank fell 0.43% even as its ADR rose 8.35% on Monday.

The RBI did not relax mark-to-market rules for bank's debt holdings at a quarterly policy review on 27 October 2009. The market was been agog with talks of the central bank hiking the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM).

The central bank also decided to streamline provisioning requirement on non-performing assets. The RBI, asked banks to ensure by September 2010 that the total provisioning coverage against non-performing or bad loans aren't less than 70% of the outstanding amount.

Metal stocks rose after a gauge of six metals traded on the London Metal Exchange, rose 0.92% on Monday, 9 November 2009. Hindustan Zinc and Sterlite Industries rose by between 0.65% to 0.69%.

National Aluminium Company rose 0.34%. The company recently hiked the prices of aluminium products by Rs 1000 a tonne reflecting the recent uptrend in prices on the London Metal Exchange.

Steel stocks rose for the fourth straight day on reports major steel producers have posted strong sales volumes for the month of October 2009. Steel Authority of India (Sail) rose 0.26%. Sail has posted 28% growth in saleable steel volumes to 0.85 million tonnes in October 2009 over October 2008.

JSW Steel rose 4.19% after a group company JSW Energy recieved approval for an initial public offer from the Securities and Exchange Board of India. JSW steel's sales doubled to 0.4 million tonnes in October 2009 over October 2009.

But Tata Steel, the world's eighth largest steelmaker by output, fell 0.9%. The company said on Friday 6 November 2009 steel sales at its Indian operations rose 38% to 462,000 tonnes in October 2009 over October 2008.

Demand for steel remains strong auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales. Another reason for the surge in sales in October 2009 was lower base effect, as last year demand dropped significantly owing to economic downturn. Most steel companies had cut production in October last year due to the global economic crisis and steep fall in demand.

Auto stocks fell on profit taking. Low interest rates and attractive benefits offered by companies pushed up sales of the industry in October 2009.

India's second largest bike marker by sales Bajaj Auto fell 1.14% after Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan Motor Co, said on Tuesday an agreement had been signed with Bajaj Auto for a low-cost car which would come to India in 2012.

India's largest bike marker by sales Hero Honda Motors fell 3.27%. The company reported a marginal increase in October sales at 354,156 units as against 352,449 units in the same month last year

India's largest small car marker by sales Maruti Suzuki India fell 2.73%. The company's total sales grew 32.4% to 85415 units in October 2009, compared with 64490 units posted in the same month a year ago.

India's largest tractor maker by sales Mahindra & Mahindra was flat at Rs 1002.90. The company's overall sales climbed 32% in October this year to 18,410 units against 13,935 units in the same month last year. Mahindra and Mahindra (M&M) reportedly plans to launch a motorcycle next year. The company is also looking at acquisitions in the electronic scooter space. The auto major had entered the two-wheeler market market by acquiring the assets of Pune-based scooter manufacturer Kinetic Motor in 2008.

India's largest truck marker by sales Tata Motors rose 2.26%. Its total sales grew 18% to 20,011 units last month against 17,014 units in the same period last year.

GVK Power & Infrastructure clocked highest volume of 1.63 crore shares on BSE. Suzlon Energy (1.36 crore shares), Cals Refineries (1.21 crore shares), Unitech (1.2 crore shares) and Reliance Natural Resources (1.15 crore shares) were the other volume toppers in that order.

Reliance Industries clocked highest turnover of Rs 281.21 crore on BSE. State Bank of India (Rs 239.91 crore), Educomp Solutions (Rs 210.10 crore), Housing Development & Infrastructure (Rs 158.09 crore) and DLF (Rs 146.17 crore) were the other turnover toppers in that order.