Market extends losses for the fourth day; volatility to the fore

Key benchmark indices extended their losses for the fourth straight session after US President Barack Obama proposed limiting risk-taking at US banks. Volatility was the hallmark of the day. The BSE 30-share Sensex settled 191.46 points or 1.12% lower at 16,859.68, below the psychological 17,000 mark. The S&P CNX Nifty declined 58.15 points or 1.14% to 5036, regaining the psychological 5,000 mark soon after falling below that level at the onset of the trading session. Index heavyweight Reliance Industries (RIL) was volatile after the company today reported higher third quarter net profit.

Intraday volatility on the bourses was high. The market tumbled in early trade on weak global stocks. The market staged a strong intraday rebound in afternoon trade after the chief economic adviser to the finance ministry Kaushik Basu said the economy will be back at a 9% growth rate by the next fiscal year. But the intraday rebound proved short-lived. The market weakened in afternoon trade. The market once again recovered from lower level. It lost ground again later.

India VIX, a volatility index based on the S&P CNX Nifty index option prices, surged for the second day in a row. It jumped 5.74% to 24.85. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days

The market breadth was weak, though it recovered from early trade. The breadth was dismal in early trade. Shares related to infrastructure sector were hammered for the second running day. IT stocks languished following the US bank plan. Bank stocks declined as investors turned cautious ahead of the Reserve Bank of India's quarterly monetary policy review meet on 29 January 2010. Auto stocks were mixed ahead of Q3 earnings. PSU shares regained fancy after taking a pause on Thursday on profit booking.

European markets extended losses for the third-straight session, with banks under pressure after Obama proposed tough new regulations on the sector. Key benchmark indices in UK, Germany and France were down by between 0.59% to 0.61%.

Asian stocks fell for a fifth day today amid concerns China's economic growth will lead to policy tightening there. Key benchmark indices in China, Hong Kong, South Korea, Japan, Singapore and Taiwan were down by between 0.65% and 2.56%.

Fears that China will get more aggressive in reducing the risk of asset bubbles sent investors bailing from China-focused stock funds for an 18th consecutive week, research firm EPFR Global said on Friday. Investors pulled $348 million from China equity funds in the week ended 20 January 2010, the biggest outflow in 18 weeks.

Though global emerging market equity funds attracted $748 million in fresh money in the week of Jan. 20, Asia ex-Japan equity funds took in only $29 million because of the China-related outflows. Net inflows to emerging market bond funds hit the highest in eight weeks and US bond funds extended a streak of inflows to 55 weeks.

China will stick to its moderately loose monetary policy, People's Bank of China Governor Zhou Xiaochuan said in comments broadcast on Friday. Zhou made the comments soon after China on Thursday reported stronger-than-expected 10.7% year-on-year gross domestic product growth for the last quarter of 2009.

US stocks tumbled on Thursday after Obama threatened to fight Wall Street banks with a new proposal to limit financial risk taking. The Dow registered its biggest two-day drop since June 2008 led by losses in financial shares

The Dow Jones Industrial Average slipped 213.27, or 2%, to 10,389.88. The broader Standard & Poor's 500 Index declined 21.56 points, or 1.9%, to 1,116.48. The Nasdaq Composite Index was down 25.55 points, or 1.1%, to 2,265.70.

Obama proposed new limits on the size and activities of the nation's largest banks, pushing a more muscular approach toward regulation that yanked down bank stocks and raised the stakes in his campaign to show he's tough on Wall Street.

Obama proposed that banks be prohibited from running proprietary trading operations or investing in hedge funds and private equity funds as a way to limit the risk of another financial crisis. The plan comes as banks around the world are recovering from $1.7 trillion in losses and writedowns since the start of 2007.

The concern over lending in China and banking reforms in the US overshadowed better-than-estimated earnings at companies from Starbucks Corp. to Xerox Corp. and EBay Inc. which sent US shares higher at the start of trading on Thursday.

The World Bank has raised its forecast for global growth in 2010 but warned that the recovery may lose momentum in the second half of the year as government stimulus programs wind down and unemployment persists. The world economy will expand 2.7% this year after the worst recession since the end of World War II, compared with an estimate in June of a 2% expansion, the Washington- based poverty-reduction agency said today in an annual report. Growth may reach 3.2% in 2011, the bank said.

The World Bank report also includes figures on last year's downturn, with an estimate that the global economy declined 2.2%, compared with the 2.9% decrease projected in June. Growth in emerging nations is expected to reach 5.2% this year, compared with a June estimate of 4.4%, the bank said. China will expand 9% this year and India 7.5%, it said.

The World Bank also raised its forecast for US growth in 2010 to 2.5% growth, after predicting 1.8% in June. Japan's gross domestic product will expand 1.3% this year, more than the 1% predicted in June. The euro area's economy is forecasted to grow 1%, compared with the earlier estimate of 0.5% expansion.

Trading in US index futures indicated the Dow could rise 5 points at the opening bell on Friday, 22 January 2010.

Back home, aggregate results of 469 Indian companies showed 42.20% advance in net profit on 20.30% rise in sales in quarter ended December 2009 over the quarter ended December 2008.

The food price index rose 16.81% in the 12 months to 9 January 2010, while the fuel index was up 6.34%, the government said on Thursday. The rise in food price index was lower than an annual rise of 17.28% in the previous week.

The annual wholesale inflation rose to 7.31% in December 2009, compared with 4.78% in November and 6.15% a year ago. Finance minister Pranab Mukherjee said on Wednesday the government was taking steps to contain inflation. The situation is constantly under review, he said. He also promised more measures to check the rise in the prices of essential commodities.

Food prices will cool off in 1-2 months and inflation will turn around, finance ministry's chief economic advisor Kaushik Basu said in a newspaper interview published on Wednesday. The Reserve Bank of India will hold its quarterly monetary policy review on 29 January 2010 and is widely expected to increase the cash reserve ratio (CRR) requirements for banks, but economists are divided on when it will raise interest rates. CRR is the level of cash that banks must keep in deposit with the central bank. Food prices rose near 20% in December from a year earlier, their highest in 11 years.

India's October-December 2009 quarter economic growth is expected to be lower than the previous quarter, chief statistician Pronab Sen said on Thursday, due to a contraction in farm output. Indian economy, which grew at 7.9% in the September quarter, is expected to grow 6-6.5% in the December quarter, Sen said.

He expects the Indian economy to grow at 6.5-7.5% for the fiscal year ending in March 2010. The annual farm output in the December 2009 quarter is expected to contract by 6-7%, he added. Monthly inflation may touch double digits by March 2010, Sen had said earlier this week

Union food and agriculture minister Sharad Pawar on Wednesday suggested that the prices of milk and related products were set to rise because of the demand-supply mismatch.

Meanwhile, the government reportedly proposes to ease the norms for foreign direct investment (FDI) approval. Presently projects worth more than Rs 600 crore require the final approval of the Cabinet Committee on Economic Affairs (CCEA). The department of industrial policy and promotion (DIPP) has proposed that this ceiling be raised to anywhere between Rs 1,000 crore and Rs 1,500 crore. The new norms are likely to be notified after the introduction of a consolidated FDI policy framework on 1 April 2010.

FDI inflows increased to $27 billion in 2008-09 from $3.2 billion in 2004-05. During the period April-September 2009-10, FDI inflows reached $15 billion. The government has set a target of achieving $50 billion annual FDI by 2012 and $100 billion by 2017.

The BSE 30-share Sensex declined 191.46 points or 1.12% to 16,859.68. The Sensex opened 72.78 points lower at 16,978.36. It fell 50.81 points at the day's low of 17,000.33 in early afternoon trade. Sensex lost 443.05 points at the day's low of 16,608.09 in morning trade

The S&P CNX Nifty was down 58.15 points or 1.14% to 5036. The Nifty crashed below the psychological 5,000 mark to hit a low of 4954.85 in early trade.

Nifty January 2010 futures were at 5013.90, at a discount of 22.10 points as compared to the spot closing. Turnover in NSE's futures & options (F&O) segment soared to Rs 1,32,392.09 crore from Rs 1,11,117.17 crore on Thursday, 21 January 2010.

The total turnover on BSE amounted to Rs 6355 crore as compared with Rs 6537 crore on Thursday, 21 January 2010.

The market breadth, indicating the overall health of the market was weak. On BSE, 2041 shares declined as compared with 873 that rose. A total of 56 shares remained unchanged. The breadth was extremely weak in opening session of trade.

The BSE Mid-Cap index fell 1.09%, outperforming the Sensex. The BSE Small-Cap index declined 1.14%, underperforming the Sensex

BSE Bankex index (down 1.56%), BSE Realty (down 1.70%), and BSE IT index (down 1.61%), underperformed the Sensex

BSE FMCG index (up 1.34%), BSE Power index (down 0.22%) and BSE PSU index (up 0.36%), outperformed the Sensex.

Among the 30-member Sensex pack, 25 declined while only 5 of them gained.

Metal stocks declined after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 1.14% on Thursday, 21 January 2010.

India's largest private sector steel maker by production capacity Tata Steel slumped 4.03% to Rs 622.20 and was the top loser from the Sensex pack.

Hindalco Industries (down 1.14%), Sterlite Industries (down 0.28%), Jindal Stainless (down 2.11%), Sail (down 3.23%), Sesa Goa (down 0.66%), and National Aluminum Company (down 3.77%), edged lower.

Capital goods pivotals saw divergent trend. India's largest engineering & construction firm by sales Larsen & Toubro (L&T) slumped 3.45% to Rs 1471.70. Nevertheless, the stock recovered from day's low of Rs 1438.80.

L&T extended Thursday's over 6% plunge after the company cut its revenue growth target to 10% from 15% at the time of announcing Q3 results on Thursday. L&T said profit after tax from ordinary activities rose 15% to Rs 696 crore in Q3 December 2009 over Q3 December 2008. Gross sales revenue declined 6% to Rs 8139 crore. The result was announced during trading hours on Thursday, 21 January 2010.

However, India's largest power equipment maker by sales Bharat Heavy Electricals (Bhel) surged 3.36% to Rs 2374.70, staging a sharp recovery from day's low of Rs 2240. The company's the net profit rose 35.67% to Rs 1072.59 crore on a 17.28% rise in total income to Rs 7422.51 crore in Q3 December 2009 over Q3 December 2008. The result was announced during trading hours on 21 January 2010. It was the top gainer from the Sensex pack

Power generation stocks declined as investors shuffled their portfolios ahead of the upcoming mega follow-on-public (FPO) offer of NPTC. Tata Power Company (down 1.64%), Torrent Power (down 4.91%), CESC (down 1.66%), Reliance Power (down 1.50%), declined.

India's largest power generation firm by total capacity NTPC was down 0.74%. The company FPO remains open between 3 and 5 February 2010. The pricing has not yet been announced by the company. Speaking in an interview to a news agency, the company's chairman said he expects an upcoming sale of its shares by the government to raise up to Rs 12,000 crore.

India's largest private sector utility firm by sales Reliance Infrastructure (R-Infra) declined 1.49%. The company has won Mumbai Metro Line II project from Maharashtra government. The estimated cost of project is around Rs 11,000 crore

DLF (down 2.88%), Unitech (down 1.85%), HDIL (down 0.78%), Indiabulls Real Estate (down 1.42%), and Omaxe (down 4.15%), declined from the realty pack.

Index heavyweight Reliance Industries (RIL) advanced 0.29% to Rs 1050.70, staging a steep recovery from the day's low of Rs 1029.70 in volatile trade. RIL's net profit rose 15.77% to Rs 4008 crore on 89.77% surge in total income to Rs 57364 crore in Q3 December 2009 over Q3 December 2008. RIL said the results had been reworked and restated to include figures from Reliance Petroleum, which it absorbed last year. The company announced the Q3 result during market hours today, 22 January 2010.

RIL's gross margin from refining a barrel of crude was $5.90 a barrel in the latest quarter, compared with $10 a barrel a year earlier. The company added said it has increased production at the D6 gas block in the Krishna-Godavari basin, off India's east coast, to 60 million metric standard cubic meters per day.

India's largest oil exploration firm by sales Oil & Natural Gas Corporation dropped 1.93%. The company posted a 23% rise to Rs 3054 crore on 24% rise in net sales to Rs 15373 crore in Q3 December 2009 over Q3 December 2008. The results, which lagged street estimates, were announced after market hours on 21 January 2010.

India's largest cellular services provider by sales Bharti Airtel gained 0.11% to Rs 322.50, after oscillating in a band of Rs 315-Rs 329.80. On consolidated basis, the company's net profit rose 13.2% to Rs 2236.90 crore on a 6.6% increase in total income to Rs 10327.57 crore in Q3 December 2009 over Q3 December 2008. The result was announced during trading hours today, 22 January 2010.

Idea Cellular surged 7.64% as net profit fell less than market estimates. Idea Cellular declared results after market hours on Thursday, 21 January 2009. Idea's net profit fell 23.1% to Rs 218.38 crore on a 11.8% increase in sales to Rs 2911.57 crore in Q3 December 2009 over Q3 December 2008.

Banking shares declined as investors turned cautious ahead of the Reserve Bank of India's monetary policy review meet on 29 January 2010.

India's largest private sector bank by net profit ICICI Bank lost 1.45%. The bank's net profit declined 13.44% to Rs 1101.06 crore on a 25% fall in total income to Rs 7762.71 crore in Q3 December 2009 over Q3 December 2008. The result was announced during trading hours on 21 January 2010. The company's American depository receipt, or ADR lost 4.60% to $35.87 on the New York Stock Exchange on Thursday, 21 January 2010.

India's second largest private sector bank by net profit HDFC Bank fell 2.33%.

India's largest bank by net profit and branch network State Bank of India slipped 1.60%. The bank's chairman O P Bhatt on 21 January 2010 said it is not looking at acquisition of any other bank outside SBI-fold, even as speculations are rife that consolidation in the banking sector may gather pace.

Indiabulls Financial Services rose 4.08%. The company will declare Q3 December 2009 results on 25 January 2010.

IT stocks declined on fears the Obama administration's bank plan will crimp outsourcing demand. The fall came despite the rupee losing further ground against the dollar today, 22 January 2010.

India's largest IT exporter by sales Tata Consultancy Services fell 2.01%. India's second largest IT exporter by sales Infosys fell 1.95%. India's third largest software services exporter Wipro lost 1.40%.

The partially convertible rupee was at 46.10/11, weaker than its close of 46.04/05 per dollar on Thursday, 21 January 2010. A weak rupee boosts operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

India's top tractor maker by sales Mahindra & Mahindra slipped 0.68%. After market hours on Thursday, the company said the board will meet on 25 January 2010, to consider stock-split proposal

Other auto shares were mixed as investors chose to stay on sidelines ahead of their earnings. India's largest car maker by sales Maruti Suzuki India fell 0.35% on profit booking. The company announces its Q3 December 2009 results on 23 January 2010.

India's top truck maker by sales Tata Motors rose 0.38% ahead of its Q3 December 2009 results on 29 January 2010

India's top bike maker by sales Hero Honda Motors advanced 1.11% ahead of its Q3 December 2009 results on 25 January 2010.

Defensive buying helped FMCG shares outperformed the Sensex as investors shuffled portfolio to low beta stocks with the market fall extending to fourth-day today.

India's largest cigarette maker by sales ITC rose 1.62% as net profit rose 26.67% to Rs 1144.17 crore in Q3 December 2009 over Q3 December 2008. The company announced Q3 result during market hours today.

Hindustan Unilever (down 0.31%), Britannia Industries (down 0.71%), Colgate Palmolive India (down 0.66%), Dabur India (down 0.57%), Marico (down 0.73%), Tata Tea (down 0.50%), and Nestle India (down 0.62%), though down, outperformed the Sensex.

United Spirits jumped 5.47% after net profit soared 216.6% to Rs 96.85 crore on a 30.8% increase in sales to Rs 1346.78 crore in Q3 December 2009 over Q3 December 2008. Net profit got a boost from robust growth of premium liquor brands. The company has sold over 2.6 crore cases of Indian made foreign liquor, registering 13% volume growth.

PSU shares regained fancy after taking a brief pause on Thursday on profit booking. State run shares have been a flavor of the season with the government pushing hard its disinvestment drive to raise funds for public welfare.

STC India (up 12.66%), HMT (up 3.04%), NMDC (up 6.95%), Dredging Corporation (up 7.18%), Engineers India (up 1.83%), gained.

Hindustan Copper jumped 9.99% after reports citing the company's chairman and managing director Shakeel Ahmed indicated that mines ministry has approved selling a 10% stake in the copper miner.

SpiceJet galloped 10.40% after company reported net profit of Rs 108.94 crore in Q3 December 2009 compared to a net loss of Rs 17.96 crore in Q3 December 2008. Total income rose 38.32% to Rs 653.38 crore in Q3 December 2009 over Q3 December 2008. The company announced the Q3 result during market hours today, 22 January 2010.

Reliance Industries was the top traded counter on BSE with turnover of Rs 234.53 crore followed by Larsen & Toubro (Rs 205.46 crore), Hindustan Copper (Rs 166.17 crore), NMDC (Rs 162.42 crore) and Tata Steel (Rs 144.35 crore).

Cals Refineries reported a highest volume of 3.17 crore shares on the BSE. SpiceJet (2.40 crore shares), Alok Industries (1.27 crore shares), RCF (1.25 crore shares), and K Sera Sera (1.11 crore shares), were the other volume toppers on the BSE.