Small-cap, mid-cap indices reverse initial gains

Key benchmark indices declined reversing early gains as investors turned cautious ahead of the opening of the large follow-on public offer (FPO) of state-run power generation firm NTPC on Wednesday, 3 February 2010. The BSE 30-share Sensex fell 192.59 points or 1.87%, up close to 35 points from the day's low and off close to 360 points from the day's high. Power, realty, metal, auto, capital goods and banking stocks fell. Index heavyweight Reliance Industries (RIL) declined. The market breadth turned weak in contrast to a strong breadth earlier in the day. European markets rose and the US index futures reversed early losses.

NTPC kickstarts what is expected to be a large fund raising exercise by Indian firms in calendar 2010 from share sales. A section of the market is concerned that a glut in share sales will soak liquidity from the secondary market. As per reports, Indian firms may raise $30 billion from share sale in 2010, led by government stake sales and initial public offers from power and property firms. Indian companies raised about $20 billion from share sales in calendar 2009.

India VIX, a volatility index based on the S&P CNX Nifty index option prices, jumped 4.22% to 26.69. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days

The market jumped in early trade tracking firm Asian stocks which surged after the latest data showed a jump in manufacturing activity across Asia, the euro zone and the US. The market pared gains in morning trade as some Asian stocks reversed gains and US index futures fell. It recovered after turning negative for a brief period in mid-morning trade. It once again slipped into the red, hitting fresh day's low in early afternoon trade. The market cut losses later. The market slumped to hit fresh day's low in mid-afternoon trade as European stocks fell in early trade and US index futures dropped. A bout of volatility was witnessed at the fag end of the trading session

White House adviser Paul Volcker will urge the US Congress to curb the risks taken by large banks to help prevent them from being treated as "too big to fail", a media report said on Tuesday. Volcker will appear before the Senate Banking Committee on Tuesday, 2 February 2010, to defend the US administration's latest proposal to rein in the banks.

Detailing a recent proposal known as "the Volcker rule," the former Federal Reserve Chairman will tell lawmakers that commercial banks' proprietary and speculative activities should not be protected by the government, a news agency report suggested. Volcker will also urge international consensus on "appropriate" actions to restrict commercial banks' activities. In January 2010, US President Barack Obama proposed limiting commercial banks' ability to engage in proprietary trading, to end their ties to hedge funds and private equity funds and to restrict the future growth of large banks beyond a new market share cap.

Closer home, domestic institutional investors (DIIs) are on a buying spree on the bourses even as foreign funds have pressed heavy sales over the past few days. As per data from the stock exchanges, domestic institutions have bought shares worth Rs 12421.88 crore since the beginning of calendar 2010 even as foreign funds dumped stocks worth a net Rs 7711.32 crore since the beginning of in the New Year.

On the macro front, manufacturing activity in January 2010 grew at its fastest pace in almost 1-1/2 years, driven by a sharp rise in new export orders that are supporting a recovery in the industrial sector, a survey showed on Monday. The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian companies, rose to 57.7 in January, its strongest reading since August 2008 and up from 55.6 in December.

Exports continued to rebound, rising an annual 9.3% in December to $14.6 billion, their second consecutive monthly rise, although the pace of annual growth was slower than the 18.2% registered in November. Imports increased by 27.2% in December from a year earlier to $24.75 billion while the trade deficit shrunk by a little over 28 percent to $76.24 billion for the April- December 2009 period.

The HSBC Purchasing Managers' Index mirrored the positive export performance, with a more-than 5 point jump in the new export orders component, a sign that growth in manufacturing sector is increasingly fuelled by exports.

Rising prosperity will increasingly put pressure on food supply in India and the country urgently needs to boost farm productivity, Prime Minister Manmohan Singh said on Monday. After last year's failed monsoon rains, food prices have jumped in India, one of the world's top consumers of sugar, wheat, edible oils, rice and lentils, triggering protests in poorer regions and putting pressure on authorities to tighten monetary supply. He urged state governments to take steps to boost food output and tackle shortages of essential commodities.

On Friday 29 January 2010, the Reserve Bank of India raised the cash reserve ratio for banks by a higher-than-expected 75 basis points in an effort to soak up excess liquidity, and ramped up its forecast for GDP growth in the current fiscal year through March to 7.5% from its earlier forecast of 6%. It lifted its wholesale price index inflation forecast for the end of the fiscal year in March to 8.5% from 6.5%.

Meanwhile, the Reserve Bank of India (RBI) governor Duvvuri Subbarao has for the first time, said the nation may have to take some measures towards capital control in the short term to avoid stark economic imbalances after acknowledging in the past the role played by fund flows in worsening inflation, boosting asset prices and destroying industry competitiveness.

The RBI will target inflation in the coming months, Subbarao said on Monday. Subbarao also said it is important for the government to withdraw the stimulus and that the government and central bank would have to coordinate in withdrawing stimulus. He reiterated that the economy is back to growth and added that the challenge is to accelerate momentum.

The Reserve Bank of India (RBI) will adjust monetary policy outside of its quarterly review cycle only under extraordinary circumstances, a deputy governor Subir Gokarn said on Monday.

European shares moved off early lows on Tuesday, as gains for miners offset weakness for oil and gas producers after BP's fourth-quarter results. The key benchmark indices in France, Germany and UK rose by between 0.22% to 0.85%.

Asian markets reversed early gains on Tuesday. The key benchmark indices in South Korea, Indonesia, Singapore, Taiwan and China fell by between 0.23% to 1.26%. The key benchmark indices in Hong Kong and Japan rose by between 0.14% to 1.63%.

US index futures reversed early losses. Trading in US index futures indicated that the Dow could gain 31 points at the opening bell on Tuesday, 2 February 2010.

In US markets action on Monday, the Dow kicked off February with a triple digit gain after some strong earnings report and a positive manufacturing report. The Dow added 118.20 points, or 1.2%, to 10,185.53. The broader Standard & Poor's 500 Index gained 15.32 points, or 1.4%, to 1,089.19. The Nasdaq Composite Index advanced 23.85 points, or 1.1%, to 2,171.20.

In encouraging economic data, the ISM manufacturing index for January hit a 5 year high of 58.4, which is stronger than expected 55.5. Personal income and spending rose, while construction spending fell 1.2% for the month of December.

Also, the White House yesterday revealed its 2010 budget, which showed the deficit is likely to soar to 1.56 trillion dollars this year, but will fall to half that by the time President Obama's term ends in 2012. President Barack Obama pledged on Monday to halve a record 2010 budget deficit by the end of his first term in office, but made tackling double-digit unemployment his immediate priority with a spending plan that risked public ire and a rough battle in Congress.

Closer home, the BSE 30-share Sensex fell 192.59 points or 1.87% to 16,163.44. The index rose 169.95 points at the day's high of 16,525.98 in early trade. The Sensex lost 226.92 points at the day's low of 16,129.11 in late trade.

The S&P CNX Nifty fell 69.60 points or 1.42% to 4830.10. Nifty February 2010 futures were at 4,818, at a discount of 12.10 points as compared to the spot closing of 4,830.10. Turnover in NSE's futures & options (F&O) segment surged to Rs 79683.06 crore from Rs 60383.27 crore on Monday, 1 February 2010.

The BSE Mid-Cap index fell 1.19% and the BSE Small-Cap index fell 0.77%. Both these indices were in green earlier in the day.

All the sectoral indices on BSE edged lower. BSE Realty index (down 2.45%), banking sector index Bankex (down 1.99%), BSE PSU index (down 1.71%), BSE Metal index (down 1.57%), BSE Oil & Gas index (down 1.57%), BSE Capital Goods index (down 1.46%), BSE Auto index (down 1.45%), and BSE Power index (down 1.44%), underperformed the Sensex. BSE FMCG index (down 0.46%), BSE Healthcare index (down 0.74%), BSE IT index (down 0.77%), and BSE Consumer Durables index (down 1.1%), outperformed the Sensex

The market breadth, indicating the overall health of the market, turned weak. The breadth was strong earlier in the day. On BSE, 1110 shares advanced as compared with 1781 that fell. A total of 71 shares remained unchanged.

Among the 30 share Sensex pack, 26 fell and rest rose.

BSE clocked a turnover of Rs 5265 crore, higher than Rs 4809.01 crore on Monday, 1 February 2010.

Index heavyweight Reliance Industries (RIL) fell 1.91%. The company'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 on 22 January 2010.

Stocks from interest rate sensitive auto sector fell on profit taking. India's largest tractor maker by sales Mahindra and Mahindra (M&M) fell 2.61%. Mahindra & Mahindra total vehicle sales jumped 71.2% to 30,149 units in January 2010 over January 2009.

TVS Motor Company fell 2.16%. The company's vehicle sales rose 34% in January 2010 over January 2009.

India's top truck marker by sales Tata Motors fell 1.54%. Tata Motors total sales rose 77% to 65,478 units in January 2010 over January 2009. Domestic sales rose 74% to 62,202 units in the same period. Commercial vehicles sales increased 107% to 35,957 units, while passenger vehicle sales rose 43% to 28,547 units in January 2010 over January 2009.

Bajaj Auto fell 1.93%. The company's total vehicle sales soared 101% to 2.66 lakh units in January 2010 over January 2009.

India's top small car maker by sales Maruti Suzuki India fell 1.87%. The company's vehicle sales rose 33.3% to 94649 units in January 2010 over January 2009.

India's largest motorbike maker by sales Hero Honda Motors fell 0.73%. Hero Honda Motor's total sales rose 23.6% to 389,802 units in January 2010 over January 2009. After market hours on 25 January 2010, the company reported a 78.34% rise in net profit to Rs 535.77 crore on a 32.72% rise in sales to Rs 3814.42 crore in Q3 December 2009 over Q3 December 2008.

Rate sensitive realty shares also fell on profit taking. Akruti City, Indiabulls Real Estate, Housing Development & Infrastructure, Omaxe fell by between 0.31% to 1.96%.

India's largest realty player by sales DLF fell 2.03%. The company's net profit rose 26.04% to Rs 224.43 crore on 109.03% rise in sales to Rs 887.16 crore in Q3 December 2009 over Q3 December 2008. The company announced the Q3 result last week.

Unitech fell 4.34%. The company's net profit rose 576.6% to Rs 131.94 crore on 216.7% rise in sales to Rs 642.88 crore in Q3 December 2009 over Q3 December 2008.

India's largest power equipment maker by sales Bharat Heavy Electricals lost 1.04%, extending Monday's losses. Bharat Heavy Electricals said last week it would sign an agreement with the Madhya Pradesh state utility to jointly set up a 1,600 megawatts thermal power plant in the central Indian state.

India's largest engineering and construction firm by sales Larsen & Toubro fell 1.43%. The company announced on Monday said that it won orders worth Rs 2155 crore.

Among other capital goods stocks, Siemens, ABB, Thermax, BEML and Praj Industries fell by between 0.74% to 3.14%.

Metal stocks fell on profit taking. India's largest private sector steel maker by sales Tata Steel fell 0.98%. The company's net profit surged 155.6% to Rs 1191.75 crore in Q3 December 2009 over Q3 December 2008. The company announced the result during market hours on Thursday 28 January 2010.

Tata Steel will report consolidated third-quarter results, to include the Corus numbers this month. The Indian operations account for a quarter of the group's annual global capacity of about 30 million tonnes.

National Aluminium Company lost 2.25%. The company's net profit declined 29.3% to Rs 155.18 crore in Q3 December 2009 over Q3 December 2008.

India's largest non-ferrous metal firm by capacity Sterlite Industries India fell 2.2%. The company's net profit slumped 77.16% to Rs 46.59 crore on a 39.83% increase in sales to Rs 3611.99 crore in Q3 December 2009 over Q3 December 2008.

Steel Authority of India (Sail) fell 2.06%. Sail reported a 99% jump in its net profit at Rs 1,675.55 crore in Q3 December 2009 over Q3 December 2008.

But, India's largest private sector aluminum maker by sales Hindalco Industries rose 1.31%. The company's net profit fell 21.60% to Rs 427.10 crore on a 29.56% increase in sales to Rs 5286.10 crore in Q3 December 2009 over Q3 December 2008.

Rate sensitive banking shares fell as bank lending growth remains sluggish. India's second largest private sector bank by net profit HDFC Bank fell 1.26% extending Monday's 1.57% decline. Its ADR rose 1.14% on Monday. India's largest private sector bank by net profit ICICI Bank fell 1.85%. Its ADR rose 1.9% on Monday.

India's largest bank by net profit and branch network State Bank of India fell 2.14%. SBI chairman O P Bhatt recently said deposit rates may not go up immediately but there is no room for deposit rates to come down.

Bank stocks had risen on Friday 29 January 2010 after Reserve Bank kept interest rates unchanged in its quarterly monetary policy review announced on Friday. Commercial banks do not see any upward pressure on lending rates in the next six months, after the Reserve Bank raised banks' reserve requirements on Friday, 29 January 2010 top bankers said. The head of Indian Banks' Association (IBA), the apex industry body, said lending rates were expected to be stable till the first quarter of fiscal year starting 1 April 2010.

Banks' outstanding loans fell by Rs 11,900 crore in the two weeks to 15 January 2010 because companies repaid some loans as is typical at the beginning of a quarter, the central bank's data showed last week. The Reserve Bank of India data showed loans fell to Rs 30,08,000 crore in the two weeks to 15 January 2010 and deposits fell by around Rs 22,000 crore to Rs 42,43,000 crore. In the two weeks to 1 January 2010, outstanding loans rose by a massive Rs 78,192 crore and deposits also went up by Rs 82,769 crore.

Bank of Baroda fell 1.53% on profit booking after the stock advanced 13% in the preceding three sessions.

India's largest power utility firm by sales NTPC fell 2.46%, to Rs 206.05 extending Monday's 1.4% fall after the government fixed the benchmark price for the proposed divestment of government stake at Rs 201 per share, at a discount of almost 5% over Monday's closing price of Rs 211.25 on BSE. NTPC's follow-on public offer (FPO) opens for bidding on 3 February 2010 and closes on 5 February 2010.

Among other power firms, CESC, Torrent Power, Tata Power Company, Reliance Power fell by between 1.15% to 1.8%.

Cement shares gained after most firm posted encouraging cement sales last month. UltraTech Cement rose 3.03% after Aditya Birla Group's cement shipments rose 14% to 34.3 lakh tonnes in January 2010 over January 2009.

Ambuja Cements rose 0.94%. Ambuja Cements' January shipments rose to 17.5 lakh tonnes, up 7.5% from a year earlier. The company said production rose to 17.4 lakh tonnes from 16.1 lakh tonnes.

Shree Cement rose 0.17%. Shree Cement's January shipments rose 18% to 8.82 lakh tonnes, up from 7.49 lakh tonnes a year earlier. Total shipments during April-January period rose 24% to 76.5 lakh tonnes, up from 61.8 lakh tonnes a year ago.

But, ACC fell 0.25%. ACC's shipments in January rose 1.1% to 19.1 lakh tonnes from 18.9 lakh tonnes a year earlier. The company said production rose to 18.9 lakh tonnes from 18.7 lakh tonnes.

FMCG and healthcare stocks also fell on profit taking. Among FMCG stocks, Hindustan Unilever, Dabur India, Tata Tea, ITC, fell by between 0.32% to 0.93%.

Among healthcare stocks, Lupin, Biocon, Sun Pharmaceuticals Industries, Ranbaxy Laboratories, Cipla, Aurobindo Pharma fell by between 1.1% to 3.55%.

Hindustan Fertilisers and Chemicals clocked the highest volume of 2.44 crore shares on BSE. Cals Refineries (1.5 crore shares), IFCI (1.23 crore shares), Adani Power (1.18 crore shares) and Unitech (1.15 crore shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 149.26 crore on BSE. Tata Steel (Rs 123.71 crore), Adani Power (Rs 120.34 crore), National Fertiliser (Rs 105.88 crore) and Rashtriya Chemicals & Fertilisers (Rs 99.28 crore) were the other turnover toppers in that order