IT, metal shares lead decline

Weakness in global stocks triggered profit taking on the domestic bourses, with metal and IT stocks leading the decline. Bank stocks also fell. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. The BSE 30-share Sensex fell 126.86 points or 0.71%. The Sensex had jumped 1,259.45 points or 7.5% in nine trading sessions to settle at 2-1/2 month closing high of 17,876.55 on Monday, 21 June 2010, from a recent low of 16,617.10 on 8 June 2010.



FMCG stocks rose. The market breadth was negative in contrast to a positive breadth earlier in the day.

Intraday volatility was high as traders rolled over positions in the derivatives segment from the near-month June 2010 contracts to July 2010 contracts ahead of the expiry of the near-month June 2010 derivatives contracts on Thursday, 24 June 2010. The market dropped in early trade as most Asian stocks fell. It trimmed losses before weakening once again in morning trade.

The market hit a fresh intraday low in mid-morning trade. The Sensex extended losses later. The market came off the lower level in afternoon trade. Recovery gathered steam in mid-afternoon trade. The market slumped to hit fresh intraday low in late trade.

Rollover in Nifty futures was a little over 27% at the end of Monday's (21 June 2010) trade. Rollover in Mini Nifty futures was about 38%

NSE's volatility index, India VIX, which is a gauge of traders' perception of near-term risks in the market based on options prices, jumped 6.34% to 20.64. The index had declined sharply in the preceding three trading sessions. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

European shares extended losses in thin trade on Tuesday, led lower by commodity stocks and banks, as investors became skeptical that China would allow its currency to rise quickly. The key benchmark indices in France, Germany and UK fell by between 0.93% to 1.55%.

The Ifo Institute's German business climate index rose to 101.8 in June from a reading of 101.5 in May, according to media reports on Tuesday.

Asian stocks fell on Tuesday on renewed concern over Europe's economic crisis after Fitch Ratings cut its debt rating on French bank BNP Paribas SA. Fitch slashed BNP's long-term rating to AA-minus, the fourth-highest investment grade, from AA on deteriorating asset quality. The key benchmark indices in Japan, South Korea, Singapore, Indonesia, Hong Kong and Taiwan fell by between 0.25% to 1.22%.

But, Chinese stocks reversed earlier losses as expectations for a stronger yuan continued to drive investor-demand. The Shanghai Composite rose 0.1%. China said over the weekend that it will allow its currency more freedom to move against the US dollar, which should spur its economic growth.

Trading in US index futures indicated that the Dow could fall 33 points at the opening bell on Tuesday, 22 June 2010. US index futures moved between positive and negative terrain.

US stocks closed lower on Monday, 21 June 2010, after investors lost some of their enthusiasm about China's decision to let its currency appreciate against the US dollar. The Dow Jones industrial average fell 8.23 points or 0.08% at 10,442.41. The Standard & Poor's 500 Index was down 4.30 points, or 0.38% at 1,113.21. The Nasdaq Composite Index was down 20.71 points or 0.90% at 2,289.09.

Back home, most Indian firms including Reliance Industries, L&T, Tata Steel and Tata Motors, have paid higher advance tax in Q1 June 2010 over Q1 June 2009. Higher advance tax payment normally indicates higher profits for the period under review. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year.

Investors will closely watch the progress of the monsoon rains. Between June 1-16, rains were 5% deficient due to super cyclone Phet over the Arabian sea. The cyclone slowed the initial progress of the monsoon which had hit the Kerala coast a day ahead of schedule on 31 May 2010. The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The south-west monsoon usually covers the entire country by mid-July. The weather office late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

Meanwhile, in a major development, the government has ended the row over Ulip by promulgating an ordinance on Friday, 18 June 2010, stating that unit linked insurance policies with investment component are insurance products which will come under the regulatory jurisdiction of the Insurance Regulatory & Development Authority (Irda) and not the Securities & Exchange Board of India (Sebi). It amended four Acts to make it clear that Ulips are not securities and they did not form part of collective investment schemes or mutual funds.

Foreign funds have made heavy purchases of Indian stocks over the past few days. The net inflow totaled Rs 4504.96 crore in June 2010 in this month so far (till 21 June 2010) compared to a massive outflow of Rs 12071.13 crore in May 2010.

Domestic funds, which had absorbed some of the heavy selling from foreign funds last month, offloaded stocks worth a net Rs 2013.11 crore this month so far. Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.

The BSE 30-share Sensex fell 126.86 points or 0.71% at 17,749.69. The Sensex fell 8.43 points at the day's high of 17,868.12 in early trade. The Sensex fell 150.92 points at the day's low of 17,725.63 in late trade.

The S&P CNX Nifty declined 36.75 points or 0.69% to 5,316.55.

The BSE Mid-Cap index was down 0.02%. The BSE Small-Cap index was up 0.07%. Both the indices outperformed the Sensex.

Most sectoral indices on BSE declined. The BSE Metal index (down 1.9%), IT index (down 1.24%), banking sector index Bankex (down 0.81%) and Capital Goods index (down 0.72%), underperformed the Sensex. The BSE Power index fell 0.71%, matching the fall in the Sensex. The BSE Auto index (down 0.43%), BSE PSU index (down 0.36%), BSE Oil & Gas index (up 0.02%), Healthcare index (up 0.06%), FMCG index (up 0.71%) and Capital Goods index (up 1.01%), outperformed the Sensex. The BSE Realty index was unchanged for the day, thereby outperforming the Sensex.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1566 shares declined while 1317 shares advanced. A total of 101 shares remained unchanged.

From the 30-share Sensex, 27 stocks fell and the rest rose.

BSE clocked turnover of Rs 4835 crore, higher than Rs 4112.46 crore on Monday, 21 June 2010.

Index heavyweight Reliance Industries (RIL) fell 0.15% to Rs 10643.65. The stock was volatile. It hit a high of Rs 1074.80 and a low of Rs 1057.55. As per reports RIL is close to announcing a deal to pay $1.35 billion for a stake in a Texas shale gas field controlled by Pioneer Natural Resources. Reliance, will buy a 45% stake in the Eagle Ford shale gas field in south Texas, reports suggest.

RIL chairman Mukesh Ambani said on Friday, 18 June 2010, at the company's AGM that RIL aims to build a significant position in the shale gas business and that RIL will commit capital to accelerate development of shale gas.

Banking stocks fell on profit taking. India's largest private sector bank by market capitalisation ICICI Bank fell 0.87%. India's second largest private sector bank by operating income HDFC Bank fell 0.59%. PSU banking major State Bank of India declined 1.34%. Among the other PSU stocks, Bank of Baroda and Punjab National Bank fell by between 0.37% to 0.58%. But, Bank of India rose 0.26%. India's largest mortgage lender by market capitalisation HDFC fell 0.08%.

Yes Bank dropped 3.5% after Dutch lender Rabobank sold about 11% in the private-sector bank through multiple block deals. Institutional investors were buyers in the bulk deals. After the latest sale, Rabobank's holding in Yes Bank has declined to 4.9% from 15.9%.

Rabobank aims to set up its own banking unit in India following 12 years of operations in Asia's third-largest economy and therefore it cut the stake in Yes Bank to meet the regulatory requirements. Rabobank plans to keep the remaining 4.9% stake in Yes Bank.

India's largest FMCG maker by sales Hindustan Unilever rose 1.2% and was the top gainer from the Sensex pack.

India's largest cigarette maker by sales ITC rose 1.04%. The stock hit a record high of Rs 303.65 today. The company's board of directors recently recommended liberal 1:1 bonus issue.

High-beta realty stocks fell in volatile trade. Housing Development & Infrastructure (HDIL), Ackruti City, Omaxe and DLF fell by between 0.46% to 1.36%.

IT stocks fell on fresh economic worries in Europe, the second biggest market for the Indian IT firms. A recent surge in rupee against dollar also weighed on IT stocks. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. India's largest IT exporter by sales Tata Consultancy Services fell 0.96%. India's second largest IT exporter by sales Infosys fell 1.19%. India's third largest IT exporter by sales Wipro declined 1.8%.

Metal and mining stocks fell on profit taking after Monday's sharp surge. Sesa Goa, Sterlite Industries, NMDC, Steel Authority of India, Tata Steel and Hindalco Industries fell by between 0.69% to 2.98%. LMEX, a gauge of six metals traded on the London Metal Exchange, rose 2.16% on Monday, 21 June 2010.

Oil exploration firms fell as crude oil declined for the first time in three days as optimism faded that China's plan to add more flexibility in the yuan's fixed exchange rate would strengthen the global economic recovery. India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) declined 0.53%. Cairn India lost 1.44%. But, India's second biggest oil and gas exploration firm by revenue, Oil India, rose 1.34%. Fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms. Crude for July delivery dropped as much as 85 cents, or 1.3% to $76.80 a barrel in Asian electronic trading.

But, PSU OMCs rose after Oil Minister Murli Deora said an empowered group of ministers (EGoM) will hold a meeting on 25 June 2010 to decide on fuel prices. HPCL, BPCL and Indian Oil Corporation rose by between 3.58% to 4.36%.

The Indian government early this month deferred a decision on raising fuel prices, the second time in a year it has tripped on pushing politically-sensitive reform measures that could help trim a budget deficit. An empowered group of ministers (EGoM) was to discuss on 7 June 2010 a report by an experts' committee headed by Planing Commission member Kirit Parikh, which had recommended freeing petrol and diesel prices and a steep Rs 100 per cylinder hike in LPG rates and a Rs 6 per litre increase in kerosene prices.

India's largest engineering and construction company by revenue Larsen & Toubro fell 0.83% to Rs 1821.20. The stock recovered from the day's low of Rs 1806 after the company announced during market hours today that it bagged Rs 827 crore orders for thermal power plant construction. The stock on Monday, 21 June 2010 hit a 52-week high of Rs 1,843.75.

Consumer durables stocks rose on bargain hunting. Gitanjali Gems, Blue Star, Titan Industries, Videocon Industries, Blue Star and Rajesh Exports rose by between 0.41% to 4.01%.

Sun Pharmaceutical Industries rose 0.28% after the company announced during market hours today that the US Food & Drugs Administration has granted an approval for an abbreviated new drug application to market a generic version of optivar, which is used to treat itching of the eyes. The company also announced that it settled litigation over generics Stalevo and Comtan with Orion.

Among other healthcare stocks, Lupin, Biocon and Ranbaxy Laboratories rose by between 0.14% to 3.34%.

Auto shares fell on profit taking. Auto stocks had surged recently on expectations of strong Q1 June 2010 results as most auto firms paid higher advance taxes in Q1 June 2010 over Q1 June 2009. India's largest tractor maker by sales Mahindra & Mahindra fell 0.64%. The stock hit a record high of Rs 644.90 today. Among other auto stocks, Maruti Suzuki India, Hero Honda Motors and Tata Motors fell by between 0.19% to 1.27%.

According to a monthly report released by auto industry body the Society of Indian Automobile Manufacturers (Siam) on 9 June 2010, car sales in India rose 30.4% to 1.48 lakh units in May 2010 over May 2009. Auto sales rose despite recent price increases and a partial withdrawal of government stimulus measures in February 2010. The auto industry expects consumer demand to sustain following the overall economic expansion.

Yes Bank clocked the highest volume of 4.19 crore shares on BSE. Sanraa Media (1.73 crore shares), Cals Refineries (1.44 crore shares), Reliance Natural Resources (1.12 crore shares) and Hindustan Motors (89.87 lakh shares) were the other volume toppers in that order.

Yes Bank clocked the highest turnover of Rs 1139.91 crore on BSE. VIP Industries (Rs 172.63 crore), Tata Steel (Rs 98.97 crore), Sesa Goa (Rs 96.80 crore) and Reliance Natural Resources (Rs 72.23 crore) were the other turnover toppers in that order.