Market ends flat after hitting 3-week high; bank shares drop

The key benchmark indices ended almost unchanged, giving up initial strong gains as profit taking emerged after the Sensex hit 3-month high. Weak European stocks and lower US index futures triggered profit taking on the domestic bourses. The BSE 30-share Sensex was up 14.38 points or 0.07%, off close to 235 points from the day's high and up close to 35 points from the day's low. The market breadth turned negative when compared with a strong breadth earlier in the day.



The BSE Sensex fell below the psychological 20,000 mark after regaining that level in early trade. The 50-unit S&P CNX Nifty, too, closed below the psychological 6,000 mark after reclaiming that mark in early trade. Banking stocks fell across the board. Index heavyweight Reliance Industries (RIL) pared gains. Metal and IT stocks rose.

The market opened on a firm note as investors heaved a sigh of relief after truckers, over the week-end, called off a proposed strike. Stocks extended gains in morning trade. The market was hovering near the day's high in mid-morning trade. The market trimmed gains after hitting fresh intraday high in early afternoon trade. The market further cut gains in mid-afternoon trade. The market slipped into the red at the fag end of the trading session.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 4.14% at 19.37. The index had lost 1.06% to 18.60 on Friday, 3 December 2010. The index had lost 2.08% to 18.80 on Thursday, 2 December 2010. The index had lost 7.29% to 19.20 on Wednesday, 1 December 2010. 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.

Foreign funds resumed buying of equities at the begging of this month, compared to recent selling. Foreign funds bought shares worth a net Rs 542.20 crore on Friday, 3 December 2010, higher than Thursday's (2 December 2010) Rs 463.40 crore. FII inflow in the calendar year 2010 totaled Rs 133858.91 crore (till 3 December 2010). In dollar terms, the net equity inflow in 2010 now stands at $29.49 billion, far above last year's $17.45 billion. The annual inflows are at record level this year.

The transporters' union -- the All India Motor Transport Congress (AIMTC) on Saturday, 4 December 2010, called off the proposed strike after the government assured it of some level of reduction in toll charges for trucks with three axles, among other issues. AIMTC had threatened to go on strike from 5 December 2010 if the toll charges were not reduced.

The next major trigger for the equity market is the advance tax payment of corporates for the third installment, which falls due on 15 December 2010. The advance tax figures will provide a cue on Q3 December 2010 corporate earnings.

Meanwhile, France and India on Monday signed a framework contract during President Nicolas Sarkozy's visit to India for the sale of French atomic reactors. The French president called for a joint proposal with India to push his reform agenda for the G20 group of nations, including greater stability in global commodity prices. Sarkozy has pushed an ambitious G20 agenda for financial reforms as well as bilateral nuclear and arms sales.

European shares turned negative on Monday, led by banking stocks as worries about the euro zone debt crisis persisted, with investors cautious ahead of the outcome of a meeting of euro zone finance ministers. The key benchmark indices in France, Germany and UK fell by between 0.04% to 0.45%.

Moody's Investors Service on Monday downgraded Hungary's foreign- and local-currency government bond ratings by two notches to Baa3 from Baa1. The main reasons for the downgrades are increased concerns about the country's medium- to long-term fiscal sustainability as well as higher external vulnerabilities than most of Hungary's rated peers. The outlook on the ratings is negative, which reflects the uncertainties regarding the government's financial strength.

Most Asian stocks gained on Monday, 6 December 2010, as US stocks on Friday, 3 December 2010, shrugged off weak non-farm payrolls data. The key benchmark indices in China, Indonesia, Singapore and Taiwan were up by between 0.28% to 0.91%. But, the key benchmark indices in Hong Kong, Japan and South Korea fell by between 0.11% and 0.36%.

US stocks closed their best week in a month on Friday, 3 December 2010, shrugging off tepid jobs growth in a sign that the rally may have further to run. Employment barely grew in November 2010. Non-farm payrolls rose by only 39,000, much weaker than the 140,000 new jobs that economists forecast. The US unemployment rate unexpectedly jumped to a seven-month high of 9.8%, the Labor Department said.

Federal Reserve Chairman Ben Bernanke said on Sunday that US unemployment may take five years to fall to a normal level and that Fed purchases of Treasury securities beyond the $600 billion announced last month are possible.

Trading in US index futures indicated that the Dow could fall 36 points at the opening bell on Monday, 6 December 2010.

Back home, recent macro economic data has been strong. Business activity in India's services sector surged to a four-month high in November 2010, driven by robust growth in new orders, a survey showed on Friday, 3 December 2010. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 60.1 in November from 56.2 in October. It was the best showing for the index since July, and the 19th straight month it has remained above the 50 mark that divides growth from contraction.

The manufacturing activity strengthened further in November 2010 and the strong growth momentum is showing up in rising inflation pressures, according to an HSBC survey released on Wednesday, 1 December 2010. The HSBC Manufacturing Purchasing Managers' Index rose to 58.4 in November from 57.2 in October, the survey said.

The Indian economy grew a robust 8.9% year-on-year in Q2 September 2010, maintaining the same pace of expansion as the previous quarter, boosted by farm output and manufacturing, government data released Tuesday, 30 November 2010 showed. The manufacturing sector grew an annual 9.8% and farm output grew an annual 4.4% in Q2 September 2010. The government revised upwards the Q1 June 2010 GDP growth to 8.9% from 8.8% earlier.

Finance Minister Pranab Mukherjee recently said GDP growth would be between 8.5% to 8.75% in the current fiscal that ends in March 2011 (FY 2011). Chairman of the Prime Minister's Economic Advisory Council C. Rangarajan said the economy is expected to grow 9% in the year to March 2012 (FY 2012). Rangarajan also said the government may reassess FY 2011 growth expectations and that it was "not impossible" to reach 9% growth in the financial year.

The output of key infrastructure industries surged by a robust 7% in October 2010, against a 3.9% growth recorded in the same month last year, helped by a strong showing by the electricity, crude oil and the finished steel sectors. The latest data for the six core sector showed a sharp rebound from the output in September 2010, when growth in these sectors had slipped to 2.7%.

The latest data showed a continuation of the recent trend of easing of food inflation. The food price index rose 8.60% while the fuel price index climbed 9.99% in the year to 20 November 2010, government data on Thursday, 2 December 2010 showed. In the prior week, annual food and fuel inflation stood at 10.15% and 10.57% respectively. The primary articles price index was up 12.72% in the latest week compared with an annual rise of 13.38% a week earlier.

The BSE 30-share Sensex was up 14.38 points or 0.07% to 19,981.31. The Sensex rose 250.93 points at the day's high of 20,217.86 in early afternoon trade, its highest level since 16 November 2010. The index fell 22.22 points at the day's low of 19,944.71 in late trade.

The S&P CNX Nifty was almost unchanged at 5,992.25. The Nifty hit high of 6,069.45 in early afternoon trade, its highest since 18 November 2010.

The BSE Mid-Cap index fell 0.37% and the BSE Small-Cap index fell 0.9%. Both these indices underperformed the Sensex.

BSE Metal index (up 2.3%), Oil & Gas index (up 0.84%), IT index (up 0.58%), Power index (up 0.43%), Auto index (up 0.33%) and Teck index (up 0.31%), outperformed the Sensex.

Banking sector index Bankex (down 2.37%), PSU index (down 0.91%), FMCG index (down 0.38%), Realty index (down 0.36%), Consumer Durables index (down 0.35%), Healthcare index (down 0.05%) and Capital Goods index (up 0.16%), underperformed the Sensex.

The BSE clocked turnover of Rs 3511 crore, lower than Rs 3977.31 crore on Friday, 3 December 2010.

The market breadth, indicating the health of the market, turned negative. On BSE, 1,726 shares fell while 1,238 shares rose. A total of 83 shares remained unchanged. The breadth was strong earlier in the day.

Among the 30-member Sensex pack, 18 rose while the rest fell.

Index heavyweight Reliance Industries (RIL) gained 1.33% to Rs 1019.75. The stock came off the day's high of Rs 1029.80. As per recent reports, the natural gas production from its East Coast block has dropped by about 15% to about 45-46 million standard cubic metres per day (mscmd) from 53-54 mscmd. The production from D-1 and D-3 gas fields in the KG-D6 block has dropped due to reservoir complexities, reports suggest

Tata Steel rose 3.38% after shares of Riversdale Mining surged in Sydney on Monday after the later said Rio Tinto Group has made a takeover proposal. Riversdale Mining, which is developing coal mines in Africa, said that Rio made an initial A$3.5 billion (US$3.47billion) takeover proposal. Rio offered A$15 per share, Sydney-based Riversdale said today in a statement. Tata Steel is the single largest shareholder in Riversdale, with a 21.15% stake.

Most other metal shares rose. Hindalco Industries, National Aluminum Company, Bhushan Steel, Sterlite Industries, JSW Steel and Steel Authority of India rose by between 0.12% to 4.37%.

Jindal Steel & Power was up 2.65% after company said on Friday its 2,400 megawatt coal-based power project was recommended for environmental clearance.

India's largest engineering and construction firm by sales Larsen & Toubro fell 0.48%, reversing initial gains. The company's information technology unit L&T Infotech said it is partnering with US software major International Business Machines Corp. to offer business process management solutions. L&T Infotech will use the solutions in banking and financial services. It didn't give any financial details of the partnership.

Hero Honda Motors fell 3.2% on reports Honda Motor Co. has reached a basic agreement to dissolve its partnership in Hero Honda Motors. Honda will sell its entire stake in the motorcycle maker to the Hero Group's founding family -- the Munjals and investment funds by as early as March 2011, reports suggest.

An agreement whereby Honda provides technical to Hero Honda for development and production will not be renewed once the agreement ends in 2014, reports suggest. Honda and its Indian partner Hero Group will seek approval for the breakup from their respective boards of directors later this month, the report said. Honda will focus its resources on wholly owned subsidiary Honda Motorcycle & Scooter India (HMSI), reports suggest.

Banking stocks fell on profit taking. India's largest bank by net profit and branch network State Bank of India fell 3.86%. The bank said during market hours today said it has revised upwards deposit rates across various maturities by 50-150 basis, effective from 7 December 2010. Among other PSU banks, Bank of India, Punjab National Bank, Bank of Baroda, Union Bank of India, Canara Bank fell by between 2.8% to 4.76%.

India's largest private sector bank in terms of operating income ICICI Bank fell 2.66%, reversing initial gains. The bank has hiked its benchmark prime-lending rate and Floating Reference Rate (FRR) for consumer loans (including home loans) by 50 basis points with effect from 6 December 2010. It has also announced an increase in interest rates for various tenors of retail fixed deposits by 25-50 basis points with effect from 6 December 2010.

India's second largest private sector bank by net profit HDFC Bank fell 0.29%. India's top mortgage lender by total income, Housing Development Finance Corporation (HDFC), rose 0.97%. On Friday, 3 December 2010 HDFC, hiked its benchmark lending rate by a steep 75 basis points, making home loan dearer for both existing and new borrowers. With this revision, the retail prime lending rate (RPLR) goes up from 14.25% to 15%.

Software stocks extended recent gains. India's largest software company by sales TCS rose 0.54%, with the stock gaining for the third straight day. The company announced during market hours on Friday, 3 December 2010 that the Uttar Pradesh state government has selected the company for its State Data Center project.

India's second largest software company by sales Infosys rose 0.72%, with the stock gaining for the fourth straight day. Infosys Technologies is reportedly looking for an acquisition in the legal process outsourcing business and will consider domestic firms with a strong client base or US firms with technologies in the business. India's third largest software company by sales Wipro rose 0.64%, with the stock gaining for the third straight day.

India's largest truck maker by sales Tata Motors surged 3.32% to Rs 1358.50, after striking a record high of Rs 1381.40. The company is reportedly roping in global consultancy firm Accenture to review issues pertaining to production, quality standards and supply chain management, following dwindling sales of its small car, Nano, coupled with recent incidents of the car going up in flames. Tata Motors' total vehicle sales rose 1% to 54,622 units in November 2010 over November 2009. The figures were announced on Wednesday, 1 December 2010.

India's top small car maker by sales Maruti Suzuki India rose 0.72%. Total sales rose 28.20% to 1.12 lakh vehicles in November 2010 over November 2009. The figures were announced on Wednesday, 1 December 2010.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) fell 0.84%. The company on Wednesday, 1 December 2010, announced strong sales in November 2010.

Bajaj Auto fell 0.65%. The company's total sales rose 8% to 2,99,231 units in November 2010 over November 2009. The figures were announced on Thursday, 2 December 2010.

PSU OMCs fell after crude-oil futures rallied on Friday, 3 December 2010, overcoming a bout of weakness on a smaller-than-expected rise in US payrolls and reclaiming a two-year high on the back of a weaker dollar. Indian Oil Corporation (IOC) fell 1.98%, Bharat Petroleum Corporation (BPCL) fell 1.03% and Hindustan Petroleum Corporation (HPCL) declined 1.51%. Crude oil for January 2010 delivery added $1.19 or 1.4% to settle at $89.19 a barrel on the New York Mercantile Exchange on Friday, its best finish since early 2008.

Higher crude oil prices will increase under-recoveries of state-run oil marketing firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Oil exploration firms rose as the rise in crude oil prices would result in higher realizations from crude sales. ONGC and Cairn India rose 0.16% to 1.58% respectively. But, Oil India fell 0.62%.

India's largest cigarette maker by sales ITC fell 1.4%. As per recent reports the company has halted production over a health ministry order that every pack that cigarette maker sell should carry a stark image of mouth cancer as a deterrent to smokers.

Karuturi Global clocked highest volume of 3.47 crore shares on BSE. Cals Refineries (2.29 crore shares), RRP Infra Projects (2.08 crore shares), Sanraa Media (1.83 crore shares) and Birla Power Solutions (62.43 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 213.24 crore on BSE. Tata Motors (Rs 144.14 crore), RRP Infra Projects (Rs 143.94 crore), Tata Steel (Rs 138.07 crore) and Welspun Corp (Rs 75.81 crore) were the other turnover toppers in that order.