Market takes a breather after four days gains

The key benchmark indices edged lower in volatile trade, snapping last four days gains as profit taking emerged after indices struck a seven-week closing highs on Monday, 3 January 2011. Index heavyweight Infosys Technologies hit record high while another index heavyweight Reliance Industries jumped more than 2%. PSU OMCs fell while oil exploration firms rose on firm crude oil prices. IT, FMCG and healthcare stocks rose. Interest rate sensitive banking and realty stocks skidded. The BSE 30-share Sensex was down 62.33 points or 0.3%, up close to 150 points from the day's low and off close to 35 points from day's high. The market breadth was negative.



The market edged higher in early trade extending last four days gains on firm Asian stocks. It cut losses after reversing initial gains to hit fresh days low in morning trade. It again trimmed losses after hitting fresh intraday lows in mid-morning trade. It recovered sharply after hitting fresh intraday lows in early afternoon trade. Market turned positive in afternoon trade as select heavyweights extended gains. It held positive zone in mid-afternoon trade. It again slipped into the red in late trade.

European shares rose on Tuesday, tracking gains on Wall Street, following upbeat economic data, and with London shares catching up with gains on mainland Europe in the previous session. The key benchmark indices in France, UK and Germany rose by between 0.35% to 2.34%.

The number of unemployed German workers rose by a seasonally-adjusted 3,000 in December, Germany's federal labor office reported Tuesday.

Asian stocks advanced on Tuesday and oil hovered near a 27-month high, supported by U.S. data suggesting a recovery in the world's biggest economy was gathering momentum. The key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea and Singapore rose by between 0.45% to 1.65%. But, Taiwan's Taiwan Weighted fell 0.31%.

U.S. stocks greeted the new year with a rally on Monday, 3 January 2011 as encouraging signs about the outlook for manufacturing around the world prompted investors to inject new money into the market.

U.S. manufacturing grew at its fastest pace in seven months in December, extending a recent run of encouraging economic data and suggesting that expansion of the world's biggest economy will accelerate in2011 .The Institute for Supply Management's national factory activity index rose to 57 from 56.6 in November, marking the 17th consecutive month of growth in the manufacturing industry, with a rise in new orders providing momentum for further growth.

Trading in US index futures indicated that the Dow could gain 44 points at the opening bell on Tuesday, 4 January 2011.

Back home, exports in November 2010 rose an annual 26.5% to $18.9 billion, while imports for the month grew 11.2% on the year to $27.8 billion, government data released on Monday showed. India's trade deficit in November narrowed to $8.9 billion compared with $9.7 billion in October.

India's manufacturing activity continued to expand in December 2010, although the momentum from the prior month eased because of capacity constraints and a slowdown in new orders, a survey by HSBC showed Monday. The monthly purchasing managers' index eased to 56.7 from November's reading of 58.4, though it stayed well ahead of the threshold of 50, which separates expansion from contraction. "The PMI numbers show that the economy remains in high gear, but that this is becoming increasingly difficult to reconcile with a comfortable level of inflation," HSBC economists wrote in a statement. India's central bank, they wrote, may raise interest rates sooner rather than later to curb price increases

The output of six key infrastructure sectors grew 2.3% in November 2010 from a year ago, the slowest pace in the last 21 months, raising the prospects of a drop in industrial growth for the month. The six core industries -- crude oil, petroleum refining, coal, electricity, cement and finished steel, have a combined weight of 26.7% in the index of industrial production and are considered an advance indicator of industrial activity. These sectors had grown an upwardly revised 8.6% in October 2010.

Inflation in the food articles group climbed to 14.44% in the week ended 18 December 2010 from 12.13% in the previous week, the latest government data showed. This was the fourth instance of an increase in food inflation after easing for seven consecutive weeks. Inflation in the Primary Articles group jumped to 17.24% in the week under review from 15.35% in the week ended 11 December 2010, the latest data showed. Inflation in the Fuel & Power group inched higher to 11.63% in the week ended 18 December from 10.74% in the week ended 11 December.

The Reserve Bank of India, last week, warned that a sudden reversal of overseas portfolio investments that have been flooding in this year could create problems for the economy. "A potentially worrying feature of capital flows to India has been the dominance of portfolio flows which are prone to sudden stops and reversals," the RBI said in a report on assessment of the health of financial sector.

The second financial stability report by the central bank also warned that "at present, stressed liquidity conditions warrant caution and a watchful management in the coming months". With both financial and real sectors still under stress in advanced economies, the report said, "India will have to guard against vulnerabilities arising from risks to global growth and financial stability."

The report said that the other soft spots in the financial sector include widening current account deficit, deteriorating external sector ratios and tight liquidity position, in addition to inflationary pressures. The report also said that recent concerns regarding microfinance institutions (MFIs) warrant closer examination.

The BSE 30-share Sensex was down 62.33 points or 0.3% to 20,498.72. The Sensex rose 90.16 points at the day's high of 20,651.21 in early trade. The index declined 112.04 points at the day's low of 20,449.01 in early afternoon trade.

The S&P CNX Nifty was down 11.25 points or 0.18% to 6,146.35. The Nifty hit high of 6,181.05 in early trade, its highest since 12 November 2010.

The market breadth, indicating the overall health of the market was marginally negative. On BSE, 1496 shares declined while 1454 shares advanced. A total of 97 shares remained unchanged. The breadth alternately moved between the positive and negative breadth earlier in the day.

From the 30 share Sensex pack 18 fell and the rest rose.

The BSe Mid-Cap index fell 0.26% and the BSE Small-Cap indices fell 0.04%. Both the indices outperformed the Sensex.

BSE clocked turnover of Rs 4318 crore higher than Rs 3447.14 crore on Monday, 3 January 2011.

Index heavyweight Reliance Industries (RIL) rose 2.12% on reports the company has commissioned international consultants AT Kearney and Booz and Co to prepare a business transformation plan for it for fiscal 2011-12.

PSU OMCs fell as the price of crude oil rose Monday to a 27-month high on speculation the United States will sustain an economic recovery this year, bolstering fuel demand in the world's biggest oil-consuming country. Benchmark oil for February delivery rose 17 cents to settle at $91.55 a barrel. BPCL, HPCL and Indian Oil Corporation fell by between 0.87% to 1.29%. Higher crude oil prices will increase under-recoveries of state-run oil firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Oil exploration firms rose on higher crude oil prices. The rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms. Oil India and Cairn India rose 0.49% and 1.87%. ONGC declined 0.4%.

Realty stocks reversed initial gains on worries higher interest rates could dent demand for residential and commercial properties. HDIL, Indiabulls Real Estate, Unitech and DLF declined by between 1.28% to 2.7%.

IT stocks gained on positive economic data in the US, prime market for Indian IT firms. India's third largest IT exporter by sales Wipro rose 0.3%. The company said on 10 December 2010, that it won a 5-year outsourcing contract from Vasan Eye Care. Financial details of the contract were not disclosed.

India's second largest IT services provider by sales Infosys rose 0.44%. The stock hit a record high of Rs 3,489.90 today. Infosys will unveil Q3 December 2010 results on 13 January 2011.

But, India's largest software company by sales TCS declined 1.36%. The stock had hit record high of Rs 1179 on Friday, 31 December 2010. The company said on 22 December 2010 that Hilton Worldwide, a leading global hospitality company, has signed a multi-year agreement with TCS.

FMCG stocks edged higher. United Spirits, Dabur India, ITC, Hindustan Unilever and Marico gained by between 0.11% to 2.54%.

Some healthcares stocks too rose. Sun Pharmaceutical Industries, Biocon, Lupin, Cipla, Ranbaxy Laboratories and Dr Reddy's Laboratories rose by between 0.47% to 1.64%.

Banking stocks declined on worries central bank may hike interest rate to tame inflation. India's largest commercial bank in terms of branch network State Bank of India declined 3.09%. The bank raised its base rate by 40 basis points (bsp) to 8% effective 1 January 2011, from 7.6% earlier. The bank has also raised the benchmark prime-lending rate upwards by 25 bps from 12.50% to 12.75%.

India's largest private sector bank by market capitalisation ICICI Bank fell 3.45%, with the stock declining for the second straight day after the bank raised its base rate by 50 basis points to 8.25% effective 3 January 2011. ICICI Bank has also announced an increase of 0.25% in its benchmark prime-lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from 3 January 2011.

India's second largest private sector bank by market capitalisation HDFC Bank fell 1.97%, after bank raised its interest rates on retail term deposits by up to 1.25% depending on the maturities. The rate hike is effective 1 January2011 and applicable on deposits of less than Rs 15 lakh.

But, Kotak Mahindra Bank rose 0.9%, with the stock gaining for the second straight day after bank raised its base rate to 8.25% per annum from 8%. The bank has also increased its benchmark prime lending rate by 25 basis points.

Metal stocks were mixed. Sterlite Industries, Bhushan Steel, Jindal Steel & Power and National Aluminum Company rose by between 0.23% to 1.66%.

Copper and aluminum maker Hindalco Industries fell 1.12%. The stock hit record high of Rs 249.40 on Monday.

Steel Authority of India rose 0.35%. The company raised prices of its products by an average Rs 1,000 a tonne, or about 3%. The price increases are with immediate effect.

JSW Steel shed 1.9%. The company raised prices by Rs 1,400-1,700 a tonne, or 4-5%, across various grades. The price increases are with immediate effect.

India's largest engineering and construction firm by sales Larsen & Toubro declined 0.43%. The company's railway business unit secured a slew of orders aggregating Rs 1103 crore from various power plant developers for construction of dedicated railway lines to link power plant sites to the main line rail network.

Among other capital goods stocks, Bhel, ABB and Siemens declined by between 0.43% to 0.81%.

Auto stocks fell on profit taking. Mahindra & Mahindra shed 0.87%. The company's auto sales rose 42% to 34,062 units in December 2010 over December 2009. Domestic auto sales rose 43% to 32,546 units while exports increased 22% to 1,516 units.

Hero Honda Motors declined 0.51%. The company reported a 33% growth in sales at 5.01 lakh units for December 2010 over the same month in 2009. The company recorded a sales growth of 16.4% during the calendar year 2010 with cumulative sales of over 5 million units. During the October-December quarter of 2010, the company sold 14,28,030 units, registering a 29% growth over the same period in 2009.

Tata Motors declined 0.46%. The total sales jumped 31% to 67,441 in December 2010 over December 2009. The company's domestic sales for December 2010 were 61,632 units, 28% growth over 48,173 units sold in December 2009.

India's second largest motorcycle maker by sales Bajaj Auto fell 3.12% after tumbling 4.21% on Monday. Bajaj Auto's total vehicle sales rose 10% to 2.76 lakh units in December 2010 over December 2009. Motorcycle sales rose 11% to 2.43 lakh units in December 2010 over December 2009. But, the performance was disappointing on sequential basis. Total vehicle sales declined 7.69% and motorcycle sales declined 8.3% in December 2010 over November 2010.

Eicher Motors declined 1.74%. The VE Commercial Vehicles, the joint venture between Eicher Motors and Sweden's Volvo sold 4,030 Eicher-branded trucks and buses in December 2010, up 51% from a year ago. Domestic sales for the month rose 44% to 3,426 units, while exports surged to 604 units from 287 units.

India's largest car maker by sales Maruti Suzuki India rose 0.11% reversing initial gains. The company's total vehicle sales declined 11.84% to 99,225 units in December 2010 over November 2010. The company's sales rose 17% to 99225 units in December 2010 over December 2009.

Airline stocks declined after state-run oil marketing companies hiked jet fuel prices by 2%. Kingfisher Airlines (down 1.2%), Spice Jet (down 1.22%) and Jet Airways (down 1.69%), edged lower.

Jet fuel constitutes more than 50% of operating cost for airliners. State-owned oil marketing companies have hiked jet fuel prices by 2% from Sunday, 1 January 2011. After the price revision, the jet fuel or the aviation turbine fuel (ATF) rates in Delhi increased by Rs 935.20 per kilolitre (kl), or 1.99%, to Rs 47,815.50 per kl. In Mumbai,

Comfort Intech clocked highest volume of 4.24 crore shares on BSE. Bellary Steels (3.12 crore shares), Ravikumar Distilleries (2.03 crore shares), Suzlon Energy (1.39 crore shares) and Cals Refineries (1.33 crore shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 200.91 crore on BSE. Ravikumar Distilleries (Rs 125.64 crore), Tata Steel (Rs 125.64 crore), Reliance Industries (Rs 124.99 crore), Reliance Industries (Rs 99.50 crore) and Mahindra Satyam (Rs 86.78 crore) were the other turnover toppers in that order.