Market snaps three-day losing streak; breadth weak

The key benchmark indices registered small gains in a volatile trading session as index heavyweight Larsen & Toubro surged close to 6% after company said at the time of announcing Q4 March 2011 results that it is well positioned to sustain the revenue growth momentum in the medium term. Data showing easing of food inflation and higher European stocks, aided gains as the market snapped three-day losses. The BSE 30-share Sensex was up 55.20 points or 0.31%, up about 85 points from the day's low and off close to 55 points from the day's high.



The market breadth was weak. Index heavyweights Reliance Industries edged higher. ONGC also gained on bargain hunting after recent steep slide. Realty shares also fell on concerns higher interest rates could dent demand for residential and commercial property. Metal stocks also fell. Shares from Reliance Anil Dhirubhai Ambani (ADA) group were under selling pressure for the second straight day. Most bank stocks fell after the Reserve Bank of India (RBI) on Wednesday issued a notification on enhancement of rates of provisioning for non-performing assets and restructured advances.

The market pared gains soon after a firm start triggered by higher Asian equities. The market came off lows later. The market trimmed gains once again to hit fresh intraday low in morning trade. A bout of volatility was witnessed in mid-morning trade as the key benchmark indices regained positive terrain soon after slipping into the red to hit fresh intraday lows. The market held positive zone in early afternoon trade. The market held positive zone amid a bout of volatility in afternoon trade. The market extended gains in mid-afternoon trade.

The BSE 30-share Sensex was up 55.20 points or 0.31% to 18,141.40. The index gained 112.25 points at the day's high of 18,198.45 in early trade. The Sensex fell 28.38 points at the day's low of 18,057.82 in morning trade.

The S&P CNX Nifty was up 7.50 points or 0.14% to 5,428.10.

The BSE Mid-Cap index fell 0.7% and the BSE Small-Cap index declined 0.54%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 2420 crore, lower than Rs 2614.85 crore on Wednesday, 18 May 2011.

The market breadth, indicating the health of the market, was weak. On BSE, 1697 shares declined while 1071 shares advanced. A total of 145 shares remained unchanged. The breadth was positive at the onset of the trading session.

Among the 30-member Sensex pack, 17 declined while the rest of them advanced.

India's largest engineering and construction firm by sales Larsen & Toubro rose 5.92% and was the top gainer from the Sensex pack after the company said at the time of announcing Q4 March 2011 results that it is well positioned to sustain the revenue growth momentum in the medium term given its excellent execution capabilities, presence in diverse sectors of the economy, a healthy order book and leadership position it most of the sectors where it operates.

Larsen & Toubro (L&T)'s net profit rose 17.25% to Rs 1686.21 crore on 12.74% increase in net sales to Rs 15078.39 crore in Q4 March 2011 over Q4 March 2010. Net profit fell 9.54% to Rs 3957.89 crore on 18.60% rise in net sales to Rs 43495.93 crore in the year ended March 2011 over the year ended March 2010. On a consolidated basis, the company's net profit declined 18.25% to Rs 4456.17 crore on 18.47% increase in net sales to Rs 51552.03 crore in the year ended March 2011 over the year ended March 2010. The results was announced during trading hours today, 19 May 2011.

As on 31 March 2011, the company's order book stood at Rs 130217 crore, which is almost 3 times its net sales of Rs 43495.93 crore for the year ended March 2011, giving strong revenue visibility. The company's order inflow rose 27% in Q4 March 2011. The company said the completion of the several expansion projects underway will strengthen its position of pre-eminence in its various businesses. The company also said that intense competition and spiraling input costs may exert some pressure on the operating margin going forward. L&T's board recommended a dividend of Rs 14.50 per share for the year ended March 2011.

Shares from Reliance Anil Dhirubhai Ambani (ADA) group were under selling pressure for the second straight day. Reliance MediaWorks (down 6.9%), Reliance Capital (down 1.1%), Reliance Communications (down 3.43%) and Reliance Power (down 1.44%), declined.

Reliance Anil Dhirubhai Ambani (ADA) group power generation firm Reliance Infrastructure fell 1.37% extending 4.11% fall on Wednesday. The company announced after market hours on Wednesday, 18 May 2011 that it bought back 1 lakh equity shares under the buyback programme on that day. So far, the company has bought back 16 lakh shares under its buy back programme of up to Rs 1000 crore.

Index heavyweight Reliance Industries (RIL) gained 1.45% on bargain hunting. The stock had lost ground recently on reports the company may not be able to ramp up natural gas output from its eastern offshore D6 block for the next three years. Reports suggested that the wells cannot be drilled because of commercial and logistical reasons.

India's largest oil exploration firm by sales ONGC rose 1.2% on bargain hunting after a recent steep slide triggered by reports the government has hiked the subsidy burden on upstream companies with respect to under-recoveries of oil marketing firms on sale of fuel at controlled price to 38.5% from 33% for the year ended March 2011 (FY 2011). Upstream companies will have to bear burden of Rs 30,000 crore in FY 2011, reports added.

Cairn India rose 0.44% after Cairn Energy PLC said it has greed to extend the deadline for finalising the sale of a stake in its Indian unit Cairn India. Cairn Energy did not set a new date. Cairn agreed in August last year to sell up to 51% of Cairn India for up to $9.6 billion to Vedanta Resources.

Realty shares declined on concerns higher interest rates could dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance. BSE Realty index slumped 2.87% and underperformed the Sensex. Orbit Corporation, Housing Development and Infrastructure (HDIL), Unitech, Indiabulls Real Estate, Sobha Developers, Anant Raj Industries and DLF fell by between 2.07% to 4.2%.

Metal stocks fell even as LMEX, a gauge of six metals traded on the London Metal Exchange, jumped 2.91% on Wednesday, 18 May 2011. BSE Metal index shed 0.98% and underperformed the Sensex. Sesa Goa, Sterlite Industries JSW Steel, Tata Steel, Hindalco Industries and Nalco fell by between 0.09% to 3.14%.

State-run Steel Authority of India (Sail) lost 2.13% to Rs 140.35, extending recent losses. The stock had hit a 52-week low of Rs 140.20 today. Recent reports quoted company's chairman C. S. Verma as saying that the company is likely to launch its follow-on public offer by 14 June 2011.

The Indian government plans to sell a 5% stake the country's largest steel producer in the first phase, while the company will issue an equal amount of new equity through new shares in the first phase. The second phase will also comprise a similar equity issue, taking the total stake on offer to 20% and the expected proceeds to Rs 12000 crore.

Tata Power Company fell 2.6%. The company announced after market hours today that consolidated net profit after statutory appropriations declined 29.8% to Rs 661.54 crore on 4% growth in revenue to Rs 4985.84 crore in Q4 March 2011 over Q4 March 2011. The company attributed the decline in profit mainly to lower forex gains. Meanwhile, the company's board of directors approved a 10-for-1 stock split.

IT pivotals were mixed. India's largest software services exporter TCS gained 1.14%. A report citing the company's chief financial officer S. Mahalingam on Wednesday indicated that the company expects demand for technology outsourcing services to remain strong even as the global economic environment remains volatile. India's second largest software services exporter Infosys rose 0.2%. India's third largest software exporter Wipro fell 0.62%.

Most bank stocks fell after the Reserve Bank of India (RBI) on Wednesday, 18 May 2011, issued a notification on enhancement of rates of provisioning for non-performing assets and restructured advances. India's largest commercial bank by branch network State Bank of India (SBI) lost 1.19%, with stock falling for the third straight day. The stock has tumbled recently on weak Q4 results. Net profit slumped 98.88% to Rs 20.88 crore on 18.07% rise in total income to Rs 26536.84 crore in Q4 March 2011 over Q4 March 2010. The result hit the market during trading hours on Tuesday, 17 May 2011.

SBI's net profit declined sharply as provisions for non-performing assets jumped 49.2% to Rs 3263.91 crore in Q4 March 2011 over Q4 March 2010. A sharp surge in tax provision to Rs 1901.85 crore from Rs 977.88 crore in Q4 March 2010 pulled down the profit to a measly figure in Q4 March 2011.

India's largest private sector bank by net profit ICICI Bank declined 0.18%. The bank raised its benchmark base rate by 50 basis points to 9.25% per annum effective 7 May 2011. It has also announced an increase of 0.5% in its benchmark prime lending rate and in its Floating Reference Rate for consumer loans (including home loans).

Among other banking stocks, Bank of India, Punjab National Bank, Bank of Baroda, Federal Bank and Axis Bank fell by between 0.06% to 2.23%.

India's second largest private sector bank by net profit HDFC Bank rose 0.26%. The bank raised its base rate by 55 basis points (bps) to 9.25% per annum and prime lending rate (PLR) by 50 bps to 17.75% effective 12 May 2011.

Advances classified as "sub-standard" will attract a provision of 15% as against the existing 10%, the RBI said on Wednesday, 18 May 2011. The "unsecured exposures" classified as sub-standard assets will attract an additional provision of 10% i.e. a total of 25% as against the existing 20%. However, "unsecured exposures" in respect of infrastructure loan accounts classified as sub-standard, in case of which certain safeguards such as escrow accounts are available, will attract an additional provision of 5% only i.e. a total of 20% as against the existing 15%.

The secured portion of advances which have remained in "doubtful" category up to one year will attract a provision of 25% as against the existing 20%. The secured portion of advances which have remained in "doubtful" category for more than one year but upto 3 years will attract a provision of 40% as against the existing 30%. The secured portion of advances which have remained in "doubtful" category for more than 3 years will continue to attract a provision of 100%.

Restructured accounts classified as standard advances will attract a provision of 2% in the first two years from the date of restructuring. In cases of moratorium on payment of interest/principal after restructuring, such advances will attract a provision of 2% for the period covering moratorium and two years thereafter (as against existing provision of 0.25% to 1%, depending upon the category of advances). Restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2% in the first year from the date of upgradation (as against existing provision of 0.25% to 1%, depending upon the category of advances).

Auto shares were mixed. India's largest car maker by sales Maruti Suzuki India fell 0.44%.

India's second largest bike maker by sales Bajaj Auto rose 0.34% after the company announced during market hours on Wednesday that net profit surged 164.89% to Rs 1400.39 crore on 23.54% rise in total income to Rs 4199.97 crore in Q4 March 2011 over Q4 March 2010. The stock had lost 1.65% on Wednesday.

Huge extraordinary (EO) income boosted Bajaj Auto's net profit in Q4 March 2011. Bajaj Auto said that in Q4 March 2011 sales tax deferral incentive/loan to the extent eligible under Rule 84 of the Maharashtra Value Added Tax Rules, 2005, has been prepaid at a discounted value of Rs 368 crore, thereby resulting in a surplus of Rs 827 crore. Meanwhile, considering the longer gestation period and initial losses made in PT. Bajaj Auto Indonesia, the company has written of an impairment amount of Rs 102 crore as a diminution in the value of investment in Q4 March 2011.

India's largest truck maker by sales Tata Motors rose 0.34%, with the stock snapping three days' losses on bargain hunting. The company's global sales rose 12% to 87,114 units in April 2011 over April 2010 on good demand for both commercial and passenger vehicles. The company unveils its year ended March 2011 result on 26 May 2011.

India's top bike maker by sales Hero Honda Motors fell 2.31%. Recent reports indicated the company is evolving strategies for branding, resource allocation for exports and identifying potential overseas markets to export its bikes following the break-up with its long-standing joint venture partner Japan's Honda Motor Company. The joint venture pact had barred Hero Honda Motors from exporting two-wheelers to countries where Honda sells bikes and scooters.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) gained 1.11%, with the stock snapping three days' losses on bargain hunting. The company unveils its year ended March 2011 result on 30 May 2011.

Ashok Leyland jumped 4.18% after company announced during market hours today that net profit rose 33.93% to Rs 298.22 crore on 30.3% rise in total income to Rs 3832.64 crore in Q4 March 2011 over Q4 March 2010.

FMCG stocks extended recent gains. India's largest cigarette maker by sales ITC rose 0.16% on expectations of good Q4 March 2011 result due on Friday, 20 May 2011. India's largest FMCG maker by sales Hindustan gained 0.18%.

The Q4 March 2011 results announced so far have been a mixed bag. The combined net profit of a total of 2165 companies rose 15.2% to Rs 63378 crore on 22.4% rise in sales to Rs 667390 crore in the quarter ended March 2011 over the quarter ended March 2010.

The food price index rose 7.47% and the fuel price index climbed 12.11% in the year to 7 May 2011, government data showed on Thursday. In the previous week, annual food and fuel inflation stood at 7.70% and 12.25% respectively. The primary articles price index was up 10.94%, compared with an annual rise of 11.96% a week earlier.

State-run oil marketing companies hiked petrol rates by a steep Rs 5 per litre late last week. Expectations are that the government may soon let oil retailers increase diesel and cooking fuel prices as well. If diesel price is hiked, it could further stoke inflationary pressure in the economy -- diesel being a key transportation fuel. The Reserve Bank of India (RBI) at its annual 2011-2012 monetary policy review on 3 May 2011 said it will continue with its anti-inflationary stance. Short-term sacrifices in economic growth will have to be made to rein in surging prices, the central bank said.

European stocks moved mostly higher Thursday as strong results from Air France-KLM helped lift airline stocks. The key benchmark indices in UK, France and Germany were up by 0.98% to 1.33%.

Most Asian stocks edged lower on Thursday after Japan's economy shrank more than expected in January-March quarter. The key benchmark indices in China, South Korea and Taiwan fell by between 0.45% to 1.89%. The key benchmark indices in Hong Kong, Singapore and Indonesia rose by between 0.51% to 1%.

Japan's Nikkei Average fell 0.43% after Japan's economy shrank much more than expected in the first quarter and slipped into recession after the triple blow of the March earthquake, tsunami and nuclear crisis hit business and consumer spending and tore apart supply chains. Gross domestic product fell 0.9% in January-March quarter.

Trading in US index futures indicated that the Dow could gain 37 points at the opening bell on Thursday, 19 May 2011. US index futures moved between gains and losses.