Market drifts lower ahead of the weekend

Key benchmark indices edged lower on Friday, 15 July 2011, snapping gains in the preceding two trading sessions, as traders opted for caution ahead of the weekend. The BSE Sensex was down 56.28 points or 0.3%, up close to 50 points from the day's low. Index heavyweight Reliance Industries (RIL) edged higher. The market breadth was negative. Realty stocks reversed initial gains. Auto stocks were mixed.

TCS rose after CEO and Managing Director N Chandrasekaran said at the time of announcing Q1 June 2011 results on Thursday, 14 July 2011, that TCS continues to see steady demand flow for its services. Metal stocks declined as metal prices fell on the London Metal Exchange on Thursday, 14 July 2011. Tyre stocks rose. Bank stocks were mixed. FMCG stocks declined.



The Sensex jumped more than 1,000 points at the onset of the trading session, thanks to weird quotes in many Sensex stocks. The key benchmark indices slipped into the red to hit fresh intraday lows in morning trade. The market trimmed losses in mid-morning trade as Asian stocks rose in volatile trade. The market hovered in the red in early afternoon trade. Weakness continued in afternoon trade as European stocks declined in early trade on caution ahead of the release of European bank stress tests results. The market trimmed intraday losses in mid-afternoon trade as index heavyweight RIL rose. The market moved in a tight range in the negative terrain in late trade.

The BSE Sensex was down 56.28 points or 0.3% to settle at 18,561.92, its lowest closing level since 12 July 2011. The Sensex jumped 1,001.45 points at the day's high of 19,619.65 in early trade. The index shed 104.98 points at the day's low of 18,513.22 in morning trade.

The S&P CNX Nifty was down 18.70 points or 0.33% to 5,581.10, its lowest closing level since 12 July 2011. The Nifty hit high of 5,631.70 and a low of 5,562.75 in intraday trade.

The BSE Mid-Cap index fell 0.11%. The BSE Small-Cap index rose 0.08%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 2088 crore, lower than Rs 2782.36 crore on Thursday, 14 July 2011.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,386 shares advanced and 1,481 shares declined. A total of 127 shares remained unchanged. The breadth was positive earlier in the day.

Among the 30-member Sensex pack, 22 stocks fell while the rest of them rose. ONGC, Cipla and HDFC shed by between 1.3% to 1.94%.

Index heavyweight Reliance Industries (RIL) rose 0.74% to Rs 873.30. The stock hit a 52-week low of Rs 693.55 today as weird quote were witnessed in the counter at the onset of the trading session. The stock hit high of Rs 1040.25 in opening trade.

FMCG stocks fell on profit taking. Dabur India, Hindustan Unilever, ITC, United Spirits and Marico shed by between 0.09% to 2.7%.

Bank stocks were mixed. India's largest commercial bank by branch network State Bank of India (SBI) rose 0.18% to Rs 2470.95, off the day's high of Rs 2959.65. The stock hit 52 week low of Rs 1973.15 today. SBI recently raised base rate by 25 basis points (bps) from 9.25% per annum to 9.50% per annum. The bank has revised the Benchmark Prime Lending Rate upwards by 25 bps from 14% to 14.25%. The bank has also revised upwards deposit rates on some maturities by up to 100 basis points.

India's largest private sector bank by net profit ICICI Bank fell 0.83% to Rs 1060.05. The stock hit 52 week high of Rs 1282.65 today. ICICI Bank raised its base rate by 25 basis points to 9.5% per annum with effect from 4 July 2011. The private sector bank also raised its benchmark prime lending rate (BPLR) and its floating reference rate (FRR) for consumer loans, including home loans. BPLR and FRR are used for determining interest rates on loans and advances sanctioned up to 30 June 2010.

India's second largest private sector bank by net profit HDFC Bank rose 0.61% to Rs 509, off the day's low of Rs 500, as the private sector bank is seen reporting more than 30% growth in net profit in Q June 2011 on Tuesday, 19 July 2011. The stock hit 52 week high of Rs 607.05 today.

Realty stocks reversed initial gains. Housing Development & Infrastructure (HDIL), Indiabulls Real Estate, and Ackruti City fell by between 0.1% to 1.28%.

India's largest real estate firm by sales DLF fell 0.41% to Rs 233.05, off the day's high of Rs 280.80. The stock hit 52 week low of Rs 187.25 at the onset of the trading session.

Metal shares fell across the board as LMEX, a gauge of six metals traded on the London Metal Exchange, fell 1.82% to $4,213.50 on Thursday, 14 July 2011. Sterlite Industries, Sesa Goa, Welspun Corp, Jindal Saw, Hindustan Zinc, Tata Steel, Jindal Steel & Power, Hindalco Industries, JSW Steel, National Aluminium Company and Steel Authority of India fell by 0.13% to 2.16%.

Auto shares were mixed after two-wheeler major Bajaj Auto's Q1 results on Thursday, 14 July 2011, lagged market expectations. Hero Honda Motors declined 1.28%.

Tata Motors fell 2.61%. The company reported a 1% fall in its global auto sales to 89,846 units in June 2011 over June 2010, primarily due to lower demand for Jaguar sedans globally and its cars and sport-utility vehicles in India. Global sales of trucks and buses in the past month, however, grew 13% to 45,285 vehicles. The figure includes sales of Tata Daewoo and Tata Hispano Carrocera commercial vehicles. Global sales of cars and SUVs slipped 12% in June to 44,561 vehicles while those in India decreased 21% to 24,203 units. Total sales of Jaguar and Land Rover vehicles increased 1% to 20,358 units. Sales of Land Rover SUVs jumped 22% to 16,320 vehicles but that of Jaguar cars slumped 40% to 4,038 units.

Bajaj Auto fell 0.85%, with the stock falling for the second day in a row on disappointing Q1 June 2011 results. The company announced during market hours on Thursday that net profit rose 20.48% to Rs 711.06 crore on 22.8% increase total operating income to Rs 4777 crore in Q1 June 2011 over Q1 June 2010. Both revenue growth and net profit growth lagged market expectations.

Bajaj Auto on Thursday said it has shelved a project to develop a low-cost minicar in India for Renault S.A. and Nissan Motor Co. as the company found the project commercially unviable. Bajaj Auto Managing Director Rajiv Bajaj said the company will instead unveil a low-cost commercial vehicle at the auto show at New Delhi in January 2012. "We will stay in the commercial space...it could be a passenger or a goods carrier," Bajaj said at the time of announcing the company's Q1 June 2011 results. "It will be a low-capex, high-EBITDA [earnings before interest, taxes, depreciation and amortization] project," he added.

Kevin D'sa Bajaj Auto's president in charge of finance said Bajaj Auto may raise vehicle prices during July 2011 to March 2012 if raw material costs don't stabilize.

India's largest small car maker by sales Maruti Suzuki India fell 0.11% to Rs 1174.50, off the day's low of Rs 1161.60. The stock had risen recently on reports the Japanese parent Suzuki Motor Corp is considering a plan to raise its stake in the company by 5% through open-market purchases over a year. The report said Suzuki will likely buy the stake from financial institutions via block deals on the stock exchanges. Suzuki Motor Corp holds 54.21% stake in Maruti Suzuki India (as at end 30 June 2011).

India's largest tractor maker by sales M&M rose 0.83% to Rs 718.85, off the day's low of Rs 707.95.

Tyre stocks bucked the weak market. CEAT, MRF and Apollo Tyres rose by between 1.51% to 3.36%.

India's largest IT company by sales TCS rose 2.03% after CEO and Managing Director N Chandrasekaran said at the time of announcing Q1 June 2011 results on Thursday, 14 July 2011, that TCS continues to see steady demand flow for its services. TCS' consolidated net profit fell 7.9% to Rs 2415 crore on 6.3% growth in revenue at Rs 10797 crore in Q1 June 2011 over Q4 March 2011. Operating profit declined 2% to Rs 2820 crore in Q1 June 2011 over Q4 March 2011. The result was announced after trading hours on Thursday, 14 July 2011.

TCS added 24 new clients in Q1 June 2011. TCS said the number of clients in the category of $50 million has risen to 33 from 27. There was a gross addition of 11,988 employees and net addition of 3,576 employees in Q1 June 2011. The company said employee utilization rate remained high at 83.2% (excluding trainees) in Q1 June 2011.

TCS said growth in Q1 June 2011 was balanced and broad-based. Growth across industries was led by hi-tech, retail and BFSI. There was balanced growth across IT and other service lines led by infrastructure, assurance and global consulting services. All markets including the US, Europe grew alongside growth markets like India and Asia Pacific, TCS said.

Chandrasekaran said a customer-focused approach and a balanced business model helped drive growth across all major customer segments and operating regions in Q1 June 2011. "Though we continue to see steady demand flow for our services, the uncertain global macroeconomic environment demands that we adopt an entrepreneurial approach and remain agile to capture growth opportunities as they emerge," Chandrasekaran said.

TCS CFO and Executive Director S Mahalingam said, "By focusing and optimizing operations to support our growth, we have been able to limit the erosion in operating margins by using various levers like utilization and productivity. We remain watchful but do no expect the current macro issues to impede business decision making in those markets."

Infosys Technologies fell 0.38%, with the stock extending recent losses triggered by disappointing Q1 June 2011 results. Consolidated net profit as per International Financial Reporting Standards fell 5.3% to Rs 1722 crore on 3.2% growth in revenue to Rs 7485 crore in Q1 June 2011 over Q4 March 2011. The result was announced before trading hours on Tuesday, 12 July 2011.

India's third largest software services exporter Wipro gained 0.74%. The firm declares its Q1 June 2011 results on 20 July 2011.

PSU OMCs rose as crude oil prices declined in New York on Thursday, 14 July 2011. HPCL, and BPCL gained 0.5% to 1.33%. Indian Oil Corporation fell 0.16%. Lower crude oil prices could reduce under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.

Crude oil futures prices fell 2.4% in New York on Thursday, 14 July 2011, after Federal Reserve Chairman Ben Bernanke said the central bank was not ready to take immediate action to further bolster the economy.

Airline stocks gained as a fall in crude oil prices eased concerns about the impact of high jet fuel prices on operating costs. Kingfisher Airlines and Jet Airways rose by between 0.38% to 3.42%. SpiceJet fell 0.26%. Aviation turbine fuel, or jet fuel constitutes more than 50% of operating cost for airliners. Prices of jet fuel are directly linked to crude oil prices.

Cals Refineries clocked highest volume of 2.4 crore shares on BSE. Readymade Steel (1.31 crore shares), Rushil Decor (88.78 lakh shares), SpiceJet (56.33 lakh shares) and Resurgence Mines (42.37 lakh shares) were the other volume toppers in that order.

Rushil Decor clocked highest turnover of Rs 121.19 crore on BSE. Readymade Steel (Rs 83.10 crore), SKS Microfinance (Rs 65.30 crore), Jubilant Foodworks (Rs 63.26 crore) and State Bank of India (Rs 60.06 crore) were the other turnover toppers in that order.

As the crucial corporate earnings season has begun, investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs. A hike in transportation costs will add to cost pressure of India Inc. As per reports, freight rates have gone up by 8% to 9% on all routes across India following the recent hike in diesel prices.

HDFC Bank, Ashok Leyland and Crompton Greaves report Q1 results on 19 July 2011. Wipro, Dr Reddy's Lab and Exide Industries are set to announce Q1 results on 20 July 2011. Zee Entertainment Enterprises, JSW Energy, Biocon, Hero Honda, Hindustan Zinc and Kotak Mahindra Bank unveil Q1 results on 21 July 2011. Private sector bank Axis Bank reports Q1 results on 22 July 2011. Godrej Consumer Products reports Q1 earnings on 23 July 2011. Sterlite Industries and Rural Electrification Corporation will announce Q1 results on 25 July 2011. Car major Maruti Suzuki, steel major JSW Steel, decorative paints major Asian Paints and Shriram Transport Finance Company are set to unveil Q1 results on 26 July 2011.

HCL Technologies, Bank of Baroda, Infrastructure Development Finance Company (IDFC), Oil India and Lupin unveil results on 27 July 2011. State-run oil exploration giant ONGC and cement major Ambuja Cements unveil results on 28 July 2011. ICICI Bank, Power Finance Corporation and TVS Motor unveil Q1 results on 29 July 2011. M&M announces Q1 results on 8 August 2011. ABB announces Q2 results on 9 August 2011. Tata Power unveils Q1 results on 10 August 2011. Hindalco unveils Q1 results on 12 August 2011.

On the macro front, the latest government data showed that wholesale price index (WPI) rose an annual 9.44% in June 2011, driven by higher manufactured goods and fuel prices. The rate of rise in inflation was lower than market expectation of a 9.7% rise. The inflation figure for April 2011 was revised upwards to 9.74% compared to 8.66% reported earlier.

The government is working with the Reserve Bank of India (RBI) to bring down inflation, finance minister Pranab Mukherjee said in a statement on Thursday. Mukherjee also said that June inflation data was a matter of concern and he was monitoring the price situation closely. Mukherjee said an increase in fuel prices, seasonal effects and an upward movement in prices of minerals as well as manufactured products were driving inflation.

The Reserve Bank of India (RBI) is seen raising its key lending rate by another 25 basis points at its first quarter review of the monetary policy 2011-12 on 26 July 2011, to tame inflation, which remains much above its perceived comfort level of 5% to 6%.

Weather officials expect an improvement in the rainfall next week. Monsoon rains were above average in June 2011, but dropped to 3% below average after slowing in the first week of July. Rainfall between July 7 and July 13 was 19% below average, while it was 25% below average between June 30 and July 6. As per reports, the rainfall distribution so far has been good except for areas in the country's extreme northwest and southeast, mainly in Gujarat's Saurashtra region and the Andhra Pradesh coast. While Gujarat is India's largest groundnut and cotton producer, Andhra Pradesh is a key rice-producing region.

The central state of Chhattisgarh and the Vidarbha region in Maharashtra are also rainfall-deficient, but the gap is expected to be bridged over the next few days. The grainbowl northern states of Punjab and Haryana, as well as parts of Uttar Pradesh, have all received above normal to normal rains, while eastern rice-growing states, including key producer West Bengal, have received good rains. Oilseed-growing regions in central India have also been lashed by abundant rains.

Rainfall in the month of July is considered crucial as sowing of a number of crops starts in June and good July rains determine the soil moisture and ensure proper development of the crops planted in June.

European stocks were off the day's lows on Friday, 15 July 2011, ahead of the release of bank stress test results later this afternoon. The key benchmark indices in UK, France and Germany were down by 0.13% to 0.42%. The European Banking Authority will publish the results of its bank stress tests after European equity markets close on Friday, 15 July 2011. The European Banking Authority will also provide more information on the specific sovereign exposures of the lenders that have been reviewed.

Many Asian stocks ended higher at the end of a volatile session Friday as strong earnings from US firms--Google Inc. and J.P. Morgan Chase & Co. on Thursday, 14 July 2011, aided sentiment. The key benchmark indices in China, Indonesia, Japan, Taiwan, and South Korea rose by between 0.35% to 1.10%. The key benchmark indices in Singapore and Hong Kong fell 0.14% and 0.3%, respectively.

Trading in US index futures indicated that the Dow could gain 16 points at the opening bell on Friday, 15 July 2011. US stocks dropped on Thursday, 14 July 2011, after Federal Reserve Chairman Ben Bernanke said the central bank was not ready to take immediate action to further bolster the economy.

Standard & Poor's Ratings Services on Thursday put US sovereign ratings on formal credit watch and warned of at least a 50-50 chance for a downgrade. S&P said that "owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days." A day earlier, rival Moody's Investors Service said it put the US government's Aaa bond rating on review for possible default due to a small but rising risk of a short-lived default.

Talks between President Barack Obama and congressional leaders ended Thursday with no deal to raise the debt ceiling or cut spending. However, some leaders were reportedly working on a backup plan to keep the government from defaulting.