Market retracts from 1-1/2-week high

Volatility continued as key benchmark trimmed losses after hitting fresh intraday lows in mid-afternoon trade. The BSE Sensex was provisionally down 88.74 points or 0.56%, off about 170 points from the day's high and up closet to 80 points from the day's low. The market reversed direction after hitting 1-1/2 week high in mid-morning trade. The market breadth was negative.

Index heavyweight Reliance Industries (RIL) edged lower. Metal stocks reversed intraday gains. Interest rate sensitive banking stocks edged lower on fears of increase in bad loans in a slowing economy. Realty shares fell on profit booking after recent gains. Multiplex shares spurted on reports Shah Rukh Khan's action thriller "Don 2" garner box office collection of Rs 48.39 crore in its opening weekend.



The market edged lower in early trade on weak Asian shares. After a bout of initial volatility, key benchmark indices alternately moved between positive and negative terrain near the flat line in morning trade. The barometer index fell below the psychological 16,000 mark, after regaining that mark in mid-morning trade. The Sensex alternately moved between positive and negative terrain in early afternoon trade. Key benchmark indices weakened to fresh intraday lows in afternoon trade. A bout of volatility was witnessed as key benchmark weakened again to hit fresh intraday lows in mid-afternoon trade after erasing almost all the intraday losses in afternoon trade. The market trimmed losses after hitting fresh intraday lows in mid-afternoon trade.

Volatility may remain high this week as traders roll over positions in futures & options (F&O) segment from the near-month December 2011 series to January 2012 series. The near-month December 2011 F&O contracts expire on Thursday, 29 December 2011.

As per provisional figures, the BSE Sensex was down 88.74 points or 0.56% at 15,882.01. The index rose 78.37 points at the day's high of 16,049.12 in mid-morning trade, its highest level since 16 December 2011. The index fell 171.12 points at the day's low of 15,799.63 in mid-afternoon trade.

The S&P CNX Nifty was down 28.30 points or 0.59% to 4,750.70, as per provisional figures. The Nifty hit a high of 4,800.50 in intraday trade, its highest level since 16 December 2011. The index hit a low of 4,723.65 in intraday trade.

The BSE clocked turnover of Rs 1336 crore, higher than Rs 1287.57 crore on Monday, 26 December 2011.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,524 shares declined and 1,129 shares advanced. A total of 136 shares were unchanged. The breadth was positive earlier in the day.

Among the 30-member Sensex pack, 22 fell while the rest of them rose.

Index heavyweight Reliance Industries (RIL) fell 0.91% to Rs 754, off the day's high of Rs 768.80. Gas output from Reliance Industries' eastern offshore KG-D6 gas field has fallen to a fresh low of 38.66 million cubic metres per day during the week ended 18 December 2011, as the company has shut down five wells due to water ingress, a news agency report says citing a status report filed by the company with the Oil Ministry. The director general of hydrocarbons S.K. Srivastava last week said that RIL is planning workover operations to revive sick wells at its D6 block in the Krishna-Godavari basin, off India's east coast. Srivastava said production at the KG-D6 block may increase post the workover program.

RIL late last month said that it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company's entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks. RIL said it has initiated arbitration proceedings against the Government of India (GoI) in a bid to finally resolve the cost recovery issue so as not to hinder future investments in this block.

RIL said its investment in KG-D6 production facilities has been only partly recovered and the return on the investment so far is less than the cost of the capital. The production sharing contract (PSC) with the Government of India (GoI) contains no provision which entitles the GoI to restrict the costs recovered by the company by reference to factors such as the level of production or the extent to which field facilities are utilised, RIL said.

Pharma stocks declined on reports that more than 500 Indian drug companies will have to collectively pay over Rs 4000 crore in dues after a high court shot down their petition challenging penalty notices sent by drug authorities for overcharging. Cipla, Dr Reddy's Laboratories and Sun Pharmaceutical Industries shed by between 0.17% to 2.69%.

IT stocks reversed intraday gains. India's second largest software services exporter by revenues Infosys fell 0.47%. The company said last week its business process outsourcing subsidiary -- Infosys BPO has signed a definitive agreement to acquire all of the outstanding share capital in Australia-based Portland Group Pty, a leading provider of strategic sourcing and category management services. The purchase consideration for the deal is Australian dollar (AUD) 37 million. Portland Group reported revenue of about AUD 31.3 million for the year ended 30 June 2011.

India's third largest software services exporter by revenues Wipro declined 0.05%.

India's largest software services exporter by revenues Tata Consultancy Services (TCS) shed 1%. TCS early last week announced that it will expand its operations in the state of Maharashtra by building a new software development campus in Nagpur with an investment of Rs 600 crore in the first phase.

Engineering and construction major, L&T, rose 0.38% after the company said during market hours today that its shipbuilding arm -- L&T Shipbuilding will sign technological collaboration agreement with Mitsubishi Heavy Industries, Japan. Mitsubishi will provide a broad range of technological support services for the construction of commercial vessels, L&T said in a statement.

Metal stocks reversed intraday gains. Tata steel, Sterlite Industries (India), Nalco, Hindustan Zinc, Jindal Saw, Hindalco Industries, Sail and JSW Steel dropped by between 0.32% to 3.31%.

Realty shares fell on profit booking after recent gains. Indiabulls Real Estate, DLF, Unitech, HDIL and D B Realty dropped by between 0.68% to 5.61%. The BSE Realty index had jumped 6.07% in the preceding four sessions to 1,450.45 on 26 December 2011 from a recent low of 1,367.39 on 20 December 2011.

Interest rate sensitive banking stocks edged lower on fears of increase in bad loans in a slowing economy. India's second largest private sector bank by branch network HDFC Bank shed 0.78%. The bank raised interest rates on non-resident savings deposits to 9% from 3.82% from Friday, 23 December 2011, taking advantage of recent deregulation to attract dollars.

India's largest commercial bank by net profit and branch network State bank of India (SBI) dropped 1.48%. The bank will raise term deposit rates for non-resident external accounts by up to 574 basis points from 1 January 2012. Deposits below Rs 1 crore will earn interest rates of 9.25%. Deposits above Rs 1 crore will earn 9% for 1-2 years maturity from 3.82% earlier, SBI said in a press release.

The Reserve Bank of India deregulated interest rates on non-resident external (NRE) rupee deposits and ordinary non-resident accounts earlier this month to provide greater flexibility to banks to attract dollars

India's largest private sector bank by branch network ICICI Bank declined 0.65%. Federal Bank, Union Bank of India, Axis Bank and IndusInd Bank shed by between 2.07% to 4.25%.

Multiplex shares spurted on reports Shah Rukh Khan's action thriller "Don 2" garner box office collection of Rs 48.39 crore in its opening weekend. Fame India, Inox Leisure, and Cinemax India rose by between 6.87% to 19.97%. According to reports, the film earned Rs 15.30 crore Friday, Rs 15.09 crore on Saturday and approximately Rs 18 crore Sunday, making a grand total of Rs 48.39 crore. Reports suggest that the occupancy in theatres has been around 90%.

Foreign funds bought shares worth Rs 113.43 crore on Monday, 26 December 2011, as per provisional data from the stock exchanges. FIIs had bought shares worth Rs 84.27 crore on Friday, 23 December 2011. Earlier, FIIs were net sellers for ten days in a row from 9 to 22 December 2011. FIIs have sold shares worth a net Rs 1488.91 crore so far this month (till 26 December 2011), as per provisional data from the stock exchanges.

The next major trigger for the market is Q3 December 2011 corporate earnings which will start tricking from second week of January 2012. The focus will be on guidance from the company managements on outlook for the remaining part of the year and for the next year. Advance tax collection from the country's top 100 companies, as per the final numbers, declined by 1.4% to Rs 30763 crore in the third quarter of 2011-12, indicating sluggishness in economy. Advance taxes are collected in four installments -- 15% by 15 June; 40% by 15 September; 75% by 15 December and 100% by 15 March.

A government statement in parliament last month dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam has said that the government has no proposal to lower the securities transaction tax (STT). There has been a speculation that the government will reduce STT in Union Budget 2012-2013 in a bid to revive sagging volumes on the bourses. Palanimanickam said in a written reply to Rajya Sabha that the securities transaction tax receipts had declined by around 18% to Rs 2960 crore during the first six months in the current fiscal year from a year ago period.

Prime Minister Manmohan Singh said on Thursday, 22 December 2011 he was disappointed to hear negative comments from industry leaders that the government's policies were leading to a slowdown. Singh, who met members of his Trade and Industry Council, said such comments strengthened negative forces who had no stake in the country's development. The UPA government has been battling criticism over its handling of the economy and the perception of policy paralysis in the aftermath of a string of scandals which hit the headlines since last year. Several top industrialists had written to the government expressing frustration at the slow pace of reforms and the gloomy atmosphere.

Credit rating agency Moody's Investors Service on 14 December 2011 said that the recent sharp decline in the value of the Indian rupee against the dollar is generally exerting only a moderate impact on rated Indian companies. Risks for companies holding large amounts of dollar denominated debt are also manageable in the near term, given that debt maturities are limited for this time frame, Moody's said in a new report. This means Indian companies rated by Moody's do not have a significant dollar outflow at a time when the Indian rupee is losing ground.

The infrastructure sector output grew 6.8% in November from a year earlier, sharply higher than the annual growth of 3.7% in November last year, data released by the government on Monday, 26 December 2011, showed. The infrastructure sector accounts for 37.9% of India's industrial output.

The food inflation eased sharply to 1.81% in the year to 10 December 2011, from an annual 4.35% rise in the previous week, government data showed on Thursday, 22 December 2011. The fuel inflation remained unchanged at 15.24% in the latest week compared with the prior week, data showed, while the primary articles price index rose 3.78%, compared with an annual rise of 5.48% in the previous week.

At its mid-quarterly monetary policy review meet on Friday, 16 December 2011, the Reserve Bank of India (RBI) left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI said in a statement. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI said.

RBI said inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces. RBI also said that the rupee remains under stress. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

India may face the risk of stagflation if the government doesn't take urgent steps to tame inflation and stimulate growth, a parliamentary panel on finance warned on Thursday, 22 December 2011. The Standing Committee on Finance blamed the Reserve Bank of India's 13 interest-rate increases over the past 21 months for stalling economic growth. "Measures taken by the government and the RBI so far have squarely failed to rescue the economy from unabated inflation. Instead, monetary measures initiated for this purpose have only resulted in worsening the condition of the economy further," the report said.

Finance minister Pranab Mukherjee on Sunday, 25 December 2011, said he did not think there was any problem in presenting the Budget for 2012-13 on schedule in the wake of the announcement of assembly elections in five states. Mukherjee, however, said the date for the presentation of the budget will be fixed after discussions at various levels. The Union Budget is presented on the last date of February every year.

The Election Commission on Saturday, 24 December 2011, announced the dates for the assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Manipur and Goa. Uttar Pradesh will have polling on February 4, 8, 11, 15, 19, 23 and 28, while Uttarakhand and Punjab will go to polls on January 30. Manipur will have polls on January 28 and Goa on March 3.

European stocks advanced for a third day on Tuesday, 27 December 2011, before reports that may show house prices in US cities fell at a slower pace and US consumer confidence climbed. Key benchmark indices in France and Germany rose by between 0.51% to 0.59%. London markets remained closed for a holiday.

House prices in the UK fell in December, the latest survey results from property researcher Hometrack showed. Prices fell 0.2% month-over-month in December, the same pace of decline recorded in both October and November. Annually, prices fell 2.1% slower than the 2.3% fall reported in November. Separately, French jobless claims rose to a 12-year high in November amid economic slowdown, data from labor ministry revealed. The number of unemployed rose by 29,900 or 1.1% to 2.85 million in November. On an annual basis, unemployment increased 5.2%.

Asian shares edged lower on Tuesday, 27 December 2011, in thin volume as investors took to the sidelines before US markets reopen later in the day from a long weekend and data which could offer clues over growth prospects in the world's largest economy. Key benchmark indices in Singapore, Indonesia, China, Japan, South Korea and Taiwan fell by between 0.11% to 1.09%. Hong Kong market remained closed for a holiday.

Investors will be looking for more positive signs from US data this week, including the S&P Case-Shiller house price index for October and consumer confidence for December.