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Tuesday, February 07, 2012

Market snaps five-day winning streak; aviation shares take off


Key benchmark indices snapped a five-day winning streak as weakness in European shares triggered on profit taking on the domestic bourses after recent strong rally in share prices, which was driven by heavy buying of Indian stocks by foreign institutional investors (FIIs). The barometer index, BSE Sensex, lost 84.86 points or 0.48%, off about 210 points from the day's high and up close to 40 points from the day's low. The market breadth was negative.

The Sensex had jumped 844.01 points or 5% in five trading sessions to settle at 17,707.31 on Monday, 6 February 2012, from a recent low of 16,863.30 on 30 January 2012. The Sensex has surged 2,167.53 points or 14.027% in calendar 2012 so far. From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 2,486.59 points or 16.42%. From a 52-week high of 19,811.14 on 6 April 2011, the Sensex has lost 2,188.69 points or 11.04%.



Coming back to today's trade, index heavyweight Reliance Industries (RIL) edged higher. Mahindra & Mahindra (M&M) fell after the company said it expects pressure on profit margin to continue in the near future. Banking stocks extended recent strong gains. Airline stocks jumped after the Group of Minister (GoM) recommended up to 49% foreign direct investment by foreign airlines into Indian airline companies and to let local carriers directly import jet fuel.

Telecom stocks fell across the board after telecom regulator Telecom Regulatory Authority of India (TRAI) said it plans to review its stance of not interfering in fixing of telecom tariffs as reports indicate a possible reversal of the declining trend in telecom tariffs. Shares of organized retailers rose. Realty stocks fell on profit taking after recent strong gains. Capital goods stocks also declined.

The market trimmed gains after a firm opening. The 50 unit S&P CNX Nifty pared gains after hitting its highest level in more than six months at the onset of the trading session. The market regained positive zone after slipping into the red for a brief period to hit fresh intraday low in morning trade. A bout of volatility was witnessed as the Sensex trimmed gains after hitting 14-1/2-week high in mid-morning trade. The market was range bound in early afternoon trade. The market slipped into the red to hit fresh intraday low in mid-afternoon trade. The market trimmed losses after hitting a fresh intraday low in late trade.

The BSE Sensex shed 84.86 points or 0.48% to settle at 17,622.45, its lowest closing level since 3 February 2012. The index surged 124.73 points at the day's high of 17,832.04 in mid-morning trade, its highest level since 28 October 2011. The index fell 124.82 points at the day's low of 17,582.49 in late trade.

The S&P CNX Nifty lost 26.50 points or 0.49% to settle at 5,335.15, its lowest level since 3 February 2012. The index hit a high of 5,413.35, its highest level since 4 August 2011. The index hit a low of 5,322.95 in intraday trade

The BSE Mid-Cap index fell 0.81% and underperformed the Sensex. The BSE Small-Cap index declined 0.44% and outperformed the Sensex.

BSE clocked turnover of Rs 3440 crore, higher than Rs 3193.63 crore on Monday, 6 February 2012.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,635 shares fell and 1,234 shares rose. A total of 110 shares were unchanged. The breadth was positive earlier in the day.

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

Index heavyweight Reliance Industries (RIL) rose 1.44% to Rs 844.75, off the day's high of Rs 852.40. RIL said on 30 January 2012, that it proposes to buy-back its shares from the existing shareholders/beneficial owners other than the promoters/persons who are in control of the company from the open market. The company proposes to buy-back up to a maximum of twelve crore shares and a minimum of three crore shares. The buyback programme started on 1 February 2012 and will end on 19 January 2013.

The maximum price for buyback has been set at Rs 870 per share. The company has set aside Rs 10440 crore for share buyback, which represents approximately 7.22% of the company's total paid-up equity capital and free reserves as on 31 March 2011.

Realty stocks fell on profit taking after recent strong gains. HDIL, Indiabulls Real Estate, DLF and Sobha Developers fell by between 1.7% to 5.09%. From a recent low of 1370.23 on 2 January 2012, the BSE Realty index had jumped 35.37% to 1854.89 on 6 February 2012.

Unitech fell 3.4% after surging 13.08% on Monday. Norway's Telenor ASA on Monday, 6 February 2012, indicated it may exit India if it fails to secure telecommunication licenses, after the Supreme Court last week ordered cancellation of the permits of its local unit and several other companies. But, as of now, the Norwegian company doesn't plan to slow its operations in India, Sigve Brekke, executive vice president and head of Asian operations, told reporters. Telenor--which runs a telecom joint venture called Unitech Wireless--is now in talks with the telecom regulator and the government to decide on the way forward.

The Supreme Court last week ordered the cancellation of 122 telecom licenses, including 22 belonging to Unitech Wireless, saying their allocation in 2008 was an "arbitrary and unconstitutional exercise," which facilitated corruption. The order will be effective in four months.

Unitech, last week, said that the Supreme Court verdict pertains to the telecom venture Uninor, which was issued 2G licenses in accordance with the government policy. Unitech is separate entity from Uninor and it will continue to focus on its real estate business, the company said.

FMCG major Hindustan Unilever (HUL) fell 1.22%, with the stock extending Monday's 3.49% losses triggered by the company's Q3 December 2011 sales growth falling short of market expectations. HUL's profit after tax but before exceptional items jumped 30% to Rs 762 crore on 15.62% increase in total income to Rs 6017.71 crore in Q3 December 2011 over Q3 December 2010. The result was announced during trading hours on Monday, 6 February 2012.

HUL said the company's domestic consumer business grew at 16.5% in Q3 December 2011, with strong underlying volume growth of 9.1%. All segments delivered double digit growth, the FMCG giant said. Inflationary pressures during the quarter were primarily on account of currency depreciation HUL said adding that cost pressures were managed dynamically through aggressive savings programmes coupled with judicious pricing. Cost of goods sold was up by 140 basis points (bps). Brand investment continued to be competitive with A&P at 11.8% of turnover in Q3 December 2011, HUL said.

L&T declined 2.08%. The company announced during market hours today that L&T Construction has bagged new orders valued over Rs 1880 crore across various business segments in Q4 March 2012.

Power equipment maker Bhel slumped 4.22% and was the top loser from the Sensex pack. Mired in legal tangle, country's largest power producer NTPC is unable to place equipment orders worth Rs 34000 crore for four super-critical projects in the country. The placement of these orders have been stranded since one of the participating bidders -- Ansaldo Caldaie Boilers (ACB) -- approached the court after its bid was rejected by NTPC citing non-fulfillment of minimum criteria in the tender.

Reliance Power fell 1.69%. The company said during market hours today that its 2400 megawatts (MW) Samalkot gas-based power plant, located close to India's east coast in Andhra Pradesh, is ready for commissioning in a record time of 15 months.

Shares of organized retailers surged. Pantaloon Retail, Shoppers Stop, Provogue India, V2 Retail, Brandhouse Retail and Koutons Retail rose by between 3.2% to 10.31%. The government on 10 January 2012 notified 100% foreign direct investment (FDI) in single brand retail.

Banking stocks extended recent strong gains. From a recent low of 9153.39 on 30 December 2011, the BSE Bankex had jumped 28.89% to settle at 11,798.19 on Monday, 6 February 2012. India's largest private sector bank by branch network ICICI Bank rose 0.98%, with the stock gaining for the fourth straight day. The bank's net profit rose 20.26% to Rs 1728.10 crore on 24.14% increase in total income to Rs 10483.73 crore in Q3 December 2011 over Q3 December 2010. The result was announced on 31 January 2012.

ICICI Bank said advances increased by 19% year-on-year to Rs 246157 crore as on 31 December 2011 from Rs 206692 crore as on 31 December 2010. The bank said its Current and savings account (CASA) ratio increased to 43.6% at 31 December 2011, from 42.1% as on 30 September 2011. Net non-performing asset ratio decreased to 0.7% at 31 December 2011 from 0.8% at 30 September 2011 and 1.16% as at 31 December 2010. The bank had strong capital adequacy ratio of 18.88% and Tier-1 capital adequacy of 13.13% as on 31 December 2011.

India's second largest bank by net profit HDFC Bank rose 0.58%. HDFC Bank reported 31.4% growth in net profit to Rs 1429.70 crore on 35.6% increase in total income to Rs 8622.64 crore in Q3 December 2011 over Q3 December 2010. The result was announced on 19 January 2012.

HDFC Bank said its core CASA deposit ratio, adjusted for one-off current account balance of about Rs 4000 crore, was at 47.7% of total deposits as on 31 December 2011. The private sector bank said its asset quality remains healthy. The bank's capital adequacy ratio (CAR) remained strong at 16.3% as on 31 December 2011, against the regulatory minimum of 9%. The bank's Tier-I CAR was 11.2% as on 31 December 2011.

India's largest commercial bank by net profit and branch network State Bank of India (SBI) fell 0.51%, with the stock reversing initial gains. SBI recently said that the Government of India has agreed to inject approximately Rs 7900 crore into bank by way of preferential allotment of equity shares to help SBI achieve minimum 8% Tier I CAR by 31 March 2012. The country's biggest lender by assets didn't say when the government would infuse the capital. The government currently owns 59.40% of SBI.

Airline stocks jumped after the Group of Ministers (GoM) recommended up to 49% foreign direct investment by foreign airlines into Indian airline companies and to let local carriers directly import jet fuel. The suggestions will need an approval from the Union Cabinet. Jet Airways, SpiceJet and Kingfisher Airlines surged by between 10.98% to 14.48%.

Both proposals are meant to support local aviation companies, which have been severely hit by losses due to high fuel costs and interest rates. Foreign airlines are currently barred from buying stakes in Indian aviation companies. Jet fuel accounts for up to 45% of the total costs for an Indian carrier. Importing the fuel would allow an airline to save on sales tax imposed by local governments.

Telecom stocks fell across the board after telecom regulator Telecom Regulatory Authority of India (TRAI) said it plans to review its stance of not interfering in fixing of telecom tariffs as reports indicate a possible reversal of the declining trend in telecom tariffs. Idea Cellular, Bharti Airtel, Reliance Communications, Tata Teleservices (Maharashtra) and MTNL shed by between 2.46% to 4.04%.

In a move which could severely dent profits of India's telecom companies, the sector's regulator Telecom Regulatory Authority of India (TRAI) is seeking suggestions from industry stakeholders on whether it should change its stance of not interfering with telephone call rates. If the TRAI decides to change its policy, it will ensure that operators won't be able to increase rates by themselves. The regulator may also move to fix tariffs across the board, thus affecting telecom companies' profit margins.

Auto stocks fell on profit taking after recent gains triggered after auto companies reported good sales in January 2012. India's largest car maker by sales Maruti Suzuki India fell 0.37%, with the stock snapping a four-day winning streak. The car major last week said its total sales rose 5.2% to 1.15 lakh units in January 2012 over January 2011. Domestic sales rose 0.6% to 1.01 and exports jumped 54.3% to 14,386 units in January 2012 over January 2011.

Maruti early this month introduced a shorter, cheaper version of its Swift Dzire sedan as part of efforts to retain its position as the country's largest car maker by sales. The new Dzire is 3.95 meters in length, qualifying it for a lower federal excise tax, compared with the current 4.1 meter-long model. The government imposes a 10% tax on cars measuring up to 4 meters in length. These cars can have a diesel engine of only up to 1.5 liters or a gasoline engine of up to 1.2-liters. An excise tax of 22% is imposed on cars beyond 4 meters in length.

Mahindra & Mahindra (M&M) fell 2.88% after the company said it expects pressure on profit margin to continue in the near future. The combined net profit of M&M and Mahindra Vehicle Manufacturers (MVML), excluding extra-ordinary items, rose 16% to Rs 705.90 crore in Q3 December 2011 over Q3 December 2010. The combined gross revenue and other income of M&M and MVML jumped 33.9% to Rs 9011.20 crore in Q3 December 2011 over Q3 December 2010. MVML was set up a 100% subsidiary of M&M, with a view to sourcing contemporary products for expanding the market offerings of M&M. M&M announced the Q3 result during trading hours today, 7 February 2012.

M&M said growth in profit in Q3 December 2011 despite relentless increase in material costs was due to a good volume performance by both vehicles and tractors segments in a difficult market and due to tight control on expenses. M&M said it has always met challenges through its continuous focus on new product introductions, which has helped it drive volumes.

M&M said earlier in the day that it has received more than 25,000 bookings for its latest XUV500 sport-utility vehicle after it reopened applications. Bookings for the vehicle reopened on 25 January 2012 across 19 cities in the country and closed on 3 February 2012. M&M had introduced the SUV in September 2011 and received 8,000 bookings within 10 days. The company then had to stop taking fresh orders as it was working on monthly output of 2,000 units. The company said recently it increased the vehicle's monthly output to 3,000 in January 2012 and plans to further raise it 4,000-5,000 in June 2012.

India's largest commercial vehicle maker by sales Tata Motors declined 0.32%. The company's total sales rose 16% to 87,465 units in January 2012 over January 2011. The company announced the monthly sales data early this month.

India's largest motorcycle maker by sales Hero MotoCorp fell 0.56%. The company reported 11.5% growth in sales to 5.20 lakh units in January 2012 over January 2011. The company announced the monthly sales data early this month.

Bajaj Auto dropped 0.27%. The company early this month said its total vehicle sales rose 8% to 3.37 lakh units in January 2012 over January 2011. The company announced the monthly sales data early this month.

Most cement stocks fell on profit taking after recent strong gains triggered by good cement dispatches data for January 2012. Jaiprakash Associates fell 4.25%. The company's cement dispatches rose 27% to 1.96 million tonnes in January 2012 over January 2011.

Ambuja Cements fell 1.17% to Rs 177.80. The stock hit a record high of Rs 182 today. The company's cement dispatches rose 3.8% to 1.91 million tonnes in January 2012 over January 2011.

UltraTech Cement dropped 0.26% to Rs 1359.45. The stock hit a record high of Rs 1400 today. The company's cement dispatches rose 11.2% to 3.72 million tonnes in January 2012 over January 2011.

ACC rose 1.74% to Rs 1351. The stock had hit a record high of Rs 1,371.80 today. The company last week said that its cement dispatches rose 8.78% to 2.23 million tonnes in January 2012 over January 2011. ACC's cement production rose 9.22% to 2.25 million tonnes in January 2012 over January 2011.

India Cements rose 0.58%, with the stock extending Monday's gains triggered by strong Q3 results. Net profit surged 162.27% to Rs 56.31 crore on 20.55% increase in net sales to Rs 941.52 crore in Q3 December 2011 over Q3 December 2010. The result was announced during trading hours on Monday, 6 February 2012.

Sun Pharmaceutical Industries fell 1.89% to Rs 536. The stock hit a record high of Rs 565.75 on Monday, 6 February 2012.

Metal stocks declined as LMEX, a gauge of six metals traded on the London Metal Exchange dropped 1.55% on Monday, 6 February 2012. Tata Steel, Sail, JSW Steel, Sterlite Industries, Hindustan Zinc, Hindalco Industries, NMDC, and Jindal Steel & Power rose by between 0.32% to 3.96%.

National Aluminium Company fell 1.62%, with the stock extending Monday's 2.9% decline triggered by weak Q3 results. The company announced during market hours on Monday that net profit fell 79.98% to Rs 51.22 crore on 3.06% growth in total income to Rs 1579.51 crore in Q3 December 2011 over Q3 December 2010.

SpiceJet clocked highest volume of 3.99 crore shares on BSE. Kingfisher Airlines (1.15 crore shares), Resurgence Mines (68.01 lakh shares), Jet Airways (60.89 lakh shares) and Cals Refineries (59.42 lakh shares) were the other volume toppers in that order.

Jet Airways clocked highest turnover of Rs 207.75 crore on BSE. SBI (Rs 131.03 crore), SpiceJet (Rs 109.16 crore), Adani Enterprises (Rs 104.03 crore) and JSW Holdings (Rs 100.55 crore) were the other turnover toppers in that order.

Foreign institutional investors (FIIs) bought shares worth Rs 997 crore on Monday, 6 February 2012, as per provisional data from the stock exchanges. FIIs have bought shares worth Rs 5688.93 crore in first four trading sessions this month, as per provisional data from the stock exchanges. FIIs made substantial purchases of Indian stocks last month. FIIs bought shares worth a net Rs 10357.70 crore in January 2012, as per data from Securities & Exchange Board of India (Sebi).

Finance Minister Pranab Mukherjee will present the annual budget for 2012/13 on 16 March 2012, while the railways budget will be presented on 14 March 2012, a minister said on Tuesday, 7 February 2012. The budget session of parliament will start on 12 March 2012, Pawan Kumar Bansal, minister of parliament affairs, told reporters. The government will present on March 15 the Economic Survey for 2011/12, a document on the state of economy prepared by the economic division in the ministry of finance, he said. The annual budget is usually presented on the last working day of February. However, the budget has been delayed this time due to the ongoing assembly polls. Polling for assembly elections in five states concludes in early March 2012.

The Indian economy is estimated to grow 6.9% in the current fiscal year through March 2012 (FY 2012), sharply slower than the 8.4% expansion reported last year, according to a government forecast released on Tuesday, 7 February 2012. The new expectation is due to weaker growth in manufacturing and farm output, data from the ministry of statistics and implementation showed. The government expects manufacturing output to grow 3.9% this fiscal year compared with a 7.6% increase a year earlier. Farm output is expected to rise 2.5%, compared with 7% last year. In December 2011, the government had cut its growth projection for FY 2012 to between 7.25% and 7.75% from an initial forecast of 9%.

Bharti Airtel, ONGC, Power Grid Corporation of India and Tech Mahindra unveil Q3 results tomorrow, 8 February 2012. Tata Steel, Hindalco, ACC, Ambuja Cements and HPCL unveil quarterly results on Thursday, 9 February 2012. DFL, Tata Power, BPCL, Reliance Communications (RCom), Britannia Industries, Sun TV Network, Essar Oil and Neyveli Lignite Corporation unveil Q3 results on Friday, 10 February 2012. JSW Steel announces consolidated Q3 results on Friday, 10 February 2012. The company has already announced its stand-alone results.

Aditya Birla Nuvo, Oil India and Ashok Leyland announce Q3 results on Saturday, 11 February 2012. State Bank of India, Cipla, Reliance Power, Indian Oil Corporation, Coal India, Sun Pharmaceuticals Industries and Steel Authority of India (Sail) unveil Q3 results on 13 February 2012. Tata Motors, Reliance Infrastructure, Jaiprakash Associates, Videocon Industries and Shipping Corporation of India unveil Q3 results on 14 February 2012. Ranbaxy Laboratories and ABB unveil Q4 December 2011 results on 23 February 2012.

India is facing some challenges on its stable rating outlook and the balance of risk factors for its rating may be shifting slightly toward the negative, said Standard & Poor's Ratings Services on Monday, 6 February 2012, in a report titled "Several Factors Could Weigh On India's Current Stable Sovereign Rating In 2012." High inflation, a weak government fiscal position, and slower economic growth have hurt investor confidence in the rupee, triggered a capital outflow, and weighed on the stable sovereign outlook on India in 2012, the report said. S&P has an investment grade BBB- rating with a stable outlook on India.

The government is likely aim to shrink its budget deficit by at least 0.4 percentage point of gross domestic product next fiscal year, as it attempts to boost government revenue and cut subsidies, a news agency quoted an unnamed senior finance ministry official as saying on Monday, 6 February 2012. Under a medium-term fiscal consolidation plan, the government is tasked with shrinking the fiscal deficit to 3.5% by March 2014. Getting back to a tight fiscal road is critical, and the government may have to take some tough steps such as cutbacks in social spending and streamline subsidies to help keep a lid on government expenditure, the official said.

The official said the government is likely to add more services to boost indirect taxes as a slowing economy limits chances of a sharp rise in personal income tax and corporate tax revenue. However, raising service tax rates seems unlikely ahead of the roll out an ambitious Goods and Services Tax, the official added.

India's services sector grew at its fastest pace in six months during January 2012 as new business swelled, extending the previous couple of months' positive trend into the new calendar year, a survey showed on Friday, 3 February 2012. The HSBC Business Activity Index, compiled by Markit and based on a survey of around 400 firms, bounced to 58 in January from 54.2 in December. That was the third month the index has been above the 50-mark separating growth from contraction.

India's manufacturing sector grew at its fastest pace in eight months in January 2012 as factory output surged the most on record on increased domestic and foreign demand, a survey showed last week. The HSBC manufacturing purchasing managers' index (PMI), compiled by Markit, jumped to 57.5 from 54.2 in December. The factory output sub-index jumped to 62.9 in January from 55.8 in December, the biggest rise from one month to the next on record. Both the output and the new orders indexes rose to their highest level since May last year.

India's trade deficit widened to $12.7 billion in December from $8.0 billion a year earlier as export growth slowed due to falling global demand. But imports, specially in the non-oil segments, continued to grow. For the April-December period, the trade gap was $133.2 billion, compared with $96.2 billion a year earlier. India's merchandise exports in December grew 6.7% from a year earlier to $25.0 billion while imports rose 19.8% to $37.7 billion.

European stocks edged lower on Tuesday, with market participants continuing to exercise caution as the Greek debt situation remains unresolved. Key benchmark indices Germany, France and UK fell by between 0.22% to 0.46%.

Greece's political leaders pushed back their decision for another day on Monday, resisting terms of a proposed new bailout deal which demands strict labour reforms and other austerity steps. The full package must be approved by the euro zone, the European Central Bank and the International Monetary Fund before February 15 in order to complete legal procedures for a bond swap deal for a March 20 bond redemption.

Asian shares were mixed on Tuesday, as renewed fears of a messy debt default by Greece gave pause to mounting hopes the global economy is improving. Key benchmark indices in China, Hong Kong, Japan, and Indonesia fell by between 0.05% to 1.68%. Key benchmark indices in South Korea, Taiwan, and Singapore rose by between 0.25% to 0.6%.

Trading in US index futures indicated a flat opening of US stocks on Tuesday, 7 February 2012. US stocks fell on Monday after a five-week rally on concerns Greece may be unable to avoid a chaotic default as it struggles to reach terms on a new bailout package.