Key benchmark indices trimmed losses in early afternoon trade as auto stocks rose on good on expectations of a boost in rural demand following normal monsoon rains this year. The BSE Sensex was down 63 points or 0.37%, off about 110 points from the day's high and up close to 75 points from the day's low. Interest rate sensitive realty stocks edged lower on worries that higher interest rates will dent demand for residential and commercial property. Private banks fell while PSU banks rose. Index heavyweights Reliance Industries, Infosys and Larsen & Toubro, edged lower. The market breadth was positive.
The market edged lower amid initial volatility, reversing gains, after a higher opening triggered by firm Asian stocks and gains in US index futures. The barometer index BSE Sensex retracted after hitting 4-week high. The market hit a fresh intraday low in morning trade. The market extended losses in mid-morning trade as many Asian stocks reversed initial gains. The market trimmed losses in early afternoon trade.
Investors will keenly watch data on second quarter September 2011 corporate advance tax payment due on 15 September 2011, which may provide cues on Q2 September 2011 results.
At 12:20 IST, the BSE Sensex was down 63 points or 0.37% to 17,102.54. The index rose 46.26 points at the day's high of 17,211.80 in early trade, its highest level since 12 August 2011. The index fell 139.95 points at the day's low of 17,025.59 in mid-morning trade.
The S&P; CNX Nifty was down 26.55 points or 0.53% to 5126. The Nifty hit a high of 5,163.75 and a low of 5,107.55 in intraday trade.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,411 shares rose and 1,085 shares declined. A total of 97 shares remained unchanged. The breadth was much stronger at the onset of the trading session.
Among the 30-share Sensex pack, 21 fell while rest of them rose. Hero MotoCorp, Hindustan Unilever and Bharti Airtel rose by between 1.47% to 3.37%. Hindalco Industries, Sterlite Industries and Infosys fell by between 2.12% to 2.49%.
Index heavyweight Reliance Industries (RIL) fell 1.58% to Rs 840.05 on profit taking after recent sharp surge. From a recent low of Rs 719.50 on 26 August 2011, the stock had jumped 18.62% to settle at Rs 853.50 on Thursday, 8 September 2011. The stock had gained 2.62% on Thursday, 8 September 2011, after the firm said it has set a global benchmark for effective and efficient project completion and capital cost competitiveness in KG D6 gas production block under the most trying circumstances. RIL issued the statement during trading hours on Thursday after the Comptroller and Auditor General of India or CAG said in its final report submitted to the parliament on Thursday, 8 September 2011, that RIL initially estimated capital expenditure of D-1 and D-3 gas discovery at $2.4 billion, which it later revised to $8.8 billion.
The report said that RIL started implementing the revised capex plans even before they were approved by the government. The report also found that RIL didn't relinquish some least-priority areas in the KG D6 block, which the government could have given to other companies for further exploration.
RIL said it is unable to comment on the final CAG report as the company has not seen the contents of the final report. RIL said it had already provided its detailed comments along with the views of international experts on the draft CAG report to Ministry of Petroleum and Natural Gas (MOPNG), Directorate General of Hydrocarbons (DGH) and CAG. RIL said it hopes that its detailed responses and the views of industry experts have been duly considered in finalising the audit report by CAG.
RIL said it reiterates that, as a contractor, it remains committed to complying with the PSC (Production Sharing Contract) provisions and procedures, including adopting Good International Petroleum Industry Practices (GIPIP) in its operations. Since many of the comments in the draft report had referred to issues that were technical in nature, the firm had offered to CAG a complete and thorough interaction with subject matter specialists, RIL said. RIL also said it remains open to such interaction at all times. RIL also said that it will continue to co-operate with the Government of India for audit as per the provisions of PSC.
Europe's second largest oil company BP Plc, last month, completed the acquisition of a 30% stake in 21 oil and gas blocks that RIL operates in India. BP will pay RIL an aggregate consideration of $7.2 billion subject to completion adjustments for the interests to be acquired in the 21 production sharing contracts, the two companies said in a joint statement late last month. Further performance payments of up to $1.8 billion could be paid based on exploration success that results in development of commercial discoveries, the two companies said.
India's biggest engineering & construction firm by revenue, Larsen & Toubro, fell 0.43% on profit taking.
ONGC rose 0.59%. The company, early this month, filed prospectus for about Rs 11000-crore follow-on public offer with the Securities and Exchange Board of India. The government will sell a 5% stake in ONGC through the offer as a part of its plan to raise Rs 40000 crore through sale of shares in state-run companies in the current financial year through March to fund social-sector programs.
Reliance Communications, India's No 2 mobile phone carrier by subscribers, rose 1.62%, with the stock gaining for the second straight day on reports that the company has received an order worth Rs 1400 crore for building and maintaining a data centre for HDFC Bank. The contract with HDFC Bank, the country's No. 3 lender, is for 15 years.
Private sector banking pivotals fell on concerns elevated interest rates may restrict loan growth. India's largest private sector bank by net profit ICICI Bank fell 0.58%. India's second largest private sector bank by net profit HDFC Bank declined 0.85%.
But, PSU banks rose. Bank of Baroda, Punjab National Bank and Bank of India gained by between 0.16% to 1.45%.
India's largest bank by branch network and net profit State Bank of India (SBI) rose 0.11%. The government is likely to take a call shortly on infusing capital into SBI. SBI requires Rs 20000 crore to fund its growth plans over the next two financial years.
Interest rate sensitive realty stocks edged lower on worries that higher interest rates will dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance. DLF, HDIL, Indiabulls Real Estate and Unitech dropped by between 1.31% to 1.73%.
Networking solutions provider GTL jumped 21%. The stock rose on heavy 1.4 crore shares on BSE.
Foreign institutional investors (FIIs) bought shares worth Rs 14.14 crore on Thursday, 8 September 2011, as per provisional data from the stock exchanges. FII inflow totaled Rs 1999.71 crore in the first few days this month, till 8 September 2011, as per data from the stock exchanges.
The six-week long monsoon session of the parliament ended on Thursday, 8 September 2011, with passage of only 14 bills in Lok Sabha and just nine in the Rajya Sabha due to frequent disruptions and forced adjournments.
Prolonged rainfall in the latter part of the season has helped ease concerns that this year's monsoon might drop below the long-term average after a brief lull in July, when the country usually receives a third of its monsoon rains. The monsoon was 3% above average till 7 September 2011, as per the latest data from Indian Meteorological Department (IMD). Most parts of the country received average to above-average rainfall this year, but the season was marked by both lulls and periods of intense rainfall in western and eastern regions.
While overall rainfall plays a key part in determining farm output, the timing and distribution of rains are also important to ensure a good crop. The unusual pattern of this year's rains may delay harvesting, affecting the yield from key summer-sown crops such as rice, oilseeds, sugarcane and cotton. Rice acreage as of 2 September 2011 was up 12% from last year at 35.75 million hectares.
A good monsoon season can typically boost rural farm incomes and have an impact on the wider economy through increased spending on consumer goods as well as reduced prices of food items. But food prices may not necessarily fall if delayed and excess rains in some regions affect crop yields.
Annual inflation in the Food Articles group fell to 9.55% in the week ended 27 August 2011, from 10.05% in the previous week, the latest data showed. It was at 14.76% in the corresponding period of last year. However, inflation in the Primary Articles group climbed to 13.34% in the week under review, from 12.93% in the week ended 20 August 2011. It was at 15.24% in the year-ago period. Inflation in the Fuel & Power group was at 12.55% in the week ended 27 August, unchanged from the previous week, the latest data showed. It was at 12.61% in the comparable week of the previous year.
The Reserve Bank of India (RBI) has said that a change in anti-inflationary monetary stance will be motivated by signs of a sustainable downturn in inflation. Data on 12 September 2011 on industrial production for July 2011 and on 14 September 2011 on headline inflation for August 2011 will provide cues on the central bank's likely policy stance at its mid-quarter monetary policy review on 16 September 2011. The Reserve Bank of India has raised its key policy rate 11 times in the past 18 month to tame high inflation.
Industrial production growth is seen easing to 6.2% in July 2011 from 8.8% growth recorded in June 2011, according to median estimate of 15 economists polled by Capital Market. Inflation based on wholesale prices is forecast at 9.6% for August 2011, higher than a reading of 9.22% in July 2011, as per the median estimate of 13 economists polled by Capital Market. Eleven out of twelve economists polled by Capital Market expect a 25 basis points (bps) hike in repo rate, the key short-term policy interest, from the Reserve Bank of India at its mid-quarter policy review on 16 September 2011.
Montek Singh Ahluwalia, deputy chairman of the Planning Commission, on Thursday, 8 September 2011, said that he agrees with the finance minister's view on pausing India's tight monetary stance.
Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released early this week. The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.
The report was upbeat about India's ability to weather a global economic downturn. While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors, the report said. It noted that India's foreign currency reserves equal four times its foreign debt obligations.
A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio, the report said.
India's services sector grew at its slowest pace in more than two years in August 2011, throttled by feeble expansion in new business as a faltering global economy and tight domestic monetary conditions weighed, a survey showed on Monday, 5 September 2011. The HSBC Markit Business Activity Index, based on a survey of around 400 companies, slumped to 53.8 in August from 58.2 in July, the index's biggest one-month decline since January 2009. It was also the weakest growth since June 2009, but the index has stayed above the 50 mark that separates growth from contraction for 28 consecutive months.
The new business sub-index fell to its lowest level in three months in August, at 54.9 from July's 59.3, as dampening global economic conditions knocked orders. Expectations for new business were also scaled back in August. The survey also showed a reduction in service sector employment levels for the second consecutive month as new business growth slowed while input costs and output prices continued to march ahead.
India's manufacturing activity in August 2011 slowed to a 29-month low as exports took a beating amid the lingering uncertainty in the global economic environment, a survey showed last week. The seasonally adjusted HSBC Purchasing Managers' Index, prepared by Markit, fell to 52.6 in August from 53.6 in July. The pace of new order flows in August decelerated to the slowest in 29 months as export orders contracted at the sharpest rate since the series was started, HSBC said.
Production backlogs fell for the first time since March 2010 as pressure on operating capacity subsided. Also, inflationary pressures intensified as both input and output prices rose.
Exports surged 81.79% to $29.3 billion while imports jumped 51.5% to $40.4 billion in July 2011 over July 2010, leaving a trade deficit of $11 billion, data showed last week.
Asian stocks turned mostly lower on Friday, 9 September 2011, with manufacturers and property stocks among the hardest hit, as initial optimism about cooling inflation in China and a fresh US jobs plan evaporated in afternoon trading. The key benchmark indices in China, Japan, Hong Kong, South Korea and Singapore fell by between 0.17% to 1.83%. The key benchmark indices in Taiwan and Indonesia were up by between 0.27% to 0.82%.
Chinese consumer and producer price indexes showed inflation cooling in August 2011, with the CPI 6.2% higher than a year earlier, easing from July's three-year-high inflation rate of 6.5%.
Japan revised down its April-June gross domestic product Friday, registering a 0.5% contraction during the quarter compared to a 0.3% fall in the preliminary reading.
US index futures reversed initial gains on Friday, 9 September 2011. Trading in US index futures indicates that the Dow could fall 7 points at the opening bell.
US President Barack Obama on Thursday, 8 September 2011, said that the current state of the US economy is a national crisis. Obama outlined a broad jobs package of tax cuts and other incentives designed to give the economy a jolt.
US stocks closed sharply lower on Thursday after Federal Reserve Chairman Ben Bernanke gave no indications of new stimulus measures to boost the flagging economy in a keenly awaited speech. A rise in jobless claims reported earlier in the day underscored the weakness of the US economy. Separately, the government said the US trade deficit narrowed considerably in July, a positive signal for economic growth in the third quarter after a sluggish first half.
Bernanke on Thursday said the US central bank would spare no effort to boost weak growth, but to the dismay of investors stopped short of a full plunge into further monetary support. Bernanke failed to provide an outline on how or whether the central bank could ease the costs of borrowing further. Bernanke said a rise in consumer prices this year would likely to be transitory.
The Federal Open Market Committee (FOMC) is scheduled to undertake a two-day policy review on US interest rates on 20 and 21 September 2011.
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