The key benchmark indices weakened once again after reversing initial losses to hit fresh intraday highs in mid-morning trade. Weak Asian stocks and lower US index futures weighed on investor sentiment. A likely increase in key short-term interest rates by the central bank at a policy review next week also weighed on sentiment. The BSE 30-share Sensex was down 35.53 points or 0.2%, up close to 70 points from the day's low and off close to 45 points from the day's high.
Index heavyweight Reliance Industries (RIL) edged lower. But, another index heavyweight ICICI Bank rose. IT and realty stocks fell. FMCG stocks rose. The market breadth was weak.
The market was volatile. Stocks cut losses soon after an initial slide caused by weak Asian stocks. The market weakened shortly with the Sensex hitting a fresh intraday low in early trade. The market bounced back from lower level in morning trade. The market slipped into the red once again after briefly regaining positive zone in mid-morning trade when it hit a fresh intraday high.
The fourth quarter earnings of India Inc are major near term trigger for the market. This is because the Q4 March 2010 results and management commentary on outlook could result in revision in earnings estimates of India Inc by analysts for the year ending March 2011 (FY 2011).
Expectations of good fourth quarter result by India Inc and heavy foreign fund inflows boosted the domestic bourses in recent weeks with the key benchmark indices surging to their highest level in more than 25 months on 7 April 2010. The market witnessed a correction later.
Investors have priced a 25-basis point increase in key short term interest rates by the Reserve Bank of India (RBI) at a policy review on Tuesday, 20 April 2010. Last month, the RBI raised the repo rate and the reverse repo rate, at which it absorbs excess cash from the banking system, by 25 basis points each.
The latest data showed the wholesale prices rose 9.9% in March 2010 from a year earlier and a tad higher than February's annual rate of 9.89%. Finance Minister Pranab Mukherjee said price pressures would continue until June, when summer harvests and good rains should help cool prices.
Rising inflation remains a key cause for concern. A sharp surge in interest rates may adversely impact private investment demand as well as the proposed large scale investment in the infrastructure sector.
Meanwhile, double-digit annual growth in industrial output for the fifth straight month in February 2010 underlined the strength of the economic recovery. Data on Monday, 12 April 2010, showed the industrial output rose 15.1% in February from a year earlier, less than a rise of 16.7% in January.
Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound. The June-September monsoon season is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.
Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. Agriculture secretary P K Basu said in a media interview on Monday, 5 April 2010, that early signs indicate normal monsoon rains this year. The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data.
A weakening El Nino is a positive sign for the monsoon, Ajit Tyagi, director general at the India Meteorological Department, had said on 18 March 2010.
Asian stocks retreated from 22-month highs on Friday as fresh doubts about the US economic recovery and Greece's rescue package prompted profit taking. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.52% to 1.49%. Property and banking stocks led the decline in China after Beijing tightened policies toward the residential property market on Thursday.
Trading in US index futures indicated that the Dow could fall 42 points at the opening bell on Friday, 16 April 2010.
US stocks posted their sixth straight day of gains on Thursday as an encouraging profit forecast from United Parcel Service lifted transportation shares, though concerns about a rise in weekly jobless claims limited the market's advance. The Dow Jones Industrial Average rose 21.46 points or 0.19% to 11,144.57. The Nasdaq rose 10.83 points or 0.43% to 2515.69 and the S&P; 500 rose 1.02 points or 0.08% to 1211.67.
Global trade will face lingering protectionism for up to two years, as the job market reels from the global financial crisis, World Trade Organization Director-General Pascal Lamy said on Thursday
Back home, Sebi has tightened disclosure norms for foreign institutional investors (FIIs) and sub-accounts with regard to the investment structure in India. The norms are applicable for new registrations from 7 April 2010. Existing FIIs and sub-accounts can provide the additional information by 30 September 2010.
These foreign investors will now have to disclose to the regulator whether they are a multi class vehicle (MCVs), segregated portfolio company (SPC) or a protected cell company (PCCs) and whether they maintain segregated or a common portfolio.
Meanwhile, a new rule released by the Department of Industrial Policy and Promotion (DIPP) has clarified that an individual foreign institutional investor (FII) will not be allowed to pick up more than 10% equity in an Indian company even if it is coming through the foreign direct investment route thus limiting their ability to acquire big stakes in companies.
Meanwhile, it remains to be seen if and to what extent the recent controversy with regard to unit linked insurance plans (Ulips) negatively impacts inflows into Ulips which are a major source of inflows into equities. Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities.
The stock market regulator Securities & Exchange Board of India (Sebi) has reportedly moved the Supreme Court and some high courts to guard against any ex parte decision after insurance regulator Insurance Regulatory and Development Authority of India (IRDA)'s decision to challenge Sebi's ban on unit-linked insurance products (Ulips). On 9 April 2010, Sebi had banned 14 life insurance companies from raising funds through Ulips without its approval.
IRDA, on the other hand, asked insurers to ignore the Sebi ban. On Tuesday, Sebi came out with a second order that exempted existing Ulips from the ban, but said its nod was must for issuing new Ulips issued after 9 April 2009.
According to IRDA, a total of 16.7 lakh Ulip policies, with a premium of Rs 44611 crore, were sold from 1 April 2009 to 28 February 2010. A total of 7.03 crore Ulip polices involving a total premium of Rs 90645 crore were in force in 2008-09.
The BSE 30-share Sensex was down 35.53 points or 0.2% to 17,603.73 at 11:20 IST. The index fell 109.71 points at the day's low of 17,529.55 in early trade. The Sensex rose 10.18 points at the day's high of 17,649.44 in mid-morning trade.
The S&P; CNX Nifty was down 10.85 points or 0.2% to 5263.
The BSE Mid-Cap index fell 0.08%. The BSE Small-Cap index rose 0.21%.
The market breadth, indicating the overall health of the market, was weak. The breadth was positive in early trade. On BSE, 1083 shares advanced as compared with 1390 that declined. A total of 55 shares remained unchanged.
Among the 30-member Sensex pack, 21 fell while rest rose.
Index heavyweight Reliance Industries (RIL) fell 0.73% to Rs 1082.25, extending Thursday's near 3% losses. Nonetheless, the stock came off the day's low of Rs 1067.05. Global agency Standard & Poor's Ratings Services said on Tuesday that it had revised its outlook on Reliance Industries to stable from negative. The stable outlook reflects RIL's strong competitive position and S&P;'s expectation that the company will maintain its financial risk profile.
RIL on Friday, 9 April 2010, said the company will pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the US with Atlas Energy, becoming the latest foreign company to invest in shale plays that are expected to be very lucrative. The firm will pick up a 40% stake in Atlas's operations in the booming Marcellus Shale, a gas project that spans parts of Pennsylvania, West Virginia and New York in the United States and which, according to some geologists, could hold enough natural gas to satisfy US demand for a decade.
FMCG stocks rose on expectation of good Q4 results. Marico, ITC, Hindustan Unilever, Godrej Consumer Products rose by between 0.22% to 3.85%
India's second largest software exporter by sales Infosys Technologies fell 0.24% on profit taking after hitting a record high of Rs 2,823.80 on Thursday 15 April 2010. The stock had risen in the past two days after the company issued a stronger revenue guidance in dollar terms for financial year ending March 2011 (FY 2011). The stock had jumped 3.69% on Tuesday, 13 April 2010, after the IT bellwether issued a stronger guidance in dollar terms, projecting a 16% to 18% growth in revenue at between at between $5.57 billion to $5.67 billion for the current year.
Other IT pivotals were mixed. India's third largest software services exporter by sales Wipro rose 0.15%, with the stock gaining for the third straight day. But, India's largest software services exporter by sales Tata Consultancy Services fell 0.5% on profit taking after a two-day rise.
Realty stocks fell on profit taking. Parsvnath Developers, Unitech, Anant Raj Industries, Omaxe, Indiabulls Real Estate, Unitech and DLF fell by between 0.21% to 2.08%.
India's largest private sector bank by net profit ICICI Bank rose 1.34% on bargain hunting after the stock skidded in the preceding three trading sessions. It was the major gainer form the Sensex pack. Its ADR fell 2.33% on Thursday.
India's largest mortgage finance firm by total income Housing Development Finance Corporation (HDFC) fell 1.3%. The stock was the third major loser from the Sensex pack. The company said on Thursday it has launched a Dual Rate Product-2 (DRHL-2) in which home loan interest rates will be fixed rate at 8.25% annually up to 31 March 2011, 9% for the period between 1 April 2011 and 31 March 2012, and the applicable floating rate for the balance term. The offer is for loan application made before 30 April 2010 and at least part-disbursement taken before 30 June 2010.
Financial Technologies (India) jumped 5.39% on reports the company and Multi Commodity Exchange of India reduced their stakes in MCX Stock Exchange to pave the way for the launch of its stock trading platform.
Castrol India rose 2.25% after net profit jumped 53.60% to Rs 117.20 crore on 29.30% increase in sales to Rs 654 crore in Q1 March 2010 over Q1 March 2009.
Tanla Solutions surged 5.2% to Rs 48.65 at 10:35 IST on BSE after 3.18% of equity changed hands in a bulk deal on the BSE.
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