Intense volatility was witnessed as the key benchmark indices again slipped into the red after recovering sharply to hit fresh intraday highs in mid-afternoon trade. The market breadth was weak. Lower global stocks and a likely increase in key short-term interest rates by the Reserve Bank of India (RBI) at a policy review next week, weighed on investor sentiment. The BSE 30-share Sensex was down 25.57 points or 0.14%, off close to 50 points from the day's high and up close to 85 points from the day's low.
Intraday volatility was immense. 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 market moved in a range in early afternoon trade.
Weak opening of European markets kept domestic bourses depressed in afternoon trade. Stocks extended losses later. A sudden rebound saw the Sensex briefly regaining positive zone in mid-afternoon trade as the barometer index hit a a fresh intraday high. The market again slipped into the red.
Reliance Industries (RIL) pared losses after the company said it will provide growth capital to logistics firm Deccan 360. Another index heavyweight ICICI Bank edged higher on bargain hunting after a recent fall. Realty stocks fell on fears of interest rate hike by the Reserve Bank of India (RBI) next week. IT and telecom stocks also fell. However, FMCG stocks gained on defensive buying as the Sensex fell for the fourth day in a row.
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.
The combined net profit of a total of 44 companies declined 17.7% to Rs 2304 crore on 30.1% rise in net sales to Rs 21180 crore in the quarter ended March 2010 over the quarter ended March 2009.
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. Kaushik Basu, the finance ministry's chief economic adviser, said on Friday inflation has peaked but it would remain high. Basu also said inflation would be on a downward trend.
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.
European stocks edged lower on Friday as investors turned cautious ahead of results from select front line companies. Key benchmark indices in UK and Germany were down by between 0.07% to 0.1%. But, France's CAC 40 rose 0.12%.
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 0.24% to 1.52%. 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 29 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 25.57 points or 0.14% to 17,613.69 at 14:20 IST. The index fell 109.71 points at the day's low of 17,529.55 in early trade. The Sensex rose 24.73 points at the day's high of 17,663.99 in mid-afternoon trade.
The S&P; CNX Nifty was down 7.55 points or 0.14% to 5266.05.
The market breadth, indicating the overall health of the market, was weak. The breadth was positive in early trade. On BSE, 1688 shares declined as compared with 1091 that advanced. A total of 168 shares remained unchanged.
Among the 30-member Sensex pack, 22 fell while rest rose.
Index heavyweight Reliance Industries (RIL) fell 0.21% to Rs 1088, extending Thursday's near 3% losses. Nonetheless, the stock came off the day's low of Rs 1067.05. RIL today said it will provide growth capital to logistics firm Deccan 360. The investment would be done through a wholly owned subsidiary. Deccan 360 is a cargo service headed by Captain Gopinath.
RIL on 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.
Bharti Airtel, India's largest mobile operator by sales fell 0.1%. The company added 30 lakh mobile subscribers in March 2010, and took its total subscribers to 12.76 crore. India's second largest mobile operator by sales Reliance Communications fell 0.26%.
India's largest private sector bank by net profit ICICI Bank rose 0.97%, on bargain hunting after a recent fall. The stock was the second major gainer from the Sensex pack. The stock had corrected 6.07% to Rs 918.10 on 15 April 2010 from Rs 977.45 on 9 April 2010.
India's largest mortgage finance firm by total income Housing Development Finance Corporation (HDFC) fell 0.86%. 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.
FMCG stocks rose on expectation of good Q4 results. Marico, ITC, Hindustan Unilever, Godrej Consumer Products rose by between 0.22% to 6.66%
India's second largest software exporter by sales Infosys Technologies fell 0.48% 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.
Among other IT pivotals, India's third largest software services exporter by sales Wipro was flat. India's largest software services exporter by sales Tata Consultancy Services fell 0.36% on profit taking after a two-day rise.
Realty stocks fell on fears of interest rate hike by the Reserve Bank of India (RBI) at its monetary policy review meet scheduled on 20 April 2010. Most of the property sales are driven by borrowed funds. Ackruti City, Parsvnath Developers, Unitech, Anant Raj Industries, Unitech and DLF fell by between 0.94% to 3.03%.
Kamat Hotels (India) jumped 17.48% after foreign funds bought 1.49% stake in the Mumbai-based firm through bulk deals on 15 April 2010.
Steel Strips Wheels jumped 6.14% after the company won an order to supply 4,000 tractor wheel rims to Turkey-based Turk Traktor.
Mastek fell 1.35%, extending recent steep losses after net profit tumbled 71.83% to Rs 4.49 crore in Q3 March 2010 over Q2 December 2009.
Essar Oil fell 2.38% after net profit declined 72.70% to Rs 180 crore on 52.50% rise in net sales to Rs 10,650 crore in Q4 March 2010 over Q4 March 2009.
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