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The key benchmark indices fell for the fifth straight day to hit five-month lows on worries corporate profit growth will slow on rising input costs and higher interest charges. Macroeconomic worries arising from higher crude oil prices and selling by foreign funds last month, also weighed on the sentiment as index heavyweight Reliance Industries (RIL), a number of Anil Dhirubhai Ambani group stocks, some realty and construction shares hit 52-week low/lifetime low. Indian stocks underperformed higher global equities. World stocks rose as worries over the unrest in Egypt receded. The BSE 30-share Sensex was down 305.54 points or 1.67%, off close to 430 points from the day's high and up close to 40 points from the day's low. The Sensex settled above the psychological 18,000 mark after falling briefly below that mark in late trade.
Index heavyweight Reliance Industries (RIL) extended initial losses. Realty, capital goods, auto and FMCG stocks declined. The market breadth was weak, in contrast with positive breadth earlier in the day. All the sectoral indices on BSE were in the red.
The market slipped into the red after a firm start triggered by higher Asian stocks. The market extended initial losses to hit fresh intraday low in morning trade. The market came off lows in mid-morning trade. Th market weakened once again after recovering from the day's lows in early afternoon trade. A bout of volatility was witnessed in afternoon trade as a recovery from lower level was cut short. The market slumped to five-month low in mid-afternoon trade. Stocks extended losses in late trade.
Concerns about high inflation, surging global commodity prices, and fears of slowing corporate earnings have spooked Indian stocks this year. The Sensex has lost 2,486.87 points or 12.12% in calendar 2011 so far. The BSE Mid-Cap index has lost 1,046.58 points or 13.41% and the BSE Small-Cap index has lost 1,314.56 points or 13.59%.
With the rise in key policy rates by the Reserve Bank of India (RBI) recently, interest cost will only rise in the coming quarters that could hurt earnings going forward. If raw material costs keep rising at a fast clip, companies will feel the heat of slowing sales growth and rising cost of operations that could start eating into profit growth faster than they have till now.
The results announced so far showed that the combined net profit of a total of 1,424 companies rose 23.4% to Rs 67,216 crore on 20.8% rise in sales to Rs 5,59,774 crore in Q3 December 2010 over Q3 December 2009.
Macroeconomic worries arising from higher crude oil prices also weighed on sentiment today, 1 February 2011. Benchmark Nymex light sweet crude-oil futures settled at the highest level in more than two years on Monday, 31 January 2011, after climbing 3.2% in the session. The Indian government on Monday, 31 January 2011, approved a Rs 8,000-crore subsidy to the three public sector oil marketing companies to compensate half the revenues they lost on selling diesel, domestic LPG and kerosene below cost for the quarter ended 31 December 2011.
A recent data had showed that the government's fiscal deficit in the April-December 2010 period of fiscal 2010-11 declined 44.75% to Rs 1.71 lakh crore, from Rs 3.09 lakh crore in the same period last fiscal. The deficit during the period is just 44.9% of the Budget Estimate of Rs 3.81 lakh crore for the whole fiscal.
Foreign institutional investors (FIIs) sold shares worth a net Rs 900.50 crore on Monday, 31 January 2011, higher than an outflow of Rs 592.40 on Friday, 28 January 2011. FII outflow in calendar year 2011 totaled Rs 5713.50 crore (till 31 January 2011). FII outflow in January 2011 totaled Rs 4813.20 crore. FIIs had bought equities worth Rs 2049.60 crore in December 2010.
Faster than expected global recovery may enhance the attractiveness of investment opportunities in advanced economies, which may impact capital flows to India, the Reserve Bank of India (RBI) said at a quarterly policy review last week.
Indian stocks today, 1 February 2011, underperformed firm global stocks. European shares bounced back on Tuesday, with investors confidence bolstered by a bright outlook for the economy and corporate profits, with strong earnings from Infineon and ARM lifting technology firms. The key benchmark indices in France, Germany and UK rose by between 0.9% to 0.96%.
Asian stocks rose on Tuesday, led by shares of resource companies, as strong US factory data and surging commodities prices offset fears that unrest in Egypt could spread to other parts of the Middle East. The key benchmark indices in Hong Kong, Indonesia, China, Japan, Singapore and South Korea rose by between 0.11% to 0.98%.
China's official purchasing managers' index (PMI) gauge of manufacturing slipped to 52.9 in January, indicating slowing growth in the sector after December's 53.9 reading. However, HSBC said its own China PMI rose slightly in January, edging up to 54.5 from 54.4 in December, though still below November's 55.3 reading. Still, both readings agreed that inflation remained a problem.
US index futures edged higher in volatile trade. Trading in US index futures indicated that the Dow could gain 44 points at the opening bell on Tuesday, 1 February 2011.
US stocks rose on Monday on strong corporate earnings and signs of a strengthening economy, even as a surge in the price of oil highlighted the potential for increased political risk in the Middle East to upset markets.
Egyptian Vice President Omar Suleiman said on Monday that President Hosni Mubarak has asked him to start a dialogue with all political forces, while Egypt's armed forces pledged not to fire on peaceful demonstrators. The latest news calmed US markets after stocks suffered their biggest fall in nearly six months on Friday on worries turmoil in Egypt could spread to other Middle East countries.
On the economic front, the Commerce Department said US consumer spending rose in December for a sixth straight month, while a separate report showed business activity in the US Midwest grew more than expected in January.
The BSE 30-share Sensex was down 305.54 points or 1.67% to 18,022.22, its lowest closing level since 31 August 2010. The index shed 345.59 points at the day's low of 17,982.17 in late trade. The index gained 124.30 points at the day's high of 18,452.06 in early trade.
The S&P CNX Nifty was down 88.70 points or 1.61% at 5,417.20, its lowest closing level since 31 August 2010. The Nifty hit a low of 5,402 in late trade.
The BSE Mid-Cap index fell 1.63% and the BSE Small-Cap index declined 1.44%. Both these indices outperformed the Sensex.
All the thirteen sectoral indices on BSE declined. The BSE Realty index (down 4.04%), Auto index (down 2.83%), Capital Goods index (down 2.49%), Oil & Gas index (down 2.1%), and FMCG index (down 2.02%), underperformed the Sensex. The BSE Power index (down 1.53%), banking sector index Bankex (down 1.44%), Healthcare index (down 1.37%), IT index (down 1.07%), Consumer Durables index (down 0.91%), PSU index (down 0.87%), and Metal index (down 0.8%), outperformed the Sensex.
The market breadth, indicating the health of the market, was weak, compared with positive breadth earlier in the day. On BSE, 1966 shares declined while 936 shares advanced. A total of 89 shares remained unchanged.
Among the 30-member Sensex pack, 27 declined while rest rose.
BSE clocked turnover of Rs 3443 crore, lower than Rs 3559.94 crore on Monday, 31 January 2011.
Index heavyweight Reliance Industries (RIL) fell 2.57%, with the stock falling for the sixth straight day. The stock hit 52 week low of Rs 888.55 on NSE today. The Comptroller and Auditor General of India is reportedly finalising a report that questions the government's move to allow Reliance Industries to increase its expenditure in developing the D-6 field of the KG basin, significantly reducing the country's share of revenues from the biggest gas field.
The RIL stock has fallen recently on concerns about slow ramp up in gas production from the KG-D6 field. Gross natural gas production from RIL KG-D6 block, off India's east coast, declined 5.7% to 55.8 million metric standard cubic metres per day (mmscmd) in Q3 December 2010 from Q2 September 2010, as the company continues to struggle to find solution to problems related to the reservoir.
RIL's net profit rose 28.14% to Rs 5136 crore on 5.15% rise in net turnover to Rs 59789 crore in Q3 December 2010 over Q3 December 2009. Higher refining and petrochemicals margins boosted the performance. RIL's gross refining margin (GRM) improved to $9 per barrel in Q3 December 2010 from $5.9 per barrel in Q3 December 2009. The GRM was also higher compared to $7.6 per barrel in Q2 September 2010. The result was announced after trading hours on Friday, 21 January 2011.
Many Anil Dhirubhai Ambani Group stock hit 52-week/lifetime lows. Reliance Capital fell 4.48%. The stock hit 52 week low of Rs 497 today. Reliance Communications slumped 3.47%. The stock hit a record low of 117.10 today. Reliance Energy shed 2.92%. The stock hit 52 week low of Rs 680.05 today.
Capital goods stocks declined on profit taking. Larsen & Toubro, Bhel, Thermax, BEML and ABB shed by between 0.49% to 5.24%.
Auto stocks declined on worries higher interest rates and vehicle costs could dent demand. India's largest truck maker by sales Tata Motors tumbled 6.92%. Tata Motors' total vehicle sales rose 15% to 75,423 units in January 2011 over January 2009. Domestic sales rose 13% to 70,475 units. Commercial vehicle sales rose 12% to 40,263 units.
Maruti Suzuki India fell 1.02%. Total vehicle sales rose 14.7% to Rs 1.09 lakh units in January 2011 over January 2010. Domestic sales rose 23.8% to 1 lakh units in January 2011 over January 2010. The company announced the monthly sales data during market hours today.
M&M, and Bajaj Auto declined by between 0.98% and 0.19% respectively.
Hero Honda Motors, India's largest motorcycle maker fell declined 1.4%. The company said its sales in January 2011 rose almost a fifth from a year earlier to 4,66,524 units.
FMCG stocks fell on profit taking. United Spirits, Marico, Nestle India, ITC and Hindustan Unilever fell by between 1.65% to 4.15%.
Interest rate sensitive realty stocks declined for the fifth straight day on concerns higher interest and higher property prices may dent demand for residential units. Indiabulls Real Estate, Sunteck Realty and HDIL fell by between 0.27% to 4.64%.
Unitech slumped 10.59%. The stock hit 52 week low of Rs 42.35 today.
DLF declined 1.38%, reversing initial gains after consolidated net profit fell 0.47% to Rs 465.67 crore on 20.56% rise in total income to Rs 2594.23 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 results after market hours on Monday, 31 January 2011.
The company said at the time of announcing Q3 December 2010 result that the focus on debt reduction will be visible gong forward with new launches, acceleration of execution, culmination of investments in strategic land buys and continuing non-core asset divestments. DLF also said Q4 March 2011 will witness a scale up in launches across 4-5 geographic locations.
ACC declined 1.44%. ACC's cement dispatches rose 7.32% to 2.05 million tones in January 2011 over January 2010. Production rose 9.5% to 2.06 million tonnes. The company announced the monthly sales data during trading hours today, 1 February 2011.
Banking stocks extended recent losses on worries higher cost of funds may negatively impact net interest margin. India's largest private sector bank by net profit ICICI Bank shed 2.61%. India's largest bank by net profit and branch network State Bank of India fell 1.72%.
India's second largest private sector bank by net profit HDFC Bank declined 0.13%. Net profit rose 32.91% to Rs 1087.83 crore on 28.9% rise in operating income to Rs 6357.78 crore in Q3 December 2010 over Q3 December 2009. The result was announced after trading hours on Thursday, 27 January 2011.
IT stocks fell for the second day in a row. India's second largest software services exporter Infosys shed 0.97%. Consolidated net profit rose 2.5% to Rs 1,780 crore on 2.3% rise in revenues to Rs 7106 crore in Q3 December 2010 over Q2 September 2010 as per International Financial Reporting Standards. The result was announced before market hours on 13 January 2011.
India's largest software services exporter TCS declined 0.59%. On a consolidated basis, net profit rose 9.25% to Rs 2369.83 crore on 5.35% increase in total income to Rs 9857.56 crore in Q3 December 2010 over Q2 September 2010. The result was announced after trading hours on 17 January 2011.
India's third largest IT exporter by sales Wipro shed 2.17% extending recent losses triggered by resignations of joint-CEOs of its information technology business. The resignations were announced at the time of announcing third quarter results before market hours on Friday, 21 January 2011.
Wipro's net profit as per International Financial Reporting Standards rose 10% to Rs 1319 crore on 12% increase in total revenue to Rs 7829 crore in Q3 December 2010 over Q3 December 2009.
Diversified firm Jaiprakash Associates shed 4.32%, extending Monday's 4.69% losses. The stock hit 52 week low of Rs 79.05 today. Net profit rose 125.84% to Rs 232.66 crore on 0.52% rise in net sales to Rs 2893.71 crore in the quarter ended December 2010 over the quarter ended December 2009. The result was announced after market hours on Friday, 28 January 2011.
PSU OMCs fell as crude oil prices surged. BPCL, Indian Oil Corporation and HPCL declined by between 3.48% to 6.28%. Crude oil prices rose on Monday as the financial markets continued to keep an eye on the situation in Egypt. The price rose $2.85, or 3.19% to settle at $92.19 a barrel on New York Mercantile Exchange on Monday. Higher crude oil prices will increase under-recoveries of state-run oil firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.
The Finance Ministry on Monday, 31 January 2011, approved Rs 8000-crore cash subsidy to state-owned oil marketing companies to make up for their under recoveries on selling fuel at a subsidised rate for the quarter ended December 2010. Meanwhile, stat-owned oil firms on Monday hiked jet fuel prices by a massive 4.5%, the biggest hike in almost a year, on the back of spiralling international oil prices.
NTPC declined 1.96%. Net profit rose 0.27% to Rs 2371.48 crore on 18.43% rise in total income to Rs 14165.90 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 results after market hours on Monday, 31 January 2011.
Metal stocks fell on profit taking. Tata Steel, Jindal Steel & Power, Hindustan Zinc and Steel Authority of India shed by between 0.16% to 4.34%.
National Aluminium Company (Nalco) rose 2.09% after the board approved 2-for-1 stock split and 1:1 bonus issue of at the time of announcing Q3 December 2010 results after trading hours on Monday, 31 January 2011. Net profit rose 64.94% to Rs 255.95 crore on 2.78% rise in net sales to Rs 1425.02 crore in the quarter ended December 2010 over the quarter ended December 2009.
Airline stocks declined after oil marketing firms hiked jet fuel prices by a massive 4.5% with effect from Tuesday, 1 February 2011, the biggest hike in almost a year, on the back of spiralling international oil prices. SpiceJet (down 11.41%), Jet Airways (down 8.99%) and Kingfisher Airlines (down 8.7%), edged lower. Jet fuel prices are linked to the global crude oil prices. Jet fuel constitutes more than 50% of operating cost for airliners.
Unitech clocked highest volume of 1.75 crore shares on BSE. C Mahendra Exports (1.13 crore shares), Cals Refineries (99.66 lakh shares), Delta Corp (99.16 lakh shares) and Shree Ashtavinayak Cine Vision (94.31 lakh shares) were the other volume toppers in that order.
State Bank of India clocked highest turnover of Rs 226.96 crore on BSE. Reliance Industries (Rs 208.99 crore), C Mahendra Exports (Rs 183.72 crore), Tata Steel (Rs 131.34 crore) and Tata Motors (Rs 127.75 crore) were the other turnover toppers in that order.
Exports in December rose an annual 36.4% to $22.5 billion, while imports for the month fell 11.1% on the year to $25.1 billion, the latest government data showed. The trade deficit in December narrowed to $2.6 billion compared with $8.9 billion in November. Exports rose an annual 29.5% to $164.7 billion in April-December 2010.
The manufacturing sector expanded at a slightly faster pace in January 2011 on the back of output and new order growth but inflationary pressures persisted, a business survey showed. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 companies, edged up to 56.8 in January from 56.7 in December. That was the 22nd consecutive month the key index of manufacturing has been above the reading of 50 that divides growth from contraction.
The GDP growth for the 2009/10 fiscal year has been provisionally revised upwards to 8% from 7.4%, a government statement said on Monday. The estimates of GDP and other aggregates for the previous years have been revised on account of using the new series of wholesale price index (WPI) with base 2004-05 and also subsequent revision in index of industrial production (IIP), the Central Statistical Organisation said in a statement on Monday.
The food price index rose 15.57% and the fuel price index climbed 10.87% in the year to 15 January 2011, government data, last week, showed. In the prior week, annual food and fuel inflation stood at 15.52% and 11.53%, respectively. The primary articles index was up 17.26% in the latest week, compared with an annual rise of 17.03% a week earlier.
To control surging inflation, the Reserve Bank of India (RBI) at its quarterly policy review on 25 January 2011 raised repo rate by 25 basis points to 6.5% and the reverse repo rate by 25 basis points to 5.5%. Repo rate is the rate at which the RBI lends money to banks. Reverse repo is the rate at which RBI borrows funds from banks. The central bank held the cash reserve ratio steady at 6%.
As high food inflation persists, the prospect of it spilling over to the general inflation process is rapidly becoming a reality, Reserve Bank of India (RBI) Governor Subbarao said in the policy document released on Tuesday, 25 January 2011. The RBI lifted its headline inflation projection for March 2011 to 7% from 5.5% previously. The RBI stuck with its 8.5% GDP growth forecast for the current fiscal year, but with an upside bias.
The combined risks from inflation, the high current account deficit (CAD) and fiscal situation contribute to an increase in uncertainty about economic stability that consumers and investors will have to deal with, RBI said. To the extent that this deters consumption and investment decisions, growth may be impacted. While slower growth may contribute to some dampening of inflation and a narrowing of the CAD, it can also have significant impact on capital inflows, asset prices and fiscal consolidation, thereby aggravating some of the risks that have already been identified, it said.
Capital flows, which so far have been broadly sufficient to finance the CAD, may be adversely affected, the RBI said. Faster than expected global recovery may enhance the attractiveness of investment opportunities in advanced economies, which may impact capital flows to India. This may increase the vulnerability of India's external sector. Hence, the composition of capital inflows needs to shift towards longer-term commitments such as foreign direct investment (FDI), the RBI said.
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Dev Purohit
