Capital goods, bank stocks rise as market recovers from 5-month low

The key benchmark indices extended last three days' losses to hit five month closing lows as world stocks fell on concerns turmoil in Egypt could spread to other Middle East countries. Nevertheless, the market staged a strong intraday rebound after an initial steep slide. Banking stocks came off lows. Some capital goods stocks also rose after the parent of Siemens made an open offer to raise its stake in the Indian arm to 75% from current 55.18%. The BSE 30-share Sensex was down 68.21 points or 0.37%, up close to 290 points from the day's low and off close to 70 points from the day's high. The market breadth was weak. FMCG, IT and realty stocks declined. Index heavyweight Reliance Industries edged higher in volatile trade.

Intraday volatility was high. The market slumped to five-month low in early trade on worries turmoil in Egypt could spread to other Middle East countries. The market trimmed losses after hitting fresh five-month low in morning trade. The market further extended recovery to hit fresh intraday high in mid-morning trade. The key benchmark indices once again came off lows after sliding from the day's highs. The market hit a fresh intraday high in afternoon trade. The market weakened again in mid-afternoon trade. The market recouped all the intraday losses in late trade. The Sensex once again slipped into the red later.

The GDP growth for the 2009/10 fiscal year has been provisionally revised up to 8% from 7.4%, a government statement said. "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.

In overseas news, Moody's Investors Service downgraded Egypt's government bond ratings to Ba2 from Ba1 on Monday and changed the outlook to negative from stable. Moody's said the rating action was prompted by the recent significant rise in political event risk and concern that the policy response could undermine Egypt's already weak public finances. Protests against the government of Hosni Mubarak have rocked Egypt in recent days, with demonstrators inspired by events in Tunisia. Investors are worried about oil supply disruption from the possible closure of the Suez Canal, which Egypt controls.

Foreign institutional investors (FIIs) sold shares worth a net Rs 592.40 crore on Friday, 28 January 2011, lower than an outflow of Rs 1397.40 on Thursday, 27 January 2011, data from Securities & Exchange Board of India (Sebi) showed. FII outflow in January 2011 totaled Rs 4813.20 crore (till 28 January 2011). FIIs had bought equities worth Rs 2049.60 crore in December 2010.

Emerging-market equity funds posted their first outflows for the year in the week ended 26 January 2011, marking a shift in investor sentiment that favors developed-market funds, according to fund tracker EPFR Global. For that week, a net $3.04 billion flowed out of emerging-market equity funds, compared to a net inflow of $1.7 billion the previous week. Investors were driven away from emerging-market equity funds by "high valuations, inflationary pressures, and moves towards capital controls" in the developing world, the fund tracker said.

The finance ministry is reportedly expected to seek cabinet approval to a proposal for giving proportionate voting rights to promoters in private sector banks so as to give confidence to corporate houses that are planning to start banks and help improve competition in the sector. Currently, the voting right of a single individual or entity is limited to 10% even if the shareholding is more.

Meanwhile, Oil Minister S. Jaipal Reddy today, 31 January 2011, said the finance ministry may approve some cash subsidies for oil refiners on Monday. State-run oil refiners had earlier deferred their quarterly earnings on the hope of getting cash subsidies.

European shares trimmed losses on Monday after initial slide triggered by worries that unrest in Egypt could spread to other parts of the Middle East. The key benchmark indices in France, Germany and UK declined by between 0.18% to 0.4%.

Asian stocks fell on Monday after riots in Egypt prompted a sell-off in risky assets on concern that the protests could spread to other Middle East countries. The key benchmark indices in Hong Kong, Indonesia, Japan, South Korea and Singapore fell by between 0.72% to 2.25%. But, China's Shanghai Composite rose 1.35%.

Industrial output in Japan and South Korea jumped more than expected in December in a sign that a draw down of inventories and a rebound in export demand will help to underpin recovery in the global economy this year.

US index futures edged higher in volatile trade. Trading in US index futures indicated that the Dow could gain 3 points at the opening bell on Monday, 31 January 2011. US stocks suffered their biggest one-day loss in nearly six months on Friday, 28 January 2011, as anti-government rioting in Egypt prompted investors to flee to less risky assets to ride out the turmoil. The latest economic data showed that the US economy grew at 3.2% rate in the fourth quarter as consumer spending accelerated.

Back home, the results announced so far showed that the combined net profit of a total of 1094 companies rose 25.8% to Rs 62,872 crore on 19.7% rise in sales to Rs 5,05,627 crore in Q3 December 2010 over Q3 December 2009.

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%. 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 Tuesday, 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.

The BSE 30-share Sensex was down 68.21 points or 0.37% to 18,327.76, its lowest closing level since 3 September 2010. The index lost 0.88 points at the day's high of 18,395.09 in late trade. The index shed 357.49 points at the day's low of 18,038.48 in morning trade, its lowest level since 1 September 2010.

The S&P CNX Nifty was down 6.25 points or 0.11% at 5,505.90, its lowest closing level since 3 September 2010. The Nifty hit low of 5,416.65 in morning trade, its lowest level since 1 September 2010.

The BSE Mid-Cap index fell 0.44% and the BSE Small-Cap index declined 0.8%. Both these indices underperformed the Sensex.

Sectoral indices on BSE were mixed. The BSE Capital Goods index (up 3.26%), Power index (up 1.31%), Consumer Durables index (up 1.22%), Oil & Gas index (up 1.22%), PSU index (up 0.81%), Healthcare index (up 0.74%), banking sector index Bankex (up 0.64%), Auto index (up 0.6%), and Metal index (up 0.25%), outperformed the Sensex. The BSE IT index (down 1.47%), FMCG index (down 2%) and Realty index (down 2.23%), underperformed the Sensex.

The market breadth, indicating the health of the market, was weak. On BSE, 1720 shares declined while 1187 shares advanced. A total of 101 shares remained unchanged.

Among the 30-member Sensex pack, 17 declined while the rest rose.

BSE clocked turnover of Rs 3546 crore, lower than Rs 3904.41 crore on Friday, 28 January 2011.

Index heavyweight Reliance Industries (RIL) rose 0.52% to Rs 919.25 in volatile trade. The stock hit high of Rs 929 and low of Rs 903.30. The RIL stock had 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.

PSU OMCs fell as crude oil prices surged. BPCL and HPCL declined by between 1.6% to 2.49%. Indian Oil Corporation rose 0.72%, reversing initial losses. US crude for March delivery ended up $3.70, or 4.32% to settle at $89.34 per barrel on the New York Mercantile Exchange on Friday, 28 January 2011. 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.

Oil exploration firms rose as the rise in crude oil prices would result in higher realizations from crude sales. Cairn India and Oil India rose 0.63% and 2.89%, respectively.

India's largest oil & gas exploration firm by sales ONGC rose 3.69% and was the major gainer from the Sensex pack after net profit jumped 131.96% to Rs 7083.23 crore on 38.75% rise in total income to Rs 21473.41 crore in Q3 December 2010 over Q3 December 2009. The result was announced after market hours on Friday, 28 January 2011.

Banking stocks came off the day's lows. India's second largest private sector bank by net profit HDFC Bank declined 0.75% to Rs 2042.85, off the day's lows of Rs 1997. 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.

India's largest private sector bank by net profit ICICI Bank rose 0.29% to Rs 1020, off the day's low of Rs 997.05. India's largest bank by net profit and branch network State Bank of India rose 0.86% to Rs 2641.05, off the day's low of Rs 2570.80.

Some capital goods stocks rose after the parent of Siemens made an open offer to raise its stake in the Indian arm to 75% from current 55.18%. ABB, Crompton Greaves, Thermax and Bhel rose by between 2% to 6.48%.

Siemens surged 17.32% to Rs 853.50 after overseas parent -- Siemens AG, Germany announced an open offer to acquire additional 19.82% stake in the firm at Rs 930 per share. The stock rose on heavy volume of 17.83 lakh shares on BSE.

Index heavyweight Larsen & Toubro rose 2.19% to Rs 1641.15, off the day's low of Rs 1555.

Sun Pharmaceutical Industries declined 1.86% after company's consolidated net profit rose 3.3% to Rs 350.15 crore on 56.83% rise in net sales to Rs 1601.07 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 results during market hours today.

Interest rate sensitive realty stocks declined for the fourth straight day on concerns higher interest and higher property prices may dent demand for residential units. Indiabulls Real Estate, Unitech and HDIL fell by between 0.78% to 5.97%. Realty major DLF rose 0.36%, reversing initial losses ahead of Q3 results today.

IT stocks fell. India's second largest software services exporter Infosys shed 1.8%. 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 2.15%. The stock hit a record high of Rs 1221 on Monday, 24 January 2011. 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 rose 0.18%, reversing initial losses. The stock battered past few days 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.

Some FMCG stocks fell on profit taking. Nestle India, ITC and Hindustan Unilever fell by between 0.48% to 4.83%.

Telecom stocks declined after Telecom Minister Kapil Sibal said on Saturday that the government will delink 2G spectrum that now comes free with telecom licences and price radio airwaves on a market-driven mechanism. Bharti Airtel, Idea Cellular and Reliance Communications fell by between 0.78% to 2.61%.

At present, 2G licences come with 4.4 MHz start-up spectrum, which later goes up to 6.2 MHz. Telecom minister Kapil Sibal had said operators given licences in 2008 would have to pay market rates for start-up spectrum beyond 4.4 MHz. The older operators would have to pay market rates for spectrum beyond 6.2 MHz, he said.

Metal stocks were mixed. Sterlite Industries, Jindal Steel & Power and Hindustan Zinc fell by between 0.07% to 1.8%. Tata Steel, Hindalco Industries, National Aluminum Company and Steel Authority of India gained by between 0.29% to 2.73%.

Diversified firm Jaiprakash Associates shed 4.69%. 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.

Auto shares were mixed. M&M and Tata Motors rose 2.18% and 0.22%, respectively. Hero Honda Motors, and Bajaj Auto declined by between 1.63% to 0.48%.

India's largest carmaker by sales Maruti Suzuki India rose 1.56%, reversing initial losses triggered by weak Q3 results. Net profit declined 17.79% to Rs 565.17 crore on 26.39% rise in total income to Rs 9622.72 crore in Q3 December 2010 over Q3 December 2009. The company announced the results on Saturday, 29 January 2011.

Airline stocks declined as crude oil prices rose on Monday, 31 January 2011, spurred by continued unrest in Egypt, as investors are concerned about possible disruptions to tanker shipments in the Suez Canal. SpiceJet (down 3.18%), Jet Airways (down 4.69%) and Kingfisher Airlines (down 4.71%), edged lower. Jet fuel constitutes more than 50% of operating cost for airliners.

Shree Ashtavinayak Cine Vision clocked highest volume of 3.74 crore shares on BSE. Sanraa Media (2.61 crore shares), Cals Refineries (1.65 crore shares), C Mahendra Exports (72.61 lakh shares) and Unitech (61.36 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 179.43 crore on BSE. Tata Steel (Rs 157.06 crore), Siemens (Rs 152.21 crore), Reliance Industries (Rs 136.19 crore) and C Mahendra Exports (Rs 115.92 crore) were the other turnover toppers in that order.