The market today snapped last two days' winning streak as data
showing a surge in inflation to a seven-year high and weak European
markets kept bulls in check. Sensex had gained 360.95 points in
last two trading sessions supported by strong global cues and
robust April 2008 industrial production data announced by the
Indian government during trading hours on 12 June 2008.
After holding in green for a better part of the day, banking
declined in late trade. FMCG, power, realty and metal stocks fell.
Investors took shelter in small-cap and mid-cap stocks causing
sharply rally in some of the stocks in this segment.
A near term trigger for the market will be corporate advance tax
payments for the first installment which falls due on 15 June 2008.
The income tax law requires a company to 15% the estimated tax
liability for the year as advance tax in the first installment. The
advance tax payment by the corporate sector will give a cue on Q1
June 2008 results.
Inflation based on the the wholesale price index rose 8.75% in the
12 months to 31 May 2008, above the previous week's annual rise of
8.24%, government data released today, 13 June 2008, afternoon
showed. The reading is highest since 10 February 2001, when it was
8.77%.
European stocks drifted lower, trimming some of the previous
session's gains as inflation worries remained high on investors'
minds ahead of US consumer price data. Key benchmark indices in
France, Germany and UK were down by between 0.41% to 0.89%.
In a relatively range bound trade, the 30-share BSE Sensex lost
60.58 points or 0.4% at 15,189.62. At the day's low of 15,135.81,
Sensex lost 114.39 points in mid-afternoon trade. At the day's high
of 15,337.10 Sensex gained 86.9 points in early trade.
The broader based S&P CNX Nifty was down 22.25 points or 0.49% at
4,517.10. Nifty June 2008 futures were at 4482.10, at a discount of
35 points as compared to spot closing of 4517.10.
The BSE clocked a turnover of Rs 5,827 crore today as compared to a
turnover of Rs 6,233.42 crore on 12 June 2008.
NSE's futures & options (F&O) segment turnover was Rs 41,003.40
crore, which was lower than Rs 52,333.46 crore on Thursday, 12 June
2008.
The market breadth was positive on BSE with 1,445 shares advancing
as compared to 1156 that declined. 77 remained unchanged. Among the
30 stocks from Sensex pack, 21 were trading in red.
The BSE Mid-Cap index rose 0.08% to 6,228.17 and BSE Small-Cap
index was up 0.74% to 7,581.72. Both these indices outperformed
Sensex.
BSE Consumer Durables index (up 1.74% to 3,981.55), BSE HealthCare
index (up 1.19% at 4,494.02), BSE Bankex (up 0.26% at 7,056.24),
BSE Capital Goods (up 0.25% at 12,019.16), BSE PSU index (up 0.11%
to 6,528.94), BSE TecK index (down 0.18% to 3,381.05), BSE IT index
(down 0.22% to 4,336.06) outperformed Sensex.
The BSE Realty index (down 2.59% at 5,670.23), BSE Metal index
(down 2.08% to 15,185.92), BSE FMCG index (down 1.2% to 2,241.53),
BSE Power index (down 1.08% to 2,627.73), The BSE Auto (down 0.45%
at 4,129.79), BSE Oil & Gas index (down 0.58% to 9,917.01)
underperformed Sensex.
India's largest private sector firm by market capitalisation and
oil refiner Reliance Industries declined 0.59% to Rs 2,268.30.
Healthcare stocks rose. India's biggest drugmaker by sales Ranbaxy
Laboratories rose 4.31% to Rs 566.90. The stock rose on heavy
volume of 22.34 lakh shares on BSE. Drug maker Pfizer Inc may
reportedly make a hostile bid for the 65% stake in Ranbaxy not held
by its founders. Daiichi Sankyo Co., Japan's third-largest drug
maker, had agreed on 11 June 2008 to buy a controlling stake in
Ranbaxy for as much as $4.6 billion.
Pfizer's Indian arm surged 4.76% to Rs 620. Dr Reddy's Laboratories
(up 3.96% to Rs 728.55) and Biocon (up 1.34% to Rs 483.15) edged
higher.
Rate sensitive realty stocks fell after last two days' gains.
Indiabulls Real Estate (down 5.52% to Rs 373.15), DLF (down 3.61%
to Rs 479.75) and Unitech (down 1% to Rs 187.25) edged lower.
Metal stocks declined. Steel Authority of India (down 1.81% to Rs
159.80), Sterlite Industries (down 4.27% to Rs 770.40), Hindalco
Industries (down 1.27% to Rs 175.40) and Tata Steel (down 1.81% to
Rs 841.35) edged lower. However India's second largest aluminium
producer by sales National Aluminium Company rose 1.89% to Rs
489.40.
Power stocks edged lower. Tata Power Company (down 4.87% to Rs
1,252.45), Reliance Infrastructure (down 2.5% to Rs 1,020.30), NTPC
(down 1.23% to Rs 161.10) edged lower.
FMCG stocks declined. Hindustan Unilever (down 2.54% to Rs 226.55),
ITC (down 1.25% to Rs 197.45) and Nestle India (down 1.12% to Rs
1,700) edged lower.
Bank stocks declined after data released today afternoon showed a
surge in inflation to highest level in more than seven years.
India's largest commercial bank State Bank of India declined 0.38%
to Rs 1,334.55. The asset-liability committee of State Bank of
India (SBI), will be reviewing interest rates today following the
latest RBI move to raise repo rate.
The Reserve Bank of India on Wednesday, 11 June 2008, hiked repo
rate by 25 basis points to 8% with immediate effect in an effort to
contain rising inflation.
India's second largest private sector bank by net profit HDFC Bank
declined 3.45% to Rs 1,123.35. India's largest private sector bank
by net profit ICICI Bank rose 3.03% to Rs 764.80.
India's largest dedicated housing finance firm by operating income
HDFC declined 1.78% to Rs 2,133.30. HDFC chairman Deepak Parekh
said on Thursday, 12 June 2008, HDFC will take a decision on
raising interest rates on home loans by end of this month. He said
there was upward pressure on interest rates.
Tata Consultancy Services (up 2.16% to Rs 907.65), Tata Motors (up
1.74% to Rs 516.20), ONGC (up 1.21% to Rs 841.25), Bharat Heavy
Electricals (up 2.79% to Rs 1,561.10), and ACC (up 0.31% to Rs
634.10), edged higher from Sensex pack.
Jaiprakash Associates (down 4.03% to Rs 178.70), Cipla (down 2.63%
to Rs 211.30), Maruti Suzuki India (down 1.97% to Rs 721.85),
Grasim Industries (down 1.27% to Rs 2,182.30), ITC (down 1.25% to
Rs 197.45) edged lower from Sensex pack.
India's third largest IT exporter by sales Wipro declined 1.09% to
Rs 477.85. It is reportedly bidding for 12 contracts worth at least
$100 million each as it seeks bigger clients.
India' largest engineering and construction firm by sales Larsen &
Toubro was up 0.25% to Rs 2,710.15. Due to unfavourable market
condition, L&T has reportedly decided to delay the listing of its
software business unit L&T Infotech to 2009-10. The firm had
earlier decided to go for L&T Infotech's initial public offer in
the second half of this fiscal.
Chambal Fertiliser and Chemicals clocked the highest volume of 2.8
crore shares on BSE. Nagarjuna Fertiliser and Chemicals (1.78 crore
shares), Reliance Petroleum (1.37 crore shares), Reliance Natural
Resources (1.29 crore shares) and IFCI (1.26 crore shares) were
other volume toppers in that order.
Reliance Capital clocked the highest turnover of Rs 269.58 crore on
BSE. Anu's Laboratories (Rs 261.64 crore), Chambal Fertiliser and
Chemicals (Rs 248.3 crore), Reliance Petroleum (Rs 246.7 crore) and
Reliance Industries (Rs 220.7 crore) were the other turnover
toppers in that order.
Asian markets were trading mixed. Key benchmark indices in Hong
Kong, China, South Korea, were down by between 0.99% to 3%. Key
benchmark indices in Japan, Singapore and Taiwan were up by between
0.46% to 0.54%.
US stocks rose on Thursday after a stronger-than-expected May 2008
retail sales report and a $46 billion takeover bid for
Anheuser-Busch from an overseas rival helped the market recover
from a string of deep losses. The Dow Jones Industrial Average
gained 57.81 points or 0.48% at 12,141.58. The tech-laden Nasdaq
Composite Index gained 10.34 points or 0.43% at 2,404.35.
Oil was trading below $137 a barrel, near record highs of $139.12
hit last Friday, 6 June 2008.
Short covering by traders following improved industrial production
data for April 2008 triggered a strong intra-day rebound on the
bourses yesterday, 12 June 2008. The barometer index BSE Sensex
gained 64.88 points or 0.43% to settle at 15,250.20, bouncing back
from an intra-day 437.33-points fall.
The market's concerns are that higher interest rates will raise
borrowing costs and hit bottom line of corporates. Banks are likely
to raise interest following a strong signal from the Reserve Bank
of India (RBI) that banks' cost of funds is headed north when the
central bank raised repo rate, a short term rate, by 25 basis
points on Wednesday, 11 June 2008. The repo rate is the rate at
which RBI lends money to banks under its liquidity adjustment
facility.
The stock market's another concern is that high interest rates may
delay expansion plans of corporates which in turn may impact future
earnings growth. A latest research report released by Lehman
Brothers pointed out that the cost of borrowing is likely to
increase further. According to Lehman inflation is unlikely to
tread below 8% in 2008. Lehman expects another 25 basis points hike
in repo rate in third quarter and a 100 basis points hike in banks'
cash reserve ratio (CRR) later this year.
A surge in global commodity prices led by crude oil spooked stocks
across the globe in the past few days. In India, foreign funds have
pressed heavy sales. FIIs sold shares worth a net Rs 5321.50 crore
in the first few days of this month, till 11 June 2008. They had
dumped stocks worth a net Rs 5011.50 crore in May 2008. Their
outflow in calendar 2008 reached Rs 20690.90 crore, till 11 June
2008. There has been heavy buying by domestic funds led by
insurance firms in the past few days, but that has failed to stop
the slide on the bourses.
India's economic growth has slowed down as fall in consumer demand
caused by rise in interest rates. Industrial output rose 8.1% in
2007/08 (April-March) compared with 11.6% growth in 2006/07.
According to a report on the Indian economy made at the beginning
of this month by Morgan Stanley, weak consumption growth and
slowing business investment will slow India's gross domestic growth
(GDP) growth to 6.7% in the quarter ending March 2009 from 8.8%
growth in the quarter ended March 2008. It, however, states that,
on a long-term basis, an interplay of three key macro factors viz.
favourable demographics, continuation of economic reform process by
the government, and globalization, justify a gradual speeding up in
India's pace of growth.
According to a recent monthly June 2008 strategy report by HSBC
Global Research, a possibility of Left parties withdrawing support
to the government at the centre over the fuel price hike issue,
cannot be ruled out. In such an environment with prospects of
mid-term polls, the stock market is likely to remain nervous, HSBC
says. Parliamentary elections are due in India in May 2009. The
Union government on Wednesday, 4 June 2008, raised retail petrol
and diesel prices by about 10%, more than expected, to help curb
losses at its state-owned refiners arising from surging global
crude oil prices.
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