INDIAN CAPITAL MARKETS/Sensex sheds 2% on weak global equities

Key benchmark indices witnessed sharp losses in a highly volatile trading session as world stocks fell. NSE's futures & options segment clocked record turnover as traders rolled over positions from November 2009 series to December 2009 series ahead of the expiry of the near-month November 2009 contracts today, 26 November 2009. The BSE 30-share Sensex lost 344.02 points or 2%, off 347.58 points from the day's high and up 46.06 points from the day's low. The S&P CNX Nifty fell below the psychological 5,000 mark before regaining that level at the fag end of the trading session. The Sensex fell below the psychological 17,000 level.

World stocks fell as news of Dubai asking for a creditor standstill at Dubai World and Vietnam's currency devaluation, increased investors' aversion to risk.

Selling pressure was conspicuous in banking, IT and oil & gas stocks. Index heavyweight Reliance Industries turned ex-bonus today, 26 November 2009. The company had announced a liberal 1:1 bonus. The market breadth was weak with small and mid-cap stocks under selling pressure.

Intraday volatility was high ahead of the expiry of the near-month derivatives contracts. The market cut losses after an initial slide. However, the intraday recovery proved short-lived. The market weakened in early afternoon trade as Asian stocks fell. The market cut losses after hitting a fresh intraday low in early afternoon trade. The market tumbled in mid-afternoon trade.

As per reports, rollover of Nifty positions was about 64% while market wide rollover stood at 66% at the end of Wednesday's (25 November 2009) trade. In individual stocks, Hindustan Unilever, Cairn India, India Cements, Maruti Suzuki and Power Grid Corporation have witnessed high rollover.

Chinese stocks tumbled on Thursday, led by losses in bank stocks, as investors fled the market amid mounting worries that the government may take steps to clamp down on surging asset prices. Banks fell on concerns about shrinking lending and a possible need to raise funds next year to shore up their capital.

Meanwhile, Dubai's financial health has come under scrutiny after a major, government-owned investment company asked for a six-month delay on repaying its debts. Dubai World, which has total debts of $59bn (£35bn), is asking creditors if it can postpone its forthcoming payments until May next year. Dubai World has also appointed global accountancy group Deloitte to help with its financial restructuring. The company has been hit hard by the global credit crunch and recession. It was due to repay $3.5bn of its debts next month.

The request for a delay in repayments led to major credit ratings agencies downgrading a number of state-backed companies. Following six years of rapid growth, the Dubai economy has slumped since the second half of 2008. The Dubai government said in a statement that the request to delay debt repayments also applied to property developer Nakheel, a Dubai World subsidiary.

The announcement raised concern about the once-booming Gulf region's financial health and added to general nervousness in financial markets about the real state of the world economy at a time when investors are also seeking to lock in 2009 profits.

Meanwhile, Vietnam's stock market tumbled after the nation's central bank devalued the currency by around 5% against the US dollar and raised interest rates by a percentage point to 8% from 1 December 2009.

Closer home, the food price index rose 15.58% and primary article index rose 11.04% in 12 months to 14 November 2009, data released by the government today showed. The fuel price index declined 1.51%.

The worst dry spell in nearly four decades and floods in parts of the country have hurt farm output and pushed up food prices. C. Rangarajan, Chairman of Prime Minister Manmohan Singh's Economic Advisory Council, recently said food price inflation is the biggest worry for the economy in near term and a strong rise in food prices could prompt monetary action. Inflation based on the wholesale price index rose 1.34% in October 2009 from a year earlier

Meanwhile, in a bid to converge Indian accounting norms with International Financial Reporting Standards (IFRS) by 2011, the government on Wednesday said all concerns of the industry would be addressed before convergence takes place. However, the industry fears that there are ambiguous issues which demand more clarity. The Institute of Chartered Accountants of India has still not legally notified the syllabus containing IFRS and the tax implications of the convergence are still not known.

The Reserve Bank of India (RBI) is not in favour of consolidation in the banking industry even as the finance ministry has started laying the ground for fewer and larger public sector banks. RBI deputy governor KC Chakrabarty said on Wednesday consolidation in the sector can wait and the need of the hour is to make available banking services to more Indians. Earlier in the day, RBI governor D Subbarao suggested the need for banks to strengthen their capital base to usher in better risk management.

Meanwhile, the government is likely to postpone a plan to recapitalise state-owned banks to the next financial year, as some key approvals to the process are yet to come. The World Bank had sanctioned a loan of $2 billion to the Indian government to recapitalise 15-16 state-owned banks.

Another set of reports indicated the government plans to move a bill early next year to amend a banking law for allowing foreign investors in private banks to have voting rights in proportion to their shareholdings. Currently, voting rights of foreign investors are capped at 10%.

Trade minister Anand Sharma said on Wednesday that the government has no plan to further liberalise foreign investment in retail sector. India, currently, does not permit foreign direct investment (FDI) in multiple-brand retailers, restricting global firms like Wal-Mart Stores and Carrefour from selling directly to customers in the country. Foreign holding in single-branded retailers is capped at 51%.

There are concerns that a glut in share sales may suck liquidity from the secondary market. A foreign brokerage firm expects Indian firms to raise roughly $70 billion through share sales over the next three years. The brokerage expects stake sales in state-run firms will account for $10-$15 billion of the total funds to be raised. The upcoming auction of third-generation mobile spectrum will also spur potentially billions of dollars in equity raising, although not necessarily from the public markets.

Indian companies have raised about $18 billion in equity thus far this year to repay high cost debt or to fund expansion plans. Last year, Indian firms raised $7.2 billion in equity.

European markets were trading weak today, 26 November 2009, weighed by banking and mining shares. Key benchmark indices in UK, France and Germany were down 1.86% to 2.05%.

Asian markets dropped, led by Japanese exporters as the yen firmed to near 14-year highs against the dollar. Key benchmark indices in China, Hong Kong, Singapore, Japan, South Korea and Taiwan were down by between 0.22% and 3.62%.

Stocks in Hong Kong and China dived weighed by a disappointing market debut of China Minsheng Bank Corp. The bank which raised $3.9 billion in the world's fifth-largest initial public offering of 2009, fell 1% in its Hong Kong trading debut.

Concerns of potential cash calls by the sector on expectations the government may lift capital adequacy ratios or reserve requirements for larger state lenders next year after a lending boom aggravated the slide.

China needs far-reaching structural reforms to root out industrial overcapacity, which is doing untold damage to domestic growth and the global economy, according to a report released on Thursday. Excess capacity is a long-standing scourge in China, but its impact has become ever more destructive as a result of the global financial trauma, said the study by the European Union Chamber of Commerce in China.

US stocks climbed on Wednesday, 25 November 2009 as investors welcomed a bigger-than-expected drop in weekly jobless claims. The Dow Jones Industrial Average gained 30.69 points, or 0.29%, to 10,464.40 and the Standard & Poor's 500 Index rose 4.98 points, or 0.45% to 1,110.63. Both these indices settled at a fresh 13-month high. The Nasdaq Composite index advanced 6.87 points, or 0.32%, to 2,176.05.

In economic data, the new claims for unemployment posted biggest drop last week, falling to 466,000, a 14-month low. New home sales were up 6.2% in October 2009 to an annualized rate of 430,000, at 1-year high. Personal income for October 2009 increased 0.2% and personal spending for October 2009 increased 0.7%.

US financial markets are closed on Thursday, 26 November 2009, for the Thanksgiving holiday.

The British economy shrank in the third quarter, but at a slower pace than initially estimated, the Office for National Statistics said Wednesday. Gross domestic product contracted by 0.3% compared to the previous quarter and fell 5.1% compared to the third quarter of last year.

The BSE 30-share Sensex lost 344.02 points or 2% to 16,854.93. The Sensex opened almost unchanged at 17,199.05. It lost 390.08 points at the day's low of 16,808.87 in mid-afternoon trade. It rose 3.56 points at the day's high of 17,202.51 in early trade

The S&P CNX Nifty was down 102.60 points or 2.01% to 5,005.55. It hit a low of 4,986.05 in intraday trade.

A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex is up 7207.62 points or 74.71% in calendar year 2009, as on 26 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8694.53 points or 106.54% as on 26 November 2009.

Nifty December 2009 futures were at 4,980.55, at a discount of 25 points as compared to the spot closing. Turnover in NSE's futures & options (F&O) segment spurted to Rs 1,37,130.38 crore from Rs 91,235.90 crore on Wednesday, 25 November 2009. This is a record turnover on NSE's F&O segment.

The market breadth, indicating the overall health of the market was weak. The breadth had turned negative in early afternoon trade after a strong start. On BSE, 1910 shares declined as compared with 905 that rose. A total of 72 shares remained unchanged.

The BSE Mid-Cap index fell 1.45% and the BSE Small-cap index fell 0.98%. Both the indices outperformed the Sensex.

All sectoral indices on BSE ended lower. The BSE Oil & Gas index (down 2.30%), the BSE Bankex (down 2.64%), the BSE Realty index (down 2.11%), the BSE Consumer Durables index (down 2.24%), underperformed the Sensex.

The BSE Capital Goods index (down 1.05%), the BSE PSU index (down 1.34%), the BSE FMCG index (down 1.45%), the BSE Healthcare index (down 0.34%), the BSE Teck index (down 1.49%), the BSE Metal index (down 1.83%), the BSE Power index (down 1.29%), the BSE Auto index (down 1.54%), the BSE IT index (down 1.97%) outperformed the Sensex.

The total turnover on BSE amounted to Rs 4487 crore, lower than Rs 4,872.39 crore on Wednesday, 25 November 2009

Among the 30-member Sensex pack, 25 dipped while the rest gained. Reliance Infrastructure (down 3.01%), ITC (down 2.87%), and Jaiprakash Associates (down 2.44%), edged lower from the Sensex pack.

Private sector banking pivotals declined despite reports indicating the government plans to move a bill early next year to amend a banking law for allowing foreign investors in private banks to have voting rights in proportion to their shareholdings. Currently, voting rights of foreign investors are capped at 10%.

India's largest private sector bank by net profit ICICI Bank slumped 4.15% to Rs 861.80 and was the top loser from the Sensex pack. India's second largest private sector bank by net profit HDFC Bank shed 2.44%.

State run banking shares declined on reports the government is likely to postpone a plan to recapitalise state-owned banks to the next financial year, as some key approvals to the process are yet to come.

State Bank of India (down 3.29%), Bank of Baroda (down 3.02%), Punjab National Bank (down 1.94%), Vijaya Bank (down 5.83%), Union Bank of India (down 3.38%), Oriental Bank of Commerce (down 2.75%), and Andhra Bank (down 1.87%), edged lower.

The World Bank had sanctioned a loan of $2 billion to the Indian government to recapitalise 15-16 state-owned banks.

India's largest private sector steel marker by sales Tata Steel plunged 3.95% after it reported a consolidated net loss of Rs 2707 crore in Q2 September 2009 as compared with a net profit of Rs 4772 crore in Q2 September 2008. Net sales dropped 42.82% to Rs 25270 crore in Q2 September 2009 over in Q2 September 2008. The results were announced during market hours today, 26 November 2009.

India's largest aluminum maker by sales Hindalco Industries slipped 1.81%. The company on Tuesday raised about Rs 2900 crore through private placement of shares to qualified buyers to part-finance its expansion projects.

Other metal stocks declined on profit booking. The gauge of six metals traded on the London Metal Exchange, rose 1.67% to 3,178.30 on Wednesday.

JSW Steel (down 2.62%), Steel Authority of India (Sail) (down 1.50%), and Sterlite Industries (down 1.67%), and Sesa Goa (down 1.55%) edged lower.

Hindustan Zinc climbed 3.83%. Recently, a foreign broker rated the stock as 'buy' with a 12-month price estimate of Rs 1,529.

India's top truck maker by sales Tata Motors rose 0.12% to Rs 644.50. The stock gained in volatile trade after swinging in a band of Rs 611-Rs 650.70 for the day. The company will unveil its consolidated results for the quarter ended September 2009 on Friday, 27 November 2009.

However other auto stocks dipped on profit booking. India's largest small car marker by sales Maruti Suzuki India dipped 3.26%. India's top tractor market by sales Mahindra & Mahindra shed 1.39%.

India's largest private sector firm by market capitialisation Reliance Industries (RIL) settled at Rs 1057.70 after the stock went ex-bonus from today, 26 November 2009. The stock oscillated in a band of Rs 1056.60 and Rs 1110 in the day. The stock had closed at Rs 2193.75 on Wednesday, 25 November 2009.

Meanwhile, Sinopec Group, the largest refiner in Asia by capacity, and US private equity investment firm TPG are not considering bidding for a stake in bankrupt Dutch chemical firm LyondellBasell Industries. Indian energy giant RIL has reportedly offered between US$10 billion and US$12 billion last weekend for acquiring LyondellBasell Industries.

India's largest power generation firm NTPC fell 1.56%. As per reports, the government is considering cancelling the power PSU's Rs 2,000-crore contract with a Russian equipment firm Technopromexports (TPE).

Meanwhile, the Bombay High Court, on Wednesday, held that it will frame additional issues for the trial in a dispute for gas supply between state-run NTPC and Reliance Industries (RIL) on 4 December 2009. Justice Anoop Mohta has asked the parties to decide which documents submitted by either of them will be admitted or denied by the other

Shares of state-run oil marketing companies fell after crude oil prices surged on the New York Mercantile Exchange on Wednesday, 25 November 2009. Hindustan Petroleum Corporation (HPCL) (down 1.90%), Indian Oil Corporation (IOC) (down 2.36%) and Bharat Petroleum Corporation (BPCL) (down 1.08%), edged lower.

Rise in crude oil prices will increase under-recoveries of state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price. Light, sweet crude rose $1.94 or 2.55% to $77.96 a barrel on the New York Mercantile Exchange on Wednesday, 25 November 2009 after a US government inventory report showed a lower than expected rise in inventories last week.

India's second largest software exporter Infosys fell 2.61% following reports it is considering acquiring companies in the consulting and health-care industries for as much as $500 million. Other IT pivotals also edged lower on profit booking. India's third largest software exporter Wipro declined 2.54% despite a 2.18% rise in its American depositor receipt (ADR) on Wednesday. India's largest software exporter TCS fell 2.46%.

Mahindra Satyam rose 2.48% to Rs 92.80 on bargain hunting after the company's top official told media that customer attrition has stopped and the firm is not resorting to price cuts to bag new deals. The stock had earlier tanked as much as 8.28% to hit day's low of Rs 83.05

Rate sensitive realty shares declined on worries of higher interest rates. The Reserve Bank of India (RBI) had late last month raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% at a regular monetary policy review.

Indiabulls Real Estate (down 5.15%), Unitech (down 1.72%), Parsvnath Developers (down 2.37%), Anant Raj Industries (down 2.37%), and DLF (down 2.33%), declined.

Cement stocks saw an across the board rally on hopes demand will remain firm from the infrastructure sector. ACC (up 0.43%), India Cement (up 4.26%), Birla Corporation Cement (up 0.99%), and Shree Cement (up 1.84%), rose.

J K Cements surged 2.40%, extending gains for the second consecutive day, after one of the promoter group companies hiked its stake in the firm. The company made this announcement during trading hours on Wednesday, 25 November 2009, when the stock had risen 1.07%

Mahindra Satyam was the top traded counter on BSE with turnover of Rs 271.20 crore followed by Tata Steel (Rs 252.33 crore), Reliance Industries (Rs 121.53 crore), Housing Development & Infrastructure (Rs 121.10 crore), and State Bank of India (Rs 121.05 crore).

Cals Refineries was the volume topper on BSE with volume of 4.05 crore shares followed by Mahindra Satyam (3.01 crore shares), IFCI (1.21 crore shares), Suzlon Energy (90.84 lakh shares), and Unitech (67.40 lakh shares).

Sugar shares declined after spot sugar price dropped on Wednesday on weak demand and hopes supplies will improve after sugar mills in the country's top cane-producing region offered higher prices for cane procurement.

Bajaj Hindusthan (down 2.11%), Balrampur Chini Mills (down 3.11%), Shree Renuka Sugars (down 2.39%), Sakthi Sugar (down 2.44%), and Triveni Engineering & Industries (down 3.26%), declined.

Shipping stocks declined after the Baltic Dry Index (BDI), which measures the changes in dry bulk freight rates across all categories of vessels, declined 2.44% to 4,234 on Wednesday, 25 November 2009.

Great Eastern Shipping (down 3.90%), Mercator Lines (down 6.22%), Varun Shipping (down 2.03%), Essar Shipping (down 2.73%), slipped.

EIH jumped 4.52% on reports cigarette maker ITC is open to raising its stake in the company after media reported that investor Analjit Singh plans to buy another 17% in EIH.

Kwality Dairy (India) gained 1.88% after the company fixed 11 December 2009 as the record date for a 10-for-1 stock split. The company announced the record date during trading hours today, 26 November 2009.

Jet Airways (India) soared 5.77% to Rs 468.30 on reports the company is looking to hire 25-30 Indian pilots for its proposed expansion of operations.