Market Commentary - Mid-Session

The key benchmark indices trimmed losses in mid-morning trade after hitting fresh intraday lows in morning trade. The BSE 30-share Sensex was down 179.48 points or 1.01%, up close to 50 points from the day's low. Weak Asian stocks weighed on investor sentiment. Asian stocks fell after the latest data showed Chinese manufacturing growth slowed in the month just gone by. Auto and capital goods stocks fell. The market breadth was marginally negative. All the sectoral indices on BSE were in red. Index heavyweight Reliance Industries remained weak.
The market opened on a weak note, tracking lower Asian stocks. The market extended losses in morning trade. The Sensex trimmed losses in mid-morning trade.
On the macro front, a survey showed manufacturing growth cooled in June 2010 after a surge in activity the prior month, mainly due to slowing production and rapidly easing input price pressures. The HSBC Markit Purchasing Manager's Index, based on a survey of 500 Indian companies, slipped to 57.3 in June from 59.0 in May, which was the highest in more than two years. Despite an increase in workloads and outstanding business, manufacturers did not add new jobs to their payrolls in June, leaving the employment index stagnating.
The government will unveil data on some wholesale price indices for the year through 19 June 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.
Asian stocks fell on Thursday after Chinese manufacturing growth slowed and Moody's Investors Service placed Spain's credit rating on review for a possible downgrade, fueling concern over the strength of the global economy. The key benchmark indices in China, Taiwan, South Korea, Japan, Singapore and Indonesia and fell by between 0.21% to 1.88%. Hong Kong markets were closed for a holiday.
One of China's two key manufacturing surveys fell in June, coming in below economists' forecasts, according to data released Thursday. The China Federation of Logistics & Purchasing said its purchasing managers' index fell to 52.1 in June, from 53.9 in May.
The Bank of Japan's quarterly tankan survey of business sentiment released Thursday showed that the diffusion index for large manufacturers improved more than expected to a positive reading of 1.
The HSBC South Korea PMI fell to 53.3 for June from 54.6 in May, indicating the weakest pace of expansion since December 2009. HSBC's Taiwan Manufacturing PMI fell for the third successive month to 53.8 in June, from 57.4 a month earlier.
Trading in US index futures indicated that the Dow could fall 26 points at the opening bell on Thursday, 1 July 2010.
US stocks staggered to the end of a dismal second quarter on Wednesday in another low volume session as investors found little reason to take on risk after conflicting economic data. The Dow Jones Industrial Average dropped 96.28 points, or 0.98% to 9,774.02. The Standard & Poor's 500 Index slid 10.53 points, or 1.01% to 1,030.71. The Nasdaq Composite Index fell 25.94 points, or 1.21% to 2,109.24.
The latest data showed Midwest business activity grew slightly more than expected in June, but a private-sector report showed employment grew by only a paltry amount, adding to concerns about the health of the economy ahead of non-farm payrolls numbers on Friday.
Meanwhile, the US House of Representatives on Wednesday approved a landmark overhaul of financial regulations but the Senate put off action until mid-July, delaying a final victory for President Barack Obama. Still, the 237 to 192 vote in the House marked a win for Obama and his fellow Democrats, who have made the most sweeping rewrite of Wall Street rules since the 1930s a top priority in the wake of the 2007-2009 financial crisis. The bill would impose tighter regulations on financial firms and reduce their profits. It would boost consumer protections, force banks to reduce risky trading and investing activities and set up a new government process for liquidating troubled financial firms.
European banks borrowed less than expected from the European Central Bank in a key funding operation on Wednesday, easing fears about how they would cope with repaying close to half a trillion euros in emergency loans on Thursday.
Back home, the vital monsoon rains were 16% below normal in June 2010. The India Meteorological Department (IMD) said adverse local weather conditions had weakened the monsoon winds that reached the country's southern coast on schedule but have not advanced beyond eastern and central India since 18 June 2010
The poor start of monsoon rains has slowed down planting of soybeans in central India, reports suggest. Farmers in the grainbowl states of Punjab and Haryana may delay rice planting if rains do not revive quickly, reports suggest.
The south west monsoon 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. The south-west monsoon usually covers the entire country by mid-July. Last week, the weather office said the rains were expected to be better than previously forecast. Monsoon rains are expected to be at 102% of the long-period average for the current monsoon season. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
Food inflation accelerated in mid-June 2010, maintaining pressure on the Reserve Bank of India to tighten monetary policy at a faster pace. The food price index rose 16.90% in the year to 12 June 2010, higher than the previous week's annual reading of 16.12%, data released by the government on Thursday 24 June 2010 showed. The fuel price index remained unchanged at 13.18% in the year to 12 June 2010.
The government's latest decision to raise fuel prices will stoke inflation, maintaining pressure on the Reserve Bank of India to tighten monetary policy. The government on Friday, 25 June 2010, raised petrol price by Rs 3.50 a litre, diesel price by Rs 2 litre, kerosene by Rs 3 litre and LPG by Rs 35 per cylinder.
The government has decided to decontrol petrol prices. The government will also eventually decontrol diesel prices, Oil Secretary S. Sundareshan said on 25 June 2010. The government will, however, continue to subsidize kerosene and LPG.
The consumer price index (CPI) rose 13.91% in May from a year earlier, marginally higher than April's annual rise of 13.33%, government data showed on Wednesday.
The fiscal deficit from April to May was Rs 101000 crore ($21.7 billion), or 26.5% of the full-year target, the government said in a statement on Wednesday. In February 2010, the government had forecast a fiscal deficit of Rs 381000 crore or 5.5% of gross domestic product, for the current financial year.
Infrastructure sector output grew 5% in May from a year earlier, lower than an upwardly revised annual growth of 5.4% in April, government data showed on Monday. The infrastructure sector accounts for 26.7% of the industrial output.
On the corporate front, most Indian firms, including Reliance Industries, L&T, Tata Steel and Tata Motors, have paid higher advance tax in Q1 June 2010 over Q1 June 2009. Higher advance tax payment normally indicates higher profits for the period under review. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year.
Coming back to stocks, foreign funds bought shares worth a net Rs 7713.97 crore in June 2010, as per data from the stock exchanges. Domestic funds offloaded shares worth a net Rs 4777.05 crore in June 2010
At 11:20 IST, the BSE 30-share Sensex was down 179.48 points or 1.01% at 17,521.44. The Sensex fell 21.56 points at the day's high of 17,679.34 in early trade. The Sensex lost 230.59 points at the day's low of 17,470.31 in morning trade.
The S&P CNX Nifty was down 59.40 points or 1.12% to 5,253.10.
The BSE Mid-Cap index was down 0.15%. The BSE Small-Cap index was up 0.28%. Both these indices outperformed the Sensex.
The market breadth, indicating the strength of the broader market, was marginally negative. On BSE, 1,256 shares declined while 1214 shares advanced. A total of 106 shares remained unchanged.
From the 30 share Sensex pack, 28 stocks fell and 2 rose.
India's largest FMCG maker by sales Hindustan Unilever rose 0.66%, on defensive buying in a weak market.
Index heavyweight Reliance Industries (RIL) fell 1.14%. The stock had risen nearly 2% on Wednesday on reports the Mukesh Ambani group is close to signing an equal joint venture agreement with global private equity and hedge fund company, DE Shaw, to enter the financial services sector.
RIL announced early this week that it made seventh oil discovery in Cambay basin in Gujarat. RIL and Reliance Natural Resources (RNRL) on 25 June 2010, entered into a new gas supply agreement, as directed by the Supreme Court. The Supreme Court had ordered the two companies to renegotiate the Gas Supply Master Agreement, which was signed between the Ambani brothers as part of the business demerger in 2005.
Copper maker Sterlite Industries fell 3.21% and was the top loser from the Sensex pack.
Auto stocks fell on rate hike worries. Bajaj Auto, Ashok Leyland, Mahindra & Mahindra, Hero Honda Motors fell by between 0.22% to 1.94%.
India's largest car maker by sales Maruti Suzuki India fell 1.83%. The company announced during market hours today that its total vehicle sales rose 17.3% to 88,091 vehicles in June 2010 over June 2009.
India's largest commercial vehicle maker by sales Tata Motors fell 1.23%, extending recent losses on equity dilution concerns after the company announced after market hours on Monday that it plans to raise about Rs 4700 crore ($1.02 billion) through a combination of shares, bonds, debentures and other equity-linked instruments to cut debt and grow its business.
TVS Motor Company rose 1.84% after the company's two-wheeler sales jumped 36% to 1,56,685 units in June 2010 over June 2009.
Index heavyweight Larsen & Toubro fell 0.81%. The company announced during market hours on Wednesday that it has bagged orders worth Rs 1383 crore.
Among other capital goods stocks, Bharat Heavy Electricals, ABB, SKF India, BEML, Punj Lloyd and Thermax fell by between 0.19% to 1.76%.
Fortis Healthcare rose 1.58% after falling as much as 3.4% after the company along with its founders made a general offer buy shares in Singapore hospital operator Parkway Holdings for Singapore dollar 3.2 billion.
Redington India slumped 4.76% after a block deal of 1.04 crore shares, or 13.1% equity, was struck at Rs 355 on BSE in early trade.
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