ET: Market trims losses after hitting a fresh intraday low
Moody's downgrade of Portugal's bond rating pushed the key benchmark indices to fresh intraday lows in early afternoon trade. But, the market soon cut losses. IT stocks fell as Infosys officials warned that the global economic environment continues to be uncertain, even though the company raised its full-year revenue and profit forecasts at the time of announcing Q1 June 2010 results today. FMCG stocks also fell.
The BSE 30-share Sensex was down 45.04 points or 0.25%, off close to 52.5 points from the day's high and up close to 36.31 points from the day's low. The Mid-cap and Small-cap indices on BSE gained, outperforming the Sensex. Eight out 13 sectoral indices on BSE were in green.
A bout of volatility was witnessed at the onset of the trading session as the key benchmark indices slipped into the red after recovering from an initial slide. The Sensex recovered from lower level in morning trade after hitting a fresh intraday low. The market moved in a narrow range in mid-morning trade. The market hit a fresh intraday lows in early afternoon trade led by decline in IT stocks. The market recovered from lower level in afternoon trade after hitting a fresh intraady low.
European shares edged up in early trade, extending a rally into a sixth session, after Alcoa got the second-quarter US earnings season off to a strong start. The key indices in UK, France and Germany were up by 0.31% to 0.59%
Moody's Investor Service on Tuesday downgraded Portugal's bond ratings two notches to A1 from Aa2, with the ratings outlook stable. Moody's said the Portugal government's financial strength will continue to weaken over the medium term, as evidenced by ongoing deterioration in the country's debt metrics. Moody's had placed Portugal's bond ratings on review for possible downgrade on 5 May 2010.
Asian markets declined on Tuesday, 13 July 2010, as a tumble in Chinese stocks tempered optimism from US aluminum maker Alcoa's earnings. The key benchmark indices in Indonesia, Singapore, Japan, Hong Kong and Taiwan fell by between 0.08% to 0.55%. South Korea's Seoul Composite rose 0.06%. China's Shanghai Composite fell 1.62% after the Chinese government quashed speculation it will abandon real-estate curbs that drove property prices to snap 15 months of gains.
The Chinese government denied an unsourced report in the state-run Securities Times Monday that China had loosened some controls on mortgage lending in first-tier cities. In response to the newspaper report, China's Ministry of Housing and Urban-Rural Development late Monday said it would strictly carry out differentiated mortgage policies to support reasonable housing consumption in households, while also resolutely curbing investment and speculative types of property purchases.
Trading in US index futures indicated that the Dow could decline 6 points at the opening bell on Tuesday, 13 July 2010.
Caution prevailed in the US stock market on Monday, 12 July 2010, with indexes edging higher as investors reserved their bets ahead of the onset of the earnings season. The Dow Jones Industrial Average added 18.24 points, or 0.18% to end at 10,216.27. The Standard & Poor's 500 Index edged up just 0.79 of a point, or 0.07% to 1,078.75. The Nasdaq Composite Index gained 1.91 points, or 0.09% to close at 2,198.36. Dow component Alcoa Inc reported its second-quarter results after the closing bell. The aluminum producer reported a second-quarter profit as sales rose 22%.
Back home, the revived monsoon rains in India accelerated the planting of rice, oilseeds and cotton last week. The area under rice cultivation jumped 56% to 7.2 million hectares on 9 July 2010 while cotton planting rose by half, during the week, compared with the previous week, as monsoon rains were 2% above normal, ending a two-week dry spell since 18 June 2010. Rainfall was 16% below average in June 2010. The shortfall narrowed to 10% last week.
While total rainfall since 1 June 2010 is now 13% below normal, key crop areas such as rice-growing Punjab and Haryana and soybean-growing Madhya Pradesh have received adequate rains.
The weather office in its daily update on Monday, 12 July 2010, said the southwest monsoon was vigorous over Chhattisgarh and was active over Gangetic West Bengal, Orissa, Bihar, Uttar Pradesh, Punjab, East Madhya Pradesh, Vidarbha and Telangana during past 24 hours. Widespread rain/thundershowers would occur over Sub-Himalayan West Bengal & Sikkim, Bihar and East Uttar Pradesh during next 48 hours and decrease thereafter, the India Meterological Department (IMD) said. Fairly widespread rain/thundershowers would occur over northeastern states, Lakshadweep, West Coast, it said.
The IMD added that fairly widespread rain/thundershowers would occur over Gangetic West Bengal, Jharkhand, Chhattisgarh, east Madhya Pradesh, Vidarbha, North Andhra Pradesh, Jammu & Kashmir, Himachal Pradesh, West Uttar Pradesh, Uttarakhand, Punjab, Haryana, Chandigarh and Delhi during next 48 hours and decrease thereafter. Scattered rain/thundershowers would occur over Madhya Maharashtra, Marathwada, West Madhya Pradesh, Gujarat, Rayalaseema, interior Karnataka, Orissa, and Tamilnadu, the IMD said.
IMD expects fairly widespread to widespread rainfall with isolated heavy to very heavy falls over Sub-Himalayan West Bengal & Sikkim, northeastern states and west coast, this week.
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. The weather office expects this year's monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
Industrial output in May 2010 rose at a slower-than-expected 11.5% from a year earlier, data showed on Monday, 12 July 2010. Manufacturing output rose an annual 12.3%, the statistics office said. Mining output was up 8.7% and power generation rose 6.4%. Production of capital goods rose 34.3% year-on-year after an annual rise of 72.8% in April 2010, while consumer durables output grew 23.7%, down from a 37% rise in the previous month
April's industrial production growth was revised downwards to 16.5% from 17.6%.
The International Monetary Fund (IMF) on Thursday, 8 July 2010 raised its world output forecast for 2010, citing solid growth in the first half, especially in Asia, but warned of significant downside risks flowing from Europe. The IMF revised its 2010 world gross domestic product forecast to 4.6%, up from a previous forecast in April of 4.2%. The 2011 GDP forecast was unchanged at 4.3%.
The IMF raised India's growth forecast for 2010 to 9.5%, stating that favourable financing conditions and robust corporate profits will accelerate economic expansion. The IMF expects India's economy to grow 8.5% in 2011.
The Reserve Bank of India (RBI) on 2 July 2010, hiked the repo rate by 25 basis points to 5.5% from 5.25%, with immediate effect. It also hiked the reverse repo rate, at which it absorbs excess cash from the banking system, by an equal 25 basis points to 4% from 3.75%. The central bank said the latest rate hike is a part of the calibrated exit from the expansionary monetary policy.
Two-thirds of WPI inflation in May 2010 was contributed by non-food items, suggesting that inflation is now very much generalised and that demand-side pressures are evident, the central bank said in a statement. WPI inflation increased to 10.2% in May 2010, up from 9.6% in April 2010.
In its April 2010 policy review, the Reserve Bank projected real GDP growth for 2010-11 at 8% with an upside bias. More recent data suggest that the upside bias has largely materialized, the central bank on 2 July 2010. The growth projection will be reviewed in the first quarter review on 27 July 2010, RBI said.
Meanwhile, the government will announce the inflation data for the month of June 2010 on Wednesday, 14 July 2010.
At 13:17 IST, the BSE 30-share Sensex was down 45.04 points or 0.25% at 17,892.16. The index fell 81.35 points at the day's low of 17,855.85 in early afternoon trade. The Sensex rose 7.46 points at the day's high of 17,944.46 in early trade.
The S&P CNX Nifty was down 10.55 points or 0.20% at 5,372.45.
The BSE Mid-Cap index rose 0.34%. The BSE Small-Cap index rose 0.40%. Both these indices outperformed the Sensex.
The market breadth, indicating the strength of the broader market, was positive. On BSE, 1,480 shares advanced while 1,287 shares declined. A total of 104 shares remained unchanged. The breadth was much stronger earlier in the day.
From the 30 share Sensex pack, 15 stocks fell and rest rose.
HDFC (up 1.85%), DLF (up 1.32%), Jaiprakash Associates (up 0.86%), State Bank of India (up 0.80%), Tata Motors (up 0.73%) and Bharat Heavy Electricals (up 0.57%), were the top Sensex gainers.
Index heavyweight Reliance Industries (RIL) rose 0.80%. 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. RIL also recently announced its seventh oil discovery in Cambay basin in Gujarat.
Infosys was down 3.45% and was the top loser form the Sensex pack. The Infosys stock had hit a record high of Rs 2,911.55 on Monday, 12 July 2010, ahead of the first quarter results. The IT bellwether has revised upwards its earnings and revenue guidance in both rupee and dollar terms for the year ending March 2011 (FY 2011).
Infosys' consolidated net profit as per International Financial Reporting Standards (IRFS) declined 7% to Rs 1488 crore on 4.3% increase in revenue to Rs 6198 crore in Q1 June 2010 over Q4 March 2010. Operating profit declined 1.9% to Rs 1755 crore in Q1 June 2010 over Q4 March 2010. The operating profit margin (OPM) declined to 28.31% in Q1 June 2010 from 30.09% in Q4 March 2010. During the quarter, the company and its subsidiaries hired as many as 8,859 employees in total, but the net addition to its headcount was just 1,026.
Infosys now expects a between 6.1% to 10.5% growth in earnings per American depository share (ADS) at between $2.42 to $2.52 for the year ended March 2011 (FY 2011) over the year ended March 2010 (FY 2010). At the time of announcing Q4 March 2010 results in April this year, the IT bellwether had forecast a between 5.3% to 9.6% growth in earnings per American depository share (ADS) in FY 2011 over FY 2010.
Infosys now expects a between 3.7% to7.9% growth in EPS in rupee terms at between Rs 112.21 to Rs 116.73 for FY 2011. At the time of announcing Q4 March 2010 results in April this year, the IT bellwether had forecast a 1.2% decline to a growth of 2.9% EPS at between Rs 106.82 to Rs 111.28 for FY 2011.
As far as the top line is concerned, Infosys now expects a 19% to 21% growth on consolidated revenue in dollar terms at between $5.72 billion to $ 5.81 billion for FY 2011. At the time of announcing Q4 March 2010 results in early April 2010, Infosys had projected a between 16% to 18% growth in consolidated revenue in dollar terms at between $5.57 billion to $5.67 billion for FY 2011.
Infosys now expects 16.3% to 18.2% growth in revenue in rupee terms at between Rs 26441 crore to Rs. 26885 crore for FY 2011. At the time of announcing Q4 March 2010 results in early April 2010, Infosys had projected a between 9% to 11% growth in consolidated revenue at between Rs 24796 crore to 25239 crore for FY 2011.
The upward revision in guidance in earnings and revenue in rupee terms appears to be mainly due to weakness in the rupee when compared to the previous guidance. The previous guidance was based rupee dollar exchange rate at 44.50 whereas the current guidance is based on rupee dollar exchange rate of 46.45.
TCS (down 2.44%), Bharti Airtel (down 2.34%), Wipro (down 1.95%), Mahindra & Mahindra (down 1.31%), Reliance Communications (down 1.15%), ITC (down 1.12%) and Hindustan Unilever (down 1.07%), were the top Sensex losers.
Top gainers in the BSE's 'A' group were, Max India (up 5.54%), Educomp Solutions (up 4.61%), Suzlon Energy (up 3.99%), Jet Airways India (up 3.58%), Bank of India (up 3.39%) and Everest Kanto Cylinders (up 3.12%).
FCS Software reported a highest volume of 1.48 crore shares on BSE. Cals Refineries (96.32 lakh shares), Suzlon Energy (68.10 lakh shares), LML (44.63 lakh shares) and BAMPSL Securities (26.69 lakh shares), were the other volume toppers on BSE.
