Key benchmark indices extended losses to hit fresh intraday lows in mid-morning trade as data showing sustained selling by foreign funds this month weighed on sentiment. A standoff between the government and anti-corruption activist Anna Hazare over the Lokpal Bill also weighed on the market. The market breadth was weak. The BSE Sensex was down 85.94 points or 0.53%, off close to 175 points from the day's high and up close to 5 points from the day's low. Index heavyweight Reliance Industries (RIL) edged lower.
Bank stocks extended recent steep losses triggered by concerns that elevated interest rates may restrict loan growth, with Axis Bank, Bank of Baroda, and State Bank of India (SBI) hitting 52 week lows. Metal stocks declined on worries the global economic slowdown may crimp demand. Steel giant Tata Steel hit 52 week low.
Foreign institutional investors (FIIs) have pressed heavy sales this month amid the ongoing credit crisis in the euro zone. The sustained selling by foreign funds is a cause for concern for India Inc. Foreign portfolio inflow acts as a catalyst to private corporate capital expenditure in India. FIIs sold shares worth a net Rs. 883.48 crore on Wednesday, 24 August 2011, as per provisional data from the stock exchanges. FIIs have sold shares worth Rs. 10726.63 crore this month, till 24 August 2011, as per data from the stock exchanges. There was a massive outflow of Rs. 5279.30 crore in just three trading sessions between 5 August 2011 and 9 August 2011.
FIIs have sold shares worth a net Rs. 15765.87 crore in calendar year 2011 so far, as per data from the stock exchanges. Domestic institutional investors have bought shares worth a net Rs. 22039.35 crore this year so far.
The Reserve Bank of India (RBI) said at first quarter 2011-2012 policy review late last month that that the uncertain global macro-economic environment poses a challenge for the Indian economy from the perspective of financing the current account deficit. In this context, the composition of capital flows remains a concern. In recent months, some shift in composition of capital flows towards foreign direct investment (FDI) has been observed, RBI said. This trend needs to be reinforced through policy actions to improve the quality of financing of the current account deficit, RBI said.
The market pared gains soon after a firm opening triggered by a rally in Asian shares. The market swung between gains and losses in morning trade. The market extended losses to hit fresh intraday low in mid-morning trade. Asian stocks rallied on Thursday, 25 August 2011, as strong US manufacturing data and several robust earnings reports boosted investor sentiment.
Intraday volatility may remain high today, 25 August 2011, as traders roll over positions in the derivatives segment from the near-month August 2011 series to September 2011 series. The August 2011 derivatives contracts expire today, 25 August 2011.
At 11:20 IST, the BSE Sensex was down 85.94 points or 0.53% to 16,199.04. The Sensex gained 88.86 points at the day's high of 16,373.84 in early trade. The index fell 91.89 points at the day's low of 16,193.09 in mid-morning trade, its lowest level since 22 August 2011.
The S&P CNX Nifty was down 32.30 points or 0.66% to 4,856.60. The Nifty hit a low of 4,851 in intraday trade, its lowest level since 22 August 2011. The Nifty hit a high of 4,915.85 so far during the day.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,340 shares fell and 794 shares rose. A total of 107 shares remained unchanged.
Among the 30-share Sensex pack, 20 fell while the rest rose. Sun Pharmaceutical Industries, Tata Motors and Bajaj Auto rose by between 1.99% to 2.45%. TCS, Jaiprakash Associates and HDFC fell by between 1.16% to 2.17%.
Index heavyweight Reliance Industries (RIL) shed 0.32% to Rs. 758.50. The stock had hit 52-week low of Rs. 721.60 in intraday trade on Friday, 19 August 2011. RIL has received the government's formal approval to sell a 30% stake in 21 oil and gas production sharing contracts to BP PLC. Following the approval, Reliance and BP will work together to conclude the deal expeditiously, RIL said in a statement recently.
The initial proposal was for RIL to sell the stake in 23 blocks to BP for $7.2 billion plus another $1.8 billion linked to exploration success. However, the government cleared only 21 blocks and RIL had said it would continue to seek approval for the remaining two blocks.
Larsen & Toubro fell 0.71%. The company said during market hours today that it has bagged yet another order of Rs. 797 crore in the building and factories segment in Q2 September 2011. During market hours on Wednesday, 24 August 2011, the company had said it has bagged new orders worth Rs. 1340 crore in the building and factories segment in Q2 September 2011.
Bank stocks extended recent steep losses triggered by concerns that elevated interest rates may restrict loan growth. India's largest bank by branch network and net profit State Bank of India (SBI) dropped 1.16% to Rs. 1969 after sliding to a 52-week low of Rs. 1966.15. SBI Chairman Pratip Chaudhuri on Tuesday, 23 August 2011, said the bank expects to launch a rights issue in the second half of this financial year. He said the government is considering infusing additional capital into the lender. SBI is looking to bolster its capital base to keep up with its fast-growing loan portfolio and expects the government to invest Rs. 5000 crore-Rs 9000 crore in the rights issue. Chaudhuri said the bank is well-capitalized for loan growth of 16%-19% in the current fiscal year ending March 2012.
SBI's plan to raise about Rs. 20000 crore in fresh capital was submitted to the Indian government--its biggest stakeholder--in 2010, but it is yet to receive a decision.
India's largest private sector bank by net profit ICICI Bank fell 1.35% to Rs. 830.45. India's second largest private sector bank by net profit HDFC Bank was flat.
Axis Bank shed 2.58% to Rs. 1022. The stock hit 52 week low of Rs. 1021.95 today. Bank of Baroda dropped 1.84% to Rs. 711.90. The stock hit 52 week low of Rs. 708.70 today.
Rating agency Fitch Ratings on Tuesday, 23 August 2011, that Indian banks are better prepared to face asset quality challenges arising from the economic slowdown compared to 2008. In a study, Fitch said that banks have higher tier-1 capital and improved loan-loss reserves at the end of June 2011 against 2008. The government's injection of capital in state-owned banks in 2010 has helped most banks raise core tier-1 capital ratio above 8%. The report said that though banks' operating margins are likely to decline in the year ending March 2012 (FY 2012), the margins are likely to remain sufficiently robust to absorb credit costs for most banks.
MphasiS fell 5.41% after consolidated net profit declined 10.36% to Rs. 194.80 crore on 2.9% increase in revenue of Rs. 1294 crore in Q3 July 2011 over Q2 April 2011.
Metal stocks declined on worries the global economic slowdown may crimp demand. JSW Steel, Hindalco Industries, Hindustan Zinc, Jindal Steel & Power, Jindal Saw, Sterlite Industries, Sail, Welspun Corp, Nalco and Bhushan Steel fell 0.01% to 2.85%.
India's largest steel maker by sales Tata Steel declined 2.66% to Rs. 443.30 on concerns euro-zone debt worries will impact its European operations adversely. The stock hit 52 week low of Rs. 442.60 today, 25 August 2011. Tata Steel derives substantial revenue from Europe.
Clutch Auto was locked at upper limit of 5% at Rs. 38.10 after the company's board approved allotting 8.27 lakh equity shares at Rs. 50 each to a promoter on conversion of share warrants.
Indian firms relying on European and US markets are worried about a likely economic slowdown in the US and Europe. Bilateral trade between India and the US stood at $36.5 billion in 2010.
Commerce Minister Anand Sharma, last week, said India's discussions with the European Union (EU) and Canada to form free-trade agreements are in advance stages. India aims to boost bilateral trade with Canada to C$15 billion (US$15.3 billion) a year by 2015 from about C$4.2 billion in 2010. With the 27-member EU, India had initiated discussions on the free-trade pact in 2007. The two sides originally hoped to conclude a wide-ranging deal by 2010 to boost trade to $237 billion annually by 2015. Their bilateral trade is currently worth about $92 billion.
The Indian government will unveil data on some wholesale price indices viz. the food price index, the primary articles index and the fuel price index for the year through 13 August 2011 today, 25 August 2011.
Prime Minister Manmohan Singh, last week, said the government is aiming for 9% annual growth over a five-year period beginning 1 April 2012. It will be prudent to have a growth target, which would ensure achievement of the objective of sustained inclusive growth at a level which will also take into account the capabilities of the economy to achieve higher growth, Mr. Singh said, after a meeting of the planning commission to finalize details of the 12th five-year plan. If the global economic situation improves, India's growth can be 9.2% during the period, he added.
India sets five-year macroeconomic targets, and the planning commission's view is a part of planning for the next five-year period. The commission is chaired by the prime minister.
Reserve Bank of India (RBI) deputy governor Subir Gokarn on Tuesday, 23 August 2011, said that RBI continues to expect inflation to start falling by November and December 2011 and is watching for signs of moderation in demand. Gokarn had said last week that the primary objective of monetary policy must be to keep inflation low and stable. The RBI is scheduled to undertake a mid-quarter policy review on 16 September 2011.
Food Minister K.V. Thomas, last week, said that the government plans to introduce a food security bill, which promises to give cheap food grains to 70% of the country's population, in the winter session of parliament. Thomas told reporters that the bill won't be introduced in the ongoing session of parliament, as earlier planned, because the consultation process with state governments and different ministries is still on. A ministerial panel had cleared the draft law last month.
Indian Meteorological Department (IMD) said on 18 August 2011 that monsoon rains were 26% above normal in week to 17 August 2011, strengthening from a 14% above normal reading in the previous week. The June to September Southwest monsoon rains are crucial to crop production in 60% of the country that does not have adequate irrigation.
Total rainfall since the beginning of the season was 1% below normal until 17 August 2011, down from a deficit of 4% until last week. Good rains will help India achieve its target of increasing its food grains output to a record 245 million metric tonnes this crop year that started 1 July 2011. Good rains could help boost rural income and may help bring down food inflation. The rainfall has been normal in 65% of the country, while it has exceeded the normal in 23% and deficient in 12% until 17 August 2011.
The rainfall was excess to normal in oilseeds-growing western region, in the rice-growing eastern region as well as parts of the grain-bowl northern region and the north-western Rajasthan state. Plantings of key summer crops have been on the rise until 5 August, aided by favourable weather, including the main summer-sown rice crop. Rice acreage rose to 26.03 million hectares as against 24.47 million hectares during the same period last year.
As anti-corruption activist Anna Hazare's fast entered tenth day today, 25 August 2011, thousands of his supporters organized mass prayers for the well being of the Gandhian leader. Hazare has been fasting since 16 August 2011, demanding passing of Janlokpal Bill in the Parliament.
Asian stocks rallied on Thursday, 25 August 2011, as strong US manufacturing data and several robust earnings reports boosted investor sentiment, although some technology shares were subdued after Steve Jobs resigned as Apple Inc.'s chief executive. The key benchmark indices in Indonesia, Singapore, China, Japan, Hong Kong and South Korea were up by between 0.22% to 2.26%. Taiwan's Taiwan Weighted fell 0.98%.
Trading in US index futures indicated that the Dow could fall 17 points at the opening bell on Thursday, 25 August 2011.
US stocks rose for a third straight session on Wednesday, 24 August 2011, as investors bought beaten-down financial shares and unloaded gold. Investors are looking ahead to Federal Reserve Chairman Ben Bernanke's scheduled speech tomorrow, 26 August 2011, in Jackson Hole, Wyo., and whether he will announce another round of quantitative easing or QE3 to prop up the US economy. The Fed chairman used the same forum in 2010 to hint at the launch of a QE2, which sparked a rush into risky assets and away from dollar.
Before that, investors will scrutinize data on weekly US jobless claims, which is due later in the global day today, 25 August 2011, for signs of stabilization in the nation's labor market.
