Volatility persisted in afternoon trade as key benchmark indices hit their intraday lows after European market opened lower. Market breadth was negative. Investors` sentiment turned weak after the latest data showed inflation accelerating in May 2012. The sentiment was also hit after the government revised upwards inflation for March 2012 to 7.69% from a provisional reading of 6.89%.
The barometer index, BSE Sensex, was down 63.01 points or 0.37%, up about 52 points from the day`s low and off about 104 points from the day`s high. Euro-zone debt worries also weighed on the domestic bourses on reports independent auditors examining Spanish lenders have estimated that the sector`s capital needs are about euro 60 billion ($75 billion).
Bank stocks edged lowered as investors reduced bets on a possible interest rate cuts by the central bank after the latest data showed inflation accelerating in May 2012. Index heavyweight Reliance Industries (RIL) reversed initial gains. Capital goods shares tumbled across the board. Most FMCG stocks rose. FMCG major Hindustan Unilever slipped after hitting a record high.
The market moved alternately between positive and negative terrain near the flat line in early trade. A bout of volatility was witnessed as key benchmark indices trimmed losses after hitting fresh intraday lows in morning trade. Volatility continued as the market once again trimmed losses after hitting fresh intraday low in mid-morning trade. It recovered to hit fresh intraday high later. It slipped into the red to hit fresh intraday low in early afternoon trade. Volatility persisted in afternoon trade as key benchmark indices hovered in negative terrain after European market opened lower.
Inflation based on the wholesale price index (WPI) accelerated to 7.55% in May 2012 from a year earlier as prices of manufactured products and fuel increased, adding to concerns of a rise in price pressures. Inflation was at 7.23% in April 2012. The WPI, used as a measure of inflation, rose to 163.9 in May from 163.1 in April, according to data released by the Ministry of Commerce and Industry Thursday. The government also raised WPI inflation reading for March 2012 to 7.69% from 6.89% reported earlier.
Inflation in India has moderated from 10% in September 2011, but still remains above the central bank`s comfort level. The central bank undertakes a mid-quarter monetary policy review on 18 June 2012. Weak industrial production data for April 2012 and a sharp deceleration in GDP growth in Q4 March 2012 had raised expectations that the central bank will cut interest rates to revive economic growth.
At 13:15 IST, the BSE Sensex was down 63.01 points or 0.37% to 16,817.50. The index fell 115.15 points at the day`s low of 16,765.36 in afternoon trade, its lowest level since 12 June 2012. The index rose 40.98 points at the day`s high of 16,921.49 in early afternoon trade.
The S&P CNX Nifty was down 24.40 points or 0.48% to 5,097.05. The index hit a low of 5,082.45 in intraday trade, its lowest level since 12 June 2012. The index hit a high of 5,130 in intraday trade.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1420 shares fell and 996 shares rose. A total of 139 shares were unchanged.
From 30-share Sensex pack, 20 stocks fell and rest of them rose. Tata Motors (down 2.59%), Tata Power (down 1.38%), ONGC (down 1.04%), Jindal Steel & Power (down 0.82%), Bharti Airtel (down 0.76%) and Sun Pharmaceuticals Industries (down 0.58%), edged lower from the Sensex pack.
Infosys (up 1.12%), TCS (up 0.55%), Cipla (up 0.53%), Sterlite Industries (up 0.49%), Hero MotoCorp (up 0.44%), Mahindra & Mahindra (up 0.42%), Tata Steel (up 0.29%), GAIL (India) (up 0.1%) and Coal India (up 0.03%), edged higher from the Sensex pack.
Index heavyweight Reliance Industries (RIL) fell 0.48% to Rs 713.45, off the day`s high of Rs 720.95. RIL chairman Mukesh Ambani said at the company`s Annual General Meeting in Mumbai last week that the company has cumulatively bought back a total of 2.7 crore shares under the share buyback programme, which is 22.5% of share buyback target. Ambani said the company`s buyback programme represents highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future.
Ambani said RIL will invest about Rs 1 lakh crore over the five years in expanding its business in India. Ambani said RIL is targeting to double its operating profit in about five years.
NTPC was down 2.72% to Rs 150. The company announced during trading hours today, 14 June 2012, that the Unit-11 of 500 megawatts (MW) of Vindhyachal Super Thermal Power Station has been commissioned on 14 June 2012 at 07:35 IST. With this, the total capacity of NTPC group has become 39,174 MW.
Bank stocks edged lowered as investors reduced bets on a possible interest rate cuts by the central bank after the latest data showed inflation accelerating in May 2012.
India`s largest commercial bank in terms of branch network State Bank of India fell 1.90%. The state-run bank has cut its retail term deposit interest rates by 0.25% in tenors up to 240 days with effect from 8 June 2012.
India`s largest private sector bank by net profit ICICI Bank declined 2.76%. India`s second largest private sector bank by net profit HDFC Bank shed 0.76%.
Among other banks, Punjab National Bank (down 4.14%), Canara Bank (down 3.59%), Yes Bank (down 3%), Axis Bank (down 2.47%), Bank of Baroda (down 2.46%), IndusInd Bank (down 2.35%), IDBI Bank (down 2.25%), Bank of India (down 1.85%), Kotak Mahindra Bank (down 1.35%), Union Bank of India (down 0.75%) and Federal Bank (down 0.54%), edged lower.
Engineering and construction major L&T declined 2.94% to Rs 1310 on profit taking after recent strong gains. Last week, L&T Shipbuilding -- a subsidiary of L&T -- bagged orders valued at Rs 483 crore for four specialized commercial vessels in Q1 June 2012. L&T also announced last week that its construction division bagged new orders worth Rs 2410 crore across various businesses in Q1 June 2012.
Among other capital goods stocks, Punj Lloyd (down 2.81%), BEML (down 1.55%), Praj Industries (down 1.51%), Havells India (down 1.49%), Alstom Projects (down 1.43%), ABB (down 1.28%), Alstom T&D India (down 1.26%), Bhel (down 0.66%), Crompton Greaves (down 0.47%), Thermax (down 0.39%), BGR Energy Systems (down 0.36%), Bharat Electronics (down 0.29%) and SKF India (down 0.03%), edged lower.
FMCG stocks extended Wednesday`s gains. Colgate-Palmolive (India) (up 2.47%), ITC (up 1.21%), Marico (up 0.67%), Nestle India (up 0.16%), Dabur India (up 0.09%) and Godrej Consumer Products (up 0.07%), edged higher.
FMCG major Hindustan Unilever was down 0.37% to Rs 444.25. The stock hit a record high of Rs 449.30 today.
Data on first installment of the advance tax payment due tomorrow, 15 June 2012 could provide cues on Q1 June 2012 corporate earnings.
Housing finance major HDFC announces Q1 June 2012 results on 11 July 2012.
Finance Minister Pranab Mukherjee on Tuesday, 12 June 2012, said that the government is taking several measures to kick-start the economy. The government is committed to ensure faster project clearances, attracting new investments, both domestic and foreign, fixing regulatory issues, etc to boost investors` confidence, he said.
Mukherjee on Monday, 11 June 2012, said the government hopes to introduce a bill for a direct tax code (DTC) during the monsoon session of parliament. The monsoon session usually runs from July to August. The code, which will replace the existing Indian Income Tax Act 1961, intends to cut tax rates to bring more people and companies under the tax net, phase out profit-linked exemptions for companies and replace them with investment-linked incentives.
Industrial production in April rose a dismal 0.1% from a year earlier as manufacturing output remained weak and mining output shrank, deepening worries of a slowdown in the economy. Manufacturing output, which has a 75.5% weight in the index of industrial production, grew a mere 0.1% from a year earlier in April, government data showed Tuesday. Capital goods production in April shrank 16.3% while mining output contracted 3.1%. The government slightly revised upwards March industrial output data to a contraction of 3.2% from a contraction of 3.5% reported earlier.
Global rating agency Standard & Poor`s on Monday warned that India could become the first BRIC nation to lose its investment-grade rating if the South Asian country doesn`t revive its growth and push the pedal on reforms. Setbacks or reversals in India`s path toward a more liberal economy could hurt its long-term growth prospects and therefore its credit quality, Joydeep Mukherji, S&P`s credit analyst, stated in a report titled `Will India Be the first BRIC Fallen Angel?`. S&P currently rates India BBB-minus, just one notch above junk. The other three BRIC group of emerging nations--Brazil, Russia and China--are also rated investment-grade.
S&P had in April this year cut the outlook on India`s long-term credit rating to negative from stable and warned that the country could lose its investment-grade status if the government fails to bring its fiscal house in order. Data released on 31 May 2012 showed India`s economic growth slowed to its weakest pace in nine years in the January-March quarter, when it expanded 5.3% from a year earlier. For the fiscal year ended March 31, the economy grew 6.5%, below the 6.9% expansion the government had projected.
US Treasury Secretary Timothy Geithner will meet India`s finance minister in Delhi in June to strengthen economic and financial ties between the two countries, the US Treasury Department said early this week.
European shares edged lower in early trade on Thursday with caution prevailing among investors as Moody`s became the latest rating agency to downgrade Spain, ahead of an Italian bond auction later in the session and the Greek election over the weekend. Key benchmark indices in UK, France and Germany were down by 0.07% to 0.16%.
Independent auditors examining Spanish lenders have estimated that the sector`s capital needs are about euro 60 billion ($75 billion), according to a Spanish daily ABC. Bankia SA, Novalgalicia Banco and CatalunyaCaixa will absorb about 66% of that total, the newspaper said. The rest of the total will be divided among five lenders. Banco Santander SA, BBVA SA, La Caixa, Bankinter SA and Kutxabank are the only lenders that will not need any aid, the newspaper said.
Italy is today, 14 June 2012, set to auction euro 4.5 billion ($5.62 billion) in medium- and long-term debt. The threat of contagion from the banking crisis in Spain has contributed to worries over Italy, Europe`s 3rd biggest economy. Italian Prime Minister Mario Monti, however, insisted in a radio interview with the German Public Radio ARD, that the country is not lining up for a bailout and that Italy is more disciplined than many other European countries.
Moody`s Investors Service on Wednesday downgraded Spain`s sovereign-debt rating to Baa3 from A3, while placing the country on review for a possible further downgrade. Moody`s said it made the move following last weekend`s announcement that Spain will borrow up to 100 billion euros ($126 billion) to support its banking sector, coupled with the country`s limited financial-market access and increasingly vulnerable economy. The downgrade by Moody`s followed a similar move from Egan-Jones, which lowered its rating on Spain to CCC+ from B on that day. On Wednesday, yields on Spain`s 10-year note pushed past 6.75%.
Spain on Saturday, 9 June 2012, agreed to receive euro 100 billion ($125 billion) in financial aid for its struggling banking sector from the European Union. The request made Spain the fourth euro-zone country to require international assistance.
Moody`s Investors Service cut its credit ratings on Cyprus` sovereign debt by two notches on Wednesday, citing rising risks of a Greek exit from the euro currency and an already strained fiscal position. The speculative grade credit for the European Union member, which is third-smallest economy in the euro zone, is also on review for further downgrade, Moody`s said. Cyprus and its banks have a high exposure to Greece.
Greek voters return to the polls on 17 June 2012 after the splintered results of a May 6 parliamentary election left no party able to put together a government. The poll could potentially decide whether the nation will remain in the euro zone.
Most Asian shares staged a retreat on Thursday, with Italy due to auction more debt later in the day, Spain under the threat of more downgrades, and weekend elections in Greece looming closer. Key benchmark indices in China, Hong Kong, Japan, Taiwan, Singapore and Indonesia fell by between 0.19% to 1.61%. South Korea`s Kospi rose 0.65%.
Trading in US index futures indicated that the Dow could gain 41 points at the opening bell on Thursday, 14 June 2012. US markets fell Wednesday, with investors parsing weaker retail-sales data and increasingly nervous ahead of elections in Greece on Sunday that may lead to the country exiting the European currency union
The Federal Open Market Committee holds its next policy meeting on June 19-20. It remains to be seen if the Fed extends Operation Twist -- a plan expiring this month that lengthens the average duration of bonds in the Fed`s portfolio. The Fed launched Operation Twist in September 2011 to lower long-term borrowing costs.
The Organization of Petroleum Exporting Countries (OPEC), which supplies about 40% of the world`s crude, may maintain its official daily production ceiling at 30 million barrels a day when the group meets in Vienna today, 14 June 2012. On Tuesday, Saudi Arabia`s Oil Minister Ali Naimi said his country wouldn`t ask for OPEC to increase its production levels at this week`s meeting
Nigeria`s oil minister said Wednesday she expects currently volatile prices to settle in the next six months. Diezani Alison-Madueke said volatility in various markets had affected oil prices.
The International Energy Agency on Wednesday said global oil supply rose slightly in May 2012.
The 7th Group of 20 industrial and developing nations summit is scheduled to be held in Los Cabos, Mexico on 18 and 19 June 2012. The agenda of the summit is to address growing global risks from Europe`s sovereign-debt crisis.
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