Market tumbles as key earnings disappoint

Disappointing Q3 results from frontline companies sparked a sell-off on the bourses today, 21 January 2010. The market extended losses for the third straight day. Shares from sectors related to infrastructure were the worst hit. Asian markets were mixed as bullish economic data from China raised concerns Beijing may tighten policy. The BSE 30-share Sensex was provisionally down 423.82 points or 2.43%. The market breadth was extremely weak as small and mid-cap stocks underwent correction after a recent solid surge. L&T led decline in capital goods stocks after the engineering & construction major reported fall in third quarter sales revenue. Power equipment major Bharat Heavy Electricals also declined sharply as its third quarter revenue growth fell short of market expectations. ICICI Bank, too, was under selling pressure as third quarter net profit declined. Power generation stocks dropped as investors shuffled their portfolios ahead of the upcoming mega follow-on-public (FPO) offer of NPTC. Banking shares were reeling under selling pressure ahead of the Reserve Bank of India's monetary policy review meet on 29 January 2010. Shares from metal, realty sectors and PSU stocks were not spared either. The IPO of Jubilant Foodworks ended on Wednesday, 20 January 2010, with an oversubscription of 31.11 times. Foreign institutional investors (FIIs) made a beeline for the IPO. FIIs put in bids for 25.56 crore shares as compared to 71.41 lakh shares reserved for the qualified institutional investors segment as a whole. The strong response from FIIs indicates that global liquidity remains ample. The food price index rose 16.81% in the 12 months to 9 January 2010, while the fuel index was up 6.34%, the government said on Thursday. The rise in food price index was lower than an annual rise of 17.28% in the previous week. The annual wholesale inflation rose to 7.31% in December 2009, compared with 4.78% in November and 6.15% a year ago. Finance minister Pranab Mukherjee said on Wednesday the government was taking steps to contain inflation. The situation is constantly under review, he said. He also promised more measures to check the rise in the prices of essential commodities. Food prices will cool off in 1-2 months and inflation will turn around, finance ministry's chief economic advisor Kaushik Basu said in a newspaper interview published on Wednesday. The Reserve Bank of India will hold its quarterly monetary policy review on 29 January 2010 and is widely expected to increase the cash reserve ratio (CRR) requirements for banks, but economists are divided on when it will raise interest rates. CRR is the level of cash that banks must keep in deposit with the central bank. Food prices rose near 20% in December from a year earlier, their highest in 11 years. Monthly inflation may touch double digits by March 2010, Chief Statistician Pronab Sen told Television media on Tuesday. Union food and agriculture minister Sharad Pawar on Wednesday suggested that the prices of milk and related products were set to rise because of the demand-supply mismatch. Aggregate results of 336 companies showing an 64.70% advance in net profit on 12.5% rise in sales in quarter ended December 2009 over the quarter ended December 2008. Excise, customs and service tax collections are continuing to show a negative growth. Excise duty collections between April to December 2009 are down by 13% at close to Rs 70,000 crore. Revenues by way of customs duty are also down by a whopping 28% at around Rs 59,000 crore while service tax collection is also down over 6% with the government collecting slightly over Rs 36,000 crore. This takes the total collection of indirect taxes in the first nine months to about Rs 1,66,000 crore, down by 18% as compared to last fiscal. The government has set itself a target to collect around Rs 2,70,000 crore by the end of fiscal year ending March 2010. Meanwhile, the government reportedly proposes to ease the norms for foreign direct investment (FDI) approval. Presently projects worth more than Rs 600 crore require the final approval of the Cabinet Committee on Economic Affairs (CCEA). The department of industrial policy and promotion (DIPP) has proposed that this ceiling be raised to anywhere between Rs 1,000 crore and Rs 1,500 crore. The new norms are likely to be notified after the introduction of a consolidated FDI policy framework on 1 April 2010. FDI inflows increased to $27 billion in 2008-09 from $3.2 billion in 2004-05. During the period April-September 2009-10, FDI inflows reached $15 billion. The government has set a target of achieving $50 billion annual FDI by 2012 and $100 billion by 2017. Economic growth will accelerate this year, Commerce and Industry Minister Anand Sharma said on Tuesday as he demanded better access to China's markets to help exports. Sharma's call for greater access for goods comes amid a widening trade gap between the two countries. Trade between the two grew rapidly to $50 billion in 2008, making China India's second-largest trading partner, but fell back to $43 billion in 2009 as global trade declined. Sharma called for more Chinese direct investment in India, especially in infrastructure, while noting that Indian firms are already present in China. European shares rose on Thursday, continuing a choppy week for trading, with miners recouping some sharp losses made in the previous session. Key benchmark indices in Germany, France and UK were up by between 0.27% and 0.42%. Asian markets were trading mixed today. Key benchmark indices in Hong Kong, Singapore, and Taiwan were down by between 1.13% and 1.99%. Japan's Nikkei 225 index rose 1.22% led by technology shares. South Korea's Seoul Composite index was up 0.45%. China's Shanghai Composite added 0.22%. Chinese data released Thursday were largely in line with expectations, showing economic growth powered higher in the fourth quarter, putting the full-year figure above forecasts. But inflation surprised to the upside, suggesting fiscal and monetary policy tightening could be ahead. China's gross domestic product expanded at a rapid rate of 10.7% in the fourth-quarter of 2009 from the year-earlier period, pushing the full-year economic growth rate to a better-than-expected 8.7%, according to official data released Thursday. Developing Asian economies face the risk of asset bubbles or overheating as the region's growth outpaces the rest of the world this year, the World Bank said in a report today. In South Asia, policy makers will be particularly responsive to signs of building inflationary pressures because of a strong aversion to food-price increases, the World Bank said. US markets ended sharply lower on Wednesday, 20 January 2010, as earnings and the dollar's gains clipped the market's momentum. In earnings, Bank of America disappointed investors with a loss of $5.2 billion, which was worse than expected. Among others, Morgan Stanley's earnings fell short of analysts' expectations, but Wells Fargo posted an unexpected profit. The Dow Jones industrial average lost 122.28 points, or 1.1%, to 10,603.15. The S&P 500 index fell 12.19 points, or 1.1%, to 1,138.04, and the Nasdaq Composite Index fell 29.15 points, or 1.3%, to 2,291.25. Trading in US index futures indicated the Dow could fall 11 points at the opening bell on Thursday, 21 January 2010. US stocks futures were firm earlier in the global day. The World Bank raised its forecast for global growth in 2010 but warned that the recovery may lose momentum in the second half of the year as government stimulus programs wind down and unemployment persists. The world economy will expand 2.7% this year after the worst recession since the end of World War II, compared with an estimate in June of a 2% expansion, the Washington- based poverty-reduction agency said today in an annual report. Growth may reach 3.2% in 2011, the bank said. The World Bank report also includes figures on last year's downturn, with an estimate that the global economy declined 2.2%, compared with the 2.9% decrease projected in June. Growth in emerging nations is expected to reach 5.2% this year, compared with a June estimate of 4.4%, the bank said. China will expand 9% this year and India 7.5%, it said. The World Bank also raised its forecast for US growth in 2010 to 2.5% growth, after predicting 1.8% in June. Japan's gross domestic product will expand 1.3% this year, more than the 1% predicted in June. The euro area's economy is forecasted to grow 1%, compared with the earlier estimate of 0.5% expansion. Speaking to a news agency on the anniversary of his first year in office US President Barack Obama urged lawmakers on Wednesday to agree quickly on core elements of healthcare reform, signaling he might support a scaled-back overhaul after his Democrats lost a key Senate seat. Obama acknowledged that voter anger helped carry Republican Scott Brown to a stunning victory in Tuesday's Massachusetts election which has imperiled the president's healthcare effort and the rest of his legislative agenda. The White House said it may retool its strategy for selling Obama's agenda while pressing ahead with his priorities of job creation, climate change and financial regulatory reform as well as healthcare. Meanwhile British Prime Minister Gordon Brown in an article published in Asian Lite magazine marking the 60th anniversary of India becoming a republic said India is a 'modern global success story' that is marching toward prosperity. Brown further said the relationship of one of the world's oldest democracies with one of the largest owes its foundations to our proud historic ties. As per provisional closing, the BSE 30-share Sensex was down 423.82 points or 2.43% to 17,050.67. The Sensex opened unchanged from its previous close at 17,474.49, which was the day's high. Sensex fell 449.23 points at the day's low of 17,025.26 in late trade The S&P CNX Nifty was down 128 points or 2.45% to 5093.70 The market breadth, indicating the overall health of the market was extremely weak. On BSE, 2369 shares declined as compared with 579 that rose. A total of 51 shares remained unchanged. The total turnover on BSE amounted to Rs 6327 crore as compared with Rs 4893 crore by 14:25 IST Bharti Airtel (down 2.93%), Tata Motors (down 2.84%), and HDFC (down 2.94%), edged lower from the Sensex pack. Mahindra & Mahindra was the lone gainer from the 30-member Sensex pack. India's top tractor maker by sales gained 0.34% to Rs 1149.75. The stock staged a pullback from day's low of 1136.50. The company announces its Q3 December 2009 results on 25 January 2010. India's largest car maker by sales Maruti Suzuki India fell 1.25% on profit booking. The company announces its Q3 December 2009 results on 29 January 2010. High beta infrastructure shares were the worst hit in today's sell-off. India's largest engineering & construction firm by sales Larsen & Toubro (L&T) slumped 6.63% to Rs 1527.95 and was the top loser from the Sensex pack. L&T said profit after tax from ordinary activities rose 15% to Rs 696 crore in Q3 December 2009 over Q3 December 2008. Gross sales revenue declined 6% to Rs 8139 crore. The result was announced during trading hours today, 21 January 2010. India's largest power equipment maker by sales Bharat Heavy Electricals (Bhel) fell 4.26%. The company's the net profit rose 35.67% to Rs 1072.59 crore on a 17.28% rise in total income to Rs 7422.51 crore in Q3 December 2009 over Q3 December 2008. The result was announced during trading hours today, 21 January 2010. Power generation stocks declined as investors shuffled their portfolios ahead of the upcoming mega follow-on-public (FPO) offer of NPTC. Tata Power Company (down 4.69%), Reliance Infrastructure (down 2.66%), CESC (down 2.01%), Torrent Power (down 2.77%), Reliance Power (down 2.36%), and NHPC (down 2.30%), declined. India's largest power generation firm by total capacity NTPC was down 1.55%. The company FPO remains open between 3 and 5 February 2010. The pricing has not yet been announced by the company. Japirakash Associates (down 2.48%), Lanco Infratech (down 5.52%), GMR Infrastructure (down 1.84%), Punj Lloyd (down 4.91%), and GVK Power Infrastructure (down 2.29%), declined. Realty shares were not spared either. DLF (down 2.69%), Unitech (down 2.29%), HDIL (down 3.98%), Indiabulls Real Estate (down 3.90%), and Omaxe (down 3.84%), declined. India's largest private sector bank by net profit ICICI Bank lost 3.32%. The bank's net profit declined 13.44% to Rs 1101.06 crore on a 25% fall in total income to Rs 7762.71 crore in Q3 December 2009 over Q3 December 2008. The result was announced during trading hours today, 21 January 2010. India's largest bank by net profit and branch network State Bank of India lost 1.76%. India's second largest private sector bank by net profit HDFC Bank slipped 2.26% after its American depository receipt shed 1.56% on Wednesday. Metal stocks declined after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 2.12% on Wednesday, 20 January 2010. Hindalco Industries (down 1.06%), Tata Steel (down 0.70%), Hindustan Zinc (down 3.09%), Sesa Goa (down 3.96%), and National Aluminum Company (down 4.42%), edged lower. India's largest non-ferrous metal producer by sales Sterlite Industries India lost 3.70% after its American depository receipt or ADR dropped 5.23% to $18.11 on the New York Stock Exchange on Wednesday, 20 January 2010. Index heavyweight Reliance Industries (RIL) shed 1.97% to Rs 1056.25. Reports indicated that RIL is unlikely to raise its offer price to take a controlling stake in LyondellBasell Industries. Lyondell's current restructuring plan values it as high as $15.5 billion. Recently, RIL had reportedly sweetened its initial $12.0 billion offer to about $13.5 billion for acquiring LyondellBasell. RIL will announce its Q3 result on Friday, 22 January 2010. India's largest oil exploration firm by sales Oil & Natural Gas Corporation was down 1.98% to Rs 1140, off day's high of Rs 1180. The company is scheduled to announce its Q3 December 2009 earnings today, 21 January 2010. As per analysts estimates ONGC will fork out Rs 3,497 crore towards auto fuel subsidy in the third quarter of the current fiscal. India's second largest mobile services provider by sales Reliance Communications (RCom) fell 0.99%. As per reports, the company has written to the Department of Telecom (DoT) asking it to reject the report submitted by the Government-appointed auditors. In a 28-page letter to the DoT, the company said that the report was based on uncorroborated facts and contrary to the all norms of audit and professional conduct. Earlier the independent auditor - Parakh & Co - appointed by the DoT to examine the accounts of RCom had concluded that the company has under-reported revenues of Rs 2,799 crore to the Government, resulting in under-payment of Rs 315 crore as license fee and spectrum charges during 2006-08. IT stocks succumbed to selling pressure in late trade after a firm start. The rupee fell to two-week lows against the dollar today, 21 January 2010. India's largest IT exporter by sales Tata Consultancy Services fell 0.85% to Rs 772, off day's high of Rs 790.90. The third quarter earnings unveiled by the company after trading hours on 15 January 2010 surpassed market estimates as demand for outsourcing surged and prices stabilised, fuelling hopes of recovery in the showpiece sector. India's second largest IT exporter by sales Infosys fell 1.39% to Rs 2616, after hitting a day's high of Rs 2663. On 12 January 2010 Infosys raised its full-year revenue and profit outlook after strong Q3 results and on improving trend for outsourcing orders. India's third largest software services exporter Wipro lost 2.21% to Rs 709.40, easing from day's high of Rs 739. The company's consolidated net profit rose 21.26% to Rs 1217.40 crore on 4.17% rise in total income to Rs 7055.80 crore in Q3 December 2009 over Q3 December 2008. The company announced the results before trading hours on 20 January 2010. Chief Financial Officer Suresh Senapaty said in a statement that the key financial services sector had bounced back on the back of strong outsourcing demand. The partially convertible rupee was at 46.01/02 after falling to 46.06 in early deals, which was its lowest since 6 January 2010. It had ended at 45.93/94 per dollar on Wednesday, 20 January 2010. A weak rupee boosts operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.