The key benchmark indices edged lower in early trade as Asian stocks fell on weak global economic data. India's largest oil & gas exploration firm by sales ONGC fell after weak Q1 result. India's largest motorbike maker by sales Hero Honda Motors fell more than 2% after reporting fall in Q1 net profit and the stock was the top loser from the Sensex pack. Other auto stocks were mixed. Realty stocks fell. The market breadth was positive. The BSE 30-share Sensex was down 63.78 points or 0.35%.
The government is trying to persuade truckers not to go on strike from 6 August 2010 to press their demand for lower toll tax. Truckers lobby group, the All India Motor Transport Congress (AIMTC), has called for lower toll tax failing which it plans to take nearly 62 lakh trucks off roads from 6 August 2010, and halt movement of goods across the country.
Foreign funds continue to mop up Indian stocks. Foreign funds have bought shares worth a net Rs 8109.64 crore this month (till 29 July 2010), absorbing selling by domestic institutional investors. Domestic funds have sold shares worth a net Rs 6193.15 crore this month (till 29 July 2010), as per data from the stock exchanges.
Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010, absorbing selling by domestic funds in that month. Domestic funds had dumped shares worth a net Rs 4777.05 crore in June 2010.
Asia ex-Japan equity funds absorbed more than $1 billion in the week ended 28 July 2010, their biggest inflow in 14 weeks, according to data from global fund tracking firm EPFR Global. Indian equity funds posted an eighth consecutive week of inflows and China stock funds recorded the biggest weekly intake since mid-April, EPFR said.
Asian stocks fell on Friday, 30 July 2010, as higher-than-estimated unemployment in Japan and a poorer Macquarie Group earnings outlook overshadowed increased profit targets at Sony Corp. and Panasonic Corp. The key benchmark indices in China, Indonesia, Hong Kong, Singapore, Taiwan and South Korea were down by between 0.34% to 1.16%.
Japan's Nikkei Average fell 1.5% after the bureau reported the country's unemployment rate rose to a seven-month high of 5.3% in June from 5.2% a month earlier. In other economic news, Japanese factory output marked its biggest fall in more than a year in June and core consumer prices posted their 16th straight month of annual decline in June. The industrial output unexpectedly fell 1.5% in June, surprising markets that expected a 0.2% increase.
Trading in US index futures indicated that the Dow could fall 38 points at the opening bell on Friday, 30 July 2010.
US stocks sagged in volatile trading on Thursday, 29 July 2010, after weak outlooks from technology companies and downbeat comments from a Federal Reserve official gave investors little reason to buy. The Dow Jones Industrial Average dropped 30.72 points, or 0.29% to 10,467.16. The Standard & Poor's 500 Index dropped 4.59 points, or 0.41% to 1,101.54. The Nasdaq Composite Index dropped 12.87 points, or 0.57% to 2,251.69.
St. Louis Federal Reserve Bank President James Bullard said he is worried about the risks the United States could fall into a Japan-style quagmire of falling prices and investment. That pressured stocks before a late session rebound.
The Labor Department said initial claims for unemployment benefits dropped by 11,000 to 457,000. Friday's Commerce Department report on second-quarter gross domestic product will be another marker for the strength of the recovery.
Back home on the macro front, the food inflation declined in the week ended 17 July 2010 falling to single digit levels for the first time in many months while inflation in the fuel group remained elevated. Inflation in the Primary Articles group also fell, the Government said on Thursday. According to the data released on Thursday by the Commerce & Industry Ministry, inflation in the Food Articles group stood at 9.67% in the week ended 17 July 2010 versus 12.47% in the previous week. Inflation in the Primary Articles group was at 14.5% as against 16.48% in the week ended 10 July 2010 while inflation in the Fuel & Power group rose to 14.29% from 14.27% in the preceding week.
Meanwhile, the revival of monsoon rains in the crucial sowing month of July 2010 augurs well for the Indian economy which is driven by strong domestic demand. The annual monsoon rains were 38% above normal in the week to 28 July 2010, bouncing back from a 17-percent deficit in the previous week, the weather office said on Thursday, 29 July 2010. Weekly rainfall was the highest in the current June-September season and much heavier than any week in the 2009 monsoon period, which delivered the lowest rainfall since 1972 and triggered a sustained rise in food prices.
Heavy, well-distributed showers in the past week helped total rainfall rise to normal during July, the most important month for planting rice, corn, soybean and cane. The Southwest monsoon was active over Andaman & Nicobar Islands, Vidarbha, Andhra Pradesh, Karnataka and Kerala during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Thursday, 29 July 2010. The weather office expects fairly widespread rainfall over west coast, northwest, east and northeast India in the near term.
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 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.
The infrastructure sector output grew 3.4% in June from a year earlier, slower than the annual growth of 5% in May, government data showed on Wednesday. The infrastructure sector accounts for 26.7% of India's industrial output. The industrial output rose 11.5% in May from a year earlier, at its slowest pace in seven months.
The Reserve Bank of India (RBI) at its Q1 monetary policy on Tuesday, 27 July 2010, raised its key short term interest rates for the fourth time this year to curb surging inflation. The central bank also raised its economic growth and inflation forecasts.
The RBI raised GDP forecast to 8.5% for the year ending March 2011 (FY 2011), from 8% with an upside bias earlier. The central bank said the upward revision in growth forecast is primarily based on better industrial production and its favourable impact on the services sector and also giving due consideration to the global scenario.
The RBI also signaled its strong preference for tight liquidity, saying it would ensure that excess liquidity in the system doesn't dilute the effectiveness of policy-rate actions.
The RBI also raised the baseline projection for inflation based on wholesale price index for March 2011 to 6% from 5.5% indicated in the April 2010 policy statement, taking into account the emerging domestic and external scenario. The RBI said its outlook on inflation will partly be shaped by the distribution of monsoon rains and their impact, as the agricultural harvest will be crucial to easing currently high food prices in the country.
The central bank said consumer price inflation remains at elevated levels and demand-side pressures need to be contained. The central bank also said real policy rates are not consistent with strong economic growth.
The dominant concern that has shaped the monetary policy stance in this review is high inflation, RBI Governor D Subbarao said in a statement. Non-food inflation has risen, and demand-side pressures are clearly evident. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations, the RBI said.
The Reserve Bank of India said the economy could face a significant risk in the form of a slowdown in capital flows, at a time when the current account deficit is widening. In its first quarterly review of monetary policy, the Reserve Bank of India said that a potential slowdown in capital inflows could impact the current and trade deficit. The current deficit is already widening as imports continue to rise with the rebound in economic growth.
RBI has said that the risk of capital flows runs both ways. Given the present state of the global economy, central banks in advanced economies are likely to maintain accommodative monetary policies for an extended period. With the strong growth potential of emerging market economies, including India, this is likely to trigger large capital inflows. Large capital inflows above the absorptive capacity of the economy will pose a challenge for monetary and exchange rate management. This also has implications for asset prices. In this scenario, a widening current account deficit will help absorb a larger proportion of the inflows.
On the corporate front, the combined net profit of a total of 982 companies fell 8.9% to Rs 47921 crore on 22.7% rise in sales to Rs 561868 crore in Q1 June 2010 over Q1 June 2009.
At 9:20 IST, the BSE 30-share Sensex was down 63.78 points or 0.35% to 17,926.37. The Sensex fell 10.94 points at the day's high of 17981.06 in early trade. The index lost 78.85 points at the day's low of 17,913.15 in early trade.
The S&P CNX Nifty was down 22.85 points or 0.42% to 5,386.05.
The BSE Mid-Cap index rose 0.38%. The Small-Cap index rose 0.4%. Both these indices outperformed the Sensex.
The market breadth, indicating the health of the market, was positive. On BSE, 398 shares advanced while 324 shares declined. A total of 22 shares remained unchanged.
All the shares from 30 share Sensex pack fell.
Index heavyweight Reliance Industries (RIL) rose 0.14%, on bargain hunting after a two-day slide triggered by worries about stagnant gas production. Gas production is likely to stagnate at 60 million standard cubic metres of gas a day for a while. Reliance Industries will be able to pump natural gas at full capacity from its deep-sea field during the year to March 2013, Oil Secretary S. Sundareshan said on Wednesday.
RIL's net profit jumped 32.3% to Rs 4851 crore on 86.7% increase in net turnover to Rs 58,228 crore in Q1 June 2010 over Q1 June 2009. The results were announced after trading hours on Tuesday 27 July 2010.
India's largest oil & gas exploration firm by sales ONGC fell 1.01% as net profit fell 24.48% to Rs 3661.14 crore in Q1 June 2010 over Q1 June 2009. The company announced the result after market hours on Thursday
Cipla rose 0.55% and was the top gainer form the Sensex pack.
Auto stocks were mixed after weak Q1 result from Hero Honda Motors, India's largest motorbike maker by sales. Hero Honda Motors fell 2.5% as net profit declined 1.6% to Rs 491.69 crore on 12% growth in turnover to Rs 4296.61 crore in Q1 June 2010 over Q1 June 2009. The stock was the top loser form the Sensex pack. The company announced the result after trading hours on Thursday, 29 July 2010.
Hero Honda said a sharp rise in commodity prices in the first half of the quarter and additional expenditure incurred on account of conversion to new emission norms negatively impacted profit margins in Q1 June 2010. Managing Director and CEO Pawan Munjal said the company is striving to meet continuously rising demand for its products. He added that the company is scaling up production at its existing plants to meet expected market demand.
India's largest car maker by sales Maruti Suzuki rose 0.71% on bargain hunting. The stock had slumped 12.31% in a single trading session on Monday, 26 July 2010, after net profit fell 20.2% to Rs 465.40 crore on 27% growth in net sales to Rs 8050.70 crore in Q1 June 2010 over Q1 June 2009. Maruti said the fall in net profit was due to higher commodity prices, increase in royalty and lower 'other income'. The company said income from exports to Europe declined due to weakening of the euro.
India's second largest bike maker by sales Bajaj Auto was flat. The stock hit a record high of Rs 2,734.95 on Thursday, 29 July 2010.
Among other auto stocks, Tata Motors and Mahindra & Mahindra fell by between 0.59% to 1.11%.
Reliance Infrastructure fell 0.22% ahead of its Q1 result today, 30 July 2010.
Rate sensitive realty fell on worries higher interest rates will crimp property demand. Parsvnath Developers, Unitech, Indiabulls Real Estate fell by between 0.42% to 0.66 %.
Realty major DLF fell 0.44%, sliding for the second straight day. DLF's consolidated net profit rose 3.79% to Rs 411.03 crore in Q1 June 2010 over Q1 June 2009. DLF's boards has approved further issue equity shares by its wholly owned subsidiary, DLF Brands to a promoter group company. DLF Brands will cease to be a subsidiary of DLF after the issue.