Key benchmark indices edged lower in choppy trade as the deadlock over allowing foreign direct investment (FDI) in retail sector continued as an all-party meeting failed to reach an agreement and both houses of Parliament were adjourned for the day amid protests by parties opposed to the move. Shares of organized retailers dropped. Data showing sustained selling by foreign funds over the past few days also weighed on sentiment. The BSE Sensex lost 158.79 points or 0.98%, off close to 200 points from the day's high and up about 55 points from the day's low. The market breadth was negative.
The Sensex has lost 1,696.67 points or 9.58% this month so far. The Sensex has slumped 4,500.75 points or 21.94% in calendar 2011. From a 52-week high of 20,664.80 on 3 January 2011, the Sensex has lost 4,656.46 points or 22.53%. From a 52-week low of 15,478.69 on 23 November 2011, the Sensex has risen 529.65 points or 3.42%.
Coming back to today's trade, index heavyweight Reliance Industries (RIL) dropped in volatile trade after the company said it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company's entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks. Interest rate sensitive realty shares fell on profit taking after recent gains triggered by the latest data showed easing of food inflation. IT stocks were mixed. Bank stocks declined in volatile trade. Telecom stocks declined after the telecom secretary said that the Department of Telecommunications may auction more bandwidth to provide wireless broadband services. FMCG stocks rose on defensive buying.
The market slipped into the red soon after hitting one-week high at the onset of the trading session. The market extended initial losses to hit fresh intraday low in morning trade. The market trimmed losses in mid-morning trade. A bout of volatility was witnessed in early afternoon trade as the market slipped into the red after recovering sharply to move into the positive terrain in early afternoon trade. The S&P CNX Nifty slipped into the red soon after hitting fresh one-week high in early afternoon trade. The market hovered in negative zone in afternoon trade. The market slumped to hit fresh intraday low in mid-afternoon trade. Stocks were volatile in late trade.
Data showing sustained selling by foreign funds over the past few days weighed on sentiment. Foreign institutional investors (FIIs) sold shares worth Rs 302.59 crore on Monday, 28 November 2011, as per the provisional data from the stock exchanges. FIIs have pressed heavy sales of Indian stocks over the past two weeks. Their outflow totaled Rs 7591.26 crore from 15 to 28 November 2011.
The BSE Sensex lost 158.79 points or 0.98% to settle at 16,008.34, its lowest closing level since 25 November 2011. The index gained 43.24 points at the day's high of 16,210.37 in early trade, its highest level since 22 November 2011. The index slumped 214.59 points at the day's low of 15,952.54 in mid-afternoon trade.
The S&P CNX Nifty shed 46.20 points or 0.95% to settle at 4,805.10, its lowest closing level since 25 November 2011. The Nifty hit a high of 4,866.10 in intraday trade, its highest level since 21 November 2011. The index hit a low of 4,787.10 in intraday trade.
The BSE Mid-Cap index fell 0.56% and the BSE Small-Cap index declined 0.18%. Both these indices outperformed the Sensex.
BSE clocked a turnover of Rs 1890 crore, lower than Rs 1909.26 crore on Monday, 28 November 2011.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1,525 shares fell and 1,224 shares rose. A total of 112 shares were unchanged.
From the 30-member Sensex pack, 20 stocks declined and the rest of them rose.
FMCG stocks rose on defensive buying in a weak market. ITC, Hindustan Unilever, and Britannia Industries rose by between 0.3% to 1.25%.
Telecom stocks fell after the telecom secretary said that the Department of Telecommunications may auction more bandwidth to provide wireless broadband services. Bharti Airtel tumbled 3.8% and was the top loser from the Sensex pack. Idea Cellular (down 3.2%), Tata Teleservices (Maharashtra) (down 3.05%) and MTNL (down 0.56%), edged lower. Reliance Communications rose 0.62%.
Telecom secretary R. Chandrashekhar told the media today, 29 November 2011, that there is one chunk of bandwidth for wireless broadband services available in 15 of India's 22 service areas, but it was unlikely that the government would be able to complete the auction process within this fiscal year through March 2012. Chandrashekhar also said that state-run telecom companies Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) have sent proposals to the government to offer voluntary retirement to employees to save costs.
Index heavyweight Reliance Industries (RIL) fell 2.3% to Rs 765 after the company said it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company's entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks. The stock was volatile. The stock hit a high of Rs 782.80 and a low of Rs 760.
RIL said all the investments in the exploration, development and production of hydrocarbons from KG-D6 were made by RIL and its foreign partners at their own risk, and not by the Government of India (GoI). RIL and its partners are entitled under the production sharing contract (PSC) with the GoI to recover their full costs from the revenues generated by production from the block, RIL said in a statement.
The investment made in KG-D6 production facilities has been only partly recovered and the return on the investment so far is less than the cost of the capital, RIL said. The PSC contains no provision which entitles the GoI to restrict the costs recovered by the company by reference to factors such as the level of production or the extent to which field facilities are utilised, RIL said. RIL said it has initiated arbitration proceedings against the GoI in a bid to finally resolve the cost recovery issue so as not to hinder future investments in this block.
Shares of organized retailers fell for the second straight day after leaders of many states said they were opposed to foreign giants setting mega stores in their state. Pantaloon Retail India, Trent, Koutons Retail, V2 Retail, Brandhouse Retail, Provogue (India), Shoppers Stop and Store One Retail shed by between 1.23% to 11.89%. The Union Cabinet on Thursday, 24 November 2011, cleared a proposal to allow 51% foreign direct investment (FDI) in multi-brand retail and increase in FDI in single brand retail to 100% from current 51%.
To set up shop, foreign retailers must get a green light from the government of the state where they want to do business. The leaders of the states of Tamil Nadu, Uttar Pradesh, Kerala, Orissa and West Bengal have all publicly opposed the government's move to let foreign retailers own up to 51% of supermarkets and 100% of single-brand stores. A newspaper report suggested that 28 of the 53 cities where retailers could set up under the new rules are in states controlled by political parties opposed to the regulations.
Nevertheless, the move to liberalize FDI norm in retails signals that the Indian government, after years of prevaricating over allowing greater foreign investment in several sectors, is now serious about attracting overseas funds. Foreign direct investment in India dropped 28% to $29.4 billion in the year ended 31 March 2011 as the country's economic forecast clouded. Further opening the retail market--and the message that sends about the government's willingness to introduce reforms--might help kick-start the economy and shore up faltering investor sentiment.
Foreign supermarkets wanting to set up shop in India will have to source 30% of their produce from local, small industries, a government statement said on Monday, 28 November 2011. Last Friday, a government statement had said supermarkets could not be forced to source their wares from Indian industries as such a policy would not be compliant with guidelines from the World Trade Organisation (WTO).
IT stocks were mixed. India's second largest software services exporter by revenue Infosys fell 1.41%. India's third largest software services exporter Wipro rose 0.23%. India's largest software services exporter TCS gained 0.14% extending Monday's 2.46% gains. Tata group holding firm, Tata Sons, last week named Cyrus Pallonji Mistry as the successor to Tata Group Chairman Ratan Tata.
Interest rate sensitive realty shares fell on profit taking after recent gains triggered by the latest data showed easing of food inflation. Another trigger for the recent rally in realty shares was the government's decision to liberalize foreign investment rules in retail sector which could throw open a big opportunity for domestic real estate developers. DLF, HDIL, Indiabulls Real Estate and Unitech shed by between 2.56% to 4.66%.
Bank stocks declined in volatile trade. India's largest private sector bank by net profit ICICI Bank fell 1.85%. India's second largest private sector bank by net profit HDFC Bank shed 1.45%. India's largest bank by net profit and branch network State Bank of India (SBI) dropped 1.15%.
Axis Bank, Bank of India, Punjab National Bank and Bank of Baroda declined by between 1.37% to 3.97%.
Interest rate sensitive auto shares rose after the latest data showed easing of food inflation. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Reports that petrol prices are likely to fall by up to Re 1 per litre this week, on account of the declining trend in international prices, also aided gains in auto stocks. Auto firms will start unveiling sales figures for the