Bear hug costs Sensex 1392 pts in 8 days; Hero Honda up 6%

The mood on Dalal Street has not improved yet after the key rates hike and hawkish tone set by the RBI governor Duvvuri Subbarao in a policy meeting on May 3. The Sensex shed nearly 259 points on Thursday, with continuing downtrend for eighth consecutive session.

Experts see earnings downgrade in the quarter ended June 2011 after the 50 basis points hike in repo and reverse repo rate. Interest cost of the companies will increase going ahead as banks have slowly been increasing their lending rates.

Deven Choksey of KR Choksey Shares & Securities feels that people basically want to sit on cash for a simple reason that there is a kind of possibility of earning downgrade happening going forward once this particular oil price hike is announced.

Inflation is a major cause of concern, says Finance Minister Pranab Mukherjee. "Food and oil prices are major inflation factors," he said. Food articles inflation for the week ended April 23 was at 8.53% as against 8.76% in previous week. Fuel group inflation was unchanged at 13.53% during same period. RBI governor has made the move to contain inflation without hurting country's growth.

Robert Prior-Wandesforde, Credit Suisse says that the Indian economy and markets are facing a particularly unpleasant combination of macroeconomic circumstances right now. "This includes high inflation, rising interest rates and the likelihood of downside growth surprises. This situation may continue for some months making us pessimistic about the equity market outlook," he said.
The 30-share BSE Sensex dropped 258.78 points or 1.40%, to close at 18,210.58 and the 50-share NSE Nifty closed below the 5500 mark for first time since March 23, down 77.30 points or 1.40% to 5,459.85, dragged down by 42 shares out of 50.

Choksey feels that the Nifty could possibly stay in range of 5400-5700 because the option traders are basically taking a strong long bet on the 5400 level.

Amit Dalal, Executive Director, Tata Investment Corporation said there would be some more pressure mainly because people have to still adjust their portfolios worldwide. "So there maybe some largecaps where there maybe selling based on global perspective," he said.

Realty, power, FMCG, healthcare, banking, metal, technology and capital goods stocks saw selling pressure today, with respective indices falling 1-3%.

Bharti Airtel plunged more than 3% after less than expected bottomline reported in fourth quarter on dip in margins. India's largest telecom operator reported net profit of Rs 1,401 crore on consolidated basis as against street expectations of Rs 1,740 crore.

Largecaps like TCS, NTPC, ITC, ICICI Bank, Sterlite, HDFC Bank, HUL and BHEL were down 1-3%. Tata Power, Reliance Power, PNB and Reliance Communications plunged 5-6%.

Ranbaxy Labs was the biggest loser on Nifty, with falling 6%. US Federal prosecutors are negotiating a settlement with Ranbaxy that could result in fines and payments exceeding USD 1 billion, as mentioned in the Fortune Magazine, for fraudulent conduct alleged by the FDA, reports CNBC-TV18 quoting sources.

ACC and Ambuja Cements tumbled about another 4% after Holcim increased stake above 50% in both companies.

However, Hero Honda showed outstanding performance today, with rising 6% on short covering. Analysts feel that company's fourth quarter EBITDA performance was better than street expectations.

The broader indices too were down around 1%. Midcap stocks like HDIL, Shriram City, Redington, Hathway Cable and Marico lost 5-8%.

However, Jyothy Labs, Apollo Hospital, United Phosphorous, Tulip Telecom and Religare Enterprises gained 3.5-7%. Rs 474.75 3.51%

About 899 shares advanced as against 1955 shares declined on Bombay Stock Exchange.

Sensex climbs modestly at start...Nifty stays above 5900

BSE Sensex was trading at 19,781, up 94 points over the previous close.

The Indian market has commenced the new trading session with a positive bias, but trading is likely to be muted amid mixed global cues. The Large-Cap shares may remain subdued while the non-index counters could continue to hog the limelight. Market breadth is positive.

Investors seem to be brushing aside concerns over rising crude oil prices and its impact on inflation and monetary policy. China yesterday hiked key lending and deposit rates by 25 bps to check inflation. Also, central banks in the eurozone may announce plans to increase borrowing costs this week. The US Federal Reserve is also debating when to exit from the current stimulus.

At 09: 28 (IST), the BSE Sensex was trading at 19,781, up 94 points over the previous close.
NSE Nifty was trading at 5,934, up 24 points over the previous close. It had earlier touched a day's high of 5,935 and a day's low of 5,907. It opened at 5,908.

The BSE Small Cap index and the BSE Mid Cap index were trading flat.

Sesa Goa, BPCL, Grasim, Sterlite, ONGC, IDFC, Hindalco, Maruti, M&M and HUL were among the notable leaders in the Sensex and the Nifty.

Ranbaxy, Sun Pharma, Kotak Mahindra Bank, ITC, Amuja Cement, Infosys, PNB and HDFC Bank were among the notable losers in the Sensex and the Nifty.

The market breadth is positive with 1,971 shares rising and 959 shares falling.

In global action, stocks in Asia are mixed, with Japan in the red. The Chinese market has shrugged off the latest monetary tightening move by its central bank. Markets in the US and Europe finished flat amid anxiety about the future direction of monetary policy.

Outside equities, gold prices have touched new all-time highs amid persistent safe haven buying as investors fret over the MENA turmoil, eurozone debt worries and high crude oil prices. Oil prices were hovering around 30-month peak while the dollar gained.

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India Stocks Rise; Bharat Heavy, Larsen & Toubro Advance

July 4 (Bloomberg) -- Indian stocks rose after a regional political party said Prime Minister Manmohan Singh's nuclear agreement with the U.S. is ``satisfactory,'' signaling they may support the deal and prevent the government from collapsing.

Bharat Heavy Electricals Ltd., the country's largest power equipment maker, had the biggest gain on the Sensitive Index this week. Jaiprakash Associates Ltd., India's biggest builder of dams, climbed the most in more than three months.

``Early elections look unlikely now,'' said R.K. Gupta, who manages the equivalent of about $100 million of stocks at Taurus Asset Management Co. in New Delhi. ``Chances of the nuclear deal going through seem bright, that's giving some relief to the markets.''

The Bombay Stock Exchange's Sensitive Index, or Sensex, rose 359.89, or 2.8 percent, to 13,454. The index posted its seventh weekly decline, its longest losing run since the week ended April 13. The S&P CNX Nifty Index on the National Stock Exchange added 90.25, or 2.3 percent, to 4,016.

India's Samajwadi Party, a regional group based in the country's most populous state, will decide later today after meeting smaller parties whether to back the deal, Mulayam Singh Yadav, chief of the Samajwadi Party, told reporters in New Delhi after meeting Singh.

The ruling coalition is making a final attempt to shore up support for a nuclear energy accord before Singh and President George W. Bush meet in Japan next week. The Congress party, which leads the alliance, has sought backing from other parties to save the accord after its communist allies threatened to withdraw support.

Bharat Heavy
Bharat Heavy rose 7 percent to 1,500.20 rupees, the most since June 11. Jaiprakash added 11 percent to 153.50 rupees, its biggest advance since March 25. Larsen & Toubro Ltd., India's largest engineering company, gained 6.7 percent to 2,381.45 rupees. Siemens India Ltd., the local unit of Europe's biggest engineering company, jumped 11 percent to 428.40 rupees, its most since Oct. 29.

Stocks also rose after the weather office said India's monsoon, which accounts for four-fifths of the nation's annual rainfall, has been 21 percent above average so far this season.

ITC, the country's largest cigarette maker, rose 1.1 percent to 171.20 rupees. Hindustan Unilever Ltd., India's biggest maker of household goods, added 2.6 percent to 201.50 rupees.

Overseas funds sold a net 3.5 billion rupees ($87 million) of Indian stocks on July 2, increasing their net outflow this year from equities to $6.41 billion, according to the nation's stock market regulator.

Jain Irrigation Systems Ltd. (JI IN) rose 28.25 rupees, or 6.5 percent, to 461, its biggest gain since March 24. India's biggest agriculture-related company by value rebounded from a 14-month low after 3.1 percent of its shares traded in a single transaction. As many as 2.23 million shares traded at 442 rupees apiece at 10:06 a.m. local time on the Bombay Stock Exchange, data available on the Bloomberg showed. The buyers and sellers weren't immediately known.

Punj Lloyd Ltd. (PUNJ IN) added 28.2 rupees, or 14 percent, to 227.85, the most since May 23, 2006. The engineering and construction company got a 10.1 billion rupees contract from GVK Power (Govindwal Sahib) Ltd. to build a coal-fired thermal power project. Work on the project is expected to be completed by 2011, the company said.

Ranbaxy Laboratories Ltd. (RBXY IN) rose 24.45 rupees, or 4.8 percent, to 538.40, the most since June 10. Pfizer Inc., the world's biggest drugmaker, may offer 20 percent more than Daiichi Sankyo Co.'s $4.6 billon bid to obtain a majority stake in Ranbaxy, the Financial Chronicle reported, without citing anyone.

Reliance Communications Ltd. (RCOM IN) climbed 47.05 rupees, or 12 percent, to 436.75, the biggest advance since Feb. 4. India's second-largest mobile phone service operator plans to raise as much as $6 billion from banks to help fund its proposed acquisition of Africa's MTN Group Ltd., the Economic Times newspaper reported, citing unidentified people familiar with the matter.

SpiceJet Ltd. (SJET IN) rose 1.8 rupees, or 7.8 percent, to 25, the most since June 6. Kingfisher Airlines Ltd. is close to finalizing a share-swap deal with low-cost carrier SpiceJet, the Business Standard newspaper said, without saying where it got the information. SpiceJet's stockholders are expected to get one share of the merged entity for every three shares owned, the newspaper said.

Shrenuj & Co. (SJC IN) climbed 4.5 rupees, or 18 percent, to 30.10. The Indian diamond retailer rose the most since April 13, 1998, after 3.5 percent of its equity changed hands in a single trade.

To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net