Market loses ground ahead of RBI's policy review

The key benchmark indices skidded to their lowest level in more than a week as high inflation stoked macroeconomic problems for the world's second fastest growing economy. Data showing sustained selling by foreign institutional investors weighed on the sentiment. Caution prevailed as the central bank is seen raising key short-term interest rates by a minimum 25 basis points at a policy review early next week. The market fell on all the five trading sessions during the week ended Friday, 29 April 2011. Volatility was high as traders rolled over positions in the futures & options (F&O) segment ahead of the expiry of the near-month April 2011 contracts Thursday, 28 April 2011.

The BSE Sensex declined 466.27 points or 2.38% to 19135.96, in the week ended 29 April 2011, its lowest closing level since 19 April 2011. The S&P CNX Nifty shed 135.20 points or 2.29% to 5,749.5096, its lowest closing level since 19 April 2011.

The BSE Mid-Cap index declined 1.95%. The BSE Small-Cap index skidded 1.84%. Both these indices outperformed the Sensex.

Index heavyweight Reliance Industries' (RIL) lower-than-expected bottom line growth in Q4 March 2011 pulled the key benchmark indices marginally lower in volatile trade on Monday, 25 April 2011. The BSE 30-share Sensex lost 17.92 points or 0.09% at 19,584.31.

Firm European equities and higher US index futures helped Indian stocks trim intraday losses triggered by political worries on Tuesday, 26 April 2011. The BSE 30-share Sensex was down 38.96 points or 0.2% to 19,545.35.

The key benchmark indices edged lower in choppy trade on Wednesday, 27 April 2011, as higher crude oil prices stoked macroeconomic worries. The BSE 30-share Sensex was down 96.66 points or 0.49% to 19,448.69.

The key benchmark indices dropped for the fourth straight day on Thursday, 28 April 2011 as data showing sustained selling by foreign funds over the past three trading sessions weighed on the sentiment. The BSE 30-share Sensex was down 156.67 points or 0.81% to 19,292.02.

The key benchmark indices fell for the fifth straight day on Friday, 29 April 2011, as data showing sustained selling by foreign institutional investors weighed on the sentiment. The BSE Sensex fell 156.06 points or 0.81% to 19,135.96.

From the 30 share Sensex pack, 24 stocks declined and six stocks rose in the week ended Friday, 29 April 2011.

Index heavyweight Reliance Industries (RIL) slumped 5.58% on disappointing Q4 March 2011 results. RIL reported a 14.14% rise in net profit to Rs 5376 crore on 26.47% rise in total income to Rs 73591 crore in Q4 March 2011 over Q4 March 2010. Net profit of RIL was below expectations due to gross refining margin (GRMs) being at $9.2 per barrel, lower than expected, for Q4 March 2011 due to impact of FCCU (fluidized catalytic cracking unit) shutdown for 46 days. The Q4 result was announced after market hours on Thursday, 21 April 2011

The company said it is drawing up a plan to raise gas production from its D6 deepwater block in the Krishna Godavari basin in the Bay of Bengal, off India's east coast. RIL said the reservoirs in the block are more complicated than previously expected and continuous and significant efforts are underway for understanding these reservoirs. RIL said it is trying to "identify well locations for incremental production and sustenance."

Gas output from the block touched a peak of 60 million metric standard cubic meters a day (mmscmd) last year. Production has now fallen to 50 mmscmd as against a target of 69.8 mmscmd, S.K. Srivastava, head of India's upstream regulator, said. He also said that Reliance hasn't given any "satisfactory response" on the matter.

Integrated development plan for all other discoveries in KG-D6 is being conceptualized to augment production in the most capital efficient manner, RIL said on 25 April 2011. The company said it is studying various options such as "recompletion of wells and compression" to increase gas production.

India's largest oil exploration firm by market capitalization Oil and Natural Gas Corporation (ONGC) gained 1.55% and was the top gainer from the Sensex pack. During market hours on Friday, 29 April 2011, ONGC said it made a significant oil discovery in NELP block CB-ONN-2004/2 in Gujarat. ONGC has 50% interest in the concession it had won along with Gujarat State Petroleum Corporation (40%) and Sunterra (10%). The second discovery was made in the Linch Extn-I PML of North Kadi field of western onshore basin of ONGC in Gujarat.

Sterlite Industries rose 1.43% as consolidated net profit jumped 35.05% to Rs 1925 crore on 38.54% rise in total income to Rs 10781.51 crore in Q4 March 2011 over Q4 March 2010.

Bank stocks declined as the central bank is seen raising key short-term interest rates by a minimum 25 basis points at a policy review early next week. India's second largest private sector bank by net profit HDFC Bank slipped 4.63% and India's largest bank by net profit and branch network State Bank of India declined 1.91%.

India's largest private sector bank by net profit ICICI Bank slipped 0.27%. The bank reported a 44% jump in net profit to Rs 1452 crore on 23% growth in net interest income to Rs 2510 crore and an 18% growth in fee income to Rs 1791 crore in Q4 March 2011 over Q4 March 2010. Consolidated net profit rose 16.85% to Rs 1567.93 crore in Q4 March 2011 over Q4 March 2010.

The bank said its savings deposits increased by 26% to Rs 66,869 crore as at 31 March 2011 from Rs 53,218 crore as at 31 March 2010. The CASA (current & savings accounts) deposits ratio increased to 45.1% as at 31 March 2011 from 41.7% as at 31 March 2010. ICICI Bank's net non-performing asset ratio decreased to 0.94% as at 31 March 2011 from 1.87% as at 31 March 2010 and 1.16% as at 31 December 2010.

IT stocks fell as the three top IT firms -- Infosys, TCS and Wipro said at the time of announcing their Q4 March 2011 results this month that margins will be under pressure due to hike in wage costs.

India's largest IT exporter by sales TCS declined 2.35%. At the time of announcing Q4 March 2011 results, TCS management said wage hikes and currency volatility are the main threats to profit margins. TCS plans to increase wages by 12% to 14% for India-based staff. The company plans to raise wages by 2% to 4% in major overseas markets and 2% to 14% in emerging markets.

India's second largest software services exporter Infosys slipped 0.11%. The stock has been under selling pressure this month after company's disappointing earnings growth forecast for the year ending March 2012 (FY 2012).

India's third largest IT exporter by sales Wipro slumped 2.8% after the company said proposed wage hike would impact operating margins. The company announced before the market hours on Wednesday, 27 April 2011, a 14% rise in net profit as per International Financial Reporting standards (IFRS) to Rs 1375 crore on 18% rise in total revenues to Rs 8302 crore in Q4 March 2011 over Q4 March 2010.

India's largest car maker by sales Maruti Suzuki India rose 1.01%. Chief Executive Shinzo Nakanishi said at the time of announcing Q4 results on Monday, 25 April 2011, that Maruti will make efforts to protect and increase margins going forward. Net profit fell 8.4% to Rs 2288.60 crore on 24.60% increase in total income, net of excise, to Rs 37522.40 crore in the year ended March 2011 (FY 2011) over the year ended March 2010. The company said adverse currency movement (particularly on exports), higher commodity prices and new model launches impacted the company's profits in the year ended March 2011.

India's second largest listed cellular services provider by sales Reliance Communications fell 6.11% on investor worries about the ongoing telecoms licencing graft case.

Realty major DLF slumped 9.78% and was the top loser from the Sensex pack. DLF fell on worries higher interest rates could dent demand for residential and commercial property. Purchases of both residential and commercial property are largely driven by finance.

Jindal Steel & Power (JSPL) tumbled 5.84% on muted Q4 earning growth. Consolidated net profit rose 3.97% to Rs 1001.70 crore on 22.12% rise in total income to Rs 3915.15 crore in Q4 March 2011 over Q4 March 2010. JSPL said its power generation unit Jindal Power reported net profit of Rs 495.54 crore on turnover of Rs 827.99 crore in Q4 March 2011. Jindal Power achieved plant load factor of 100.84% in Q4 March 2011.

Jaiprakash Associates (down 8.85%), Larsen & Toubro (down 6.22%), Reliance Infrastructure (down 5.59%) and Hero Honda Motors (down 4.28% slumped.

The corporate results announced so far have been good. The combined net profit of a total of 407 companies rose 22.3% to Rs 32753 crore on 26.1% rise in sales to Rs 282336 crore in Q4 March 2011 over Q4 March 2010.

Nine of 14 economists polled by Capital Market expect 25 basis points (bps) hike in key short-term interest rates while five expect a 50 bps hike in short-term rates on 3 May 2011 when the Reserve Bank of India (RBI) undertakes its annual 2011-2012 monetary policy review. A cumulative hike of 75-100 bps in short-term rates is expected during the financial year ending March 2012 (FY 2012). Economists expect inflation based on the wholesale price index (WPI) to slide to a median 7.8% in FY 2012 from 9.4% in the year ended March 2011 (FY 2011). The poll shows that economists expect inflation to remain high in the first half of the year and slide in the second half of the year.

A sharp surge in global crude oil prices over the past few months has raised macroeconomic worries. India imports majority of its crude oil requirements and high oil prices have raised concerns about widening current account deficit. High oil prices have also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were down 16 cents or 0.14% at $112.70 a barrel.

The food price index rose 8.76% and the fuel price index climbed 13.53% in the year to 16 April 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 8.74% and 13.05%, respectively. The primary articles price index was up 12.08%, compared with an annual rise of 11.96% a week earlier.

The India Meteorological Department (IMD) has predicted the southwest monsoon 2011 to be 98% (normal) of the long period average (LPA) with a model error of plus/minus 5%. IMD has indicated that there is very low probability for the season rainfall to be deficient (below 90% of LPA) or excess (above 110% of LPA).

Good rains, if they arrive on time and if they are well spread, would help ease food inflation and boost rural income. Rainfall that comes within 96% to 104% of the long-term average is considered a normal monsoon season, but this alone doesn't guarantee a good crop. The timing and spread of the rains are equally important. The quantity and geographical spread of rainfall during the monsoon season is crucial for India's agriculture sector, which lacks irrigation facilities on more than half its farm land. Monsoon rains usually enter India's mainland through the southern state of Kerala in the first week of June, gradually progressing to cover most of central and northern India by July, before retreating in September.