Impact of RBI policy on mkt
The key benchmark indices extended losses in late trade as investors booked profit after the Reserve Bank of India did away with some special liquidity steps that it had announced in the aftermath of the global financial crisis. The RBI had pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. The central bank said the precise challenge for the Reserve Bank of India is to support the recovery process without compromising on price stability.
The BSE 30-share Sensex was down 409.90 points or 2.45% Intraday volatility was immense. Banking stocks fell as the RBI did not relax mark-to-market rules for bank's debt holdings. The market has been agog with talks of the central bank hiking the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM). India's largest steel maker by sales Tata Steel fell after poor Q2 result.
Telecom stocks fell. Rate sensitive realty stocks fell. Metal stocks also declined. Index heavyweight Reliance Industries, too, edged lower.
Intraday volatility was immense. The market cut losses after an initial fall caused by weak Asian stocks. However, the intraday recovery proved short-lived. The market weakened soon after the central bank at 11:15 said an exit from an easy monetary policy has begun. The market extended losses in volatile trade later
Volatility may remain high on the bourses this week as traders rollover positions in the derivatives segment from October 2009 series to November 2009 series ahead of the expiry October 2009 contracts on Thursday, 29 October 2009.
The Reserve Bank kept its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on Tuesday, 27 October 2009. It also kept steady cash reserve ratio at 5% but raised the statutory liquidity ratio to 25% from 24% with effect from 7 November 2009. Funds in CRR fetch no return, while returns from SLR are small The central bank said an accommodative monetary policy stance is required as the ongoing economic recovery was fragile
The RBI kept 2009/10 GDP forecast at 6% with upside bias and said it sees modest decline in agriculture. The RBI raised projection of inflation to 6.5% with an upside bias at end March 2010 from earlier 5%.
The RBI said it will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively. It said it is mindful of its fundamental commitment to price stability. The central bank said the current large overhang of liquidity could engender inflation expectation even if credit demand remains subdued.
The central bank said the policy dilemma for India is different in some important respects from that of advanced economies as also other emerging market economies. It said India is confronted with an upturn in inflation, with rising headline inflation and stubbornly elevated consumer price inflation. According to RBI, most advance economies and emerging market economies do not face an immediate risk of inflation. In several advanced economies, the concerns are about a possible deflation, which are just about waning.
Effective immediately, the RBI ended a special repurchase facility for banks and another for the funding needs of non-bank financial companies, mutual funds and housing finance companies. It also ended a forex swap facility for banks, and cut an export credit refinance facility to a pre-crisis level of 15% from 50% with immediate effect.
The central bank said the collateralised borrowing and lending obligation liabilities of banks would be subject to cash reserve ratio requirements from 21 November 2009.
The balance of judgement at the current juncture is that it may be appropriate to sequence the exit in a calibrated way so that while the recovery process is not hampered, inflation expectations remain anchored, the RBI said in its quarterly review. The 'exit' process can begin with closure of some special liquidity support measures, it said.
The RBI said bank credit remained sluggish and it cut its forecast for adjusted non-food credit growth in 2009/10 to 18% from 20%. Banks are urged once again to step up their efforts towards credit expansion while preserving credit quality which is critical for revival of growth, it said. The central bank has lowered the money supply growth projection for 2009-2010 to 17% from 18%.
The RBI said a large amount of liquidity in the system could potentially result in an unsustainable asset price build-up. There is already some evidence of excess liquidity feeding through asset prices with potential financial stability concerns. Further, capital flows have resumed. Given the limitations of the economy's current absorptive capacity, these flows will add to the overall domestic liquidity, further fuelling the asset price build-up. Large capital inflows and asset price inflation have the potential to feed on each other, it said.
The Reserve Bank of India's monetary policy review, announced on Tuesday, is in line with the government's thinking, Finance Minister Pranab Mukherjee said. Finance Minister sees FY2010 growth of 6.5 to 6.75 % and said easy monetary policy likely to continue until recovery is firm. Finance secretary Ashok Chawla said on Tuesday, one percentage point increase in banks' statutory liquidity ratio (SLR) by Reserve Bank of India (RBI) on Tuesday would not impact banks much.
Reserve Bank head D Subbarao said there is scope for banks to cut lending rates further.
European shares rose on Tuesday, with energy stocks taking the lead after oil heavyweight British Petroleum's third-quarter results beat forecasts. The key benchmark indices in France, Germany and UK rose by between 0.28% to 0.38%.
Asian stocks declined on Tuesday as raw material prices fell and Hong Kong enacted measures to curtail property speculation. Down payments for homes priced above HK$20 million ($2.58 million) will be raised to 40% from 30%, Hong Kong Monetary Authority Chief Executive Norman Chan said. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan, were down by between 0.14% to 2.83%.
Prices for the luxury property in Hong Kong have exceeded their former historical peak, set in 1997. Prices in the mass market, meanwhile, have risen about 30% since the start of the year, matching highs seen in the run up to the global financial crisis last year, but they remain below their 1997 levels.
Trading in US index futures indicated a flat opening of US stocks on Tuesday, 27 October 2009.
US markets retreated on Monday, led by financials and commodities, as the dollar rebounded. Financials were the day's biggest decliner after Rochdale Securities analyst Richard Bove downgraded three of the industry's bigger names- Suntrust, Fifth Third Bancorp, and US Bancorp. The Dow Jones dropped 104.22 points, or 1.05%, to 9,867.96. The S&P 500 Index shed 12.65 points, or 1.17%, to 1,066.95. The Nasdaq Composite Index fell 12.62 points, or 0.59%, to 2,141.85.
Back home, the supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary equity market. As per reports, Indian firms have garnered about $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April 2009. Indian companies are taking advantage of a surge in liquidity to recapitalize and fund capital expenditure after being starved of cash last year.
Most of these companies - from industries ranging from liquor and spirits to infotech - issued equity shares to a select group of investors by way of qualified institutional placement or QIP. If the enabling resolutions passed by the companies are any indication, Indian firms are gearing up to raise $15 billion (Rs 69,427 crore) in the next six months. The list includes Hindalco (Rs 2,900 crore), JSW Steel ($1 billion), India Cements ($100 million), Essar Oil ($2 billion), Tata Steel (Rs 5,000 crore), Jet Airways ($ 400 million) and Bharat Forge ($150 million).
Unlisted Reliance Infratel announced on 22 September 2009 its intention to raise Rs 5,000 crore from the primary market. Divestment of state-run firms by the government may also increase the supply of paper in the market.
The government recently approved stake sales in state-run power producer NTPC and another unlisted power firm Satluj Jal Vidyut Nigam which reflects the country's resolve to speed up reforms and raise more resources for social schemes. On Monday, Trade Minister Anand Sharma said the Union Cabinet had approved a 5% stake sale in NTPC, and 10% in, an unlisted power producer. On 16 October 2009, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.
The government has approved a follow-on public offering of 20% of state run Steel Authority of India, the steel minister said on Wednesday, 21 October 2009. The Government of India owns nearly 86% of Sail.
As per provisional figures, the BSE 30-share Sensex was down 409.90 points or 2.45% to 16330.60. The Sensex fell 41.41 points at the day's high of 16,699.09 in early trade. The barometer index fell 429 points at the day's low of 16,311.50 in late trade.
The S&P CNX Nifty was down 129.50 points or 2.61% to 4,841.40 as per provisional figures.
The market breadth, indicating the overall health of the market was weak. On BSE, 409 shares advanced as compared with 2287 that declined. A total of 62 shares remained unchanged.
Among the 30-member Sensex pack, 25 fell while rest rose.
BSE clocked a turnover of Rs 5899 crore higher than Rs 4978.15 crore on Monday, 26 October 2009.
The BSE Mid-Cap index fell 3.71% and the BSE Small-Cap index fell 4.33%.
Telecom stocks fell after Idea Cellular's Managing Director Sanjeev Aga, said on Monday the price war in the teleocom sector which he described as a 'bloodbath' would cut local call charges, currently at 40 paise a minute, to 'unsustainable' levels. Idea Cellular fell 4.14% extending Monday's 3.49% fall even as net profit rose 81.62% to Rs 273.15 crore in Q2 September 2009 over Q2 September 2008. The result hit the market during trading hours on Monday.
India's largest wireless operator by sales Bharti Airtel fell 6.65%. India's second- largest wireless operator by sales Reliance Communications fell 7%. The company said on Monday it does not have to pay any additional licence or spectrum fee to the government nor had it inflated its revenues. The statement came after the company said it had completed a preliminary review of a report issued by a government-appointed auditor which had accused it of various malpractices.
Energy major Reliance Industries fell 1.55% extending recent losses as partner Hardy Oil said late last week a D9 well will be plugged and abandoned. Hardy holds a 10% participating interest in the D9 block, which is located in the Krishna Godavari basin on the east coast of India. Reliance Industries is the operator and holds a 90% stake.
The continued pressure on gross refining margins, or the difference between the price of crude and the price of refined petroleum products, is seen weighing on the company's bottom-line in Q2 September 2009, in spite of higher gas production and refining throughput. RIL unveils Q2 results on Thursday, 29 October 2009.
A total of eight brokerages expect a between a 9% fall to a 1.4% rise in RIL's net profit at between Rs 3752.10 crore to Rs 4178 crore in Q2 September 2009 over Q2 September 2008. Their expectations peg a between 23% fall to a rise of 19.8% in revenue at between Rs 34292.90 crore to Rs 53667.70 crore in Q2 September 2009 over Q2 September 2008.
Meanwhile, RIL told the Supreme Court, last week, it had no knowledge of the pact between its chairman Mukesh Ambani and his younger brother Anil.
Mukesh Ambani-controlled Reliance Industries, India's top conglomerate, is fighting with Reliance Natural Resources, led by younger brother Anil Ambani, over the terms of a deal to sell gas to Reliance Natural at below the price set by the government. Reliance Industries has been presenting initial arguments in the case before the Supreme Court since 20 October 2009, saying the private deal between the Ambani brothers is not binding on the company, and it can sell the gas only at the government-approved price.
The government, which has the power to decide who can buy gas and at what price, had filed an application asserting it is the rightful owner of the disputed gas.
Anil Ambani's Reliance Natural Resources claims the contract is valid and wants the court to direct Reliance Industries to supply it with 28 mmscmd of gas for 17 years at almost half the government-set price of $4.2 per mmBtu.
The Supreme Court will resume hearing the case today, 27 October 2009, with Reliance Industries expected to conclude its initial arguments by Thursday, 29 October 2009. The court will then hear arguments by Reliance Natural Resources, following which it will consider a petition by the government to become a party to the dispute.
Metal stocks fell on profit taking after recent strong gains. Hindustan Zinc, National Aluminum Company, Hindalco Industries fell by between 0.08% to 7.81%.
India's largest copper maker by sales Sterlite Industries fell 5.48%. The company recently raised $500 million in convertible senior notes and plans to use the proceeds primarily for expansion of its copper business. The notes are convertible into American depositary shares at $23.33 per share.
Steel Authority of India (Sail) fell 3.57%. The steel minister said last week the government has approved a follow-on public offering of 20%. The government holds 85.82% stake in Sail.
India's largest steel maker by sales Tata Steel fell 7.04% after its net profit fell 49.49% to Rs 902.94 crore in Q2 September 2009 over Q2 September 2008. The results hit market during market hours today.
Bank stocks fell after Reserve Bank held key rates unchanged. India's largest private sector bank by operating income ICICI Bank fell 6.25% after Singapore's Temasek cut its stake to 5.76% as of 30 September 2009 from 7.6% as of end of June 2009. Temasek said in a statement in Singapore that any stake sales are part of regular moves to review and rebalance its portfolio.
India's largest bank by branch network State Bank of India fell 4.36%. State Bank of India (SBI) announced on 24 October 2009 that it has concluded the issue of $750 million fixed rate senior notes having a maturity of 5 years at a coupon of 4.50% under the Medium Term Notes (MTN) Programme in the form of Regulation S Global Note. The bonds have been issued through the bank's London branch as of 23 October 2009
India's second largest private sector bank by net profit HDFC Bank fell 1.23% as its ADR fell 3.31% on Monday. The bank's net profit rose 30.2% to Rs 687.46 crore in Q2 September 2009 over Q2 September 2008. The results were more or less in line with market expectations.
Banks do not have to make any mark-to-market provisions on securities held in the HTM basket if prices of securities fall. Provisions have to be made out of profit and therefore, impact a bank's bottom line. Yields on ten-year government bonds have risen sharply this year. Bond prices and bond yields are inversely related.
Rate sensitive realty stocks fell after the central bank raised the provisioning requirement for banks' advances to the commercial real estate sector classified as 'standard assets' from the present level of 0.40% from 1%. Indiabulls Real Estate,DLF, Ackruti City, Unitech, Omaxe fell by between 2.48% to 8.99%.
In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said.
Realty stocks have risen sharply over the past few weeks on reports that demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and a recovery in the job market. The housing market had slumped last year amid a global credit crunch and buyers fearing job losses
India's third largest IT exporter by sales Wipro rose 1.99% on better than expected results. As per consolidated Indian GAAP results, the company recorded 19% rise in net profit to Rs 1162 crore in Q2 September 2009 over Q2 September 2008. The net profit rose 14% to Rs 1162 crore in Q2 September 2009 over Q1 June 2009. The results hit the market before trading hours today.
Wipro said order book has gone up and it is seeing a strong second half as pricing stabilises. Wipro expects its IT services revenue to rise 3.8% to 5.7% to $1.09-$1.11 billion in Q3 December 2009 ovfrom Q2 September 2009
India's largest commercial vehicle maker by sales Tata Motors rose 1.56% after net profit jumped 110.13% to Rs 729.14 crore on 11.87% rise in total income to Rs 8399.75 in Q2 September 2009 over Q2 September 2008. The results were announced after market hours on Monday.
Tata Motors said its operating margins surged 580 basis points at 13.4% in Q2 September 2009 over Q2 September 2008. Stable input costs and accelerated cost reduction efforts boosted margins, the company said. It said higher volumes and improved realizations contributed to growth in revenue. The company, however, warned that rise in commodity prices and component costs will exert pressure on margins going forward.
The company said a change in accounting policy with respect to foreign exchange transaction contributed to a massive 153.3% surge in profit before tax (PBT) to Rs 906.85 crore in Q2 September 2009 over Q2 September 2008. The year-on-year growth in PBT would have been much lower at 49.7% if the company had followed the current accounting policy with respect to foreign exchange transaction in Q2 September 2008, Tata Motors said.
Sales volume in the domestic market rose on the back of revival of the industrial activity in the country, improvement in liquidity in the financial system, introduction of new products and new variants of existing products. However, exports continue to be impacted by slowdown in the company's prime export markets and also due to volatility in exchange rates.
Tata Motors said its market share in the domestic commercial vehicles sector surged to 65.5% in Q2 September 2009 from 62% in Q2 September 2008. The company expects better demand in the second half of 2009/10 for medium and heavy trucks as economic activity picks up.
In the passenger car segment, Tata Motors said it has commenced deliveries of British brands Jaguar and Land Rover in the domestic market which has received encouraging response. The company expects its car sales to pick up in the coming months helped by its recently launched Manza sedan, and the Grande Punto from its joint venture with Fiat.
Ipca Laboratories rose 1.09% after net profit surged 74.97% to Rs 63.88 crore in Q2 September 2009 over Q2 September 2008.
Gillette India jumped 5.66% after the net profit soared 91.21% to Rs 38.32 crore on a 24.25% increase in sales to Rs 177.46 crore in Q1 September 2009 over Q1 September 2008.
Crompton Greaves fell 2.33% even after the net profit rose 47.07% to Rs 136.1 crore in Q2 September 2009 over Q2 September 2008.
The key benchmark indices extended losses in late trade as investors booked profit after the Reserve Bank of India did away with some special liquidity steps that it had announced in the aftermath of the global financial crisis. The RBI had pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. The central bank said the precise challenge for the Reserve Bank of India is to support the recovery process without compromising on price stability.
The BSE 30-share Sensex was down 409.90 points or 2.45% Intraday volatility was immense. Banking stocks fell as the RBI did not relax mark-to-market rules for bank's debt holdings. The market has been agog with talks of the central bank hiking the ceiling on the portion of government securities that banks can park in held-to-maturity (HTM). India's largest steel maker by sales Tata Steel fell after poor Q2 result.
Telecom stocks fell. Rate sensitive realty stocks fell. Metal stocks also declined. Index heavyweight Reliance Industries, too, edged lower.
Intraday volatility was immense. The market cut losses after an initial fall caused by weak Asian stocks. However, the intraday recovery proved short-lived. The market weakened soon after the central bank at 11:15 said an exit from an easy monetary policy has begun. The market extended losses in volatile trade later
Volatility may remain high on the bourses this week as traders rollover positions in the derivatives segment from October 2009 series to November 2009 series ahead of the expiry October 2009 contracts on Thursday, 29 October 2009.
The Reserve Bank kept its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on Tuesday, 27 October 2009. It also kept steady cash reserve ratio at 5% but raised the statutory liquidity ratio to 25% from 24% with effect from 7 November 2009. Funds in CRR fetch no return, while returns from SLR are small The central bank said an accommodative monetary policy stance is required as the ongoing economic recovery was fragile
The RBI kept 2009/10 GDP forecast at 6% with upside bias and said it sees modest decline in agriculture. The RBI raised projection of inflation to 6.5% with an upside bias at end March 2010 from earlier 5%.
The RBI said it will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively. It said it is mindful of its fundamental commitment to price stability. The central bank said the current large overhang of liquidity could engender inflation expectation even if credit demand remains subdued.
The central bank said the policy dilemma for India is different in some important respects from that of advanced economies as also other emerging market economies. It said India is confronted with an upturn in inflation, with rising headline inflation and stubbornly elevated consumer price inflation. According to RBI, most advance economies and emerging market economies do not face an immediate risk of inflation. In several advanced economies, the concerns are about a possible deflation, which are just about waning.
Effective immediately, the RBI ended a special repurchase facility for banks and another for the funding needs of non-bank financial companies, mutual funds and housing finance companies. It also ended a forex swap facility for banks, and cut an export credit refinance facility to a pre-crisis level of 15% from 50% with immediate effect.
The central bank said the collateralised borrowing and lending obligation liabilities of banks would be subject to cash reserve ratio requirements from 21 November 2009.
The balance of judgement at the current juncture is that it may be appropriate to sequence the exit in a calibrated way so that while the recovery process is not hampered, inflation expectations remain anchored, the RBI said in its quarterly review. The 'exit' process can begin with closure of some special liquidity support measures, it said.
The RBI said bank credit remained sluggish and it cut its forecast for adjusted non-food credit growth in 2009/10 to 18% from 20%. Banks are urged once again to step up their efforts towards credit expansion while preserving credit quality which is critical for revival of growth, it said. The central bank has lowered the money supply growth projection for 2009-2010 to 17% from 18%.
The RBI said a large amount of liquidity in the system could potentially result in an unsustainable asset price build-up. There is already some evidence of excess liquidity feeding through asset prices with potential financial stability concerns. Further, capital flows have resumed. Given the limitations of the economy's current absorptive capacity, these flows will add to the overall domestic liquidity, further fuelling the asset price build-up. Large capital inflows and asset price inflation have the potential to feed on each other, it said.
The Reserve Bank of India's monetary policy review, announced on Tuesday, is in line with the government's thinking, Finance Minister Pranab Mukherjee said. Finance Minister sees FY2010 growth of 6.5 to 6.75 % and said easy monetary policy likely to continue until recovery is firm. Finance secretary Ashok Chawla said on Tuesday, one percentage point increase in banks' statutory liquidity ratio (SLR) by Reserve Bank of India (RBI) on Tuesday would not impact banks much.
Reserve Bank head D Subbarao said there is scope for banks to cut lending rates further.
European shares rose on Tuesday, with energy stocks taking the lead after oil heavyweight British Petroleum's third-quarter results beat forecasts. The key benchmark indices in France, Germany and UK rose by between 0.28% to 0.38%.
Asian stocks declined on Tuesday as raw material prices fell and Hong Kong enacted measures to curtail property speculation. Down payments for homes priced above HK$20 million ($2.58 million) will be raised to 40% from 30%, Hong Kong Monetary Authority Chief Executive Norman Chan said. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan, were down by between 0.14% to 2.83%.
Prices for the luxury property in Hong Kong have exceeded their former historical peak, set in 1997. Prices in the mass market, meanwhile, have risen about 30% since the start of the year, matching highs seen in the run up to the global financial crisis last year, but they remain below their 1997 levels.
Trading in US index futures indicated a flat opening of US stocks on Tuesday, 27 October 2009.
US markets retreated on Monday, led by financials and commodities, as the dollar rebounded. Financials were the day's biggest decliner after Rochdale Securities analyst Richard Bove downgraded three of the industry's bigger names- Suntrust, Fifth Third Bancorp, and US Bancorp. The Dow Jones dropped 104.22 points, or 1.05%, to 9,867.96. The S&P 500 Index shed 12.65 points, or 1.17%, to 1,066.95. The Nasdaq Composite Index fell 12.62 points, or 0.59%, to 2,141.85.
Back home, the supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary equity market. As per reports, Indian firms have garnered about $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April 2009. Indian companies are taking advantage of a surge in liquidity to recapitalize and fund capital expenditure after being starved of cash last year.
Most of these companies - from industries ranging from liquor and spirits to infotech - issued equity shares to a select group of investors by way of qualified institutional placement or QIP. If the enabling resolutions passed by the companies are any indication, Indian firms are gearing up to raise $15 billion (Rs 69,427 crore) in the next six months. The list includes Hindalco (Rs 2,900 crore), JSW Steel ($1 billion), India Cements ($100 million), Essar Oil ($2 billion), Tata Steel (Rs 5,000 crore), Jet Airways ($ 400 million) and Bharat Forge ($150 million).
Unlisted Reliance Infratel announced on 22 September 2009 its intention to raise Rs 5,000 crore from the primary market. Divestment of state-run firms by the government may also increase the supply of paper in the market.
The government recently approved stake sales in state-run power producer NTPC and another unlisted power firm Satluj Jal Vidyut Nigam which reflects the country's resolve to speed up reforms and raise more resources for social schemes. On Monday, Trade Minister Anand Sharma said the Union Cabinet had approved a 5% stake sale in NTPC, and 10% in, an unlisted power producer. On 16 October 2009, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.
The government has approved a follow-on public offering of 20% of state run Steel Authority of India, the steel minister said on Wednesday, 21 October 2009. The Government of India owns nearly 86% of Sail.
As per provisional figures, the BSE 30-share Sensex was down 409.90 points or 2.45% to 16330.60. The Sensex fell 41.41 points at the day's high of 16,699.09 in early trade. The barometer index fell 429 points at the day's low of 16,311.50 in late trade.
The S&P CNX Nifty was down 129.50 points or 2.61% to 4,841.40 as per provisional figures.
The market breadth, indicating the overall health of the market was weak. On BSE, 409 shares advanced as compared with 2287 that declined. A total of 62 shares remained unchanged.
Among the 30-member Sensex pack, 25 fell while rest rose.
BSE clocked a turnover of Rs 5899 crore higher than Rs 4978.15 crore on Monday, 26 October 2009.
The BSE Mid-Cap index fell 3.71% and the BSE Small-Cap index fell 4.33%.
Telecom stocks fell after Idea Cellular's Managing Director Sanjeev Aga, said on Monday the price war in the teleocom sector which he described as a 'bloodbath' would cut local call charges, currently at 40 paise a minute, to 'unsustainable' levels. Idea Cellular fell 4.14% extending Monday's 3.49% fall even as net profit rose 81.62% to Rs 273.15 crore in Q2 September 2009 over Q2 September 2008. The result hit the market during trading hours on Monday.
India's largest wireless operator by sales Bharti Airtel fell 6.65%. India's second- largest wireless operator by sales Reliance Communications fell 7%. The company said on Monday it does not have to pay any additional licence or spectrum fee to the government nor had it inflated its revenues. The statement came after the company said it had completed a preliminary review of a report issued by a government-appointed auditor which had accused it of various malpractices.
Energy major Reliance Industries fell 1.55% extending recent losses as partner Hardy Oil said late last week a D9 well will be plugged and abandoned. Hardy holds a 10% participating interest in the D9 block, which is located in the Krishna Godavari basin on the east coast of India. Reliance Industries is the operator and holds a 90% stake.
The continued pressure on gross refining margins, or the difference between the price of crude and the price of refined petroleum products, is seen weighing on the company's bottom-line in Q2 September 2009, in spite of higher gas production and refining throughput. RIL unveils Q2 results on Thursday, 29 October 2009.
A total of eight brokerages expect a between a 9% fall to a 1.4% rise in RIL's net profit at between Rs 3752.10 crore to Rs 4178 crore in Q2 September 2009 over Q2 September 2008. Their expectations peg a between 23% fall to a rise of 19.8% in revenue at between Rs 34292.90 crore to Rs 53667.70 crore in Q2 September 2009 over Q2 September 2008.
Meanwhile, RIL told the Supreme Court, last week, it had no knowledge of the pact between its chairman Mukesh Ambani and his younger brother Anil.
Mukesh Ambani-controlled Reliance Industries, India's top conglomerate, is fighting with Reliance Natural Resources, led by younger brother Anil Ambani, over the terms of a deal to sell gas to Reliance Natural at below the price set by the government. Reliance Industries has been presenting initial arguments in the case before the Supreme Court since 20 October 2009, saying the private deal between the Ambani brothers is not binding on the company, and it can sell the gas only at the government-approved price.
The government, which has the power to decide who can buy gas and at what price, had filed an application asserting it is the rightful owner of the disputed gas.
Anil Ambani's Reliance Natural Resources claims the contract is valid and wants the court to direct Reliance Industries to supply it with 28 mmscmd of gas for 17 years at almost half the government-set price of $4.2 per mmBtu.
The Supreme Court will resume hearing the case today, 27 October 2009, with Reliance Industries expected to conclude its initial arguments by Thursday, 29 October 2009. The court will then hear arguments by Reliance Natural Resources, following which it will consider a petition by the government to become a party to the dispute.
Metal stocks fell on profit taking after recent strong gains. Hindustan Zinc, National Aluminum Company, Hindalco Industries fell by between 0.08% to 7.81%.
India's largest copper maker by sales Sterlite Industries fell 5.48%. The company recently raised $500 million in convertible senior notes and plans to use the proceeds primarily for expansion of its copper business. The notes are convertible into American depositary shares at $23.33 per share.
Steel Authority of India (Sail) fell 3.57%. The steel minister said last week the government has approved a follow-on public offering of 20%. The government holds 85.82% stake in Sail.
India's largest steel maker by sales Tata Steel fell 7.04% after its net profit fell 49.49% to Rs 902.94 crore in Q2 September 2009 over Q2 September 2008. The results hit market during market hours today.
Bank stocks fell after Reserve Bank held key rates unchanged. India's largest private sector bank by operating income ICICI Bank fell 6.25% after Singapore's Temasek cut its stake to 5.76% as of 30 September 2009 from 7.6% as of end of June 2009. Temasek said in a statement in Singapore that any stake sales are part of regular moves to review and rebalance its portfolio.
India's largest bank by branch network State Bank of India fell 4.36%. State Bank of India (SBI) announced on 24 October 2009 that it has concluded the issue of $750 million fixed rate senior notes having a maturity of 5 years at a coupon of 4.50% under the Medium Term Notes (MTN) Programme in the form of Regulation S Global Note. The bonds have been issued through the bank's London branch as of 23 October 2009
India's second largest private sector bank by net profit HDFC Bank fell 1.23% as its ADR fell 3.31% on Monday. The bank's net profit rose 30.2% to Rs 687.46 crore in Q2 September 2009 over Q2 September 2008. The results were more or less in line with market expectations.
Banks do not have to make any mark-to-market provisions on securities held in the HTM basket if prices of securities fall. Provisions have to be made out of profit and therefore, impact a bank's bottom line. Yields on ten-year government bonds have risen sharply this year. Bond prices and bond yields are inversely related.
Rate sensitive realty stocks fell after the central bank raised the provisioning requirement for banks' advances to the commercial real estate sector classified as 'standard assets' from the present level of 0.40% from 1%. Indiabulls Real Estate,DLF, Ackruti City, Unitech, Omaxe fell by between 2.48% to 8.99%.
In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said.
Realty stocks have risen sharply over the past few weeks on reports that demand for residential projects in major cities is picking up on lower home loan rates, property price cuts by developers and a recovery in the job market. The housing market had slumped last year amid a global credit crunch and buyers fearing job losses
India's third largest IT exporter by sales Wipro rose 1.99% on better than expected results. As per consolidated Indian GAAP results, the company recorded 19% rise in net profit to Rs 1162 crore in Q2 September 2009 over Q2 September 2008. The net profit rose 14% to Rs 1162 crore in Q2 September 2009 over Q1 June 2009. The results hit the market before trading hours today.
Wipro said order book has gone up and it is seeing a strong second half as pricing stabilises. Wipro expects its IT services revenue to rise 3.8% to 5.7% to $1.09-$1.11 billion in Q3 December 2009 ovfrom Q2 September 2009
India's largest commercial vehicle maker by sales Tata Motors rose 1.56% after net profit jumped 110.13% to Rs 729.14 crore on 11.87% rise in total income to Rs 8399.75 in Q2 September 2009 over Q2 September 2008. The results were announced after market hours on Monday.
Tata Motors said its operating margins surged 580 basis points at 13.4% in Q2 September 2009 over Q2 September 2008. Stable input costs and accelerated cost reduction efforts boosted margins, the company said. It said higher volumes and improved realizations contributed to growth in revenue. The company, however, warned that rise in commodity prices and component costs will exert pressure on margins going forward.
The company said a change in accounting policy with respect to foreign exchange transaction contributed to a massive 153.3% surge in profit before tax (PBT) to Rs 906.85 crore in Q2 September 2009 over Q2 September 2008. The year-on-year growth in PBT would have been much lower at 49.7% if the company had followed the current accounting policy with respect to foreign exchange transaction in Q2 September 2008, Tata Motors said.
Sales volume in the domestic market rose on the back of revival of the industrial activity in the country, improvement in liquidity in the financial system, introduction of new products and new variants of existing products. However, exports continue to be impacted by slowdown in the company's prime export markets and also due to volatility in exchange rates.
Tata Motors said its market share in the domestic commercial vehicles sector surged to 65.5% in Q2 September 2009 from 62% in Q2 September 2008. The company expects better demand in the second half of 2009/10 for medium and heavy trucks as economic activity picks up.
In the passenger car segment, Tata Motors said it has commenced deliveries of British brands Jaguar and Land Rover in the domestic market which has received encouraging response. The company expects its car sales to pick up in the coming months helped by its recently launched Manza sedan, and the Grande Punto from its joint venture with Fiat.
Ipca Laboratories rose 1.09% after net profit surged 74.97% to Rs 63.88 crore in Q2 September 2009 over Q2 September 2008.
Gillette India jumped 5.66% after the net profit soared 91.21% to Rs 38.32 crore on a 24.25% increase in sales to Rs 177.46 crore in Q1 September 2009 over Q1 September 2008.
Crompton Greaves fell 2.33% even after the net profit rose 47.07% to Rs 136.1 crore in Q2 September 2009 over Q2 September 2008.