Market may turn accommodating

The possibilities are numerous once we decide to act and not react.

After reaction, its time for some action now. The market appears to have made a hasty exit just as the RBI tone signaled the beginning of the end of easy monetary policy. A few surprisingly hawkish steps and comments unveiled in the RBI’s mid-year policy review set the cat among the pigeons. A hike in SLR, some tightening of lending norms and hike in inflation expectation sent a clear message that the soft corner shown during the economic upheaval will no longer be available. But, the market may have overreacted. What made the matters worse were persistent weakness in global markets and a couple of less enthusiastic numbers.

So, expect a bounce back though the start may still be a nervous one due to mixed external trend. RIL will announce its results tomorrow and numbers could match expectations as there is usually some treasury gain to bank on. With F&O expiry just a day away, further short covering could set in. Nifty Nov futures managed to end at a slight premium to the spot Nifty price.

Results Today: ACC, Ambuja Cements, Anant Raj, Andhra Bank, BOB, BEML, Bombay Dyeing, Chennai Petro, Cipla, EIH, Essel Propac, GAIL, Gammon Infra, GNFC, HCL Tech, Hexaware, HPCL, Hotel Leela, India Cement, Ingersol Rand, Jain Irrigation, LMW, MRPL, Marico, Mercator Lines, Shree Cement, Sun Pharma, Sun TV, Tata Tea, Thomas Cook, Usha Martin and Zicom.

FIIs were net sellers in the cash segment on Tuesday at Rs5.49bn on a provisional basis. The local funds were net buyers of Rs1.42bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs15.94bn. On Monday, the foreign funds were net buyers of Rs1.9bn in the cash segment. Their net investments in Indian stocks this year is above $14bn. Mutual Funds were net sellers at Rs3.61bn on Monday.

US stocks closed mixed on Tuesday with Dow Jones Industrial Average managing slim gains and the Nasdaq Composite finishing in the red. A rally in energy space and a surprise drop in consumer confidence provided a competitive backdrop to the day.

A better-than-expected housing market report and a strong response to the government's latest debt auction were also in the mix.

The Dow gained 14 points, or 0.1%, to 9,882.17. The S&P 500 index rose 3 points, or 0.3%, to 1,063.41. But the Nasdaq lost 26 points, or 1.2%, to 2,116.09.

Since peaking at rally highs a week ago, the Dow has lost 2.3%, the S&P 500 has lost 3.4% and the Nasdaq has lost 3.4% through Tuesday's close.

Although the S&P 500 is up 57% from the March bottom, when it hit a 12-year low, the broad average is still down 32% from its all-time high of October 2007.

Weakness in banks, techs, retailers and transportation stocks dragged down the Nasdaq and limited the rest of the market from moving much. A rally in heavily weighted Dow components Chevron, Exxon Mobil, DuPont and American Express kept the blue-chip measure afloat.

US stocks had tumbled on Monday, with the Dow dropping 100 points for the second day in the row. A spiking dollar hit commodity shares and other stocks that benefit from a weak US currency.

The dollar and commodity prices remained in focus Tuesday as well. But investors also looked to the economic news ahead of Thursday's highly anticipated gross domestic product (GDP) report.

Energy was the strongest sector on the day, as investors reacted to a smattering of financial reports and the impact of the US dollar.

European oil behemoth BP reported weaker quarterly earnings and revenue due to lower oil prices, but the results topped analysts' estimates. BP's US-traded shares rose 4%.

Valero Energy, the largest US oil refiner, reported a bigger-than-expected quarterly loss, with fuel demand suffering amid the sluggish economy. Shares fell 4.3%.

Nonetheless, a variety of energy stocks rallied, including Dow components Chevron and Exxon Mobil.

Raw commodity prices were higher as well, despite a mixed dollar. Typically a weak dollar boosts dollar-traded commodity prices and a strong dollar pressures prices.

Consumer sentiment took a plunge in October, according to a Conference Board report released after the start of trading. The Consumer Confidence index fell to 47.7 in October from a revised 53.4 in September, reflecting the impact of rising joblessness and shrinking household wealth. Economists thought the index would rise to 53.5.

The part of the index that measures how consumers rate the present economic situation fell to 20.7 in October from 23 in September. It was the lowest level since February 1983, when it stood at 17.5.

Home prices rose for the fourth month in a row in August, according to the S&P Case-Shiller Home Price index of the 20 largest metropolitan areas. Prices also showed the smallest year-over-year declines in nearly 2 years. Prices rose 1.2% in August after climbing 1.6% in July. Versus a year ago, prices were down 11.3%, but that was shy of the 11.9% drop economists were expecting.

With 230 companies, or 46%, of the S&P 500 having already reported results, profits are on track to have fallen 18.1% from a year ago, according to the latest from Thomson Reuters. Results have largely topped forecasts, with 80% of companies beating earnings' estimates, 6% meeting expectations and 13% missing forecasts.

The dollar gained versus the euro, after falling to a 14-month low last week. But the greenback fell versus the yen.

US light crude oil for December delivery rose 87 cents to settle at $79.55 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $7.40 to settle at $1,035.40 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.

Treasury prices rallied, lowering the yield on the 10-year note to 3.47% from 3.55% late on Monday. Gains accelerated after the government saw strong demand for its sale of $44 billion in 2-year notes.

European stocks closed higher in a choppy session, as weaker-than-expected US consumer confidence data contrasted with better-than-expected results from oil giant BP. The pan-European Dow Jones Stoxx 600 index finished with a rise of 0.3% to 242.56.

The UK's FTSE 100 index rose 0.2% to 5,200.97, while the French CAC-40 index finished fractionally lower to 3,734.95 and Germany's DAX index declined 0.1% to 5,635.02.

Indian markets witnessed a sharp dent dropping the most in two months on a hawkish RBI tone in the Monetary Policy. The central bank’s move to tighten liquidity and an upward revision in inflation forecast triggered a heavy sell-off on the bourses. Weak global cues and disappointing quarterly earnings announced by select leading Indian companies further dampened the sentiment on Dalal Street.

The interest rate sensitive like the Banking and the Realty stocks were offloaded the most. Apart from the index heavyweights, even the Mid-Cap and the small-Cap stocks were hammered by the bears.

Markets saw the highest turnover ever in the F&O segment on a non-expiry day and third highest volumes in the overall market.

Technically, the NSE Nifty was seen taking support at the 4545 levels which is also the 50 Day moving average for the index. If the crucial support level is taken out, 4720-4730 levels which have acted as an important resistance in the past would be the next support.

The BSE Sensex fell 387 points at 16,353 after touching a high of 16,699 and a low of 16,311. The index opened at 16,699 against the previous close of 16,740. The NSE Nifty fell 124 points to shut shop at 4,847.

In Asia, the Nikkei in Japan was down 1.4%, while Australia's S&P/ASX ended lower by 1.6% at 4,753. Shanghai SE Composite fell 2.8% and Hang Seng index in Hong Kong fell 2%.

In Europe, stocks were in the positive terrain. The FTSE in the UK was up 0.3%, The DAX in Germany was up 0.3% and the CAC 40 index in France was up 0.2%.

Coming back to India, among the BSE sectoral indices, the Realty index was the top loser, shedding 6.2%, followed by the Metals index that was down 6% and the BSE Banking index was down 4%.

The BSE Mid-Cap index fell 3.7% and the BSE Small-Cap index was down 4.4%.

Among the 30-components of Sensex, 23 stocks ended in the red and 7 ended in the positive terrain. Hindalco, Tata Steel, Bharti Airtel, RCom, DLF and ICICI Bank were among the major losers.

On the other hand, among the major gainers were Wipro, Hindustan Unilever, Tata Motors and Grasim.

Outside the frontline indices, the big losers in the broader market were Sesa Goa, Areva Jet Airways and Sterling Biotech. On the other hand, gainers included PTC, Union Bank, Cadila and Apollo Hospital.

Tata Steel Q2 net profit fell 49% YoY to Rs9.03bn as against Rs17.9bn in the same period last year. Q2 Net sales dropped 16% YoY to Rs56.3bn as against Rs67.3bn.

Shares of Tata Steel plunged over 7% to Rs501. The stock opened at Rs534 and made an intra-day high of Rs534 and a low of Rs495. Total traded volumes stood at 3.6mn shares.

The telecom stocks continued to remain under pressure as the CBI probe on the Indian telecommunication ministry and the private operators in connection with alleged irregularities in allocation of spectrum to new operators prolong.

"It has been alleged that there had been serious irregularities in the award of Unified Access Services Licenses to private companies," CBI said.

The CBI has carried out searches to collect "incriminating documents in the Wireless Planning Cell, and in the office of deputy-director general for Access Services, Sanchar Bhawan, Ashoka Road".

Bharti Airtel lost 7%, RCom fell 6.5% and Idea declined 4.5%.

Shares of DLF further lost ground after the income-tax department gave a notice to the company asking it why its accounts for fiscal year 2007 should not be subjected to a special audit by an independent auditor.

The I-T department calls for a special audit when officials assessing a company’s tax returns suspect the tax liability has been understated.

However, according to reports, a DLF spokesman termed the new notice as a routine follow-up. “The due legal process is on, and our appeal on last year’s assessment is sub judice in the I-T department. DLF is sure of its facts and figures, which will be duly considered in the appeal.”

The stock declined over 10% in the past four trading sessions. On Tuesday, it was down 6.5% to Rs401; it opened at Rs420 and made an intra-day high of Rs425 and a low of Rs399. Total traded volumes stood at 3.9mn shares.

Shares of Power Finance zoomed from days low after the company registered a growth of 95% YoY with net profit of Rs6.37bn for the quarter ended September 30, 2009 as compared to Rs3.29bn for the quarter ended September 30, 2008.

Total Income increased from Rs16.02bn for the quarter ended September 30, 2008 to Rs20.46bn for the quarter ended September 30, 2009.

The stock ended flat at Rs227, it opened at Rs228 and made an intra-day high of Rs236 and a low of Rs216. Total traded volumes stood at 0.76mn shares.