Monday, October 24, 2011

BSE / NSE Weekly Analysis for the week ending 21 Oct 2011


BSE / NSE Weekly Analysis for the week ending 21 Oct 2011


The market declined for the week ended 21 st  October 2011 due to trailing weakness in global shares caused by disappointment over the pace of European rescue plan. Investors feared  building fresh positions as data  showing acceleration of food inflation early this month raised prospects of more rate hikes from the central bank to tame inflation, which remains uncomfortably high. Stock specific action  was witnessed as most index heavyweights announced their results for the quarter ending September 2011.

Foreign institutional investors (FIIs) outflow in October 2011 totaled Rs 675.20 crore (19th October 2011). FII outflow in calendar 2011 totaled Rs 966.80 crore (19th  October 2011).

Indices Review

The BSE Sensex fell 297.05 points or 1.74% to settle at 16,785.64 in the week ended Friday, 21 October 2011. The 50 shares S&P CNX Nifty fell 82.35 points or 1.60% to 5,049.95
The market declined this week, trailing weakness in global shares caused by disappointment over speed of European rescue plan. Investors feared building fresh positions as data showing acceleration of food inflation early this month  raised prospects of more rate hikes from the central bank to tame inflation, which remains uncomfortably high. Stock specific action was witnessed as most index heavyweights announced their June-September 2011 quarter results.
  
Foreign institutional investors (FIIs) outflow in October 2011 totaled Rs 675.20 crore (till 19 October 2011). FII outflow in calendar 2011 totaled Rs 966.80 crore (till 19 October 2011). 
Inflation, as measured by the wholesale price index (WPI), rose 9.72% in September 2011, compared with a 9.78% rise in August 2011,  data released by the government on 14 October 2011, showed. WPI inflation for July 2011 was revised upwards to 9.36% from the provisional reading of 9.22%.

Trading for the week began on a weak note. The BSE Sensex 
fell 1.74% to settle at 16,785.64 in the week ended Friday, 21 October 2011. The 50 shares S&P CNX Nifty fell 1.60% to 5,049.95. The BSE Mid-Cap index fell 1.26% and the BSE Small-Cap index fell 1.20%. Both these indices outperformed the Sensex.

Sectoral Review           
                 
Capital Goods:  
The BSE Capital Goods index fell 4.38% to close at 10,558. Among the heavyweights in the industry Crompton Greaves, L&T, BHEL & Siemens fell 14.0%, 5.1%, 4.1% & 2.6% respectively. Disappointing L&T Q2 numbers dragged the gauges in the negative zone. L&T tumbled 5.1% to Rs 1336 after the company cut its order growth guidance for the current fiscal year to 5%, from 15% earlier. Order flow is being hampered by investment slowdown, project deferrals and higher competition

IT: 
The BSE IT index fell 3.04% in the week to close at 5,526 levels. TCS, HCL Tech, Wipro, and Infosys fell 7.6%, 6.4% 2.6% and 0.8% espectively. TCS was the top loser this week. The stock declined 7.60% to Rs 1048.25 after disappointing Q2 results, which the company announced after market hours on Monday, 17 October 2011.  TCS chief financial officer and executive director S Mahalingam on Tuesday, 18 October 2011, said that TCS would cut costs and focus on high-margin services to maintain its profitability in the traditionally weak October-December quarter. TCS' consolidated net profit fell 4.7% to Rs 2301 crore on 7.7% growth in revenue to Rs 11633 crore in Q2 September 2011 over Q1 June 2011.
  
Realty: 
The BSE Realty index fell 2.96% to close at 1,773 levels. HDIL, Indiabuls Real Estate, DLF, Unitech and fell 8.1%, 7.3%, 3.1% and 2.4% respectively. DLF declined 3.1% to Rs 225.05 after the Securities and Exchange Board of India (Sebi) said on Thursday, 20 October 2011, that it would investigate allegations against the real estate developer that it failed to disclose a police complaint against an associate firm in its share sale document in 2007. The allegations were from a complainant who alleged that Sudipti Estates, which he said was an associate of DLF, had duped him of about Rs 34 crore.

Power: 
The BSE Power index fell 2.78% to close at 2,108 levels in the week ended 21st October 2011. Crompton Greaves, BHEL, Tata Power, NTPC fell 14.0, 4.1%, 2.7% and 2.2% respectively. Crompton Greaves has announced its financial  results for the quarter and half year ended September 2011. During 2QFY12, the company has reported 13% YoY rise in sales and 45% YoY decline in net profits. The rise has come on the back of around 12% YoY growth in power systems business and about 29% YoY rise in industrial systems business.

However, growth in the consumer products segment was muted at about 4% YoY. Operating profits declined by 32% YoY during 2QFY12 as operating costs grew by  20% YoY. Further, significant increase in interest cost and depreciation charges during the quarter caused the bottomline to decline by about 45% YoY. During 1HFY12, the company's sales increase by 9% YoY, while net profits decline by 52% YoY

Oil & Gas:  
The BSE Oil & Gas index fell 2.37% to close at 8,650 levels in the week ended 21st October 2011. Reliance Industries and ONGC fell 3.6% and 0.5% respectively. Reliance Industries (RIL) fell extending recent losses triggered by weak  Q2 operating performance. The core operating profit margin (OPM) declined sharply to 12.5% in Q2 September 2011 from 16.3% in Q2 September 2010. Media reports had suggested recently that RIL may suspend oil and gas drilling operations for an unspecified time until an  internal valuation of its exploration and production strategy.

Outlook 

High volatility is expected on the bourses in a truncated trading week. There are many variables for investors to grapple with, including corporate earnings, a policy review from the Reserve Bank of India, expiry of the near-month  October 2011 futures & options contracts and a European Union summit to finalize a package of  comprehensive measures to tackle the eurozone debt crisis.

The near-month October 2011  derivatives contracts expire on, 25th  October 2011. Furthermore with the rupee hitting a near 30-month low below the 50/$ level against the dollar, shares of exporters including IT firms may edge higher while those of the importers may witness an adverse impact.  

With inflation remaining at uncomfortably high level, the Reserve Bank of India (RBI) is seen delivering another rate hike of 25 bps at its half-yearly review of the monetary policy on Tuesday, 25th October 2011.

A special muhurat trading session is scheduled on the bourses from 16:45 to 18:00 on Wednesday, 26th  October 2011on account of Diwali. There is no regular trading session on that day. The market also remains closed on Thursday, 27 October 2011, on account of Diwali, the festival of lights.

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