Sensex tanks over 100 points on disappointing HLL results

Sensex tanks over 100 points on disappointing HLL results

HLL results weigh down the market

Disappointing quarterly results from FMCG major Hindustan Lever dragged the market lower in the afternoon trades as selling continued after early weakness and subsequent decline in stock prices. While heavyweights led the losses on the bourses, weakness was conspicuous in banking stocks.

At 14:27 IST, the Sensex was trading 117.91 points lower at 6,166.29. The NSE S & P CNX Nifty index was down 33.80 points at 1,907.59.

The market ended with a small gain on Thursday on expiry of the April series futures contracts. However, the May series futures contracts have been trading at sharp discount to the spot market, indicating a bearing view of the market by traders. Besides, in its annual Credit Policy, the Reserve Bank of India on Thursday hiked the reverse repo rate – the rate at which banks park their surplus funds with the RBI – by 25 basis points to 5%. The decision is a clear signal that the interest rate cycle may have turned.

Hindustan Lever (down 4.56% to Rs 137.10) lost ground – having come off its day’s high of Rs 145 – as selling pressure intensified on the counter after the company posted quarterly numbers that fell short of expectations. For quarter ended 31 March 2005, the FMCG giant posted a 15.13% fall in the net profit to Rs 250.25 crore (Rs 294.88 crore) on total income of Rs 2,581.02 crore (Rs 2,424.69 crore). Over 8.40 lakh HLL shares were traded on BSE so far.

Banking stocks traded lower. The BSE Bankex was trading 116.77 points, or 3.24%, lower at 3,491.69.

Banking and financial sector blue chips ICICI Bank (down 4.29% to Rs 359), State Bank of India (down 2.85% to Rs 587), HDFC (down 2.07% to Rs 531.40) and HDFC Bank (down 1.04% to Rs 531) lost further ground as selling continued amid fears that rising bond yields may affect banks’ profits.

In its annual Credit Policy, the Reserve Bank of India on Thursday, hiked the reverse repo rate – the rate at which banks park their surplus funds with the RBI – by 25 basis points to 5%. The decision is a clear signal that the interest rate cycle may have turned.

Bank of India (down 6.32% to Rs 80.85) lost ground – having come off its day’s high of Rs 87.90 – on selling after the company announced disappointing quarterly results. For quarter ended 31 March 2005, the PSU bank posted a 85% fall in the net profit of Rs 52.79 crore (Rs 349.10 crore) on total income of Rs 1,978.65 crore (Rs 2,059.09 crore). Over 8.50 lakh BoI shares were traded on BSE so far.

Other banking stocks Union Bank of India (down 5.59% to Rs 97.10), Andhra Bank (down 5.52% to Rs 93.35), Bank of Maharashtra (down 4.13% to Rs 30.15), Bank of Baroda (down 4.32% to Rs 173.90), Indian Overseas Bank (down 3.95% to Rs 70.55), Canara Bank (down 3.59% to Rs 174.50), Corporation Bank (down 3.65% to Rs 330) and Kotak Mahindra Bank (down 3.51% to Rs 297.20) also lost further ground on sustained selling pressure.

Punjab National Bank (down 0.55% to Rs 350) traded lower – off its day’s high of Rs 358.80 – on selling at higher levels. The PNB stock rose after the bank announced improved quarterly results in early afternoon. Over 6.40 lakh PNB shares were traded on BSE so far.

Grasim (down 3.13% to Rs 1,174.80) remained subdued as selling continued after the company announced disappointing quarterly results. For quarter ended 31 March 2005, the Aditya Birla group flagship posted an 18.63% fall in the net profit to Rs 229.52 crore (Rs 282.07 crore) on total income of Rs 1,724.65 crore (Rs 1,625.27 crore). Close to 50,000 Grasim shares were traded on BSE so far.

Zee Telefilms (up 1.62% to Rs 131.70) traded higher after the company announced quarterly results. On consolidated basis, for quarter ended 31 March 2005, the Zee Telefilms group posted a 2.02% rise in the net profit to Rs 92.69 crore (Rs 90.85 crore) on total income of Rs 400.17 crore (Rs 410.49 crore). Over 3.72 lakh Zee shares were traded on BSE so far.

United Phosphorus (down 0.15% to Rs 743.95) traded flat – having come off its day’s high of Rs 772 – after the company announced improved quarterly results. For quarter ended 31 March 2005, the company posted a net profit of Rs 21.48 crore (Rs 10.35 crore) on net sales of Rs 349.06 crore (Rs 261.91 crore).

The volumes on the bourses were modest with shares worth Rs 1,300 crore being traded on BSE so far. The breadth of the market was very weak with 1,673 losers and 593 gainers.

Yeah. Bad day for the markets. But given the global macro scenario and disappointing results from some large cap stocks, guess the fall was not all that unexpected. The Bovespa cracked around 3.5% yesterday. Will need to watch for the trends in other emerging markets closely over the next few days. 1900 held today (though it was broken intra-day). Lets see how the market pans out on Monday.

.. and now the FIIs have sold net 325.2 crores on Thursday. With US GDP growth slowing and inflation rising, the Fed may continue raising rates to curb inflation. This will result in a flow of capital out of emerging markets and back to the US.

Share prices tumbled across the board on the back of below-expectation earnings announced by Hindustan Lever and Grasim, rising interest rates and input costs for companies.

Prospects of a firm interest rate trend hit banks and a firm rupee took the shine off export-oriented software service firms. According to market players, share prices are expected to remain weak ahead of a key meeting of the US Federal Reserve Open Market Committee next Tuesday.

The 30-share BSE sensex fell 2% or 130 points to 6154. Over the past one week, the market has shed 3% in value. Losers outpaced gainers by a ratio of 3:1. Trading volume remained at 148m shares, the average for April ’05. This is much lower than the over 200m shares daily average till mid-March ’05.

On the NSE, the Nifty index fell 2% to close at 1902. Technical analysts see 1900 as a support level for the index. The Nifty May futures contracts closed at Rs 1,882, a discount of 20 points. This is lower than the 30-point discount on Thursday. Many short-sellers booked profits by covering up their positions at the 1900-level, according to traders. Foreign institutional investors have turned net sellers as global risk appetite is all set to decline amid rising interest rates.

Investors opted for bond markets in the US. Over the past three days to Thursday, FIIs reported a net outflow of over $100m.

Local funds bought just over Rs 250 crore or $50m worth of equities. However, this was not enough to stem the fall in Indian equities.

A below-expectation performance by Hindustan Lever and Grasim hit stock prices. Hindustan Lever, the biggest consumer goods firm, fell 4.1% after it reported a 12% drop in its March quarter profits. The company cited high input costs and competitive pressures for operating profits to decline to 9.7% from over 15%.

Grasim Industries reported a 19% drop in quarterly net profit for the March ’05 quarter. The company reported a 24% decline in operating profit margin, against 28% in the year-ago period. Consequently, share price fell 4.2% to Rs 1,162.

Bank shares fell on fears that rising bond yields are likely to hit profits. This follows a hike of 25 basis points in short-term interest rate by the RBI on Thursday. State Bank of India, the biggest commercial bank, fell 3.2% to Rs 585, while ICICI Bank lost 4% value to Rs 360.

A firm trend in the rupee hit software service firms. Every 1% change in the value of the rupee shaves off 0.25% of software service firms’ operating profits. Infosys Technologies, the second biggest software services exporter, fell 1% to Rs 1,885. Wipro, the third largest exporter, fell 1.2% to Rs 632 and Satyam Computer, the fourth largest, shed 4.5% to Rs 399.