Mkts under selling pressure; Nifty holds above 5K

The markets have recovered some early trade losses following recovery in Asian markets but still witnessing huge selling pressure The Sensex is hovering around its 17000 mark and the Nifty maintained above 5000. Selling continued in banking, auto, capital goods, realty, power, oil, FMCG and metal stocks. Market breadth has improved a bit but still weak. Midcap and small cap stocks also recovered smartly but still in red.

At 11:15 am, the Sensex was down 257 points at 16,986 and the Nifty down 72 points at 5,045. About 1323 shares have advanced, 1590 shares declined, and 190 shares are unchanged.

Tata Motors, Reliance Infra, ICICI Bank, Suzlon Energy and BPCL were top losers while TCS, Satyam, Infosys, Cairn India and Dr Reddy’s Labs gainers.

BSE Bankex lost over 2%; Auto and Capital Goods down close to 2%; Power and Realty down over 1.5%. BSE Oil & Gas, Metal and FMCG slipped over 1%.

However, major technology stocks were on buyer’s radar barring Wipro, MphasiS and HCL Tech. BSE IT Index up marginally by 0.22%. The Indian Rupee was trading around 43.15 per dollar.

Tea stocks like Harrisons Malay, Jayshree Tea, Ledo Tea and Tata Coffee, Bombay Burmah, CCL Products, Asian Tea, Dhunseri Tea and Goodricke Group were witnessing buying interest.

Amonst the small cap stocks, KGN Industries resumed its trading again today and locked at 5% upper circuit after yesterday’s unrealistic trading price. Sylph Technologies was up 65,525% at Rs 525 as against earlier close of 80 paise. There is no circuit filter for the stock.

Infosys sees higher wages to keep staff

Infosys Technologies Ltd, India’s No. 2 software services exporter, is seeing greater competition for talent, and expects higher salaries to help prevent attrition, a top company official said on Wednesday.

Infosys, which plans to add 25,000 employees in 2008/09, has made 18,000 offers to students at engineering colleges, and will also hire about 330 business school graduates, Nandita Gurjar, group head of human resources, told reporters.

"At business schools, we are competing with financial services firms -- they are the ’in thing’ now," she said.

"But at engineering colleges, where we compete with other software firms, we get in at Day Zero or Day One."

The Bangalore-based firm, which trails leader Tata Consultancy Services, has said wage increases of 11-13 percent will impact margins by 2.3 percent in the June quarter.

But higher wages were essential to retain talent in an industry where attrition levels are at 14-16 percent, she said.

"Our attrition rate is 13.4 percent, and we’d like to get it back to single digits -- the level we were at in 2004.

"But that will be hard," Gurjar said.

India’s $64 billion software services sector has been hit by slower growth at battered banks and financial firms, sectors that contribute most to revenues.

But that has not affected Infosys’ compensation strategy, Gurjar said.

"We are in fact, offering bigger raises than others, whose wage increases are in the single digits," she said.

"We haven’t changed our strategy because of the slowdown, as we need to hire and retain the best talent."

Oil knocks rupee past 43/dollar to 13-month low

The partially convertible rupee weakened past 43 per dollar to its lowest level in 13 months in opening deals on Thursday, as record oil prices raised worries of a widening trade deficit.

As long as the currency pair holds above Rs 43, there would be the possibility of a move higher to Rs 43.53 or Rs 43.82. A decline below Rs 42 would imply that the near term trend has turned negative and that the currency pair could move towards Rs 41.6 or Rs 41.2.

Supports – 42.2, 41.9, 41.3

Resistances –, 43.2, 43.5

Indian Stock Mkts crack Sensex below 17K

The markets have opened on a weak note following negative cues from Asian and US markets as Crude has hit a new all time high of USD 135 a barrel. Selling in banking, metal, realty and auto stocks is also putting pressure. The Sensex dipped below its psychological level of 17000 while Nifty is still holding above 5000 mark.Market breadth is unhelpful. Midcap and small cap stocks also caught up in negative terrain.

At 9:56 am, the Sensex was down 185 points at 17,057 and the Nifty down 51 points at 5,066. The CNX Midcap fell 55 points at 6,901.

BPCL, PNB, M&M, Unitech, HDFC Bank, Tata Motors, L&T, Nalco, ICICI Bank, Tata Comm, Rel Infra, ONGC and HUL were gainers while Satyam, Infosys, Cairn and Ambuja Cements gainers.

Asian markets were trading lower following weak US markets cues. Shanghai Composite fell 1.42% or 50.48 points at 3,493.71. Hang Seng slipped 2.435 or 617.45 points at 24,842.84. Nikkei 225 Average fell 0.91% or 126.42 points at 13,799.88. Jakarta Composite was down 1.05% or 26.08 points at 2,468.63. Straits Times fell 40.57 points or 1.27% at 3,156.33. Seoul Composite slipped 1.47% or 27.24 points at 1,820.27. Taiwan Weighted lost 71.30 points or 0.79% at 8,944.27.

US markets tumbled, posting their biggest losses in two weeks. The Federal Reserve signaled it is done cutting interest rates and record oil prices threatened to reduce profits at consumer companies. The Dow tumbled 227.49 points, or 1.77%, to 12,601.19. The Standard & Poor’s 500 index declined 22.69 points, or 1.61%, to 1,390.71, while the Nasdaq composite index plunged 43.99 points, or 1.77%, to 2,448.27.

Crude oil shot up by 4% and hit a high of USD 135 per barrel on the Nymex

India's consumer goods firms hike prices on rising costs

India’s consumer goods companies are hiking prices across categories as they battle rising costs of commodities such as steel, copper and oil, which are inputs for their products, company officials said on Wednesday.

Videocon Industries, Mirc Electronics, which owns the Onida brand, Whirlpool of India and Samsung India are among home appliance makers who have either raised prices or plan to do it in coming weeks.

"We are taking the opportunity of price increases but there will be a limitation to what extent you can pass on to the consumer because of competitive pressures and consumer purchasing patterns," Tamal Kanti Saha, vice president, sales at Whirlpool.

India’s growing middle-class and rising incomes have attracted consumer goods companies, but rising inflation could hurt consumer spending and put pressure on profit margins.

Crude prices have increased about 35 percent so far this year and copper is up around 24 percent. Global steel prices rose 40 percent since the beginning of the year.

Import costs are also rising with India’s weakening rupee that hit a 13-month low of 42.92 last Friday. The inflation rate rose to 7.83 percent in the 12 months to May 3, the highest since November 2004.

But, price increases alone may not suffice, officials say.

"The current situation might force companies to innovate better and squeeze out inefficiencies," Ashish Nanda, Partner Business Advisory Services, Ernst & Young said.

"Because you’re in an inflationary environment you cannot necessarily pass on the price increase to the consumer. Beyond a point of time the consumer is going to stop accepting that."

Whirlpool plans to hike prices across categories between 2-5 percent in July and said in April it will hike prices 2-3 percent in April-June.

Mirc Electronics plans to hike prices 5-7 percent in the next few days while Videocon Industries will increase prices of its consumer durables by 5-10 percent in two weeks.

Samsung India, owned by Korea’s Samsung Electronics Co Ltd is holding prices, but hiked refrigerator prices 2-3 percent in March, said Ruchika Batra, General Manager-Corporate Communications of Samsung South-West Asia Headquarters.

"It’s the peak selling period in air-conditioners. We don’t want to disturb the consumer sentiment," she said.

India’s consumer electronics market is expected to grow 32.2 percent annually between 2007-2012, touching almost 2 trillion rupees, according to Euromonitor International’s estimates.

"In the longer term perspective, the overall growth story is still good for the key players who are investing in strong brands," Ernst & Young’s Nanda said.

India's Rupee Weakens Past 43 a Dollar as Oil Increases Costs

India’s rupee weakened past 43 a dollar for the first time in more than 13 months as crude oil’s advance to an all-time high increased demand for dollars needed to buy the commodity.

The rupee fell for a third day on concern the 40 percent increase in oil prices this year will slow growth in Asia’s third-largest economy and widen the nation’s current-account deficit from last year’s record. The local currency is the second-worst performer this year among the 10 most-traded Asian currencies excluding the yen.

``There are fundamental reasons for the rupee to fall given our dependence on imports to meet energy requirements,’’ said Ravindra Babu, a currency trader at state-owned Andhra Bank in Mumbai. ``There are growing concerns about the current-account deficit widening which may cause the rupee to decline further.’’

The rupee dropped as much as 0.9 percent to 43.21 against the dollar, the lowest intraday since April 3, 2007, before trading at 43.1525 as of 10:06 a.m. in Mumbai, according to data compiled by Bloomberg. It may fall to 43.50 in the next few weeks, Babu said.

The rupee’s decline gathered pace after a government report on May 12 showed the annual pace of growth in factory output more than halved to 3 percent in March from 8.6 percent the previous month.

Paring Advance

The local currency is headed for a fifth weekly loss and has slid 8.6 percent this year, erasing more than two-thirds of its 12.3 percent gain last year. India imported oil worth $71.8 billion in the 12 months through March, 23.5 percent more than a year earlier.

The current-account shortfall widened to $5.4 billion in the three months ended Dec. 31 from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31.

Growth in Asia’s third-biggest economy may decelerate to about 8 percent, the slowest since 2005, in the fiscal year that started April 1, according to Finance Minister Palaniappan Chidambaram. The economy expanded 8.7 percent in the 12 months through March, slower than the 9.6 percent growth in the previous year.

Oil hits high above $135 after U.S. crude stock fall

Oil galloped to a high above $135 on Thursday, extending this month’s near 20 percent rally after a sharp drop in U.S. crude stocks and the weakening U.S. dollar triggered short covering by investors.

The climb in prices, which have marked new record highs in 10 of their last 14 sessions, has set off alarm bells around the world, although OPEC has maintained that the market remains well supplied with crude and that prices are beyond its control.

The U.S. July crude contract extended Wednesday’s more than $4 surge to reach a high of $135.04 early on Thursday. By 0333 GMT it was trading up $1.41 or 1 percent at $134.58 a barrel, taking gains so far this year to over 40 percent.

"Prices are going in one direction. They are up all the way," said Gerard Rigby of Fuel First Consulting in Sydney. "The primary mover is the fall in the U.S. oil stocks, and this started a series of short covering."

U.S. crude stocks fell 5.4 million barrels to 320.4 million barrels last week, counter to expectations of a small rise in inventories, intensifying concerns about supplies in the world’s biggest consumer just ahead of the start of summer.

The drop was caused by a fall in imports to their lowest in five weeks and a pick-up in demand from refineries, the Energy Information Administration said.

U.S. gasoline supplies fell 800,000 barrels against a 700,000-barrel build forecast, while stocks of distillates -- which has been one of the market’s biggest driver this month -- rose 700,000 barrels but were 12 percent below last year.

Heating oil for June delivery reached a fresh record high of $3.9704 a gallon on Thursday, having climbed nearly 25 percent since the start of this month Heating oil for June delivery reached a fresh record high of $3.9704 a gallon on Globex on Thursday. It settled 13.34 cents or 3.53 percent higher at a record $3.9084 a gallon on Wednesday.

Investors have been drawn into oil by a weak U.S. dollar, which has made commodities relatively cheap for holders of other currencies.

The dollar fell to a one-month low versus the euro on Wednesday after the Federal Reserve cut its 2008 growth forecast and warned of higher unemployment, reducing prospects of an interest rate hike later this year.

The market has been convinced to buy oil amid a series of bullish forecasts, while the outlook for the dollar is weak, traders said.

Investment bank Goldman Sachs has said it thinks oil prices will average $141 a barrel in the second half of this year and could top $200 a barrel by 2010.

U.S. investor Warren Buffett, the world’s richest person, said on Wednesday he expects the dollar to keep falling as policies needed to correct the slide had yet to be implemented.

U.S. Energy Secretary Sam Bodman said record oil prices fairly reflect tight supplies and strong global oil demand, and speculators were not at fault for pushing up petroleum costs.

Rupee weakens past 43/dlr to 13-mth lows

The partially convertible rupee weakened past 43 per dollar to its lowest level in 13 months in opening deals on Thursday, as record oil prices raised worries of a widening trade deficit.

At 9.02 a.m., the rupee was at 43.10 per dollar, a level it last traded on April 6, 2007. It had closed at 42.83/84 on Wednesday.

The rupee will climb from a 13-month low as the end of a worldwide credit market slump encourages investors to buy emerging-market assets, corporate treasurers in India said.

JSW Steel Ltd., the nation’s third-biggest steelmaker, predicts the currency will rise almost 7 percent in the next year to 40 per dollar, Finance Director Seshagiri Rao said. Grasim Industries Ltd., the No. 3 cement maker, and Larsen & Toubro Ltd., the largest engineering company, say India’s growth and rising company earnings will fuel the rupee’s recovery.

``Which other countries are growing at 8 percent or so? Very few,’’ Yeshwant M. Deosthalee, chief financial officer at Mumbai-based Larsen, said in an interview. ``Investors have been holding back due to risk aversion. Once such concerns ease, they’ll have to look at India. The rupee’s tendency to appreciate will resume.’’

India expanded an average 8.7 percent a year since 2003, second only to China among the world’s 20 largest economies. The central bank forecast the $912 billion economy will grow as much as 8.5 percent in the 12 months through March 2009.

The rupee may advance to 39.50 against the dollar by the end of the year from yesterday’s close of 42.83 per dollar in Mumbai, according to the median forecast of 21 analysts surveyed by Bloomberg.

Short-Term Weakness

``The rupee’s weakness is only for the short-term,’’ Mumbai-based JSW’s Rao said in an interview. ``Indian companies are doing well and may show an average 20 percent growth in the year ahead. That should help the stock market rebound’’ and create demand for the rupee, he said.

The currency slid 8 percent this year, after rising 12 percent in 2007, on concern that rising energy costs will widen India’s record current account deficit. The broad measure of trade and investment flows was negative $5.4 billion in the fourth quarter, compared with a shortfall of $4.7 billion the previous three months. A wider deficit means the nation needs more dollars to finance the gap.

``Exporters could use the situation now to convert some dollars if they think the rupee won’t weaken further,’’ said Robert Prior-Wandesforde, a senior economist at HSBC Holdings Plc in Singapore.

The rupee is the second-worst performer among the 10 most- traded currencies in Asia after the South Korean won. It reached 42.915 per dollar on May 16, its weakest since April 12, 2007.

Less Pessimistic

A flight from all but the safest government assets led funds based abroad to sell $2.1 billion more of Indian stocks and bonds than they bought this year, after purchasing a net $19.5 billion in 2007, according to data compiled by the Securities and Exchange Board of India. The Bombay Stock Exchange’s Sensitive Index, or Sensex, is down 15 percent in 2008 after rising 47 percent last year, when the rupee had its biggest gain since 1974.

International investors became less pessimistic on global equities this month as concern that the world economy is slipping into a recession eased, a Merrill Lynch & Co. survey showed on May 14. Money managers who oversee $615 billion favor emerging markets, the survey of 191 fund managers conducted between May 2 and May 8 showed.

An advance in oil prices may cause the rupee to extend a three-month decline as demand for dollars to pay for crude increases, according to Mumbai-based Essar Group, which owns oil, steel and shipping businesses. Crude climbed to an all-time high of $135.04 per barrel today, and imports rose to a record $8.6 billion in March, government data show.

Easing Curbs

``The rupee may fall as low as 43.25 before the end of the month as oil prices keep rising to new records,’’ said N.S. Paramsivam, head of treasury at Essar.

Offsetting that may be India’s plan to ease nine-month old curbs on overseas borrowings, said D.D. Rathi, chief financial officer at Nagda, Madhya Pradesh-based Grasim.

The government imposed limits on such borrowings in August to slow capital inflows after the rupee’s surge threatened to erode export earnings. Indian companies borrowing more than $20 million overseas need the central bank’s permission to bring the funds back into the country.

``Any further loss in the rupee should not be sizeable,’’ Rathi said. ``Some of the factors that contributed to its decline, such as the curbs on external borrowings, may ease.’’