Indian shares erased early gains of more than 1 percent and eased on Monday, extending losses for a third session, with energy major Reliance Industries dropping after it raised $763 million from a treasury share sale. Outsourcer Infosys Technologies bucked the trend and climbed 1 percent, ahead of its quarterly result and forecast on Tuesday.
"All eyes are set on the guidance. Infosys is likely to raise its EPS guidance marginally," said Manish Sonthalia, fund manager of portfolio management services at brokerage Motilal Oswal. Top outsourcers are expected to post a decline in profit margins for the last quarter due to a firmer local currency, but demand for outsourcing is picking up as global economic recovery in underway.
Bigger rival Tata Consultancy Services rose nearly 2 percent, but third-ranked outsourcer Wipro dropped 1 percent. Reliance, which has the heaviest weight in the main index, closed down 1.9 percent at 1,081.55 rupees after it sold 33 million existing treasury shares to foreign institutional investors at a 5 percent discount to the previous close.
The deal followed a $577 million share sale last week and a $660 million stock sale in September, all seen as part of Reliance's bid to take control of Luxembourg-based LyondellBasell. "The current price seems to be the fair value of the stock, until we have more updates on the LyondellBasell deal, and the court case," said Amit Shah, research analyst at BNP Paribas Securities.
He was also referring to a legal dispute with Reliance Natural Resources, controlled by the estranged younger brother of Reliance Industries Chairman Mukesh Ambani, over a gas pricing dispute. The 30-share BSE index closed down 0.08 percent, or 13.58 points, at 17,526.71 after rising as high as 17,776.57 at one stage. The benchmark had leapt 81 percent in 2009.
The market ignored the rise in world stocks, which hit a 15-month high as robust Chinese trade data fuelled optimism about the global economy. "People are on the sidelines before the earnings announcement. Investors are waiting for Infosys results announcement," said Jigar Shah, vice-president of equity sales at Motilal Oswal. Banks dropped on worries their earnings could fall in the December quarter.
"We expect a 4.9 percent y-o-y decline in banks' profit in 3QFY10, chiefly due to slowing business growth, subdued NII (net interest income) growth and likely treasury losses," brokerage Anand Rathi said in a note. Top lender State Bank of India slipped 0.9 percent, rival ICICI Bank lost 0.6 percent and HDFC Bank eased 0.4 percent.
NTPC climbed nearly 1 percent to 232.10 rupees after media reports over the weekend suggested the state-run power producer may file a prospectus with the regulator for its follow-on offer this week. After the market closed, the power secretary said the NTPC issue was likely to be launched in the first week of March. The broader market, gainers outnumbered losers in the ratio of 2.5:1 on heavy volume of 750 million shares. The 50-share NSE index closed 0.1 percent higher at 5,249.40.
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