The market remained subdued although it recovered some ground from its intra-day lows in mid-afternoon trade. Earlier Indian benchmark indices had slumped due to a sharp surge in global crude oil price and setback in US stocks on Friday, 6 June 2008. BSE. Sensex had fallen below 15,000 mark for the first time since 19 March 2008. The S&P CNX Nifty hit a fresh 2008 low.
Except the BSE HealthCare index, all the other sectoral indices on BSE were in red. The market breadth was extremely weak. IT, realty, power stocks were worst in today`s market fall. European markets which opened after Indian markets were mixed.
Oil prices surged by their biggest one-day gain ever on Friday, 6 June 2008, rocketing over $10 to a new record high above $139 a barrel, taking this year`s gains to 44%. Oil prices edged lower to $137.7 today, 9 June 2008.
At 13:28 IST, the 30-share BSE Sensex was down 415.28 points or 2.61% at 15,165.12. At the day`s low of 14846.18 hit during mid-morning trade, the Sensex lost 726 points.
The broader based S&P CNX Nifty was down 123.05 points or 2.66% at 4,504.75. It hit a low of 4411.60 today in mid-morning trade. The index fell below 2008 low of 4448.50 hit on 22 January 2008.
The market breadth was extremely weak on BSE with 367 shares advancing as compared to 2216 that declined. 41 remained unchanged. From the 30-share Sensex pack, 27 fell.
The BSE Mid Cap index declined 3.22% to 6145.94 and BSE Small-Cap index fell 3.77% to 7405.75. Both these indices underperformed Sensex.
India`s second largest telecom services provider by sales Reliance Communication rose 2.21% to Rs 557.50. The stock recovered from session`s low of Rs 507.90. Reliance Communication (RCom) and the South African telco MTN will reportedly decide the share swap ratio at which Anil Ambani will transfer his stake in RCom to get stake in MTN. Both the companies have reportedly agreed for the deal, which will result in RCom promoter viz. the Anil Dhirubhai Group (ADAG) emerging as the single-largest shareholder in MTN and the foreign company becoming the holding firm of RCom.
Metal stocks dropped. National Aluminium Company (down 2.91% to Rs 477), Sterlite Industries (down 1.97% to Rs 838), Hindalco Industries (down 1.03% to Rs 173.80), Tata Steel (down 0.48% to Rs 819.20) and Steel Authority of India (down 0.23% to Rs 153.35) edged lower.
IT stocks declined. Wipro (down 4.22% to Rs 484.50), Infosys (down 3.1% to Rs 1,931), Tata Consultancy Services (down 2.8% to Rs 932.75) and Satyam Computer Services (down 2.63% to Rs 495.65) edged lower.
Capital goods stocks fell. Suzlon Energy (down 8.99% to Rs 255), Bharat Heavy Electricals (down 2.66% to Rs 1,383.60) and Larsen & Toubro (down 3.04% to Rs 2604) edged lower.
BSE Realty index was down 7.23% to 5,761.04. It was the top loser from the sectoral indices on BSE. Unitech (down 8.79% to Rs 185.75), Indiabulls Real Estate (down 6.15% to Rs 399) and DLF (down 7.87% to Rs 479.05) edged lower from the realty pack.
BSE Power index was the second biggest loser from the sectoral indices on BSE. It was down 3.76% to 2598.44. Reliance Infrastructure (down 7.6% to Rs 1,016), Reliance Power (down 4.44% to Rs 185), PowerGrid Corporation of India (down 2.7% to Rs 84.60), Tata Power Company (down 4.16% to Rs 1,222), NTPC (down 1.9% to Rs 162.45) edged lower from the BSE Power index.
Jaiprakash Associates (down 8.33% to Rs 184.30), HDFC (down 6.57% to Rs 2199.45), Tata Motors (down 6.12% to Rs 507), ONGC (down 5.38% to Rs 887.85), HDFC Bank (down 4.65% to Rs 1179.90), Bharti Airtel (down 4.25% to Rs 768), Ambuja Cements (down 4.04% to Rs 81.80), State Bank of India (down 3.49% to Rs 1288.50), Mahindra & Mahindra (down 3.38% to Rs 563), edged lower from the Sensex pack.
Ranbaxy Laboratories jumped 3.65% to Rs 525.30. It was the top gainer from the Sensex pack.
European markets were trading mixed. Key benchmark indices in France and Germany were down by between 0.08% to 0.09%. The UK”S FTSE 100 however rose by 0.18%.
In Asia, key benchmark indices in Japan, South Korea, Singapore and Taiwan were down by between 1.27% to 2.13% today. Markets in China, Hong Kong and the Philippines were closed for public holidays.
US stocks plunged on Friday, 6 June 2008, marking the Dow`s worst day in 15 months, after the US government said the May 2008 unemployment rate jumped the most in 22 years and oil prices shot to another record, renewing fears that the US economy faces 1970s-style stagflation. The Dow Jones industrial average tanked 394.64 points, or 3.13% to end at 12,209.81, its biggest drop since February 2007. The S&P 500 slid 43.37 points, or 3.09%, to finish the day at 1,360.68. The Nasdaq Composite Index lost 75.38 points, or 2.96 percent, to close at 2,474.56.
Surging global crude oil prices, a hike in domestic fuel prices and rising inflation have spooked the domestic bourses in the past few days. Foreign institutional investors (FIIs) pressed heavy sales in the backdrop of a weakening rupee against the dollar, accentuating fall in share prices. From a recent high of 17,434.94 on 16 May 2008, the barometer index, BSE Sensex tanked 1,862.76 points or 10.68% in a short span to 15,572.18 on 6 June 2008.
FIIs sold shares worth a net Rs 3291.20 core in the first few days of this month, till 5 June 2008. They had dumped stocks worth a net Rs 5011.50 crore in May 2008. Their outflow in calendar 2008 reached Rs 18660.60 crore, till 5 June 2008. There has been heavy buying by domestic funds led by insurance firms in the past few days, but that has failed to stop the slide on the bourses.
Brokerage earnings downgrades of Indian firms/stock prices amid rising input and interest costs for India Inc, high inflation and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market. If inflation remains high, the Reserve Bank of India (RBI) would be forced to hike repo rate – a move that could choke overall growth of the economy. The Indian industry and consumer have already been reeling under high interest rates over the past few months. A further hike in rates would raise interest costs of corporate India and hit bottomline.
After 10 days of debate, the Union government on Wednesday, 4 June 2008 agreed to raise retail petrol and diesel prices by about 10%, more than expected, to helpcurb losses at its state-owned refiners. A sharp fall in the rupee against the dollar in the past few days has heightened concerns about inflation. This is because the fall in rupee will raise cost of imports which in turn will result in further rise in inflation.
According to rating agency CRISIL, headline inflation is expected to increase by 95 basis points on account of direct and indirect effects of the fuel price hike. The indirect impact which will be felt over the course of the next few months, it states in a note.
A well distributed monsoon will bolster food production, helping douse inflation. Agricultural output in India depends on good rains. The Indian Meteorological Department (IMD)`s second monsoon forecast for the crucial annual south-west monsoon (June-September) due this months which may indicate spatial rainfall distribution in the main sowing month of July 2008, will be keenly watched by market men. The IMD has forecast the 2008 monsoon rains would be near-normal and 99% of the average between 1941 and 1990.
A section of the market is of the view that the central bank may only use the reserve requirement route to tame inflation, fearing any hike in rates would further hurt growth already seen moderating to a still strong 8%-8.5% this fiscal year from 9% in 2007/08. To rein in inflation, in its monetary policy review for 2008-09 on 29 April 2008, the RBI raised cash reserve ratio (CRR) by 25 basis points to 8.25% to suck out excess liquidity in the banking system. RBI often says pass-through of high global oil prices is incomplete in India, complicating policy making.
Another near term trigger for the market will be corporate advance tax payments for the first installment which falls due on 15 June 2008. The income tax law requires a company to 15% the estimated tax liability for the year as advance tax in the first installment. The advance tax payment by the corporate sector will give a cue on Q1 June 2008 results.
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