Friday, February 20, 2009

Sensex cracks below the 9,000 on weak global cues

Key benchmark indices faltered in opening trade on weak cues from global markets. The barometer index BSE Sensex fell below the psychologically vital 9,000 level. The Sensex was down 186.30 points, or 2.06%, to 8,856.33. Global cues were weak.

Asian markets declined today, 20 February 2009, after Wall Street tumbled to six-year low on Thursday, 19 February 2009, as a gloomy US unemployment data reinforced fears the world`s largest economy is in a severe slump. Key benchmark indices in Hong Kong, Japan, Singapore, South Korea and Taiwan were down by between 1.47% and 4.07%. However, China`s Shanghai Composite rose 0.58%.

US markets tumbled on Thursday, 19 February 2009 on mounting concerns about the fate of major banks and signs that the recession is deepening, pushing the Dow to its lowest level in more than six years. The Dow Jones industrial average lost 89.68 points, or 1.19%, at 7,465.95. The Standard & Poor`s 500 Index fell 9.48 points, or 1.2%, at 778.94. The Nasdaq Composite index shed 25.15 points, or 1.71%, at 1,442.82.

US government data showed a record number of continuing unemployment claims, at nearly 5 million, and a surprisingly sharp drop in manufacturing in the mid-Atlantic states.

Closer home, Commerce minister Kamal Nath is likely to announce an export booster package later this month which would address some of the crucial concerns of the exporters. The sops under consideration include simplification of rules for service tax refund, extension of time given to exporters to meet export obligation and an increase in rates of input duty reimbursement schemes like drawback and DEPB for some sectors.

At 10:25 IST, the BSE 30-share Sensex was down 186.30 points, or 2.06%, to 8,856.33. The Sensex opened 98.85 points lower at 8,943.78, also its day`s high. At the day`s low of 8,829.57, the Sensex lost 213.06 points in early trade.

The S&P CNX Nifty slumped 55.85 points, or 2%, to 2,733.50

The market breadth, indicating the overall health of the market, was weak on BSE with 600 shares declining as compared with 269 that advanced. A total of 29 shares remained unchanged.

BSE clocked a turnover of Rs 389 crore by 10:25 IST.

All the members from the 30-share Sensex pack were trading lower. Mahindra & Mahindra (down 3.53%), HDFC (down 3.13%), and Reliance Infrastructure (down 2.65%), were among the major losers from the Sensex pack.

Realty shares declined as margins of realty firms are under pressure due to falling property prices. India`s largest realty developer by market capitalisation DLF fell 3.68% to Rs 150.70 and was the top loser from the Sensex pack. Foreign brokerage Goldman Sachs in its recent research report lowered DLF`s 12-month target price to Rs 124 post weak Q3 December 2008 results.

Unitech (down 2.45%), Omaxe (down 1.60%), HDIL (down 2.72%), and Parsvnath Developers (down 1.33%), fell.

India`s largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 2.18% to Rs 1265.50 on fears the worsening global economy will hit demand for petrochemicals.

Banking stocks fell as fears of rising defaults in a weakening economy and overnight fall in American Depository Receipts (ADRs), offset hopes of rate cuts from the Reserve Bank of India (RBI). India`s second largest private sector bank by net profit HDFC Bank lost 3.09% to Rs 857.50 as its ADR fell 0.26% on Thursday, 19 February 2009. India`s largest private sector bank by net profit ICICI Bank slipped 4.14% to Rs 346.55 on a 1.36% fall in its ADR on Thursday, 19 February 2009.

India`s largest bank in terms of assets and branch network State Bank of India shed 1.75% to Rs 1039.65.

Inflation rose at the lowest level in 13-months at 3.92% in the year through 7 February 2009, much lower than previous week`s annual rise of 4.39%, data released by the government on Thursday, 19 February 2009, showed. Falling inflation provides room for the Reserve Bank of India (RBI) to cut interest rates further to shield the domestic economy from the global financial sector crisis and recession in key global economies.

Only on Wednesday, 18 February 2009, the Reserve Bank of India Governor D Subbarao said that there is room to cut interest rates further. The statement comes at a time when the market is expecting further action from the central bank.

Market men see a bigger role for RBI to shield the domestic economy from the global financial sector crisis and recession in key global economies in the coming months as election code will be in force by the end of the month which means that there cannon be any policy action from the government.

IT pivotals fell as fears a weak global economy would cut the amount firms spent on technology offset a weak rupee. India`s third largest software services exporter, Wipro slipped 3.43% to Rs 212.80 despite a 1.12% rise in ADR on Thursday, 19 February 2009. India`s second largest software services exporter Infosys Technologies lost 2.26% to Rs 1181.80 as its ADR fell 1.71% on Thursday, 19 February 2009. India`s largest software services exporter by sales TCS slipped 2.41% to Rs 477.95 and India`s fifth largest IT exporter by sales HCL Technologies declined 2.93% to Rs 105.95.

However Satyam Computer Service galloped 3.03% to Rs 47.50 at 10:18 IST after it won approval to bring on board a strategic investor needed to ensure the survival of the scam-tainted software outsourcer.

Indian rupee slipped today on concerns of capital outflows following decline in global markets. The partially convertible rupee was at 49.75 per dollar against previous close of 49.62. A weaker rupee boosts operating margins of IT firms which earn a lion`s share of revenue from exports.

India`s largest power equipment maker by sales Bharat Heavy Electrical (Bhel) fell 1.24% to Rs 1365. The company reportedly plans to pump in around Rs 1000 crore in developing locomotive manufacturing facility.

India`s second largest cellular services provider by sales Reliance Communications (RCom) lost 3.5% to Rs 157 on reports the government on Thursday, 19 February 2009 reportedly informed the Parliament that it will do a special audit on the books of RCom and its subsidiaries over allegations that the telecommunications company had diverted revenues earned from its mobile services to a subsidiary to bring down the total amountit had to pay to the government as licence fee and spectrum charge.

Back home, key benchmark indices ended slightly higher on Thursday, 19 February 2009, in what was a lackluster trading session, in sync with range-bound activity in global markets. The BSE 30-share Sensex rose 27.45 points, or 0.30%, to 9,042.63 and the S&P CNX Nifty rose 13.20 points or 0.48% to 2789.35.

According to provisional data on NSE, FIIs were net sellers worth Rs 363.48 crore while mutual funds bought shares worth Rs 108.44 crore on Thursday, 19 February 2009.

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