Purge continues for the third day

The market has been unable to come to terms with a surprising CRR hike announced by RBI after market hours on Friday(8 December). This is the third day of a steep decline, which has brought the bull-run to an abrupt halt. The Sensex was shaved of close to 980 points in just three days, in a knee-jerk reaction to the RBI move, with banking stocks unwittingly falling prey. The BSE benchmark also hit a record high of 14,035.30 on 6 December 2006.

India’s premier index, the Sensex, regained some lost ground during the final minutes of trade after plunging over 575 points to an intra-day low of 12,801.65, in what can be referred to as an absolute bloodbath on the Bombay bourse. The premier index swung 690.56 points during the day.

Extensive damage across the board was evident in the market-breadth; only 442 shares rose while a huge, huge 2,124 scrips declined. The BSE Small-Cap index closed at 6,278.75, which is down 269.56 points (4.12%), while the BSE Mid-Cap index tanked 231.44 points (4.13%), to 5,370.10.

The 30-shares BSE Sensex settled below 13,000, at 12,995.05, registering a huge loss of 404.41 points (3.02%) for the day. It had witnessed high volatility in the opening session of trade. After opening flat at 13,413.61, it declined sharply. It also struck a high of 13,492.21 during the day.

The NSE Nifty tanked 131.60 (3.42%), to end at 3,717.90.

The frenzied selling is attributed to margin-selling, which has become an add-on feature of steep index declines. The BSE Sensex had tumbled 400 points on Monday, its 10th biggest ever.

Renewed selling gripped the bourses after latest data showed a lower-than-expected 6.2% growth in industrial production for October 2006.

Finance Minister P Chidambaram declined to comment on today’s 3% fall and added, "I have already commented yesterday. In fact, there is no need for any comment," he said.

On Monday, the minister had said the fall was no cause for worry.

The total turnover on BSE amounted to Rs 4,913 crore.

HDFC Bank was the lone gainer from the 30-Sensex pack. It rose 0.10% to Rs 1,035 as 99,558 shares changed hands. It swung in a wild range of Rs 1,065.90 - Rs 1,002.20.

Bharti Airtel was the top loser, down 6.77% to Rs 566, on a volume of 3.18 lakh shares. It had surged to a high of Rs 613.50.

Diversified firm Grasim lost down 6.47% to Rs 2,529.40. The company is reportedly said to be buying a stake in Austrian cellulose-fibre maker Lenzing AG. The deal could help the firm to get a foothold in the global viscose staple fibre market, and will increase its fibre production capacity by almost 453,000 tonnes. The deal is likely to be completed during the current fiscal.

ACC (down 6.39% to Rs 970), SBI (down 5.52% to Rs 1,174.10), Tata Steel (down 3.39% to Rs 438), and Maruti Udyog (down 3.20% to Rs 878) were the other losers.

L&T declined 3.63% to Rs 1,384.20, on 4.55 lakh shares as GMR Infrastructure-promoted Delhi International Airport (DIAL) awarded the company a contract worth Rs 5,400 crore on Monday, for design and construction of terminal, runway and associated works at the Delhi airport. The order involves design and construction of a passenger terminal, and a 4.43-km runway, which will be one of Asia's longest. L&T will execute the work in time for the Commonwealth Games.

Index heavyweight Reliance Industries (RIL) lost 2.30% to Rs 1,210, as 26.67 lakh shares changed hands in the counter on BSE. The stock recovered smartly, after declining to Rs 1,181.

Reliance Industries (RIL) was a top-traded counter on BSE, with a total turnover of Rs 329.59 crore, followed by Indiabulls (Rs 162.71 crore) and Parsvnath Developers (Rs 158.41 crore).

Shares of power equipment makers tumbled under intense selling pressure. The BSE Capital Goods lost 4.14%. ABB plunged 9% to Rs 3,442, Siemens tumbled 7.33% to Rs 1,043 while Bhel had lost 3.94% to Rs 2,433.30.

Banking stocks extended their downward journey, as selling pressure continued following the surprise CRR hike. The BSE Bankex was down 3.23%. Major losers were Punjab National Bank (down 5.02% to Rs 483.10), Kotak Mahindra Bank (down 1.56% to Rs 375), Indian Overseas Bank (down 6.72% to Rs 103.35), Bank of Baroda (down 8.01% to Rs 220), Oriental Bank of Commerce (down 7.37% to Rs 218) and Canara Bank (down 10.43% to Rs 250).

Heavy selling was witnessed across the board and all BSE sectoral indices ended in the red.

Fastener maker Lakshmi Precision Screws plunged 10% to Rs 122.95 ahead of a board meeting to consider an issue of 10 lakh shares on a preferential basis.

SpiceJet lost 3.21% to Rs 54.40, down from an intra-day high of Rs 61.90, which was attained on board's approval of a preferential issue of shares worth $118.5 million to foreign and domestic investors, including the Tatas, on a preferential basis. The scrip surged on Monday amid reports that Tata group is eyeing 10% stake in the company as a purely financial investment.

Rajesh Exports jumped 5% to Rs 307.20, after the gold jewellery maker said it will aggressively pursue real estate development. The jewellery maker will transfer its property holdings to a new subsidiary -Bangalore Infra. The company already has a property division and has acquired prime properties in Bangalore.

Garware Offshore Services advanced 2.67% to Rs 200, after the company said its board will meet on 20 December 2006, to consider raising up to $25 million, and also increasing the foreign investment limit to 60%.

Bank of India lost 9.37% to Rs 166.90. It decided to acquire 76% shareholding of P T Bank Swadesi Tbk, Indonesia. On 11 December 2006, Bank of India signed a conditional sale purchase agreement with majority shareholders of P T Bank Swadesi Tbk. The acquisition will be completed after necessary approvals/confirmations from Bank Indonesia and capital market regulators in Indonesia.

Most of the selling came after India's industrial production rose 6.2% in October from a year earlier, which was well below market expectations, lower-than-expected manufacturing output being the prime culprit for the slowdown. Output growth for September remained unchanged at an annual 11.4% reported earlier. Manufacturing production, which represents more than 75% of industrial output, rose 6.0% in October from a year earlier, compared with 12.0% annual growth in September.

The Nikkei average rose 0.66% on Tuesday as exporters such as Kyocera Corp advanced on a weak yen, while seafood suppliers jumped after a merger announcement by Maruha Group Inc fuelled speculation of a further sectoral shake-up. The Nikkei 225 index was up 0.66%, or 109.79 points, at 16,637.78.

The Hang Seng index was down marginally by 0.09%, or 17.49 points, at 18,907.17.

As per provisional data, FIIs were net buyers to the tune of Rs 334 crore in the cash segment on 11 December, the day when the Sensex had lost 400 points. They were net sellers to the tune of Rs 152.60 crore on 8 December, the day when the Sensex lost 173 points.

US stocks edged higher on Monday. The Dow Jones industrial average rose 20.99 points, or 0.17%, to close at 12,328.48. The Standard & Poor's 500 Index ended up 3.20 points, or 0.23%, to finish at 1,413.04. The Nasdaq Composite Index gained 5.50 points, or 0.23%, to end at 2,442.86.

Oil fell nearly a dollar on Monday as mild weather prevailed over much of the United States, cutting into heating oil demand from the world's largest fuel consuming nation. US crude prices slipped 77 cents, or 1.2%, to $61.28 a barrel, while London Brent crude fell 22 cents to $61.98 a barrel.

A major near term trigger for the domestic bourses is Q3 December 2006 results. Another quarter of strong performance from corporate India may be on the cards.

Meanwhile, healthy FII allocations are expected in the calendar year 2007.