THE WEEK THAT WAS - Sensex declines 185 points

The BSE Sensex snapped its winning streak, posting a loss for the week ended Friday, (15 December) on profit-booking.

The Sensex lost 184.97 points for the week ended Friday, (15 December) to 13,614.52, while the NSE Nifty lost 63.90 points, to settle at 3,888.65.

The Sensex started the week with a sharp plunge of 400.06 points, to settle at 13,399.43, on 11 December 2006, after the RBI came out with a surprise 0.5% hike in cash reserve ratio (CRR), after market hours on Friday (8 December).

On 12 December 2006, the BSE Sensex registered a mammoth 404.41 point loss, to settle at 12,995.05 as selling continued following data showing lower-than-expected 6.2% growth in industrial production in October 2006, which raised fears of economic slowdown.

The BSE Sensex jumped 186.32 points on 13 December, to settle at 13,181.34, on bargain-hunting after a steep fall and on short covering later in the day.

The market continued to recover due to strong buying in index pivotals, with the Sensex gaining 305.82 to 13,487.16 on 14 December 2006.

The Sensex jumped 127.36 points, to settle at 13,614.52 on 15 December on the back of firm global markets, and a decline in inflation.

Reliance Industries (RIL) lost 1.22% to Rs 1,252.55. RIL has reportedly paid Rs 444 crore towards the third installment of advance tax due 15 December 2006. CLSA, a brokerage, while issuing an outperform rating on the scrip with a 12-month price target of Rs 1,265, recently stated that RIL's scrip performance over the next year will hinge on news flow.

State Bank of India (SBI) declined 7.33% to Rs 1,261. The Standing Committee on Finance has endorsed the proposed legislative amendment to reduce State Bank of India’s shareholding in its subsidiary banks from current 55% to 51%.

ICICI Bank slipped 0.10% to Rs 868.05, after it announced an increase of 0.5% in its Benchmark Advance Rate (I-BAR) and its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from 18 December 2006. The hike in lending rates will help protect margins.

Tata Steel lost 5.27% to Rs 460. Brazil’s CSN had announced a higher bid at 515 pence per share for Corus. There are media reports that the company will invest Rs 450 crore for setting up an iron ore smelting plant in Thailand. The iron ore smelter unit will be part of Millennium Steel, Tata Steel's Thai subsidiary. Tata Steel had also hiked its offer for Corus to 500 pence per share, from the earlier 455 pence per share. Reacting to the CSN bid, Tata Steel said Monday, it was considering its position on Corus. Media speculates that Tata Steel may raise its bid to 550 pence per Corus share, raising the price to over $10 billion, to trump Companhia Siderurgica Nacional's (CSN) offer of 515 pence per share.

Reliance Communications gained 4.58% to Rs 466, on media reports that it is in talks with three US private equity groups, for buying the India operations of Hutchison Telecommunications International in a deal worth more than $14 billion.

ONGC lost 3.39% to Rs 812, on reports that its joint venture with Mittal group, is close to signing an agreement for an oil block in Turkmenistan. Another report that ONGC’s overseas investment arm proposes to undertake joint exploration and production activities in Iraq with Reliance Industries (RIL), too, aided the recovery after a steep decline in the past four days. ONGC Mittal Energy (OMEL), the joint venture between ONGC and Mittal group, is eyeing opportunities in Kazakhstan, Azerbaijan and Indonesia, reports add.

Larsen & Toubro (L&T) rose 0.39% to Rs 1,454, after announcing that the company won two major contracts of an aggregate value of $ 86 million from a leading Chinese petrochemical company, Sinopec. It had also bagged a massive Rs 5,400 crore contract from GMR Infrastructure, to design and construct the terminal and run-way at New Delhi airport. Also L&T Infotech, the software and services arm of construction major Larsen & Toubro, signed an agreement to acquire US-based GDA Technologies, an electronics design services firm.

Diversified firm Grasim lost 0.15% to Rs 2,741. 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 4,53,000 tonnes. The deal is likely to be completed during the current fiscal.

Budget airline SpiceJet advanced 6.33% to Rs 56.25, after Tata group on Monday said it had picked up `less than 10% stake' as a purely financial investment.

In a surprise move, the RBI hiked cash reserve ratio (CRR) by 50 basis points after trading hours on Friday (8 December). The RBI move fuelled expectations of rise in lending and deposit rates by Indian banks. They are likely to take a final view on raising interest rates on loans as well as deposits, by the end of this week, or early next week.

India's wholesale price index rose 5.16% in the 12 months to 2 December 2006, lower than the previous week's annual rise of 5.30% helped by a decline in food and energy prices, data showed on Friday (15 December).

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.

Meanwhile, the US Federal Reserve kept interest rates unchanged on Tuesday (12 December) for the fourth straight time, as worries about inflation continued to overshadow concerns about the slowing economy. At its final meeting of 2006, Fed left its target for federal funds at 5.25%. The funds rate, the interest that banks charge each other, has been at that level since June, when the Fed raised rates for the 17th consecutive time in a two-year effort to combat rising inflation.