The market was hammered post the Budget, as it turned out to be a big disappointment for India Inc., which did not have second thoughts in giving it a thumbs down. Let us not forget that today's steep fall was amid extremely high volatility.
The 30-shares BSE Sensex tumbled 540.74 points, to settle at 12,938.09, on heavy selling across the board. The barometer Sensex moved in a range of approximately 500 points; 13,298.52 on the higher side and 12,800.91 on the lower.
The S&P CNX Nifty was down 155.80 points, to 3,738.10.
The total turnover on BSE amounted to Rs 5683 crore.
The market-breadth was weak. There were close to four losers for every single gainer. On the BSE, 1,968 shares declined compared to 594 that advanced. Just 37 scrips remained unchanged.
All the 30-members of the Sensex pack ended in the red.
Satyam Computers was the top loser, down 8.38% to Rs 412.70, on a volume of 15.66 lakh shares.
Gujarat Ambuja Cements (down 7.48% to Rs 116.30), Wipro (down 7.15% to Rs 562) and ACC (down 6.25% to Rs 901) were the other losers.
Index heavyweight Reliance Industries (RIL) was down 3.65% to Rs 1353.80 on a volume of 23.76 lakh shares.
ITC was the star of the day's trading session, and was the top gainer among the BSE Sensex pack. The scrip rose 3.21% to Rs 170.50, on huge volumes of 48.89 lakh shares, under the reckoning that makers will be able to pass on the 5% hike in excise duty announced on cigarettes to customers. The excise duty on cigarettes has been raised by 5% in the Union Budget 2007-08.
The worst fears of the market were that cigarettes will be brought under value added tax with 12.5% VAT, spawning concerns that higher tax may lead to a shift in tobacco consumption, to low-end products such as bidis and chewing tobacco. The stock had also surged to a high of Rs 179.90, in intra-day trade.
SMS Pharmaceuticals, which debuted on BSE at Rs 349.90, settled at Rs 357.85 compared to its IPO price of Rs 380 per share. The counter clocked 34.57 lakh shares on BSE. It also struck a high of Rs 390, and fell to a low of Rs 285.30. The face value per share is Rs 10. The paid-up equity capital of the company is Rs 10 crore.
Markets across the globe were reeling. However, the Chinese market bounced back after plunging 8.84% on Tuesday (27 February 2007), on concerns that the government may crack down on illegal investments that helped drive market to record highs recently. China's Shanghai Composite was up 109.28 points (3.94%), to 2881.07. In the morning, the markets were extremely weak.
Hong Kong’s Hang Seng Index was down 2.26%, while Japan's Nikkei 225 Index slipped 2.85%.
Reactions from a section of the market raised concerns on lack of measures to increase productivity, and a lost opportunity to provide relief to the corporate sector.
This Budget is disappointing. There are no steps taken to increase productivity in agriculture, electricity and other sectors, which are not performing as is their potential," R Sesashayee, CII President said.
He feels since revenues from peak customs and excise were increasing, this could have been a time to reduce excise duty to 20%, if not 15% overall, which would have been in line with the Kelkar Committee Report.
FICCI President Habil Khorakiwala said a wrong signal has gone out to the corporate world, as the government has increased cess and dividend distribution tax.
The market had a bumpy ride to the day of the Budget. Lack of inflows at higher levels, high valuations, inflation and rising interest rates, fears of an earnings slowdown in coming quarters, and profit taking at higher levels returned to haunt the market. From an all-time high of 14,723.88 struck on 9 February 2007, the BSE Sensex had already tumbled 1,245 points, to 13,478.83 by 27 February 2007, a day before the Budgt. The defeat of the Congress in Uttarakhand and Punjab also did not help.
US stocks tumbled on Tuesday (27 February 2007), driving the Dow Jones industrial average down; its worst slide since the aftermath of the 9/11 attacks on the World Trade Centre, New York, as a sell-off in China's stock market raised concerns that equity valuations may be too high.
A US Government report showing a bigger-than-expected drop in January's new orders for US-made durable goods added to investors' concerns about the outlook for economic growth and corporate profits. Those worries added more fuel to the sell-off, and helped contribute to a loss of about $600 billion in market value for the day.
The Dow Jones industrial average slid 416.02 points, or 3.29%, to end at 12,216.24. The Standard & Poor's 500 Index dropped 50.33 points, or 3.47%, to finish at 1,399.04. The Nasdaq Composite Index sank 96.65 points, or 3.86%, to close at 2,407.87.
As per provisional data, FIIs were net sellers to the tune of Rs 503 crore on Tuesday (27 February 2007), the day when the Sensex lost 171 points. FIIs were net sellers to the tune of Rs 688 crore in index-based futures on that day. They were net sellers to the tune of Rs 40 crore in individual stock futures. Nifty March futures settled at 3886.65 on Tuesday, a discount of 7.25 points over the spot Nifty closing of 3,893.90.