The market’s winning streak was cut short as a surge in inflation to an over two-year high raised concerns that interest rates may rise further. The rise in oil price to above $60 a barrel also weighed on the sentiment. The decline was spread over small-cap, mid-cap and large-cap segments. Volatility also remained high.
The 30-share BSE Sensex lost 113.19 points (0.77%), to settle at 14,538.90. The S&P CNX Nifty lost 36 points (0.85%), to 4,187.40.
The Sensex had opened firm and struck a high of 14,723.88 at 10:07 IST, surpassing an earlier all-time high of 14,697.69, which the barometer index had struck only on Thursday (8 February 2007).
The market was volatile. It swung about 466 points between some of the vital intra-day tops and bottoms of the day. It swung 230.21 points between the day’s low of 14,493.67 and a high of 14,723.88.
The wholesale price index rose 6.58% in the 12 months to 27 January 2007, the biggest rise in more than two years, and higher than the previous week's annual increase of 6.11% due to higher food prices. At its quarterly policy review on 31 January 2007, RBI had raised its key short-term rate, the repo rate, by 25 basis points. Recently, private sector ICICI Bank raised its benchmark reference rate on corporate loans and home loans by 100 basis points.
US crude oil futures rose 35 US cents to $60.06 a barrel on Friday. In addition to the OPEC cuts and tensions over Iran, energy prices were also supported by news that Occidental Petroleum was unable to meet supply contracts due to a fire-stricken oilfield in California.
All the BSE sectoral indices ended in the red. BSE Metal index lost 161.05 points (1.7%), to 9,114.05. The BSE Healthcare Index lost 57.94 points (1.4%), to 3,842.94. The BSE Oil & Gas Index lost 56.49 points (0.8%), to 6,631.51. The BSE IT Index shed 41.76 points (0.7%) to 5,479.15. The BSE’s banking sector index, the Bankex, shed 34.52 points (0.45%), to 7,560.31.
The market-breadth was very weak. Against 2,043 shares declining on BSE, 622 rose. Just 45 shares were unchanged. Losers outpaced gainers by a ratio of 3.28:1. The BSE Small-Cap Index lost 160.97 points (2.1%), to settle at 7,490.10. The BSE Mid-Cap Index lost 108.76 points (1.7%), to 6,064.79.
The BSE clocked a turnover of Rs 4332 crore, lower than Thursday’s Rs 5136 crore.
The market witnessed a solid surge in the past few days with FIIs stepping up buying. From 14,090.92 on 31 January 2007, the Sensex rose 561.17 points (3.98%) in six trading sessions to a lifetime closing high of 14,652.09 on 8 February 2007. Foreign funds stepped up buying since the upgradation of India by Standard and Poor's to investment grade. A lot of funds, for instance, pension funds in foreign countries, which were not allowed to invest in Indian equities hitherto, will now become eligible to purchase Indian equities after the Standard & Poor's upgrade on 30 January 2007
Foreign funds bought equities worth Rs 2211 crore in four trading sessions, from 2 February to 7 February 2007. As per provisional data, FIIs were net buyers to the tune of Rs 255 crore on 8 February 2007, the day when the Sensex staged an intra-day rebound from an over 100- point fall, to settle nearly flat for the day.
Corporate earnings growth remains strong in a booming Indian economy. The government, on Wednesday (7 February 2007) estimated GDP growth of 9.2% in the financial year ending March 2007, above the Reserve Bank of India (RBI)’s forecast between 8.5 - 9%, spreading cheer all around.
The near-term trend on the bourses will be determined by expectations regarding the Union Budget 2007-08. Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget. According to a pre-budget report of Man Financial, though the 10% surcharge on corporate tax may be eliminated, the effective tax burden for corporates may go up if certain open-ended exemptions are removed.
In today’s trade, IT shares dropped after the rupee hit a one-year high against the dollar today. Satyam Computer lost nearly 4% to Rs 467, TCS lost 1% to Rs 1286 and Infosys Technologies shed 0.7% to Rs 2350. Infosys was volatile. The stock moved between positive and negative zone.
Cement pivotals were under pressure. ACC lost 3.2% to Rs 1032, Gujarat Ambuja Cements shed 1.9% to Rs 138.75 and Grasim shed 1.5% to Rs 2815. Cement pivotals had firmed up in the past two days after the government on Wednesday (7 February 2007) forecast 9.2% GDP growth for the current fiscal. Demand for cement is closely linked to economic growth.
Interest rate worries hit banks. The State Bank of India lost 0.8% to Rs 1195, Bank of India shed 3.3% to Rs 186, Canara Bank shed 2.9% to Rs 232, Punjab National Bank shed 2.4% to Rs 502.75, and Bank of Baroda lost 1.4% to Rs 238.
Cellular service providers slipped following reports that the Department of Telecom is set to impose penalty on seven operators for non-fulfillment of the roll out obligations as per their license conditions. Reliance Communications shed 2.7% to Rs 475.80 as reports suggested it will have to pay a penalty of Rs 147 crore on this count. Bharti Airtel shed 1.6% to Rs 753.90. Bharti has added 1.76 million new GSM subscribers in January 2007.
L&T shed 2.3% to Rs 1711 on profit-taking after a recent surge.
Maruti Udyog dropped 2.6% to Rs 938. However, Tata Motors rose 1.1% to Rs 906, following reports of launching its models, Indigo Sedan and Indigo Marina Estate, with 1.4 litre direct injunction common rail diesel engine.
Bajaj Auto rose 0.2% to Rs 3015. However, the stock came sharply off a high of Rs 3171.90, reached in early trade. A newspaper reported that the company had put the plan to spin off the cash and investment assets on a fast track. The paper also said Bajaj Auto may consider merging these assets, which include the insurance business, with Bajaj Auto Finance. Bajaj Auto Finance jumped 16% to Rs 429.
Oil exploration major ONGC lost 1.2% to Rs 882. The Centre on Thursday awarded 25 oil and gas exploration blocks to ONGC in the largest ever auction of assets.
Reliance Industries lost 0.7% to Rs 1385.25. The upstream regulator said on Thursday crude production from RIL’s deepwater gas block off the country's east coast was commercially viable.
Tata Steel shed 1.5% to Rs 454.55. The stock had been hit recently after clinching the Corus deal, at a valuation deemed expensive by the market.
Real estate scrips witnessed selling pressure on worries about high cost of funds. Parsvnath Developers lost 6% to Rs 338.80, Peninsula Land shed 6.7% to Rs 458, Sobha Developers shed 6% to Rs 911, Mahindra Gesco Developers shed 5% to Rs 643, Ansal Properties & Infrastructure lost 5% to Rs 784.25 and Akruti Nirman lost 2.3% to Rs 550.45.
Power transmission equipment maker ABB India ended flat at Rs 3820. The company said it won a Rs 311 crore order for power and automation equipment.
Zee Entertainment Enterprises surged 5% to Rs 361.55. In January 2007, the media major reported strong Q3 results.
IDBI dropped 8.7% to Rs 97.60, and Arvind Mills shed 5.6% to Rs 55.70 after futures & options (F&O) contracts in both scrips crossed 95% of the market-wide position limit. No fresh positions are permitted in these stocks in the (F&O) segment.
Gammon India lost 6% to Rs 352, extending a recent fall when the regulator, Securities & Exchange Board of India, recently barred IPO of its subsidiary Gammon Infrastructure Projects. On 21 December 2007, Sebi barred Gammon, its chairman Abhijit Rajan and two other entities, from any transaction in shares of Gammon Infrastructure for three years. Gammon has challenged the order.
European markets opened positive on Friday. Key benchmark indices in London, Germany and France were up by about 0.6% each. Key Asian markets were mixed on Friday (9 February 2007). While Japan’s Nikkei 225 average was up 1.2%, Hong Kong’s Hang Seng was down 0.27%.
US stocks fell on Thursday after warnings by two big banks about bad loans in the US mortgage market reignited concerns about the housing market. The Dow Jones industrial average fell 29.24 points, or 0.23%, to close at 12,637.63. The Standard & Poor's 500 Index was down 1.71 points, or 0.12%, at 1,448.31. The Nasdaq Composite Index was down 1.83 points, or 0.07%, at 2,488.67.
On Thursday, the European Central Bank (ECB) kept interest rates steady at 3.5% but signaled that it is not done with hiking rates. Bank of England also left its key policy rate unchanged at 5.25% overnight, which had been widely expected following January's surprise 25 basis point increase.