Sensex sheds 183 points

The Sensex declined through the week amidst high volatility. A host of factors like fears of a further rise in domestic interest rates, a large number of IPOs lined up for the next few weeks, rising inflation, heavy unwinding of leveraged derivative positions and a surprise CRR hike were behind the havoc.

The BSE Sensex shed 183.35 for the week ended 15 February 2007, to settle at 14,355.55, while the NSE Nifty lost 41.20 points, to end at 4,146.20.

On 12 February 2007 (Monday), the BSE Sensex plunged 348.20 points, to settle at 14,190.70. It stayed in the red for the entire session as plenty of stop losses were triggered due to highly leveraged positions in the derivatives market. Weak global markets also played spoilsport.

The Sensex lost 99.72 points on Tuesday (13 February 2007), to settle at 14,090.98, in highly volatile trading.

The benchmark index shed 81.08 points, to end at 14,009.90 on Wednesday (14 February 2007). It had plunged to a low of 13,805.36, but recovered on short-covering in the later half of the day’s trading session. The initial fall was because of the Reserve Bank of India (RBI) announcing a surprise hike in the cash reserve ratio (CRR) to 6% from 5.5% in two stages, the first on 17 February 2007 and the second on 3 March 2007, to curb inflation and credit growth.

The Sensex rebounded, after falling for the past four trading sessions, taking cue from firm Asian markets and short covering in derivatives ahead of the expiry of February 2007 derivative contracts on Thursday (15 February 2007). It jumped 345.65 points, to settle at 14,355.55 that day.

The market will be closed on 16 February 2007 for Mahashivratri.

Aluminium major Hindalco Industries plunged 13.81% to Rs 151.90 after its large all-cash acquisition of US-based Novelis for approximately $6 billion, including approximately $2.4 billion of debt. raised concerns about a short-term strain on financials. Novelis posted a net loss of $102 million during the third quarter of 2006. The US company has been plagued by high metal prices.

Reliance Communications (RCL) lost 2.05% to Rs 466.10, after it lost the bid to acquire the fourth largest cellular services provider, Hutch Essar. Vodafone emerged the top bidder with a $19 billion bid. Vodafone's emergence as a top bidder has dashed Reliance Communications' hopes of becoming the largest mobile operator in the country. Reliance Communications added 1.2 million subscribers in January 2007.

ONGC rose 2.25% to Rs 903.50, amid reports that it had initiated talks with Brazil’s Petrobras for offering each other a stake in their respective oil & gas blocks.

Reliance Industries (RIL) rose 1.58% to Rs 1410, after it said that crude production from its deepwater gas block, off the country's east coast, was commercially viable.

Bajaj Auto (BAL) declined 1.16% to Rs 3012. The company is targeting revenues of Rs 10,000 crore for the current fiscal with total sales of 28 lakh vehicles. Bajaj Auto also launched its 200 cc Pulsar DTS-i for Rs 65,497 ex-showroom, New Delhi. It will be the first bike with an oil-cooled engine of 18 BHP power.

Infosys Technologies advanced 0.85% to Rs 2382, on reports of the company scouting for mid-sized BPO companies in Europe, with a value of over Rs 400 crore.

Suzlon Energy plunged 19.71% to Rs 1040, on concerns about a short-term strain on its financials due to plans for a big acquisition overseas. It offered $1.33 billion for REpower Systems AG, trumping the offer by Areva of France by 20%. Suzlon Energy is bidding in consortium with Martifer, Portugal, a steel construction company.

Technocraft Industries India settled at a discount, at Rs 100.90, on the day of debut, over the IPO price of Rs 105.

Theater chain operator Cinemax India settled at Rs 152.35, a slender discount compared to an issue price of Rs 155 per share on 14 February 2007.

On 15 February 2007, Redington (India) settled at Rs 163.25, a premium compared to the IPO price of Rs 113. House of Pearl Fashions, however, settled at Rs 469.40, a discount compared to the IPO price of Rs 550 on the day of listing.

Growth in industrial output in December slowed from its fastest pace in more than a decade, but its persistent strength and rising inflation kept the prospects of further monetary tightening burning. Data released on 12 February showed output rising 11.1% in December 2006 from a year earlier, in line with a median estimate of 10.9% of analysts, but slower than the upwardly revised annual growth of 15.4% in November.

Manufacturing rose 11.9% in December from a year earlier, capital goods production rose an annual 20.2%, while consumer goods output rose 7.4%. The government estimates that the economy will grow 9.2% in 2006/07, backed by rising industrial output and services.

The wholesale price index rose 6.73% in the 12 months to 3 February, higher than the previous week's annual increase of 6.58% due to an increase in food and manufactured product prices, data released showed on 15 February 2007. The annual inflation rate was 3.98% during the corresponding week of the previous year.

On Wednesday (14 February 2007), the Bombay Stock Exchange (BSE) sold 5% stake to Germany's Deutsche Börse for Rs 189 crore, at Rs 5,200 per share. The transaction values the BSE at Rs 3,777 crore ($854 million).

The BSE intends to reduce the stake held by brokers by offering 26% to strategic investors, and a further 25% through an IPO for listing of shares on the exchange. Any single strategic investor's stake is limited to 5%.

The Singapore Stock Exchange has also expressed its desire for a stake in BSE. The Nasdaq Stock Market and the London Stock Exchange are also in contenders for a stake in India's premier exchange.