Fall wipes out even semblance of recovery

A fresh setback put paid to the recovery on the domestic bourses, that had just started coming into their own, drawing inspiration from the promise showed by global bourses. The trigger for today’s fall was a setback bourses around the globe suffered due to a deepening US mortgage lending crisis.

The 30-share BSE Sensex plunged 453.36 points (3.4%), to settle at 12,529.62. It was the Sensex's biggest daily point fall since 5 March 2007. On that day, the Sensex had lost 471 points due to weakness across the Asian markets.

The S&P CNX Nifty lost 129.45 points (3.4%), to settle at 3,641.10. The Nifty March 2007 futures settled at 3,591, a huge discount of 50.10 points compared to the spot Nifty closing 3,641.10

All the sectoral indices on BSE ended in the red. The biggest loser in percentage terms was the BSE banking sector index, the Bankex, which plunged 270.40 points (4.1%) and settled at 6,268.28. The BSE IT Index plunged 200.13 points (3.97%), to end at 4,836.38. The BSE Capital Goods Index lost 292.68 points (3.3%), to finish at 8,559.83.

The market-breadth was weak. Against 1,798 shares declining on BSE, 751 rose. Just 66 shares were unchanged. Losers outpaced gainers by a ratio of 2.39:1. The BSE Small-Cap Index lost 110.65 points (1.7%), to finish at 6,324.22. The BSE Mid-Cap Index shed 107.45 points (2%), to end at 5,246.38.

The BSE clocked a turnover of Rs 4284 crore compared to Tuesday’s Rs 4193 crore. The turnover on NSE’s futures & options segment rose to Rs 31977.51 crore from Tuesday’s Rs 27434.30 crore.

Domestic bourses had showed some sign of a tentative recovery from a steep fall in late February 2007-early March 2007. From 12,415.04 on 5 March 2007, the Sensex had risen 634.31 points (5.1%), to 13,049.35 by 8 March 2007. It had seen a bout of volatility over the next three days, moving between 12,885 and 12,983.

Deepening US mortgage lending crisis and an unexpected drop in February retail sales, excluding automobiles, rekindled concerns that had spooked US bourses on Tuesday (13 March 2007), which in turn sent Asian shares reeling and the domestic bourses were no exception. Key benchmark indices in Hong Kong, Japan, China, South Korea, Singapore and Taiwan were down between 1.4 - 3%.

The Dow Jones Industrial Average dropped 242.66 points, or 1.97%, to end at 12,075.96 on Tuesday. The Standard & Poor's 500 Index slid 28.65 points, or 2.04%, to 1,377.95. The Nasdaq Composite Index tumbled 51.72 points, or 2.15%, to 2,350.57.

Talking of domestic bourses, selling was conspicuous in IT shares. Wipro lost 4.6% to Rs 555, Infosys shed 4% to Rs 2017 and TCS lost 4.3% to Rs 1210. Bank shares edged lower. ICICI Bank plunged nearly 6% to Rs 825.60, State Bank of India lost 3.7% to Rs 944.10 and HDFC Bank lost 2.6% to Rs 934.

Telecom shares drifted lower. Reliance Communications dropped 4.7% to Rs 396.80, and Bharti Airtel shed nearly 5% to Rs 727.20.

Reliance Industries dropped 3.3% to Rs 1282. Reliance Industries (RIL) said on Monday it had made two new gas discoveries in blocks located off the East Coast. While one strike is in the Krishna-Godavari basin, the second find is located in the Mahanadi basin, off the Andhra coast.

ONGC lost 3% to Rs 782, even after the state-run firm said it had received Rs 864 crore as indemnity against an insurance claim seeking damage due to a fire at one of its platforms in July 2005.

Cement pivotals pared losses. Gujarat Ambuja Cements ended down 0.2% to Rs 102.65, off the session’s low of Rs 99.80. Volumes in the stock were substantial, at 27.6 lakh shares on BSE. ACC was down 0.9% to Rs 743.05, and off the session’s low of Rs 708. Cement shares have caved in after firms last week agreed not to raise prices of the key construction material for one year, to cooperate with the government’s efforts against inflation.

Bajaj Auto rose 0.4% to Rs 2529.90, off the session’s low of Rs 2451.05. A strong 1.4 lakh shares changed hands in the counter on BSE.

Maruti Udyog (MUL) was down 1.7% to Rs 790, off the session’s low of Rs 746.40. The government has initiated the process of divesting its residual 10.27% stake in (MUL).

ITC lost almost 4% to Rs 143.10, extending its recent fall on concern that the government may bring cigarettes under the Value Added Tax (VAT) net.

PSU power equipment major Bhel lost 4% to Rs 2030. A strong 1.3 lakh shares changed hands in the counter on BSE.

MindTree Consulting spurted in late trading. The stock was finished up nearly 5% to Rs 921.50. However, the stock came off sharply from an intra-day surge of as much as 14.3%, to Rs 1005. Volumes in the scrip were a huge 90.1 lakh shares on BSE. The stock of Mindtree Consulting has spurted on high volumes in the past three days. From Rs 651.80 on 9 March 2007, it has vaulted 41.3% in the past three trading sessions, to the current Rs 976.50.

A sell-off had gripped domestic bourses in late February-early March 2007 due to setback in global markets, and a disappointing Union Budget 2007-08 on 28 February 2007. A sharp fall of nearly 9% in Chinese stocks on 27 February 2007, had left global bourses badly shaken that time. The sharp fall had driven some investors to cut carry trades, where they borrow cheaply in Japan and invest in countries with higher yields.

A disillusioning Union Budget was another reason why the market fell post Budget. While there was no across-the-board cut in the 10% corporate surcharge as expected, the dividend distribution tax was raised to 15% from 12.5%. The Budget also raised direct/indirect taxes for cement, construction and IT sectors.

The Sensex is off 14.4% from its all-time closing high of 14,652.09 of 8 February 2007. It had declined 9.1% in calendar 2007 thus far.

The next trigger for the domestic bourses may come from global bourses. The US Federal Reserve will meet on 20-21 March 2007 to decide US interest rates. The latest US jobs data helped ease expectations of a possible rate cut by the Fed.