Sensex ends below 13,000 on late selling

A sell-off gripped the market in late trading, and the Sensex plunged below the psychological 13,000 level. Index heavyweight Reliance Industries (RIL) dived and so did IT scrips, cement producers, banks and telecom shares.

The Sensex's provisional closing was 12,841.04, a fall of 318.51 points.

The market-breadth turned weak in late trading following the Sensex’s sharp fall from a strong breadth earlier during the day. Against 1,717 shares declining on BSE, 890 rose. Just 51 shares were unchanged. Losers outpaced gainers by a ratio of 1.9:1. At 11:30 IST the adv/dec ratio was over 2:1.

The BSE clocked a turnover of Rs 3993 crore.

Reliance Industries shrunk 4% to Rs 1312. A strong 13.8 lakh shares changed hands in the counter on BSE. RIL has a 11.3% weightage in Sensex. The company today called a board meeting on 10 March 2007, to consider the payment of interim dividend for FY 2007 (year ending 31 March 2007). The company has also set 22 March 2007, as a record date for paying interim dividend. The company’s announcement comes after the finance minister raised dividend distribution tax to 15% from 12.5% in Union Budget 2007-08. Paying dividend before the end of this financial year will ensure that RIL pays the existing 12.5% tax on dividend distribution.

IT shares drifted lower. IT major TCS lost 4% to Rs 1205, Infosys shed 2.8% to Rs 2093 and Wipro lost 3.4% to Rs 569. IT pivotals had surged on Thursday, recovering from Wednesday’s fall, under the reckoning that their earnings will be impacted only to a small extent following an increase in tax after the Budget.

The recovery in banks following lower inflation proved short-lived. State Bank of India lost 4.5% to Rs 1005. The stock rose as much as 2.1% to Rs 1074.90 at 12:13 IST following a dip in inflation. HDFC Bank lost 3.3% to Rs 948, and ICICI Bank shed 0.4% to Rs 851.90. The wholesale price index rose 6.05% in the 12 months to 17 February 2007, sharply lower than previous week's annual increase of 6.63% due to a fall in fuel and food prices. The figure was lower than an expected 6.25%.

Engineering & construction major L&T lost nearly 5% to Rs 1465. The stock had bounced back from the lower level on Thursday due to the Union Budget’s thrust on infrastructure.

PSU power equipment major Bhel lost 4% to Rs 2082.

Cigarette major ITC lost 3% to Rs 167. The Budget did not bring cigarettes under value added tax as was feared. Instead, excise duty on cigarettes was hiked by 5%.

Cement shares resumed their slide. Grasim lost 3.9% to Rs 2070, ACC lost 2.4% to Rs 855 and Gujarat Ambuja Cements shed 1.1% to Rs 110.50. In early trade, cement shares had firmed up.

Telecom shares, too, edged lower. Bharti Airtel lost 3.3% to Rs 703 and Reliance Communications shed 2.9% to Rs 415.50.

European markets slipped into the red after an initial firm trend. London’s FTSE 100 Index was down 0.2%, and CAC 40 Index in France was down 0.3. Asian markets were mixed. Chinese shares rose across the board on Friday, led by real estate, as profit-taking in highly valued financial shares eased after this week's massive selling. The Shanghai Composite Index was up 1.2%. But Japan’s Nikkei 225 average was down 1.3%. Hong Kong’s Hang Seng was up 0.4%.

Although the US market ended in the red on Thursday (1 March), it finished well off lows thanks to an upbeat US manufacturing report, which assuaged some concerns about the world's largest economy. The Dow Jones industrial average closed down 34.29 points, or 0.28%, at 12,234.34. The Standard & Poor's 500 Index finished down 3.65 points, or 0.26%, at 1,403.17. The Nasdaq Composite Index fell 11.94 points, or 0.49%, at 2,404.21

FIIs stepped up selling Indian stocks on the day of the Budget, on Wednesday (28 February 2007). FIIs pressed sales worth a massive Rs 1644.30 crore on that day. Their net outflow was Rs 415.70 crore on Tuesday (27 February 2007). The FII outflow was Rs 582.10 crore on Monday (26 February 2007).

FIIs were net sellers to the tune of Rs 483 crore on Thursday (1 March 2007), the day when the Sensex rose 221 points. They were net sellers to the tune of Rs 59 crore in index-based futures on the same day.

Global crude oil prices remained firm and Nymex crude hovered at above $62 a barrel level.