RBI casts its spell on D-Street
Everything falls apart, even the people who never frown eventually break down…
Everything has to end, you'll soon find we're out of time left to watch it all unwind…
The surprise hike in Repo Rate and CRR last week took everyone by surprise. The impact of the RBI's offensive against inflation was seen on Monday as everything fell apart with the Sensex plunging by over 600 points, notching up its second biggest intra-day fall in history. However, with positive cues coming from the global markets, the local bulls staged a smart recovery after Monday's mayhem. Crude oil prices also fell later in the week after Iran released the 15 British sailors.
After yet another manic Monday, the main indices slowly clawed their way up, recouping some of the big losses. Interestingly, the fall in February and March is more due to the culmination of all the internal factors rather than international triggers which led to the carnage in May 2006. Despite the recovery in the last two trading sessions, key benchmarks closed lower for the second week in a row. Banking, Auto, Capital Goods, FMCG and IT stocks were the biggest losers. However, metal and sugar stocks bucked the negative trend to close higher over the week. The benchmark BSE Sensex lost 216 points or 1.6% during the week to close at 12,856 while the NSE Nifty fell by 70 points or 1.8% to close at 3752.
The tussle between the Government and cement makers got worse. In the latest saga, the Government scrapped 16% Countervailing Duty and 4% Special Additional Duty on portland cement. However, the Centre is willing to consider rolling back the dual excise duty structure. Cement stocks were mixed. Grasim was up by 2.7% to Rs2108, Gujarat Ambuja rose 1.3% to Rs105. However, ACC declined 1.7% to Rs721 and Kakatiya Cement fell 2.5% to Rs72.Banking and real estate stocks were at the receiving end after the RBI raised the repo rate by 25 basis points to 7.75% and hiked the CRR by 50 basis points in two stages to 6.5%. The move will suck out liquidity worth over Rs150bn and would impact loan growth as well as spending. Profitability of banks would also be impacted, as cost of funds would increase. As a result, banking stocks fell sharply over the week. SBI fell nearly by 4% to Rs947, ICICI Bank dropped 2% to Rs838 and PNB declined over 6.5% to Rs440. However, HDFC Bank gained 1% to Rs943. In the real estate pack, Sobha Developers fell by over 6% to Rs750 and Parsvnath dropped over 6% to Rs149. However, Mahindra Gesco advanced by over 4% to Rs593.
Rising crude oil prices and hardening rates brought about a downfall in auto stocks. Hero Honda was the top loser in the Nifty. It was down by over 7% to Rs632, Maruti was in reverse gear during the week. The scrip fell by over 7% to Rs755, M&M lost over 5.5% to Rs713 despite the launch of the Logan. Tata Motors declined 4.2% to Rs686. Among the mid-cap stocks, Ashok Leyland, Eicher Motors and Hindustan Motors were the major losers.IT stocks continued to get a harsh treatment after the rupee rose to the strongest in eight years against the dollar amid tight money market liquidity and lack of intervention from the RBI. Financial Technology lost by over 4% to Rs1803 and HCL-Tech was down by over 3.6% to Rs287. Among the heavy weights, TCS fell 4.2% to Rs1193, Wipro declined 2.5% to Rs551 and Satyam dropped 1.3% to Rs455.
Firm metal prices on LME and expectations of a price hike by steel makers pushed steel stocks higher. SAIL and Tata Steel were the notable gainers. Tata Steel rose nearly by 6% to Rs465, JSW Steel surged by over 5% to Rs498, SAIL advanced by 2.5% to Rs114 and Jindal Steel added 2.3% to Rs122.
BHEL was in the limelight during the week. The scrip rose by over 3.5% to Rs2359. It was among the top three gainers in the Sensex, hitting week's high of Rs2410 and a low of Rs2145. The company plans to more than double sales in the next five years by building more power stations. The PSU reported a 42% jump in provisional net profit for FY07 on revenues that grew by nearly 29%.NTPC was another star performer of the week. The scrip was the top gainer in the Nifty. It rallied by over 9% to Rs158 hitting the week's high of Rs163 and a low of Rs146. The public sector power generation major has reported a net profit of Rs67.26bn for the year 2006-07 as against Rs58.2bn in the previous financial year. This translates into a growth rate of 15.5%. Revenues for the year ended March 2007 are up by 27% at Rs332bn versus Rs261.43bn in the year 2005-06..