Market tumbles on Sebi clamp down on FII inflow

After starting on a firm note, the market lost ground later as Securities & Exchange Board of India (Sebi) draft norms on restriction of FII inflow sent shivers on the street. Volatility was high in the three trading sessions after Sebi issued the draft proposals after trading hours on Tuesday, 16 October 2007. IT stocks weathered the market turmoil as rupee weakened.

The 30-share BSE Sensex lost 859.06 points or 4.66% to 17,559.98 in the week ended Friday, 19 October 2007. The S&P CNX Nifty lost 212.95 points or 3.9% to 5215.30 in the week.

BSE Mid-Cap index lost 290.96 points or 3.86% to 7,238.58 in the week. BSE Small-Cap index lost 298.33 points or 3.28% to 8,800.32 in the week.

On Monday, 15 October 2007, the market had consolidated throughout the day after an initial surge. Easing of political worries and improved Index of Industrial Production (IIP) figures for August 2007 released during the previous trading session on Friday, 12 October 2007, boosted the bourses. The 30-shares BSE Sensex surged 639.63 points, or 3.47%, to 19,058.67, a record closing high. It hit an all-time high of 19,095.75 in late trade on that day. The S&P CNX Nifty rose 242.15 points or 4.46% at 5,670.40. Nifty recorded an all time high of 5,682.65 on that day.

On Tuesday, 16 October 2007, weak global markets played a spoilsport for the domestic bourses as they ended flat note. The 30-shares BSE Sensex lost 6.81 points, or 0.04%, to 19,051.86 on that day. It opened on a positive note and soon rose to hit its all-time high of 19,174.45 on that day. It later pared gains. The S&P CNX Nifty lost 2.35 points or 0.04% at 5,668.05.

On Wednesday, 17 October 2007, after an initial jolt, the market staged a solid rebound from lower level even as it ended in the red. Earlier the market regulator Sebi’s proposals to clamp down participatory notes to restrict foreign inflows, announced after trading hours on Tuesday, 16 October 2007, created havoc on the bourses on Wednesday. Trading was halted just within minutes of opening, as market wide circuit filters were triggered by a steep fall. The BSE 30-share Sensex ended down 336.04 points, or 1.76%, to 18,715.87. The S&P CNX Nifty lost 108.75 points or 1.92% at 5,559.30.

Securities & Exchange Board of India (Sebi) Chairman M Damodaran assured that participatory notes (PNs) are not being banned. Finance Minister P Chidambaram also assured that there is no proposal to ban participatory notes.

On Thursday, 18 October 2007, the market plunged in the late trade with Sensex losing more than 900 points at one point of time in late trade. The 30-share BSE Sensex ended down 717.43 points or 3.83% to 17,998.39. The S&P CNX Nifty lost 208.3 points or 3.75% to 5351.

The market lost further ground on Friday, 19 October 2007, with Sensex shedding 438 points on worries that official attempts to moderate FII inflows would see foreigners pull out funds.

Reliance Industries lost nearly 4% to Rs 2469.20 in the week. Reliance Industries (RIL) reported 27.9% growth in net profit to Rs 3837 crore on 6.6% growth in net sales to Rs 32,043 crore in Q2 September 2007 over Q2 September 2006. The results are after taking effect merger of IPCL in the company. RIL’s gross refining margin was a robust $13.6 a barrel in Q2 September 2007 compared to $9.1 in Q2 September 2006.

The results hit the market after trading hours on Thursday, 18 October 2007. Though the results were strong, there was no announcement of stock split/bonus. The market was agog with speculation that RIL could announce a bonus issue or stock split at the time of announcing the Q2 results.

Bharti Airtel plunged 9.4% to Rs 968.45 in the week and it was one of the biggest losers on the bourses.

ICICI Bank 2.75% to Rs 1024.05 in the week. ICICI Bank’s net profit rose 32.7% to Rs 1002.60 crore in Q2 September 2007 over Q2 September 2006. The results hit the market after trading hours on Friday, 19 October 2007.

IT stocks survived the market fall as rupee weakened following uncertain outlook on FII inflow. The BSE IT index ended almost flat at 4,685.91.

Tata Consultancy Service, India’s largest software services firm by sales, gained 4.1% to Rs 1,106.75 in the week. TCS signed $1.2 billion deal with Nielsen for outsourcing a portion of Nielsen’s information technology (IT) and operations functions worldwide. Wipro, the third biggest software firm by revenue, gained 2.05% to Rs 496.45.

Satyam Computer Services, the fourth biggest software firm by revenue, gained 4.87% to Rs 460.05 in the week. Infosys, the second-largest computer services provider, fell 1.1% to Rs 1908.10 in the week.

The BSE Capital Good index fell 7.47% to 15,373.11 in a week, led by major losses in Larsen & Toubro (L&T) and Bharat Heavy Electrical (Bhel). Larsen & Toubro (L&T) lost 10% to Rs 3023.05 in the week. Bhel lost 12.3% to Rs 2051.60 in the week.

Other stock major loser was Reliance Energy. The stock declined 18.5% to Rs 1333.25 in the week. State Bank of India declined 10.4% to Rs 1667.60.

Consolidated Construction Consortium settled at Rs 791.45 on BSE, on Monday, 15 October 2007, a premium of 55.18% over IPO price of Rs 510. The stock debuted at Rs 801, a premium of 57.05% against the IPO price. Consolidated Construction undertakes turnkey building contracts for corporate, infrastructure and realty players.

Dhanus Technologies settled at Rs 311.15 on BSE on Wednesday, 17 October 2007, a premium of 5.47% over the IPO price of Rs 295. The stock debuted at Rs 300.20, premium of 1.73% over the IPO price. Chennai-based Dhanus Technologies offers telecommunication and unified messaging and enhanced logistics services.

Supreme Infrastructure India (SIIL) settled at Rs 175.25 on BSE on Thursday, 18 October 2007, a premium of 62.2% over IPO price of Rs 108. The stock debuted at Rs 189, a premium of 75% over the IPO price. SIIL is into infrastructure development, primarily engaged in civil construction.

Saamya Biotech (India) settled at Rs 15.30 on BSE on Friday, 19 October 2007, a premium of 53% over IPO price Rs 10. The stock debuted at Rs 17.50, a 75% premium over IPO price of Rs 10. Hyderabad-based Saamya Biotech (India), a first generation biotech company has entered into an agreement for technology transfer with Biofin Laboratories s.r.l Italy for production of Daunomycin and Hyaluronic Acid.

On Thursday, 18 October 2007, Finance Minister P Chidambaram approved 14 foreign direct investment (FDI) proposals amounting to Rs 1,258 crore, which were recommended by the foreign investment promotion board (FIPB). The proposals relate to biotechnology, commerce, new and renewable energy and information technology among others. Six proposals have been deferred.

The Reserve Bank of India's (RBI) governor Yaga Venugopal Reddy while addressing the Peterson Institute of International Economics in Washington on 18 October 2007, highlighted that managing capital flows is a challenge for the Indian economy and with the opening of trade it has become more difficult.

The International Monetary Fund (IMF), in its latest World Economic Outlook report, has revised downwards its forecast for India’s gross domestic product (GDP) to 8.9% from 9% for the calendar year (CY) 2007. The growth projection has been retained at the previous estimate of 8.4% for CY 2008.

According to provisional figures compiled by the Cement Manufacturers' Association, domestic sales of cement rose 3.7% to 12.7 million tonnes in September 2007 compared with 12.2 million tonnes in September 2006.

According to the Solvent Extractors' Association (SEA) India’s vegetable oil imports jumped 9.5% to 4,802,153 tonnes in the first 11 month of the oil year (November-October 2006-07) from 4,385,723 tonnes in the corresponding period the previous year. This was due to rising edible oil demand.