Sensex at 6-month closing low

A surge in inflation, weak global cues and political concerns dampened the investor sentiments today as share prices declined sharply. All the sectoral indices on BSE were in the red. Reliance Energy was the biggest loser from the Sensex pack. Banking stocks tumbled. European markets, which opened after Indian market, were weak.

The 30-share BSE Sensex plunged 566.56 points or 3.42% at 15,975.52, its lowest closing since 18 September 2007. The index had shaved off 852.16 points at the session’s low of 15,689.92, hit in afternoon trade.

The broader CNX S&P Nifty was down 149.80 points or 3.04% at 4771.60.

BSE clocked a turnover of Rs 5599 crore as against Rs 5,363.43 crore on Wednesday, 5 March 2008.

Mid-caps and small-caps were the worst affected as reflected in the extremely weak market breadth. The market was closed on Thursday, 6 March 2008 on account of Mahashivratri.

Inflation based on the wholesale price index rose 5.02% in the 12 months to 23 February 2008, higher than the previous week's rise of 4.89%, government data showed on Friday, 7 March 2008. The annual inflation rate was 6.20% during the corresponding week of the previous year.

Asian markets, which open before the Indian market, tumbled as investors sold riskier assets due to dented confidence in the health of the US economy. US stocks tumbled on Thursday after a series of fresh jolts to credit markets and lackluster retail sales compounded worries the economy is near recession. The main catalyst for the move was news that Thornburg Mortgage Inc, a mortgage lender, was in default after failing to meet creditor demands for more upfront cash.

Adding to concerns about the financial sector, a Dutch-listed affiliate of private equity firm Carlyle Group said it has not been able to meet some margin calls and has received a notice of default. A report showing that US mortgage foreclosures hit a record high in late 2007 added to the gloom.

Besides the setback in Asian markets, concerns on the political front also weighed on the market after the Communist Party of India-Marxists (CPM) on Thursday, 6 March 2008, renewed its threat on the United Progressive Alliance (UPA) government saying that the ruling coalition’s future depended on how it took the call on pursuing the Indo-US nuclear deal.

CPM General Secretary Prakash Karat wrote to External Affairs Minister Pranab Mukherjee asking him to convene a meeting of the Left-UPA committee on the deal before 15 March 2008 to discuss the contentious issue. The future of the government depends on the decision they will take, an article in CPM's mouthpiece, People's Democracy, said.

Meanwhile, Foreign minister Pranab Mukherjee told a news weekly that a minority government cannot sign a major international agreement because of the risks involved. Calling it a compulsion, he said a minority government "need not and should not" sign a major agreement like this.

The BSE Mid-Cap index was down 4.35% at 6,804.39, while the BSE Small-Cap was down 4.55% at 8,409.18. Both these indices underperformed the Sensex.

The market breadth was extremely weak: on BSE, 295 advanced as compared to 2384 that declined. 31 stocks remained unchanged.

Nifty March 2008 futures were at 4706, a discount of 65.60 points as compared to spot closing of 4771.60.

The NSE's futures & options (F&O) segment turnover was Rs 38712.25 crore, which was higher than Rs 33581.65 crore on Wednesday, 5 March 2008.

India's largest private sector bank by assets ICICI Bank slipped 7.04% to Rs 892.75. Reports on Tuesday suggested that ICICI has taken a hit of $264.34 million through its exposure to US subprime home loans market. However, ICICI Bank's Joint Managing Director Chanda Kochhar clarified that ICICI Bank may have to provide for another $50 million of investment losses in this quarter on top of $70 million already provided for in Q3 December 2007. The write off will be due to its investments being marked to market rather than provisioning for a subprime loss as many large international banks have done.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) lost 1.92% to Rs 2248.80.

Among the other Sensex losers were Reliance Energy (down 12.98% at Rs 1270), Bajaj Auto (down 11.23% at Rs 1889.15), Larsen & Toubro (down 6.64% at Rs 2988.20), Hindalco Industries (down 5.79% at Rs 196.05), NTPC (down 5.06% at Rs 184.80) and Housing Development Finance Corporation (down 4.57% at Rs 2629.35).

The BSE Bankex fell 4.92% at 8,477.46. It underperformed the Sensex. Yes Bank (down 11.46% at Rs 179.95), Kotak Mahindra Bank (down 7.06% at Rs 631), Union Bank of India (down 6.87% at Rs 142.40), Axis Bank (down 6.58% at Rs 840.10), Centurion Bank of Punjab (down 6.52% at Rs 41.55) and State Bank of India (down 0.67% at Rs 1,841.80), slipped.

The BSE Power index fell 5.57% at 3,155.16. It underperformed the Sensex. GVK Power & Infrastructure (down 10.89% at Rs 36), Torrent Power (down 10.35% at Rs 116.50), Reliance Power (down 10.11% at Rs 338.20), Areva T&D (down 6.13% at Rs 1,746.05), Tata Power (down 5.09% at Rs 1,136.30) and Power Grid Corporation of India (down 5.12% at Rs 99.10), edged lower.

The BSE Realty index fell 6.64% at 7,782.38. It underperformed the Sensex. Housing Development & Infrastructure (down 12.93% at Rs 618.45), Unitech (down 9.90% at Rs 281.60), Sobha Developers (down 8.91% at Rs 720.70), Puravankara Projects (down 7.60% at Rs 271.10), Indiabulls Real Estate (down 5.13% at Rs 515.75), Omaxe (down 4.15% at Rs 212.40) and DLF (down 3.47% at Rs 657.70), tumbled.

The BSE IT index fell 3.04% at 3,638.44. It outperformed the Sensex. Financial Technologies (down 6.65% at Rs 1,798.10), Wipro (down 3.64% at Rs 415.05), TCS (down 3.20% at Rs 846.75), Infosys Technologies (down 2.85% at Rs 1,432.80), and Satyam Computer (down 2.32% at Rs 423.75), slipped.

Seamec soared 4.01% to Rs 154.25 on bagging an order worth $19 million from Sime Darby Engineering Sdn. Bhd., Qatar for charter hire and diving operations for a period of six months with option for extension.

Punj Lloyd declined 7.06% to Rs 304.15 even as the company said its consortium has bagged an order worth $500 million from Petronas Carigali Sdn Bhd, Malaysia for Sabah Sarawak gas pipeline project.

Rolta India lost 2.20% to Rs 286.15, having recovered from session's low of Rs 275.35 after the company said foreign funds FMR LLC and FIL have acquired a further 0.13% stake in the company to raise their total holding to 5.04%.

GSS America Infotech clocked the highest turnover of Rs 657.72 crore on BSE. Reliance Industries (Rs 286.84 crore), Reliance Natural Resources (Rs 239.27 crore), Reliance Communication (Rs 230.46 crore) and Reliance Energy (Rs 229.38), were the other turnover toppers on BSE in that order.

Reliance Natural Resources recorded the highest volume of 2.19 crore shares on BSE. GSS America Infotech (1.39 crore shares), Ispat Industries (1.24 crore shares), Reliance Petroleum (1.05 crore shares) and Tata Teleservices (88 lakh shares), were the other volume toppers on BSE in that order.

In Europe, key indices in UK, Germany and France were down by 0.93% to 1.20%.

Asian markets were trading weak today, 7 March 2008. Key indices in Hong Kong, China, Singapore, Taiwan, Japan and South Korea were down by 1.39% to 3.60%.

US markets slumped to 18-month low on Thursday, 6 March 2008 as credit concerns rattled the market and lacklustre retail sales compounded worries about the economy. Home foreclosures climbing to record levels triggered further sell-off.

The Dow Jones industrial average plunged 214.60 points, or 1.75%, to 12,040.39. The Standard & Poor's 500 index slipped 29.36 points, or 2.20%, to 1,304.34, and the Nasdaq Composite index fell 52.31 points, or 2.30%, to 2,220.50.

Traders, domestic funds and some foreign institutional investors (FIIs) are likely to be hit by a hike in short term capital gains tax on sale of shares to 15% from 10%, which amounts to a massive 50% hike in the tax rate, in Union Budget 2008-09 announced on Friday, 29 February 2008.

The change in tax treatment of the Securities Transaction Tax (STT) in the budget, meanwhile, may impact arbitrage volumes on the bourses. STT will now be treated like any other deductible expenditure against business income for the assesse. This is against the current practice whereby an assesse gets 100% rebate for STT paid against the tax liability for the year. A fall in arbitrage will result in decline in liquidity on the bourses.

The Indian economy is currently witnessing a moderation in growth from a solid growth last year mainly due to sluggish consumption growth. Concerns also remain about possible spike in inflation. Analysts reckon that the finance minister (FM) has targeted these two areas in Union Budget 2008-09, which he unveiled on Friday, 29 February 2008.

FM seeks to revive consumption growth through higher disposable income in the hands of the middle class through remit in personal income tax slabs, which will result in substantial tax saving for individual tax payers. Analysts also reckon that the implementation of the Sixth Pay Commission, which will result in hike in salaries of government employees, will aid consumption growth. The Sixth Pay Commission was constituted in October 2006 to recommend comprehensive changes in salary structure of the government employees.

The measures aimed at inflation control include a major fillip to agricultural and irrigation sector to boost farm production, across the board cut in Cenvat to 14% from 16% and specific excise duty cuts.