Sensex plunges 1485 points in three days on Budget blues

The key indices drifted lower for a third consecutive session hit by Budget blues. Banking and realty stocks were worst hit in today’s trade. Auto stocks bucked the bearish trend. 19 out of 30 stocks from the Sensex pack were in the red. The market breadth was extremely weak.

European markets, which were positive in early trades, turned negative as day proceeded. Asian markets, which opened before Indian market, ended on a mixed note.

The 30-share BSE Sensex lost 337.99 points or 2.03% at 16,339.89. The Sensex lost 513.31 points at the day’s low of 16,164.57, hit in afternoon trade. The index gained 76.18 points at the day’s high of 16,754.06, hit in early trade.

The broader CNX S&P Nifty was down 88.75 points or 1.79% at 4864.25.

As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 512.33 crore today. Domestic funds bought shares worth Rs 170.23 crore.

The Sensex has lost 1484.59 points or 8.32% to current 16,339.89 from its close of 17824.48 on Thursday, 28 February 2008.

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. A fallout of the hike may be that some of traders and funds may pre-pone their sales of equities before the higher short term capital gains tax becomes applicable from 1 April 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.

BSE clocked a turnover of Rs 5804 crore today compared to Rs 5,106.59 on Monday, 3 March 2008.

Nifty March 2008 futures were at 4852, a discount of 12.25 points as compared to spot closing of 4852.

The NSE's futures & options (F&O) segment turnover was Rs 40644.50 crore, which was higher than Rs 36591.82 crore on Monday, 3 March 2008.

The BSE Mid-Cap index fell 2.48% at 7,182.23, while the BSE Small-Cap fell 3.09% at 8,953.28. Both these indices underperformed the Sensex.

The market breadth was weak: on BSE, 497 advanced as compared to 2198 that declined. 42 stocks remained unchanged.

India's largest private sector bank by assets ICICI Bank fell 5.16% to Rs 971.60, off day’s low of Rs 929.10. The stock dropped on reports that the bank lost $264 million on account of the subprime crisis. However, ICICI Bank's Joint Managing Director Chanda Kochhar clarified in a television interview 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) fell 2.74% to Rs 2241.50, off session's low of Rs 2210.

Top Sensex gainers were, Hindalco Industries (up 5.27% at Rs 199.90), Maruti Suzuki (up 3.59% at Rs 905.70), Mahindra & Mahindra (up 3.08% at Rs 705.35), Housing Development Finance Corporation (HDFC) (up 2.54% at Rs 2636.65), Tata Motors (up 1.25% at Rs 701.80) and Reliance Energy (up 1.29% at Rs 1504.75).

Top Sensex losers were, ACC (down 5.11% at Rs 746), DLF (down 5.11% at Rs 678.15), Reliance Communication (down 4.96% at Rs 514.55), Cipla (down 4.61% at Rs 201.90), ITC (down 4.22% at Rs 184.85) and Larsen & Toubro (down 3.61% at Rs 3223.15).

The BSE Bankex fell 4% at 9,056.76. It underperformed the Sensex. Yes Bank (down 9.97% at Rs 206.45), Canara Bank (down 6.43% at Rs 239.45), Kotak Mahindra Bank (down 5.89% at Rs 685.80), Bank of India (down 5.88% at Rs 309.70), Axis Bank (down 3.32% at Rs 909.10) and State Bank of India (down 2.57% at Rs 1,873.95), declined.

The BSE Realty index fell 5.43% at 8,467.41. It underperformed the Sensex. Housing Development & Infrastructure (down 10% at Rs 724.90), Akruti City (down 9.51% at Rs 990.15), Indiabulls Real Estate (down 7.60% at Rs 550.95), Parsvnath Developers (down 5.26% at Rs 238.60) and Unitech (down 3.83% at Rs 326.50), slipped.

The BSE Metal index rose 0.22% at 15,833.58. It outperformed the Sensex. Sesa Goa (down 3.52% at Rs 3449.80), Gujarat NRE Coke (down 1.94% at Rs 152.20), Tata Steel (down 0.92% at Rs 777.75) and Sterlite Industries (down 0.62% at Rs 788.25), rose.

Among side counters, Lanco Infratech (down 9.12% at Rs 409.15), Moser Baer (down 8.99% at Rs 153.95), India Infoline (down 8.10% at Rs 915.60), Gujarat Petronet (down 7.92% at Rs 62.75) and Jaiprakash Associates (down 7.90% at Rs 244.95), declined sharply.

India's biggest producer of wind-turbine generators by sales Suzlon Energy slumped 4.38% to Rs 241 after UBS Securities Asia cut its share price estimate on the Suzlon stock by 31% to Rs 305 and downgraded the rating to 'neutral' from 'buy', citing higher raw material costs, rising warranty provisions and overall lower volumes.

Software firm Parle Software jumped 4.46% to Rs 536.10 after the company said its board will meet on 10 March 2008 to consider allotment of bonus shares in the ratio of three shares every one existing share.

Essar Oil clocked the highest turnover of Rs 314.90 crore on BSE. Reliance Industries (Rs 280.26 crore), Reliance Natural Resources (Rs 238.13 crore), ICICI Bank (Rs 232.41 crore) and Reliance Petroleum (Rs 229.97 crore), were the other turnover toppers on BSE in that order.

Reliance Natural Resources recorded the highest volume of 1.96 crore shares on BSE. Reliance Petroleum (1.43 crore shares), Essar Oil (1.33 crore shares), IFCI (1.11 crore shares) and Ispat Industries (1.08 crore shares), were the other volume toppers on BSE in that order.

In Europe, key indices in UK, Germany and France were down between 1.01% to 1.53%.

Asian markets were mixed. Key indices in Taiwan, Japan, and South Korea were up between 0.27% to 2.51%. However, key indices in China, Hong Kong, and Singapore were down between 0.78% to 2.32%.

US markets recovered from earlier losses to finish flat in a volatile session on Monday, 3 March 2008. The main factors were weak economic data, big decline in auto sales and concerns about the fallout of housing slump. The Dow Jones industrial average fell 7.49 points, or 0.06%, to 12,258.90. The Standard & Poor's 500 index gained 0.71 points, or 0.05%, to 1,331.34, while the Nasdaq composite index was down 12.88 points, or 0.57%, to 2,258.60.

Back home, the BSE Sensex had tumbled 900.84 points or 5.12% to 16,677.88 registering its second biggest single day point loss on a closing basis on Monday, 3 March 2008. It was also Sensex’s second biggest single day fall in percentage terms. The broader CNX S&P Nifty fell 270.50 points or 5.18% at 4953 on that day.

National Stock Exchange (NSE) said trading in long term options on its main 50-share index, the S&P CNX Nifty began from Monday, 3 March 2008. The long term options contracts are now expected to deepen this market further, the NSE said in a statement issued late on Monday. Before the introduction of these contracts, options had a maximum tenure of 3 months.

The exchange said active trading was observed in the three quarterly expiries of June 2008, September 2008and December 2008. Total traded turnover for Monday in the long term options was Rs 150 crore at 5,223 contracts.