Sensex tanks 901 points in global sell-off, Budget blues

The key benchmark indices witnessed an unabated selling pressure across sectors, mirroring weakness in the global stock markets. 26 out of 30 stocks from the Sensex pack were in the red. Even the mid-and small-cap stocks tumbled, as reflected in the poor market breadth.

Asian markets, which opened before Indian markets, ended on a weak note. European markets, which opened after Indian markets, were trading lower. A global sell-off was triggered today after weak US data on Friday, 29 February 2008 and a record loss of insurer American International Group Inc fuelled worries that there are more write-downs to come.

The BSE Sensex tumbled 900.84 points or 5.12% to 16,677.88 registering its second biggest single day point loss on a closing basis. It was also Sensex’s second biggest single day fall in percentage terms. BSE Sensex’s fall of 1,408.35 points or 7.41% to 17,605.35 on 21 January 2008 is its biggest ever fall in record.

The broader CNX S&P Nifty fell 270.50 points or 5.18% at 4953.

As per provisional data, FIIs sold shares worth a net Rs 711.31 crore today. Domestic funds bought shares worth a net Rs 80.47 crore.

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 rejit in personal income tax slabs, which will result in sustantial tax saving for individual tax payers.

Analysts also reckon that the implemention 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 agricultral and irrigation sector to boost farm prodution, across the board cut in Cenvat to 14% from 16% and specific excise duty cuts. Brokerage IDFC-SSKI Securities in a post-budget report has maintained its earnings growth estimates for 30-Sensex firms. It expects 16.5% compounded annual growth rate (CAGR) in earnings of Sensex firms over FY 2008 (year ending March 2008) to FY 2010 (year ending March 2010).

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 practicse 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.

Further, 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. Another 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 BSE Mid-Cap index was down 4.11% at 7,364.85, while the BSE Small-Cap was down 4.05% at 9,238.35. Both these indices outperformed the Sensex.

The market breadth was poor: on BSE, 396 advanced as compared to 2330 that declined. 40 stocks remained unchanged.

BSE clocked a turnover of Rs 5090 crore as against Rs 6,721.65 crore on Friday, 29 February 2008.

Nifty March 2008 futures were at 4882, a discount of 71 points as compared to spot closing of 4953.

The NSE's futures & options (F&O) segment turnover was Rs 36591.82 crore, which was lower than Rs 49,083.49 crore on Friday, 29 February 2008.

India's largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) fell 6.24% to Rs 2304.75.

The BSE Bankex fell 6.72% to 9,434.44. It underperformed the Sensex. ICICI Bank (down 6.10% at Rs 1,024.45), State Bank of India (down 8.83% at Rs 1,923.40), Punjab National Bank (down 9.65% at Rs 545.85), Kotak Mahindra Bank (down 9.07% at 728.70), Bank of India (8.48% at Rs 329.05) and Axis Bank (down 7.70% at Rs 940.30), declined.

The BSE Power index fell 6.35% to 3,437.75. It underperformed the Sensex. Suzlon Energy (down 10.40% at Rs 252.05), Tata Power (down 6.78% at Rs 1,306.05), CESC (down 6.17% at Rs 500.55), Reliance Energy (down 5.24% at Rs 1,485.55), Torrent Power (down 5.17% at Rs 140.35) and Reliance Power (down 4.32% at Rs 412), slipped.

The BSE Realty index fell 6.39% to 8,953.95. It underperformed the Sensex. DLF (down 8.44% at Rs 714.70), Parsvnath Developers (down 6.27% at Rs 251.85), Ansal Properties & Infrastructure (down 6.22% at Rs 202), Housing Development & Infrastructure (down 5.97% at Rs 805.20), Mahindra Lifespace Developers (down 5.92% at Rs 536.70), Indiabulls Real Estate (down 5.78% at Rs 596.25) and Unitech (down 5.50% at Rs 339.50), skid.

Auto stocks, which bucked the weak sentiments in early trades, soon dipped into red in the later half of trading session. The BSE Auto index fell 0.80% to 4,848.05. It outperformed the Sensex. Escorts (down 2.63% at Rs 103.55), TVS Motor (down 2.40% at Rs 42.65), Ashok Leyland (down 1.74% at Rs 36.80), Mahindra & Mahindra (down 1.23% at Rs 684.25), Bajaj Auto (down 1.08% at Rs 2,255.50) and Tata Motors (down 1.01% at Rs 693.15), dipped.

However, Hero Honda Motors (up 1.26% at Rs 774.10) and Maruti Suzuki (up 0.82% at Rs 874.30), rose. The auto stocks were in demand as cut in excise duties in the Union Budget raised expectation of pick up in sales in coming months.

Among the side counters, India Infoline (down 10.81% at Rs 996.25), Indiabulls Financial Services (down 10.78% at Rs 548.80), Reliance Capital (down 10.29% at Rs 1,631.10), Adlabs Films (down 9.66% at Rs 757.90) and Steel Authority of India (down 9.65% at Rs 230.80), declined.

Essar Oil clocked the highest turnover of Rs 257.71 crore on BSE. Reliance Petroleum (Rs 237.78 crore), Onmobile Global (Rs 234.85 crore), Reliance Industries (Rs 230.46 crore) and Reliance Capital (Rs 208.06 crore), were the other turnover toppers on BSE in that order.

Reliance Petroleum recorded the highest volume of 1.41 crore shares on BSE. Reliance Natural Resources (1.21 crore shares), IFCI (1.09 crore shares), Essar Oil (1.01 crroe shares) and Nagarjuna Fertilisers and Chemicals (99.69 lakh shares), were the other volume toppers on BSE in that order.

In Europe, key indices in UK, France and Germany declined between 1.26% to 1.53%.

Asian markets were trading on a weak note today, 3 March 2008. Key indices in Japan, Hong Kong, South Korea, Singapore, and Taiwan fell between 1.78% to 4.49%. However, China's Shanghai Composite rose 2.06%.

US Market slumped on Friday, 29 February 2008. The Dow Jones industrial average tumbled 315.79 points, or 2.51%, to 12,266.39. The Standard & Poor's 500 index fell 37.05 points, or 2.71%, to 1,330.63 and the Nasdaq composite index slipped 60.09 points, or 2.58%, to 2,271.48.