Market plunges on inflation worries

The market plunged in afternoon trade extending earlier losses, hit by the latest data which showed a further rise in inflation. Bharat Heavy Electricals (Bhel) and Larsen & Toubro were major losers whereas Ranbaxy Laboratories was lone gainer from the Sensex pack. Banking stocks fell after concenrs of possible Reserve Bank of India intervention to rein in inflation. IT, capital goods and power stocks declined. The market breadth was weak. European markets which opened after Indian market, nudged higher in early trade.

Prospects of further monetary tightening by the Reserve Bank of India (RBI) following a surge in inflation is a cause for concern at a time when the already high rates are pinching the domestic industry. The surge in inflation has triggered fears that RBI my raise cash reserve ratio (CRR). An increase in CRR would suck out liquidity immediately pushing up the cost of funds and thereby curbing demand.

At 13:21 IST, the 30-share BSE Sensex was down 473.45 points or 2.99% at 15,358.87. At the day’s low of 15,353.31 Sensex lost 479.24 points in afternoon trade. At the day’s high of 15,896.09, the Sensex rose 63.54 points in early trade.

The broader based S&P CNX Nifty was down 126.95 points or 2.66% at 4,644.75.

India's wholesale price index (WPI) rose 7% in the 12 months to 22 March 2008, accelerating from the previous week's rise of 6.68%. The rate is the highest since 4 December 2004.

The market breadth turned weak: on BSE 764 shares advanced as compared to 1788 that declined. 56 shares remained unchanged.

The BSE Mid-Cap index down 1.66% to Rs 6,281.48 and BSE Small-Cap index down 1.37% to 7,733.04.

India’s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries was down 1.99% to Rs 2,346.

Capital goods stocks extended losses. Bharat Heavy Electricals (down 5.78% to Rs 1,653.60) and Larsen & Toubro (down 5.98% to Rs 2,679.80) edged lower. Suzlon Energy rose 1.1% to Rs 275.

Banking stocks plunged after inflation data. HDFC Bank (down 2.53% to Rs 1,291), ICICI Bank (down 4.56% to Rs 752) and State Bank of India (down 2.11% to Rs 1,603) edged lower.

Power stocks declined. Tata Power Company (down 3.84% to Rs 1,113.10), Reliance Energy (down 3.74% to Rs 1,145), NTPC (down 1.52% to Rs 191.30) and Reliance Power (down 1.55% to Rs 324.50) edged lower.

IT stocks declined after yesterday’s surge. Infosys (down 2.68% to Rs 1,480.10), Satyam Computer Services (down 2.43% to Rs 417.95), Wipro (down 4.32% to Rs 416.50) and Tata Consultancy Services (down 2.65% to Rs 862) edged lower.

HDFC (down 4.09% to Rs 2,343), ), Mahindra & Mahindra (down 4% to Rs 618), Tata Motors (down 3.25% to Rs 608.25), ONGC (down 2.8% to Rs 992), Jaiprakash Associates (down 2.96% to Rs 226.50) and Cipla (down 3% to Rs 213.35) edged lower from Sensex pack.

Ranbaxy Laboratories rose 2.27% to Rs 457 and was the lone gainer from Sensex pack.

ACC shed 0.83% to Rs 827.05 even as the company said its cement shipments rose 4.9% to 1.92 million tonnes in March 2008 over March 2007.

European markets were in green. France’s CAC, Germany’s DAX and UK’s FTSE 100 rose between 0.14% to 0.32%.

Japan’s Nikkei edged 0.72% lower in cautious trade today, 4 April 2008, ahead of US jobs data later in the session that will provide fresh clues on the world's largest economy. Stock markets in China, Taiwan and Hong Kong were closed today for the Tomb Sweeping Day holiday.

US stocks edged up on Thursday, after a report that Merrill Lynch & Co does not need to raise more capital eased fears of a deeper credit crisis and offset concern that monthly jobs data would point to a recession. The Dow Jones Industrial Average gained 20.20 points or 0.16% at 12,626.03. The tech-laden Nasdaq Composite index rose 1.90 points or 0.08% to 2,363.30.

As per provisional data, foreign funds sold shares worth a net Rs 393.41 crore on Thursday, 3 April 2008. Domestic funds bought shares worth a net Rs 265.39 crore.

Foreign institutional investors (FIIs) were net buyers of Rs 132.39 crore in the futures & options segment on Thursday. According to data released by the NSE, FIIs were net buyers of index futures to the tune of Rs 248.96 crore. They sold index options worth Rs 86.22 crore. They were net sellers of stock futures to the tune of Rs 28.70 crore and sold stock options worth Rs 1.66 crore.

Meanwhile, the Bombay Stock Exchange (BSE) today launches the trading of Sensex-based futures on the US Futures Exchange (USFE) in Chicago. The contract will have a notional value of $40,000 and a tick value of $10. The clearing and settlement will take place through The Clearing Corporation, Chicago.

Stock-specific activity may rule the roost on the bourses depending on the guidance given by company managements for FY 2009 at the time of announcing Q4 March 2008 results. IT bellwether Infosys Technologies kickstarts the earnings reporting season on 15 April 2008.