Market slips on fuel price hike concerns

An imminent hike in domestic retail fuel prices due to soaring crude oil prices weighed on the market last week. Foreign institutional investors sold close to Rs 2204 crore in the first three trading sessions of the week which accentuated the downfall. However better than expected Q4 gross domestic product figures provided some relief to the bourses on Friday. IT stocks gained on slipping rupee. BSE Sensex rose in two out of five trading sessions.

The BSE Sensex declined 234.07 points or 1.41% to 16,415.57 in the week ended Friday, 30 May 2008. S&P CNX Nifty lost 76.45 points or 1.54% to 4,870.10 in the week.

The BSE Mid-Cap index declined 176.57 points or 2.55% to 6,760.54. The BSE Small-Cap index slumped 384.39 points or 4.51% to 8,133.04.

Foreign institutional investors (FII)’s sold shares worth Rs 3,927.60 crore so far in the month of May 2008. They sold shares worth Rs 14,285.70 crore in calendar year 2008 till 28 May 2008. Domestic funds sold shares worth Rs 567 crore in the month of May 2008, till 28 May 2008.

The 30-share BSE Sensex plunged 301.14 points or 1.81% at 16,348.50 on Monday, 26 May 2008, extending previous week’s steep losses on weak cues from Asian markets. Banking, and capital goods stocks suffered the most in the slide. Information technology stocks were star performers.

The 30-share BSE Sensex fell 72.91 points or 0.45% at 16,275.59 on Tuesday, 27 May 2008. Weakness in the second half of the trading session dragged the market lower. The market sentiment was hit by reports which trickled in the market in afternoon trade that one of the options that the government may consider to bail out oil firms which are bleeding due to a surge in crude oil prices, was levying of a cess or surcharge on income tax and corporate tax.

The 30-share BSE Sensex rose 249.78 points or 1.53% at 16,525.37 on Wednesday, 28 May 2008. The market, which moved between positive and negative zone in early trade, surged in the second half of the trading session led by rally in information technology and cement stocks. A sharp fall in crude oil prices and firm European markets also added to positive sentiments. The rally on the bourses gathered steam after the Finance Ministry said in afternoon trade, some media reports about new tax proposals to help ease mounting losses at state oil firms due to soaring crude prices, were totally baseless.

The 30-share BSE Sensex lost 209.11 points or 1.27% to 16,316.26 on Thursday, 29 May 2008. The market, which swayed between positive and negative territory earlier in the day, slumped in the last hour of trade. Major selling pressure was seen in auto and banking shares. Tata Motors plunged even as Larsen & Toubro bucked the weak market trend. Petroleum minister, Murli Deora said the government would take a decision on raising fuel prices in two to three days.

The 30-share BSE Sensex rose 99.31 points or 0.61% to 16,415.57 on Friday, 30 May 2008. Falling global crude oil prices and strong Q4 GDP growth data kept market up throughout the day. Power and oil & gas stocks tumbled. Capital goods and information technology stocks were in demand.

India’s largest telecom services provider by sales Bharti Airtel advanced 4.74% to Rs 876.45. The company decided to disengage from the ongoing talks with the South African telecom major, MTN, to explore the possibility of a merger between the two emerging markets telecom giants. According to a statement issued by the Bharti group, the decision to pull out of the talks was prompted by its consideration that the new structure proposed by the MTN board would not have been in the interest of Bharti Airtel's minority shareholders and in its plans for grow as an Indian telecom multinational. The new structure had envisaged Bharti Airtel becoming a subsidiary of MTN and exchange of majority shares of Bharti Airtel held by the Bharti family and Singtel, in exchange for a controlling stake in MTN.

India’s second largest telecom services provider by sales Reliance Communication edged up 0.85% to Rs 577.15. The company entered into exclusive negotiations with South Africa's MTN Group after the latter’s merger deal with Bharti Airtel collapsed. In an announcement made on 26 May 2008, Reliance Communication (RCom) said that there is no certainty of either the completion or the timing of the proposal. The deal is for discussing a potential combination of business of RCom and MTN Group.

India's largest electrical equipment maker by sales Bharat Heavy Electricals declined 4.87% to Rs 1662.15. The company's net profit declined 3.4% to Rs 1,110.87 crore on 4.1% rise in sales to Rs 7,202.04 crore in Q4 Mrrch 2008 over Q4 March 2007. It announced the result on 23 May 2008. The company had recently secured an order worth Rs 1150 crore to set up a power plant in Punjab.

India’s largest commercial bank State Bank of India declined 8.26% to Rs 1443.35. There are concerns that bank’s surprise hike of 25-50 basis points in deposit rates could put pressure on its operating profit margin in the short term. In an announcement made on 26 May 2008, State Bank of India said that two to three year term deposit rate will be raised to 8.75% from 8.5%, and five to ten year deposits would fetch 9% from 8.5%, effective from 1 June 2008. The hike in deposit rates is aimed at attracting more funds to meet aggressive growth targets.

India’s largest tractor maker by sales Mahindra & Mahindra was down 9.11% to Rs 592.50. The company’s net profit declined 6.3% to Rs 221.10 crore on 14.6% rise in sales to Rs 3148.16 crore in Q4 March 2008 over Q4 March 2007. It announced the results on 28 May 2008.

India’s largest commercial vehicle maker by sales Tata Motors declined 9.56% to Rs 576.90. The company’s net profit declined 7%t o Rs 536.27 crore on 5.8% rise in sales to Rs 8749.52 crore in Q4 March 2008 over Q4 March 2007. Tata Motors also announced plan to raise about Rs 7,200 crore through three simultaneous but unlinked rights issues to be used for financing the Jaguar-Land Rover acquisition.

The world’s sixth largest thermal power producer National Thermal Power Corporation declined 2.66% to Rs 172.25. The company posted 22.78% fall in net profit to Rs 1339.50 crore on 20.33% rise in total income to Rs 11487.50 crore in Q4 March 2008 over Q4 March 2007. It announced result on 29 May 2008.

India’s largest engineering and construction firm by sales Larsen & Toubro rose 4.8% to Rs 2981.30. It recommended a liberal 1:1 bonus and posted 37.95% surge in net profit to Rs 966.76 crore on 34.79% rise in total income to Rs 8715.92 crore in Q4 March 2008 over Q4 March 2007. The company declared a dividend of Rs 17 per share in the year March 2008 as compared to Rs 13 in the year March 2007.

India’s largest private sector bank by net profit ICICI Bank declined 8.74% to Rs 788.30.

Infosys (up 7.18% to Rs 1957.55), Satyam Computer Services (up 8.68% to Rs 523.75), Wipro (up 5.68% to Rs 508) edged higher.

S. Sundareshan, additional secretary in the oil ministry, 27 May 2008, said he hopes that a decision regarding an oil ministry proposal to raise petrol and fuel prices, will be taken soon. He said the government was also considering changes in duties, and whether to issue more oil bonds to compensate state oil firms that are forced to sell petrol and diesel below cost.

The Union government eased the ban on cement exports from the ports in Gujarat, which accounts for almost 90% of the country’s cement exports. The Director-General of Foreign Trade has issued a notification to give effect to the government decision. It may be recalled that on 11 April 2008, the government had banned cement export in its bid to rein in rising inflation.

The Finance Ministry said on 28 May 2008 that media reports about new tax proposals to help ease mounting losses at state oil firms due to soaring crude prices were totally baseless. Media reports on Tuesday, 27 May 2008, had suggested that the government may levy a cess or surcharge on income tax and corporate tax to compensate it for losses due to any duty reduction on crude oil and motor fuels.

The market regulator Securities & Exchange Board of India (Sebi) on Thursday, 29 May 2009, allowed sovereign wealth funds, university funds, endowments and charitable trusts to register as foreign institutional investors (FIIs). Sebi also said an asset management company, investment manager or advisor or an institutional portfolio manager set up and/or owned by non-resident Indians (NRIs) would be eligible to be registered as an FII subject to the condition that they would not invest their proprietary funds. In other words, such entities can act only as asset managers.

The government on 29 May 2008, announced relaxation on restriction imposed last year on external commercial borrowings (ECBs). The limit on the amount that a company can borrow by way of ECB and repatriate, has been raised to $50 million from $20 million.

The gross domestic product (GDP) grew 8.8% in Q4 March 2008 from a year earlier, led by strong expansion in the services sector. The annual growth matched an upwardly revised 8.8% growth in Q3 December 2007. The GDP was 9.% in FY 2008 (year ended March 2008). The government had earlier estimated annual growth of 8.7% in FY 2008.

Inflation based on the wholesale price index rose 8.1% in 12 months to 17 May 2008, above the previous week's annual rise of 7.82%, government data released on 30 May 2008, afternoon showed. Inflation for the week ended 22 March 2008 was revised upwards to 7.85% from 7%.