Soaring crude oil, high inflation pull market lower

The key benchmark indices suffered losses in the week ended Friday, 3 May 2008 following concerns that soaring global crude oil prices which struck record high of over $135 barrel and spiraling inflation will impact growth.

The BSE Sensex slumped 785.30 points or 4.50% to 16,649.64 in the week ended Friday, 23 May 2008. The S&P CNX Nifty declined 211.15 points or 4.09% to 4,946.55in the week.

The BSE Mid-Cap index fell 192.59 points or 2.77% at 6,937.11 in the week. The BSE Small-Cap index rose shed 102.83 points or 1.19% at 8,517.43. Both these indices outperformed the Sensex.

Foreign institutional investors (FII) sold shares worth Rs 673.40 crore in this month, till 21 May 2008. They sold shares worth Rs 11,031.40 crore in calendar year 2008, till 21 May 2008. Domestic funds sold shares worth Rs 639.80 this month, till 14 May 2008. Mutual funds were net sellers of shares worth Rs 578.30 crore in this month, till 20 May 2008.

The Indian stock market remained closed on Monday, 19 May 2008, on account of Buddha Pournima.

Concerns about monetary tightening by the Reserve Bank of India following high inflation rate pulled the market lower on Tuesday, 20 May 2008. The 30-share BSE Sensex lost 204.76 points or 1.17% at 17,230.18 and the broader based S&P CNX Nifty was down 52.75 points or 1.02% at 5,104.95, on that day.

However the 30-share BSE Sensex rose 12.98 points or 0.08% at 17,243.16 and the broader based S&P CNX Nifty gained 12.7 points or 0.25% at 5,117.65, on Wednesday, 21 May 2008, due to short covering at lower levels.

Sharp fall in US stocks overnight and record breaking crude oil prices above $135 a barrel triggered a broad based decline in blue chips on Thursday, 22 May 2008. The 30-share BSE Sensex lost 336.05 points or 1.95% at 16,907.11 and the broader based S&P CNX Nifty was down 92.2 points or 1.8% at 5,025.45 on that day.

On Friday, 23 May 2008, the 30-share BSE Sensex settled 257.47 points or 1.52% lower at 16,649.64 and the broader based S&P CNX Nifty declined 78.9 points or 1.57% at 4,946.55 as relentless selling in realty, oil & gas and metal stocks spooked sell-off in late trade, erasing early gains.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries declined 3.05% to Rs 2,554.80 in the week. It has reportedly formed a $1 billion joint venture with New York-based Vornado Realty Trust to set up a real estate fund.

India's largest commercial bank State Bank of India slumped 7.67% to Rs 1,573.20 in the week. It has reportedly decided to stop giving loans for the purchase of tractors and other farm equipment. Due to mounting non-performing assets in the farm equipment loan segment, the bank has decided to temporarily put on hold all future advances for farm equipment like tractors, power tillers and combined harvesters, the reports suggested.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.56% to Rs 651.90 in the week. It is reportedly eyeing Italian motorcycle marque brands - Cagiva and MV Agusta. The Castiglioni family, which owns flagship MV Agusta and Cagiva motorcycle brands, has been facing financial troubles for some time and has been on the look out for a potential acquirer, the reports added.

India's largest state-run oil exploration firm in terms of revenue Oil and Natural Gas Corporation (ONGC) shed 5.14% to Rs 902.05 in the week. It is reportedly planning to sell 30% to 40% each in two blocks in Vietnam to share the risks and drilling costs. ONGC owns 100% in the two deepwater exploration blocks. The buyer has not yet been finalised, the reports added.

India's largest car maker by sales Maruti Suzuki India was down 3.52% to Rs 790.15 in the week. It has reportedly increased prices of cars by up to Rs 18,000 because of higher raw material costs.

India's largest engineering and construction firm by sales Larsen & Toubro declined 5.06% to Rs 2,844.75 in the week. The company received electrical project orders worth Rs 640 crore in the Gulf region.

HDFC Bank, India's second largest private sector bank in terms of net profit, declined 7.92% to Rs 1,383.35 in the week. The Reserve Bank of India has approved the scheme of amalgamation of Centurion Bank of Punjab with HDFC Bank. The scheme of amalgamation will come into effect from 23 May 2008.

India's largest telecom services provider by market share Bharti Airtel lost 1.71% to Rs 836.80 in the week. As per reports Bharti Airtel has forged an exclusive alliance with Indian Oil Corporation (IOC) that will enable the telco to access 18,000 retail outlets and 5,500 Indane cooking gas distributors of the oil giant.

India's largest IT exporter by sales Tata Consultancy Services (TCS) shed 4.35% to Rs 933.70 in the week. It has reportedly won a contract, estimated to be worth more than Rs 1000 crore, for processing Indian passport applications.

Inflation based on the whole price index rose 7.82% in the year through 10 May 2008, marginally lower than 7.83% rise in the previous week, government data released on 23 May 2008, showed. Meanwhile, inflation for the year through 15 March 2008 was revised upwards to 8.02% compared to provisional figure of 6.68%.

Meanwhile the Securities Exchange Board of India (Sebi) plans to keep in abeyance the imposition of upfront margins for institutional trades in the cash market. Securities & Exchange Board of India (Sebi) had earlier asked institutional investors to pay upfront margins from 16 June 2008. In the light of difficulties expressed by the market participants regarding implementation of upfront margining of institutional trades in the cash market, it has been decided to keep the same in abeyance, Sebi said in a circular issued to stock exchanges.

On Wednesday, 21 May 2008, the US Federal Reserve cut its 2008 US economic growth forecast and signaled that mounting concerns over inflation would make further interest rate cuts unlikely, driving the three major US indexes down over 1.5%. Oil prices surged to a record high above $135 per barrel on Thursday, 22 May 2008, stoking fears of global inflation.