Indian market underperforms global peers on speculation RBI may hike CRR

The key benchmark indices underperformed their global peers today amid rumours the Reserve Bank of India (RBI) may announce a hike in cash reserve ratio (CRR) or interest rate later in the day to tame runaway rise in inflation. Volatility was high throughout the day.

Inflation based on the wholesale price index (WPI) rose 8.24% in the year through 24 May 2008, compared to previous week's rise of 8.10%. The government also revised the annual inflation rate for the year through 29 March 2008 to 7.75% as compared to 7.41% reported earlier. This is the 15th consecutive week when inflation rate has been above 5.5%, the RBI's target for the fiscal year ending March 2009.

Crude oil climbed close to $6 on Thursday, 5 June 2008, to more than $127 per barrel as funds shifted back into oil when the dollar fell against the euro following a signal from the European Central Bank that it may raise interest rates. The crude contract climbed another 0.3% in Asian trading today.

The 30-share BSE Sensex declined 197.54 points or 1.25% to settle at 15,572.18. The Sensex lost 243.22 points at day’s low of 15,526.50 touched in late trade. After opening 144.69 points higher at 15,914.41, the Sensex advanced further to strike an intra-day high of 15,970.70 in early trade. At the day’s high, Sensex gained 200.98 points.

The broader based S&P CNX Nifty was down 49.15 points or 1.05% to 4,627.80. Nifty June 2008 futures were at 4613.80, a discount of 14 points as compared to spot closing.

Reserve Bank of India governor YV Reddy yesterday, 5 June 2008 hinted at a possible increase in CRR in an attempt to curb inflationary expectations

The Sensex has slumped 5634.59 points or 26.57% from its all time high of 21,206.77, struck on 10 January 2008. However, it is still 762.69 points or 5.15% above its recent low of 14,809.49 touched on 17 March 2008.

The market breadth was negative on BSE with 1516 shares declining as compared to 1142 that advanced. 64 remained unchanged. On the contrary, the market breadth was strong in early trade.

The BSE Mid-cap index was down 0.78% to 6,350.15 and the BSE Small-Cap index slipped 0.51% to 7,696.05. Both these indices outperformed the Sensex.

The total turnover on BSE amounted to Rs 5229 crore as compared to Rs 6,172.82 crore yesterday, 5 June 2008.

Turnover in NSE’s futures & options segment amounted to Rs 42888.38 crore as compared to Rs 51017.9 crore yesterday, 5 June 2008.

All the sectoral indices on BSE ended with losses except the BSE Auto index. The BSE Auto (up 0.14% at 4,227.32), BSE Health Care index (down 1.15% at 4,296.01), BSE Consumer Durables index (down 0.75% to 4,001.66), BSE Power (down 0.31% to 2,700.02), BSE Bankex (down 1.12% at 7,266.28), BSE PSU index (down 0.79% to 6,666.59), BSE Oil & Gas index (down 0.55% to 10,006.08), BSE Capital Goods (down 0.65% at 12,032.64), BSE TecK index (down 0.80% to 3,497.88), outperformed the Sensex.

The BSE Realty index (down 1.83% at 6,210.30), BSE Metal (down 1.27% to 15,515.39), BSE FMCG index (down 2.65% to 2,361.88), underperformed the Sensex.

Among the 30-member Sensex pack, 25 declined while the rest advanced.

Mahindra & Mahindra (M&M), the country’s largest tractor company in terms of sales, advanced 3.07% to Rs 580 on 60,044 shares. On 5 June 2008, the company agreed to buy Italian auto designer Engines Engineering for an undisclosed sum. The stock was the top gainer from Sensex pack.

Tata Motors (up 1.37% to Rs 539.90), Infosys Technologies (up 0.73% to Rs 1994.10), and Grasim (up 1.06% to Rs 2270) edged higher from the Sensex pack

India’s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries (RIL) was down 0.74% to Rs 2231.10 on high volumes of 17.10 lakh shares. The stock had surged to an intra-day high of Rs 2299 in opening trade. Reliance Industries today said only one unit at its Nagothane petrochemicals plant had been shut by a fire and others were running normally. The plant has an annual capacity of 4,00,000 tonnes of ethylene. The shut unit has annual capacity of 1,20,000 tonnes

India’s third largest software services exporter Wipro lost 4.05% to Rs 507 on 2.86 lakh shares. It was the top loser from Sensex pack.

Hindalco Industries (down 3.99% to Rs 174.65), ITC (down 3.98% to Rs 213.50) and DLF (down 3.98% to Rs 517.50), edged lower from the Sensex pack.

India’s largest state run engineering company in terms of outstanding order book Bharat Heavy Electricals declined 1.80% to Rs 1419, after striking an intra-day high of Rs 1499.95. On 26 May 2008, the company had bagged Rs 1,150-crore turnkey contract from a joint venture of HPCL and Mittal Energy for setting up an energy efficient 153 megawatt captive power plant at Bhatinda in Punjab.

India's second largest power generation company in terms of sales, Reliance Infrastructure (formerly Reliance Energy), slipped 2.29% to Rs 1105, after hitting day’s high of Rs 1163. The stock was boosted by reports that it has won regulatory approval to raise power tariff by as much as 10.22% for its 2.6 million users in Mumbai. Shares of rival power generation company Tata Power Company rose 1.86% to Rs 128.05 on reports it has also hiked tariff marginally. The new tariff will be applicable from 1 June 2008 31 March 2009.

Interest rate sensitive banking shares declined. ICICI Bank (down 1.66% to Rs 768.25) and HDFC Bank (down 1.05% to Rs 1230) declined.

India’s largest stare-run bank in terms of net profit State Bank of India fell 1.80% to Rs 1330. The bank signed an agreement with Societe Generale Securities Services, a division of Societe Generale Group, to form a joint venture company for providing custody services.

India’s top small car company in terms of sales Maruti Suzuki India dropped 0.84% to Rs 756 despite reports the company has launched a new LPG variant Maruti 800 Duo of its once flagship model Maruti 800, in the price range between Rs 2.05 lakh and Rs 2.26 lakh.

Reliance Industries was the top traded counter on BSE with turnover of Rs 386.07 crore followed by Reliance Capital (Rs 214.18 crore), Cairn India (Rs 208.51 crore), Gokul Refoils (Rs 196.95 crore), and Anu’s Labs (Rs 173.44 crore), in that order.

IFCI topped the volumes chart clocking volumes of 1.63 crore shares followed by SpiceJet (1.16 crore shares), Chambal Fertilisers & Chemicals (1 crore shares), Gokul Refoils (96.70 lakh shares) and Ispat Industries (89.45 lakh shares), in that order.

Indiabulls Real Estate jumped 4.70% to Rs 424.50 ahead of the sale of shares in Indiabulls Properties Investment Trust in Singapore, which ends today. The stock struck in intra-day high of Rs 475.80. The real estate investment trust aims to raise S$388.3 million ($284 million) from selling 353 million units in the trust in range of Singapore $1 to Singapore $1.10 a piece. So far, the issue has been reportedly subscribed 1.8 times.

Karur Vysya Bank rose 2.17% to Rs 362 on reporting 33.39% rise in net profit to Rs 70.54 crore on 39.33% rise in total income to Rs 354.21 crore in Q4 March 2008 over Q4 March 2007. The bank announced the result during the market hours today 6 June 2008.

GMR Infrastructure slipped 2.44% to Rs 120. Its 100% subsidiary GMR Energy entered into a power purchase agreement with Karnataka Power Transmission Corporation for sale of power for a period of 7 years.

HOV Services jumped 20% at Rs 100.40 after it received an offer of approximately $202 million to purchase 100% of its wholly owned subsidiary HOV Services, LLC and its Hong Kong unit .

Sun Pharmaceutical Industries declined 3.35% to Rs 1405 after the company strongly opposed Taro Pharmaceutical Industries' decision to sell its Irish subsidiary, Taro Ireland, to protect its merger plans with Taro Pharmaceutical.

Suzlon Energy gained 4.24% to Rs 280 after the company said it has signed an agreement with Areva for the acquisition of Areva's total stake of approximately 30% in REpower Systems AG, Germany. The acquisition will consolidate Suzlon Energy’s total holding in REpower to approximately 66%.

SpiceJet surged 14.33% to Rs 35.90 on reports the Anil Dhirubhai Ambani Group has begun talks to buy the low-cost carrier. Vijay Mallya-promoted Kingfisher Airlines and the country`s largest private sector carrier Jet Airways are also said to be in fray for picking up a stake in SpiceJet.

Cairn India surged 7.75% to Rs 284.40 after the company said it has received an exploration license from the Sri Lankan government to explore oil and natural gas in the Mannar Basin. The company made this announcement after trading hours on Thursday, 5 June 2008.

GHCL plunged 10.94% to Rs 50.90 even as the company said it has increased soda ash prices.

Motilal Oswal Financial Services rose 4% to Rs 757 on reports it has chalked out plans to raise over Rs 800 crore to fund its expansion plans and meet other working capital requirements.

Punj Lloyd fell 2.33% to Rs 272.25 after the company said it has secured an order worth Rs 649 crore for motor spirit quality upgradation project from Indian Oil Corporation for its Barauni Refinery, Bihar.

European markets, which opened after Indian markets pared early gains. Key benchmark indices in United Kingdom (up 0.47% to 6,023.40), France (up 0.01% to 4,907.23), and Germany (up 0.02% to 6,943.43), advanced.

Most Asian markets, which opened before Indian markets, were trading higher today, 6 June 2008. Japan's Nikkei (up 1.03% at 14,489.44), Hang Seng (up 0.61% at 24,402.18), Taiwan's Taiwan Weighted (up 0.08% at 8,745.35), Singapore's Straits Times (up 0.26% at 3,151.94), advanced. However, China's Shanghai Composite declined 0.56% at 3,332.77.

US markets rallied yesterday, 5 June 2008 on stronger-than-expected May 2008 sales by Wal-Mart and other retailers and a surprising fall in weekly jobless claims, spurring optimism about the economy's health. The Dow Jones industrial average gained 213.97 points, or 1.73%, to 12,604.45. The S&P 500 index advanced 26.85 points, or 1.95%, to 1,404.05, and the Nasdaq Composite index surged 46.80 points, or 1.87%, to 2,549.94

The European Central Bank said yesterday, 5 June 2008, it would keep key lending rates unchanged at 4%. The bank, however, anticipates inflation to be more persistent than previously anticipated. Also the Bank of England kept its benchmark interest rate unchanged at 5% yesterday, 5 June 2008.

Back home, frenzied buying coupled with short covering after three straight days of fall triggered a solid rally yesterday, 5 June 2008. The 30-share BSE Sensex jumped 254.93 points or 1.64% at 15,769.72 and the broader based S&P CNX Nifty was up 91.35 points or 1.99% to 4,676.95, on that day.

Meanwhile, market regulator Securities and Exchange Board of India (Sebi) yesterday, 5 June 2008, ruled out relaxing curbs imposed last year on participatory notes (PNs), a derivative tool that enables unregistered foreign investors to invest in Indian stock markets. In October 2007, Sebi had imposed restrictions on Foreign Institutional Investors (FIIs) to issue PNs and asked FIIs and their sub-accounts not to issue fresh PNs against underlying derivatives and wind up their existing position in 18 months.