Sensex at 3-month closing low

The market recovered some of the lost ground in late trade after the barometer index BSE Sensex and the S&P CNX Nifty had tumbled to its lowest in 2008 in mid-afternoon trade. Weakness in global markets weighed on the domestic bourses. The market breadth was weak. Healthcare stocks and shares of public sector oil marketing firms rose even as IT, realty and banking stocks declined.

The 30-share BSE Sensex lost 176.85 points or 1.17% at 14,889.25, its lowest close since mid-March 2008. At the day’s low of 14,645.31 the Sensex lost 420.79 points in mid-afternoon trade, falling below its previous year 2008 low of 14,677.24 hit 18 March 2008.

Earlier, after opening on a subdued note on weak global cues, the market had recovered to trade in green for a brief period. At the day’s high of 15,088.03 Sensex gained 21.93 points in early trade.

The broader based S&P CNX Nifty was down 41.25 points or 1.14% at 4,449.80. Nifty hit new year 2008 low of 4369.80 today. Nifty June 2008 futures were at 4453, at a premium of 3.20 points as compared to spot closing of 4449.80.

The BSE clocked a turnover of Rs 5,265 crore today as compared to a turnover of Rs 5,053.75 crore on Monday, 9 June 2008. NSE's futures & options (F&O) segment turnover was Rs 53,893.30 crore, which was lower than Rs 58,333.52 crore on Monday, 9 June 2008.

The market breadth was weak on BSE with 964 shares advancing as compared to 1,667 that declined. 68 remained unchanged. Among the 30 stocks from Sensex pack, 21 were trading in red.

As per the provisional figures on NSE, Foreign institutional investors (FII)s sold shares worth Rs 910.16 crore today, 10 June 2008 while domestic funds bought shares worth Rs 296.39 crore.

The BSE Mid-Cap index fell 1.08% to 6,103.83 and BSE Small-Cap index fell 1.02% to 7,341.16.

All the sectoral indices on BSE ended with losses except the BSE HealthCare index. BSE IT index (down 2.75% to 4,283.96), BSE Bankex (down 2.43% at 6,862.33), BSE Consumer Durables index (down 2.37% to 3,840.96), The BSE Realty index (down 2.11% at 5,630.61), BSE TecK index (down 1.94% to 3,323.17), BSE FMCG index (down 1.58% to 2,276.59), BSE PSU index (down 1.23% to 6,390.28) underperformed Sensex.

BSE HealthCare index (up 2.16% at 4,411.91), BSE Oil & Gas index (up 0.15% to 9,691.22), The BSE Auto (down 0.1% at 4,119.58), BSE Capital Goods (down 0.16% at 11,617.57), BSE Power index (down 0.47% to 2,606.96), BSE Metal index (down 0.8% to 15,265.92), BSE FMCG index (down 1.58% to 2,276.59), outperformed the Sensex.

Bharat Heavy Electricals (up 0.54% to Rs 1,382.05), Reliance Industries (RIL) (up 1.68% to Rs 2,199.40), Ambuja Cements (up 0.43% to Rs 82.30) and ACC (up 0.55% to Rs 616.40) edged higher from the Sensex pack.

ONGC (down 4.74% to Rs 831.25), HDFC (down 4.79% to Rs 2,101), Jaiprakash Associates (down 3.54% to Rs 177.15), Reliance Infrastructure (down 2.59% to Rs 1,011.60), Tata Motors (down 0.81% to Rs 512.90) edged lower from the Sensex pack.

Consumer durables stocks declined. Rajesh Exports (down 6.53% to Rs 70.85), Titan Industries (down 3.73% to Rs 1,088), Blue Star (down 3.26% to Rs 390) and Gitanjali Gems (down 1.13% to Rs 266) edged lower.

Banking stocks fell extending their recent sharp losses on concerns of further policy tightening of the monetary policy by the Reserve Bank of India to rein in inflation which is at its highest level in nearly four years. HDFC Bank (4.96% to Rs 1,130.95), State Bank of India (down 1.06% to Rs 1,279.10) and ICICI Bank (down 2.47% to Rs 731.60) edged lower.

Realty stocks extended yesterday’s huge losses. Indiabulls Real Estate (down 1.82% to Rs 391.15), Unitech (down 3.03% to Rs 179.20) and DLF (down 0.35% to Rs 479.85) edged lower.

Software services companies, which get more than half their revenue from the United States, fell on signs the US economy was heading for stagflation. BSE IT index was the top loser from the sectoral indices on BSE. It was down 2.75% to 4,283.96. Infosys (down 2.89% to Rs 1,849.10), Tata Consultancy Services (down 3.89% to Rs 880.05), Satyam Computer Services (down 2.76% to Rs 477.90), and Wipro (down 1.46% to Rs 473.55) edged lower.

Healthcare stocks rose. Ranbaxy Laboratories (up 6.53% to Rs 560.75), Cipla (up 2.13% to Rs 211.05), Dr. Reddy’s Laboratories (up 0.54% to Rs 696.50) edged higher.

Shares of oil state-run oil marketing firms rose today after witnessing heavy battering over the past few days. HPCL (up 1.86% to Rs 196.90), BPCL (up 2.24% to Rs 284.65) and Indian Oil Corporation (up 0.91% to Rs 366.55) edged higher.

IFCI clocked the highest volume of 1.85 crore shares on BSE. Reliance Petroleum (1.36 crore shares), Ispat Industries (1.34 crore shares), Reliance Natural Resources (1.31 crore shares) and Spice Communications (1 crore shares) were other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 281.98 crore on BSE. Reliance Capital (Rs 261.73 crore), Reliance Petroleum (Rs 23.74 crore), Ranbaxy Laboratories ( Rs 213.44 crore) and Anu’s Laboratories (Rs 167.13 crore) were other turnover toppers in that order.

European markets were weak. Key benchmark indices in France, Germany and UK were down by between 0.37% to 0.59%.

Stocks dropped in Asia after US Federal Reserve Chairman Ben Bernanke's warning on inflation on Monday, 9 June 208, fanned expectations of higher US interest rates later this year. Key benchmark indices in Hong Kong, Japan, China, South Korea, Singapore and Taiwan were down by between 1.49% to 7.73%.

The Dow staged a modest rebound on Monday from Friday's nearly 400-point drop, as concerns about US consumer spending and the troubled US housing market were eased by better-than-expected sales figures from McDonald's Corp and a surprising gain in pending home sales. The broader market was little changed, with a drop of more than $4 in the price of oil helping fuel-dependent sectors such as manufacturers, mitigating sharp losses in the financial and technology sectors. The Dow Jones industrial average was up 70.51 points, or 0.58%, to end at 12,280.32. The Standard & Poor's 500 Index was up 1.08 points, or 0.08%, at 1,361.76. But the Nasdaq Composite Index was down 15.10 points, or 0.61%, at 2,459.46.

A surge in global commodity prices led by crude oil spooked stocks across the globe in the past few days. In India, foreign funds have pressed heavy sales. FIIs sold shares worth a net Rs 2984.20 core in the first few days of this month, till 6 June 2008. They had dumped stocks worth a net Rs 5011.50 crore in May 2008. Their outflow in calendar 2008 reached Rs 18660.60 crore, till 6 June 2008. There has been heavy buying by domestic funds led by insurance firms in the past few days, but that has failed to stop the slide on the bourses.

Brokerage earnings downgrades of Indian firms/stock prices amid rising input and interest costs for India Inc, high inflation and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market. If inflation remains high, the Reserve Bank of India (RBI) would be forced to hike repo rate – a move that could choke overall growth of the economy. The Indian industry and consumer have already been reeling under high interest rates over the past few months. A further hike in rates would raise interest costs of corporate India and hit bottomline.

After 10 days of debate, the Union government on Wednesday, 4 June 2008 agreed to raise retail petrol and diesel prices by about 10%, more than expected, to help curb losses at its state-owned refiners. A sharp fall in the rupee against the dollar in the past few days has heightened concerns about inflation. This is because the fall in rupee will raise cost of imports which in turn will result in further rise in inflation.

According to rating agency CRISIL, headline inflation is expected to increase by 95 basis points on account of direct and indirect effects of the fuel price hike. The indirect impact which will be felt over the course of the next few months, it states in a note.

A well distributed monsoon will bolster food production, helping douse inflation. Agricultural output in India depends on good rains. The Indian Meteorological Department (IMD)’s second monsoon forecast for the crucial annual south-west monsoon (June-September) due this months which may indicate spatial rainfall distribution in the main sowing month of July 2008, will be keenly watched by market men. The IMD has forecast the 2008 monsoon rains would be near-normal and 99% of the average between 1941 and 1990.

A section of the market is of the view that the central bank may only use the reserve requirement route to tame inflation, fearing any hike in rates would further hurt growth already seen moderating to a still strong 8%-8.5% this fiscal year from 9% in 2007/08. To rein in inflation, in its monetary policy review for 2008-09 on 29 April 2008, the RBI raised cash reserve ratio (CRR) by 25 basis points to 8.25% to suck out excess liquidity in the banking system. RBI often says pass-through of high global oil prices is incomplete in India, complicating policy making.

According to a latest monthly June 2008 strategy report by HSBC Global Research, a possibility of Left parties withdrawing support to the government at the centre over the fuel price hike issue, cannot be ruled out. In such an environment with prospects of mid-term polls, the stock market is likely to remain nervous, HSBC says. Parliamentary elections are due in India in May 2009. HSBC’s 2008 year-end (calendar year) target for Sensex is 17,500, compared to current Sensex level of 15,066.10.

Another near term trigger for the market will be corporate advance tax payments for the first installment which falls due on 15 June 2008. The income tax law requires a company to 15% the estimated tax liability for the year as advance tax in the first installment. The advance tax payment by the corporate sector will give a cue on Q1 June 2008 results.

Market may also be keeping a watch on the industrial production numbers for April 2008, which the government will unveil on Thursday, 12 June 2008, which will give a cue on the extent of slowdown in the Indian economy caused by high interest rates.

The BSE Sensex may fall to a 10-month low of around 13,000 points by end-2008, as the Reserve Bank of India may raise interest rates to check inflation due to record oil prices, Credit Suisse said on Monday, 9 June 2008. "The market is still not pricing in the much lower earnings growth being forecast by corporates and banks," Nilesh Jasani, head of research at the Indian unit of the Swiss bank told reporters at a briefing on Monday, 9 June 2008. Uncertainty ahead of national elections will also weigh on the minds of investors, Jasani said.