Market tanks on uncertainty over US bailout deal

Key benchmark indices suffered a sever setback mirroring weak global imarket and amid impasse over the proposed $700 billion bailout deal for the US financial sector. Sustained selling by foreign institutional investors weighed on the market sentiment. The market posted losses in four out of five trading sessions. The S&P CNX Nifty fell below the psychological 4,000 level. Among index pivotals Ranbaxy Laboratories and Hindalco Industries hit 52-week lows on BSE.

A financial crisis engulfed the global markets earlier this month with the US investment banking giant Lehman Brothers filing for bankruptcy, Merrill Lynch being bought over by the Bank of America and the US government bailout of American Insurance Group (AIG) for $85 billion in turn of 80% stake.

On Thursday, 25 September 2008, JPMorgan Chase acquired the banking assets of Washington Mutual after the troubled thrift was seized by federal regulators, marking the biggest bank failure in the United States.

The barometer index BSE Sensex lost 940.14 points or 6.69% to settle at 13,102.18 in the week ended Friday, 26 September 2008. The S&P CNX Nifty shed 260 points or 6.12% at 3985.25 in the week.

The BSE Mid-Cap index lost 287.96 points or 5.50% to 4,940.82 in the week ended Friday, 26 September 2008. The BSE Small-Cap index slipped 354.21 points or 5.69% to 5,861.78 in the week.

The BSE Sensex is down 7184.84 points or 35.41% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 8104.59 points or 38.21% below its all-time high of 21,206.77 struck on 10 January 2008.

Trading for the week started on a subdued note as rise in oil prices weighed on the market sentiments on Monday, 22 September 2008. The BSE 30-share Sensex fell 47.36 points or 0.34% to 13,994.96 and the S&P CNX Nifty fell 22.20 points or 0.52% to 4223.05, on that day.

Key benchmark indices suffered sharp losses on Tuesday, 23 September 2008, mirroring fall in global stocks on uncertainty about the potency of the US government's $700 billion bank bailout. The BSE 30-share Sensex was down 424.65 points or 3.03% to 13,570.31 and the S&P CNX Nifty fell 96.15 points or 2.28% to 4,126.90, on that day.

Domestic bourses saw a relief rally on Wednesday, 24 September 2008, posting decent gains to snap two-day losses. The BSE 30-share Sensex rose 122.21 points or 0.9% to 13,692.52 and the S&P CNX Nifty gained 34.35 points or 0.83% to 4,161.25, on that day.

On Thursday, 25 September 2008, key benchmark indices ended volatile session in the red. The BSE 30-share Sensex shed 145.34 points or 1.06% to 13,547.18 and the S&P CNX Nifty was down 50.70 points or 1.22% to 4110.55, on that day.

Indices tumbled on Friday, 26 September 2008, as Washington Mutual's failure and uncertainty over the fate of the US government's $700 billion rescue plan for the financial sector haunted investor sentiment. First-time jobless claims in the US rose to their highest count in seven years pointing to a slow down. The BSE 30-share Sensex lost 445 points or 3.28% to 13,102.18 and the S&P CNX Nifty fell 125.30 points or 3.05% to 3,985.25, on that day.

Foreign institutional investors FIIs have been consistently pressing sales to pull out their investments from India and other emerging markets in an attempt shore up resources to beat the global liquidity crunch. In India, FIIs sold shares worth a net Rs 8,061 crore (till 25 September 2008). FII outflow reached Rs 36,574.90 crore in calendar 2008.

India’s largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) lost 4.43% at Rs 1960.90. Reliance Industries (RIL) began production of crude oil at KG-D6 block of the Krishna Godavari basin on 17 September 2008, the company said on 22 September 2008. RIL holds 90% participating interest in the block while the balance is being held by Niko Resources.

Sterlite Industries (India) fell 4.36% to Rs 447.20. The company’s parent Vedanta Resources dropped a restructuring plan. As per a restructuring plan proposed earlier, the Vedanta group was to create three units focused on commodities: copper, zinc and lead; aluminium and energy; and iron ore.

India’s largest drug maker by sales Ranbaxy Laboratories tumbled 23.67% at Rs 272.40 on reports the Canadian drug regulator, Health Canada, issued a notice to Ranbaxy saying it will be particularly cautious about drug marketing applications from Ranbaxy after the US drug regulator blocked the sale of more than 30 generic medicines made in two factories by the company. The stock hit a 52-week low of Rs 269.05 on 26 September 2008.

Banking shares were hard hit on fears local banks may reportedly suffer losses on their exposure to the US financial giants that collapsed recently. ICICI Bank (down 10.64% at Rs 561.25), HDFC Bank (down 4.12% at Rs 1245.70), and State Bank of India (down 8.33% at Rs 1434.20), dipped.

Real estate heavyweights were not spared either. India’s largest real estate developer in terms of market capitalisation DLF lost 13.45% to Rs 369.50. Unitech, the country’s second largest real estate developer in terms of market capitalisation fell 30.59% to Rs 111.05, after sliding to a 52-week low of Rs 109.10 on 26 September 2008.

India's largest aluminium producer Hindalco Industries slipped 12.19% at 99.10 after hitting a 52-week low of Rs 98.50 on 26 September 2008. The company's Rs 5,050 crore rights share offering for subscription Monday, 22 September 2008. The sale in a ratio of three shares for every seven held at Rs 96 a share will close on 10 October 2008. The company aims to use the funds to repay a bridge loan it had taken to buy Canada's Novelis in 2007.

Software firms fell on lingering concerns about the economic prospects for the United States, their biggest export market. Satyam Computer (down 13.01% to Rs 321.95), Infosys Technologies (down 10.85% to Rs 1447.10), Wipro (down 17.54% to Rs 343.75), slipped. India’s largest software exporter by sales TCS lost 11.69% at Rs 676.45 after hitting a 52-week low of Rs 666.20 on 26 September 2008.

India's largest state-run oil explorer Oil & Natural Gas Corporation (ONGC) dropped 3.45% to Rs 1035.10. As per reports, ONGC Videsh (OVL), the overseas investment arm of ONGC, may take a $1 billion short-term loan to partly fund the $2.8 billion acquisition of London Stock Exchange-listed Imperial Energy.

Inflation remained steady, the latest data showed. Inflation based on the wholesale price index rose 12.14% in 12 months to 13 September 2008, unchanged from the previous week's annual rise, government data released after trading hours on Thursday, 25 September 2008, showed. Inflation for the week ended 19 July 2008 was revised upwards to 12.54% from 11.98%.

On 22 September 2008 the Indian government eased overseas borrowing rules for infrastructure companies, increasing the amount they can bring in to $500 million from $100 million. The ceiling on borrowing by infrastructure firms has been raised to $500 million a year from the exiting $100 million a year.