Market extends losses for fifth straight week

Key benchmark indices extended losses for the fifth consecutive week, closely mirroring their global counterparts which tumbled to 5-year lows as fears of a looming sharp global economic slowdown shattered investors sentiment. Market edged lower in three out of five trading sessions. It was the worst weekly performance of the Sensex and Nifty in more than three years.

Back home, sustained offloading from foreign institutional investors (FIIs) and muted Q2 September 2008 corporate report added to the sell-off. FII have sold Rs 11,736.10-crore more shares than they have bought in October 2008 so far, till 22 October 2008. Their sales has reached Rs 48,527.90 crore in calendar 2008.

The BSE 30-share Sensex lost 1274.28 points or 12.77% to 8,701.07 in the week ended Friday, 24 October 2008. The S&P CNX Nifty fell 490.35 points or 15.94% to 2,584 in the week.

The BSE Mid-Cap index fell 449.16 points or 12.67% at 3,095.68 and the BSE Small-Cap index lost 506.03 points or 12.14% at 3,661.83. Both the indices outperformed the Sensex.

The barometer index BSE Sensex is down 11,585.92 points or 57.11% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 12,505.70 points or 58.97% below its all-time high of 21,206.77 struck on 10 January 2008.

Trading for the week started on positive note after the Reserve Bank of India (RBI), on Monday, 20 October 2008 announced a 100 basis points cut in repo rate to 8%, with immediate effect. The repo rate is the rate at which the RBI provides funds to banks against the collateral of government bonds for a day to three days. The BSE 30-share Sensex gained 247.74 points or 2.48% to 10,223.09 and the S&P CNX Nifty was up 48.45 points or 1.58% to 3,122.80, on that day.

Market extended gains on Tuesday, 21 October 2008, boosted by an overnight central bank's repo rate cut, positive global markets and short covering after the regulator Securities & Exchange Board of India (Sebi) warned foreign funds against overseas lending and borrowing of Indian securities. The BSE 30-share Sensex rose 460.30 points or 4.5% to 10,683.39 and the S&P CNX Nifty was up 112.10 points or 3.59% to 3,234.90, on that day.

Weak global markets, cautious outlook by IT major Wipro and sustained selling by foreign funds played the spoilsport on Wednesday, 22 October 2008. The BSE 30-share Sensex lost 513.49 points or 4.81% to 10,169.90 and the S&P CNX Nifty was down 169.75 points or 5.25% to 3,065.15, on that day.

Stock suffered setback in highly choppy trade on Thursday, 23 October 2008. Finance minister P Chidambaram’s comments that the Securities & Exchange Board of India (Sebi) has asked foreign institutional investors (FIIs) to reverse short positions on borrowed shares, triggered a solid intra-day pullback after early slide caused by weak global cues. The BSE 30-share Sensex lost 398.20 points or 3.92% to 9.771.70 and the S&P CNX Nifty slipped 122 points or 3.98% to 2,943.15, on that day.

Global equities rout on worries about a sharp global economic slowdown and second disappointing quarter monetary policy review by the central bank led carnage on the domestic bourses, on Friday 24 October 2008, pulling them to near three low. The BSE 30-share Sensex slumped 1070.63 points or 10.96% to 8,701.07, its lowest closing since 24 November 2005. The S&P CNX Nifty lost 359.15 points or 12.20% to 2,584, its lowest closing since 14 November 2005.

Banking stocks slumped as the central bank did not announce any measures to boost liquidity at the policy review announced on Friday, 24 October 2008.

India’s largest state-run bank by net profit State Bank of India lost 18.22% to Rs 1156.35 in the week. ICICI Bank, the country’s largest private sector bank by net profit slipped 20.86% to Rs 310.

HDFC Bank, the country’s second largest private sector bank by net profit fell 5.02% to Rs 972.65. The bank's net profit rose 43.2% to Rs 527.98 crore on 62.8% growth in total income to Rs 4,634.32 crore in Q2 September 2008 over Q2 September 2007.

India’s largest private sector company by market capitalization and oil refiner Reliance Industries plunged 22.20% to Rs 1015.50 as net profit in Q2 September 2008 rose at the slowest pace in the past 10 quarters, largely due to fall in refining margins. The net profit rose 7.4% to Rs 4122 crore on 39.8% growth in sales to Rs 44787 crore in Q2 September 2008 over Q2 September 2007. The company announced the result after market hours on 23 October 2008.

India’s largest electric equipment maker by sales Bharat Heavy Electricals slipped 8.62% to Rs 1091.75. On 24 October 2008, the company reported 10.4% fall in net profit to Rs 615.77 crore on 34.7% rise in net sales to Rs 5342.63 crore in Q2 September 2008 over Q2 September 2007.

India’s largest drug maker by sales Ranbaxy Laboratories slumped 26.25% to Rs 188.95. Japan's Daiichi Sankyo has acquired 52.5% of Ranbaxy Laboratories making the Indian firm a subsidiary, the two companies said in a joint statement on 20 October 2008. Daiichi Sankyo bought shares from Ranbaxy's founders and through an open offer from other shareholders. It also subscribed to shares and warrants worth $736 million. Daiichi Sankyo had agreed in June 2008 to take over Ranbaxy in a deal worth up to $4.6 billion.

IT stocks were mixed. India’s third largest IT exporter by sales Satyam Computer Services rose 7.86% to Rs 286.65. The company raised its earnings guidance in rupee terms at the time of announcing Q2 September 2008 results on Friday, 17 October 2008.

India's fourth largest IT exporter by sales Wipro fell 8.72% to Rs 235.15 after it said on 22 October 2008 the outlook is cautious in the near term given the extent of strain on the global economy. Wipro reported 56.13% spurt in net profit to Rs 852.50 crore on a 15.48% increase in total income to Rs 5551.60 crore in Q2 September 2008 over Q1 June 2008.

India’s biggest software exporter by sales TCS rose 7.94% to Rs 490.20. On 22 October 2008, the company reported 2.57% decline in net profit to Rs 1173.04 on a 9.36% rise in sales to Rs 5699.96 in Q2 September 2008 over Q1 June 2008.

India’s second largest software exporter by sales Infosys Technologies rose 3.84% to Rs 1248.75 on reports it bagged an order worth $10-15 million from the Union Bank of California, US, for implementing core banking solution (CBS) Finacle.

India’s largest steel maker by sales Tata Steel plunged 28.16% to Rs 178.30 after Moody's Investors Service on 23 October 2008 lowered outlook on corporate family rating to negative from stable due to weak operating environment at its UK unit.

Telecom stocks fell on reports they may have to shell out Rs 6,000 crore for failing to verify their customers. India's largest telecom services provider by market share Bharti Airtel slipped 21.03% to Rs 534.45. India's second largest telecom services provider by market capitalisation Reliance Communications fell 17.33% to Rs 193.40.

The Reserve Bank of India (RBI) kept the bank rate, repo rate, reverse repo rate and cash reserve ratio unchanged in a mid term review of Annual Policy for the Year 2008-09 on 24 October 2008. RBI also revised India's GDP growth projection for FY 2008-09 to a range of 7.5 to 8%, down from its own earlier projection of around 8% in July 2008. Inflation target was also kept unchanged at 7% by end March 2009.

Ahead of the policy review, the Reserve Bank of India cut repo rate by 100 basis points to 8% with immediate effect on 20 October 2008. The repo rate is the rate at which the RBI provides funds to banks against the collateral of government bonds for a day to three days.

The government and the Reserve Bank of India (RBI) late on Wednesday, 22 October 2008, relaxed overseas borrowing norms for corporates. According to the new rules notified by the RBI, external commercial borrowings (ECBs) up to $500 million per borrower per financial year would be permitted for rupee expenditure or foreign currency expenditure for permissible end uses under the automatic route.

Oil Minister Murli Deora on 23 October 2008 said the government is watching crude price and will decide in a week if fuel prices should be cut. US crude oil has fallen sharply from a record of above $147 in July 2008.

On 20 October 2008, Prime Minister Manmohan Singh said the economic growth may decelerate to 7.5% in 2008-09, as the country experienced "ripple effects" of the global financial crisis and liquidity crunch. The financial crisis is likely to have an indirect impact on the Indian economy, he said in the parliament. Singh said the recent steps taken by the government and central bank would help ease a liquidity shortage. Inflation was also expected to moderate further in the next two months, he added.

Inflation based on the wholesale price index (WPI) rose 11.07% in the year through 11 October 2008, much lower than previous week’s 11.44% rise.