Market mauled in global rout in equities, disappointment from RBI

n a carnage in late trade the domestic bourses fell to their lowest level in nearly three years, joining a global equities rout on worries about a sharp global economic slowdown. Sensex provisionally lost 1131.82 points or 11.58%. The sell-off on the domestic bourses began in mid-morning trade as the second quarter monetary policy review by the central bank disappointed the market.

Uncertainty on the final order with regard to short sales, also weighed on the bourses. Twenty stocks from the 30-share Sensex pack fell more than 10% each with DLF, Ranbaxy Laboratories and Hindalco Industries leading the fall. Reliance Industries (RIL) tumbled as net profit in Q2 September 2008 rose at the slowest pace in the past 10 quarters.

Banking stocks slumped as the central bank did not announce any measures to boost liquidity at the policy review announced at about 11:15 IST. Other rate sensitive stocks also fell on disappointment from the policy review. The Reseve Bank of India (RBI) kept all the key rates unchanged even as it lowered its 2008/09 growth forecast to 7.5% to 8% from a previous forecast of around 8%. The RBI also left the cash reserve ratio, the amount of funds that banks have to keep on deposit with it, unchanged at 6.5%.

European shares tumbled on data suggesting Britain would enter a prolonged recession and on dismal corporate results. Key benchmark indices in France, Germany and UK were down by between 8.1% to 9.79%. Trading in US index futures suggested the Dow would fall 550 points at the opening bell.

In Asia, Japanese and South Korean stocks, which were down by 7.37% and 9.94% respectively, led fall, as the global economic slowdown slashed earnings prospects for an array of companies, forcing investors to look to safer government bonds. Key benchmark indices in Hong Kong, China, Singapore and Taiwan were down by 1.27% to 4.84%.

Back home, there is uncertainty as to what steps the market regulator will take regarding short sales. Despite announcing its displeasure on overseas lending by foreign funds early this, the Securities & Exchange Board has not yet taken any concrete decision in this regard.

As per the provisional figures, the BSE 30-share Sensex was down 1131.82 points or 11.58% to 8,639.88. The Sensex fell 1204.88 points at day’s low of 8,566.82 in late trade, its lowest level since 23 November 2005. The index declined 200.99 points at the day's high of 9.570.71 in early trade.

The S&P CNX Nifty was down 385.90 points or 13.11% to 2,557.25 as per the provisional figures. Nifty hit a low of 2,525.05 in late trade its lowest level since 11 November 2005.

The BSE Mid-Cap index was down 8.64% at 3,086.96 and The BSE Small-Cap index was down 7.88% at 3,653.36. Both the indices outperformed the Sensex.

The market breadth was weak. On BSE, 267 shares advanced as compared to 2312 that declined. 48 shares remained unchanged.

India’s largest private sector company by market capitalization and oil refiner Reliance Industries plunged 16.89% to Rs 1,010 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.

Ranbaxy Laboratories (down 17.48% to Rs 189.75), Mahindra & Mahindra (down 19.37% to Rs 276), Reliance Infrastructure (down 16.99% to Rs 372), were the other major losers from the Sensex pack.

India’s largest power producer by sales NTPC fell 9.73% despite 9.6% rise in net profit to Rs 2110.51 crore on 18.9% rise in total income to Rs 10406.21 crore in Q2 September 2008 over Q2 September 2007.

India’s largest electric equipment maker by sales Bharat Heavy Electricals fell 7.31% as net profit declined 10.4% 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.

Banking stocks tanked as the central bank did not announce any measures to boost liquidity at the policy review announced at about 11:15 IST. BSE Bankex fell 12.68%. State Bank of India and HDFC Bank fell between 8.68% to 15.28%.

India’s largest private sector bank by net profit ICICI Bank fell 14.38%, even as its American depository receipt (ADR) rose 2% overnight. The bank has reportedly raised its home loan rates by 100 basis points for new borrowers. The bank raised it floating rates from 12% to 13%, with the fixed rate being raised to 16.5% from 10 October 2008.

ICICI Bank, State Bank of India and HDFC Bank have a weightage of 24.21%, 22.44% and 20.55%, respectively, in the Bankex.

The RBI had cut repo rate by steep 100 basis points early this week. 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.

Most realty stocks declined despite hopes cut in lending rates will spur demand for residential properties. The BSE Realty index battered 24.96% and was the major loser from the sectoral indices on BSE.. Realty majors, DLF, Indiabulls Real Estate and Unitech fell by between 13.1% to 56.63%.

Metal stocks extended recent losses on slump in metal prices on the London Metal Exchange. The BSE Metal index was down 12.37% Hindustan Zinc, National Aluminum Company, Sterlite Industries Steel Authority of India fell by between 10.59% to 22.59%.

Concerns that the global economy will slide into recession rattled commodities markets on Thursday, 23 October 2008.

India’s largest steel maker by sales Tata Steel slumped 14.46%, extending losses for the third day in a row, despite a 50.13% rise in net profit to Rs 1787.81 crore on 40.9% rise in net sales to Rs 6744.16 crore in Q2 September 2008 over Q2 September 2007. The company announced the results during trading hours today. The stock had tumbled in the last two days after Moody's Investors Service on 22 October 2008 lowered outlook on corporate family rating to negative from stable due to weak operating enviourment at its UK unit.

JSW Steel tumbled 10.28% as net profit slumped 40.57% to Rs 317.45 crore in Q2 September 2008 over Q2 September 2007.

India’s largest car maker by sales Maruti Suzuki India slumped 9.87% on 36.5% fall in net profit to Rs 296.1 crore on 5.69% rise in net sales to Rs 4806.3 crore in Q2 September 2008 over Q2 September 2007.

FMCG stocks fell after mixed September 2008 quarter results. India’s largest cigarette maker by sales ITC fell 5.66% on a muted 4.13% rise in net profit to Rs 802.72 crore on 14.2% rise in total income to Rs 3973.12 crore in Q2 September 2008 over Q2 September 2007.

India’s largest FMCG major by sales Hindustan Unilever fell 7.56% despite a 33.9% rise in net profit to Rs 546.61 crore on 21.08% rise in total income to Rs 4110.91 crore in Q3 September 2008 over Q3 September 2007.

Finance minister P Chidambaram on Thursday, 23 October 2008, the Securities & Exchange Board of India (Sebi) has asked foreign institutional investors (FIIs) to reverse short positions on borrowed shares. After trading hours Thursday, 23 October 2008, a finance ministry official clarified that only those transactions of foreign funds in which shares were lent after 20 October 2008 will have to be reversed.