Market slumps

Banking stocks dragged down the market from a positive opening into the red in a volatile opening session. But for index heavyweight Reliance Industries, the fall could have been even steeper as global markets tumbled to new five-year lows on investors withdrawing from equity markets on worries a global economic slowdown would hurt corporate profitability.

Asian markets were trading lower today, 27 October 2008. Key benchmark indices in China, Hong Kong, South Korea, Taiwan, and Japan were down by between 0.46% and 5.57%.

The US markets had declined in volatile trade on Friday, 24 October 2008, as fears of a full-blown global recession intensified and investors dumped risky assets. The Dow Jones Industrial Average plunged 312.30 points, or 3.59%, to 8,378.95. The S&P 500 index slipped 31.34 points, or 3.45%, to 876.77, and the Nasdaq Composite index lost 51.88 points, or 3.23%, to 1,552.03.

At 10:25 IST, the BSE 30-share Sensex was down 434.49 points, or 5%, to 8,266.38. The Sensex opened 112.21 points lower at 8,588.86. The Sensex lost 436.91 points to a three-year low of 8,264.16 hit in early trade. At the day’s high of 8,739.48, the Sensex had risen 38.41 points.

The S&P CNX Nifty lost 136.85 points, or 5.30%, to 2,447.15, after tanking to a three-year low of 2,431.10 in early trade.

The total turnover on the BSE amounted to Rs 453 crore by 10:30 IST

Volatility is likely to remain high as derivative contracts for October 2008 series expire on Wednesday, 29 October 2008. As per reports, marketwide rollover of positions was 37%, while that of Nifty stood at 45% from October 2008 series to November 2007, by Friday, 24 October 2008. The rollovers are fairly high, indicating market players are uncertain about the direction of the market.

Among the 30-member Sensex pack, only two managed to escape the drubbing.

Banking shares extended the losses of Friday, 24 October 2008, as the central bank did not announce any measures to boost liquidity at the mid-term monetary policy review. On Friday, 24 October 2008, 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%.

India’s second largest bank by market capitalisation HDFC Bank lost 8.31% to Rs 891.85 and was the top loser among the Sensex pack. India’s second largest private sector bank by market capitalisation ICICI Bank slipped 4.68% to Rs 298.50 ahead of its Q2 September 2008 results today, 27 October 2008. In the midst of a credit turmoil gripping economies across the world, marketmen will focus on ICICI Bank’s result for its exposure to some of the crisis-ridden institutions in the US including Lehman Brothers Holdings Inc.

India’s largest state-run ban by net profit State Bank of India (SBI) fell 6.60% to Rs 1080 on muted growth in consolidated net profit in Q2 September 2008. In its results declared before market hours today, 27 October 2008, SBI reported a 10.60% rise in consolidated net profit to Rs 2378.19 crore on a 26.4% increase in total income to Rs 27083.47 crore in Q2 September 2008 over Q2 September 2007. The consolidated earnings include numbers from recently acquired State Bank of Saurashtra.

NTPC (down 7.57% to Rs 120.95), Ranbaxy (down 6.59% to Rs 176.50), and Maruti Suzuki India (down 7.24% to Rs 494.90), were the other key losers from the Sensex pack.

India’s largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 1.41% to Rs 1029.80 in volatile trade, rebounding from its 52-week low of Rs 985.10 hit in early trade. It was the top gainer from Sensex pack. RIL’s 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 said after market hours on Thursday, 23 October 2008.

India’s biggest listed cellular services provider Bharti Airtel rose 0.29% to Rs 536. The stock moved in a range of Rs 552 and Rs 502.20 in choppy trade.

Among the side counters, Glenmark Pharma (down 20% to Rs 259.25), Numeric Power (down 19.87% to Rs 229.30), and Omax Auto (down 17.65% to Rs 21) slumped.

However, Unitech (up 38.54% to Rs 41.70), Suzlon Energy (up 6.15% to Rs 50.15), and Gujarat NRE Coke (up 3.44% to Rs 28.50), surged.

India Inc.’s report card for the September 2008 quarter so far shows a muted bottomline growth, partly due to a surge in interest cost. Aggregate results of 875 companies showed a 6.2% rise in net profit on 28.5% increase in net sales in Q2 September 2008 over Q2 September 2007. Interest cost jumped 35.6% in Q2 September 2008 over Q2 September 2007.

While governments and central banks across the globe are expected to take further dramatic action to prop up the global financial system this week, there is concern this would not be enough to prevent companies from slashing production and jobs as sales get hit and financing remains difficult.

Central banks are likely to launch new coordinated emergency action this week to calm panic in financial markets. Reports indicate the US Federal Reserve is widely expected to announce a 50 basis-point cut in overnight rates on Wednesday, 29 October 2008 that would take them to 1%, the lowest level since June 2004, with some expecting an even deeper reduction to 0.75%.

Back home, markets suffered a severe setback on Friday 24 October 2008, plunging to three-year lows mirroring weak global equities on worries about a sharp global economic slowdown and disappointment from the second quarter monetary policy review of the Reserve Bank of India. The BSE 30-share Sensex plunged 1070.63 points, or 10.96%, to 8,701.07, recording its biggest fall in percentage terms since May 2004 and the S&P CNX Nifty was down 359.50 points or 12.2% to 2,584.

Foreign institutional investors (FIIs) were net sellers of equities worth Rs 1431.56 crore, while the mutual funds bought more shares than they sold at a net Rs 514.26 crore on Friday, 24 October 2008, according to provisional data on the NSE.

US light crude for December 2008 delivery fell 22 cents to $63.93 a barrel today, 27 October 2008, after touching a 17-month low of $63.67 as an emergency production cut by OPEC was shrugged off by traders anxious about the onset of a deep global recession.