Sensex in red, Nifty in green

The key benchmark indices ended mixed on a highly volatile day of trade today. The BSE Sensex lost 106.46 points while Nifty rose 4.25 points. The market swung between positive and negative zone throughout the day. European stocks were green amid choppy trade amid reports the UK government may be forced to provide funding for Royal Bank of Scotland.

The BSE Sensex and the S&P CNX Nifty both hit two-year lows in mid-afternoon trade today, 7 October 2008. This was in contrast to an initial surge on the bourses that was triggered by liquidity boosting measures by Indian financial regulators announced after trading hours on Monday, 6 October 2008. Reliance Industries recovered sharply from 52 week low hit today. Bharat Heavy Electricals came off from the session’s lows. The market breadth was negative

US futures were up. Nasdaq futures were up 19.25 points and Dow Jones futures were up 33 points.

The BSE 30-share Sensex lost 106.46 points or 0.9% to 11,695.24. The index fell 299.85 points at the day's low of 11,501.85, hit in mid-afternoon trade, its lowest level in more than two years.

The Sensex surged 379.73 points at day’s high of 12,181.43, in early trade. The market regulator Securities & Exchange Board of India (Sebi)'s decision to lift restriction on issue of participatory notes and the Reserve Bank of India's surprise steep 50 basis cut in the cash reserve ratio had triggered a rebound on the bourses in early trade after steep losses of the past two trading sessions. Both the Sebi and RBI announcements were made after trading hours on Monday, 6 October 2008.

The barometer index is down 8,591.75 points or 42.35% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 9,511.53 points or 44.85% below its all-time high of 21,206.77 struck on 10 January 2008.

The S&P CNX Nifty was up 4.25 points or 0.12% to 3,606.60. Nifty hit a low of 3,537 in mid-afternoon trade, its lowest level since 5 October 2006.

BSE clocked a turnover of Rs 4,728 crore today as compared to a turnover of Rs 3,992.08 crore on 6 October 2008.

Nifty October 2008 futures were at 3640.10, at a premium of 33.50 points as compared to spot closing of 3606.60. NSE's futures & options (F&O) segment turnover was Rs 59,767.70 crore, which was higher than Rs 46,853.23 crore on Monday, 6 October 2008.

The BSE Mid-Cap index was down 2% at 4,257.16 and the BSE Small-Cap index was down 2.17% at 4,976.39.

BSE Capital Goods index (down 3.96% to 9,118.52), BSE IT index (down 3.04% to 2,840.30), BSE Bankex (down 2.15% to 6,039.25), BSE Realty index (down 1.94% to 2,941.72), BSE FMCG index (down 1.77% to 2,053.68), BSE HealthCare index (down 1.74% to 3,427.52), BSE Metal index (down 1.34% to 7,534.03), BSE Teck index (down 1.22% to 2,352.76), underperformed the Sensex.

BSE Oil & Gas index (up 1.3% to 8,012.18), BSE PSU index (up 0.84% to 5,980.92), BSE Power index (up 0.38% to 2,074.26), BSE Auto index (down 0.41% to 3,511.96), BSE Consumer Durables index (down 0.67% to 2,552.32), outperformed the Sensex.

The market breadth was weak on BSE with 787 shares advancing as compared to 1,822 that declined. 74 shares remained unchanged.

India’s largest private sector company by market capitalization and oil refiner Reliance Industries rose 2.04% to Rs 1,675.40. The stock recovered from a 52 week low of 1615.25 hit today.

Capital goods stocks declined. Larsen & Toubro (down 6.94% to Rs 1,008.10), and Suzlon Energy (down 1.97% to Rs 124.60) edged lower. However India’s largest electric equipment maker by sales Bharat Heavy Electricals surged 3.26% to Rs 1,496.70. The stock recovered from session’s low of Rs 1,440.10.

Bank shares pared gains after firm opening. India’s largest private sector bank by net profit ICICI Bank fell 1.07% to Rs 485.20. The stock came off from the session’s high of Rs 521.70. India’s second largest private sector bank by net profit HDFC Bank declined 6.17% to Rs 1,127.70. The stock came off from the session’s high of Rs 1,245. India’s largest commercial bank State Bank of India fell 1.81% to Rs 1,408. The stock came off from the session’s high of Rs 1,503.

The Reserve Bank of India (RBI), after trading hours on Monday, 6 October 2008, announced a 50 basis points cut in the cash reserve ratio (CRR) to 8.5%, with effective from 11 October 2008. RBI said the CRR cut is an ad hoc, temporary measure and it will be reviewed on a continuous basis in the light of the evolving liquidity conditions. RBI said it will give priority to liquidity management over the period ahead given the turbulence in international financial markets. RBI also said the overriding priority for monetary policy is to eschew any further intensification of inflationary pressures and to firmly anchor inflation expectations.

Tata Consultancy Services (down 7.02% to Rs 575.08), Sterlite Industries (down 6.35% to Rs 314.05), Satyam Computer Services (down 5.18% to Rs 279.09), edged lower from the Sensex pack.

NTPC (up 4.83% to Rs 176.85), Ranbaxy Laboratories (up 5.54% to Rs 260.10), and Bharti Airtel (up 3.6% to Rs 755), edged higher from the Sensex pack.

India’s largest oil exploration firm by revenue Oil and Natural Gas Corporation rose 1.25% to Rs 992.35. The stock came off from the session’s high of Rs 1,040. The company will shortly tie up with Uranium Corporation of India for exploring and mining the fissile material, suggest reports.

Reliance Natural Resources clocked the highest volume of 1.41 crore shares on BSE. Idea Cellular (1.18 crore shares), Chambal Fertilisers and Chemicals (1.02 crore shares), Reliance Petroleum (82.07 lakh shares) and IFCI (77.66 lakh shares) were the other volume toppers in that order.

Reliance Capital clocked the highest turnover of Rs 389.90 crore on BSE. Reliance Industries (Rs 344.76 crore), Larsen & Toubro (Rs 204.33 crore), State Bank of India (Rs 178.05 crore) and ICICI Bank (Rs 176.86 crore) were the other turnover toppers in that order.

In Europe, UK’s FTSE 100, France’s CAC 40 and Germany’s DAX were up between 0.75% to 1.95%. As per reports the UK government may be forced to provide funding for Royal Bank of Scotland. On Monday, credit ratings agency S&P cut its rating on RBS, citing earnings and further writedown risks.

European Union finance ministers gathered in Luxembourg on Tuesday, 7 October 2008, to discuss ways of protecting savers' deposits and counter the market turmoil that saw the region's stock markets suffer record losses on Monday, 6 October 2008. Australia's central bank cut its benchmark cash rate by 100 basis points to 6%, stunning investors with its biggest interest rate cut in 16 years.

Asian stocks outside Japan rose for the first time in four days on Tuesday, 7 October 2008, after a surprisingly large interest rate cut by Australia's central bank raised hopes that other policymakers would follow suit. Taiwan stocks ended up 0.34%, recouping sharp losses earlier in the day and rebounding from a more than four-year closing low the previous session as government funds helped bolster market heavyweights such as TSMC.

South Korea's KOSPI rebounded from a 21-month low and rose 0.54%. The country's regulator said it was considering steps to reduce volatility in the equity market, helping to stem some of the day's losses.

China's stock market fell but ended well off its lows as hopes for government support helped banks and property shares rebound from a sharp early slide. The Shanghai Composite Index, which had dropped as much as 4.64% in the morning, closed down 0.73% at 2,157.839 points. Singapore shares reversed early losses go gain about 2%.

Japan’s Nikkei was down 3.03% after The Bank of Japan kept interest rates unchanged at 0.5% on Tuesday, 7 October 2008, and maintained its assessment on the economy, which it said was sluggish.

Back home, the Sebi decision on lifting of restriction on P-notes comes at a time when foreign institutional investors (FIIs) have been pulling out their investments from India and other emerging markets to shore up resources to beat the global liquidity crunch. In India, FIIs sold shares worth a net Rs 8278.10 crore last month. The outflow has reached Rs 38037.30 crore in calendar year 2008 (till 3 October 2008).

Exactly a year ago, Securities & Exchange Board of India (Sebi) had announced stringent restrictions on P-notes, totally banning fresh issue of P-notes with Indian derivatives as underlying. It had also mandated unwinding of such positions within 18 months. Sebi had also restricted issuance of P-notes in the spot segment to 40% of assets under custody. P-notes are issued by foreign institutional investors registered in India to unregistered overseas investors.

Meanwhile, with the end of third quarter of the calendar year 2008 on Tuesday, 30 September 2008, hedge fund are bracing for heavy redemption amid US financial sector crisis which has already spread to Europe. Investors in hedge funds are usually allowed to exit funds only on the final day of the financial quarter. Large-scale investor redemption in hedge funds may trigger further selling by foreign funds in India. Hedge funds mainly operate through the participatory notes route in India. However, there is no data available on the quantum of hedge funds’ investment in India.

The troubles that started with an overheated housing market in the US have infected financial markets around the world, making banks fearful of lending to other banks, let alone to businesses and consumers. That has led to worries that economies around the world might not only sputter but slide into reverse. Recently, governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland and Greece also said they would guarantee bank deposits.

Oil prices, down nearly 40% from their peak because of recession worries, climbed back to over $90 a barrel.

According to Finance Minister P Chidambaram Indian business and industry have placed India in a situation where the country can weather the global financial crisis. He counts robust revenues, exports and investment planned by Indian corporates as major positive factors which would help India through the global crisis.

The Finance Minister expects 8% GDP growth in the current financial year and 9% in financial year 2009-10.