Small-cap, mid-cap indices tumble

Fears of a prolonged global recession, slowdown in the domestic economy and selling by foreign funds pulled the key benchmark indices lower in the week ended Friday, 21 November 2008. The market edged lower in four out of five trading sessions. The BSE Small-Cap and Mid-Cap indices tumbled on intense selling pressure. Volatility was high throughout the week.

The BSE 30-share Sensex lost 470.21 points or 5.01% to 8,915.21 in the week ended Friday, 21 November 2008. The S&P CNX Nifty declined 116.90 points or 4.15% to 2693.45 in the week.

The BSE Mid-Cap slumped 299.42 points or 9.31% to 2,916.66 and the BSE Small-Cap index shed 374.29 points or 9.94% to 3,390.76. Both the indices underperformed the Sensex.

Sustained selling by the foreign institutional investors (FII) to shore up resources to beat the global liquidity crunch, have weighed heavily on the bourses since 2008. FII outflow reached Rs 53,476.90 crore in calendar 2008, till 20 November 2008.

World stocks fell on worries that a recession in Japan will last longer than expected and on doubts about the survival of Citigroup Inc, the No. 2 US bank. Reports the US economy could shrink by 0.2% through 2009 and that US automakers, General Motors Corp, Ford Motor Co and Chrysler LLC are at risk of bankruptcy if a last-minute bail-out plan fails, sent the world stock indices to 5-1/2 year lows on 20 November 2008. The rising jobless claim, which rose to a 16-year high in the US, is expected to worsen the US economy further.

Closer home, the barometer index BSE Sensex is down 11,371.78 points or 56.05% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 12,291.56 points or 57.96% below its all-time high of 21,206.77 struck on 10 January 2008.

Trading for the week started on a dull note with the market declining on Monday, 17 November 2008, despite the Reserve Bank of India announcing measures to shield the Indian economy from the global economic slowdown. The BSE 30-share Sensex slipped 94.91 points, or 1.01%, to 9,291.01 and the S&P CNX Nifty fell 10.80 points, or 0.38%, to 2,799.55, on that day.

The BSE 30-share Sensex lost 353.81 points, or 3.81%, to 8,937.20 and the S&P CNX Nifty fell 116.40 points, or 4.16%, to 2,683.15 on Tuesday, 18 November 2008, as worries about a weakening domestic and world economy, political uncertainty due to ongoing state elections, and weak global cues played spoilsport.

Fears of more foreign fund sales pulled the market lower on Wednesday, 18 November 2008, offsetting hopes of more measures from the government and Reserve Bank of India (RBI) to help revive the domestic economy. The BSE 30-share Sensex fell 163.42 points, or 1.83%, to 8,773.78 and the S&P CNX Nifty fell 48.15 points, or 1.79%, to 2,635, on that day.

Worries of a deep global recession and fears that there could be another wave in the global credit crisis pulled the domestic bourses down for the seventh consecutive trading session on Thursday, 19 November 2008. The BSE 30-share Sensex was down 322.77 points, or 3.68%, to 8,451.01 and the S&P CNX Nifty was down 81.85 points, or 3.11%, to 2,553.15, on that day.

Key benchmark indices edged higher on Friday, 21 November 2008 as battered pivotals made a comeback snapping seven-day losses. A surge in US index futures and gains in European stocks boosted the domestic bourses. The BSE 30-share Sensex rose 464.20 points, or 5.49%, to 8,915.21 and the S&P CNX Nifty gained 140.30 points, or 5.50%, to 2693.45, on that day.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 1.85% to Rs 1127.35 in the week on concerns a global slowdown would hit demand for petrochemicals.

IT stocks fell on mounting worries about US economy after the Federal Reserve slashed its growth forecasts for the economy. Indian IT firms derive a lion's share of revenue from exports to US. India's second largest IT exporter by sales Infosys fell 2.72% to Rs 1184.74 after chief executive S. Gopalakrishnan on 17 November 2008 said the currency movement will have an impact on revenue in Q3 December 2007 and that the company is seeing flat billing rates.

Wipro (down 4.61% to Rs 229.80), Satyam Computer Services (down 8.05%to Rs 240.60), and TCS (down 4.32% to Rs 506.55), edged lower.

Metal stocks declined on worries that global economic slowdown will hit demand. Hindalco Industries (down 8.30% to Rs 51.90), Sterlite Industries (down 3.72% to Rs 218.75), and Tata Steel (down 7.62% to Rs 160.05), slipped.

Auto stocks declined on a worsening global economic outlook and declining domestic demand due to high interest rates and fuel prices. Maruti Suzuki India (down 4.71% to Rs 511.35), Mahindra & Mahindra (down 6.49% to Rs 309.25), and Tata Motors (down 2.45% to Rs 133.60), declined.

Private sector banking shares slipped on worries about bad loans in a slowing economy. India's second largest private sector bank by net profit HDFC Bank lost 15.32% to Rs 856.70. India's India's largest private sector bank by net profit, ICICI Bank slumped 15.25% to Rs 335.55 after it halved its lending growth target for March 2009 to 15% in a slowing economy.

But India's largest commercial bank by net assets State Bank of India (SBI) rose 1.12% to Rs 1183.15.

Realty stocks fell on slowdown in the sector due to lower demand and a liquidity crunch. Unitech (down 30.38% to Rs 31.85), Indiabulls Real Estate (down 8.82% to Rs 99.75),and DLF (down 17.73% to Rs 198.20), slipped.

India's largest oil exploration firm by revenues ONGC shed 0.50% to Rs 690.05 even as the company along with its partners bagged 20 out of the 44 blocks were awarded under the seventh round of the New Exploration Licensing Policy (NELP-VII). The government announced awarding the blocks after trading hours on Thursday.

Telecom firms slipped amid a controversy regarding the award of 2G telecom licenses. India's largest cellular services provider by net profit Bharti Airtel fell 4.78% to Rs 619.10. India's second largest cellular services provider by net profit Reliance Communications lost 5.76% to Rs 207.10

The controversy centres on award of 2G telecom licenses for a total of Rs 9000 crore on 10 January 2008. It has been alleged that this amounted to severe underpricing, causing a loss of almost Rs 51000 crore to the exchequer.

Among the non-Sensex stocks, Amtek India (down 47.80%), Orchid Chemicals (down 29.87%), Reliance Capital (down 24.60%), and Chambal Fertilisers & Chemicals (down 24.59%), suffered steep losses.

On 15 November 2008, the Reserve Bank of India (RBI) announced measures to improve money market liquidity and help exporters. The measures include extension of a special repurchase facility to provide liquidity for mutual funds and non-banking finance companies till March 2009, increase in the limit on export credit refinance available to banks, allowing housing finance companies to raise funds through short-term overseas borrowings, reduction in provisioning on standard assets of banks to a uniform level of 0.4%, and reduction in risk weights for banks on commercial real estate and on unrated claims on corporates. The central bank also said it would consider proposals from local firms to buy back foreign currency convertible bonds early.

On 18 November 2008, Finance Minister P Chidambaram said the government will take steps to stimulate the domestic economy to compensate for the downside caused by the downturn in the world economy.

Inflation based on the wholesale price index rose 8.90% in the 12 months to 8 November 2008, marginally below the previous week's annual rise of 8.98%, data released by the government on Thursday, 20 November 2008 showed. Inflation has been softening ever since it hit a 16-year high of 12.91% on 2 August 2008.

On 21 November 2008, Prime Minister Manmohan Singh said India will emerge strong from the global economy crisis. Singh said the government will ensure that the shortage of demand from the global slowdown is neutralised to the maximum possible extent through the use of fiscal and monetary policies and through the use of public investment.