Sensex drops 7.6% on worries over Q3 results

Key benchmark indices edged lower in the week ended Friday, 26 December 2008, reversing gains in the preceding two weeks. Global economic uncertainties and concerns about corporate earnings weighed on the market ahead of next month's Q3 December 2008 earnings reporting season. The market slipped on all the four trading sessions of the truncated week.

There were also worries foreign portfolio investment could take a knock as recessions in the United States, the eurozone and Japan took their toll.

The BSE 30-share Sensex lost 770.99 points or 7.63% to 9,328.92 in the week ended Friday, 26 December 2008. The S&P CNX Nifty slipped 220.25 points or 7.15% to 2857.25 in the week.

The BSE Mid-Cap fell 157.31 points or 4.81% to 3,106.68 and the BSE Small-Cap index slipped 195.48 points or 5.22% to 3,548.54 in the week. Both these indices outperformed the Sensex.

The barometer index BSE Sensex is down 10958.07 points or 54.01% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 11877.85 points or 56% below its all-time high of 21,206.77 struck on 10 January 2008.

FIIs were net sellers in calendar 2008, so far, as they offloaded shares worth Rs 52,723.40 crore.

Trading for the week started on a negative note, with the BSE Sensex ending below the psychologically important 10,000 mark on Monday, 22 December 2008. Weak global cues also played the spoilsport. The BSE 30-share Sensex slipped 171.56 points, or 1.7%, to 9,928.35 and the S&P CNX Nifty fell 38.20 points, or 1.24%, to 3,039.30.

Bears were in command on Tuesday, 23 December 2008 on setback in Asian stocks and caution ahead of the expiry of the near month derivatives contracts. The BSE 30-share Sensex declined 241.60 points, or 2.43%, to 9,686.75 and the S&P CNX Nifty was down 70.65 points, or 2.32%, to 2,968.65

Weak global markets and signs of further deterioration in the world economy weighed on the domestic bourses on Wednesday, 24 December 2008. The BSE 30-share Sensex slipped 118.03 points, or 1.22%, to 9,568.72 and the S&P CNX Nifty was down 51.80 points, or 1.74%, to 2,916.85

A sharp drop in advance tax payment by Indian companies in the third quarter pointing to dismal earnings triggered a sell-off on Friday, 26 December 2008. The BSE 30-share Sensex fell 239.80 points, or 2.51%, to 9,328.92 and the S&P CNX Nifty lost 59.16 points, or 2.04%, to 2857.25

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 10.17% to Rs 1,121 in the week on concerns the recent sharp fall in crude prices will hit refining margins.

Metal stocks declined on worries a weakening domestic and global economy will hit demand. Steel Authority of India (down 17.46% to Rs 70.45), Tata Steel (down 7.58% to Rs 211.50), Hinalco Industries (down 10.18% to Rs 48.55), and Sterlite Industries (down 11.29% to Rs 249), declined.

Capital goods stocks fell on worries a slowing economy will crimp orders. India's largest engineering & construction company by sales Larsen & Toubro fell 9.07% to Rs 744.40. India's largest power equipment maker by sales Bharat Heavy Electricals lost 9.58% to Rs 1300.10

Banking stocks fell as fears of rising defaults in a weakening economy offset hopes that lower interest rates may boost lending growth. India's largest state-run bank by net profit State Bank of India fell 3.37% to Rs 1244.25.

India's second largest private sector bank by net profit HDFC Bank slipped 7.49% to Rs 972.60. India's largest private sector bank by net profit ICICI Bank fell 11.44% to Rs 417.95

Outsourcing firms dropped in volatile trade on fears a weak global economy would cut the amount firms spent on technology. India's fourth largest software exporter Satyam Computer Services plunged 16.77% at Rs 135.50. Satyam on Thursday, 25 December 2008, said it has asked the World Bank to withdraw "inappropriate" statements about the Indian outsourcer and to issue an apology for harm done to the company. On Tuesday, 23 December 2008, the World Bank had issued a statement saying Satyam was debarred from getting direct contracts from it under its corporate procurement programme for eight years from September this year. The company was declared ineligible for contracts for providing improper benefits to bank staff and for failing to maintain documentation to support fees charged for its sub-contractors, the World Bank had said.

The World Bank, had, however, clarified that there was no evidence of Satyam being involved in malicious attacks on the bank's information system. Media reports had earlier said that data theft was one of the reasons why the World Bank had barred Satyam from doing business with it for eight years.

India's fourth largest IT exporter by sales Wipro fell 8.78% to Rs 227.05. India's largest IT exporter by sales Tata Consultancy Services shed 8.01% to Rs 472.10. India's second largest IT exporter by sales Infosys fell 6.47% to Rs 1109.55.

Real estate heavyweights dipped on reports property rates are expected to fall by 20-25% as demand has dropped off sharply over the past 9-10 months due to high interest rates. Indiabulls Real Estate (down 19.25%), DLF (down 10.07%), and Unitech (down 18.42%), slipped. Fall in property prices is expected to hit the margins of developers already hit by the demand slowdown. Additionally, developers are facing a severe cash crunch that is hindering the execution of ongoing projects and grounding new launches.

Auto stocks fell on concerns about the weakening domestic demand. Mahindra & Mahindra, Maruti Suzuki India and Tata Motors fell by between 7.06% to 17.34%.

Among the side counters, Maytas Infrastructure (down 33.15%), TVS Motor Company (down 17.93%), and Development Credit Bank (down 16.05%), slipped.

Investors are bracing for poor Q3 December 2008 results. The advance tax paid by corporate India has reportedly declined 22% to about Rs 42600 crore in the December 2008 quarter over the December 2007 quarter. The Indian economy has slowed down after a strong growth in the past three years.

Wholesale prices increased 6.61% in the year through 13 December 2008 lower than previous week's 6.84% rise, data released by the government on Friday, 26 December 2008 showed. The central bank's fiscal year-end target for inflation is at 7%.

Commerce Minister Kamal Nath on 24 December 2008 said the government is considering another stimulus package to lift slowing growth. The new stimulus package may include steps to ease liquidity and relief measures for export and housing sectors, the trade minister said.