Sensex down 9% in two days as Satyam scandal rattles investor confidence

A massive accounting scandal at IT major Satyam Computer and caution ahead of the US non-farm payroll data for December 2008, pulled the market down for the second day in a row. IT pivotals surged as investors churned portfolio after Satyam's scandal. FMCG stocks gained on defensive buying even as realty and metal stocks fell. Volatility was high.

The BSE Sensex lost 180.41 points, or 1.88%. Extending Wednesday's (7 January 2009) s near 80% fall triggered by a confession of an accounting fraud by erstwhile chairman B Ramalinga Raju, shares of IT major Satyam Computer Services tanked 40.3% on huge volumes.

Volatility was immense right from opening bell. After an initial 2.45% slide triggered by worries that the Satyam accounting scandal in excess of Rs 7,000 crore will hit fresh inflow of foreign funds in India, the market staged a strong rebound and the Sensex moved into green as IT pivotals, other than Satyam, surged. Recovery in Asian stocks had also aided the strong rebound. But the rebound on the domestic bourses proved short-lived as the market plunged in mid-morning trade as investors were worried that the biggest scandal in the corporate history may trigger foreign portfolio outflows.

The market once again rebound from lower level in afternoon trade. It later came off the higher level. It recovered once again in late trade on reports employees of state-run oil refiner Bharat Petroleum Corporation (BPCL) have called off strike and 70% of the striking employees of the firm have returned to work. But the recovery was short-lived and the market weakened again in late trade. The Sensex swung 379.58 points between the day's high and low.

In a major relief to people across the country hit by the oil sector strike, BPCL during trading hours today, 9 January 2009, said it would resume fuel supplies at all locations starting this evening, as more than 70% cent of the striking employees returned to work. With BPCL employees resuming work, there are expectations that officers of the other oil sector companies too will follow suit and call off the strike soon. BPCL accounts for 25% of the petro goods market in the country, while HPCL accounts for 27% cent and Indian Oil Corporation (IOC) the rest. HPCL has been functioning normally throughout.

The strike by the oil company executives under the umbrella of the Oil Sector Officers Association which began on Wednesday, 7 January 2009 had brought the country to a grinding halt with over 90% of petrol pumps across the country running dry. The nation was reeling under the impact of the oil strike, compounded by the truckers' stir. The striking oil officers said that their demand of higher wages should be immediately met otherwise the strike will continue indefinitely.

European shares fell in morning trade on Friday, giving up early gains, as a rally in mining stocks on the back of higher copper prices fizzled out. The key benchmark indices in France, Germany and UK were down by between 0.2% to 0.58%.

Asian stocks were volatile and moved between positive and negative zone. Most of the Asian stocks were now in the red on an expected dismal December 2008 US job data due later in the day. key benchmark indices in Japan, Taiwan, Singapore, Hong Kong, Japan and South Korea fell by between 0.27% to 2.05%. But China's Shanghai Composite rose 1.42%.

Most US stocks rose on Thursday, 8 January 2009, after news that Citigroup Inc agreed to support legislation aimed at stemming home loan foreclosures, offsetting Wal-Mart's disappointing sales and outlook. The Dow fell, however, led down by a 7.5% decline in Wal-Mart as the discounter's sluggish December 2008 sales signaled another downturn in consumer spending, reviving fears of a prolonged recession.

The Dow Jones industrial average was down 27.24 points, or 0.31%, to 8,742.46. The Standard & Poor's 500 Index was up 3.08 points, or 0.34%, to 909.73. The Nasdaq Composite Index gained 17.95 points, or 1.12%, to 1,617.01.

Citigroup's reported backing of legislation that would bring relief to struggling borrowers brought on board the support of one of the largest US retail financial institutions -- seen as a key move in winning support for the bill.

The BSE Sensex was down 180.41 points, or 1.88%, to 9,406.47. The Sensex rose 43.52 points at the day's high of 9,630.40 hit in early trade. The Sensex fell 336.06 points at the day's low of 9.250.82 in mid-morning trade.

The S&P CNX Nifty was down 47.40 points, or 1.62%, to 2,868.40.

The market breadth, indicating the overall health of the market, was weak. On BSE, 577 stocks advanced and 1,879 stocks fell. A total of 62 stocks remained unchanged.

The BSE clocked a turnover of Rs 4,192 crore today, lower than Rs 5,831.85 on Wednesday, 7 January 2009. The financial markets were closed on Thursday, 8 January 2009 for a public holiday.

Nifty January 2009 futures were at 2860.80, at a discount of 12.20 points as compared to the spot closing of 2873. Turnover in NSE's futures & options (F&O) segment was Rs 47,709.01 crore, lower than Rs 59,555.20 crore on Wednesday, 7 January 2009.

Worries over outflow by foreign funds with the massive Satyam scandal shaking investor confidence on India Inc., weighed on the market. Institutional investors pressed heavy sales of Indian stocks on Wednesday, when the Satyam's announcement of the accounting fraud during trading hours. As per the provisional data released by the stock exchanges, foreign institutional investors (FIIs) dumped shares worth Rs 1,111.25 crore and domestic funds sold shares worth Rs 505.49 crore on Wednesday.

The BSE Sensex has lost 929.46 points or 8.99% in the last two consecutive trading sessions hit by the Satyam scandal. Before the sharp slide, the Sensex had risen 1,007.01 points or 10.79% to 10,335.93 on 6 January 2009 from a recent low of 9,328.92 on 26 December 2008.

The BSE Mid-Cap index was down 2.41% while BSE Small-Cap index was down 2.92%. Both the indices underperformed the Sensex.

The BSE Metal index (down 7.16%),the BSE Realty index (down 5.15%), the BSE Capital Goods index (down 4.7%), the BSE Oil & Gas index (down 2.81%), the BSE Consumer Durables index (down 2.4%), the BSE Power index (down 1.99%), the BSE Bankex (down 1.97%), underperformed the Sensex.

The BSE FMCG index (up 1.22%), the BSE Auto index (up 1.01%), the BSE IT index (up 0.18%), the BSE HealthCare index (down 0.46%), the BSE PSU index (down 1.31%), the BSE Teck index (down 1.87%) outperformed the Sensex.

Ranbaxy Laboratories, Reliance Infrastructure, Tata Power Company fell by between 7.09% to 7.7%.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) was down 3.82% to Rs 1,151.05 on worries the recent steep fall in crude oil prices would dent refining margins of the firm. The stock came off the lower level. It had lost 8.72% at the day's low of Rs 1,092.35.

PSU OMCs rose as crude oil prices declined sharply. BPCL, HPCL and Indian Oil Corporation rose by between 1.08% to 3.86%.

Oil rose for the first time in four days on Friday, 9 January 2009, on speculation prices had fallen too far, too fast in response to the global recession. Crude oil for February 2009 delivery gained as much as 94 cents, or 2.3%, to $42.64 a barrel on the New York Mercantile Exchange.

Crude had lost nearly $1 to settle at $41.70 a barrel on Thursday, 8 January 2009 at New York Mercantile Exchange (NYMEX) extending Wednesday's (7 January 2009) 12.25% or $5.95 fall to $42.63 a barrel. Wednesday's fall was the biggest single day percentage drop in seven years, triggered by a US government report that showed crude inventories rose much more than expected in the world's top energy consumer.

Lower crude oil prices will help oil marketing firms reduce losses on sale of kerosene and liquified petroleum gas at a controlled price. The PSU OMCs are, however, making profit on sale of petrol and diesel thanks to a sharp fall in global crude oil prices over the past few months.

FMCG stocks rose on a defensive buying. ITC, Hindustan Unilever Tata Tea and Nestle India rose by between 0.32% to 4.79%.

India's fourth largest IT firm by sales Satyam Computer Services slumped 40.3% to Rs 23.85 on huge volumes of 8.19 crore shares, recovering from the day's low of Rs 11.50. The stock had tanked 77.69% to Rs 39.95 on Wednesday after Raju confessed of reporting inflated figures in the accounts of the firm. The accounting fraud is estimated at over Rs 7000 crore.

Meanwhile, SRSR Holdings, an investment vehicle of the promoters of Satyam Computer, has sold a 1.27% stake of pledged shares in the outsourcing firm, a disclosure to the stock exchange showed on Thursday, 8 January 2009. The stock was sold on the open market, and SRSR Holdings now held 2.34% of the company's stock, the disclosure showed.

Satyam's banker Citibank has reportedly frozen more than 30 operational accounts of Satyam Computer Services. These are trade receivable accounts, and the aim may be to protect the bank's $70-million exposure to the troubled technology firm.

IT pivotals, other than Satyam Computer, surged as investors shifted positions from Satyam in favour of other IT pivotals to maintain overall portfolio weightage to the sector. India's second largest IT exporter by sales Infosys rose 0.67% even as its American depository receipt (ADR) fell 1.11% on Thursday, 8 January 2009. India's third largest IT exporter by sales Wipro rose 3.02% even as its ADR slipped 2.54% on Thursday. India's largest IT exporter by sales Tata Consultancy Services rose 6.34%.

Another reason for the rally in IT pivotals was expectations that Satyam's woes will see other IT firms getting more business. IT firms shrugged of a firmer rupee. The Indian rupee strengthened on Friday after initial weakness. The partially convertible rupee was at 48.30 per dollar, stronger compared with its close at 48.80/81 on Wednesday. A stronger rupee negatively impacts operating margins of IT firms as they earn most of their revenues from exports.

Banking stocks were volatile caught between hopes fall in inflation may give room to the Reserve Bank of India for further rate cuts and worries of rising bad loans in a slowing economy. India's largest private sector bank by net profit ICICI Bank fell 2.82% to Rs 454.85. It touced a high of Rs 482.20 and a low of Rs 441.05 during the day.

India's biggest bank in terms of total assets and branch network, State Bank of India fell 1.84% to Rs 1,215.90. It touched a high of Rs 1249 and a low of Rs 1,190.15. India's second largest private sector bank by net profit HDFC Bank rose 0.12% to Rs 1,012.30, touching a high of Rs 1,052 and a low of Rs 975.10.

India's largest dedicated housing finance firm by operating income HDFC rose 1.18%.

Axis Bank fell 6.97% after the bank said its gross non-performing assets rose 76% to Rs 788 crore in Q3 December 2008 over Q3 December 2007. In percentage terms, non-performing assets (NPAs), Axis Bank's nudged up to 0.9% of total advances as on 31 December 2008 from 0.8% on 31 December 2007, Axis bank said at the time of announcing Q3 December 2008 results during trading hours. Axis Bank's net profit rose 63.2% to Rs 500.86 crore on a 62.3% rise in total income to Rs 3716.94 crore in Q3 December 2008 over Q3 December 2007.

Inflation based on the whole price index (WPI) rose 5.91% in the year through 27 December 2008, lower than previous week's 6.38% rise, data released by the government today, 9 January 2009, showed. Inflation had surged into double digits in early June this year after an increase in state-set retail fuel prices, and peaked at 12.91% on, 2 August 2008, the highest reading since annual numbers in the current data series became available in April 1995.

The Satyam accounting scandal hit realty shares for the second day in a row on market perception that a number of realty firms do not strictly follow good corporate governance practices. DLF, Housing Development & Infrastructure, Indiabulls Real Estate and Unitech fell by between 1.37% to 7.37%.

In an effort to boost the cash-starved realty sector, the government on 2 January 2009 allowed the developers of integrated townships to borrow funds from overseas and also asked states to release land for low- and middle-income housing schemes. Earlier, as part of the first stimulus package announced last month, the public sector banks had lowered rates on home loans up to Rs 20 lakh.

Metal stocks extended Wednesday's fall on profit taking after a recent solid surge. Hindalco Industries, Steel Authority of India, National Aluminum Company and Sterlite Industries fell by between 3.75% to 9.95%. The BSE Metal index fell 7.16% today. The BSE Metal index had fallen 6.38% to 5,605.24 on Wednesday, 7 January 2009. Earlier, the BSE Metal index had risen 20.95% to 5,987.46 on 6 January 2009 from a recent low of 4950.22 on 26 December 2008.

World's sixth largest steel maker Tata Steel fell 8.2% after the company's sales volume dipped by about 14% to 1.07 million tonnes in Q3 December 2008 over Q3 December 2007 due to the global economic slowdown.

Capital goods stocks fell on worries a slowing economy will crimp orders. Bharat Heavy Electricals, Praj Industries, AIA Engineering, BEML fell by between 1.61% to 6.28%.

Indian largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 7.15% as it will make huge losses on shares of Satyam it bought before the scandal. L&T had bought shares in Satyam earlier this month and holds 3.95% stake in the company, L&T chairman A M Naik today, 9 January 2009, said in a television interview. The company, which has a small outsourcing unit, had made the investment in Satyam in the hope of forming a strategic alliance, he said.

Punj Lloyd tumbled 16.64%, extending losses for the second consecutive session after the company said its UK based subsidiary has initiated legal case against UK based SABIC Petrochemicals

India's largest commercial vehicle maker by sales Tata Motors fell 5.54% after its heavy commercial vehicle unit in Jamshedpur announced it would go for a six-day block closure from 12 January 2009, in view of the slowdown in demand.

But other auto stocks rose on hopes lower interest rates will spur demand for vehicles which is mainly driven by finance. Mahindra & Mahindra, Maruti Suzuki India, Hero Honda Motors rose by between 3.42% to 3.54%.

Sun Pharmaceuticals Industries rose 5.7% as index focused mutual funds built position in the stock ahead of its entry in the coveted BSE 30-share Sensex with effect from 12 January 2009.

Aditya Birla Nuvo slipped 1.33% after the company shut its fertilizer plant due to non-availability of gas because of oil officers strike.

Maytas Infra hit the lower circuit limit of 5% to Rs 151.10 on reports the company also fudged account books like the group firm Satyam Computer.

Satyam Computer Services clocked the highest volume of 8.1 crore shares on BSE. Unitech (4.52 crore shares), Jaiprakash Associates (2.63 crore shares), Reliance Natural Resources (2.28 crore shares) and DLF (1.88 crore shares) were the other volume toppers in that order.

DLF clocked the highest turnover of Rs 378.75 crore on BSE. Reliance Industries (Rs 274.46 crore), Reliance Capital (Rs 201.44 crore), Jaiprakash Associates (Rs 181.41 crore) and Satyam Computer Services (Rs 165.27 crore) were the other turnover toppers in that order.