Disappointment from interim budget spooks stocks

A disappointing budget and weak global markets pulled share prices sharply lower in the week ended 20 February 2009. Finance Minister Pranab Mukherjee in the interim general budget on 16 February 2009 did not offer anticipated tax sops and there was no sector-specific stimulus package for the economy, disappointing the stock markets. The market sentiment was edgy due to selling by foreign institutional investors. The BSE Sensex fell in 4 out of 5 trading sessions in the week.

In the interim budget for 2009-2010 unveiled by Mukherjee on 16 February 2009 there were no sector-specific tax sops for the industry hit by the global economic slowdown. No changes were made in direct or indirect taxes. The stock market was expecting government to offer tax sops and sector-specific stimulus package for the economy in the interim budget.

Outflow by foreign institutional investors (FIIs) totaled Rs 5,425.90 crore in calendar year 2,009 (till 19 February 2009). FIIs had pulled out a massive Rs 52,998.70 crore in calendar year 2008, as against an inflow of a huge Rs 71,486.50 crore in calendar year 2007.

The BSE 30-share Sensex fell 791.53 points or 8.22% to 8,843.21 in the week ended 20 February 2009. The S&P CNX Nifty fell 211.90 points or 7.18% at 2,736.45 in the week.

The BSE Mid-Cap index fell 221.23 points or 7.34% to 2,791.72 and the BSE Small-Cap index slipped 234.99 points or 6.92% to 3,160.59 in the week.

The barometer index BSE Sensex is 11,572.03 points or 54.56% below its all-time high of 21,206.77 struck on 10 January 2008.

Key benchmark indices slumped on Monday, 16 February 2009 on sustained unwinding in index pivotals following disappointment from the interim general budget for 2009-2010 with BSE 30-share Sensex losing 329.29 points, or 3.42%, to 9,305.45. Weak global markets also weighed on the domestic bourses on that day.

The BSE 30-share Sensex fell 270.45 points, or 2.91%, to 9,035 on Tuesday, 17 February 2009 extending Monday 16 February 2009's losses as interim budget turned out to be a non-event and weakness in global markets dampened investor sentiments.

Key benchmark indices saw divergent trends on Wednesday, 18 February 2009 in what was a highly volatile trading session. While the 30-share BSE Sensex fell, the broader based S&P CNX Nifty rose. Trend in global markets also influenced trade on the domestic bourses. The BSE 30-share Sensex was down 19.82 points or 0.22%, to 9,015.18 on that day.

The market rose on Thursday, 19 February 2009 in what was a lackluster trading session, in sync with range-bound activity in global markets. The BSE 30-share Sensex rose 27.45 points or 0.30% to 9,042.63. The BSE Sensex settled above the psychologically important 9,000 mark after alternatively moving above and below that level in intraday trade on that day.

Weak global markets pulled the domestic bourses lower with the barometer index BSE Sensex falling below the psychologically important 9,000 level on Friday, 20 February 2009. Nevertheless, a late recovery helped cut the market cut steep intraday losses. The BSE 30-share Sensex lost down 199.42 points or 2.21% at 8,843.21.

India's largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 11.21% to Rs 622.50 in the week ended Friday, 20 February 2009. The company's chairman A M Naik said on Friday 20 February 2009, L&T will decide on Satyam Computer Services deal after evaluating the Company Law Board's order on the bidding process. Larsen & Toubro is the largest shareholder in Satyam Computer Services with a 12% stake.

The Company Law Board (CLB) on 19 February 2009 allowed the government-appointed board of Satyam to bring in a strategic investor through an open bidding process. For this purpose, the CLB also permitted the board to increase the authorised share capital and issue preferential shares.

India's largest car maker by sales Maruti Suzuki rose 0.58% to Rs 633.40 after the company on 18 February 2009 said it expects sales growth in February 2009 at around 5-7%.

India's largest tractor maker by sales Mahindra & Mahindra slipped 12.37% to Rs 281.25 in the week after the company on 16 February 2009 said its promoters have pledged more than 2.09 crore or 8.09% stake in the company.

India's largest private sector firm by market capitalization and oil refiner Reliance Industries fell 9.88% to Rs 1,253.55 on fears a worsening global economy will hit demand for petrochemicals.

India's second largest telecom services provider by sales Reliance Communication declined 14.51% to Rs 155.30 after the company on 16 February 2009 said AAA Project Ventures, one of the promoters has pledged more than 27.23 crore shares or 13.19% stake in the company. Meanwhile, the Department of Telecommunications (DoT) has appointed Parakh and Co to conduct a special audit into the books of Reliance Communication (RCom) after analysts expressed concern over the way the company reported different annual gross revenue numbers to the Telecom Regulatory Authority of India (TRAI) and the stock exchanges.

India's largest private sector power utility firm by revenue Reliance Infrastructure plunged 13.7% to Rs 491.30 after the company on 16 February 2009 said one of the promoters has pledged more than 3.72 crore shares or 16.35% stake in the company.

India's largest dedicated mortgage lender by market capitalization Housing Development Finance Corporation fell 12.14% to Rs 1,353.65 as the company expects 2009/10 loan growth at about 20%, slightly lower than the previous year's rise, as property demand falls.

Metal stocks declined as there was no changes in import duty in the interim budget announced on 16 February 2009. Tata Steel (down 13.44% to Rs 168.05), Hindalco Industries (down 13.89% to Rs 39.35), Sterlite Industries (down 9.84% to Rs 248.40), National Aluminum Company (down 5.35% to Rs 197.10), Steel Authority of India (down 12.41% to Rs 79.40), slipped.

A section of the market was expecting increase in import duties on metals to protect the domestic industry from cheap imports.

Realty shares dropped in the absence of any tax sops for the housing sector in interim budget. DLF (down 3.46% to Rs 155.05), Indiabulls Real Estate (down 14.62% to Rs 93.15) and Unitech (down 11.93% to Rs 28.05) slipped.

Infrastructure shares fell in the absence of any major sops for the sector in the interim budget. Jaiprakash Associates (down 11.26% to Rs 67), Bharat Heavy Electricals (down 6.94% to Rs 1,364.95), Lanco Infratech (down 12.08% to Rs 120.40), and GVK Power Infrastructure (down 13.15% to Rs 19.15), slipped.

Infosys (down 6.08% to Rs 1,178.45), ICICI Bank (down 22.65% to Rs 335.95), HDFC Bank (down 8.31% to Rs 866.95) slipped.

The stock market regulator Securities & Exchange Board of India (Sebi) on Friday, 13 February 2009, relaxed takeover regulations for companies whose boards have been superseded and replaced by the Government or other regulatory authority. The regulator will provide relaxation under provisions of chapter III of the takeover regulations. Chapter III relates to the timing, pricing and size of open offers by acquiring companies. The amendment to the regulation would enable smoother and faster change of management of such companies on a normative basis.

Meanwhile, inflation based on the wholesale price index rose 3.92% in the year through 7 February 2009, much lower than previous week's annual rise of 4.39%. It was the index's lowest annual rise since 3.83% on 29 December 2007.