Sensex sheds 3.4% as govt makes no changes in taxes in interim budget

Key benchmark indices slumped on sustained unwinding in index pivotals following disappointment from the interim general budget for 2009-2010. The BSE 30-share Sensex lost 329.29 points, or 3.42%. Weak global markets also weighed on the domestic bourses.

After opening on a weak note taking cue from weak overseas markets, the domestic bourses lost further ground as acting Finance Minister Pranab Mukherjee began outlining achievements of the Congress-led UPA government when he began his interim budget speech at 11:00 IST. The market extended losses later as the budged disappointed the stock markets.

There were no sector-specific tax sops for the industry hit by the global economic slowdown in the interim budget for 2009-2010 unveiled by acting Finance Minister Pranab Mukherjee today, 16 February 2009. 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.

Mukherjee who is currently holding the charge of Finance Ministry, said the United Progressive Alliance government had succeeded in implementing the promises outlined in the Common Minimum Programme (CMP). The GDP grew from 7.5% in 2004-05 to 9.7% in 06-07 and clocked 9% growth in 2007-08. Per capita income increased 7.4% per annum during the UPA government's tenure. The government relaxed Fiscal Responsibility Budget Management (FRBM) targets to counter global economic slowdown.

The government has extended interest rate subsidy scheme on exports for some sectors till 30 September 2009 from 31 March 2009. The government will provide interest rate subsidy to farmers in 2009-2010.

The fiscal deficit is estimated at 6% GDP in 2008-09. The revenue deficit is seen at 4.4% of GDP in 2008-09. The government spending will rise 6% to 9.53 trillion rupees in the year starting 1 April 2009. That will result in a budget gap of 5.5% of gross domestic product by 31 March 2010, compared with a 3% target. The interim budget estimates include initiatives for the first four months of the fiscal year 2009-2010, as well as spending and revenue estimates for the full year. These figures will be revised when the new government announces its budget after assuming office in May 2009.

European markets were subdued today, 16 February 2009 amid disappointment over the lack of coordinated action from the weekend G7 meeting, grim economic data from Japan and continued uncertainty about bank rescue plans. Key benchmark indices in UK, Germany and France were down by between 0.54% and 0.75%.

Most Asia-pacific markets were trading lower today, 16 February 2009, after data showed Japan's economy shrank at an annual 12.7% last quarter, the most since the 1974 oil shock, as recessions in the US and Europe triggered a record drop in exports. Key benchmark indices in Japan, Hong Kong, South Korea, Taiwan and Singapore were down by between 0.03% and 1.42%. However, China's Shanghai Composite index rose 2.96%.

US markets ended lower on Friday, 13 February 2009 as persistent worries about the banking sector tempered news the Obama administration was set to announce on Wednesday, 18 February 2009, a plan to stem home foreclosures. US markets will be closed today, 16 February 2009 for President's Day holiday.

The Dow Jones industrial average fell 82.35 points, or 1.04%, to 7,850.41, the Standard & Poor`s 500 index slipped 8.35 points, or 1%, to 826.84, and the Nasdaq Composite index dipped 7.35 points, or 0.48% to 1,534.36.

US President Barack Obama would sign into law the American Economic Recovery and Reinvestment Act in Denver on Tuesday, 17 February 2009. The bill, popular as economic stimulus package, was passed by the US Congress on Friday, 13 February 2009 after weeks of intense deliberations. The bill makes available to the Obama Administration $789 billion to revive and recover the US economy by funding projects, offering bailout packages to sinking companies and making investments in infrastructure projects.

Meanwhile, the Group of Seven finance chiefs vowed to tackle a "severe" economic downturn that will persist for most of 2009 without spelling out new steps to do so. The G-7's finance ministers and central bankers said in a statement released after talks in Rome on Saturday, 14 February 2009 that they were working to restore confidence in markets and revive the world economy. They predicted the full effect of individual rescue packages will "build over time."

The BSE 30-share Sensex lost 329.29 points, or 3.42%, to 9,305.45 . The Sensex opened 2.3 points higher at 9,637.04, also its day's high. At the day's low of 9,279.10, the Sensex lost 355.64 points in late trade.

The S&P CNX Nifty dropped 99.85 points, or 3.39%, to 2,848.50. Nifty February 2009 futures were at 2831.05, at a discount of 17.45 points as compared to the spot closing.

As per the provisional data released by the stock exchanges after trading hours, foreign funds today, 16 February 2009, sold shares worth a net Rs 45.33 crore. Domestic funds bought shares worth a net Rs 189.52 crore.

The Sensex had jumped 333.88 points or 3.59% to 9,634.74 in the week ended 13 February 2009 in a pre-budget rally on expectations the forthcoming interim budget will contain fiscal incentives to revive sagging economy.

The barometer index BSE Sensex is down 341.86 points or 3.54% in the calendar 2009 from its close of 9,647.31 on 31 December 2008.

The market breadth, indicating the overall health of the market, was weak on BSE with 1606 shares declining as compared to 781 that advanced. A total of 103 shares remained unchanged. The market breadth was strong in opening trade.

The BSE Mid-cap index lost 2.93% to 2,924.75 and the BSE Small-cap index fell 2.10% to 3,324.14. Both these indices outperformed the Sensex.

BSE clocked a turnover of Rs 2894 crore as compared to Rs 2,908.21 crore on Friday, 13 February 2009. Turnover in NSE's futures & options (F&O) segment surged to Rs 44,914.39 crore from Rs 31,772.99 crore on Friday, 13 February 2009.

All sectoral indices on BSE edged lower. The BSE HealthCare index (down 1.95%), the BSE Auto index (down 1.04%), the BSE FMCG index (down 0.15%), the BSE IT index (down 2.64%), the BSE PSU index (down 3%), BSE Teck index (down 2.83%), BSE Consumer Durables index (down 1.56%), outperformed the Sensex.

The BSE Oil & Gas index (down 4.23%), BSE Metal index (down 4.75%), BSE Bankex (down 4.58%), BSE Realty index (down 4.58%), BSE Capital Goods index (down 4.55%), the BSE Power index (down 3.95%), underperformed the Sensex.

ITC was the lone gainer from the 30-member Sensex pack. India's largest cigarette maker by sales gained 0.59% to Rs 180.10 on defensive buying.

ONGC (down 2.77%), HDFC (down 2.76%), and ACC (down 2.68%), edged lower from the Sensex pack.

Infrastructure shares fell in the absence of any major sops for the sector in the interim budget. Jaiprakash Associates (down 7.95%), Bhel (down 4.55%), Larsen & Toubro (down 5.36%), Lanco Infratech (down 8.40%), and GVK Power Infrastructure (down 6.35%), slipped.

India's largest private sector power generation firm by sales Reliance Infrastructure tumbled 6.29% to Rs 533.50 after the company said AAA Project Ventures, a promoter of the company, has pledged more than 3.72 crore shares or 16.35% stake. It was the top loser from the Sensex pack. AAA Project Ventures held 36.66% stake in the company as on 31 December 2008, while the total promoters shareholding is 37.33%. The company made this announcement during trading hours today, 16 February 2009.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 5.40% to Rs 1315.90 on profit booking as the government did not re-introduce an anticipated seven-year income-tax holiday for natural gas producers in the interim budget. The stock retraced sharply from day's high of Rs 1395

Petroleum Minister, Murli Deora, hinted some days back that the government may consider granting seven-year tax holiday for natural gas producers in an attempt to make the next round of Nelp (New Exploration and Licensing Policy) bidding attractive. The finance ministry had withdrawn the tax holiday last year.

India's second largest cellular services provider by sales Reliance Communication (RCom) slumped 5.89% to Rs 170.95 after the company said AAA Communication, a promoter, has pledged more than 27.23 crore shares or 13.19% stake. AAA Communication held 63.38% stake in the company as on 31 December 2008. The company made this announcement during trading hours today, 16 February 2009.

Auto stocks declined after a firm start as the government did not announce any sops in the interim budget to revive demand. India's top truck maker by sales Tata Motors fell 1.99% to Rs 135.10. The stock retraced from day's high of Rs 142.80 mirroring a 1.83% rise in ADR on Friday, 13 February 2009.

India's top tractor maker by sales Mahindra & Mahindra lost 2.48% to Rs 313 after the company said its promoters have pledged more than 2.09 crore or 8.09% stake in the company. The company made this announcement during trading hours today, 16 February 2009.

Maruti Suzuki (down 2.18%), Hindustan Motors (down 3.85%), and Bajaj Auto (down 2.22%) slipped.

Auto stocks had surged in the past few days on budget hopes. The Auto index jumped 6.7% to 2612.22 on 13 February 2009, from 2447.68 on 6 February 2009.

Banking shares extended early fall on weak sentiment for financial sector stocks globally. The new US bank rescue plan that would potentially cost $2 trillion was greeted unceremoniously by investors last week, frustrated by the lack of detail, especially with regard to how the banks' illiquid assets will be valued.

India's second largest private sector bank by net profit HDFC Bank lost 3.27% as its ADR slipped 2.5% on Friday, 13 February 2009. India's largest private sector bank by net profit ICICI Bank declined 5.10% on a 1.85% slide in its ADR on Friday, 13 February 2009. India's largest bank in terms of assets and branch network State Bank of India fell 5.05%.

Metal stocks declined as there was no changes in import duty in the interim budget. Tata Steel (down 5.49%), Sterlite Industries (down 4.54%), National Aluminium Company (down 7.23%), Sail (down 4.80%), Hindalco (down 3.28%), and Sesa Goa (down 4.87%), slipped.

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

Realty shares overturned in the absence of any tax sops for the housing sector in interim budget. India's largest real estate firm by market capitalisation DLF lost 2.55% to Rs 156.50, off day's high of Rs 167.70.

Parsvnath Developers (down 2.60%), Omaxe (down 3.46%), Indiabulls Real Estate (down 10.31%), and HDIL (down 6.45%), slipped after a strong start.

India's largest power generation company by market capitalisation, NTPC fell 2.79% to Rs 177.80. The company today entered in to an MOU with Nuclear Power Corporation of India (NPCIL) and formed a joint venture company for setting up Nuclear Power Projects. The proposed joint venture company will be a subsidiary of NPCIL in which NPCIL shall hold 51% equity and the balance 49% will be held by NTPC.

IT pivotals slipped amid fears a weak global economy would cut the amount firms spent on technology offset weak rupee.

India's third largest software services exporter, Wipro fell 4.20% mirroring its ADR which slipped 1.02% on Friday, 13 February 2009. India's second largest software services exporter Infosys Technologies shed 2.36% as its ADR declined 2.55% on Friday, 13 February 2009.

India's largest software services exporter by sales TCS slipped 1.82% and India's fifth largest IT exporter by sales HCL Technologies declined 2.80%.

However Satyam Computer Service spurted 6.05% to Rs 49.10 after the stock market regulator relaxed takeover rules in certain conditions, which should make it easier for fraud-hit Satyam Computer to find a buyer. The announcement was made after market hours on Friday, 13 February 2009. Satyam ADR jumped 11.70% on Friday, 13 February 2009.

IT firms derive a lion's share of revenue from exports. The rupee declined to 48.74 against dollar from Friday's close of 48.67. A weaker rupee augurs well for the sector as IT firms earn most of their revenues from exports.

Also some anticipated tax sops for the IT sector were not announced in the interim general budget. The information technology (IT) and information technology enabled services (ITeS) industry had anticipated the interim budget will extend the Software Technology Park of India (STPI) scheme beyond 2010. But there was no such announcement

India's largest pharma company by market capitalisation Sun Pharmaceutical shed 1.45% to Rs 1052 despite reports the company is on the lookout for a possible acquisition overseas as well as in India.

Shares of domestic tyre makers fell on reports the government has started issuing licences to allow import of truck and bus radial tyres. CEAT (down 1.47%), Goodyear India (down 3.05%), Apollo Tyres (down 1.69%), JK Tyre & Industries (down 2.48%) and MRF (down 3.55%), edged lower.

According to reports, foreign tyre makers such as Bridgestone and Pirelli had sought licences from the government to allow them to import radial tyres. This will put the domestic players into more competition and the domestic tyre makers will be forced to reduce the prices of tyres to face the tough competition.

Sugar shares slipped on profit booking after a solid recent surge on the back of rising commodity prices. Shree Renuka Sugars (down 6.95%), Bajaj Hindustan (down 3.62%), and Balrampur Chini Mills (down 7.20%), slipped. Shree Renuka Sugars had jumped 18.25% to Rs 90.70 in a week to 13 February 2009.

Shares of companies associated with Indian Railways declined on profit booking, after surging earlier on hopes of favorable announcements in the interim rail budget on 13 February 2009.

Container Corporation of India (down 1.42%), BEML (down 2.94%), Titagarh Wagons (down 11.25%), Kalindee Rail Nirman Engineers (down 12.64%), Texmaco (down 12.67%), and Kernex Microsystems (down 9.97%) declined.

State-run oil marketing companies declined after cutting jet fuel price by an average of Rs 1,206 across cities effective Sunday midnight.

Among the state-run oil marketing companies HPCL (down 3.58%), BPCL (down 2.96%), and IOC (down 1.12%), declined.

Reliance Industries was the top traded counter on BSE with turnover of Rs 240 crore followed by Educomp Solutions (Rs 207.60 crore), DLF (Rs 145.70 crore), Reliance Infrastructure (Rs 119.50 crore) and Reliance Capital (Rs 118.20 crore).

Unitech led the volume chart on BSE with volumes of 2.38 crore shares followed by Satyam Computer Services (2.01 crore shares), Cals Refineries (1.46 crore shares), DLF (91.95 lakh shares) and HDIL (83.77 lakh shares).

MRO TEK jumped 6.26% to Rs 23.75 after the company said its board will meet on 25 February 2009 to consider buyback of equity shares. The company made the announcement during trading hours today, 16 February 2009.

Bartronics India jumped 8.92% to Rs 85.25 after the company said it secured a project from the Municipal Corporation of Delhi for setting up 2000 kiosks. The company announced the new order win on Saturday, 14 February 2009.

Jain Irrigation Systems fell 1.58% to Rs 369.85 despite signing a pact with National Bank for Agriculture and Rural Development for village development programme in Maharashtra. The company made this announcement on Saturday, 14 February 2009.