Sensex slumps 6.2% in two trading sessions as budget disappoints

A broad-based sell-off spilled over to the second session in a row after interim budget turned out to be a non-event. Weakness in global markets also dampened sentiments. The BSE 30-share Sensex fell 270.45 points, or 2.91%. In the last two trading session, the barometer index has lost 6.2%.

The only solace for the investors was that barometer index BSE Sensex held the psychological 9,000 level. The index had fallen below the crucial 9,000 level in late trade today, 17 February 2009, but soon recovered.

Selling was broad-based with realty, metals and bank stocks among major losers. Gains in select FMCG shares supported the indices at lower levels.

Selling by foreign funds led the decline. As per the provisional data released by the stock exchanges after trading hours, foreign funds today, 17 February 2009, dumped shares worth a net Rs 462.21 crore. Domestic funds bought stocks worth a net Rs 278.42 crore.

Not a single new scheme or tax initiative was announced in the interim budget unveiled by the acting Finance Minister Pranab Mukherjee during trading hours on Monday, 16 February 2009, disappointing the stock market. The market was expecting government to offer tax sops and sector-specific stimulus package for the economy in the interim budget.

Meanwhile, a concern among the marketmen is that the deteriorating government finances may force rating agencies to downgrade India's sovereign rating. If India's sovereign rating is downgraded, it will significantly raise the cost of borrowing of Indian firms in global markets - something the government had banked on to ease the domestic credit crunch. The financial meltdown had already reduced these inflows; a rating downgrade will put an end to them altogether.

India's rising fiscal deficit is seen at 6% of GDP at end 2008-09, much higher than the initial target of 2.5%. For the year 2009-10, it is expected to be 5.5% of GDP.

European shares hit a two-week trough on Tuesday, led lower by banking and energy stocks, as investors remained jittery over the health of the global economy and disappointing corporate results. Key indices in France, Germany and UK were down by 1.40% to 1.81%.

Asian markets, which opened before Indian market, fell as dismal Japanese growth data and fresh concerns about the financial sector fanned worries about the deteriorating global economy. Key indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan closed down between 2.17% to 4.11%. A latest survey showed Japanese manufacturers' confidence remains mired near record lows.

Data showed on Monday that Japan's economy shrank by 3.3% in the fourth quarter, its worst since the 1974 oil crisis. Meanwhile, Japanese Finance Minister Shoichi Nakagawa said on Tuesday he would resign after being forced to deny he was drunk at a G7 news conference, dealing a fresh blow to unpopular Prime Minister Taro Aso in an election year.

Trading in US index futures indicated the Dow could fall 116 points at the opening bell on Tuesday, 17 February 2009. US markets were closed on Monday, 16 February 2009 for President's Day holiday.

Countless economic stimulus packages and open promises to take more action by policymakers around the world have so far all been met with disappointment by investors, with not even the $787 billion pledged by Washington making a dent in negative sentiment.

The BSE 30-share Sensex fell 270.45 points, or 2.91%, to 9,035, its lowest closing since late January 2009. The Sensex opened 92.05 points lower at 9,213.40, which was also the day's high. The indices slowly succumbed to selling pressure to slip at the day's low of 8,994.34, losing 311.11 points at the fag end of the trading session.

The S&P CNX Nifty dropped 78 points, or 2.74%, to 2770.50. Nifty February 2009 futures were at 2749.95, a discount of 20.55 points as compared to the spot closing.

The market breadth, indicating the overall health of the market, was weak on BSE with 1722 shares declining as compared with 682 that rose. A total of 100 shares remained unchanged.

BSE clocked a turnover of Rs 2384 crore, lower than Rs 2,908.21 on Monday, 16 February 2009. Turnover in NSE's futures & options (F&O) segment fell to Rs 38956.24 crore from Rs 44914.39 crore on Monday, 16 February 2009.

The barometer index BSE Sensex is down 612.31 points or 6.34% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

The BSE Realty index fell 4.85%. The BSE Consumer Durables index (down 4.80%), the BSE Bankex (down 4.41%), the BSE Metal index (down 3.98%), the BSE IT index (down 3.24%), and BSE Oil & Gas index (down 2.98%). All these indices underperfomed the Sensex.

The BSE Power index (down 2.55%), the BSE PSU index (down 2.47%), the BSE Capital Goods index (down 1.88%), the BSE Auto index (down 1.68%), the BSE BSE Healthcare index (down 0.87%), and the FMCG index (down 0.74%), outperformed the Sensex.

India's largest cigarette maker by sales ITC was the only stock in the Sensex that bucked weak market trend. The stock, which was almost ended unchanged at Rs 180.55, supported the Sensex at lower level as ITC has 7.15% or third-highest weightage in the Sensex.

India's largest drug maker by sales Ranbaxy Laboratories declined after a firm start. The stock fell 0.20% to Rs 204.65, off day's high of 209.90. Recently some reports suggested the company got US drug regulator's nod to sell acute migraine drug sumatriptan in the US. Sumatriptan is a generic of GlaxoSmithKline's Imitrex, which has sales of nearly at $1.1 billion in the US.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries fell 3.90%. The stock has 15.59% weightage on the Sensex. The stock fell 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.

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 largest state-run oil explorer by market capitalisation ONGC fell 1.48% on lower crude prices. US crude futures were down 2.2% to $36.69 a barrel, having lost 12% so far in February 2009. A fall in crude oil prices would hit profits of the company on account of lower realizations from crude sales.

Banking shares tumbled sharply after bond yields rose to their highest in more than two months on Tuesday afternoon on concerns over the government's additional borrowing and lack of clarity on the central bank's open market operations.

India's largest private sector bank by net profit ICICI Bank which has 6.84% weightage on the Sensex, slipped 5.69%. HDFC Bank, Axis Bank, Oriental Bank of Commerce, Punjab National Bank, Kotak Mahindra Bank, Bank of India and State Bank of India fell by 1.59% to 7.39%.

At 15:13 IST, the 8.24% bond maturing in 2018 was at 6.55%, its highest since 11 December 2008 and above its previous close of 6.42%.

The biggest quarterly gains posted by government bonds in at least a decade helped most of the domestic banks to boost investment returns and post an increase in third-quarter profit.

Metal shares declined sharply as there was no changes in import duty in the interim budget. A section of the market was expecting increase in import duties on metals to protect the domestic industry from cheap imports.

World's sixth largest steel maker Tata Steel slumped 6.74%. An official from Standard & Poor's was recently quoted by media as saying that Tata Steel's liquidity is weak on a consolidated basis. The report also said the firm could face significant refinancing risk considering the near term pressure on Tata Steel UK's financial agreements which involves about more than 3 billion pounds of debt.

India's largest aluminimum maker by sales Hindalco Industries fell 4.74%. Hindalco proposes to use its share premium reserves to write off expenses incurred by the company on its international acquisition and domestic expansion. The company's board has approved a proposal to this effect. The company has a share premium reserve of around Rs 8,500 crore.

Bhushan Steel, Steel Authority of India, Sesa Goa, Jindal Steel & Power, and Sterlite Industries were down by 3.37% to 4.39%

Realty shares fell sharply in absence of any tax sops for the housing sector in interim budget. India's largest real estate firm by market capitalisation DLF slumped 5.19%. Omaxe, Puravankara Projects, Ansal Properties & Infrastructure, HDIL, Indiabulls Real Estate, Sobha Developers and Peninsula Land fell by 2.12% to 7.82%

Delhi-based realtor Unitech slipped 6.14% after the company said its founders had pledged shares equivalent to 49.48% of the company's equity.

The BSE Realty index had fallen 4.58% yesterday, 16 February 2009, due to disappointment from the budget. Prior to that, the realty index had risen 14.7% in past six sessions till Friday, 13 February 2009.

Software shares extended recent losses as US market reels under slowdown. HCL Technologies, TCS, Infosys Technologies and Wipro were down by 1.27% to 3.59%. Indian software firms earn more than half of their income from the US market.

But Hexaware Technologies jumped 7.36% to Rs 31.35 after the company reporting a net profit of Rs 36.76 crore in the year ended December 2008 as against a net loss of Rs 10.76 crore in the year ended December 2007. Net sales rose 6.3% to Rs 498.17 crore in the year ended December 2008 over the year ended December 2007. The company announced the results after market hours on Monday, 16 February 2009.

Telecom stocks slipped after Morgan Stanley, in its latest report, downgraded India's telecom sector citing increased competition in the country. Bharti Airtel (down 0.75%), Idea Cellular (down 3.06%), and Reliance Communication (down 4.53%), slipped.

The investment bank said in a report that it expects the tariff wars of the telecom firms to lead to lower than expected Average Revenues per Minute (ARPM). Morgan has downgraded its rating on Reliance Communications and Idea Cellular to 'underweight' and cut their estimated price target to Rs 132 and Rs 37, respectively. The investment bank has maintained an 'overweight' for Bharti Airtel, with a price target of Rs 758.

Shares of jewellery exporters slumped as the government did not announce any sops in the interim budget to revive demand. Su-Raj Diamonds (down 2.80%), Rajesh Exports (down 3.60%), Gitanjali Gems (down 4.75%), and Classic Diamonds (down 7%), fell. Market had expected the government to ease service tax refunds and exempt jewellery exporters from fringe benefit tax for a certain stipulated period.

Shares of stock brokerage firms tumbled on concerns weak securities market conditions may keep investors away in the near term. India Infoline (down 1.61%), Geojit Financial Services (down 4.04%), Reliance Capital (down 4.30%), Motilal Oswal (down 4.66%), Indiabulls Securities (down 6.82%), fell.

Shipping shares tumbled as the government did not announce any sops in the interim budget for the sector. Varun Shipping Company, Shipping Corporation of India, Essar Shipping, GE Shipping Company, SEAMEC, Bharati Shipyard, Mercator Lines, ABG Shipyard, and Shreyas Shipping & Logistics fell between 1.43% to 4.09%. Indian shipping firms had sought exemption from service tax on input services in the federal interim budget 2009.

Hotel shares mostly declined as the demand for inclusion of hotels in the infrastructure sector category remained unfulfilled in the in interim budget. Indian Hotels Company (down 2.64%), Hotel Leela Ventures (down 1.35). However, EIH rose 0.43% to Rs 105.85, after hitting a day's low of Rs 100.55. An infrastructure status could have enabled hotels for easier and cheaper access to bank loans. Non-priority lending by banks and institutions at higher interest rates leads to higher project cost and room rates.

Multiplex operator Cinemax India slumped 5.29% to Rs 35.80 after the company said its promoters have pledged more than 1.14 crore shares or 41% stake in the company.

Textiles firm Bombay Dyeing & Manufacturing Company lost nearly 3.83% to Rs 145.55 after the company said its promoters have pledged more than 49.72 lakh shares or 12.88% stake in the company.

Shares of Temptation Foods (down 10%) and Kohinoor Foods (20%) extended losses to hit the lower circuit for the second straight day after the market regulator Securities and Exchange Board of India pulled up Temptation Foods for falsifying shareholding information. According to the SEBI order, Temptation Foods misled investors by providing false declaration to the stock exchanges that it holds over 31.80 lakh shares representing 11.98% stake in Kohinoor Foods.

Reliance Industries reported a highest turnover of Rs 179.68 crore on the BSE. Educomp Solutions (Rs 178.55 crore), United Spirits (Rs 126.50 crore), ICICI Bank (Rs 124.34 crore), and Satyam Computer Service (Rs 109.95 crore), were other turnover toppers on the BSE.

Satyam Computer Service registered a highest volume of 2.21 crore shares on the BSE. Unitech (1.11 crore shares), Suzlon Energy (97 lakh shares), Hexaware (83.82 lakh shares), and Cals Refineries (78.01 lakh shares), were other volume toppers on the BSE.