Sensex at 3-year closing low

Key benchmark indices slumped in late trade as European stocks gave up early gains and slipped into the red on deepening concerns about the global economy. Banking, IT and metal stocks led the fall. Cement stocks rose on decent- to-strong growth in sales/dispatches in the month just gone by and on higher cement prices. The BSE Sensex lost 179.79 points, or 2.09% to 8,411.30, its lowest closing level in more than three years.

Volatility ruled the roost on the bourses right from the onset of the trading session today. The market opened weak but soon jumped into the green before plunging into the red shortly tracking weak world markets. A strong rebound took place again in morning trade on higher US index futures. Sensex moved to green from red. It, however, soon slipped into the red shortly as heavy selling by foreign funds in the past few days weighed on the investor sentiment. The market cut losses again in early afternoon trade.

The Sensex moved into the green again before once again slipping into the red. The market fell once again after surging to the fresh day's high in mid-afternoon trade. The market slumped in late trade on deepening concerns about the global and domestic economy.

There has been heavy selling by foreign funds this year. FII outflow in February 2009 totaled Rs 2707 crore. FII outflow in calendar year 2009 totaled Rs 7418.80 crore (till 2 March 2009). As per the provisional data on BSE, FIIs sold shares worth Rs 741.33 crore and domestic funds bought shares worth Rs 523,57 crore today, 3 March 2009.

Expectations of a rate cut by the Reserve Bank of India (RBI) remain with the latest foreign trade data providing further proof that the Indian economy is slowing down. Exports fell 16% in January 2009, falling for the fourth month in a row, data released by the government during trading hours on Monday, 2 March 2009, showed.

European shares moved to red from green as banks reversed early gains as concerns about the global economy mounted. Key benchmark indices in France, Germany and UK were up by between 0.07% to 1.7%.

Asian markets moved between positive and negative zone, cutting intraday losses as US index futures rose. Key benchmark indices in Japan, Singapore, China and Hong Kong were down by between 0.32% to 2.3%. Key benchmark indices in Taiwan and South Korea were up by between 0.21% to 0.66%.

Trading in US index futures showed the Dow could rise 10 points at the opening bell on Tuesday, 3 March 2009.

US markets ended at 12-year low on Monday, as another bailout of insurance giant AIG stirred fears about the stability of the financial system. It was the first time the Dow has closed below 7,000 since May 1997.

The global economy is in dire state. The International Monetary Fund may cut its month-old forecast for the global economy to predict a contraction this year, Nicolas Eyzaguirre, director of the fund's western hemisphere department, said yesterday, 2 March 2009.

The US economy shrank at a 6.2% annual pace in Q4 December 2008, the biggest contraction since 1982. Japan's economy contracted at the fastest pace since the 1974 oil shock.

Closer home, the outcome of the forthcoming parliamentary elections will be a key drive of the domestic bourses going ahead. The market may recover if a coalition led either by Congress or BJP comes to power. But the recovery will be subject to BJP or Congress led coalition coming to power without a support from the Left front which is against key economic reforms. The market will then look for whether the new government which comes to power undertakes second generation reforms that could bring India back on a strong growth path witnessed in five years between 2003 and 2008.

It is highly unlikely that either Congress or BJP comes to power on its own i.e. without the support of other smaller/regional parties. The chief Election Commission on Monday announced a month long schedule of the parliamentary elections. The elections will he held between mid-April 2009 to mid-May 2009.

The BSE 30-share Sensex lost 179.79 points, or 2.09%, to 8,411.30, its lowest closing since 10 November 2005. At the day's low of 8,390.21 the Sensex lost 216.87 points in late trade. At the day's high of 8,635.20, the Sensex rose 28.12 points in mid-afternoon trade.

The S&P CNX Nifty was down 52.20 points, or 1.95%, to 2,622.40.

The Sensex is down 1,236.01 points or 12.81% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

The BSE clocked a turnover of Rs 2,542 crore, lower than Rs 2,587.98 crore on Monday, 2 March 2009.

Nifty March 2009 futures were at 2588, at a discount of 34.40 points as compared to the spot closing of 2622.40. Turnover in NSE's futures & options (F&O) segment surged to Rs 41,297.48 crore from Rs 35,310.68 crore on Monday, 2 March 2009.

The market breadth, indicating the overall health of the market was weak on BSE with 825 shares advancing as compared with 1,617 that declined. A total of 67 shares remained unchanged.

The BSE Consumer Durables index (down 3.15%), the BSE FMCG index (down 2.59%), the BSE TECk index (down 2.15%), the BSE Bankex (down 2.1%) underperfomed the Sensex.

The BSE Realty index (down 1.03%), the BSE Healthcare index (down 1.23%), the BSE Auto index (down 1.41%), the BSE PSU index (down 1.42%), the BSE Capital Goods index (down 1.44%), the BSE Metal index (down 1.46%), the BSE Power index (down 1.81%), the BSE IT index (down 1.86%), the BSE Oil & Gas index (down 1.88%) outperformed the Sensex.

From the 30 share Sensex pack, 27 stocks fell while rest rose.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 2.13% to Rs 1,199.05 off the day's high of Rs 1,250.60. The stock had lost 3% in the previous trading session after the company set the swap ratio for merger of Reliance Petroluem which was slightly in favour of Reliance Petroleum.

Reliance Industries said on Monday 2 February 2009 its board approved the absorption of its unit Reliance Petroleum (RPL) and set a share swap ratio giving it direct control of the world's largest refinery complex. Reliance Industries said it would issue one share for every 16 held in RPL, which runs a refinery. Reliance Petroleum fell 2.4%.

Cairn India declined 3.89% as crude oil prices declined 10% on the New York Mercantile Exchange on Monday, 2 March 2009. India's largest oil exploration firm by revenue ONGC fell 2.36%.

PSU OMCs rose on sharp fall in crude oil prices. Hindustan Petroleum Corporation, Indian Oil Corporation and Bharat Petroleum Corporation rose by between 1.2% to 2.25%. The fall in crude oil prices will reduce the under-recoveries for the PSU OMCs on sale of fuel at controlled prices. PSU OMCs are currently making profit on sale of petrol and diesel. But they continue to make losses on the sale of kerosene and liquefied petroleum gas.

Capital goods stocks fell on worries a slowing economy will crimp orders. Crompton Greaves, Larsen & Toubro, ABB, Praj Industries, Bharat Heavy Electricals, Thermax fell by between 0.36% to 1.88%.

Banking stocks slumped as fears of rising defaults in a weakening economy offset hopes a further fall in interest rates may boost lending growth. Bank stocks were highly volatile as they moved between positive and negative zone on alternate bouts of buying and selling. India's largest private sector bank by net profit ICICI Bank was down 2.56% to Rs 296.40. Its American Depository Receipts (ADR) slipped 11.72% on Monday, 2 February 2009. Recently, Life Insurance Corporation of India hiked its stake in ICICI Bank by 2.04% to 9.38%.

India's second largest private sector bank by operating income HDFC Bank fell 1.73% to Rs 831 as its ADR fell 7.1% overnight.

India's largest bank in terms of assets and branch network State Bank of India fell 1.95% to Rs 975.85 after the bank reduced deposit rates by 40 to 50 basis points across maturities. The new rates would be effective from 9 March 2009.

PSU bank stocks, Union Bank of India, Bank of Baroda, Bank of India fell by between 1.89% to 4.32%.

Despite a steep cut in policy rates by Reserve Bank of India (RBI) since October 2008, there has not been a commensurate reduction in lending rates by banks as fears of rising bad loans have made them cautious in increasing advances/lending. One reason why banks have not fully passed on the central bank rate cuts to customers is because higher bond yields are pushing up their funding costs. Bond yields and bond prices are inversely related.

Meanwhile, after a recent steep rise the bond yields have started easing since late last week buoyed by hopes the central bank will purchase more bonds at the buyback auction. The central bank is scheduled to buy back Rs 6000-crore of federal debt, with an option to buy an additional Rs 3000 crore on Thursday, 5 March 2009, ahead of a Rs 12000 crore government bond auction on Friday, 6 March 2009.

It may be recalled that a solid rally in bond prices had helped banks post strong Q3 December 2008 results.

Outsourcing focussed IT firms declined in late trade on fears a weak global economy would cut the amount firms spent on technology. Earlier, IT stocks had recovered from an intraday slide. India's third largest software services exporter, Wipro fell 1.16% to Rs 200.50 off the day's high of Rs 205.80. Its ADR fell 9.67% on Monday. India's largest software services exporter by sales TCS fell 3.12% to Rs 445.15 off the day's high of Rs 465.

India's second largest software services exporter Infosys Technologies slipped 1.74% as its ADR fell 5.87% overnight. Foreign brokerage Wachovia Capital Markets cut rating on the stock to 'underperform' from 'market perform'.

IT firms derive a lion's share of revenue from exports to US. There have been concerns of cut back in technology spend by global firms amid a recession in the US economy and due to the global financial sector crisis.

IT stocks fell even as rupee reversed gains. The Indian rupee fell beyond 52 per dollar to a new record low in afternoon trading on Tuesday as a falling stock market intensified worries of capital outflows. The partially convertible unit was at 51.98 per dollar, 0.29% weaker than Monday's close of 51.90/92. A weak rupee boosts revenues of IT firms in terms of the domestic currency as IT companies earn a lion's share of revenue from exports.

Metal stocks fell on worries a weakening domestic and global economy will hit demand for metals. Sterlite Industries, Hindalco Industries, Tata Steel, Steel Authority of India fell by between 1.33% to 2.29%.

Sesa Goa fell 3.55% on reports iron ore export prices have declined in the past few days due to fall in demand from China.

Cement stocks held firm in a weak market on jump in February 2009 cement dispatches and on higher cement prices. Grasim Industries rose 2.88% while Ultratech Cement gained 1.35%. Aditya Birla Group said cement shipments rose 10.1% to 2.92 million tonnes in February 2009 over February 2008. Production for the month rose 9.5% to 2.92 million tonnes, the company said in a statement. The group's cement business includes flagship Grasim Industries and unit UltraTech Cement, with combined production capacity of 35 million tonnes a year.

India's largest cement maker by sales ACC rose 1.26% as cement dispatches were up 4% at 1.75 million tones (mt) in February 2009 over February 2008.

Ambuja Cement rose 4.68% as it reported 11.3 % increase in dispatches at 1.65 mt in February 2009 over February 2008.

Cement prices in the non-trade segment have increased from Monday by Rs 6-10 per bag, according to a report. The report stated that after a price hike of Rs 4-5 per 50 kilogram bag in the first week of February 2009, there was a second round of price hike of about Rs 3 per bag by cement manufacturers in the retail segment in the third week of February 2009

Rate sensitive realty stocks fell on recent reports falling interest rates have failed to revive housing demand .DLF, Indiabulls Real Estate and Unitech rose by between 0.47% to 2.4%. Most of the realty deals including sale of commercial property and housing sales are driven by finance.

ICICI Bank clocked the highest volume of 67.26 lakh shares on BSE. Tata Steel (30.63 lakh shares), Jaiprakash Associates (30.23 lakh shares), DLF (26.96 lakh shares) and Reliance Infrastructure (26.57 lakh shares) were the other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 220.26 crore on BSE. ICICI Bank (Rs 204.26 crore), Reliance Infrastructure (Rs 118.71 crore), State Bank of India (Rs 117.82 crore) and Larsen & Toubro (Rs 59.07 lakh) were the other turnover toppers in that order.