Sensex tumbles to 3-month low on US gloom

Weak global markets and data showing slide in India's exports for the fourth month in a row in January 2009 hit the domestic bourses hard. Trading in US index futures indicated the Dow could slide 137 points at the opening bell on Monday, 2 March 2009. The BSE 30-share Sensex tumbled 284.53 points, or 3.2%.

After a sharp slide at the onset of the trading session, the market immediately recovered from lower level as fears of heavy selling by foreign funds eased to some extent as the performance of the two indices which gauge institutional activity on the bourses indicated that neither foreign institutional investors' (FIIs) nor domestic funds' selling had pulled the market lower at the onset of the trading session. The market weakened again at about 14:00 IST on as European markets, which opened after Indian market, dropped in early trade.

After a sharp slide in mid-afternoon trade, the market immediately cut losses as the performance of the two institutional investors' indices showed that domestic institutional investors (DIIs) could be absorbing the sales of accelerated selling by foreign funds by mid-day. At 13:00 IST, the Instanex FII Index had fallen 2.49% verses a 2.45% slide in S&P CNX Nifty and 2.27% fall in Sensex. At that time, the Instanex DII 15 Portfolio was down 1.88%, outperforming the Instanex FII Index as well as the Nifty and the Sensex.

But the intraday recovery on bourses was short-lived as the market witnessed a one-way sharp slide in late trade.

According to an end-of the day analysis by Instanex Capital Consultants which owns and manages the 15-share Instanex FII index, today's fall in was not led by selling by foreign funds. The index fell 3.07% at 194.56 today, outperforming the BSE Sensex and Nifty. While Sensex lost 3.2%, the Nifty lost 3.22%.

The analysis also showed that DIIs had absorbed most of the selling as the fall in the Instanex DII 15 Portfolio was just much lower than the two key benchmark indices at 2.8%. Since the past few days, DIIs have been absorbing heavy sales by foreign institutional investors.

FIIs have pressed substantial sales of Indian stocks this year. FIIs have pressed substantial sales of Indian stocks this year. FII outflow in February 2009 totaled Rs 2707 crore. FII outflow in calendar year 2009 totaled Rs 6940.90 crore (till 27 February 2009).

As per the provisional data on BSE, foreign institutional investors (FIIs) sold shares worth Rs 580.43 crore and domestic funds bought shares worth Rs 334.13 crore today, 2 March 2009.

Banking, IT, capital goods and metal stocks led the decline on the domestic bourses today, 2 March 2009. Index heavyweight Reliance Industries (RIL) was down after its board approved a swap ratio for merger of Reliance Petroleum (RPL) with the company, with the merger ratio being more favourable to RPL. Auto stocks pared gains after an intraday rally triggered by strong monthly sales figures announced Maruti Suzuki and Hero Honda Motors.

The market has been agog with talks of a rate cut by the RBI shortly. Some expectations were that the rate cut could have been at the weekend (either on Saturday 28 March 2009 or Sunday 1 March 2009). However, there was no such announcement at the weekend, disappointing the stock market investors.

Meanwhile, Indian manufacturing activity shrank for a fourth straight month in February 2009 as the global downturn hurt demand and soured business sentiment, a survey showed on Monday. The ABN AMRO Bank purchasing managers'index (PMI), based on a survey of 500 companies, rose to a seasonally adjusted 47 in February 2009 from January's 46.7. A reading above 50 signals economic expansion while a figure below 50 suggests contraction. Manufacturing makes up about 16% of India's gross domestic product.

India's exports fell an annual 15.9% to $12.38 billion in January 2009 over January 2008, government data released during trading hours today showed. It was the fourth straight loss as the global slowdown shaved off demand for Indian goods. The trade deficit narrowed to $6.1 billion in January 2009 compared with $7.57 billion in December 2008 due to a sharp decline in imports. Imports were down 18.2% at $18.46 billion in January 2009, led by 47.5% fall in oil imports.

N Gopalaswami, the Chief Election Commissioner, today announced that Lok Sabha elections will begin on 16 April 2009 and the 15th Lok sabha will be constituted by 2 June 2009.

The outcome of the election 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. Elections are likely to be held in phases during April-May 2009.

European shares fell sharply on Monday, led lower by HSBC, which slid after unveiling a big rights issue as its annual profits fell and bad debts soared in the United States. The key benchmark indices in France, Germany and UK were down by between 3.42% to 4.58%.

Asian shares plunged as declines in Japanese wages and South Korean exports fueled concerns the global recession is deepening. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 2.88% to 4.16%. While, China's Shanghai Composite rose 0.51%.

Monthly wages in Japan fell 1.3% in January 2009 from a year earlier, after declining 0.8% in December 2008, the Labor Ministry said in Tokyo today. South Korea's overseas shipments decreased 17.1% in February 2009 from a year earlier following previous month's record 33.8% percent slump, the government reported today.

US stocks tumbled on Friday, 27 February 2009, after the Commerce Department said the US economy shrank in the three months to December 2008 by the most since 1982.

The BSE 30-share Sensex was down 284.53 points, or 3.2%, to 8,607.08, its lowest closing since 20 November 2008. At the day's low of 8,563.52 Sensex fell 328.09 points in late trade, its lowest level since 2 December 2008. At the day's high of 8,762.88 Sensex fell 128.73 points in early trade.

The S&P CNX Nifty was down 89.05 points, or 3.22%, to 2,674.60.

The market breadth, indicating the overall health of the market, was weak on BSE with 745 shares advancing as compared with 1,659 that declined. A total of 69 shares remained unchanged.

The Sensex is down 1,040.23 points or 10.78% in calendar 2009 from its close of 9,647.31 on 31 December 2008.

The BSE clocked a turnover of Rs 2182 crore, lower than Rs 3052.95 crore on Friday, 27 February 2009.

Nifty March 2009 futures were at 2629.80, at a discount of 44.80 points as compared to the spot closing of 2674.60. Turnover in NSE's futures & options (F&O) segment was Rs 35310.68 crore lower than Rs 39204.47 crore on Friday, 27 February 2009.

The BSE Consumer Durables index (up 0.15%), the BSE Healthcare index (down 0.41%), the BSE Auto index (down 1%), the BSE IT index (down 1.84%), the BSE Realty index (down 2.36%), the BSE FMCG index (down 2.48%), the BSE TECk index (down 2.5%), the BSE PSU index (down 2.61%), the BSE Power index (down 2.83%), the BSE Capital Goods index (down 2.9%), the BSE Oil & Gas index (down 2.94%) outperformed the Sensex.

The BSE Bankex (down 4.36%) and the BSE Metal index (down 4.31%) underperfomed the Sensex.

From the 30 share Sensex pack, 29 stocks fell and only one stock gained.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) fell 3.15% to Rs 1,225.15 after the company set the swap ratio for merger of Reliance Petroluem slightly in favour of Reliance Petroleum. Reliance Industries said on Monday 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 Industries said late on Friday 27 February 2009, it would also buy Chevron's 5 % stake in Reliance Petroleum valued at $344 million as of the close of trade on Friday. Reliance Industries said it would own 75.38% of Reliance Petroleum after buying out Chevron's stake. Shares of Reliance Petroleum was volatile now down 1.38% to Rs 75.15.

Meanwhile, RIL today said its absorption of its unit RPL will be tax neutral for both the entities i.e. both the refineries will retain their tax benefits.

Oil exploration firms ONGC and Cairn India declined by 3.92% each as oil April 2009 Nymex crude oil futures were 80 cents lower at $43.96 a barrel on Globex hurt by weak US gross domestic product data. It had risen sharply last week.

Banking stocks fell as fears of rising defaults in a weakening economy and on fall in American Depository Receipts (ADRs) offset hopes a further fall in interest rates may boost lending growth. India's largest private sector bank by net profit ICICI Bank fell 7.28%. Its American Depository Receipts (ADR) slipped 2.88% on Friday, 27 February 2009. Recently, Life Insurance Corporation of India hiked its stake in ICICI Bank by 2.04% to 9.38%.

India's largest bank in terms of assets and branch network State Bank of India fell 3.1%. The Indian government on Tuesday 24 February 2009 introduced a bill in Parliament which will enable it to increase the capital base of State Bank of India's subsidiaries and issue preference and bonus shares of these entities. India's second largest private sector bank by net profit HDFC Bank slipped 4.43% as its ADR fell 1.49% on Friday.

PSU bank stocks, Indian Overseas Bank, Union Bank of India, Bank of Baroda, Bank of India fell by between 1.38% to 4.55%.

Dewan Housing Finance Corporation rose 1.32% after the company said its board will meet on 6 March 2009 to consider raising funds through issue of equity shares on rights basis.

Despite a steep cut in policy rates by 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. After a steep decline in bond yields in Q3 December 2008, the yields have hardened considerably in calendar year 2009 on worries over government's borrowing programme.

As per the latest data by the Reserve Bank of India, the banking sector lent over Rs 10,000 crore in the fortnight ended 13 February 2009. Food credit rose Rs 547.82 crore, while non-food credit went up by Rs 9124.95 crore. This is the highest fortnightly growth in bank loans since November 2007.

Metal stocks declined on fall in global base metal prices on the London Metal Exchange due to dismal global economic data. Hindalco Industries, Steel Authority of India, National Aluminum Company and Sterlite Industries fell by between 1.31% to 5.79%.

The world's sixth largest steel maker by sales Tata Steel fell 7.54% to Rs 159.35. The stock had surged 5.61% to Rs 172.35 on Friday, 27 February 2009 after announcing forecast-bearing consolidated results. On a consolidated basis, the company's net profit fell 44.18% to Rs 732.21 crore on 3.57% rise in total income to Rs 33,222.59 crore in Q3 December 2008 over Q3 December 2007. The market was expecting a loss.

Auto Stocks pared intraday gains in a weak market. India's largest car maker by sales Maruti Suzuki India fell 0.3% to Rs 675.55, off the day's high of Rs 693.70. Its vehicle sales rose 24.1% to 79190 units in February 2009 over February 2008. It was a record monthly sales by the car maker.

TVS Motor Company rose 2.58% after its two wheeler sales rose 13% to 1,07,301 units in February 2009 over February 2008. But India's largest motorcycle maker by sales Hero Honda Motors fell 3.38% despite reporting a 24% jump in its total sale for the month of February 2009, at 3,29,055 units, as compared to 2,65,431 units in February 2008.

India's second largest motorcycle maker in terms of market share Bajaj Auto fell 4.93% after total vehicle sales fell 16% to 1,53,782 units in February 2009 over February 2008.

India's largest tractor maker by sales Mahindra & Mahindra rose 2.58% to Rs 317.90, off the day's high of Rs 325.50. India's largest commercial vehicle maker by sales Tata Motors fell 0.2% to Rs 149.15, off the day's high of Rs 153.90.

Apollo Tyres rose 23.81% after the company said its board will meet on March 19 to consider a share buyback.

Capital goods stocks fell on worries a slowing economy will crimp orders. Larsen & Toubro, Bharat Heavy Electricals, Crompton Greaves, ABB, Thermax fell by between 0.57% to 4.4%.

Outsourcing focussed IT firms fell on fears a weak global economy would cut the amount firms spent on technology and on fall in ADRs overnight. India's third largest software services exporter, Wipro fell 2.17% as its ADR fell 4.05% on Friday. India's second largest software services exporter Infosys Technologies fell 1.02%. Its ADR remained unchanged on Friday. India's largest software services exporter by sales TCS declined 4.39%.

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 despite a weak rupee. The Indian rupee dropped to an all-time low on Monday on heightened fears of rising capital outflows from the stock market. The partially convertible rupee was at 51.92 from Friday's close of 51.10/12 per dollar. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports.

Rate sensitive realty stocks fell on recent reports falling interest rates have failed to revive housing demand. DLF, Indiabulls Real Estate and Unitech fell by between 1.78% to 4.61%. Most of the realty deals including sale of commercial property and housing sales is driven by finance.

Some HealthCare stocks rose on defensive buying. Glenmark Pharmaceuticals, Biocon, Fortis HealthCare, Dr. Reddy's Laboratories, Novartis India rose by between 0.84% to 8.59%.

Edserv Softsystems settled at Rs 137.55, a 129.25% premium over its issue price of Rs 60, on its debut today.

Cals Refineries clocked the highest volume of 1.4 crore shares on BSE. Reliance Petroleum (89.97 lakh shares), Satyam Computer Services (77.68 lakh shares), Unitech (69.04 lakh shares) and Suzlon Energy (45.49 lakh shares) were the other volume toppers in hat order.

Reliance Industries clocked the highest turnover of Rs 205.88 crore on BSE. Educomp Solutions (Rs 116.42 crore), ICICI Bank (Rs 98.01 lakh), State Bank of India (Rs 88.30 lakh) and Reliance Infrastructure (Rs 81.94 lakh) were the other turnover toppers in that order.