Sensex suffers third biggest fall ever

Local share prices suffered severe setback today, 1 August 2007, on global meltdown. After opening weak, influenced by US markets, the market kept on declining further on intense selling pressure. Weak Asian and European markets dampened the sentiment further. The BSE 30-share Sensex declined below the physcological 15,000 mark and the Nifty fell below 4,400.

All the sectoral indices on BSE tumbled with shares from the real-estate pack suffering the most. Everonn Systems India posted strong show on day 1, settling at 242% premium over issue price. Turnover on BSE surged in today's market fall.

The 30-shares BSE Sensex plunged 615.22 points or 3.96% to settle at 14,935.77. This was the third biggest single day point fall in Sensex ever. It opened with a downward gap of 207 points at 15,344.02 and kept on falling to touch a low of 14,910.52 at 15:12 IST on intense selling pressure. As per market talks, a lot of margin calls may have accentuated fall. Margin selling emerges when there are leveraged positions.

The S&P CNX Nifty slumped 183 points, or 4.04%, to 4,345.85. The Nifty August 2007 futures settled at 4,301.05, a steep discount of 44.80 points as compared to spot closing.

The Sensex’s biggest single day fall of 826 points had occurred on 18 May 2006. Fears that a possible change in taxation laws on sale of shares would raise tax-liability for FIIs had triggered sharp fall on that day when margin calls had accentuated the decline.

The second biggest fall of 617 points took place on 2 April 2007 following the Reserve Bank of India (RBI)’s surprise hike in interest rates announced after trading hours on 30 March 2007.

Turnover surged in the last hour of trade on BSE today. The total turnover on BSE crossed Rs 6,000 crore and was at Rs 6267 crore as against Rs 5,298 crore on Tuesday, 31 July 2007

The turnover in NSE’s F&O segment amounted to Rs 55,904.92 crore as against Rs 49,276.21 crore on Tuesday, 31 July 2007

The market breadth was weak on BSE with 2,147 shares declining as compared to 533 shares that advanced, while 41 remained unchanged. BSE Small-Cap index lost 294.73 points or 3.6% at 7,775.90. BSE Mid Cap index lost 256.62 points or 3.8% at 6,461.46. This means large caps took a much more severe beating compared with mid-caps and small caps.

The market saw heightened activity in the past few days. Firm global markets had led the Sensex to surge 290 points on Tuesday, 31 July 2007, as the market shrugged off a 50 basis-point hike in CRR by RBI announced on that day. The market also took solace in that RBI had kept interest rates steady. On Monday, 30 July 2007 Sensex rose 26.34 points after seeing high volatility

All this came after the black Friday’s, 27 July 2007 sharp 542-point plunge caused by setback in global equities. Stocks tumbled in Asia and the US on that day as an avalanche of concerns over the US credit and housing markets spilled into other areas of the financial sphere and prompted investors to reduce risk.

All the 30-members of the Sensex pack ended in the red today.

India’s second largest cement producer ACC plunged 9.62% to Rs 958 on 3.44 lakh shares. It was the top loser from the Sensex pack.

Reliance Energy (down 7.11% to Rs 737), Ranbaxy Laboratories (down 5.33% to Rs 369.10) and Mahindra & Mahindra (down 4.83% to Rs 693.90) were the other major losers from the Sensex pack.

India’s largest truck maker Tata Morors slipped 4.65% to Rs 666.80 after it reported a 22.2% rise in net profit to Rs 466.76 crore in Q1 June 2007 over Q1 June 2006. Sales moved up 4.7% to Rs 6056.82 crore in Q1 June 2007 over Q1 June 2006.

Bajaj Auto, the country’s second biggest two-wheeler manufacturer, shed 2.76% to Rs 2295 after its vehicle sales fell 7% to 1,85,890 units in July 2007 over July 2006.

Reliance Industries, the country’s largest private sector enterprise, lost 5.25% to Rs 1793 on 15.84 lakh shares. As per reports, RIL is among the 11 winners for oil and gas exploration blocks announced by the Australian government. RIL won the bid for an exploration licence in part of the Bonaparte Basin, off northern Australia. It proposes to spend A$29.8 million over the next six years. This includes the cost of drilling one well. Australia awards oil and gas exploration permits depending on the amount of work bidders pledge to carry out.

India's largest aluminium maker Hindalco Industries tumbled 6.41% to Rs 159.20 after said its net profit in the first quarter remained flat at Rs 602.9 crore due to a sharp fall in alumina prices and a customs duty cut that made imported products cheaper. Hindalco’s revenue rose 9% to Rs 4,677.9 crore in Q1 June 2007 over Q1 June 2006. Hindalco is expected to invest Rs 30000 crore over the next five years in various greenfield and brownfield expansion projects, including the Utkal Alumina project in Orissa.

India’s top small-car maker Maruti Udyog lost 2.13% to Rs 825. The company today, 1 August 2007, reported an 18% rise in sales in domestic market to 52,839 units in July 2007 over July 2006. It exported 5,070 units, up from 1,755 units in July 2006.

FMCG and pharma shares, considered as defensive sectors in times of steep market correction, though they declined, the fall in their prices was relatively low. Dr Reddy’s (down 1.85% to Rs 621.80), ITC (down 2.17% to Rs 167), Hindustan Unilever (down 2.47% to Rs 201), and Cipla (down 3% to Rs 184) edged lower.

Even as the market corrected sharply, Everonn Systems India settled at Rs 478.45 on BSE, a 241.75% premium over the offer price of Rs 140. The huge premium on listing was due to 131.47 times subscription of the IPO. The issue received total bids for 52.58 crore shares compared to total issue of 40 lakh shares.

The Everonn Systems India scrip debuted at Rs 245 on BSE and touched a high of Rs 560 and a low of Rs 245 during the day. About 71.77 lakh shares were traded on the counter on BSE. Everonn Systems India is a fully integrated knowledge management, education and training company.

Real-estate stocks were the worst hit in today’s fall. The BSE Realty index declined 521.54 points or 6.6% to 7,332.51. Unitech (down 7.36% to Rs 517.70), DLF (down 4.42% to Rs 584.65), Orbit Corporation (down 9.12% to Rs 317.30), Indiabulls Real Estate (down 9.22% to Rs 501.25), Parsvnath Developers (down 9.13% to Rs 325), Mahindra Gesco Developers (down 4.77% to Rs 551.50) and Ansal Infrastructures (down 4.98% to Rs 256.90) edged lower.

Among other sectoral indices, the BSE Metal index tumbled 559.64 points or 4.8% at 11,071.28. BSE Capital Goods index lost 624.37 points or 4.69% at 12,697.41. BSE Oil & Gas index tanked 357.85 points or 4.4% at 7,772.65.

PSU banks lost ground. The top losers among PSU banks were Bank of India (down 8.33% to Rs 237), Union Bank of India (down 9.03% to Rs 141.60), Indian Overseas Bank (down 3.5% to Rs 123), and Allahabad Bank (down 6.54% to Rs 89.30).

The hike in CRR of 50 basis points means effective increase in cost of deposits for banks. The deceleration in credit offtake implies that banks have to rollback high deposit rates being offered on tenures of one year and above. Banks now have to maintain 7% of their deposits with the RBI. On these CRR deposits, banks will receive interest only on 3% of the deposits at `bank rate’, which is 6%. No interest is paid on the balance 4%. As RBI does not pay any interest on the 4% deposits, banks’ margin is impacted to that extent.

The major losers among small-cap and mid-cap shares were Shah Alloys (down 18% to Rs 62.45), Sanghi Industries (down 13% to Rs 69.95), Sical Logistics (down 12% to Rs 245), RK Forgings (down 11% to Rs 182.20), Indus Fila 9.98% to Rs 195.25, Time Technoplast (down 15% to Rs 513.50), India Infoline (down 11.9% to Rs 662), Entertainment Network India (down 11% to Rs 462), Teledata Informatics (down 10% to Rs 64.65), and NIIT (down 9% to Rs 980.35).

Select stocks survived the fall. United Phosphorus (up 4% to Rs 319.50), Ingersoll Rand (up 2.2% to Rs 345), Kansai Nerolac Paints (up 2.8% to Rs 719.95), 3M India (up 2.6% to Rs 1858), and IPCA Lab (up 1.7% to Rs 715) edged higher.

Nestle India rose 0.61% to Rs 1196.55 after posting an 18.09% rise in net profit in Q2 June 2007 to Rs 95.69 crore over Q2 June 2006. Sales were up 23.15% to Rs 838.88 crore Q2 June 2007 over Q2 June 2006.

India's third-biggest motorbike maker TVS Motor Company dropped 0.86% to Rs 57.75 after the company said its sales declined 13% to 1.05 lakh units in July 2007 over July 2006.

Jammu & Kashmir Bank lost 6.10% to Rs 651 after it received the Reserve Bank of India's nod for setting up a stockbroking subsidiary.

Jai Corp surged 5% to Rs 3966.05 after its board of directors approved the sub-division of the equity shares from existing face value Rs 10 per share to a face value of Re 1 per share. They also approved increasing the limit for investment by foreign institutional investor (FIIs) to 49% of the paid-up equity capital

Glenmark Pharmaceuticals dropped 2.50% to Rs 670 on reports that it was being sued over patent infringement of anti-allergic drug Clarinex in the US. The Indian drug maker had submitted an abbreviated new drug application (ANDA) to the US Food and Drug Administration (FDA) seeking marketing approval for Clarinex, used for treating seasonal allergic rhinitis (SAR).

VSNL slipped 1.02% to Rs 450.10. Its net profit rose 18.22% to Rs 104.16 crore in Q1 June 2007 over Q1 June 2006. Total income soared 88.49% to Rs 1035.45 crore in Q1 June 2007 over Q1 June 2006.

Escorts lost 7.77% to Rs 96.10 after the tractor and construction equipment maker reported a net loss of Rs 6.24 crore in Q3 June 2007 compared to a net profit of Rs 1.57 crore in Q3 June 2006.

Essar Steel rose 1.20% to Rs 37.90 after the steel maker posted 461.8% surge in net profit to Rs 231.06 crore in Q1 June 2007 over Q1 June 2006

Panasonic AVC Networks India was locked at the 5% upper limit of Rs 16.05 after its Japanese parent Matsushita Electric Industrial Company fixed the de-listing price at Rs 18 per share.

Asian markets were a complete sea of red today, 1 August 2007, on Wall Street's decline. Nikkei tumbled 2.19% at 16,870.88. American Home Mortgage Investment Corp., a large US mortgage provider, said on Tuesday, 31 July 2007, it may have to liquidate assets, fuelling fears that the US housing slump was broadening and sending stocks reeling around the world. Bear Stearns Cos. Inc said on Tuesday, 31 July 2007, it had halted redemptions in a third hedge fund after investors wanted to pull out their money.

Singapore's Straits Times (down 3.27% at 3,431.71), Taiwan's Taiwan Weighted (down 4.26% at 8,891.88), Hang Seng (down 3.15% to 22,455.36) and South Korea's Seoul Composite (down 3.97% at 1,856.46) all slipped lower.

China's Shanghai Composite was down 3.81% to 4,300.63

Most of the key European indices were trading with losses today, 1 August 2007.

US tocks fell sharply on Tuesday (31 July 2007) as worries about the deteriorating US credit market flared up. The Dow slipped 146.32 points, or 1.10%, to 13,211.99 after being up as much as 140 points during the session. Broader stock indicators fell. The Standard & Poor's 500 index declined 18.64 points, or 1.26%, to 1,455.27, and the Nasdaq Composite index fell 37.01 points, or 1.43%, to 2,546.27.

US oil surged more than $1 to a record settle above $78 a barrel on Tuesday, 31 July 2007, on expectation that rising refinery demand will further drain inventories in the United States.

Finance minister P Chidambaram on Tuesday, 31 July 2007, reiterated his intent to trim tax rates, thanks to better compliance by taxpayers and the broadening tax base. He also held out a special dispensation for promising sectors like food processing, electronic hardware, hotels and tourism and leather goods.